Economic downturns and the business environment The subprime mortgage crisis of

Question

Economic downturns and the business environment The subprime mortgage crisis of 2008 and the now famous failure of investment bank Lehmann Brothers in the United States brought the world's financial system to the brink of chaos in what became known as the global financial crisis. Even the acronym 'GFC became commonly used in everyday speech Hundreds of banks in the United States and other countries collapsed, and governments injected 'fiscal stimulus packages' into economies, aimed at spending their way out ofor at least delaying the onset of - the recession they feared. Once proud icons of industry appealed for increasingly large govern- ment grants and loans, and banks that had previously been free with credit tightened loan criteria to the point at which some businesses failed for want of operating capital. Even the United States government did the formerly unthinkable and virtually nationalised banks (as did the British government), and made staggeringly large 'loans' to big business, just to keep the economy turning over. Large and formerly profitable companies like insurance giant AIG and car empires General Motors and Chrysler suffered severely. United States President Barack Obama told them their bailout support would not continue, and that they could not expect to live on as 'wards of the state'. Management had to accept the downside of their behaviour along with the upside they had enjoyed for years. Ordinary people were furious as their superannuation funds were savaged while corporate high flyers took large bonuses. The crisis became an enduring downturn, and many household names simply disappeared from the market. By 2009, it was clear that this was not just a temporary downturn. Leade Australia, joined together in an unprecedented initiative for coordinated action. It took a year of fiscal stimulus by Western governments before optimism and signs of global recovery emerged. The tightly regulated Australian banking sector remained conservative throughout the GFC; while the banks needed and got government guarantees, they had no need of the rescues required by their foreign counterparts rs of nations, including

Explanation / Answer

1- The simple cause of economic downturn was lack of ethics by the financial institutions mainly in Western economies where they provided risky credit to the borrowers.There is not any simple solution but one thing can reduce happening of such thing in future is inculcation of ethics in finance.

2-We can learn that when finnacial downturn happened we have to go for austerity so that finnacial condition can be stable.The host county have pressurized to take austerity measure and Greece have to do it willingly or unwillingly.It is a lesson that one country have to bow down before the lenders in such case.

3-Definitely 2016-18 looking to be slow and steady recovery because economies of Australia, New Zealand and Asian are recovering and doing well enough to propell global economic growth.Tourism sector in Australia is performing quite well and so the manufacturing goods.The managers of these countries can plan and make better strategy of how their company can take the oppurtinities in proper way and grow in the globally instability arena.

4- A manager can not be able to completely risk averse but can try to become risk averse in some degree so that their assets will not sunk down and people should not loose confidence from them.

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