What Brought on the Financial Crisis of 2008 - 737 Words

There are many different views as to what brought on the financial crisis of 2008. One of these views are that of global imbalances. On the one hand, the United States have an extremely large current account deficit. On the other, there are countries, especially oil-exporting economies and China in particular, with large current account surpluses. The concept of global or external imbalances is often seen as a synonym for this situation. The definition of global imbalances is often vague. There is not one clear definition as it tends to oscillate between different views and can thus be defined in a number of ways. Chinn M.D (2013:68) interprets it as relating to international relationships, which include the private financial account, the current account, or official reserves transactions. Though global imbalances are usually associated with the current account, Chinn specifies that it does not necessarily refer to the current account but actually the rather large degree of the current account balances in absolute values. According to Bracke, et al., (2008:12), global imbalances can be defined as â€Å"External positions of systemically important economies that reflect distortions or entail risks for the global economy.† This definition is then broken up to explain the concept in more detail. According to Bracke, et al., (2008:12), the â€Å"external positions† refer to both the current account balances as well as the financial positions. â€Å"Systemically important economies† refer toShow MoreRelatedLehman Brothers Case Study1703 Words   |  7 Pagesthe United States was the 2008 Lehman Brother’s case. A numerous amount of the general public lost their employment, while investors lost their money during this crisis. 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