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Created with Fabric.js 1.4.5 Continue? Over? is NEUTRAL.Crisis may happen again if bankers and derivativesare still giving out loan without undergo properprocedure, selfishness between the bankers andderivative.Hence, an appropriate policy is necessaryto maintain the smooth flow of money. Global Financial Crisis What is happening? Government Reaction US AUSTRALIA Who? CHINA SINGAPORE JAPAN Government, Investment Bank, Financial Institution,Sub-Prime Borrower... Sub-prime borrowers increase When? August of year 2007 Increase Unemployment Decreased in Real wages Bank incur huge losses How? Overheated housing market Bursting of housing bubble Short-term interest rates near zero Created Commercial Paper Funding Facility Injected equity capital into banks Increased deposit insuance Loan guarantees for newly-issued bank debt Guarantee bank deposits $47 billion was allocated: $20.5 billion Resilience Package Jobs Credit Scheme and Special Risk-Sharing Initiative Entered $30 billion swap with Federal Reserve Relaxed leverage ratio Reductions in interest rates Signed swap facility with US Fed Introduced 'complementary deposit facility' Loans to financial institutions Policy 'credit easing' Special Funds-Supplying Operations Schools20000 new homesInsulate 2.7 million homesRoad repairs and infrastructureSmall business tax breaksCash bonuses $10.4 billion payments Housing prices declined Default rate INCREASED ! Housing prices plummet Increase Inflation GDP drop How to prevent this crisis to happen again? Moral of the story Case of Bailout - the erode of public confidence What should government learn? New institution - reasonable lending, watchdog agency, risk management, financial advice.. FAST government that adapt and continuously evolve-rapidly changing conditions and expectations Don't just buy a house, but own a house. Continuous-work-out-mortgage-terms adjusted continuously Too good to be true, is probably false Think wisely before you went into mortgage If you fail to plan, plan will fail you Government introduced a 4 trillion Yuan stimulus packageLocal government proposed stimulus packagesof 18 trillion yuanCentral government issue 200 billion yuan ingovernment bondMonetary expansion
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