5 EFS Project 2 Research essay

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To what extent have the US governments policies caused the financial crisis?
Title: ______________________________________________________________________________________________

THE INFORMATION THAT YOU WRITE BELOW SHOULD BE IN DOT POINT FORM USING ABBREVIATIONS AND SYMBOLS WHERE APPROPRIATE. WRITE FULL SENTENCES FOR YOUR THESIS AND TOPIC SENTENCES ONLY!! THE TOPIC and THE ISSUE (quest !n":

To what extent have the US governments policies caused the financial crisis?

INT#O$UCTION %a&'(r!und n)!rmat !n * d ))erent + e,-! nts !n t.e ssue:

The U.S. financial crisis in august 200 started to emerge full!"lown in 200#$ the impact from the U.S. financial mar%ets to the glo"al financial mar%ets continue to spread$ from the virtual econom& to the gradual infiltration of the real econom&$ so that the glo"al econom& into the worst recession since world war ''. (s of the end of )ecem"er 200*$ although the glo"al economic development$ the most difficult period has passed$ some countries have "een out of the recession and started to recover$ "ut with var&ing degrees of glo"al economic recover&$ in particular the unusuall& slow recover& in the developed countries$ even in the face of new attac%s. The reason$ it is "elieved that this is mainl& due to the formation of the U.S. financial crisis$ did not eliminate the underl&ing causes are still ma%ing. Therefore$ in!depth stud& of the cause of financial crisis in the United States$ there are lots of reasons resulting in the financial crisis. +an& scholars argues that the world monetar& fluctuations and the oil crisis mainl& result in the financial crisis. (nd some advocates that the United States government policies such as financial policies and fiscal policies contri"ute a lot to the financial crisis. (nd the this essa& would specificall& discuss to what extent that United

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States government policies would cause the financial crisis.

THESIS ST/TE0ENT

.ere$ it is "elieved the Unite States government policies mainl& result in the financial crisis. (nd it would "e illustrated from the following aspects.

OUT1INE O2 ST#UCTU#E :

)efinition of currenc& crisis /omment on (merican governments role in financial crisis /onclusion

E3TEN$E$ $E2INITION P/#/4#/PH ( !) 5E6 TE#0S /N$ CONCEPTS" Include references

Definition of c !!enc" c!i#i# +arx once points out that an& common currenc& crisis is a special stage of production and "usiness crisis$ which should "e the apart from the special crisis. The special crisis can produce alone$ onl& reacting to the industrial and commercial$ and the movement center of this crisis is monetar& capital$ so the direct scope of the crisis is the "an%s$ stoc% exchange and finance 0/olander$ et.al$ 200*1. +arxs currenc& crisis has two meanings. 2or the first t&pe of currenc& crisis$ it happed in a period of time "efore financial crisis with the currenc& crisis of economic crisis. (nd the currenc& crisis is the s&mptoms and signs of financial crisis$ which is caused "& the capitalist overproduction and capital surplus. 2or the second t&pe of monetar& crisis$ in the case of an independent currenc& crisis$ occurs in the financial sector$ which is a special stage of virtual capital independence movement. 't is from the disorder withing the financial s&stem as the social reproduction process has not "een stretched to the limit and the development of comprehensive production surplus has not &et "een critical degree of the financial crisis0/olander$ et.al$ 200*1.

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TOPIC SENTENCE%
%O$6

Section $% (rguments3'deas34oints Sources that support &our ideas 0author surname$ date 5 page num"er1 -einhart$ /.+$ -ogoff$ >.S$ 200#$ 7ol.?90@1$ 4ages$ 2*8!2** 7on$ A. -$ 8**9$ 7ol$ ?9021$ 4ages$ 8!2?.

