2008 Us Financial Crisis
US Financial crisis
On October 10, it was announced at the G7 meeting that an action plan was adopted to actively inject public funds to financial institutions in the G7 nations in an attempt to deal with the credit crunch which has resulted from capital deficiencies at those institutions. This plan has been supported by the G20 nations including such developing countries as China and India. Right after this announcement, the US government, following some of the EU nations, has decided to infuse 250 billion dollars into the banking system as new capital, where this amount of public funds is coming from the 700 billion dollar economic rescue package previously announced. Furthermore, federal insurance will be expanded to cover most of the interbank credit as well as all non-interesting bearing accounts for small businesses, in addition to the purchase of commercial paper by the Federal Reserve Board.
Although at first the stock markets responded quite positively to these developments, stock prices seemed to level off after a day or two, and went down again in New York and elsewhere. Investors around the world are still very much concerned about the future of the real economy. Basically, the announced measures were for emergency treatment, but they have fallen short of creation of a new financial and supervisory scheme to deal with fundamental causes for the US financial crisis or adoption of effective policy measures to prevent a further worsening of the real economy due to the current crisis in the world. Therefore, we are still standing at a crossroads with no visibility into the future of the post-war world economy. Aside from immediate actions to be taken by major countries, let us consider more fundamental problems of the international financial system.
First, the US authorities have been arguing that the financial system in Japan and other Asian countries should be reformed from the troublesome system based on banks, that is, indirect financing, to the
On October 10, it was announced at the G7 meeting that an action plan was adopted to actively inject public funds to financial institutions in the G7 nations in an attempt to deal with the credit crunch which has resulted from capital deficiencies at those institutions. This plan has been supported by the G20 nations including such developing countries as China and India. Right after this announcement, the US government, following some of the EU nations, has decided to infuse 250 billion dollars into the banking system as new capital, where this amount of public funds is coming from the 700 billion dollar economic rescue package previously announced. Furthermore, federal insurance will be expanded to cover most of the interbank credit as well as all non-interesting bearing accounts for small businesses, in addition to the purchase of commercial paper by the Federal Reserve Board.
Although at first the stock markets responded quite positively to these developments, stock prices seemed to level off after a day or two, and went down again in New York and elsewhere. Investors around the world are still very much concerned about the future of the real economy. Basically, the announced measures were for emergency treatment, but they have fallen short of creation of a new financial and supervisory scheme to deal with fundamental causes for the US financial crisis or adoption of effective policy measures to prevent a further worsening of the real economy due to the current crisis in the world. Therefore, we are still standing at a crossroads with no visibility into the future of the post-war world economy. Aside from immediate actions to be taken by major countries, let us consider more fundamental problems of the international financial system.
First, the US authorities have been arguing that the financial system in Japan and other Asian countries should be reformed from the troublesome system based on banks, that is, indirect financing, to the