The Global Financial Crisis
The Global Financial Crisis And Australia
What was the cause of the Global Financial Crisis (GFC)? And what can Australians that were effected do to claim back losses suffered from the GFC?
What Was The Global Financial Crisis?
The basics of the GFC, how it changed the financial world
Considered by some economists as the worst financial crisis since the Great Depression, The Global Financial Crisis occurred over 2007-08 and threatened the collapse of large business corporations before it was saved by a generous bailout from the banks of national governments. The result of the crisis was a drastic drop in the global stock market as well as the collapse of the housing market, which was where many people were affected by being evicted and foreclosed upon, leading to unemployment levels to rise.
How the GFC Happened
The main causes and effects of the global financial crisis
The first signals that there could be an issue with the market appeared in the middle of 2007 when the large American financial company Bear Stearns declared serious problems with their MBS holdings. These issues were especially concerning as they focused on sub-prime mortgages, which belonged to people with lower incomes and non-ideal credit ratings. The issues spread through the credit market throughout the end of 2007 as worry intensified about the value of mortgage securities. In previous times these securities were thought to have been ‘low-risk’ for investors, now started to suffer a great deal. These worries led banks to become more hesitant in lending each other assets and they began to stockpile their cash holdings. This resulted in cash and credit markets having much higher interest rates, leading to months of problems which inevitably lead to the collapse of Bear Sterns and the consequent aid from JP Morgan.
The crisis then reached its peak at the end of 2008 when US Company Lehman Brothers declared bankruptcy. Around the same time, AIG, a U.S. insurance company was bailed out by the US government as well as two mortgage agencies, Freddie Mac and Fannie Mae. As Lehman Brothers was such as large company, its bankruptcy caused markets to come to almost a complete halt as the stability of the global market was put into question. Government’s and central banks around the world responded to the situation with policy change that included large reductions in policy interest rates and large fiscal stimulus as well as government ownership of institutions which were beyond private repair. The market crash had affected Australia considerably less than other nations. While other countries battled with extreme recessions and unemployment rates, the Australian economy has recorded slight growth and has not required government bail outs like the US for example.
Although Australia was not terribly affected like other nations, there was still an impact on how the market has progressed since. The local economy has slowed down about 0.5% and the unemployment rate, while not huge, still rose to just under 6% by the end of 2009. Not everyone was so lucky and although we were affected less than other nations, the GFC had a negative impact on many Australians.
I was affected by the GFC, What can I do?
If you effected by the GFC there are things you can do to claim compensation
If a financial institution has invested your funds in a way that you believe to have been negligent or irresponsible, you are entitled to file a negligence claim to recover your loss. Financial negligence should not be taken lightly. If you believe that your funds have been mismanaged you have every right to file for compensation. Not all financial planners have your best interest in mind when investing your money. Don’t make the mistake of failing to notice negligent behaviour before it’s too late. The first step to take is to talk with your financial adviser. If you are not satisfied with their response to your claim, you should seek legal counsel as soon as possible. As it has been close to a decade since the GFC, it’s important to file any negligence claims in regards to malpractice leading to the crisis as soon as you can. Call us today on (02) 9011 7929.
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