Essay Example on Given the tentative state of the global Economy








Given the tentative state of the global economy in 2009 the decisions made within this General Assembly will establish the future of our nations and citizens become the foundation of arising conflicts and negotiations and redefine our international understanding of the world economy Global leaders must begin to seek preventative measures for future crises while ensuring that the global economy prevails despite the challenges that we face in 2009 Countless countries are falling into recession and unemployment rates are skyrocketing putting the number of job losses in the US at 2 8 million it s highest in 60 years and leaving civilians unprotected unnourished and discontent Therefore while attempting to rectify the economic issues posed by this crisis the international community must also remain aware of the political and social implications of this catastrophe and maintain the social fabric that prevents nations from falling into anarchy The financial crisis started in 2007 in the United States with their housing market The big banks had the belief that if a huge financial crisis were to occur within their institution the government would come to the rescue Because of this major banking corporations started to lower their standards and take on riskier subprime loans In addition to this the housing market started booming because more citizens who were looking for a loan could get one due to the lower standards Subprime loans were now classified as less risky which meant that credit rating companies would classify them as high quality when they actually were not These bad loans were bundled together to create Collateral Debt Obligations CDOs in order to make more profit off of them and make these debts seem as if they were not subprime

The problem with these CDOs is that they were being classified as AAA when in fact the were far from it Then when subprime mortgage owners began to default all of the rest defaulted too Because of this hundreds of billions of dollars in CDOs were lost Another factor that went into the collapse was mortgage backed securities A mortgage backed security gives banks the ability to turn a mortgage into a security and sell it to investors The housing market seemed insanely stable so investors were very interested in buying these but this made it so that the MBS market also had more subprime MBS s These subprime buyers started to default and again the rest followed The banks that were collapsing due to these factors although in US had global implications Georgia especially was hit very hard by this crisis due to the unfortunate timing for the country Through Georgia's recent projects rebuilding an unstable and inefficient economy the country and its government have gained valuable experience and knowledge regarding financial infrastructure Before 2008 Georgia s once incredibly unstable economic system was doing very well This is due to the 2003 Rose Revolution which resulted in a new nonviolent government led by Mikheil Saakashvili who remains the president of Georgia The Rose Revolution was a series of peaceful protests to overthrow Shevardnadze s government After the movement there was an economic growth average of 10 5 

Then change in government reduced the country's corruption which transformed Georgia from one of the most corrupt countries in the region to a role model for other transforming nations Georgia s finance sector was dominated by large scale banks and after the Rose Revolution the government worked with the IMF and the World Bank on multiple development programs including Millennium Challenge projects The Georgian government was continuously praised by international financial institutions regarding successful implementation of these programs Georgia had managed to create an upward economic spiral based on free market reforms and institution building measures Sadly Georgia endured hardship in 2008 with the twin crisis and the Georgian government faced the negative impact of both the financial decline and the Russo Georgian war As a result Georgia's economic and political progress was for naught as the country fell back into economic decline and conflict which ravaged the country While large banks around the world are largely to blame for this crisis some of the blame must also fall on the people If civilians had not been purchasing loans that they knew they could not pay back this issue could also have been more easily contained Georgia would like to instate educational institutions to prevent similar issues in the future such as free financial consultations at community centers In addition to the civilians being uneducated unemployment is also a conflict that increases this crisis because it presents a situation where citizens cannot begin to start paying their debts back Unemployment has been a persistent problem in Georgia ever since the country gained independence in 1991 Because of this we would like governments to incentivise corporations who will partner with educational organization

This will help people enter their desired fields of work while creating more job opportunities In the pre crisis world banks were surveilled minimally It was too easy for them to keep information from the government To prevent this we must first increase regulation on banks We can create a governmental branch specifically for surveilling and coordinating with the banks Second we must create more thorough credit and stress checks If we create a better vetting system and bottom line standard for how to obtain a loan we can prevent a resurgence of the issue Countries should adopt an expansionary fiscal policy increasing public spending to promote economic growth Finally if we can increase tourism inflows and high levels of public investment the world can slowly start coming out of this crisis We cannot change what has happened in the past but what can be changed is the economic future If these solutions are enacted we can begin to start ensuring that this crisis never occurs a second time

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