Impact of the Credit Crisis on Financial Market Liquidity
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The paper discusses how the credit crisis reduced the liquidity on the markets and explains that this eventually translated into decreased access to resources and a slowed down economic activity. The paper also explains how financial markets were facing hurdles from the fluctuating price of crude oil, the collapse of companies trading on financial markets and the challenges generated by regulators. The paper then explains how movements in the market subsequently impacted interest rates.
From the Paper:"But before generating these effects, the credit crunch first took its toll on the financial market, which eventually impacted the country and the world. The realization of the importance of the credit crisis for the financial market represented an unfortunate moment at which the players recognized the major potential for future looses. In other words, the credit crisis' impact on the financial market marked "the cut-off point between "an Edwardian summer" of prosperity and tranquility and the trench warfare of the credit crunch - the failed banks, the petrified markets, the property markets blown to pieces by a shortage of credit" (Elliot, 2008).
"At a more specific level, the crisis had generated falling prices for the real estate properties, a lack of consumer trust and an impending economic recession. The life style of living out of one's means through borrowing was no longer sustainable. The value of the overpriced assets (especially those of the real estate properties) quickly decreased, and the mortgage backed securities used to finance them were soon devalued and came to be "worth less - a lot less - than those holding them imagined" (Elliot, 2008)."
Sample of Sources Used:
- Conway, E., October 16, 2008, Financial crisis: Interest rates to hit lowest level since 1694, Telegraph
- Elliot, L., August 5, 2008, Credit crisis - how it all began, The Guardian
- Gray, K., Interest rates and the credit crunch, Buzzle, http://www.buzzle.com/articles/interest-rates-and-the-credit-crunch.html last accessed on June 16, 2010
- August 7, 2009, Timeline: Credit crunch to downturn, BBC News, http://news.bbc.co.uk/2/hi/7521250.stm last accessed on June 16, 2010
- June 8, 2010, IPOs stage a comeback, Forbes, http://www.forbes.com/2010/06/07/ipo-emerging-markets-business-oxford.html last accessed on June 16, 2010
Cite this Term Paper:
Impact of the Credit Crisis on Financial Market Liquidity (2013, March 07) Retrieved September 23, 2023, from https://www.academon.com/term-paper/impact-of-the-credit-crisis-on-financial-market-liquidity-152523/
"Impact of the Credit Crisis on Financial Market Liquidity" 07 March 2013. Web. 23 September. 2023. <https://www.academon.com/term-paper/impact-of-the-credit-crisis-on-financial-market-liquidity-152523/>