Essays on Housing Bubble

Today, almost seven years after the financial crisis that threw America into upheaval in 2008, the effects are still being felt. In September 2008, the collapse of Lehman Brothers, a global bank, nearly caused the collapse of the financial system of the entire world. What resulted was the worst economic downturn seen by the world since the Great Depression, 80 years ago. The event has been called the Global Financial Crisis and the 2008 Financial Crisis; the period following the collapse became known as the Great Recession.

While the ...

Introduction

Housing bubbles have happened in different economies around the globe. The most recent and most publicized was the subprime mortgage crisis in the United States of America. Understanding what a housing bubble entails in very important in determining whether any economy is experiencing a housing bubble. In economic terms, a housing bubble is the unprecedented increase in the prices of houses because of an increase in demand for housing units, speculation on the prices and the belief that the recent trends in demand and price are surefire forecasts of future trends in the housing market.

A housing bubble starts when the demand ...

Part 1

- In what ways did the video "The Crisis of Credit" demonstrate the failure of the banking industry's Fiduciary Relationship to investors and home owners?

The video explains a worldwide financial disaster that effected everyone. It started on the burst of the dot com bubble when the federal reserve of the United States decreased the interest rate to 1%. This value dramatically dropped the investment level because of the reduced ROI. This action made banks to take more and more loans from the Federal Reserve. The leverage increased as it became very easy to return a loan, so the demand for credit increased rapidly.

The banks took a lot of credit, and they were easily able to payback and made a lot of profits. Investors saw this as ...

Question 1

The American economy is just making a comeback from the 2008 economic recession. The recession took the economy to its lowest point in 25 years. The recession arose from the housing bubble, which led to the eventual disintegration of the financial markets. The housing market caused the disintegration of the markets due to irresponsible activities by investors and financial institutions. The housing market is quite different from the stocks market hence; the circumstances that led to the recession involved a series of unique events. The housing industry involves risks that is quite complex to understand because people view houses as assets ...

Abstract

Many of the US companies are trying to enter international markets, outsource the manufacturing processes, and become international. Such activity needs certain knowledge from the company’s managers and all those colleagues that will participate in communications with the foreign partners. Spain has a very rich history and culture and therefore there are many aspects that US business people should learn before starting to work with Spanish partners, suppliers or customers. The economic situation, business etiquette and traditions in Spain are different from the US ones. This is mostly caused by the relaxed rhyme of life in this country and ...

Answer 1)

Dividing the period of analysis in three periods i.e 1981-1991, 1992-1997, 1998-2011 we could easily interpret the actual trend in the bond ratings by Standard and Poors. 1981-1991: This was the period of slow economic growth and as a result, once could witness that till 1991, number of bonds downgraded had exceeded the number of bonds upgraded. 1992-1997: This was the time of blue chip stocks and when US economy was introduced to the boom of technology. As a result, with the rejuniveation of US economy, the number of bonds upgraded exceeded the number of bonds being downgraded. ...

Thesis

The global financial crisis was a period during which downturns were experienced in the stock markets, economic activities as well as losses in the housing market all over the world. During this period, banks had to be bailed out by national governments and consumer wealth declined significantly. The result was a major recession between 2008 and 2009 . This paper looks at the global financial crisis in the world, its effect in the US and measures taken by the US to manage it. This financial crisis was experienced in the world in the late 2000’s and the US was hit ...

Introduction

Banking, financial, and even insurance-issuing institutions were badly hit by the global financial crisis that happened in 2007 to 2008. It created a serious domino effect that eventually took its toll on the U.S. Federal Government. The struggling dollar and U.S. economy—the world’s largest economy in terms of GDP, led to a serious wave of financial and stock market corrections that were felt globally, especially in countries whose economy is largely dependent on U.S. commodity and financial supply and consumption. The ultimate effect of the global financial crisis of 2009 was an increased uncertainty and negativity in the financial ...

Letter of Transmittal

Designation, Department Name Dear Professor Name, I hereby submit a report requested on ‘’Major Reasons for Financial Crisis of 2008’’. In order to provide an authentic and resourceful report, I have referred to some of the best academic and research resources.

Regards,

Introduction: It has been 6 years now since the news of bankruptcy of Lehman Brothers shook the global financial world. The intensification of the global financial crisis following bankruptcy and dis-solvency of leading investment banks, corporations, commercial banks, etc. had made the economic and financial environment very tough for the world economy. By early 2009, whole ...

Introduction

Financial crises are generally protracted affairs. In most cases, the periods after a severe financial crisis have three similar characteristics. The first characteristic is that there is a deep and prolonged collapse of asset market. This means that the real prices of housing declines at an average of 35 percent. This decline is stretched over a period of more than six years. The price of equity also collapses at an average of 55 percent for over a period of three years. Secondly, there is a decline in the country’s output and employment. In this case, unemployment rate rises at a rate of 7 percent ...

The economic meltdown in the US was, as a result, of the housing bubble burst that brought about a massive economic recession in the US. The film, Inside the Melt Down, depicts a series of large American corporations going bankrupt and their shares dropping down drastically due to the economic recession. For example, Bear Stearns is a one of the multinational investment company that took an economic downturn in that its shares dropped from $171 to only $57 in a single day. Given that the media aired out their concerns regarding the economic drift of the corporation, most investors withdrew from Bear Stearns. Despite ...

The housing bubble and its subsequent burst in late 2006-07, were cited as one of the primary reasons for the financial crisis of 2007-08 that left the whole global economy in tense situations. In the US alone, millions of people went homeless, and thousand of real estate companies were having unsold homes and commercial properties. The financial pundits and researchers blamed the easy financing and relaxed regulation on the financial sectors that fed into the bubble, allowing it to grow to proportions and such level, from where it was not possible for the federal system to save the economy ...

