The Financial Crisis
To be exact, the Financial Crisis did not start with the stock market crash in October 2008 but with the housing bust that already started in 2005, because of the fact that about every bank is, to a higher or lower extent, involved with the real estate market, issuing different kinds of mortgages and speculating with real estate prices. In America’s history the housing industry has always been a fundamental part of its economy and therefore a breakdown of this industry has severe consequences. Accordingly, the housing bust was a precursor of the current Financial Crisis and it was fatal for the economy, but unfortunately mo one paid enough attention to these facts until it was too late.
Ben Bernanke just said in July 2008 that “sound economic growth is connected to well-working finance markets.” He is perfectly right; and the finance markets did not work so we now face a major recession. Until today we hear about factual or imminent bankruptcies daily and the cry for the government fixing the problem as well as the expectations towards the government grow. In the course of the Financial Crisis more than half of the US investment banks have already disappeared from the market because of bankruptcies and takeovers or mergers.
Next to the Finance markets the car industry is one the biggest losers of the current Financial Crisis. America’s big three car makers are in a very bad position and the European car industry doesn’t look much better. Even Toyota, the Japanese car manufacturer that always belonged to the most profitable companies in this industry recorded losses in 2008 for the first time in its history. In about every industrial nation car manufacturers belong tothe most important industries and there are not only thousands of people employed by the car makers themselves but even more jobs are provided by their suppliers. That suggests that politics should do everything possible to save this industry.
About two million jobs were already made redundant in the meantime and governments all over the world are trying to save their countries’ economies and avert an economic disaster. By now, most governments put up with a major recession and will be satisfied if they can prevent a depression. But how can they prevent it? How far is a government in charge of fixing the situation anyway? Different people have different answers to these questions and one is often exactly the opposite of the other. Politicians don’t concur with one another either and struggle to find compromises that meet the demands of the largest possible part of the population. But there is one fact about everyone agrees on: Action must be taken soon. But before we have a look at what governments have done and look at the effects of their actions we should first clarify how the Financial Crisis was made possible in the first place.