The credit crunch:
Whose fault was it anyway?
What is it?
In their critical thinking exercise that concludes the reading "The credit crunch: Whose fault was it anyway?", Warwick and Rogers (2018, p. 66) invite us to discuss two follow-up questions related to the events that led to, marked and followed the economic crisis of 2008.
Questions
- What reasons do you think the writer will give to support his claim that central banks, regulators, and governments were also to blame for the financial crisis?
- Use information in the paper to help you.
- What risks do ordinary people take with money every day?
- How can these risks be avoided?
You have 12:00 minutes to plan and write a response to the two questions. I suggest you divide your time roughly as:
- planning = 2:00 minutes (It's usually a good idea to plan before you start to write.)
- writing = 8:00 minutes, and
- editing = 2:00 minutes.
A helpful strategy
Imagine you are writing for someone who has not read the question you are answering or the article that the question follows up. Your aim is to clearly communicate your response to that reader, so it might help to paraphrase the question at the start of your response to it. But you need to rewrite (paraphrase) the idea in the question as a statement.
Because your writing should make sense independently of the question it might be answering, it is usually useful to give background, which can often be done by paraphrasing the question into statements that begin your answer. This is also a useful strategy in exams such as IELTS and TOEFL.
Reference
- Warwick, L. & Rogers, L. (2018). Skillful 4: Reading & Writing, Student's Book Pack (2nd. ed.). London: Macmillan Education
Although the main culprits of the 2008 economic crisis are usually seen as being irresponsible commercial banks, the author of the paper "The credit crunch: Whose fault was it anyway?" argues that central banks, regulators, and governments also contributed to that financial crisis. I thought that the clue to his support is mainly in the concluding paragraph where he tells us about the reforms enacted by President Obama in 2009. These suggest changes in response to the crisis and the reforms suggest that the writer could use statistics to show that the central bank and other government regulators had not exercised enough control over the commercial banks but had allowed them to act recklessly in pursuit of profits. That the government felt the need to change the law regarding suggests that the writer believes there is evidence to support the need for the reforms that are suggested.
ReplyDeleteI thought he might also have evidence from the OECD that central banks and regulators had not acted in an efficient manner to prevent a recession.
According to the article, the writer mentions the government's intervention that was not helpful to solve the financial crisis. I think the writer would explain that the government at that time made a wrong decision. Moreover, the central bank has a duty to support the government in order to maintain the stability of economy. The bank had a lot of specialists and useful information which can predict the worth case of that event. The central bank could prevent the destruction of economy. However, it could not do that.
ReplyDeleteI'm glad to see that someone talked about the failure of government and central bank intervention to prevent the credit crunch that led the financial crisis. I had thought of this, but i like Yo's more direct statement of things that the writer mentions in paragraphs 3 and 4, where he describes the central bank and government responses that failed to stop the crisis.
DeleteI agree with your comments that the central bank should support the government to run the economy and many specialists who are working there should be able to predict what is the best or worst case that could be happened. However, by judging that the government made a wrong decision at that time may be too subjective as I believe the government tried to do it's best to alleviate the effects from the financial crisis.
DeleteCentral banks, regulators, and governments were all responsible for the financial crisis in 2007-2008. Central banks control the interest rate. By increasing the interest rate from 1% to 5%, the central banks should consider the effects. The regulators must be more careful for rating the investments. Governments could control the fiscal policy and worked together with the central banks in order to control the amount of money in the systems. Thus, they were definitely one of the causes of the crisis.
ReplyDeleteMoney has value and it changes everyday. To maintain it's value, people invest such as buying stocks or bonds or put it into the bank, so that they receive the interest rate that helps to avoid the depreciation of the value.
I can't agree more with your opinion. The U.S. government, the central bank, and the regulator should cooperate carefully to prevent the poor financial crisis. If they could provide the right policy at the right time, the crisis would be solved. By the way, their wrong decision would lead the situation to be worse.
DeleteYour idea of maintaining money value is interesting. Investing is good point of growing money little by little.
DeleteBanks' business is about financial. As a result, if the interest rate is not stable, the bank will have a hard time to run the business. Regulators and government are both response on nation's financial. As a consequence, they are the people who have to deal with this issues.
ReplyDeleteThe risk that people have to take with their money every day is having a cash in their pocket. They can accidently lose their money by forgetting in the restaurant, or someone steal it. The solutions are having the cash as less as possible, and paying by mobile banking or credit card instead.
The situation of credit crunch affects all people. The crisis might be happened from pandemic like covid-19 or world economic. However, the government should take the responsible for this crisis. Personally, the government has the power to control the situation in several sectors such as banks and regulators. For example, the government could increase or decrease interest rates. They may boost economy by releasing the policy or spend money to society. It is challenging for people to avoid the credit crunch because it is the large impact that effects all people in the country.
ReplyDeleteI don't have time to write a proper reply, but I really liked Pueng's comparison with the current Covid crisis. I had not thought of that, but Pueng shows the relevance very well, and it's an interesting new perspective on the financial crisis.
DeleteI like that you give the example about covid-19 so that everyone could understand the situation easily. I also like your solution too. Giving money to the population is the measure that has been used by multiple countries, and now their economic is better than the countries that have not used this measure.
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