Financial Crisis

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Master General Management

GM1 WS 2010/11

„Financial Crisis – Impacts and Reactions“

Submitted by: Andreas Müller

Matriculation No.: 885059

Date : 06.01.2011

Table of Contents

Table of Contents II

1. Introduction 1

2. Collapse of the Financial Markets 1

3. Impacts on Financial Institutions 3

4. Impacts on German Economy and Companies 5

5. Monetary Reactions by the German Government 6

6. Conclusion 6

References III

1. Introduction

For the last couple of years the world has been experiencing one of the most severe financial crises ever which has been often compared to the Great Depression from 1929. Starting with the Mortage crisis in the USA in 2007 and the collapse of Lehman Brothers in September 2008, this problem increased to the worst global economic crisis ever. The negative effects of the Global Financial Crisis from 2007-2009 are both financial and real. The financial impact of the crisis resulted in problems in the banking systems of many countries. The real impact was that the economic growth has slowed down. The crisis bought many challenges and questions concerning the ability of the industries in the national economies to survive, the destiny of the employees and the role of the government in current market situation. However, the crisis might create opportunities for some industries if the companies don´t let themselves to be misled by the general negative moods towards the current state of the market.

The following essay gives an overview of the Global Financial Crisis and its challenges and monetary reactions.

2. Collapse of the Financial Markets

The Financial Crisis began with the credit crisis which was a direct result of failure of the mortage market in the U.S. The problem has started in 2001, when the Federal Reserve of America (Fed) decided to lower the interest rate from 6.5% to 1%, in order to overcome the negative affect of September 11 on the growth of economy.[1] The...