People Money Market Essay

440 words - 2 pages

It was reported that’s today’s economy is improving statistically but many people believe that the economic conditions are getting worse. People around the world witnessed the earthquake and tsunami that destroyed Japan back in March 11, 2011. Japan as one of the richest countries in the world was suffering from nuclear crisis that influenced the global economy. It was the worst earthquake the country ever experienced. Japan gets more than third of its power from nuclear energy. They are the third largest nuclear power user in the world, providing almost 35% of its electricity. Prior to the horrific events in Japan, several countries experienced ...view middle of the document...

Libya is known to the world and Africa as one the strongest oil supplier to the world.

Members of the EU decided to use a universal currency: the euro. This allowed countries such as Greece, Portugal, Italy, Ireland, and Spain to borrow money at the same interest rates as Germany. Inflation rates for each country were different; inflation is higher for countries like Greece and Italy than for Germany. Moreover, the inflation rate for these countries was higher than the interest rate charged on their loans. Therefore, borrowing at the same rate as Germany essentially meant that they were being paid to borrow. Because it was such a good deal to take loans, both the citizens and governments of these countries started to accumulate enormous amounts of debt. To get an idea of how much, Greece currently owes 160% of its GDP. Spain, on the other hand, has the largest property bubble in the world, with almost as much unsold housing as the United States. It’s real estate debt amounts to 50% of its GDP since most of the capital that went into financing these properties came from loans. Even though Greece is rated 126th with debt (the least likely country to pay off their loans) ECB will continue to buy its government bonds and give out loans. With so much interconnection, it would be a disaster to see a country default. Countries like Germany end up giving money to indebted governments so that the money can somehow end up in banks, which will be able to repay the loans.

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