Financial Crisis Revealed The Problems Behind Financial System
When we reviewed the two crisis, just like domino effect.
The collapsing banking system of United States by the overextension of
mortgage, made the great depression spreading through the global financial and
trading network since 2008. In order to stimulate the economic recovering from
the depression, some countries such like the United States, the United Kingdom
and the Eurozone utilized the quantitative easing policy- increasing the cash
flow to the market. Due to those policy, the government raised their fund by
debts, and the financial deficit rose as well.
In other words, the two financial crisis revealed the
structural problems behind the financial system in those developed countries.
Even now, the Eurozone debt crisis still affects global economy growth. The
crisis also changes the roles of states.
The States: Reframe Its Policies
Due to the recession, the states have developed new
policies to eases the impact and stimulate the economic growth. In Eurozone,
most countries acted as firefighting, Germany returned its road quickly based
on the "Agenda 2010", which was a policy announced in 2003 to reshape
its labor mechanism. Considering its strong economic heft, Germany also became
the hope to solve the European debt crisis at its roots. This expectation made
the role of Germany more complicated in its political and diplomatic position.
As one major player in the global economy, the U.S. tried
to resolve its recession by adopting quantitative easing monetary policy, which
is reaching a turning point. International Monetary Fund (IMF) said that the
quantitative easing measures of U.S. led to an unexpectedly large increase in
long-term yields in the its market and many other economies, much of which has
not been reversed despite a subsequent decision by the Federal Reserve to
maintain the amount of asset purchases and policy actions in other
countries." In this case, this policy is going to reach its bottleneck.
On the other hand, China has grown in moderate recovery -
with a growth rate over 6% from the great depression since 2008. Comparing its
strong growth in previous past, it indicates that China, the one of huge
engines of global market, will grow more slowly, despite the Chinese government
would act with a strong stimulus if the output growth was slower than the
government expected.
Japan, another major economy in Asia, announced a new
ambitious monetary policy framework called "Abenomics" in
December 2012, which has three main elements or “arrows”: monetary easing,
flexible fiscal policy, and structural reforms. The goals of Abenomics are
ending deflation, raising growth in a durable manner, and reversing the rising
debt. This policy seems successful for broaden exportation, active stock market
and increasing growth rate in 2013. However, it is a question that if this
policy could save Japan from the long term deflation.
Domino Game of Globalization
After the great depression and Eurozone crisis, IMF pointed out that monetary conditions will increasingly start to reflect
the changing growth dynamics in the major economies. It said that the growing
uncertainty about the implications for future policies has led financial
markets to expect that U.S. will tighten its monetary policy in greater degree,
and this has caused larger-than-expected spillovers on emerging market
economies.
This financial crisis was just part of the domino game in
global economy which spread from the advanced countries to the whole world. The
advanced economies are the master of the worldwide financial framework,
however, this crisis demonstrated the systematic problems behind the structure.
The governments reshaped their policies to solve the systematic problems, but
be honestly, the effect is limited. Even the role for the states shift to fit
the changing environment, it is an endless domino game.
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