Mostly issued by financial institutions, a letter of credit (LC) is a standard document which is primarily used in the trade finances to provide irrevocable payment undertakings
Financial economics is a field of economics that deals with the deployment and allocation of resources, in an uncertain environment, across time as well as spatially and blends the study of finance with the methodology of economicsSearch
A Decade’s review
The decade that passed by has not been such an easy one for the United States Economy. It seems to have set a precedent that whatever begins with a boom is sure to go out with a burst. Keeping true to its teaching the last decade did open splendidly. Let’s have a look at some of the important events of the last decade.
The dot-com bubble
The decade open the new millennia on a high note, riding on the dot-com bubble. But like all bubbles, this one too burst in March 2000 pushing the economy into a recession and killing off behemoths like WorldCom and jeopardizing companies like Cisco. The ill-effects of the bubble were further amplified due to the 9/11 attacks.
The Economic Reforms that I Want
Reading the title, one may think that I am just another Reagan wannabe who wants to hypothesize his own Reaganomics and put it forth. But don’t be mislead by the title; the economic reforms that I talk of are the ones almost every American wants.
Healthcare
As many would have guesses, this is the first reform that I want. The US healthcare system is too complex and puts a lot of power in the hands of the insurance companies. Also the cost of healthcare is high in this country than any other. Hence the government needs to not only tame the insurance companies but also needs to work towards bring down the cost of healthcare.
Subprime Mortgage Crisis – and the Homes Destroyed
To understand what this crisis was, we first have to understand what subprime lending was in the first place. Subprime lending was lending, i.e. giving loans to those people who generally have difficulty keeping up with the repayment schedule. The proponents of this type of lending believe that this practice gives credit to those who would otherwise be devoid from the credit market.
Over the years the bank gave loans to these people with the facility of adjustable mortgage rate (ARM) which many opted for. The ARM itself became a trap for the people as it gave initial lower interest rates where, in the beginning, the average interest rate was lowered for the first few years (by more than half the interest rate in some cases). However, what transpired was when the period of lower interest rate ended, the total payment suddenly spiked (in some case by more than 75%).
The Recent Recession
There was the Great Depression of the 1930’s and there is the current century’s Great Recession, a recession that sent shattering ripples through the economies of the world. The center point of this quake was the US banking system.
It all began in the December of 2007 when the US banking system was hit by a liquidity shortfall which in turn, started a chain reaction that engulfed big financial institutions like Meryl Lynch, resulted in the bailout package and set the global stock markets to a downward spiral.
What triggered this financial meltdown was the collapse of the US housing bubble. The bubble had peaked in 2006 when the banks began to give out more and more subprime loans to people along with the facility of adjustable rate mortgages (ARM).