Credit crunch Introduction The international financial crisis which called 'Credit Crunch' has happened in the summer ofit causing the United States' housing market bubble to rupture.
The crisis intimidated the global financial system and depression, thus may leads to a halt increasing wealth and employment of western trade and industry more than a decade Boeri and Luigi, There are two main effects in the U.
First, banks have turn out to be not eager to lend money, interest rate has increased. Second, some financial institutions have destroyed Cecchetti, a.
The third world also has been affected by this crisis, these nations or regions have capitalistic financial markets with a big amount of wealth where but it in a subject of conjecture on the situation of economy and future income floods.
This literature also will talk about the main causes of the financial crisis as all previous literatures talked about. Abul Hassan Financial economy vs. The financial sector has being big amount of these services.
The financial sector is a similar economy which survives next to the real economy and creates nothing real. Tangible things that can be traded are considered part of the real economy like lands, housing, factories, cars and goods, etc.
On the other hand, the financial economy is consists of traded papers with financial values. This value is not constant; it is changeable due to the value people give them.
Sub-Prime Crisis and Debt Illusion Understanding Islamic economics Communism and capitalism economies models have certain characteristics with the Islamic economy, like encouraging people to work, but Islam is not endorses them.
Islam is a way of life based on specific pillars, Islam encourage a consciousness of the hereafter in the minds of believers and teaches them not to be conquer by voracity or extremely emotionally involved to money.
Abul Hassan Honesty, credibility, cooperation, solidarity and complementarily are some of Islamic moral and ideal values. Islam is encourages people to do it. When the people committed to moral and ideal values, then they get stability, security and safety for all whom involved in financial transactions.
The Islamic Shari'ah prohibits, in all financial transactions, interest Ribagambling, uncertainty or risk Ghararlying, cheating, monopoly, greed, exploitation, unfairness and taking people's money unjustly.
Islamic Economics There are many differences between the market-based economic system and Islamic economic system, but the main difference is that the market-based economic system is authorizes the money be traded like assets or commodities, and this can be traded for interest.
On the other side, Islamic Shari'ah doesn't allow money to be traded for money except at parity. This helps the financial institutions to generate a huge amount of wealth by credit money and interest-based lending.
Financial Crisis and Islamic Banking: As we said before, there is a risk-sharing concept in Islam, so if the financial institutions commercial banks shared profits and loses with their clients, then this is give it more insure when they deciding which option to funding.
This is because the financial profits here depend on the projects performance.
A banking system based on true Islamic values would forbid giving and getting of interest as well as the fake formation of money through the procedure of fractional reserve.Introduction.
The international financial crisis which called 'Credit Crunch' has happened in the summer of , it causing the United States' housing market bubble to rupture. Some Causes of the Credit Crunch Essay Words | 4 Pages. Credit crunch is a normal phenomenon.
Every economy faces it. It is a situation where “there is reduction is the availability of loans in the market in spite of the increase in interest rates”. Home Essays Credit Crunch.
Credit Crunch. Topics: Inflation, The term credit crunch can be defined as a sudden reduction in the availability of loans and various other . Credit Crunch An economic condition in which investment capital is difficult to obtain.
Banks and investors become wary of lending funds to corporations, which drives up the price of debt products for borrowers.
Credit crunches are usually considered to be an extension of recessions. Bernanke and Lown () define a credit crunch as a decline in the supply of credit that is abnormally large for a given stage of the business cycle. Credit normally contracts during a recession, but an unusually large contraction could be seen as a credit crunch.
The credit crunch which is also known as a credit crisis, finance crunch or credit squeeze is best described as a condition that makes investment capital hard or difficult to obtain.
It is the sudden reduction in the availability of credit and loans or the abrupt tightening of loan borrowing conditions by financial institutions.