The causes, effects and solutions of Economic crisis in USA and Saudi Arabia

Running Head : ECONOMIC CRISIS IN USA AND SAUDI ARABIA

The Causes , Effects and Solutions of Economic Crisis in USA and Saudi Arabia

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The world financial crisis has impacted every economy in the world . What seemed like a small in-house fire in 2005 resulted in an international economic inferno . The causes and effects have been rightly identified as stemming from the USA , much to our chagrin . However , the solution now needs to be collaborative , with the international society joining hands rather than pointing fingers . Let us first

see how this came about and affected the US and Saudi Arabia

The economic crisis started with the subprime mortgage crisis in 2005 The incentive for lenders who would traditionally not be approved for mortgages was high since this was a golden opportunity to own a house The problem started when this extension of credit became a culture . The average American drastically increased his debt while the level of savings went drastically down . This fueled the consumption culture that is characteristic of the US . The use of subprime mortgages as securities for the lending firms and trading with these securities only served to tie up the rest of the financial system in this mess (Manzi , 2008 Lim 2009

The growth of the shadow system is attributed as the one of the greatest contributors to this financial tragedy . The shadow finance system operated similarly to the traditional banking system , only without its rules and regulations . This unregulated sector experienced phenomenal growth and...