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In consistent with this, the loans that were offered by the financial institutions were invested in Mortgage-Backed Securities, MBS with the hope that the prices of houses or on the other hand demand would continue to rise.
However, supplies too of houses rose to a critical level leading to a substantial loss of value. Thus, most investors were unable to pay back their loans or rather debts leading to financial crisis as financial institutions had no way of getting back their money.
On the other hand, whereas in some cases these institutions were guaranteed to get back their money, this would probably take longer than anticipated which in some cases created a platform for loss of value of the original amount that had been given out.
With massive investments both from within the American society and global investment community, avoiding a collapse of the financial institutions across the globe was inevitable.
Additionally, it was found out that every new invention that created an opportunity for investor to make new investments was recipe for a financial crisis since there were no clear ways that one could use to ascertain the risks and the future of a particular investment Kunreuther and Useem Since there had not been there a situation whereby there was a boom in the mortgage business, it was difficult to determine whether the future of the current investments were secure.
This was particularly worsened by the fact that most investment analysts depended on the ability of the market to regulate itself rather taking a step of confidence and setting down policies and regulations that were meant to guide the investor and avert any financial problems.
Consequently, people invested heavily in mortgage without really being in a position to foretell the future or rather stability of their investments. Recommendations Whenever one falls, one has to stand up, wipe himself and continue with the journey but work on averting situations that could lead him to fall again.
Therefore, there are different recommendations that can be made in order to avert global financial crisis in future.
In this respect, the government has a responsibility of creating an environment that is favorable to its investors while at the same time examining the risks that its investors might face in the short-run and in the long-run. It is worthy to note that whereas the most affected nation was the United States, there was a link that other nations had attached to the US that led them to be involved in the crisis thus severing their economies.
In reference to Great Britain: According to the Commonwealth Secretariatthere is need to give priority to crisis prevention containment measures because of high economic, social and political costs of financial crises and the speed with which they can spread through contagion and become worldwide debacle This can be done y laying down appropriate financial indicators that would help both analysts and investor to examine their position in any investment scheme while at the same time having a look at the future of such an investment.
This will prevent the aspect of making decisions based on heresies but rather on facts.
Conclusion In summation, it can be argued that the recent global financial crisis was the worst to be experienced in the last fifty years. However, human decisions that were spurred more by excitement rather than investment facts are cited as the major cause of this financial crisis.
More so, the mortgage boom between and created an increase in the number of investors that wanted to invest in the housing industry. On the other hand, financial analysts depended fully on the market forces as the regulator of the activities that were conducted in this market.
However, it was already too late by the time they realized that there was a crisis that could not be prevented. In spite of this, financial crisis could be averted if at all appropriate measures are instituted in place to monitor financial indicators in any particular economy.
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