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澳洲assignment business report代寫

澳洲assignment business report代寫

 
Question 1
In a widely-read piece in the Economists’ Voice, the Roosevelt Institute’s Thomas Ferguson and Robert Johnson demonstrate how the domino effect of letting Lehman fail brought on the crash. The article, “The God that Failed: Free Market Fundamentalism and the Lehman Bankruptcy,” debunks the idea that everything was just fine with the economy until Paulsen and Bernanke went to Congress and got the government involved. Ferguson and Johnson show how the ‘efficient markets theory,’ a.k.a. ‘free market fundamentalism’ has now been thoroughly discredited, and argues for the Keynesian and Rooseveltian position that wise government intervention is essential to our economic health.
 
However, they issue a warning: “The interactions between the state and market in the money-driven American political system are now too deadly and expensive to tolerate,” write Ferguson and Johnson. “They need to be fixed-by aggressive government regulation of both political finance and banks.”
 
In different economic systems, there are varying degrees of government involvement.
This major economic system was developed on the basis of the theories of Karl Marx. However, in modern times, many countries with formerly centrally planned economies have turned to different economic systems, because they realized that it is inefficient, counterproductive, and not conducive to innovation. For example, the USA and several European states are examples where free market economies had worked well over the past few decades and had led to tremendous growth (Dawson Sandra, 2007).
 
However, the change of an economic system has many demerits as well. For example, in late 2006, the first signs of an emerging financial crisis, especially in the USA, could be seen. Additionally, many banks had routinely given mortgages and loans to people who had either low income or bad credit ratings thus representing a high risk.
Moreover, the low rate of interest in the US encouraged more and more people to take loans. All these come up with the result: many Americans borrowed and consumed much more than they could afford with their income. Added to these, a lot of people could no longer pay their mortgages and had to try to sell their houses. It then caused the prices of the houses had fallen and there was a substantial oversupply of houses. Finally, the housing market collapsed and the subprime bubble burst. Even worse, by July 2007, the number of people who had lost their homes to banks had risen by 93 percent within a year. However, the President Bush insisted that the market should deal with this situation and rejected government intervention. As a result, in order to maintain the high rate of credits, the American banks had to borrow substantial capital from abroad. At the end, by December 2007, the US mortgage crisis began to spill over to European banks which had bad investments in the American real estate market. This incident is the same as the case mentioned in the passage; it became clear that without any intervention from the government, many large banks and mortgage lenders would be forced into bankruptcy. The end of this incident is what had originally started out as an American problem, quickly spread to Europe and Asia, because the financial market is global (Guillén, 2009).
 
This incident has clearly shown that there should be an urgent action by the government in order to prevent further downturn of the economy. Governments should have desperately designed plans to pump huge sums into the economy, trying to rescue the banks and avoiding a complete financial collapse which will affect its own country as well as the global economy (Guillén, 2009).
 
Question 2
A free market is a type of market structure in which the distribution and costs of all goods and services, as well as the structure and hierarchy between the capital and consumer goods as all regulated by the supply and demand, which, at the same time, is unhindered by external regulation as well as the control by the government or monopolicies. As the supply and demand, which is also an economic model of price determination in the market, plays an important role in the free market system, thus the supply and demand framework is used to illustrate the efficient outcomes of free market. At the same time, the key assumptions of the efficient market theory are explained in this question (Kumhof, Michael and Romain, 2011).
 
Firstly, there are four basic laws for the supply and demand in the free market. Firstly, if the demand of a product or the service increases whiles the supply of it remains unchanged, a problem of shortage is generated and this will lead to a higher equilibrium price. However, on the other side, if the demand of a product or a service decreases while the supply of it remains unchanged, this will cause a surplus to occur. As a result, it may lead to a lower equilibrium price. The third case is that if the demand of a product or a service remains unchanged, however there is an increase in the supply, then a surplus will generated and this will lead to a lower equilibrium price in return. Lastly, if the demand of the product or service remains unchanged, but there is a decrease in the supply, then it will lead to the problem of shortage thus it will lead to a higher equilibrium price (Kumhof, Michael and Romain, 2011).
 
Over the past few decades, demand and supply have been generalized to explain the macroeconomic variable in a free market system. And all these variables are all aggregated thus the aggregate demand curve and the aggregate supply curve. Firstly, the aggregate demand curve accounts for the purchases from all consumers, businesses, the government, as well as foreign trade in the whole market system. Besides, it is a graphical representation of GDP or demand at the national level. As the curve shifts to the right, the total level of output and GDP increases. An aggregate demand curve is shown below. The horizontal axis measures total economic output or GDP. The vertical axis uses the overall price level for the economy as a measure of prices. This curve shows the relationship between the price level and output. As the curve shows, there is an inverse relationship between prices and output (Klenow and Benjamin, 2010). 

Another graph illustrates the aggregate supply curve for an economy. The aggregate supply curve shows the total output by producers of all goods and services in an economy. This curve has a relatively flat region that rapidly becomes vertical. From the curve shown below, the flat section of aggregate supply is characterized by an economy with a good deal of excess capacity. On the other hand, the vertical section of the aggregate supply curve indicates that the economy has reached full capacity (Klenow and Benjamin, 2010).