1st su--!rt n( ar(ument 'dentif& main topic of this section

(merican scholars -ehinhart and -ogoff 0200#1 comprehensivel& anal&6ed the influence and results of financial crisis of United States$ and he concluded that the government intervention contri"utes a lot to the financial crisis. Since the #0 s last centur&$ the new li"eral capitalism in the United States occup& the dominant position$ (merican government implements the financial deregulation 07on$ 8**91. Under the government:s intervention$ the United States most housing mortgage loan originators are regional savings ;an%s and savings and loan associations$ local commercial ;an%s are also involved in mortgage loans.These institutions have not ver& strong financial strength$ that a lot of mone& was put on the housing mortgage loan poses a severe stress to the turnover of funds. Some<financial innovation< tools of financial institutions then pac%aged the credit assets as collateral$ to issue negotia"le "onds. ;& giving =uite attractive fixed income$ then these financial institutions sold the negotia"le "onds. +an& ;an%s and asset management companies$ hedge funds$ insurance companies$ pension funds and other financial institutions have invested on these
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"onds. +ortgage companies had a stead& stream of the financing channels$ to create the rapid growth of new su"prime. 'nvestment institutions so o"tain higher earnings. Bnce the "u""les come up$ it can eventuall& result in financial crisis. 2rom this point$ it can see that the deregulation of (merican government on financial industr& ma%e the "ad situation of economics. The disorder and irregular housing loans at the merc& of government intervention results in the disorder of current rates$ which contri"utes a lot to the financial crisis. So the government of (merican on the housing loan policies ta%e more responsi"ilit& of the financial crisis.

%!d7 Section &% 2nd su--!rt n( ar(ument

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TOPIC SENTENCE%

'dentif& main topic of this section

Sources that support &our ideas 0author surname$ date 5 page num"er1 (rguments3'deas34oints Ta&lor$ C.;$ 200*$ 7ol$ ;ased on the famous (merican government 2@021$ 4ages$ 8! intervention theor& put forward "& the economist Coseph stiglit6$ he thin%s that in +ish%in$ 2.S$ 2088$ 7ol$ the United States financial crisis is out of a 89 ??081$ 4ages$ 8!82 variet& of factors$ such as the im"alance of the real estate mar%et and inappropriate monetar& polic&$ the chaos of the asset securiti6ation0Ta&lor$ 200*1. 2inancial derivatives$ credit rating and the lac% of financial regulation$ loss of e=uili"rium of international econom& and the international monetar& s&stem$ the consumption of economic model and neo!li"eral capitalism$ etc.$ are closel& related to the mar%et defects and government intervention 0+ish%in$ 20881. The financial crisis is li%el& to "e destructive and has the widest affective scope. (s Coseph argued$ U.S. government:s financial polic& is a hot"ed of the financial crisis. The long time loose monetar& polic& and financial regulation$ on the one hand$ impel the transformation of the financial mar%ets and product innovation$ on the other hand also "ecause of the change of the economic c&cle and regular$ it plants the seeds of all %inds of crisis. 'n earl& 2000$ due to the economic downturn$ in 200@ to 200D the fed has cut short!term interest rates to %eep the level of around 8E$ "ut a low interest rate polic& ended in 2009$ the short!term interest rate clim"ed to ?.2?E soon. The rising of short! term interest rates are influenced "& monetar& polic&$ thus it affect long!term interest rates$ the result is that return curve "egins to flatten$ and narrow the difference "etween the long and short rates. Thus$ it strongl& affects the house rate of (merican$ which is the first phase of financial crisis. So the (merican governments monetar& polices exert great impact on the

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%!d7 Section '% 3rd su--!rt n( ar(ument 'dentif& main topic of this section

TOPIC SENTENCE: (rguments3'deas34oints Sources that support &our ideas 0author surname$ date 5 page num"er1 /hristiano$ G.C$ Aust$ /$ -oldos$ C$ 200D$ 7ol$88*081$ 4ages$ 9D! 80@.

