Introduction
Between the years 2007 and 2008, the world experienced a deep recession that greatly affected the global market. This was mainly brought about by the financial crisis that had affected most of the lending activities, with its roots from the US economy. The US economy had experienced losses in its sub-prime loans in the year 2007 and this resulted in high asset prices and low levels of inter-banking lending. It is also during this period that the world experienced very high food and oil prices, leading to further deterioration in the global market and financial situation (The Wall Street Journal, 2009).
The high rise in asset prices and the unstable market demand was the main cause of the extended period of inappropriate and poor inter-banking lending, ineffective market regulations and increased level of market inequalities in various regions around the world (Greenspan, 2007). As housing prices went down and the stock markets became unproductive, major world economies like the United States of America and Europe suffered economic hardships especially because of the decline in the activity levels of the well-established commercial and investment banks. The end result of this has been a global recession that has brought about a fall in international trade, high unemployment levels and unstable commodity prices. Most parts of the world have also experienced social and political unrest as a result.
The aim of this study is to critically look into the effort that the world has taken to correct these situations and the events that have led to the corrections. It focuses on those aspects which the world can say have led to the economic market corrections during the periods between 2008 and 2009.
Elements of the major economic market corrections
The global market corrections have been initiated in the major economies of the world like America which had been greatly affected. The corrections were mainly based on financial, economic, and political aspects. Economic and political analysts have unanimously come together to bring back the economy to its development and hence overcome the global economic recession.
Political elements
The major political parties in Europe and America, during the year 2008 felt that they would not want to be blamed for an economic recession by being against the strategies that were being established. The countries felt that there was need to stimulate economic development through tax holidays and rebates for the households so that productivity may go up. America had come up with similar tax exemptions in 2001 and in 2008 the country doubled the volume with the expectation that it will stimulate economic growth better than it did in 2001 (The Wall Street Journal, 2009).
This is likely to improve the accumulation of wealth and in turn increase the savings ratio, thus, improving market demand. With tax rebates on the private households, private consumption has gone up and has remained unaffected by the financial crises over the past year.
From the report in the Wall Street Journal (2009), the political leaders have also decided to work hand in hand with the IMF to help those economies that are still developing. This would be through providing those policy reforms that would work well to ensuring all the countries benefit from the support provided by the IMF and also make proper implementation of these policies to develop their economies.
Economic elements
The key factor that affects the economic aspect of some of our world economies is the housing sector and the sub-prime loan deficits (Friedman, 1971). This greatly affects the level of consumption in most parts of the world and brings about market inequalities. As part of the economic aspects that bring about the market, corrections are the housing developments that have been established in the major world economies. According to Greenspan (2007), housing investment strategies were put in place to increase the rate of investment from 17% in 2007 to above 30% in 2008, and in respect to the US gross domestic product, the housing sector is aimed at having a significant positive impact on the global market.
The recession in the housing sector mainly affected private consumption through a drop in housing prices and subsequent decline in the value of assets. However, through refinancing from the IMF, the sector is making dramatic progress making mortgaging improve market adjustments. Private consumption is also making its progress and by the year 2009, it’s expected that the housing sector will improve and the market situation will develop (Greenspan, 2007).
The employment level in Europe has been another element that is resulting in global economic development. The country has shown a significant rise in the level of employment and this has raised the wage levels and increased the country’s gross domestic product through its per capita income. The manufacturing sector has shown a tremendous increase and the country is improving its economic growth through creating more jobs in this sector and in turn promoting international trade in the manufactured products. There is the establishment of macroeconomic policies that focus on ensuring all families have access to capital and that the low income-earning families have not been affected by inflation that had hit most parts of the world (Greenspan, 2007).
Financial elements
According to Greider (2007), international financial regulation is one factor that has been used to correct the global economic market crisis and most countries have dropped the idea of protectionism to fully support their economy. The finance agencies in different parts of the world and the countries’ Central Banks have decided to bring back economic growth through stimulating market demand and improving employment levels to raise people’s purchasing power. They also have decided to restore both local and international trade and encourage foreign investment.
The central banks and the government financial officials have also focused on providing greater liquidity in terms of credit and also capitalizing more effectively the banking system so that economic growth is stimulated. The Central Bank worked towards maintaining low rates in order to enable the commercial banks to increase their liquidity and maintain credit levels. This way, the investment, and commercial banks will also be able to invest in the financial markets (Greider, 2007).
Conclusion
In conclusion, it can be argued that the financial, government and economic analysts have worked together to help overcome the economic and market crisis that has affected the world for the last decade. The response by the analysts has been appropriately implemented but it is still to show effective improvement on the economy. There has been slow progress in the success of these corrections especially in the developing economies; however, the countries expect that they will effectively succeed in resolving the crisis.
Works Cited
Friedman, M. & Schwartz, A. A Monetary History of the United States, 1867 – 1960: USA, Princeton University Press, 1971.
Greenspan, A. The Age of Turbulence: Adventures in a New World: Penguin Press, USA, 2007.
Greider, W., Secrets of the Temple: How the Federal Reserve Runs the Country: New York, University of Michigan, 2007.
The Wall Street Journal: Yale University, 2009.