Black Americans Essay Example for Free

Black Americans Essay Firstly black Americans faced problems in the south because of lynching and the Jim Crow Laws. Lynching meant that racist white Americans would put the law into their own hands and punish black people whenever they please. They would hang the victim from a tree. In 1897 123 black people were lynched in the south, 84 in 1903 and 61 in 1921. The police would turn a blind eye and made no effort to stop lynching from happening. Even though slavery ended in 1865 black people faced the threat of violence, intimidation and racial discrimination on almost a daily bases. The Jim Crow Laws were created to keep whites and coloured people away from each other. The Jim Crow Laws covered all the aspects of life. Black Americans were stopped from using the same restaurants, hotels, libries, taxis, and even cemeteries. If black people wanted to vote the Jim Crow Law made them have to pass a difficult literacy test and they would have to pay high taxes. Nearly 2million black Americans moved from the southern states to the north in hope of a better life. This was called the Great Migration They thought they would be able to escape the Jim Crow Laws and racism as a whole, they wanted to go to the north for a better chance at jobs and education but little did they know. Secondly black Americans faced problems in the south because of the KKK. The KKK stands for the Ku Klux Klan; they were a racist group and were part of a secret society. The leader of the KKK in the 1920’s was a dentist called Hiram Wesley Evans whose name in the KKK was Imperial Wizard. Only WASP’s could belong to the KKK- White Anglo Saxon Protestants. The KKK targeted blacks mainly, but they also hated Jews, Catholics and Liberals but there main focus was poor black families that were very vulnerable. 5 million white Americans joined the KKK between 1920 to 1925. Most members where poor white people because they were afraid that black people would take over their jobs. Some of the KKK members were judges, policemen and lawyers. They would dress in white sheets and white hoods to cover their identities. The KKK used a variety of different methods such as intimidation, murders, raping, whipping, lynching, castration and tar burning. The Black Americans tried to fight back using non-violent methods. The NAACP -National Association for the Advancement of Coloured People- asked the president for new laws to help combat the KKK violence but received very little results. In the 1920’s Black Americans started to turn to the ‘Back to Africa’ movement which told blacks that they should return to their native America. This was started by Marcus Garvey but the whole movement faltered when he was arrested for fraud and sent to prison. In 1926 membership of the KKK dropped from 2million to 300,000 people. Lastly black Americans faced problems in the north because there was still racism around. Black people would be sent to live in the worst parts of the poorest cities. They were last to be hired and first to be fired from any jobs that they could get their hands on. Factory owners in northern cities knew that huge numbers of black people knew how to work well because of the slavery era. So they sent people down South to encourage them to take jobs in their factories up North with promises of good salaries. They wanted to add to the pool of white workers to keep down wages. So the black workers were encouraged to move North to compete with white workers. The white workers did not welcome the black workers with open arms because they naturally saw them as a threat. The black workers were willing to work for less money at least at first. So this led to racial tension. The white Americans refused to accept black members to protect the jobs. Another thing was that white neighbourhoods did not want poor black people and the problems that came with them moving into their neighbourhoods. It was a bad situation all around and led to much racial issues and even race riots These are the problems black people faced in the USA during the 1920s.