Forld "an% senior vice 4resident and chief economist Custin Gin said in an interview that the financial crisis to the current development stage is greatl& connected to the U.S. government having not well dealt with the 'nternet "u""le "urst in 2008. 'n the process of economic "ooms and "usts$ the stoc% ;arnet$ F.($ /hauvet$ +$ mar%et and real estate mar%et often show the 2088$ 7ol$898081$ fluctuations0/hristiano$et$al$200D1. ,ventuall& 4ages$9!2@. ma%er people don:t understand of the economic c&cle is not the stoc% mar%et$ also is not the real estate mar%et$ "ut mastering the power to implement the expansion of the monetar& polic& "& the government. (ustrian school argues that the ultimate source of economic depression is credit expansion$ and the modern mar%et econom& power in the hands of the government$ therefore$ the government has "ecome the ma%er of the "usiness c&cle0;arnet and /hauvet$ 20881. So once the stoc% mar%et shows fluctuation$ the government should adopts suita"le monetar& police to help deal with the pro"lem. .owever$ the (merican government does not ta%e the new monetar& policies "ased on the

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modern situations "ut releases a series of laws and policies on restricting export and import. Thus$ it finall& results in the financial crisis.

C!n&8us !n

(s is illustrated a"ove$ the nature of the U.S. financial crisis lies in the intensified currenc& of internal contradictions./urrenc& as pa&ment method contains a pair of contradictions: the contradiction of calculation and the real currenc&. Fhen people trust each other$ most trading currenc& would "e settled "& calculation. Fhen people distrust$ trading should "e carried out "& real currenc&$ this raises pa& crisis or illi=uidit&$ goods will not "e a"le to smoothl& transformed into a currenc&$ internal contradictions of commodit& would out"rea%$ social production will "e in stagnation. 2rom the moment$ the financial crisis in the United States will out"rea%$ is characteri6ed "& illi=uidit&. ;an% credit crunch is a t&pical pa&ment crisis and credit crisis. Thus$ the economic polic& such as monetar& polic& pla& a vital role in the financial crisis as it is closel& related to the capital li=uidit&. (ccording to the argument a"ove$ it can "e concluded that the government policies contri"ute a lot to the financial crisis.

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#e)eren&es (/s 7!u ,!u8d ,r te t.em n a 9 98 !(ra-.7: )!88!, n( /P/ (u de8 nes"

Hame of article: 's the 200 US su"!prime financial crisis so different? (n international historical comparison (uthor: -einhart$ /.+$ -ogoff$ >.S$ Hotes: http:33www.n"er.org3papers3w8@ 98

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Hame of article: The financial

crisis and the polic& responses: (n empirical anal&sis of what went wrong

(uthor: Ta&lor$ C.; Hotes:

http:33scholar.google.com3scholar?=Irelated:G'J%Fu;J>l+C:scholar.google.com35hlI6h! /H5as_sdtI0$?

Hame of article: +onetar& polic& in a financial crisis$ Cournal of economic theor& (uthor: /hristiano$ G.C$ Aust$ /$ -oldos$ C Hotes: http:33www.sciencedirect.com3science3article3pii3S00220?@80@0022#K

Hame of article:

The financial crisis and the s&stemic failure of the economics profession

(uthor: /olander$ )$ Aold"erg$+$ .aas$($ Cuselius$ > Hotes: http:33www.tandfonline.com3doi3a"s380.80#030#*8@#80*02*@D80*

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Hame of article:
+&th and realit& of /hina:s seventeenth!centur& monetar& crisis

(uthor: 7on A. Hotes: http:33Lournals.cam"ridge.org3action3displa&2ulltext? t&peI85fidID82 9#5LidIC,.5volume'dI?95issue'dI025aidID82

90

Hame of article: (uthor: +ish%in$ 2.S Hotes:

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+onetar& polic& strateg&: lessons from the crisisM

http:33www.n"er.org3papers3w89 ??

Hame of article:
.ow "etter monetar& statistics could have signaled the financial crisis

(uthor: ;arnet$ F.($ /hauvet$ + Hotes:

http:33www.sciencedirect.com3science3article3pii3S0@0DD0 980008#2K

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