Introduction

The government of the United States of America spends approximately $100 billion per year to subsidize American homeowners. Renters often don’t get breaks, but homeowners get them. The mortgage rates of homeowners are subsidized through the use of government-sponsored enterprises such as Freddie Mac and Fannie Mae. This is realized through giving them a tax deduction on federal, local and state income taxes for mortgage interest rates payments. Homeowners are also given favored treatment on their capital gains from the sale of a primary residence. Americans are fond of the idea of houses and white picket fence. The government, therefore, ...

Thesis

This paper will discuss how capital markets influenced the creation of new economy bubble and the subsequent banking crisis. The first section of this paper will cover the topic of shadow banking and its emergence in United States. The Second section will highlight the phases of Bubble which United States economy went though in between the period of 2000-2008. The final section of the paper will list few reasons which were most relevant in bring the economic crisis and crippling the United States economy for coming years.

Introduction

In year 2007, with the burst of Housing bubble led to defaults ...

Introduction

With regard to the housing crisis in the United States, two schools of thought have emerged to explain the causes of the financial crunch. While some people blame the ‘easy money’ policies of the Federal Reserve, others contend that it is the lower interest rates on mortgages that encouraged the euphoric buying of homes, leading to the crisis. This essay argues that the latter is true and proposes that the Federal Reserve should be subjected to the rules governing money supply to contain the crisis and avoid a repeat.

Lower Interest Rates for Mortgages Caused the Housing Crisis

While it is may be right that as the US approached ...

Introduction

Behavioral finance is essential in the understanding and analysis of systematic market effects of psychological decision procedures. The concept of behavioral finance uses knowledge from anthropology, social sciences and cognitive psychology to analyze the behavior of investors. The theory of behavioral finance is based on the idea that investors act rationally by analyzing all possible or available information before settling on a given decision. Therefore, investment markets are assumed to be efficient, and they give a true reflection of the available public information of security prices. According to Minsky, capitalistic systems are always vulnerable to crises because financial innovation leads to ...

Abstract

Since 2007, the European markets continued to experience a decline as several European nations had felt the consequences of applying the unstable Euro into their countries that had influenced the nation’s economic instability as seen in the case of Greece, Ireland, Italy, Spain, and Portugal. In recent news, the European debt crisis continues to prevail as the Eurozone reaches its all-time low for the past5 years as both strong and weak European markets now enter a state of recession that affects the entire world market. With the current European Debt Crisis continuing to influence the European markets, the United States may ...

Literature Review:

The Global Financial Crisis took over the global economy in July 2007 due to the credit crunch, particularly when US investors lost confidence in the value of sub-prime mortgages thereby causing a liquidity crisis. As a result, the US FEDERAL BANK invested large amounts of funds into financial markets. The crisis had worsened by September 2008 with global stock markets crashing and becoming extremely volatile (Eves, 2010). The housing sector of the US saw majority of home owners, who had drawn out sub-prime loans, unable to make their mortgage repayments. With values of homes dropping sharply, the borrowers were left with ...

Restoring democracy in the United States will require major reforms that reduce the power of corporations, elites and special interests in the whole political process. Right now, there is a radical disconnect between the political and economic elites and the needs and interests of the ordinary voters. Most people today realize that the country is in its worse crisis since the Great Depression of the 1930s, but government and the political system seem dysfunctional and incapable of dealing with it. Removing the power and control of big money from the political process forever would be the most important step in ...

Arguably, 2000-2009 was the most difficult moment in the world economy. The financial crisis that took place in United States and the world became the worst financial munch to ever occur in the world. The financial crisis took place in the late 2008 at a remarkably speed, whereby most economic factors were fully disturbed. Mortgage-related securities, which had fully spread in United States as well as global financial systems collapsed. As a matter of fact, this crisis undermined several largest and renowned financial institutions in United states and the world. Additionally, the crisis damaged stronger economies and financial systems in the ...

Introduction

Shenzhen, a metropolitan in Southern China, has a house price to income ratio as high as 41.15 according to Property Investment Index 2012. This is not surprising news for Chinese real estate market, as the average housing prices in China had already tripled from 2005 to 2009. Chinese property bubble is an ongoing real estate bubble in both residential and commercial real estate. While this phenomenon has caused many social, economical and cultural problems in the country, there was a heated discussion about the causes of this bubble. This essay will discuss the main causes of this bubble and further connect the ...

International Finance

A floating currency refers to a system of currency valuation where by the exchange rate of a country’s currency depends on the supply and demand of that currency relative to foreign currencies. Floating rates of exchange usually vary freely because they are determined by trade activities in the forex market. A floating system of currency valuation is the complete opposite of the fixed rate of exchange. The fixed rate of exchange regime is where by the rate of exchanging the currency in relation to other foreign currencies is set at a constant rate. Countries can either choose the fixed rate ...

For this assignment, I followed the international financial markets in the period December 19-30, 2011. After analyzing a large volume of information, I made a decision to go short the Australian dollar against the US dollar. Here I offer you my reasoning.

My decision revolves around four reasons, which, in order of significance, are:

the slowdown of the Chinese economy and its effect on commodity prices; the European sovereign debt crisis and its effects on the global economy; the possibility of a housing bubble popping in Australia; the historically high level at which the AUD trades against the USD. The first reason, which may very well be considered the most ...

The housing sector in the United States of America is undergoing one of the most difficult times in the American history. The situation has become a real problem to the nation, to an extent that it has been classified as a major economic bubble1. The real cause and the direction of the situation is one of the major economic hurdles facing the United States of American today. It has affected many parts of the United States since it started occurring in 2007, while other parts are feeling the effects2. The situation has led to a decline in the number of potential buyers ...