 
The theory of free market system is crucial to all the policymakers as they desire to smooth out the business cycle by minimizing the magnitude of variation in economic growth over the course of the business cycle. Secondly, it helps the government to understand where the economy is going in the future thus it serves as a leading economic indicator for all the economic policymakers (Klenow and Benjamin, 2010).
 
Question 3
The term creative destruction refers to the incessant product and process innovation mechanism once when the new production units are going to replace the old ones.
It was coined by Joseph Schumpeter in 1942. It is considered as an essential fact about capitalism by Joseph Schumpeter. It is a type of restructuring process that permeates most of the major areas of macroeconomic performance (McKnight, Lee, Vaaler and Katz, 2010). In other words, it will not just encounter the long-run economic growth; it may face economic fluctuations, structural adjustment as well as the functioning of factor markets. In a long term, the process of creative destruction will be able to assist the productivity growth to increase by fifty per cent. At the microeconomic level, restructuring is characterized by countless decisions in order to create and destroy various types of production arrangements. As all these decisions are always involved in between multiple parties, different types of strategic as well as technological considerations; thus these decisions are usually very complex. Additionally, the efficiency of all these complex decisions does not the managerial talent only; it also depends on the existence of all the sound institutions which can provide a proper transactional framework. If there is any failure along this dimension, it may cause sever macroeconomic consequences as long as it interacts with the process of creative destruction. Besides, the concept of “Creative Destruction” is essential to free market capitalism as it allows new things constantly overtaking the old ones; it also allows tearing down of previous economic and technological systems in order to make ways of progress for a healthy capitalist system. Moreover, it can be shown that how the entrepreneurs as well as innovators will be rewarded for their work, at the same time, it shows that those businesses which are not being able to change or adapt to this system will find themselves penalized. However, I do not agree with the concept of “Creative Destruction”. Although the idea of creative destruction may seem like very common to most people: once a new product or method is produced or developed, and it is better the old one, obviously most people are going to be driven to adopt it as well as eclipsing the old product at the same time (Metcalfe, 2008). However, those people may have missed out some far-reaching implications of the creative destruction. For example, the traditional printed newspaper and magazine is threatened by the rise of Internet media in modern time. While many people argued that it is a natural and acceptable part of evolution for the death of all printed newspaper, magazines as well as journals, but I think all these are important resources and losing all these resources would have an unpleasant consequence for the next generation. Moreover, when creative destruction is interfered, other problems can arise, sometimes creating backlash as well. For example, if a government provides assistance to the failing companies, it is regard as interference with the free market capitalism as well as a failure to promote innovation. Additionally, some people protests about the use of robotics and mechanized systems in manufacturing as a merit of creative destruction, while without highlight the plight of the workers who will be unemployable after being replaced by the machinery. Thus I think the demerits of creative destruction definitely outweigh its merits so I think it still need to go through a lot of developmental processes until it is effective, useful and beneficial for the whole society (Caballero, 2007).
 
Question 4:
As shown from the passage, Lehman’s slow collapse began at the mortgage market crisis unfold in the summer of 2007. But it is believed that Lehman’s eventual collapse started as a result of the bursting about the “tech bubble” as well as affected by the LTCM failure in the USA market. As the result of all these undesirable events, the Federal Reserve lowered the federal funds rate from 6.5% to 1% between 2000
and 2003 in order to prevent the problem of deflation. Due to a large decrease in the interest rates, it created a large demand for homes and therefore home mortgages.
On the opposite side, the quality of the mortgages decreased with an increase in the demand. The occurred of this incident is due to 2003, when the mortgages originating at the traditional lending standards were exhausted. In order to solve the problem, the mortgages were issued to borrow with their weak credit histories as well as the increasing probability of default. Some of the examples of these mortgages include the adjustable-rate mortgages as well as the interest only mortgages (Aragon & Strahan, 2009).
 
Secondly, there was a strong demand on the Wall Street for the Mortgage Backed Securities as well as the Collateralized Debt Obligations in which they are beginning to drive down the lending standards. For example, the Collateralized Debt Obligations allows the financial institutions like the LBH to seek the investor funds to finance the lending. As a result, all the cash payments from multiple mortgages are placed in a single pool together. In other words, all the cash is allocated to specific securities in a sequential order dependent upon investment grade ratings that are received by the rating agents. At the same time, Mortgage Backed Securities are regarded as a bundle of loans packaged into a set of securities and being sold to the general public in the securities market. The firms who bought these Mortgage Backed Securities would receive payments based upon the mortgage payments. Other banks, such as LBH that were selling MBS, could help them pool risk and generate capital (Aragon & Strahan, 2009).
 
And for the banks that were purchased MBS, it was a source of cash flow from a safe and secure, commodity, or the real estate market. However, in the real case, the cash flows were not safe and secure, therefore as the loans defaulted, the firm selling the MBS was required to cover the debt based on its assets which was difficult due to the high levels of leverage used to purchase these securities. Take LBH as an example, it was leveraged 30:1, which eventually lead to its demise (Cochrane & Zingales, 2009).
 
