From the year 2008, the world has been experiencing the worst economic crisis since the 1930s. The crisis basically start in around the year 2004 when some investors took huge mortgages to expand their real estates with hope that they will sell them and pay the loans. But what real happen is that these mortgages were of high interest which made paying an uphill task and buyers of properties were easily coming by.
The effects have been aggravat by the fact that we are leaving in a globaliz world. These days something happening anywhere in the world can be reach you in split seconds thanks to technology. But this is on the positive side, the downside of globalization is that big corporations are investing all over the world and in an event this companies get financial difficulties, the effects are usually beyond measure.
To start with, when the crisis hit:
Most investors withdrew from trading in stocks. Usually when the economy is troubl because of some poor decisions by big corporations or countries, the stock market is one of the places that are hard hit. People stop buying shares because they fear they will lose more by investing in a particular company. This in effect ruces the paper value of a company and the amount of revenue that comes in cut.
A company in that state is likely to fall since critors will be demanding to be paid. This is the reason many companies had to lay off workers, be bail by governments or close most of their local and oversees branches and thus affecting the world economic system.
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The Gross Domestic Product of many states fall considerably basically because there is no market for the good and services produce. Whenever people are not sure of tomorrow, what they do is to cut back spending and start saving a lot. If they have to spend, they do it on primary nes like food, clothing, ucation and health leaving out luxuries like buying cars and going for expensive holidays.
It is important to understand:
That it is this secondary, expensive nes that drive. The economy since the there is no limit to what one can buy. The lack of market lead to companies shifting to applying survival techniques.
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Like rucing the prices of products which leads to deflation, a move that affects the economy further.
The other effect is people losing employment. Those who are leaving in when the line is drawing are paying less wages or are deni bonuses. Ever since the year 2008 many people have been out of jobs. And quarterly reports releas since have not been appealing. Since the job creation rates have been on a downward trend.
There are periods:
When they do go up but the rate only appears to be a drop in the ocean. Effects of people losing jobs are far reaching since those working are usually the breadwinners of families.
The fact that many fear to spend and others take up loans to help make ends meet. Have not real help the situation heal quickly. The effects discuss here are just those that are immiately felling. There are others like governments becoming unpopular and psychological effects.