Impacts of the Current Economic and Financial Crisis on Trade Essay

The current economical and fiscal crisis is the least the domain expects and wishes to happen at this time. Considering the political, br clean(prenominal)ly and environmental upheavals happening in almost every continent around the world, masses impart to submit yet another form of crisis that hits them right in the pocket and through their stomachs.Everyone hopes that the economic and pecuniary crisis ebb down out soon because of the myriad of other problems and issues the world is fronting. These problems already wreaking massacre in many part of the world include climate change and the adverse do it is easyly creating in many seek areas, the political turmoil in the Middle East towards Western Asia where extremism, the oil crisis and militancy are depriving the state their right to peaceful life and secured future. In addition, the threat of nuclear proliferation is again showing its ugly orchestrate in countries not exactly known for its civil discretion record and democratic adherence to governance.Henceforth, the spherical financial crisis is hitting its toll hard on the economy of both the unquestionable and the development areas. any(prenominal) caused the crisis is something for people of all nations to analyze and give solvings to. There is no other time that a crisis of this order and potential toxic effect on everyone has happened since the great depression in the United States spine in the 1930s.Because no one in every developed and developing countries will be spared by this financial and economic tsunami, there is a need for every nation, government, private sector and every concerned citizen of this world to talk to apiece other, discard their differences and find lasting solution to a turmoil whose long status effects is not so much known let alone the consequences of every possible solutions each economic unit adopts to avoid, control, face or even manage it.Drivers of the economic and financial crisisThe financial cr isis is believed to be caused by several factors that sufficeed trigger the wave of the meltdown causing more problems and issues to mount creating more havoc along the way.May sectors full point to simple greed and irresponsibility in overreaching corporate goals and objectives at the expenses of good governance and ethical conduct? Key corporate executives were known to have concocted various schemes to agnize money, expanding credit to dangerous limits, creating financial derivatives that are not backed by secure assets giving to food groceryplace balloons waiting to burst at the prick of the regulatory pin by the government.Banks knew that the symptoms of the crisis appeared when collections on subprime mortgages started to slowdown immobilize down the liquidity positions of banks and financial institutions that rely on prompt payments for that all-important shareholder value which banks have to deliver to the stockholders.Such drive for shareholder value gets tempered by the huge compensations and benefits enjoyed by the bring out executives of Wall Street financial firms. Credit cards transactions substituted for the liquidity that consumers have started to overleap. People started to lose homes through foreclosures resulting in more defaults. Borrowers in the market similarly defaulted as salutary creating a make clean of bad debts and worthless assets.Accountants and auditors started downgrading, depreciating, and impairing their assets to match the ongoing deterioration in the values of financial resources. While assets were beingness adjusted for overvaluation, liabilities were being litigated for non-payments and defaults. Stockholders and depositor, fearing the loss of their money to provisions for loan losses and panic withdrawals, withdrew their investments as fountainhead and kept them under their pillows until the market conditions stabilize and start to recover.In the meantime, the general sentiments in the market were gloomy, get along eroding investor confidence stalling the normal flow of credit money to the personalised credit line sector. Corporate managers, veneering the impact of bankruptcy and tight liquidity, sought government interventions and protection from the economic slide.A number of chi rotterery executives even would create fraudulent transactions to cover up their inability to create profits. Financial scams were discover along the way, worsening further the already dampened moods in the market. Here, globalization, once taunted as a phenomenon carrying a mickle of opportunities for countries which have erased their boundaries to gain headway in the borderless economies, started to carry the tentacles of the crisis and carried the waves of defaults, unemployment, depression and recession, slackening demand for consumer goods, investments drying up to other countries faster than ever.Immediate and subsequent impacts created by the economic and financial crisisThe immediate impacts cre ated by the financial and economic crisis are the loss of investor confidence in a market haunted by bad debts and slow collections, deteriorating values of properties, illiquidity in the market, mergers, consolidations and buyouts, credit squeeze, downsizing of corporate structures, and ultimately bankruptcies for those unable to find workable solutions to the financial mess. Derivative instruments burst creating a market vacuum that dissipated related derivatives.Money stopped satiny into the credit-hungry manufacturing sector threatening more unemployment and job cuts. Credit card defaults started to create more defaults and payment moratorium and debt restructuring, position laid off employees in desperate positions for more defaults.Impacts on the developed countries were critical. Luxury and semi- highlife goods suffered a extortionate slide in demand caused by dampened market outlook and wait-and-see stance. People kept their money slice those without started to think abou t more drastic financial solutions that reflected despair and chaos.Industries such as the automotive, electronics and other luxury players in the market faced an empty market not much buyers. In the meantime, borrowed funds to digest the manufacturing sector ballooned to huge levels triggering rush for bailouts from the government. Liquidity has to go back to the economy, scarcely many corporate investments were ahead brought to the developing countries to take advantage of higher returns and assurance of stability in certain self-contained developing markets analogous China, Malaysia. India, Philippines and Indonesia. These countries were likewise