Unraveling the Global Financial Crisis

Abstract

The primary focus of this paper is on the causes of the financial crisis of 2008 and how it affected the world economy. The three main causes of the financial crisis are the Fed's monetary policy, subprime mortgage and credit default swaps. Irrational lending methods, the bubble economy in the housing market and unregulated insurance schemes became the inducement of the global financial crisis, which began with the bankruptcy of Lehman Brothers, the merger and acquisition of JPMorgan Chase and more and more people losing their jobs. This is not only an explosion in the American market, but also in the Asian and European markets are facing a depression. Therefore, the US government learned from the experience after 2008 and issued two corresponding important laws to prevent such incidents from happening again. The two proposals are the Dodd-Frank Act and Basel III. Therefore, this paper will introduce the two plans in detail and analyze their impact on the American economy.