Global Financial Crisis comparative Study of the U.K and Developing Countries - Free Essay Example

Global Financial Crisis: comparative Study of the U.Kand Developing Countries Introduction The recent global financial crisis represents the first major financial crisis in the 21st century. According to Reinhart and Rogoff (2008:2) the crisis involves à ¢Ã¢â€š ¬Ã…“esoteric instrumentsà ¢Ã¢â€š ¬Ã‚ , à ¢Ã¢â€š ¬Ã…“unaware regulatorsà ¢Ã¢â€š ¬Ã‚  and à ¢Ã¢â€š ¬Ã…“skittish investorsà ¢Ã¢â€š ¬Ã‚ . The crisis began in the United States of America in the summer of 2007 when the U.S and global financial markets found themselves facing a financial crisis and the U.S Federal Reserve System à ¢Ã¢â€š ¬Ã¢â‚¬Å" The Fed found itself in difficulties. (Cecchetti, 2008). Although the crisis began in the United States, virtually every country in the world has witnessed some share of the effects of the crisis as a result of the vast trade and economic relationship between the United States and the rest of the world. For example, a World Bank Working Paper by Ravillon (2008) suggests that the crisis could soon reach à ¢Ã¢â€š ¬Ã…“deeply into the lives of many of the four fift hs of humanity in developing countriesà ¢Ã¢â€š ¬Ã‚ . However, it is not the interest of this paper to study how the crisis has affected every country of the world. This paperà ¢Ã¢â€š ¬Ã¢â€ž ¢s main objective is to understand how the crisis has affected the U.Kà ¢Ã¢â€š ¬Ã¢â€ž ¢s economy highlighting the main industries that have been hard hit by the crisis. It should be noted that the U.K economy is highly correlated with the U.S economy which indicates that the least shock on the U.S economy is likely to have an equal shock on the U.K economy transmitted through contagion. As a result we expect the U.K economy to have been significantly affected by the crisis. The rest of the paper is organised as follows: section 2 looks at the main industry sectors in the U.K that have been affected by the crisis; section 3 provides suggestions on the course of action available in macroeconomy policy terms to U.K policy makers; section 4 highlights aspects of the crisis that suggest market fai lure; section 5 provides comparisons of the crisis in the U.K and two developing countries; section 6 looks at why developing countries are more vulnerable to the effects of the crisis as well as what can be done to reduce their vulnerability in the short- and long-run; and finally section 7 looks at how the IMF, World Bank, U.N and other similar institutions can help developing countries out of the crisis. Impact of the Financial Crisis on the U.K Economy. As earlier mentioned above, the world witnessed significant crisis recently. The crisis have been mainly because of falling house prices. The main industries that have suffered from the crisis in the U.K include the Financial Services Industry, the Retail Industry and the Automobile Industry. To understand how the Financial Services Industry suffered, we would look at the case of Northern Rock and Bradford and Bingley, two Financial Institutions that were nationalised by the U.K government as a result of the crisis. Keasy and Veronesi (2008) suggest that NR has been the most obvious victim of the changes which have taken place in the financial system over the past 20 years. Northern Rock was one of the U.K highest Mortgage lender. It invested heavily on mortgages originated from the U.S. Northern suffered so much because it ran short of liquidity which came as a result of the fact that it had made a significant number of mortgage loans to borrowers who could not repay. On the contrar y depositors needed repayment of their deposits. Northern Rockà ¢Ã¢â€š ¬Ã¢â€ž ¢s difficulties were exposed because it approached the Central Bank (the Bank of England for a Loan). As a result, many depositors began demanding their deposits from Northern Rock and the Bank witnessed a Bank Run. (Keasey and Veronesi, 2008; Hall, 2008). Keasey and Veronesi (2008) suggest that the risks faced by banks depend on the quality of the lending and whether they have retained sufficient funds to meet the demands of depositors. In the event where depositors have confidence in the bank, the bank does not need to retain enough funds to meet demand deposits. On the contrary in the event were depositors lose confidence in a bank, the bank may have to retain 100 percent of deposits in cash to meet the demands of depositors. This is exactly what happened to Northern Rock. Its inability to meet its liquidity requirements landed it into trouble. Like Northern Rock, Bradford and Bingley invested heavily in sub-prime mortgage loans with less hopes that the loans would ever be repaid. It was also unable to meet the demands of depositors and as such also witnessed a bank run. (Adams, 2008). The Retail Industry has also suffered because it has been unable to get credit from banks. Despite a bailout by the government, banks have become more and more afraid to provide credit to businesses. As a result the retail industry has been witnessing a liquidity squeeze. Retail