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Write a short piece of about 500 words explaining your analysis of the link between theories and practice in political economy, with specific reference to the film. Essay Example

  • Category:
    Performing Arts
  • Document type:
    Case Study
  • Level:
    Undergraduate
  • Page:
    1
  • Words:
    591

THE LINK BETWEEN THE THEORIES EXPLAINING THE GLOBAL FINANCIAL CRISIS AND THE FILM

Course, Class, Semester

Introduction

The global financial crisis of 2008 was an endearing experience for financial institutions as well as the global economy. Numerous individuals lost their livelihood as companies they worked for were closed, their houses were repossessed and their live time savings were lost. It is worth noting that, the global financial crisis cost the US government billions of dollars in bailouts trying to rejuvenate the economy. After settling of the dust, it was vital to access the real cause of the global financial crisis to ensure that the reparations do not reoccur in the near future. The intention of this discussion is to depict the link between the theories forwarded by scholars and the reality in the film.

Even before, the global financial crisis had taken effect; numerous authors had taken it upon themselves to educate the masses on the consequences that might emanate from deregulation. After the financial depression in the early 1930’s, the American government decided to take stern measures to restrict investors from risking the depositor’s money. However, since the financial theory of higher risk higher return holds, the investors could only manage lesser returns as their risk threshold had been regulated. Over the years, the treasury in collaboration with other stakeholders had been trying to ease the strict measures seeking to add some risk element hence increasing profits. This brought about the decapitation of some Act or statute passed in the hay days. This resonated to a state where the law in itself could not protect investors from devious acts of the banks and other financial institutions (Shiller, 2008).

In collaboration, the film portrays a situation whereby, the treasury and other key stakeholders in the financial sector made decisions that would only favor their interests neglecting the investors. In addition, the US government was in on it as the President appointed the treasury chairperson from an investment bank. This was leverage to pursue personal interests by coining statute to favor personal interests.

In regards to Shiller, R. J. (2008).The result was a formation of improper derivatives and availing loans or mortgages to people who would not pay up. In turn, the companies secured themselves from losses by insuring against the financial instruments that would surely fail. As expected, the public investors bit the bait and forwarded their personal savings in their millions not aware of the time bomb ahead. It was unfortunate as everyone who tried alerting the public fell upon deaf years as the worthless financial vehicles were so lucrative to overlook. The global financial crisis was the worst ever financial crisis in recent times. Unemployment levels hiked to the brim investor lost billions worth of personal savings, and houses were repossessed as economies all over the world crumbled.

This was what scholars had projected when discussing the housing boom. However, investors were blindfolded by the lucrative nature of the financial derivates. On the other hand, the perpetrator of these fraudulent activities walked away with their fortunes intact. It was unfortunate that even after committees were formed to try and resolve financial debacle, the directors to the large financial companies that had embezzled public funds would walk away free. This was because; since they were aware of the dire repercussion, they had mutilated the legal framework hence making them and their ill acquired fortunes untouchables.

Reference

Shiller, R. J. (2008). The subprime solution: how today’s global financial crisis happened and what to do about it. Princeton, N.J.: Princeton University Press.