September - Entry

What are the root causes of the global economic crisis?

by Radioactive

These days, the most talked about news is the financial crisis that has engulfed the world economy. Everybody, the main headline of all newspapers is about falling share markets, decreasing industrial growth, high unemployment rates and the overall negative mood of the world economy (Eklavya, 2008).

The global economy crisis which is being experienced today cannot be seen as an event but rather, a process which has been building over time but has become more noticeable since September 2008 when a series of unprecedented events began to reorient the Global financial system.

These series of events has resulted in a global phenomenon called global economic/financial crisis. So what has caused this major economic upheaval in the world? What is the cause of falling share markets in the world and bankruptcy of major banks? In this essay, I intend to explain the root causes of the present day global economic crisis.

Recently, my local bank went bankrupt due to the global financial crisis. I had thought that the crisis would not reach Nigeria since we are relatively under-developed, I never knew that it was truly “global” and that even the rodents who spend some time in my room are suffering same predicament.

According to Professor Joseph Stiglitz, a Noble laureate and Professor at Columbia University, “the current financial crisis, which began in the US and then spread to Europe, has now become global” (Global Research, 2009). If you ask a thousand economists what they think is the root cause/causes of the global economic crisis, you will probably get a thousand answers! That aside, the current financial crisis is believed to have started in the United States of America where there is an imbalance in the circular flow of income.