The Power of Working Out Essay -- Exercise Self Image Papers

The Power of Working Out Wherever I go, whenever I go, whoever I see, I am always astonished by the way that people want to present themselves. The principle of working out reminds me of nothing else but a song titled â€Å" wherever, whenever, whoever â€Å" by Shakira. It is for the pure sense that everyone wants to look good and become popular by looking good. The media brings about popularity just by looking this so called â€Å" good. â€Å" Take for example Britney Spears, Christina Aguilara, Shakira, and other teen pop sensations. Many of these pop stars are not even old enough to drink, however they are making millions of dollars from their performances and cd’s that have sold. But it is not just the music that has created such popularity for them. It is without any doubt their appearance just as well. This ethnography will produce the answers to the many asked questions to reasons people even start working out, the multi effects of working out, and to produce the different outlooks of working out by different people. It is the purpose to produce a culture of working out from a masculine and feminine perspective. My research is based on where I work in the weight room located in the building of the JCC located in West Bloomfield, Michigan. It is a very big building perhaps the size of a large high school which is surrounded by a great amount of parking spaces. Inside the JCC there are different facilities. It has a Basketball court, a hall for doing big parties, a rink for roller hockey and the weight room that I am doing. People that are members of this JCC are able to use the weight room anytime they want as well as use the sauna, steam room, they have the luxury of having towels be provided for them a... ... I don’t try to impress the opposite sex as much as I used to. Although it is still nice to have people look at you while your working out I feel that staying fit and healthy is just as important as looking good. â€Å" With the help of my field notes, Keneth Pike’s explanations within etic and emic perspectives, and the interviews I did within these perspectives I was able to realize the true power of working out. The true reasoning that all people are different. Whether some are doing it to stay in shape or to look better, all are doing it for some soul purpose. America is all about working hard and striving to achieve. It is a place of freedom and opportunity. The weight room is an opportunity for people to look better, feel better, as well as socialize with other people. Works Cited: Pike Kenneth. â€Å" A Stereoscopic Window on The World, â€Å"

Funeral Customs

Funeral custom world wide Death: the act of dying; the end of life; the total and permanent cessation of all the vital functions of an organism. Death is a very painful and emotional time, yet one that may be filled with hope and mercy and is base off of the world's religious traditions and of philosophical enquiry. Belief in some kind of afterlife or rebirth has been a central aspect of most, if not all, religious traditions and as a result of that over time there has been different type of funeral customs developed in the world. The trace of funeral service is a history of mankind. Funeral customs are as old as evolution itself. Funeral customs are rituals surrounding the death of a human being and the subsequent disposition of the corpse. Such rites may serve to mark the passage of a person from life into death, to secure the welfare of the dead, to comfort the living, and to protect the living from the dead. Disposal of the body may be by burial , by conservation or by cremation , by exposure or by other methods. Funeral ceremonies have certain common features: for example, the laying out of the corpse; the watching of the dead, of which the wake is a standard example; and the period of mourning with the accompanying ceremonies. www. encyclopedia. com/doc/1E1-funeralc) â€Å"Every culture and civilization attends to the proper care of their dead. Every culture and civilization ever studied has three things in common relating to death and the disposition of the dead. Some type of funeral rites, rituals, and ceremonies or a sacred place for the dead and memorialization of the dead Researchers have found bur ial grounds of Neanderthal man dating to 60,000 BC with animal antlers on the body and flower fragments next to the corpse indicating some type of ritual and gifts of remembrance†. www. wyfda. org/basics) Funeral customs were diverse in many cultures. Some culture treated the male funerals different from the female funerals. The Cochieans buried their women, but suspended their men from trees. The Gonds buried their women but cremated their men. The Bongas buried their men with their faces to the North and their women with their faces to the South. (www. wyfda. org/basics) Body burial or direct burial simply means placing a body in the ground after death, although it also applies to storing the whole body aboveground in a ausoleum, vault, or other type of crypt. (www. caring. com/articles/body-burial-arrangements)they also found that in the medieval time the king would be buried without a heart. (Puckle 120) The Gonds are among the largest tribal groups in South Asia and perha ps the world. The term Gond refers to tribal peoples who live all over India's Deccan Peninsula. Most describe themselves as Gonds (hill people) or as Koi or Koitur. (www. everyculture. com/wc/Germany-to-Jamaica/Gonds. ) Funeral custom hasn’t really changed over time there are still similar or same customs still used today. They often had Memorials which allow friends, relatives and acquaintances to express their feelings and to share their memories. Many bereaved people find them helpful and are pleased to have provided a ceremony their loved ones would have