An analyst for the Bank of England and you have been asked to analyse Essay

An analyst for the Bank of England and you wealthy person been asked to analyse and critically evaluate the causes and consequences of the - Essay showcaseIt is apparent that events in the previous age such as the dotcom crash, bankruptcies and frauds of large firms such as Enron and the paladin prime crisis all lead to successive weakening of the fiscal markets. The money and capital markets showed extreme sadness selling and in the crash, assets were depreciated to the extent of 300 trillion USD. Money supply and demand underwent some ever-changing changes with banks reluctant to release funds to borrowers for fear of that the loans would not repaid. The UK government attempted to correct the problems by lend in a number of measures and methods. These included macroeconomic instruments and quantitative easing that was used for the first m in UK financial history. The market reacted in a diffident manner to these economic policies and some cold-shoulder recovery is apparent in the GDP, inflation and other indicators. Table of Contents An analyst for the Bank of England and you have been asked to analyse and critically evaluate the causes and consequences of the world financial crisis of 2007/2008 in the UK 1 January 19, 2013 1 1. creation 5 2. Causes and consequences of the financial crisis 6 3. Response of capital and money markets 11 4. Response and effectiveness of the macroeconomic policies 16 5. Conclusions 26 References 28 List of Figures Figure 2.1. LIBOR-OIS Spreads (Kacperczyk and Schnabl, 2012) 7 Figure 2.2. Rise in risk bonus (McKibbin and Stoeckel, 2009) 8 Figure 2.3. Euro Area Government Bond Rate (Kacperczyk and Schnabl, 2012) 10 Figure 2.4. The US accommodate bubble and crash (McKibbin and Stoeckel, 2009) 10 Figure 3.1. UK market index FTSE100 (Stockcube 2012) 11 Figure 3.2. Global financial assets value reduction (McKinsey, 2009) 12 Figure 3.3. Dispersion in Money Market Funds (Kacperczyk and Schnabl, 2012) 13 Figure 3.4. Asset hold ing and their spread (Kacperczyk and Schnabl, 2012) 14 Figure 3.5. M2 Multiplier and the ratio of M2 to reserves (Hodson and Mabbett, 2009) 16 Figure 4.1. GBP response to policies (Benford, et al, 2010) 17 Figure 4.2. UK Percent Change in GDP (Benford, et al 2010) 18 Figure 4.3. Central Banks Asset Holdings (Benford, et al 2010) 19 Figure 4.4. Transmission mechanism for purchase of assets (Benford, et al 2010) 20 Figure 4.5. Desired execution of the LM curve (Thomas, 2010) 21 Figure 4.6. Actual movement of the LM curve (Benford, et al 2010) 22 Figure 4.7. New equilibrium point in the IS-LM fabric (Athey, 2009) 23 Figure 4.8. Impact of QE on the economy (Joyce, et al, 2011) 24 Figure 4.9. UK Money Multiplier (Bank of England, 2010) 25 Figure 4.10. UK GDP growth (ONS, 2012) 25 Figure 4.11. UK CPI Inflation rate (Benford, et al, 2011) 26 1. Introduction The previous decade saw one of the worst and most widespread financial crisis in ripe history when global financial markets crashed from 2007-2008. The financial loss across the world measured in footing of devaluation of assets, insolvencies of banks and asset depreciation is estimated at 290 trillion Dollars (Barrel, 2011). According to a report by Rose and spiegel (2009), the recession was fallout of the sub prime crisis that originated in 2005 and the market crash occurred in 2007. Mishkin (2008) is of the opinion that the years before 2007 that saw the dotcom boom and bust, the peak in crude oil prices and the high value of the transmission line market were signs that a crash was coming. Nothing was done to prevent the market