Giants like Woolworths have been forced into administration as a result of the crisis. In Like manner the Automobile Industry has been unable to make sales because banks are no longer willing to provide car loans. Automobile plants such as those of Vauxhaul and Land Rover have been forced to suspend operations for some time. One can see that the international financial crisis is really having a significant impact on the U.K economy. Macroeconomic Tools Available The macroeconomic tools available to policy makers in these circumstances include fiscal and monetary policy. As far as monetary policy is concerned, the government needs to devise means of increasing the supply of money in the economy so as to reduce the liquidity squeeze. The policy tools in this case include the purchase of bonds in the open market by the Bank of England, the provision of loans to banks by the Bank of England (in its function as a lender of last resort). Fiscal Policy measures include reducing taxes, increasing government spending, etc. The U.K government has already done much to increase liquidity in the economy. On the 9th of October 2008, the government announced a bailout package of  £500billion to major banks in the U.K. (Winnett and Porter, 2008). In addition, the Bank of England on Thursday 8th January 2009 reduced the bank rate (the interbank lending rate) by 50 basis points from 2 percent to 1.5 percent in a bid to mitigate the recession. (Watts, 2 009). There are also speculations that the central bank and British government may soon feel compelled to undertake a range of extraordinary measures such as figuratively printing money in an effort to stave off the threat of deflation. (Watts, 2009). Aspects of the Crisis that Suggest Market Failure. The aspects of the crisis that suggest market failure are numerous. Firstly, banks were unable to determine that the mortgage loans will not perform well. Moreover, credit rating agencies seem to have rated most of the mortgaged backed securities (MBS) as being of high credit rating and thus made it difficult for banks to detect the inherent default in them. In addition, the regulators failed to regulate the Financial Services Industry properly to ensure that firms in the industry do not involve in too much risk taking. Even when there were signs of a crisis, the Bank of England and the FSA failed to act fast enough to bail Northern Rock out. They allowed the matter to escalate to a point were the bank had to witness a bank run. As earlier mentioned in the introduction Reinhart and Rogoff (2008:2) the crisis involves à ¢Ã¢â€š ¬Ã…“esoteric instrumentsà ¢Ã¢â€š ¬Ã‚ , à ¢Ã¢â€š ¬Ã…“unaware regulatorsà ¢Ã¢â€š ¬Ã‚  and à ¢Ã¢â€š ¬Ã…“skittish investorsà ¢Ã¢â€š ¬Ã‚ . Esoteric he re indicates that complex financial instruments were created. The risk of these instruments was difficult o determine. Regulators were also unaware of the risks inherent in these instruments and investors lose confidence in the market. Comparison of the Crisis in The U.K and Cameroon/Zambia. The main impact of the crisis on Cameroon is the fact that the demand for exports has began to drop. Cameroon depends a lot on the export of raw materials including timber, rubber, banana etc. There are reports that the timber sector in Cameroon is already facing difficulties. Many contracts to supply timber to a number of European countries have been cancelled and approximately 10,000 workers have been temporarily sent on technical leave. (Nyuylime, 2008). The main difference between Cameroon and the U.K is that Cameroon is still practicing traditional banking policies. Loans are only provided to borrowers who can pay. In addition, the banking system as well as the financial system still remains underdeveloped. So-called esoteric securities are not yet present in the system. Thus, banks in Cameroon are not exposed to the same type of risks that financial institutions in the U.K are exposed to. However, because of Cameroonà ¢Ã¢â€š ¬Ã¢â€ž ¢s dependence on exports of raw materials to European countries that currently face significant financial problems; it could not be left out of the crisis completely. The direct impact of the crisis on Zambia have also be limited. Zambia relies mostly on domestic funding and it has a limited exposure to external lines of credit. Like Cameroon, the main impact has been on exports. Global copper prices have dropped sharply and because copper accounts for a high portion of Zambiaà ¢Ã¢â€š ¬Ã¢â€ž ¢s exports, Zambiaà ¢Ã¢â€š ¬Ã¢â€ž ¢s currency has witnessed a significant deterioration of its currency. (Revilla, 2008). The governmentà ¢Ã¢â€š ¬Ã¢â€ž ¢s fiscal position has weakened because it depends heavily on increased tax revenues. (Revilla, 2008). How developing Countries can Limit Their exposure to Crisis. Developing countries can reduce their exposure to such crisis in the future by reducing their dependence on the export of raw materials. What developing countries can do is to encourage inward foreign direct investment (FDI) into its manufacturing sector that will enable them