wanted. (www. humanism. org. uk/ceremonies/humanist-funerals-memorials) Native American burial customs have varied widely, not only geographically, but also through time, having been shaped by differing environments, social structure, and spiritual beliefs. Prehistoric civilizations evolved methods of caring for the dead that reflected either the seasonal movements of nomadic societies or the life ways of settled communities organized around fixed locations. As they evolved, burial practices included various forms of encasement, sub-surface interment, cremation, and exposure. Custom usually dictated some type of purification ritual at the time of burial. Certain ceremonies called for secondary interments following incineration or exposure of the body, and in such cases, the rites might extend over some time period. Where the distinctions in social status were marked, the rites were more elaborate. The Plains Indians and certain Indians of the Pacific Northwest commonly practiced above-ground burials using trees, scaffolds, canoes, and boxes on stilts, which decayed over time. (www. nps. gov/history/nr/publications/bulletins/nrb41/nrb41_5) Many of our funeral customs have their historical basis in pagan rituals. Modern mourning clothing came from the custom of wearing special clothing as a disguise to hide identity from returning spirits. Pagans believed that returning spirits would fail to recognize them in their new attire and would be confused and overlook them. Covering the face of the deceased with a sheet stems from pagan tribes who believed that the spirit of the deceased escaped through the mouth. They would often hold the mouth and nose of a sick person shut, hoping to retain the spirits and delay death. Feasting and gatherings associated with the funeral began as an essential part of the primitive funeral where food offerings were made. Wakes held today come from ancient customs of keeping watch over the deceased hoping that life would return. The lighting of candles comes from the use of fire mentioned earlier in attempts to protect the living from the spirits. The practice of ringing bells comes from the common medieval belief that the spirits would be kept at bay by the ringing of a consecrated bell. The firing of a rifle volley over the deceased mirrors the tribal practice of throwing spears into the air to ward off spirits hovering over the deceased. Originally, holy water was sprinkled on the body to protect it from the demons. Floral offerings were originally intended to gain favor with the spirit of the deceased. Funeral music had its origins in the ancient chants designed to placate the spirits. (www. wyfda. org/basics) Funerals rank among the most expensive purchases many consumers will ever make. A traditional funeral, including a casket and vault, costs about $6,000, although â€Å"extras† like flowers, obituary notices, acknowledgment cards or limousines can add thousands of dollars to the bottom line. Many funerals run well over $10,000. (www. pueblo. gsa. gov/cic_text/misc/funeral/funeral. ) More and more people are choosing to be cremated, and there are even more choices for cremation urns than for caskets (www. uneralplan. com) The time after the death or passing away of a people in India are given a lot of importance. As per the Hindu Holy Scripture like the Bhagwat Git, it is believed that the soul of the person who has just passed away is on its way to the next level of existence at such a time. As such, it is with an intention to help the departed soul in a peaceful crosso ver to that next level of his /her existence, that Indians observe so many death rites and rituals. Basic idea behind the Indians' following all these funeral traditions is to show reverence to the deceased person. Normally during this time, all the family members share each other’s sorrows and pray, so that the soul of the deceased person rests peacefully. At the end of one year, all elderly members of the deceased person gather once again for the Shraad ceremony. The 3rd, 5th, 7th or 9th day after the death of the person are also important, as all relatives gather to have a meal of the deceased's favorite foods. A small amount of the food is offered before his /her photo and later, it is ceremonially left at an abandoned place, along with a lit diya. However, there may be slight variations in the way people of different religious sect observe this death rite. (www. iloveindia. com/indian-traditions/funeral-traditions) Chinese funeral rites and burial customs are determined by the age of the deceased, cause of death, status and position in society, and marital status Preparation for a funeral often begins before a death has occurred. When a person is on his/her deathbed, a coffin will often have already been ordered by the family. A traditional Chinese coffin is rectangular with three ‘humps', although it more common in modern times for a western style coffin to be used. The coffin is provided by an undertaker who oversees all funeral rites. When a death occurs in a family all statues of deities in the house are covered up with red paper not to be exposed to the body or coffin and all mirrors are removed it is believed that one who sees the reflection of a coffin in a mirror will shortly have a death in his/her family. A white cloth is hung over the doorway to the house and a gong is placed to the left of the entrance if the deceased is a male, and to the right if female. At the wake, the family members of the deceased gather around the coffin positioned according to their rank in the family and special clothing is worn: Children and daughters-in-law wear black signifying that they grieve the most; grandchildren, blue; and great grandchildren, light blue. Sons-in-law wear brighter colors, such as white, since they are considered outsiders. The children and daughters-in-law also wear a