Money, Banking, and Financial Market Free Essay Example, 2500 words

The major cause of the financial crisis was increased uncertainties. Many people speculated that their investments will have greater yields in the future, and this was not the case. They incurred losses and this reduced their wealth. Also, the government of the United States had a lot of money and wanted to create self-employment for its citizens. They reduced the interest rates to encourage people to borrow these funds and invest. Many people did not return their loans and the country was reported to be bankrupt. Another major cause of the financial crisis was with the banks. They did not have adequate information about its customers, especially when giving out loans. The people too did not have trust with their banks and this led to bank runs and bank panics. This reduced the amount of money available in the financial system that could be used to develop other sectors of the economy. This forced the countries affected to borrow a huge sum of money from the World Bank and this incr eased their debts. The stock prices were also reduced for the government to obtain the little funds that were in the economy to finance its operations. We will write a custom essay sample on Money, Banking, and Financial Market or any topic specifically for you Only $17.96 $11.86/page