Causes of the 2008 Global Economic Crisis – conclusion

Although recessions are a part of the business cycle, recurrent economic crises have identified other antecedents to such crises that are not a normal course of the business cycle. One such crisis was the 2008 financial crisis whose impacts were widespread. The subject of this paper was to review the causes of the 2008 financial crisis, its impacts in the UK and possible strategies that the UK can employ to overcome the crisis.

Despite the antecedent of the economic crises having been evident with the collapse of the housing market, other factors contributed to the onset or progression of the crisis. Among these other factors is the prolonged application of an expansionary monetary policy resulting into low lending rates hence the avoidance of appropriate vetting of prospective buyers before approving credits. Secondly such was contributed by persistent trade imbalances that shifted the capital flows from government bonds to lucrative and highly liquid capital markets. Although the crisis started in the US, aspects such as financial institutions connections and international trade facilitated its transmission to the UK.

Impacts of the economic crisis include job lay-offs and increased unemployment rates thus increasing the gap between the poor and the rich. A positive impact of the crisis however was reduced trade imbalances as domestic consumption reduced and currency exchange rates between emerging markets and developed economies were altered in favour of exports from such developed economies. To address economic crisis, the UK needs to institute regulatory framework that dissuades imprudent practices in corporate governance and constantly monitor economic situation to ensure appropriate application of the monetary policy initiatives. Ultimately, however, the long term aspects to averting credit crisis need to take into consideration social perspectives such as availing more work through flexible employment arrangements, thus ensuring the poor-rich gap is alleviated.

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