hood of sackcloth over their heads. The eldest son sits at the left shoulder of his parent and the deceased's spouse on the right. Relatives arriving later must crawl on their knees towards the coffin. The funeral ceremony traditionally lasts over 49 days — the first seven being the most important. Prayers are said every seven days for 49 days if the family can afford it. Otherwise, the period can be shortened by three to seven days. Usually, it is the responsibility of the daughters to bear the funeral expenses. The head of the family should be present for at least the first and possibly the second prayer ceremony. The number of ceremonies conducted depends on the financial situation of the family. The head of the family should also be present for the burial or cremation. In the second tradition, the prayer ceremony is held every 10 days: The initial ceremony and three succeeding periods of 10 days until the final burial or cremation. (www. chinaculture. org) The funeral and religious custom of burying the dead in Africa has some of the most complex customs. The ceremony is purely animist, and apparently without any set ritual. The main exception is that the females of the family of the deceased and their friends may undergo mournful lamentations. In some instances they work their feelings up to an ostentatious, frenzy-like degree of sorrow. The revelry may be heightened by the use of alcohol, of which drummers, flute-players, bards, and singing men may partake. The funeral may last for as long as a week. Another funeral custom, a kind of memorial, frequently takes place seven years after the person's death. These funerals and especially the memorials may be extremely expensive for the family in question. Cattle, sheep, goats, and poultry, may be offered in remembrance and then consumed in festivities. Some funerals in Ghana are held with the deceased put in elaborate â€Å"fantasy coffins† colored and shaped after a certain object, such as a fish, crab, boat, and even an airplane. www. a-to-z-of-manners-and-etiquette. com/funeral-and-religious-customs. ) Japanese funeral customs vary widely from region to region, so a generic description is not possible. The religion of the deceased person's family also has a bearing on the final arrangements, as do other factors such as the age at which the person died social st atus and the family's economic circumstances. The body is put on dry ice(3) in a room at the mortuary or in front of the family altar (most Japanese are Buddhists) and the next of kin stay with it or close-by until it is time to put it in the casket. By this time all of the close relatives will have changed into black suits and black kimono or black dresses. The Buddhist priest arrives at the scheduled time and is offered green tea. He speaks briefly with the family, during which time people who have not entered the room yet come in and sit on the floor (or on chairs if it is a funeral hall). After everyone has entered, the priest turns to the altar, bows, lights incense and begins to read a sutra. During the sutra reading, the priest gives a signal and the members of the family, who are seated in hierarchical order, rise and go to the incense urn, bow, offer incense, bow again and return to their seats. After the family members have finished, the visitors repeat the ritual until everyone has finished. The priest finishes the sutra, after which everyone bows to the altar and the wake service ends. Depending on the Buddhist sect, everyone may chant the â€Å"mantra† of the Buddhist sect in unison at points during the service. The funeral is usually held on the day after the wake service. The body is transferred to a temple (in the case where the wake was held at home) and placed before the altar that the mortuary has constructed in front of the temple altar. A wooden tablet inscribed with the posthumous name (4) of the deceased is placed on the altar or in front of it. The posthumous name is assigned and inscribed by the priest. (www. tanutech. com/japan/jfunerals) A Jewish funeral service is conducted in a funeral home or the family home as soon as possible after death – typically within 24 hours. Funeral attire consists of dark-colored clothing, a dress or skirt and blouse for women, and a jacket and tie for men. Men also wear a head covering known as a yarmulke, which will be provided by the funeral director for non-Jewish male guests. Guests should refrain from wearing symbols of other religions, such as a cross. Only family members attend the burial. Condolence visits by friends and extended family are welcomed during the seven-day mourning period known as shivah. Friends and neighbors may prepare the family's first meal following the funeral and may also bring gifts of food during shivah. If you bring food, make sure it is kosher, unless you know for certain that the family doesn't keep kosher. www. thelightbeyond. com/funeral_etiquette_customs_across_cultures) Just as there is a way to live as a Jew, there is also a â€Å"way to die and be buried as a Jew,† writes Blu Greenberg in her book, How to Run a Traditional Jewish Household (Fireside, 1983). This classic guide to Jewish living outlines traditional death rituals and practical issues, although many of these practices have be en adapted somewhat by Reform Jews. The first thing to do after a death in the family, if you belong to a synagogue and the family member lives near you, is to contact your rabbi or another synagogue leader. Usually, the synagogue will take over many of the arrangements. However, when your family member lives far away and is not a member of a congregation, or when you are not a member, funeral homes can often suggest rabbis who will conduct a funeral. Jewish burials take place as quickly as possible, following a principle of honoring the dead (k'vod hamet). Only if immediate relatives