Categories
Weekly Summaries

8th of November – 14th of November

Tensions at the Poland-Belarus Border

Poland has stationed thousands of troops along its border with Belarus where migrants from Middle Eastern countries have set up camp, hoping to enter the European Union. This situation can be seen as a confrontation between Belarus and the E.U., of which Poland is a member. Politicians from E.U. member countries have accused President Lukashenko, Belarus’ leader, of “intentionally trying to create a new migrant crisis in Europe,” according to the New York Times. The E.U. imposed sanctions on Belarus after President Lukashenko’s victory in the elections of August 2020.

Other News

  • After Brexit, British companies have found themselves caught in a tangled web of restrictions and financial obstacles if they want to do business in E.U. countries. The country Estonia saw an opportunity and is now welcoming British companies who want to escape such troubles.
  • The top general of Sudan’s army appointed himself as the “head of a new ruling body” after last month’s coup, according to the New York Times
  • Japan’s economy contracted again in the third quarter of the year
Categories
Weekly Summaries

1st of November – 7th of November

Elections in Japan

The governing Liberal Democrats won the elections, but it was closer than usual. The new prime minister, Fumio Kishida, was chosen by his party, the Liberal Democrats, only last month but was still able to lead them to a victory. The other candidate for the representative of the Liberal Democrats was Sanae Takaichi, who would have become Japan’s first female leader. In the end, the Liberal Democrats won 261 seats, easily making the 233 seats necessary to have a majority, but lost 23 seats compared to the 2017 elections. Interestingly, the Liberal Democrats’ main opposition party, the Constitutional Democratic Party, also lost seats, according to the New York Times. Prime minister Kishida is a former foreign minister but faces some charisma in the issues and is in fact often said to be “boring” by the Japanese press.

Other News

  • In pro-democracy protests after the coup in Sudan last week, three people were killed and more than 100 were injured.
  • 4 countries, the U.A.E., Bahrain, Saudi Arabia, and Kuwait called back their diplomats from Lebanon’s capital city, Beirut. The move comes after Lebanon’s information minister referred to the Yemen war as a “Saudi and Emirati aggression,” according to the New York Times.
  • The chief executive of the British bank Barclays stepped down after there was an inquiry by regulators into his relationship with Jeffrey Epstein.
  • A building collapsed at a construction site in Lagos, Nigeria, killing at least four people and trapping more than 100.
  • In Virginia, USA, a Republican governor, Glenn Youngkin, was elected last week. He is the first Republican governor to be elected in Virginia in more than a decade.
Categories
Weekly Summaries

25th of October – 31st of October

Coup in Sudan

Last Monday, the top generals of Sudan seized power from the government in a coup. The prime minister and other civilian leaders, which had previously shared power with the military under a tense agreement, were arrested. The military proceeded to impose a state of emergency, opening fire on protestors. President Biden condemned the coup and offered economic assistance worth $700 million in the hopes of aiding the protests for democracy.

G20 Summit in Glasgow

Presidents and Prime Ministers from around the world gathered in Glasgow, Scotland this past week for the 12-day long global warming conference hosted by the U.N. to discuss global climate policies. How successful the summit will be is very uncertain as many countries are currently more focused on battling COVID and getting their economies back on track after lockdown.

Other News

  • A very severe fuel shortage is pushing Haiti, a country already struggling, to the brink of collapse
  • Facebook changed its name to Meta as part of its rebranding scheme
Categories
Weekly Summaries

11th of October – 17th of October

Nobel Prize in Economics

The 2021 Nobel Memorial Prize in Economic Sciences was awarded to three U.S.-based economists who work with real-life experiments. David Card from the University of California, Berkeley, specializes in studying “unintended experiments to examine economic questions.” An example of such an experiment is whether raising the minimum wage causes people to lose their jobs. Joshua D. Angrist from the Massachusetts Institute of Technology and Guido W. Imbens from Stanford University won the prize for their joint work on developing research tools that economists utilize to test major theories using real-life situations. An example of this could be whether additional education has an impact on the amount a person earns. Click here to watch a video of the three winners

Other News

  • 32 countries joined the U.S. in a deal aiming to reduce methane emissions by 30% by 2030 that was developed by the E.U.
  • A trial in Burkina Faso hopes to finally establish who killed Thomas Sankara, the former president, more than 30 years after his death
  • In a pledge, the E.U. decided to give 1 billion Euros (around 1.15 billion US$) in aid to Taliban-ruled Afghanistan and neighboring countries
  • A man killed 5 people using a bow and arrow in Kongsberg, which is just outside of Oslo, Norway. The police announced that the suspect is now undergoing psychiatric evaluation
Categories
Weekly Summaries

4th of October – 10th of October

A long week for Facebook

Facebook and other apps owned by Facebook like WhatsApp and Instagram were down for over five hours last Monday. The shutdown showed just how dependent people around the world have become on Facebook. Just one day later, last Tuesday, a former product manager at Facebook turned-whistleblower, Frances Haugen, explained to a Senate subcommittee how Facebook “deliberately kept people — including children — hooked on its services,” according to the New York Times. Zuckerberg, the chief executive of Facebook, immediately rebutted the claims.

