Cause of the Financial Crisis

Nowadays, it became a commonplace practice among many American economists and politicians to suggest that it is specifically the Federal government’s failure to introduce regulatory measures, as the mean of preventing banks from providing financially non-credible citizens with mortgage loans, which created objective preconditions for the outbreak of 2007 financial crisis. The close analysis of such an idea, however, reveals it being essentially deprived of a rationale.Advertising We will write a custom essay sample on Cause of the Financial Crisis specifically for you for only $16.05 $11/page Learn More The reason for this is quite apparent – it was namely the Democrats’ preoccupation with ‘combating poverty’ (under Carter and Clinton’s administrations) that resulted in passing of the infamous Community Reinvestment Act (CRA) and in reinforcing its provisions through the course of late nineties, which in turn gave banks a ‘green light’ to qualify socially-unproductive Americans for mortgage loans (Wallison, 2011). Moreover, the Federal government is being simply in no position to regulate dynamics on the American financial market de facto, since it has long ago delegated its monopoly on designing monetary emission-policies to the privately owned Federal Reserve System. Therefore, the suggestions that the government should pass additional bylaws, in order for the financial market’s dynamics to be more predictable, cannot be referred to as anything but the part of Democrats’ sophistically sounding but essentially meaningless rhetoric. In this paper, I will aim to substantiate the validity of this statement at length. Let us elaborate on the actual causes of the most recent financial crisis first. By the year 2006, the volume of so-called ‘non-standard’ and ‘alternative’ mortgage loans, provided by banks to Americans, accounted for 40%. In ot her words, almost a good half of mortgage loans were given to people that would not normally be qualified to receive them. Yet, even though that this particular financial policy did not make any rational sense, whatsoever, through years 2003-2006 American banks strived their best to cease the opportunity to simply ‘give away’ money to those citizens that were simply in no position to be able to afford repaying annual interest rates. Why was it the case? This was because, prior to the outbreak of 2007 financial crisis, the real estate market in America was experiencing a particularly dramatic growth. In its turn, this caused more and more Americans to realize that they could make utterly lucrative profits by the mean of buying houses with bank-loans, waiting for a year or two, without even being required to pay interest on the received loans, and then selling these houses for often twice as much.Advertising Looking for essay on business economics? Let's see if we c an help you! Get your first paper with 15% OFF Learn More Thus, as time went on, a growing number of Americans were beginning to perceive mortgage loans not in terms of an opportunity to buy otherwise non-affordable real estate per se, but rather in terms of an opportunity to indulge in financial speculations. This, of course, caused the growth of the real estate market in America to attain an exponential momentum. Eventually, American bankers concluded that ‘non-standard’ and ‘alternative’ mortgage loans could also be provided to citizens for investment purposes. That is, banks started to sell mortgage agreements and potential profits (which were yet to be obtained in the future) to each other. It is needless to mention, of course, that banks were not financing these types of loans with their own assets, but with largely virtual assets of some third parties. In other words, non-financially sustainable citizens were receiving personal mortgage loan s from organizations that were simultaneously applying for corporate monetary loans, in order to have these loans simply given away to as many people as possible. One debt was generating another debt, which in turn was ‘backed’ by another debt, and so on. Yet, there was an artificially maintained respectability to all of this, as the ‘reselling of debts’ became a widespread practice. The mechanics of how the proper functioning of American economy was being undermined from within were quite simple. The likelihood of a particular mortgage loan not to be returned was evaluated by credit rating agencies, which used to result in security equities being rated according to the extent of their perceived ‘riskiness’. Loan agreements, considered most ‘secure’, were easily sold. Yet, given the continuous boom of the real estate market, even clearly risky loan agreements could be successfully resold to investors. As a result, all the involved parties were able to benefit from participating in the scheme – banks could get rid of legally bounding agreements with private citizens, investors could benefit from making almost instantaneous profits, and private borrowers could close their mortgage loans – hence, qualifying to apply for new ones. This situation lasted for seven years, while resulting in the rapid growth of America’s GDP. Millions of citizens were making huge money out of the thin air, without being required to contribute to the de facto growth of the American economy.Advertising We will write a custom essay sample on Cause of the Financial Crisis specifically for you for only $16.05 $11/page Learn More Nevertheless, the sustainability of the earlier described debt-pyramid was maintained solely by the continual but thoroughly artificial growth of the real estate market, which was attracting more and more investors. In its turn, this growth came because, as of 200 3, Federal Reserve System reduced interest rates down to 1%. This poses us with the question – given the fact that the cause of financial crises has always been the lack