Critical Accounting Research Neoliberalism -Myassignmenthelp.Com

Question: Discuss About The Critical Accounting Research Neoliberalism? Answer: Introduction The Global Financial crisis, began in 2007, when there was a credit crunch. There was a loss of confidence in the US investors, which caused liquidity crisis for the economy. The crisis had worsened which caused the market to crash and led to increase in the overall volatility. The consumer market was hit very badly because of the same and it led to wide spread resentment on what lied ahead for the people. The subprime crisis also affected the overall consumers in the area, as many people had taken housing loans and now suffered from the adversity of paying the huge interest. Large number of defaulters were there and this affected the overall growth of the banks and they had a liquidity crisis in their hand. It is said that this housing collapse had led to a global crisis and had affected the overall growth and development in the economy. It led to a situation where every aspect of the financial ladder suffered from a financial crisis. It was said that there must be an encouragement among the people all over the world to not give importance to lending and focus more on investment in the form of wealth generation and development. Apart from the subprime mortgage crisis there were many other events of financial crisis that triggered this global crisis. A brief description of the same is given below under. Analysis The subprime mortgage crisis formed the basis that led to a full-blown crisis of the banking industry that was triggered with the fall of the Lehman Brothers. The banks indulged in excessive risk taking and that had affected the overall monetary and fiscal policies and had led to the downfall of the banks. This crisis was followed by a world level crisis known as the great depression, where there was less revenue and more losses. Some other examples of such other financial crisis are- The 2000s energy crisis, where high prices of the crude oil in combination with the economic weakness had triggered huge amount of contraction in 2007-2008. This was due of the increase in the prices of the oil due to natural disasters and other changes. It thus affected the overall profitability of the economy and caused prices to rise, and in turn affected the overall growth. This is known as the energy crisis of 2000, and led to huge amount of speculation in the overall investment and trading of oil supplies. The United States Housing Bubble is one of the real estate bubble that was affecting the other half of US. This was since the overall housing prices was increasing in 2006, but later it declined and then it hit an all-time low. The collapse of the housing bubble had direct effect not only on the prices of the house, but also on the overall mortgage rates, housing rates, stock exchange where shares are traded and the overall general profitability of the nation. The housing bubbles is a scenario that might occur in the local and the global real estate fronts and the need of the situation is to curb this inflation and rise in price to make sure that lending is done at appropriate rates. It is not only good for the consumers but for the overall economy also as it helps in keeping the overall rates under control. European Debt crisis- In European Union since the end of 2009, there has been a debt crisis prevalent known as the European debt crisis. It occurred when the members of the European crisis where unable to repay their debts and were not able to refinance their overall government debts and were not able to bail out over indebted banks under the national supervision. There were several reasons that were responsible for such kind of crisis and the overall return on the economy and the growth of the same was also affected because of such situations. These reasons included, easy credit policies, high risk lending and borrowing practices, international trade imbalances, the other financial crisis that occurred previously. It also affected the labor market and led to an increase in the overall rate of unemployment. It was also blamed for subdued economic growth in Europe and the group countries(Guragai, et al., 2017). Russian Financial Crisis- Russian financial crisis occurred in 2014-2017, and began in the latter half of 2014. It led to a decline in the Russian economy and led to an overall decrease in the confidence of the public in the economy. There were two major reasons that were responsible for the same, one the fall in the overall prices of the crude oil in 2014(Han, et al., 2017). The crude oil is an important product that the country exports to other countries and hence it had to suffer huge losses in this situation. The second being the international sanction that was imposed on Russia, because of its merger with some related parties. This had huge effect on the Russian stock exchange also and had led to a decrease in the overall stock prices of the country. This was one of the major crisis that was noticed since the advent of the great depression. These are few examples of the financial crisis that had occurred in recent times and have affected the overall growth and development of the economy and had affected the consumers also. There are many reasons that are there behind such crisis(Alexander, 2016). Few of many such reasons were responsible for the Great Financial crisis that was triggered with the overall loss of liquidity of the baking sector that occurred due to the fall of the Laymen brothers. Few of these reasons are explained hereunder- The major reason behind this was the deregulation in the financial sector, that had led to banks approving high mortgage rates. It promoted banks to indulge in lending of the hedge funds, when this value of the banks declined, they stopped lending to each other. This in turn led to an increase in the overall liquidity position of the bank and made it more prone to the changes in the economy(Svahn, et al., 2017). The banks were creating too much money