cannot arrive in time from abroad, or there is not enough time for burial before Shabbat or a holiday, are burials postponed for a day. Anything less is considered a â€Å"humiliation of the dead,† Greenberg explains. www. jewishfederations. org/page. aspx? id=937) .When a Muslim is near death, those around him or her are called upon to give comfort, and reminders of God's mercy and forgiveness. They may recite verses from the Qur'an, give physical comfort, and encourage the dying one to recite words of remembrance and prayer. It is recommended, if at all possible, for a Muslim's last words to be the declaration of faith: â€Å"I bear witness that there is no god but Allah. † Upon death, those with the deceased are encouraged to remain calm, pray for the departed, and begin preparations for burial. Muslims strive to bury the deceased as soon as possible after death, avoiding the need for embalming or otherwise disturbing the body of the deceased. An autopsy may be performed, if necessary, but should be done with the utmost respect for the dead. (islam. about. com/cs/elderly/a/funerals) The male in Muslim culture body get completely washes before they die. (Triton 1) The different funeral customs has provided evidence that there are so many different way to perform a ceremonies burial rituals etc†¦ Funeral customs has provided different tradition around the world to be spread through different culture and countries worldwide. Work Cited 1. http://www. chinaculture. org/gb/en_chinaway/2004-03/03/content_46092. htm 2. http://www. iloveindia. com/indian-traditions/funeral-traditions. html 3. http://www. wyfda. org/basics_2. html 4. http://www. caring. com/articles/body-burial-arrangements 5. http://www. humanism. org. uk/ceremonies/humanist-funerals-memorials 6. http://www. a-to-z-of-manners-and-etiquette. com/funeral-and-religious-customs. html 7. http://www. encyclopedia. com/doc/1E1-funeralc. html 8. http://www. tanutech. com/japan/jfunerals. html 9. http://www. jewishfederations. org/page. aspx? id=937

Financial Crisis To A Global One Finance Essay - Free Essay Example

Sample details Pages: 11 Words: 3430 Downloads: 5 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Factors that led the US Economy to the Financial Crisis of 2007 and the Mechanisms of Transmission to a Worldwide Crisis During these last few years the most important economic event has affected the worldwide economy has been the financial crisis. There is no precise definition of financial crisis, but a common view is that disruptions in financial markets rise to the level of a crisis when the flow of credit to households and businesses is constrained and the real economy of goods and services is adversely affected.[1]Being students of economics branch, we are continuously studying about the economic models, theories and development of a variety of economic structures. Such event as the financial crisis has really fascinated us and motivated to deepen our knowledge regarding its importance and characteristics. Don’t waste time! Our writers will create an original "Financial Crisis To A Global One Finance Essay" essay for you Create order It is stated that this financial crisis is the most important and in the meantime the most dramatic one since the Great Depression of 1930s. Considering the importance of such an economic event, we wanted to understand the structure of a financial crisis, the causes that led to it describing specifically the relations between them and the mechanisms of transmission from one step to another; from the starting point to the spread of the crisis within the country of origin and afterwards all over the world. This will provide us with information about the real economy and how it constantly adapts to these happenings. The structure of our paper consists in first explaining the factors that led to the beginning of the financial crisis, which are part of the first chapter and which include War in Iraq, the securitization process, the subprime mortgages and the housing bubble effect. The development of the crisis within the country of origin will be explained in the second chapter; here we have to mention the mechanism of transmission from the financial crisis to the economic one. And in the third and last chapter we will explain channels in which the crisis became global the so called Contagion Process. The factors that led the American Economy to the Financial Crisis War in Iraq After the suicide attacks by   Al-Qaeda terrorists  upon the United States on September 11, 2001, in the World Trade Center  in New York City, the situation of the economy became even worse. This contributed to the loss of business on Wall Street, the Dow Jones[2]industrial average closed down more than 684 points, or more than 7% (dropping below the 9000 mark at 8921, according to preliminary figures), on extraordinarily heavy New York Stock Exchange (NYSE) volume. The Nasdaq[3]composite index dropped by 109 points, or 6.5%, to 1586, leaving the already battered index at its lowest point since October 1998. Besides these devastating losses, the war in Iraq, which began on March 20, 2003, as a counteraction to the terrorists attack, has come at a great cost to the American economy. According to Nobel Prize-winning economist Joseph Stiglitz the Iraq war has cost the US 50-60 times more than the Bush administration predicted and was a central cause of the sub-prime banking crisis threatening the world economy[4]He calls it a hidden cause of the current credit crunch. To fight against it, the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit. What happened than will be explained later. But before we go there, we also have to mention that in the short run, wartime spending actually stimulates the economy. As another Nobel Prize-winning economist, Paul Krugman argues, the war is indeed a grotesque waste of resources, but we cant blame it for the current economic mess. Remember, the lowest unemployment rate America has experi enced over the last half-century came at the height of the Vietnam War.