of financial liquidy, what caused the lack of financial liquidy in 2007? The answer to this question is simple – it was the FRS’s decision to dramatically increase interest rates through 2006- 2007. In essence, FRS simply followed the classical ‘recipe’ of making a financial crisis, which it had already resorted to during the time of Great Depression. The consequential guidelines for making a financial crisis are as follows: a) Increase the money’s physical volume as much as possible, b) Create loan-agitation by the mean of qualifying even jobless people to apply for loans, c) Drastically reduce the amount of money in circulation and demand borrowers to immediately return their debts. What it means is that, far from being spontaneous, the financial crisis of 2007 was intentio nal and thoroughly regulated, with its foremost goal having been the elimination (due to banks’ bankruptcies) of trillions of ‘excessive’ dollars, printed by FRS without bothering to back up their actual value with any material assets, whatsoever. Therefore, the suggestions that this crisis came because of the America’s financial system having been deregulated simply do not stand much ground. Quite on the contrary – it is specifically because, ever since 1913, FRS exercises a complete regulatory control over monetary emissions in this country, that the financial crisis of 2007 was bound to occur. In this respect, the Federal government’s regulations simply assisted FRS. The validity of this statement can be well explored in regards to the passing of enforcing bylaws to the earlier mentioned Community Reinvestment Act of 1977, â€Å"Bill Clinton†¦ passed laws to enforce the original (CRA) bill. The purpose of the CRA is to force banks to make risky loans to people who can’t afford to repay those loans† (Knight, para. 1). In other words, the government’s meddling in financial affairs, as the part of governmental officials pursuing its ideologically driven and clearly utopian agenda of ‘eliminating poverty’, contributed substantially to the outbreak of 2007 financial crisis.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Apparently, left-wing politicians simply do not understand a simple fact that the proper functioning of the free-market economy cannot be ‘regulated’ and that if it nevertheless becomes the subject of regulations (especially if these regulations are being ideologically motivated), this necessarily results in the economy’s functioning becoming susceptible to crises. There is another aspect to the earlier argument – as of today, the Federal government simply does not have instruments to regulate the functioning of FRS. This is because, contrary to the provisions of U.S. Constitution, which endows U.S. Congress with the exclusive right to exercise a unilateral control over the process of designing this country’s financial policies, this right has been delegated to FRS – a private financial organization, over which the government does not have any control. After all, it is FRS that lands money to the Federal government and not vice versa. Can bor rowers control a money-lending organization? President Kennedy did believe that it was in fact the case, which is why under his Presidency, the U.S. Ministry of Finances issued $2 and $5 banknotes, backed by silver from the National Treasury. This, however, had sealed the Kennedy’s eventual fate. Therefore, the suggestions that the functioning of the America’s financial sector could be regulated by governmental decrees appear utterly fallacious. As the example of CRA’s passing points out to, the government’s attempts to regulate this functioning simply create yet additional preconditions for the country’s richest bankers, who own FRS, to act on behalf of their sense of greed, at the expense of undermining the economy’s vitality from within. As Randazzo noted it, â€Å"Ironically, it was government action (the enforcement of CRA’s provisions) that created incentives for financial firms to be less risk adverse, not a lack of regulation † (2009, para. 6). Thus, we can well conclude that the more a particular ‘progressive’ politician talks about introducing more regulations, meant to apply to the America’s financial sector, the more he or she is being in cahoots with those greed-driven bankers, who are supposed to suffer from these regulations’ enactment – pure and simple. After all, as the history indicates, recently passed regulatory measures (such as CRA), originally conceived to work on behalf of ensuring the American economy’s stability and the ‘underprivileged’ citizens’ well-being , did not only fail at that but they actually strengthened the acuteness of the ongoing financial recession. As the famous saying goes – the road to hell is made out of good intentions. Therefore, it will only be logical, on our part, to conclude this paper by reinstating once again that the introduction of new regulatory bylaws, designed to prevent the outbre aks of financial crises, such as the one of 2007, will not possibly change the situation for better. The reason for this is simple – the periodic outbreaks of these crises can be well seen as the very purpose of the FRS’s existence. However, since the functioning of FRS cannot be regulated by governmental decrees de facto, it means that the government cannot effectively regulate the financial market’s dynamics either. I believe that this conclusion is being thoroughly consistent with the paper’s initial thesis. References Knight, W. (2009). Democrats caused the recession and Republicans tried to  stop it. WordPress.Com. Web. Randazzo, A. (2009). The myth of financial deregulation. Web. Wallison, P. (2011). Hey, Barney Frank: The government did cause the housing crisis. The Atlantic. Web. This essay on Cause of the Financial Crisis was written and submitted by user Maryam Maddox to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