starting to face the prospect of huge repatriation of capital investments back to their home countries already facing the b have a bun in the ovent of the category 5 financial storms.On the other hand, the government of the developed countries commenced bailouts and hoped to sustain market demand by creating a gamut of stimulus packa ges to keep consumer spending going. This was thought to at least confront the depressed market for imported and even local goods. Importers reviewed their orders with many stopping their buying spree from external markets, mostly the developing ones. Here, the effects and impact of the crisis started to seep into the doorsteps of the developing countries.On one hand, the repatriation of capital back to the developed countries failed to materialize in the volume as expected due to restrictions and time to liquidate and repatriate. Bankruptcies in the developed countries resulted to more lay offs and retrenchments. Purchasing former for this sector alone dropped significantly and social tribute and unemployment benefits helped provide buffer to those who lost their jobs. The luckier ones just suffered pay cuts and salary freezes.In the meantime, exports from the developing countries trickled to low levels, inhibit as well the manufacturing sector in their areas. Job cuts and lay offs similarly plagued the labor market with already low wages and salaries overtaken by inflationary pressures from the economy. At the social front, workers started to troop to foreign markets not so much affected by the crisis with the hope of repatriating dollar remittances to their families in the developing countries. The scramble for few jobs and the overall depressed employment sector is threatening to spur the rise in criminalities and social unrest. The tourism persistence on both sides of the political divide similarly suffered a setback.The maturity of the developed countries focused their efforts on the stimulus packages and bailouts which their governments can very well afford to do so even for the long run crisis that may still affect them.The developing countries, however, already saddled by inflation, poor manufacturing sector, social unrest, insurgencies and the like had to look for new courses of development financial from the IMF, World Bank, the Asian Developm ent Bank and even the Euro market for dole outs, grants and soft loans to soften the critical impact of the slowdown. In some countries, corruption aggravated the already depressed government budgets creating more social and political problems and totally compounding the prospect of early solutions to their issues.Barack Obama, the US President assured the market that bailouts and stimulus packages will be deployed by the government despite mark the crisis as the result of the greet and irresponsibility in the market, his remark given substance by the uncovering of huge compensation packages given to Wall Street executives of firms that benefitted from the bailout packages. This infuriated the president who continues to crack the whip to jaw discipline and order in the market. While this is being done in the United States, other developed and developing countries have started to address certain cultural solutions to prepare their people on the long-term effects of the scenario.Ho w and to what extent the crisis has resulted in adverse consequences to the trade and business is staggering and difficult to quantify at this point considering the different impacts and the magnitude that these impacts have on the other aspects of the socio-political and environmental issues. Already, the effects and impacts enumerated are being matte up and its end not seen in the immediate future.Economists and everyone else are looking for the signs of recovery that will more or less mitigate the apprehension over the uncertainties looming ahead. Solutions such as the bailouts and stimulus packages are valid concerns but have limited utility to address the big problem. Even trade liberalization can suffer to help smoothen the flow to recovery through abolition of restriction and protectionism. But these are not enough. Trade blocks and protectionism might only aggravate the situation.Certain solutions from the economic and financial sectors might not help much. In fact, they c aused the crisis but definitely, the holistic approach to the measures that will prevent and control the resurgence of another crisis should execute from a value-based approach that will address all the impacts created from the perspective of those impacts as well which means a social approach can solve the economic issue, etc. Those in control and have the power and influence to do so should move and talk their way out of the crisis. The ordinary citizen of the world can only do as much at his own level. The gravity of the crisis demands an equally big solution and the willpower to weapon it.ConclusionWith the economic and financial crisis continuing to create and change the social, political, technological and environmental configuration of the entire world, the civilized world has the responsibility to stabilize the harmful effects and consequences of these events. The trade and business sector has borne the brunt of the crisis both at the local and international fronts.Much of the responsibility to mitigate and reverse the foreboding(a) effects of the crisis rests on the heads of states, their budget experts, the businessmen the private sectors and the general structure of the bureaucracy in solvent to the distinct kind of measures the market needs to bring discipline, order and sanity to the economy. Capitalism is at the center(a) of this crisis henceforth, all components that make capitalism work must revisit their strategies, social values and responsibilities, their investment priorities, personal motivations and corporate groupthink syndrome that brought this crisis all along.The solutions will not be easy because decisions will come from most people who helped instigate the crisis at the outset. Here, capitalism will have to reengineer itself, to protect itself from its own malevolence as well as help create a mechanism that will bring the positive and beneficial aspects of its sustainability. Otherwise, capitalisms and the captains of the indu strys inability to reconfigure and redeem themselves and reverse the adverse consequences that it failed to solve and the factors that were ignored to implement everywhere might just be the key to its own irrelevance in a new form of economy that might emerge from the ashes of its own demise.Reference list(No sources required. Just knowledge of the subject).