Admin Do you agree with those who suggest that the financial crisis raises serious concerns about the viability of capitalism?
Unlike many economists, I do not think this was just an economic crisis. Similar to the Great Depression, the 2008 financial crisis could be another great opportunity to understand and fix a major flaw of free market capitalism. This time both government and market failed.
Should banks be regulated and bailed out by the government?
Yes because… Supporting the banks helps the rest of the economy. Financial institutions provide the loans that businesses need to open up, innovate, and invest. When the government shows that it is willing to support the economy, investors will have more confidence and economic growth increases.
Why do governments bail out companies?
Governments bail out companies because they say they are ‘too big to fail. Therefore, governments often choose to step in and help these businesses survive through subsidies and low-interest loans. Above all, in such cases, the bailouts are to protect the country and not the company.
What are the causes of the financial crisis?
Main Causes of the GFC
- Excessive risk-taking in a favourable macroeconomic environment.
- Increased borrowing by banks and investors.
- Regulation and policy errors.
- US house prices fell, borrowers missed repayments.
- Stresses in the financial system.
- Spillovers to other countries.
What caused the Panic of 1819 and what was its impact on the United States?
The major cause of the Panic of 1819 was irresponsible banking policies. Other causes that contributed to the Panic of 1819 included falling prices, a slumping cotton market in the south, and an influx of goods from foreign countries, all of which triggered widespread unemployment.
Why is it important to regulate banks?
Regulation helps make sure that banks have good management so they don’t make bad investments or are too risky. Banks also have to hold cash (or assets that can be sold very quickly) to cover unexpected withdrawals. This should help make bank runs less likely.
What is a government bail out?
A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy. Some governments also have the power to participate in the insolvency process: for instance, the U.S. government intervened in the General Motors bailout of 2009–2013.