Thirdly, between July 2004 and July 2006, the Federal Reserve increased the federal fund rate significantly, resulting in an increase in the adjustable- rate mortgages. This caused the borrowers could not refinance to avoid the higher payments due to rising interest rates and could not pay the increased mortgage payment. In return, borrowers began to default (Cochrane & Zingales, 2009).
 
Finally, as a result of overexposure to subprime mortgages through MBS as well as CDOs, all the financial institutions began to falter. At the same time June 2007, Bear Steams was the first to fall due to the securities they thought were safe were not, they were tainted with what came to be called toxic mortgages. On the other side, LBH, as the result of the mortgage market crisis, and the bailouts of the Bear Steams and Fannie and Freddie, LBH suffered a large decrease in the stock price. All these causes were going to let Lehman Brothers go bankrupt (Aragon & Strahan, 2009).
Question 5
In order to understand the role of monetary policy in generating the speculative bubble that led to the global financial crisis, the term speculative bubble is identified as a widespread or generalized increase in asset prices to the unsustainable levels, with unsustainability confirmed by the subsequent crash. A key feature of a speculative bubble that should be should be emphasized is the attendant anomalous convergence of expectations that occurs when there is a growth of share among the investors in believing that the prices can only go up and at the same time the risk of reversal has somehow disappeared. This can also used to explain why the buying eventually become frenzied in a bubble and sellers all but disappear. And this phenomenon of the convergent expectations in the stock market is also documented by Shiller’s surveys of investor sentiment. A diagram called the S&P index together with the percentage of investors in his survey shows that the stock prices are not too high (Aspromourgos, 2010).
 澳洲assignment business report代寫
As may be seen from the diagram, this percentage of investors who thought the market was going to fell in 1997 did so right after Greenspan’s famous speech about an irrational exuberance; and then the market fell again 1999, following the 1998 financial strains in Asia, Russia and LTCM. However, the investor’s confidences recovered buoyantly due to the Federal Reserve expand the response to those events. From the diagram, the dot-com crash only produced a relatively small dip in the curve, which afterwards remained on a rising trend through much of 2006, indicating a broadly shared belief that shares would keep rising (Aspromourgos, 2010).
 

 
I think Keynes is a better guide as Keynes's theory assists in the determination of equilibrium real GDP, employment, and prices focuses on the relationship between aggregate income and expenditure. This is because Keynes used his income-expenditure model to argue that the economy's equilibrium level of output or real GDP may not correspond to the natural level of real GDP. In his income-expenditure model, the equilibrium level of real GDP is the level of real GDP that is consistent with the current level of aggregate expenditure. If the current level of aggregate expenditure is not sufficient to purchase all of the real GDP supplied, output will be cut back until the level of real GDP is equal to the level of aggregate expenditure. As a result, if the current level of aggregate expenditure is not sufficient to purchase the natural level of real GDP, then the equilibrium level of real GDP will lie somewhere below the natural level (Aspromourgos, 2010).
 
 
Reference:
Aspromourgos, T. (2010), ‘The Great Financial Crisis, the Revival of Keynesianism, and the Question of Public Debt’, Australian Review of Public Affairs Digest, September: http://www.australianreview.net/ digest/2010/09/aspromourgos.html.
 澳洲assignment business report代寫
Aragon, G.O., Strahan, P.E. (2009). Hedge funds as liquidity providers: evidence from the Lehman Bankruptcy. NBER working paper series. Working Paper 15336. September 2009. http://www2.bc.edu/~strahan/HF%20and%20Lehman%20augu
st%202009_v4.pdf
 
Caballero, R. (2007). The Macroeconomics of Specificity and Restructuring. Yrjo Jahnsson Lectures. Cambridge, MA: MIT Press.
 
Cochrane, J.H., Zingales, L. (2009). Lehman and the Financial crisis. The Wall Street Journal. http://faculty.chicagobooth.edu/luigi.zingales/research/papers/le
hman_and_the_financial_crisis.pdf
 
Dawson Sandra (2007). Analysing Organizations, Third Edition, Palgrave.
 
 澳洲assignment business report代寫Guillén Mauro G. (2009). The Global Economic & Financial Crisis: A Timeline. The Lauder Institute, Wharton, University of Pennsylvania.
 
 
Klenow, Peter J., and Benjamin A. Malin., (2010).“Microeconomic Evidence on Price-Setting.” In Handbook of Monetary Economics. Vol. 3, ed. Benjamin M. Friedman and Michael Woodford, 231–284. Elsevier.
Kumhof, Michael, and Romain Ranciere., (2011). “Inequality, Leverage and Crises.” http://www.stanford.edu/∼kumhof/ilc dec 2010.pdf.
澳洲assignment business report代寫 
McKnight, Lee W., Paul M. Vaaler., and Raul L. Katz. (2010). Creative Destruction: Business Survival Strategies in the Global Internet Economy. Cambridge, MA: The MIT Press.
澳洲assignment business report代寫 
Metcalfe, J. Stanley (2008). Evolutionary Economics and Creative Destruction. London: Routledge.

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