[5] Securitization Process Securitization is a financial instrument that appeared at the American economy at the beginning of 1980s. It is referred as distribution of default risk by grouping debt obligations(such as mortgages) into a pool, and then selling securities backed by this pool. In other words this means that in order for the banks to ensure funds for their normal and ongoing activity they gave loans to people who became debtors. This money was tied up in banks and they couldnt make any profit of it(except for the part when the loan would be returned which would actually be in a long-term period). In order to profit from the loaning process banks turned these loans into securities; they divided the credits into parts and sold them to other people (security buyers) as obligations with considerably high interest rates. It is estimated about 10% interest rates for these obligations in 2006. In this way the person who had taken the loan from the bank was not a debtor of that bank where he had taken his loan from, but to the buyer of the obligation with his mortgage credit. This process was of priority from both sides- banks could take off the risk by selling these loans(and transferring that risk to the people who bought the loans) and the security buyers got regular payments from the debtors. Banks started borrowing money from other banks in order to lend more money to the people so they could increase the level of the loans and sell these loans as securities. Furthermore, one high street bank such as the Lehman Brothers also bought mortgages so it could securitize them and sell them to the others. At first the people who were profiting the loans were people with sufficient incomes or as it may also be called safe borrowers. After that the situation changed; banks started giving loans also to poor people, people who had credit level below the usual. These loans are known as the subprime mortgages[6]or self-certified loans or also liars loans. Banks started buying, selling and trading securitization or as we may say, they started buying, selling and trading risk. Whats interesting is that the banks tended to spread the risk to the security buyers. Furthermore, involved in this mechanism, banks started to invest. These investments were considered high-profit investments because the obligations were with a considerable percentage of profit (about 10 % interest in annual scale as it is mentioned in the first paragraph). But these kinds of obligations were massively supported by subprime credits. Consequently, this meant that these investments were very risky; not-safe borrowers would have subsequently problems with paying off the credit. Banks were exposed toward the problems by being engaged in these activities. Securitization was implied to be a productive financial instrument that could help the banks lend more and lower the risk; instead, it led towards a risky and unsecure situation. When people started seeing the real situation, the crisis of confidence spread. Investment banks were sitting on high risk loans. There was an increase in the prices and in the value of the immobile property known as the housing bubble(which will be explained in details later) which led to the process that the security buyers wanted their money back. People didnt have money to pay the loans so the banks found themselves in quite a difficult situation. Lacking in deposits, some of them collapsed. At this point, banks turned to the government for help. More money was injected but still it wasnt enough; the banks went bankrupted and the confidence wasnt restored. Subprime Mortgages and the subprime boom There are generally two types of mortgages in the US: fixed-rate mortgages (FRMs), which have an interest rate fixed for the life of the loan; and adjustable-rate mortgages (ARMs), which have variable periodic interest rates. Subprime mortgages are defined as mortgages to borrowers with limited credit histories. Between 2003 and 2006, a high number of mortgages were issued to subprime residential borrowers. Many subprime mortgages are a combination of ARMs and FRMs. Such mortgages provide for a fixed rate for the first two to three years, which is known as the teaser rate, and after that period the interest rate becomes adjustable semiannually. As real estate prices rose in the early years of this decade, and securitization provided more capital for mortgages, lenders changed their underwriting criteria in order to issue more mortgages and turned to subprime lenders. Between 1995 and 2005, subprime mortgages increased from 5% to 20% of the mortgage market. In 1994, $35 billion in subprime mortgages were produced, and by 2006, that number had increased to more than $600 billion, about 17 times more than in 1994. And the most significant cause for this boom appears to be the increase in the securitization of mortgages as it is explained in the first paragraph. Housing Bubble A bubble occurs when exaggerated expectations of future prices increase unusual demand either by people who fear being priced out of a market or by investors hoping to make a lot of money fast. A bubble is a self-fulfilling prophecy for a while, as successive rounds of buyers push prices higher and higher. But the willingness to pay higher and higher prices in fragile: It will end whenever buyers perceive that prices are no longer going up. Hence bubbles carry the seeds of their own destruction. Only time is needed for bubbles to end.