Sunday, April 21, 2019

Economic and Political Issues in Asia Essay Example | Topics and Well Written Essays - 1000 words

Economic and Political Issues in Asia - Essay ExampleThe major differences between these ii crisis can be identified as the implications of US monetary crisis has global impact while the impact of 1998 Asian financial was particularly limited to south-central East Asian countries only. On the some other hand, poor financial reporting can be attributed as the major cause of both financial crises. Reasons of 2008 US financial Crisis The collapse of the Lehman Brothers had spread the terror in the global financial markets. The 2008 US financial crisis was one of the largest global economic crises marked in the late world. The US political sympathies regulations started to wear away the lending standards in the middle era of 1990s. During that period Fannie Mae and Freddie Mac, the regimen owned enterprises were the owners of the huge sh be of the American mortgages. However in the year 1995, the US regulation change magnitude the holding of loans in order to lower the borrowers income. The United States government levied a regulation on Fannie Mae and Freddie Mac to lend loans with either less or no proportion of down payment. This policy of the government resulted on lowering the purchase capacity of the mortgages in order to recover the bad debts (Gwartney, 2009). The Community Reinvestment Act, 1995 regulate by the government also wanted the banks to grant loans in equal proportion to the number of the minority population existing in the financial markets. These objectives were met by the reduction of the conventional lending standards (Gwartney, 2009). There were two major reasons for the financial crisis in the year 2008 namely the increasing prices of the houses and the mortgage market being ineffectively regulated. In the initial stages of 1990, the increasing demand for the houses lowered the mortgage interest rates. Nominal rates are considered as important factor in the mortgage markets as it largely determines the repayment capacity of the bo rrower. Nevertheless, the pay of mortgages rapidly increased in the US market without the consideration of the nominal rates being decreased. This write out of decrease in the mortgage rates moved towards a drastic financial crisis in the US (Baily, Litan & Johnson, 2008). Precisely, the increasing demand for houses leading towards unstable price increase and skewed demand for mortgages by financial institutions were the prime reasons behind the eruption of 2008 US financial crisis. Differences Between 2008 US Financial Crisis and 1998 Asian Financial Crisis The most affected countries in the 1998 Asian financial crisis were Taiwan, China, Japan, Singapore, Hong Kong, and South Korea. The Asian crisis had started with the threat in the gold rates of the South East Asian countries of Malaysia, Singapore and Japan. Later the major causes of the Asian financial crisis accounted to the step by step increasing prices of the assets and the excess value of the real exchange rate. The ra pid increase of the short term foreign borrowing was one of the major external causes of the financial crisis in the Asian countries (Institute of Development Studies, 1998). On the other hand the major causes of the US financial crisis were the unorganized mortgage markets due to the increasing demand for houses. The disturbances in the mortgage financing augmented due to the non-adherence of the nominal rates. The differences in both the financial crises lie in

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