1. Introduction The financial crisis since 2008 has been a real phenomenon in the recent years. It has negatively impacted the countries` national economies as increased their deficits, public and private debts, significantly declined the GDP rates, etc. Moreover, the crisis has also deepened the social discontent and mistrust to the politicians and to the public institutions after millions people in the world remained unemployed and others lost their businesses, as well. Considered that the financial crisis has started from the USA, its effects were quickly and strongly felt beyond the country, too.
The global financial crisis started in the USA. The bursting of the housing bubble led to falling real estate prices, which caused considerable problems to major U.S subprime lending outfits. This prompted extreme problems for large financial institutions and a heavy credit squeeze; which in turn had a devastating effect on the global economy. According to many economists, the recent global financial crisis of 2008 is arguably the worse financial crisis since the great depression. Globalisation of trade and investment has increased the likeliness of a financial crisis in one country spreading to many different countries around the world.
By 2008, Porsche held a 42.6% direct ownership stake in Volkswagen. Despite telling the financial markets that they had no interest in achieving a 75% ownership stake in Volkswagen, Porsche had purchased an additional 31.5% synthetic long position in Volkswagen through the use of cash-settled call spread options. Worldwide, investors had short-sold 12.8% of VW shares. Less than 1% were left available Worldwide, investors had short-sold 12.8% of VW shares. Less than 1% were left available Porsche announced that they had accumulated a 74.1% stake in Volkswagen on October 26, 2008.
It devastated not only in the U.S economy and but worldwide. Before the crash, the stock market experienced an all-time high that the Dow Jones Industrial Average reached a record high 381.2. By November, it plummets to as a low 199 and with this low, it caused stocks to lose value about 90 percent. In lieu of the crash of this created a great depression, and it was the longest and most severe depression every experienced by the industrialized Western world. “The fundamental changes impacted the economic institutions in example, banks and macroeconomic policy and economic theory” .
Rating agencies gave many CDO’s AAA ratings. Subprime loans led to predatory lending. Many home owners were given loans they could never repay. One of the many illuminating points made in the documentary is that the inequality of wealth in the USA is higher than any other country. The imbalance has caused the middle class people to work longer hours to get out of terrible debt.
Impact of Global Financial Crisis on Accounting Auditing I Dec 6, 2011 Towards the later part of 2006 and early 2007 the U.S entered a mortgage foreclosure crisis on behalf of the, current financial crisis, which was a result of increased borrowing and homeowners faulting on their mortgage payments. The faulty mortgage payments lead to numerous foreclosures that increased the number of houses on the market and the lack of buyers made the housing prices plummet. This lead to a panic on Wall Street, investors were no longer interested in risky investments and mortgage companies that sold risky loans were faced with closing their business. Some accounting implications that were raised throughout this crisis were the faulty accounting and poor judgment of the lenders and government-sponsored enterprises that were used to manipulate their investors. The American dream is to one day own a home, like many Americans, one has to borrow money to support this dream, which can be relatively expensive.
According to Paul Alexander Gusmorino, the main cause of the drastic downfall was the combination of unequal distribution of wealth and the extensive stock market speculation that took place in the later years of that decade. Speculation is a key term in this area of history. To put it simply, speculation is an involvement in risky business transactions in an attempt to quickly gain large amounts of wealth. The imbalance of wealth led to an unstable economy, while the stock excessive speculation kept the stock marker falsely high, eventually leading to a large crash. Authoritative figures tried to help out the economy in any way they could, but not all ended up helping.
This debt has been accumulated over the past thirty years and has been growing much faster than the overall level of GDP. This poses serious threat for the economy as sooner or later this debt bubble will burst just like the housing bubble which led to the financial crisis in 2007. The bursting of the debt bubble will cripple the entire economy as it has become dependent on borrowing and debt. Nearly all the transactions of the economy is done on a credit basis, adding to the overall national debt. A burst of this bubble would affect the increasing standard of living being enjoyed by the citizens of America today.
Economic reasons were a major factor which helped and affected Hitlers rise to power. In 1923 hyper-inflation conflicted with Germany. People in Germany were affected economically. Production fell and prices rose. Middle classes were hit harder than the upper classes because wealthy people were protected since their wealth was inflation proof, for instance jewelery, art and real estate.
However, the SPH program put a lot of pressure on store managers and sales. In 2010, a large group of the R&R associates sued it for “working off the clock”. This lawsuit might cause reputation damage, and the settlement is up to $200 million. In 2008-2009 before the case, there was an economic recession. The whole luxury goods industry in the U.S. dropped over 14%, and R&R revenues declined 10%.