How Drinking Bleach Can Kill You

How Drinking Bleach Can Kill You Household bleach has many uses. Its good for removing stains and disinfecting surfaces. Adding bleach to water is an effective way to make it safe to use as drinking water. However, theres a reason there is a poison symbol on bleach containers and a warning to keep them away from children and pets. Drinking undiluted bleach can kill you. What Is in Bleach? Ordinary household bleach sold in gallon jugs (e.g., Clorox)  is 5.25% sodium hypochlorite in water. Additional chemicals may be added, especially if the bleach is scented. Some formulations of bleach are sold containing a lower concentration of sodium hypochlorite. Additionally, there are other types of bleaching agents. Bleach has a shelf life, so the exact amount of sodium hypochlorite depends largely on how old the product is and whether it has been opened and sealed properly. Because bleach is so reactive, it undergoes a chemical reaction with air, so the concentration of sodium hypochlorite goes down over time. What Happens If You Drink Bleach Sodium hypochlorite removes stains and disinfects because it is an oxidizing agent. If you inhale the vapors or ingest bleach, it oxidizes your tissues. Mild exposure from inhalation can result in stinging eyes,  a burning throat, and coughing. Because it is corrosive, touching bleach can cause chemical burns on your hands unless you wash it off immediately. If you drink bleach, it oxidizes or burns tissues in your mouth, esophagus, and stomach. According to the National Institutes of Health, it can cause nausea, chest pain, lowered blood pressure, delirium, coma, and potentially death. What Should You Do If Someone Drinks Bleach? If you suspect someone has ingested bleach, contact Poison Control immediately. One possible effect from drinking bleach is vomiting, but it is not advisable to induce vomiting because this can cause additional irritation and damage to tissue and may put the person at risk of aspirating bleach into the lungs. First aid typically includes giving the affected person water or milk to dilute the chemical. Note that highly diluted bleach can be another matter entirely. It is common practice to add a small amount of bleach to water to make it potable. The concentration is enough that the water has a slight chlorine (swimming pool) smell and taste and it may lead to a slightly upset stomach, but it should not cause burning or difficulty swallowing. If it does, the concentration of bleach very likely is too high. Avoid adding bleach to water that contains acids, such as vinegar. The reaction between bleach and vinegar, even in a diluted solution, releases irritating and potentially dangerous chlorine and chloramine vapors. If immediate first aid is administered, most people recover from drinking bleach (sodium hypochlorite poisoning). However, the risk of chemical burns, permanent damage, and even death are present. How Much Bleach Is Okay to Drink? According to the U.S. EPA, drinking water should contain no more than 4 ppm (parts per million) chlorine. Municipal water supplies commonly deliver between 0.2 and 0.5 ppm chlorine. When bleach is added to water for emergency disinfection, it is highly diluted. Suggested dilution ranges from the Centers for Disease Control are 8 drops of bleach per gallon of clear water up to 16 drops per gallon of cloudy water. Can You Drink Bleach to Pass a Drug Test? There are all kinds of rumors about ways you can beat a drug test. Obviously, the easiest way to pass the test is to avoid taking drugs in the first place, but thats not going to be much help if youve already taken something and are facing a test. Clorox  says their bleach contains water, sodium hypochlorite,  sodium chloride,  sodium carbonate, sodium hydroxide, and sodium polyacrylate. They also make scented products that include fragrances. Bleach also contains small amounts of impurities, which arent a big deal when youre using the product for disinfection or cleaning  but could prove  toxic if ingested.  None of these ingredients binds to drugs or their metabolites or inactivates them such that you would test negative on a drug test. Bottom Line: Drinking bleach wont help you pass a drug test and may make you sick or dead.

Public transportation affects on the economy in terms of employment, Essay

Public transportation affects on the economy in terms of employment, wages, and business income in the usa - Essay Example This paper discusses the effects of public transportation services on the economy in terms of employment, wages, and business income in the US. Public transportation generates numerous jobs in US. First, jobs are created through capital investments that take place in the sector, or to support the sector (Economic development Research, 2). This includes the purchase of vehicles and equipments, development of infrastructure, and other supporting facilities. An analysis conducted by Weisbrod and Reno (1) observed that per every billion dollars spent in investment activities in the US public transportation, approximately 24,000 jobs are supported annually. Public transportation operations are in addition significant sources of employment. These employment opportunities include management, operations, and maintenance of vehicles and facilities. The analysis conducted by Weisbrod and Reno (1) elaborate that for every billion dollars spent on public transportation operations in the US, around 41,000 jobs are supported annually. Moreover, the US public transportation sector helps to create jobs for individuals, or in industries inv olved in providing services such as repairs and car wash. On average, Weisbrod and Reno (1) observed that per every $ billion invested in public transportation sector in US, approximately 36,000 jobs are supported directly or indirectly annually. Investments in public transportation generate wages for employees working in the sector, in addition to individuals working in related sectors. An increase in investment in the sector results in an increase in public transportation spending, leading to employment of persons to fill the new created jobs (United States Department of Transportation, 2). This creates an opportunity for unemployed persons to earn income. The analysis conducted by Weisbrod and Reno (1) indicate that $1 billion investments in the public transportation sector in US results to $1.6 billion increase