Global Financial Meltdown Essay Example | Topics and Well Written Essays - 1000 words

Global Financial Meltdown - Essay Example2) The downfall of Iceland In the case of Iceland, it was a perfect place for a family to live till the government decided to deregulate the banks and let multinationals exploit their natural resources. The result was a disastrous uphold on the environment and the banks collapsed due to which unemployment tripled and many of the people lost their life savings. When the largest banks were privatized, they borrowed money totaling to 120 billion dollars which was roughly ten times the size of the economy. These banks and their activities were back up by American auditors such as KPMG and credit evaluate company which rewarded them highest form of grading Triple As. In the end, regulators formed the role of genuine spectators and did nothing. 3) Destructive growth of United States pecuniary sector After the Great Depression, the fiscal sector was strictly regulated most of the banks were local and were not allowed to using up depositors mone y for any sort of investment. But then the investment banks went public and that is when the financial sector went berserk. The investment bankers now were owners of vast amounts of public money. When hot seat Reagan came into power, he with his treasury secretary who was a CEO of Merrill Lynch, began a thirty year deregulation plan. The first firms to be deregulated were savings and loans companies. These firms were deregulated which provided them with a permit to lend oneself depositors savings for risky speculation purposes. They failed and many went to jail. Deregulation continued in Clintons era and by the late 1990s you could identify the major financial firms. The deregulation activity was overseen by a Harvard economic professor Larry Summers, an economist Greenspan and Robert Rubin a former CEO of investment bank Goldman Sachs. This clearly shows us how political economy was exploited for personal gains, politics was being influenced by the financial sector and the academ ia corrupted. Further on, the documentary (Ferguson, Inside Job) informs us about how financial firms became so strong that they could breach a law, be exempted by it for a year and then a new law is passed to facilitate their interest. The merger amidst Citicorp & Travelers is a mirror image of the above statement. While the financial sector continued to become powerful, the internet bubble crash gave the economy a huge blow. We realize through the documentary that the internet bubble was pre-planned because investment banks were involved in promoting firms which they knew would surely fail. Conversations between the personnel of investment banks termed those firms as useless firearm they were describing them as perfect investment opportunity to the public. With deregulation taking place and the technology advancements occurring derivatives entered the economy. They were engineered in order to make more profit, but in earthly concern it was explosive material that would make the market highly volatile. In order to avoid any discussion over its regulation, a bill was passed in promote of de-regulation of derivatives. As the industry was even more powerfully dominated by a few gigantic investment banks, security and insurance companies and credit rating agencies than before financial sector became even more complicated. 4) Complicated financial products engineered to grow profits Inside job gives