1. Critically Discuss the View That Capital Markets Created the Conditions That Led to the ‘New Economy’ Bubble and the Banking Crisis.

The emergence of the "new economy" and the formation of its economic bubble and subsequent banking crisis have been credited to the capital markets - effectively creating the conditions that allowed the bubble to form and eventually, "pop". This essay seeks to discuss the extent to which the capital markets actually be responsible for the banking crisis that resulted from the economic bubble.

The new economy was viewed as a great opportunity for most people. The start-up was easy; it does not need much capital for companies to start. Right at that point of time the banks were also giving loans for low interest rate allowing people borrowing money from the bank for its start-up or expansion. Old industry stock market is rigid. They tend not offer new investment potential when they are settled. It just simply means that there will not be a significant growth in the company. Every year they will give their dividends in money form to their investor. However in the new economy they tend to give you more shares than cash which keeps you in their market and expand their market better to greater “expand” your shares.

The boom of “new economy” bubble was slowly inflating was due to a few conditions in the capital market. Firstly there was an uneven fairness in the old economy companies and the new economy companies. The thresholds of new economy company were so much easier than the old economy company.

Basically these are the top few conditions that had hit the old economy really hard allowing the new economy to grow. 1990s the spike in the stock growth by the new market companies make the bubble really blow up was when speculators note the fast increase in value and decide to buy in anticipation of further rises. This encourages the investors who were not interested in the new market to invest in it.

New economy started well when the use of Internet grew. People saw the commercial value in it. Take buying a book as an example, E-commerce websites were created to...