The Crisis of Credit Visualized
The credit crisis adversely affected many people in the U.S and beyond. This was mainly because it was directly linked to operations in the finance sector, with significant effects on the housing and mortgage companies. In particular, finance companies were affected as a direct result of their relationship with the housing industry. Homeowners and mortgage companies that had borrowed from financial organizations in the hope of exceptional returns, defaulted in paying their loans. This resulted in banks losing their money across the globe since the U.S banks had also borrowed funds from other banks across the country (Zhu et al., 2018). The results of banks losing their finances resulted in adverse effects on other people including business owners, financial institutions, and general consumers. In particular, business owners were affected due to the inability to access credit facilities from banks and other financial institutions. Businesses could not grow at the predicted rate and start-ups failed.
With the general reduction in disposable income levels, there was a general recession in the U.S., which also resulted in a significant reduction in the demand for imported goods. This could be attributed to the impacts of the recession on general consumers. The refusal of banks to lend to each other constrained access to financial resources even further, resulting in a global recession. The impacts of this credit crisis are still felt in modern times particularly in developing countries that we’re unable to fully recover from the recession. Up to 2015, European countries faced some impacts of the credit crisis on the general economic growth rate. Rewilak (2017) also pointed out that the poor citizens of the rich countries are the most affected when it comes to credit crises, and the effects go for prolonged periods of time. It is thus deductible that the poor, whether in rich or poor countries, experienced the most pronounced adverse effects as a result of the credit crisis.
References
Rewilak, J. (2017). The impact of financial crises on the poor. Journal of International Development, 30(1), 3-19. Retrieved from onlinelibrary.wiley.com/doi/full/10.1002/jid.3334
Zhu, Z., Bai, B., Vieito, J.P., & Wong, W.K. (2018). The impact of the global financial crisis on the efficiency and performance of Latin American stock markets. Retrieved from poseidon01.ssrn.com/delivery.php?ID=043105127121024120093065004081088121009036000082061091106021015025111015023083068011120058100122042024053115066118005074096074020090034037034100067126098090067065042046000000077125106095125094090001084003084015115127102027127003125116119093117099006&EXT=pdf