Other News

  • Kurz, Austria’s chancellor announced on Saturday that he would resign
  • The WHO approved the first-ever malaria vaccine. The vaccine was developed by GlaxoSmithKline and could potentially save the lives of tens of thousands of children in sub-Saharan Africa.
  • The city of Venice in Italy is using hundreds of surveillance cameras and buying the cellphone data of tourists in an effort to establish more crowd control, according to the New York Times
  • The cost of oil, natural gas, and coal has increased drastically the past few months. The rise is caused in part by oil companies refusing to produce more to prevent the prices from dropping.
  • In an order last week, the Indian Supreme Court ruled that the government should pay families who have lost family members to COVID-19 50,000 rupees (around 671 U.S. dollars)
  • The world has lost around 14% of its coral reefs since 2009, a new study revealed
Categories
Weekly Summaries

27th of September – 3rd of October

Lithuania enrages China

Recently, Lithuania has been trying to get closer to Taiwan, enraging China by taking actions such as quitting a Chinese-led diplomatic forum. In response, China recalled its ambassador to Lithuania, made it basically impossible for Lithuanian businesses to sell their goods in China, and paused trips by a Chinese cargo train into Lithuania. While Lithuania is a lot smaller than China — China has 1.4 billion people while Lithuania has fewer than 3 million — the country is important as a “transit corridor” for goods heading to Europe from Asia.

Other News

  • Shortages are restraining the recovery of many parts of the economy worldwide
  • In a tweet last week, the Taliban announced that women would be barred from teaching and studying at Kabul University, Afghanistan’s most prestigious university
  • Facebook has “paused development of an Instagram app for children under 13,” according to the New York Time
  • Japan’s governing party elected its choice for the next prime minister: Fumio Kishida

Categories
Weekly Summaries

20th of September – 26th of September

Elections in Germany

In Germany, elections took place this past Sunday. In Berlin, the marathon took place on the same day, which led to many disruptions and some people only being able to vote after the first results had already been published. The Social Democrats (SPD) ended up winning the election, winning 25.7% of the votes, earning just 1.6% more than the Christian Democratic Union (CDU), which is Angela Merkel’s party. Because no party earned more than 50% of the votes, they have to form a coalition. At the moment, there are three possibilities, but the negotiation talks could take months. It is also still unclear who will become Chancellor now that Angela Merkel’s 16-year long chancellorship has ended.

Elections in Canada

After the current prime minister Trudeau called elections early this summer in the hopes of gaining a majority, the people decided last week that he should stay in power. Overall, Trudeau’s party the Liberals won 158 seats, 12 seats short of the 170 seats required to have a majority. The Conservatives, meanwhile, won 119 seats. However, voter turnout was the lowest in more than a decade, with just 59% of Canadians who are eligible to vote giving their poll.

Other News

  • Meng Wanzhou, the executive of Huawei, has been released and returned to China last week
  • Thousands of residents of the island La Palma had to be evacuated by Spanish authorities last week because a volcano spewed lava and smoke. The eruption was later called the “most powerful eruption in half a century,” according to the New York Times
  • The U.S. lifted its travel ban on foreign travelers who have been fully vaccinated from 33 countries, which include E.U. countries, China, Iran, South Africa, Brazil and India
  • Same-sex marriages are now legal in Switzerland after many people voted for the legalisation in the vote
Categories
Weekly Summaries

12th of September – 19th of September

Australia to get nuclear-powered submarines

Last week, the U.S. and Britain made a joint announcement that they would help Australia deploy nuclear-powered submarines. If this happens, Australia would be able to conduct routine patrols in the South China Sea, which would challenge China. Nonetheless, Australia “committed never to arm the submarines with nuclear weapons,” according to the New York Times. The deal is a major blow to France because of multiple reasons. As a result of the deal, Australia will not buy French-built submarines, which is bad news for French businesses. France sees the event as yet another example of the “widening rift” in U.S.-French relations and has announced that it will withdraw the French ambassadors to the U.S. and Australia in protest.

Other News

  • Iran will allow nuclear monitoring as agreed in a last-minute deal reached last week.
  • North Korea announced that it had launched “long-range cruise missiles” that hit targets 932 miles away, according to the New York Times. This is a major violation of multiple U.N. Security Council resolutions.
  • The company Colossal is hoping to repopulate Siberia with thousands of woolly mammoths, thousands of years after they went extinct.
  • In a huge step towards deciding the fate of Catalonia, Spain’s prime minister Pedro Sánchez and Catalonia’s leader Pere Aragonès met in Barcelona.
  • French forces killed Adnan Abu Walid al-Sahraoui, a leader of the Islamic State
Categories
Analysis Discussion

What caused the 2007/2008 Financial Crisis?