in that period and they used this money to push up the prices for the house loans and mortgages. It also led to an increase in the speculation activities in the housing sector. Eventually this triggered a situation in which the debts became unpayable, because of which the banks were having too much defaulters and they were not able to get in their money back. This led to a situation where there was low flow of money at increased cost and this led to great recession(Crosby Henneberry, 2016). The overall monetary and regulatory policies of the banks and other financial institutions was not at par, and government was not able to regulate the overall movement of the economy in sync with the same. Thus, that was also one of the major reasons for the downfall of the economy and affected the overall growth. Thus, the need of the hour was that these policies must be regulated properly and changes must take places, to make it stricter for the banks and other regulatory bodies so that they are not able to initiate such a situation of financial crisis in the future(Anon., 2017). The banks were majorly responsible for this situation, because once the crisis occurred, the banks refused to lend any more money. There were so many defaulters that it affected the overall credit standing for the bank and affected their overall liquidity position immensely. Hence, after a point the banks refused to pay any amount of money and this led to a situation where the economy crumbled(Chiapello, 2017). In a situation where people are repaying loans faster than they are banks are giving out new loans, causes a position where the value of debts in real terms increases and this eventually leads to a debt spiral for the economy. Even the people and businesses that are not part of this whole scenario suffer because of this. There was less flow of resources, which in turn effected the flow of savings and investments and this in turn led to a situation known as the Great recession(Vieira, et al., 2017). Future after GFC Since the great recession era and the end of the same, there have been many changes that have occurred that have helped in making the financial system more strong and stable. But given to the fact that the overall sector is very fragile and there are chances that these situations might crop up in the future. But in todays time, there is an existence of shareholders capital, which act as a cushion in preventing such situations and making the banks less prone to similar crisis. It cannot be said that similar situation will crop up in the future or not, but what can be stated is that if such situation occurs, there are remedies with the government to fight with them and ensure the overall stability of the economy. Given to the fact that the overall economic and monetary policies are very strong now(White, et al., 2018). Effect of the Great Financial Crisis The overall effect of the problem was so severe that the worlds largest financial institution had collapsed. Even the wealthiest nations suffered due to the same, the government ended up spending huge amount of money on the bailouts. As per reports,33% of the total companies of the world were wiped off due to this crisis. Countries like UK and other European countries had spent more than $2 trillion, on rescues and bailout packages. Even Australia was greatly affected due to the same and suffered from huge downfall of the credit standing of the banks and the overall economy(Lane Ferretti, 2017). It led to a situation of recession world-wide, where the value of money was decreasing and the overall debt was increasing in real terms, this affected the liquidity position of both the people lending and taking the money. It took many years for the nations to get over such a situation and initiate proper changes(Burke Clark, 2016). Reforms eventuated after the Great Financial Crisis There were several changes that took place, after the crisis and were brought in to make the financial system of the economy strong and more secure. Given the reasons that led to this crisis, it was important that banks had stronger monetary and fiscal policies and the overall lending was regulated, so that the value of debt in no terms could become more high(Cayon, et al., 2017). In December 2010, European regulators announced tough restrictions on the bonuses that banks can pay their staff, this was done to regulate the unreasonable payment that was done to the employees. The banks were also asked to pay an annual tax on their balance sheet, the main idea behind all this was that banks in general must contribute to the fair rise and development of the economy from this situation of financial crisis(Abbott Kantor, 2017). An independent commission was set up on banking, to regulate the overall functioning of the banks and to look over the banking policies. There has been many change s in the financial sector of the UK economy, to make the credit position better overall. The main aim of the government was to protect the investors, the people who are investing there money, there must be equal and effective flow of revenue in various sectors. The banks should not be in a dominant position to take undue advantage of the same and destroy the overall credibility and credit standing of the economy(Sweeting, 2017). Conclusion On the basis of the above analysis it can be said that banks around the world, must be regulated as they are prime source of rotation of income and there must be proper policies so that such situation of financial crisis does not crop up in the future. References Abbott, M. Kantor, A., 2017. Fair Value Measurement and Mandated Accounting Changes: The Case of the Victorian Rail Track Corporation. Australian accounting Review. Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431. Anon., 2017. Explaining auditors propensity to issue going-concern opinions in Australia after the global financial crisis. Accunting and Finance, pp. Carson,E;Fargher,N;Zhang,Y;. Burke, J. Clark, C., 2016. 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