transform their raw materials themselves. Developing continue to export raw materials at very cheap prices and buy capital goods from Europe at far more expensive rates. By so doing, they will be able to reduce their exposure to external shocks in both the short- and long-run. The Role of the IMF, World Bank and U.N. The IMF and the World Bank can help developing countries by providing them with loans that will help improve on their manufacturing sector. In addition, they need to help developing countries improve on their infrastructure, transport networks and education. They can also help developing countries improve on their financial systems and macroeconomic policies. These are the factors that help in attracting foreign direct investment to the manufacturing sector in particular. By so doing, developing countries can reduce their dependence on export of raw materials. They will rather be transforming the raw materials themselves and their European counterparts will have less power to determine prices for them. This is because falling supply of raw materials will bid up prices. Another problem with developing countries is that they are characterised with a lot of conflicts that need to be resolved. In Africa for example, there is no democracy and the few countries that claim to be practicing democracy are still far from embracing true democracy. The lack of good political structures is hampering the development of sound macroeconomic policies. The U.N needs to play a more influential role to reduce conflicts in developing countries and to install concrete democratic structures in these countries. BIBLIOGRAPHY Adams, M. (2008). What Bradford Bingley Will Cost Us. Available online at: https://money.sky.com/money/recession/bradford_bingley_public_cost.html Cecchetti, S. G. (2008). Crisis And Responses: The Federal Reserve And The Financial Crisis Of 2007-2008. Working Paper 14134, NATIONAL BUREAU OF ECONOMIC RESEARCH, 1050 Massachusetts Avenue Cambridge, MA 02138 https://www.nber.org/papers/w14134 Keasey, K., Veronesi G. (2008). Lessons from the Northern Rock affair Journal of Financial Regulation and Compliance; Volume: 16; Issue: 1 Hall, M. J.B. (2008)The sub-prime crisis, the credit queeze and Northern Rock: the lessons to be learned Journal of Financial Regulation and Compliance; Volume: 16; Issue: 1; Nyuylime, L. P. (2008). Cameroon: Global Financial Crisis à ¢Ã¢â€š ¬Ã¢â‚¬Å" Cameroon. Available online at: https://allafrica.com/stories/200810210847.html Ravallion, M. (2008). Bailing out the Worldà ¢Ã¢â€š ¬Ã¢â€ž ¢s Poorest. Policy Research Working Paper No. 4763. The World Bank Development Research Group. Reinhart, C. M., Rogoff, K. S. (2008). Is the 2007 U.S. Sub-prime financial crisis so different? An International Historical comparison. Working Paper 13761 National Bureau Of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138: https://www.nber.org/papers/w13761 Revilla, J. (2008). Impact of the Global Financial Crisis on Zambia. Available online at: https://africacan.worldbank.org/impact-of-the-global-financial-crisis-on-zambia. Watts, W. (2009). Key British interest rate cut to all-time low. Available online at: https://www.marketwatch.com/News/Story/Story.aspx?guid=%7BF64C219E%2D1B59%2D43D9%2D954C%2D4303F2645C30%7D

The Ideal Reader in Don Juan and Tristram Shandy - Literature Essay Samples

Byron called Don Juan ‘the poetical Tristram Shandy’, and both works appear consciously intertextual in their attempts to question held beliefs about storytelling. They both define an ideal reader by everything that they should not be, and attempt to create an atmosphere of uncertainty through the satirical contradictions of their own works. Their differences, however, appear to be in method: Byron attempts to fulfill his target of formal perfection and moral uncertainty, whereas Sterne experimentally portrays and then subverts different approaches to storytelling throughout, leaving readers constantly uncertain about his sincerity. Laurence Sterne’s style in Tristram Shandy pushes the ‘shaggy dog’ method of storytelling to its logical extreme, creating a narrative that interrupts itself constantly and explores tangents with little consideration to the linear plot. As Melvyn New observes, however, Sterne has created an irrational narrator through purposeful and intricately planned style: a ‘carefully crafted impression of carelessness and abandon.’ The illogical series of events and confused chronology is begun by his promise to start from the beginning, and ‘to go on tracing every thing in it, as Horace says, ab Ovo’, and this incorrect reference to classical literature (as Horace in fact praises Homer for beginning in the middle) demonstrates the relationship with an informed reader that Sterne wishes to have. The ideal reader should be able to see through commonly held beliefs about literature and any false claims to classical knowledge, as that hypocrisy is what he satirizes, but he also insults the reader who assumes that sharing an inside joke would lead to sharing all subtext or intent later in Chapter Four of Book I: ‘I know there are readers in the world, as well as many other good people in it, who are no readers at all, -who find themselves ill at ease, unless they are let into the whole secret from first to last, of every thing which concerns you.’ The shift from the impersonal third person ‘themselves’ and ‘they’ to ‘every thing which concerns you’ shows how changeable the targets of Sterne’s satire are. Fawcett connects this shifting of target to all different types of reader to the visually experimental transformations of the page through punctuation and the changing contradictions throughout the story, and compares these short-lived changes to Johnston’s Dictionary of the English Language (written four years before Shandy): his experimentations ‘resist promises †¦ that the printed word was somehow more stable or more legible than the spoken word †¦ that printed books develop more stable selves than performance.’ By including illegitimate versions of his work into the heart of his story and by using asterisks, ambiguities and euphemisms as forms of blanks that the reader must fill in, Sterne invites his fans and critics to help create his work only to shift again and chastise them later for the choices they have made. Although Byron, like Sterne, is using a wandering narrative to directly discuss his personal thoughts on the state of literature and literary discussion in Britain, his outlook on literature seems far more fixed. In actually starting the 16 and a half cantos, he seems to have been fuelled by Coleridge’s criticism of Bertram, and in his formalist approach to verse, the point of Don Juan, as Jerome J. McGann remarks, seems to be ‘to clarify the nature of poetry in an age where obscurity on the subject, both in theory and practice, was becoming rampant.’ In Don Juan he claims that ‘Good workmen never quarrel with their tools’ (1.201), which supports this conservative, formalist view of rhyme and meter as necessary ‘tools’ with undeniable material significance through his own adherence to their rules. Byron’s use of ottova rima was influenced by Beppo, and an attempt to anglicize the same form as Pulci, Berni and Casti. Italian lends i tself far easier to the form (which demands six lines of alternating rhymes and a closing couplet), due to an abundance of easily-rhymed words ending in vowel sounds unlike English, but Byron’s incredibly long exercise within such challenging restrictions exists as proof that his specifications can be fulfilled, and that readers should demand that standard of inventiveness. It also serves the thematic point of juxtaposing a constrictive verse style against the free flow of poem’s narrative and the transgressive nature of its actual content. He comments on other literature through the premise itself, by subverting the Don Juan mythology and making him the pursued neophyte who is easily seduced rather than the seducer, but also makes direct reference to other writers. He calls Wordsworth unintelligible (Dedication IV), Coleridge misguided (II), Bob Southey insolent and untalented (III), and concludes that they are ‘shabby fellows’ (VI). The reader is being a dvised as to what their standards for poetry should be, and while he has a fixed answer that he claims to be exhibiting unlike the self-conscious satire of Sterne’s easily distracted storyteller, both writers are engaging with their contemporary literary circles through trying to construct the ideal reader by teaching them to question the received wisdom of authors. Part of both writers’ self-conscious commentary on story-telling and the state of literature throughout their respective pieces is their consideration of the female reader. Barbara M. Benedict comments on the gendered nature of Sterne’s addresses to the reader: ‘The readers of the novel are segregated by gender: whereas the term Sir solicits a sympathetic reader, Madam evokes a bad one-and the division indicates the painful separation of interests that divides modern audiences. This characterization works rhetorically to associate debased modern culture, both literary and by implication political, with female values and audiences.’ This dichotomy reflects and perpetuates a societal view of women readers, as he mocks the dedications of other authors when he uses the obsequious ‘My Dear Lord’ or ‘Sir’, and the man addressed grows from ‘a perfect stranger’ to ‘my dear friend and companion’ in a manner perhaps satirizing the confessional format of novels like Moll Flanders, but appears to mock the reader themselves when using ‘Madam’. When he addresses his female reader about the truth of his and Jenny’s relationship, for example, he provides her hypothetical responses as scandalized exclamations: ‘Friend!—My friend.—Surely, Madam, a friendship between the two sexes may subsist, and be supported without—Fy! Mr. Shandy:—Without any thing, Madam, but that tender and delicious sentiment which ever mixes in friendship, where there is a difference of sex. Let me intreat you to study the pure and sentimental parts of the best French Romances;—it will really, Madam, astonish you to see with what a variety of chaste expressions this delicious sentiment, which I have the honour to speak of, is dressd out.’ The irony of recommending a French Romance to find ‘pure and sentimental’ chaste friendship between men and wome n casts doubt on the pure intentions of any reader familiar enough with the genre to understand the joke. The specifically female reader is recommended a genre that with the past popularity of novels like Richardson’s Pamela has gained a reputation for female readership, and mocked for the implication that she may already be familiar. Romances themselves are cast in a hypocritical light through Sterne’s sarcastic praise of their ‘pure and sentimental parts’: since the implication here is that they are purely written for titillation, any attempt by the author to present a romance as otherwise must be a knowing falsehood that the reader also coyly engages with. Byron acknowledges the importance of a female readership in the fourth canto by addressing women directly: ‘Oh ye, who make the fortunes of all books, | Benign ceruleans of the second sex!’ (IV, 108–9) The reference to ‘benign ceruleans’ does not indicate a fear or reverence of their opinion as potential critics, however, as he emphasizes the harmlessness of those hypothetical female readers by referring to them as inanimate representations of abstract color. He also boasted of The Corsair that it was ‘shining in boudoirs’, demonstrating an awareness of the upper-class women who accounted for a significant amount of his success. There was more concern from critics around Don Juan specifically entering boudoirs, however, as the subject matter (especially within the context of Byron’s scandals and self-imposed exile) was inherently sexual and the narrator very sympathetic to his protagonist. As Haslett observes, his reputation increa sed the perceived danger: ‘The choice of Don Juan dictated that the categories of character (Don Juan), text (Don Juan), Don Juan-like author (‘Byron’), and libertine style (the voice of the poems Don Juan-like narrator) were not only blurred but mutually contaminating.’ Byron did not attempt to distance himself or his reputation from the poem, or to sincerely construct the ‘hero’ he calls for in the first stanza, but through reference to female writers suggests that they have created Don Juan through their desire-fueled imagination:And as romantic heads are pretty painters,And above all an Englishwomans rovesInto the excursive, breaking the indenturesOf sober reason, wheresoeer it moves,He found himself extremely in the fashion,Which serves our thinking people for a passion. (XI, 33)‘Sober reason’ is rejected when it comes to Byron’s portrait of morality, and the hypocrisy of society women who could disguise desire for mili tary men as admiration for their accomplishments is exposed here through claiming that a very unaccomplished protagonist is the creation of women’s imagination. For women to ‘think’ is then synonymous with their having sexual ideas a suggestion which Byron had previously made in The Waltz. Sterne’s presence within the text in Tristram Shandy is also found in a specific character as well as through his writing voice as Tristram: a real sermon of his is presented as Yorick’s, and that character is made notable through the reader being given almost his whole linear biography from birth to death. In chapters ten to twelve of the first book, his life’s events are recounted, ending with the fact that he died as a direct consequence of a misunderstood prank; and that he â€Å"lies buried in a corner of his church-yard, in the parish of ——, under a plain marble slab, [†¦] with no more than these three words of inscription serving both for his epitaph and elegy. Alas, Poor Yorick† (35). This recounting of his death is soon followed by the completely black page, cementing him in the readers’ memories: this association of popular character with author proved financially adroit for Sterne, as he later published sermons under Yo rick’s name, but the literary associations of his name with Hamlet is another example of Sterne’s intertextuality, satirizing his own storytelling by connecting to previous works which possess more dignity. He casts himself as the jester, and through the contrast of the reference tells the informed reader not to take death as seriously in this text as in others. Both Sterne and Byron convey their thoughts on the literary world’s failings through demonstrating a reader’s potential flaws. Although Sterne’s targets appear to be always shifting, and Byron sets out with a fixed ideal of formal perfection, if not moral, they appear to share and be motivated by a primary hatred of hypocrisy: poets who speak about poetry but cannot master technical approaches, readers who hide their reason for reading, and the ‘gravity’ of British society itself. By exposing these falsehoods, they both try to fulfill their goal of changing their literary environment by creating sharper, more cynical readers.