[7] The current financial crisis started in the United States housing market in 2007. The US housing market is seen by many as the main cause of the financial crisis. The financial turmoil that engulfed the US during 2007-2009 began in the mortgage lending markets. There are two potentially reasons and competing explanations of the origins of this crisis. The first is that the easy money policies of the Federal Reserve produced the US housing bubble that is at the core of todays financial crisis. The second and more credible explanation is that it was indeed lower interest rates that spawned the speculative euphoria. As found by Robert Schiller, the inflation-adjusted house prices had been remained constant in the period 1895-1995. But he also found that the real house prices in 2002 had rosen almost 30% after adjusting from inflation. This led him think that there would be such a phenomenon called housing bubble The rise in house prices caused large increases in demand for houses, but the supply remained the same. The increase in the demand is attributed to a number of factors such as: Low mortgage rates. Even though the US savings rate was low during the housing bubble, a flow of savings entering the US economy from countries such as Japan and China helped to keep mortgage rates low.   Relaxed standards for mortgage loans.  Standards for mortgage loans were changed as a result of a number of factors: new governmental policies aimed to adopt an increase in home-ownership rates among lower-income households and also greater competition in the mortgage loan market. Low short-term interest rates. The Fed funds rate began in 2001 at 6.25% and ended at 1.75% level at the same year. If the course of housing bubble in the US would have follow the same way as in Japan, the housing bubble would have collapse along with the collapse of the stock bubble in the years 2000-2002. Instead, the collapse of the stock bubble helped to feed the housing bubble, because the loss of faith in the stock market caused that a large number of people turned to investments in immobile property as a better alternative than the stock market. In addition, the economy was very slow recovering from the 2001 recession. The weakness of the recovery of economy, led the Federal Reserve Board to continue cutting interest rates, pushing the Fed funds rate in mid-2003 to a record of 50-years to the level of 1%, where it stayed for a year. In purchasing-power terms, a borrower during that period who merely invested in goods, whose prices merely rose at the rate of inflation, was prof iting in proportion to what he borrowed. In this way, unconsciously, Fed created a credit bubble. But Fed says that the reason of a very low interest rate choice in 2003 and 2004 was that they ignored the dollar weakness, higher interest rate choices abroad, the Taylor Rule[8]and the booming performance of the US and global economics. Affected by some factors, housing bubble burst in 2006. First, average hourly wages in U.S had remained stagnant or declined 2002 until 2009; in real term this represented a decline. Second, growth in the supply for houses tracked price rises. Third, as interest rate rose to a peak of 5.25%, adjustable-rate mortgages (ARMs) become less attractive and so removed many non-prime prospective buyers from the market. Fourth, as house prices fell, home-owners unable to take monthly payments, lost their houses in foreclosures, while banks and other mortgage-lenders lost hundreds of billions (unable to recover amounts loaned). By the beginning of 2007 these changes happened: ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Home prices were at unprecedented levels. ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Mortgage quality had declined substantially. ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Asset-backed securitizations had spread well. This is determined as the beginning of the subprime mortgage crisis. But how did we get to the Financial Crisis? We will try to explain all the mechanism in the upcoming chapter. From the Financial Crisis to the Economic one Because of the rising of the interest rates due to the inflation, the debtors were unable to return the money to the banks. Based on the lending contract, if they couldnt pay the borrowed money back by the end of the maturity of the mortgage, they were obligated to consign their houses to the banks. Millions of home-owners lost their houses. Even though banks had the right of the ownership over the houses, the level of the bank reserves was minimal, because of the non-pay backed loans. In order to profit from the ownership of the houses banks tried to sell them, but the great supply of the houses derived an unpredicted result; people didnt need the houses and moreover, they couldnt pay for them. This led to the devaluation of the house prices. By the first  quarter of 2009, home prices had decreased by over 32% from their 2006 peak.  Ãƒâ€šÃ‚  However, home prices were still 50% higher than they had been in the first  quarter of 1998. Contrary to the housing bubbl e process, the house prices declined dramatically. Banks couldnt get enough money to cover the original inflated loans by selling the foreclosed properties. The bust quickly spread and the crisis had affected the general economy. At this moment distress among subprime mortgage lenders was visible. Some of the top investment banks either failed or were taken over. The deepening crisis in the subprime mortgage market had affected the investors confidence. Confidence was also shaken in many financial institutions so banks began to avoid engaging in any interbank lending activity. But those transactions are the engine of the entire economy. The credit crunch became a visible crisis when there was zero liquidity in the market. That is the point where subprime crisis crossed the border and turned into the credit crisis (crunch). On December 1, 2008, the National Bureau of Economic Research announced that the economy had entered into a recession in December of 2007. Real GDP