Hi, need to submit a 4250 words essay on the topic Reasons Behind the Global Financial Crisis of 2008.
The present research has identified that there was a global macroeconomic imbalance. Due to the high levels of exports of the eastern countries, they generally experienced a trade surplus. On the other hand, the high consumption patterns of the western countries caused them to experience trade deficits. To help deal with that gap, the west took advantage of the free flow of capital in the financial market and increased its dependence on leverages even more. The essay then discusses the case of China. With US$2.56 trillion worth of exports and US$870 billion worth of foreign investments according to Gu (2009), China’s dependence on the prosperity of the global economy was evident. The financial crisis, therefore, hit China hard. However, China responded to the problem quickly. China made many changes in its policies. With the adoption of expansionary fiscal and monetary policies, China made investments in projects and constructions to grow employment levels and improve the conditions. These helped China deal with the problem, at least in the short run. .The paper then moves on to discuss the analysis and evaluation of the policies and how, eventually, the only way for China to revive completely from this crisis is if the global economy, especially the United States’, stands back on its two feet. Finally, some concluding remarks are given for China as to what kind of an economic system should China adopt. The cause of the global financial crisis can be ascribed to a number of factors like the Housing Bubble, the Subprime Mortgage Crisis, the global macroeconomic imbalances (Acharya, 2009), incorrect pricing of risk, financial innovation and complexity and heavy reliance on leverage.