The Causes of the Global Financial Crisis

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the oil producing countries and Brazil, Russia, India, China. When the war started on 19 March, 2003, Iraq, a country with the second largest oil reserves in the world, were forced to cease its oil exporting. Thus, the OPEC (Organization of Petroleum Exporting Countries) started to control the price of the oil. As a result, the oil globally increased, bringing excessive profits into oil producing countries. In addition, BRICs, making a rapid economic growth, increased their amount of foreign reserves. This surplus money intensively flower into America and its housing market, a natural result to a country with the largest economic market and in the middle of a war. This formed the structure of the housing bubble.

When Saddam Hussein, the former president if Iraq, was executed in 30 December 2006, and the others, becoming tired if lingering war, saw this event as a sign of political stability to come to Iraq, the money that was overflowing in America suddenly turned outward. The money started to move to countries with higher interest rates than America, causing the American dollar to fall. The result was the housing bubble burst and the subprime loan system collapsed, leading to the global financial crisis.

The effects of global financial crisis are everywhere. It has caused the world economic market to contract, decreasing the number of jobs and increasing the rate of unemployment around the world. According to the report by Business Labor Trend in 2009, in America, the epicenter of the financial crisis, all the companies have been conducting an extensive personnel reduction, and its rate of unemployment has reached 6.5%, which is highest in 14 years. The rate of unemployment was also increasing in Europe and Asia. Britain and Germany have been hit by negative growth, Korea and France have been conducting tax reduction to help the citizens. In Greece, the rate of unemployment is high among youth and it’s about 21% for under age 25, causing the riot break out. Japan has also experiencing a difficult time in financial terms. The rate unemployment has increased form 3.8% to 4.4% in 2009.

In conclusion, global financial crisis was the result of the collapsing subprime loan system in America. However, this was only an immediate cause of the crisis. There were other causes, indirect, but important, that caused the global financial crisis: the domestic financial policy in America after September 11 Attacks and an excessive inflow of world’s money to America. Now, the world is together facing similar problems such as decreasing number of jobs and increasing rate of unemployment, both problems that must be solver for a brighter future.