increased by only 1.1% for the year 2008. Real GDP  decreased  at annual rates of 6.3% in the 4th quarter of 2008 and of 5.7% in the 1st  quarter of 2009. The unemployment rate increased from 4.9% in December of 2007 to 9.5% in June of 2009. From the Economic Crisis to the Global one In this chapter we will see how the economic crisis in the US became a global crisis and which are the channels in which it passed, by differing them in two parts: the transmission mechanism the developed countries and in the developing ones. This process is also called Contagion[9]and has a big importance to us, because it lets us understand how the global economy interacts. Developed Countries To explain how the economic crisis spread throughout the world lets take the example of two international trade giants such as Toyota (the worlds largest automobile producer, headquartered in Tokyo, Japan) and Caterpillar of Peoria, Illinois (the worlds largest producer of heavy construction equipment and vehicles). Toyotas US sales consists of one-third of the companys total sales. The current recession caused Toyotas sales in the United States to fall by 37 percent in December 2008 and by 32 percent in January 2009. This, not surprisingly, led to cutbacks in production, and so announced a reduction in employment. In the example of Caterpillar of Peoria, in the other hand, we conclude that its sales, of which 60 percent are typically outside North America, fall dramatically in late 2008. In anticipation of the global economy continuing to weaken in 2009, Caterpillar announced in January that it was reducing employment by 20,000 workers. By reducing the workforce these companies have indirectly decreased the demand on goods and services in both countries (US and Japan), leading to the global crisis. International trade (Import-Exports) between and among countries means that what happens in one nations economy can have a dramatic effect on that of others. Developing Countries The economic downturn in developed countries have significant impact on other worlds devel ­oping countries. But how can this happen? The channels of impact on develop ­ing countries include: ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Trade and trade prices. Growth in China and India, as developed countries, has increased imports and pushed up the demand for goods and services, which has led to greater exports and higher prices, for example from African countries. Eventually, a slow down on the growth rate of the economy of China and India has led to a decrease of exports of the developing countries. ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Remittances. There will be fewer economic migrants coming to developed countries when they are in a recession, so fewer remittances and also probably lower volumes of remittances per migrant. ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Foreign direct investment (FDI). The process of securitization, as shown before, insured the investors with obligations and increased the level of investments within the US and abroad. But these obligations were based in risky borrowers, and so they never got their money back. The result is that they cant invest in the developing countries, causing an economic crisis there. ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Commercial lending. Banks under pressure in developed countries may not be able to lend as much as they have done in the past. ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Aid. Aid budgets are under pressure because of debt problems and weak fiscal positions, and this will be reflected in the developing countries economies. Each of these channels needs have direct consequences for growth and development. The impact on developing countries will vary. It will depend on the response in developed countries to the financial crisis and the slowdown, and the economic characteristics and policy responses, in developing countries. Conclusions In the end of this paper we would like to summarize some of the most important conclusions we found about the Financial Crisis. First, we have to mention that the crisis has its roots in some key factors; they all together led the American Economy and the World into the crisis. These factors include the War in Iraq, which contributed in the decline of the American economy as a whole. The reaction of the Fed by cheapening the credit led the banks to a risky initiative: the Subprime Mortgages. Followed by the securitization process, which on one hand creates diversification and liquidity, but on the other hand resulted to be risky, if not well understood by the investors, it created such a situation in which the debtors could not pay their money back. This caused the so called Housing Bubble. From the housing bubble the American economy passed to the devaluation of the house prices and the so called Crisis of Confidence. This is the point in which the financial crisis began leading the banks to a very low liquidity level and made it impossible for them to go on with their transactions. All this affected the American economy as a whole and transformed the crisis into an Economic Crisis. As the American economy dropped, the effects would be present in the other countries too. And this because channels in which the crisis was transmitted all over the world. These channels may be seen in two different point of views: in developed countries (which are strongly related with the American economy) and in developing countries(which are indirectly related with it). The most important channel through which the crisis spread is the foreign trade which includes import and export of the US to other countries and vice versa. But there are also other channels as remittances, foreign direct investments, commercial lending and aid, which delivered the crisis in all the countries around the world.