Note: this article is part of our collaboration with Filmynomics. To find out more about the consequences of the 2008 Financial Crisis and how it affected people worldwide, please read their article here: https://www.instagram.com/p/CToYddwgX_t/ 

Introduction

The Financial Crisis of 2007 and 2008 led to the Great Recession (2007-2009), the worst economic downturn since the Great Depression of the 1930s. Additionally, the financial crisis caused the failure of multiple major investment and commercial banks and nearly caused the collapse of the international financial system. It is safe to say that everybody was impacted by the Financial Crisis in one way or another. What could have caused such a devastating crisis?

Role of the Federal Reserve (Fed)

Between May 2000 and December 2001, the Fed decreased the federal funds 11 times—from 6.5% to 1.75%. This meant that consumer banks were now able to offer low-risk borrowers lower interest rates. Furthermore, the lower federal fund also meant that banks were encouraged to lend more to high-risk borrowers, albeit at higher interest rates. As bank loans became easier to acquire, the housing market began gaining attention. People used these loans to purchase more expensive homes, causing the prices of homes to skyrocket. This created a so-called “housing bubble.”

Commercial Banks Perpetuate the Crisis

The “housing bubble” problem was aggravated because changes were made to the bank laws in the 1980s, allowing banks to offer mortgages with “balloon payments”. Loans with balloon payments have the largest payment of the loan due towards the very end of the loan period. As the prices of houses continued to increase, people who could not pay off the loan were able to borrow more money against the value of their homes. If these people were still unable to pay off the loans, the bank could resell the house for more than it was originally worth. 

Banks often sought to make profits, therefore more banks adopted the practice of giving mortgages to high-risk customers with few assets. The banks would take advantage of these customers, as they knew that they would not be able to repay the loan. Such mortgages are known as subprime mortgages and are often viewed as the main cause of the crisis by economists.

Securitization by banks

As the number of subprime mortgages and other consumer debt began piling up, banks started to sell these mortgages in capital markets as bonds (securities) to other banks and investors. Purchasers of bonds that were primarily based on mortgage-backed bonds (mortgage-backed securities, MBSs) were entitled to receive shares of the payments made on the original loan. By selling MBSs, banks could increase their liquidity and reduce the number of risky loans they owned, while banks that were purchasing MBSs could “diversify their portfolios and earn money.” As the housing prices continued growing, MBSs became increasingly popular.

Merging of Banks

In 1999, the Depression-era Glass-Steagall Act was repealed. This act prevented banks and insurance companies from involving themselves in each other’s markets and merging. The repeal led to banks growing and becoming “too big to fail.” In 2004, these huge banks were stimulated to buy and sell even more MBSs because the Securities and Exchange Commission decreased the ratio of capital that banks were required to have, preventing insolvency. This became problematic because the value of the MBSs was reliant on the indefinite increase of housing prices. 

Overconfidence of the people involved

Overall, government officials, economists, and bank executives were convinced that financial crises were things of the past due to the long period of global economic stability and growth. They believed the business cycle of a period of economic growth followed by a recession had finally been overcome. This meant that almost everyone was oblivious to the clear signs of the imminent financial crisis.

Conclusion

In summary, the 2007-2008 financial crisis can be attributed to a variety of factors. Although economists are still debating on the exact breakdown of the factors, and to what extent they were responsible, many people believe subprime mortgages and the banks’ risky behavior as the main cause. Do you agree?

Sources

Duignan, Brian. Financial crisis of 2007-2008, accessed through https://www.britannica.com/event/financial-crisis-of-2007-2008 (05.09.2021)

Jickling, Mark. 2009. Causes of the Financial Crisis, accessed through https://ecommons.cornell.edu/bitstream/handle/1813/77536/R40173_20090129.pdf?sequence=1&isAllowed=y (03.09.2021)

Field, Anna. 2021. What caused the Great Recession? Understanding the key factors that led to one of the worst economic downturns in US history, accessed through https://www.businessinsider.com/what-caused-the-great-recession (03.09.2021)

Categories
Weekly Summaries

6th of September – 11th of September

Uncertainty in Nicaragua

The current President of Nicaragua, Daniel Ortega, is taking steps to ensure that he will win the elections in November again. The New York Times writes that there is no “credible challenger” and that Ortega is “turning Nicaragua into a police state.” Seven candidates have been jailed or put under house arrest since June alone and people from all backgrounds — from millionaire banker to a decorated general to a low-profile provincial activist — have been targeted.

Other News

  • The U.S. remembered the 9/11 attacks that happened 20 years ago.
  • Maria Kolesnikova, a Belarusian opposition figure, was sentenced to 11 years in prison during a trial in Minsk last week
  • In a ruling last week, Mexico’s Supreme Court decided that making abortion a crime was “unconstitutional”. Nonetheless, abortion is still not available to most of the Mexican female population.
  • El Salvador adopted Bitcoin as a legal tender, the first country to do so
  • The Taliban named an acting cabinet last week. However, the lack of women and some former leaders from the Taliban’s 1990s regime have raised alarm bells in other countries.