CAUSES OF THE GLOBAL ECONOMIC MELTDOWN

The causes of the global economic meltdown can be largely attributed to the definite in result of decades of economic mismanagement in both public and private sectors worldwide. It maybe argued that globalization, monetarism, and greed of major stakeholders set the stage for the recession.

However, the world over, these could be the possible causes:

                  GREED OF CORPORATE LEADERS

Generally speaking, CEOs enjoy excessive high salaries and other allowances when in office and apparently unexplainable retirement benefits otherwise called golden parachute even among those that mismanaged resources in their respective corporations. The collapse of some large industrial giants and their possible bail out by the government the world over, weakens business confidence and causes major meltdown in the value of stock.

          SUB-PRIME LENDING BY MORTGAGE BANKS

The policy designed to encourage more widespread home ownership in the United states for example, eventually resulted in lending to people whose income could not meet repayment obligations. Foreclosure and declining property values left mortgage banks holding non-performing assets or toxic assets and their survival suspect. Declining property values in turn, reduce the net worth of home owners and their readiness to spend on goods and services. This sub-prime lending occurred in American, Nigeria and other parts of the world hence,  they have to approach government for loans to recapitalize in order not to become bankrupt. This also had negative impact on the over-all business confidence of the people.

            DECLINING BANK LENDING TO THE PRIVATE SECTOR

Business pessimism, increasing stock of toxic assets in bank balance sheet and declining consumer spending discourages banks from further lending. An economy in recession cannot recover unless productive enterprises have access to credit and government is ready to run budget deficits.

                         REGULATORY DEFICIT

Banks, insurance companies and the stock exchange were subjected to regulatory deficit that doesn’t guarantee sustainability and this in turn, created a disadvantage situation to the share holders as they watch the mismanagement of their funds helplessly.

                   STOCK EXCHANGE MELTDOWN

Stock exchange prices, though normally influence by corporate performance are sensitive to other factors such as greed, poor regulatory framework resulting in insider trading, and perception of the impact of economic policies were some of the causes of the stock exchange meltdown.

            INDISCIPLINE USE OF CREDIT CARDS

Credit cards enable consumers to spend irresponsibly beyond their disposable incomes. An unsustainable personal debt overhang, eventually subverts the ability of consumers to consume. This is for the fact that larger percentage of their income is being used in servicing debt and repayment. Moreover, the uses of credit cards are largely on imported consumer goods. This also has advert effect on the balance of payment hence, increasing the amount of currencies held