GLOBALIZATION AND THE FINANCIAL CRISIS CONSEQUENCES AND SOLUTIONS OF FINANCIAL CRISIS

MINISTRY OF FINANCE UNIVERSITY OF FINANCE – MARKETING FACULTY OF FINANCE AND BANKING - - -  - - - ESSA Y TOPIC: FINANC IAL CRISIS Lecturer name: Ph.D Phan Thu Hien Subject name: International Finance Group number: Group Names of students: Phan Trung Dien Thai Thuy Trang Huynh Ngoc My Hien Nguyen Thi Phuong Thuy Tran Cao Phuong Uyen 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat Evaluation table of the members' work completion Name of member Phan Trung Diện Huỳnh Ngọc Mỹ Hiền Nguyễn Thị Phương Thùy Thái Thùy Trang Task Completion level Chapter 1: Globalization and the financial crisis Chapter 2: Sign of financial crisis Chapter 3: Consequences 95% 100% 95% 100% and solutions of financial Trần Cao Phương Uyên 95% crisis Comments of the group leader: The members are all responsible and complete the work well as the assigned deadline 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS CHAPTER 1: GLOBALIZATION AND THE FINANCIAL CRISIS I Concepts and aspects of globalization II Financial Crisis Concepts History of financial crisis and the global financial crisis .6 2.1 History of financial crisis 2.2 Global financial crisis Basic crisis models 3.1 First-generation crisis model 3.2 Second generation crisis model 3.3 Third-generation crisis model 10 Types of financial crises 10 4.1 Banking crisis 11 4.2 Currency Crisis 11 4.3 Debt Crisis 11 Causes of the financial crisis 11 5.1 Financial leverage 12 5.2 Uncertainty and herd mentality 12 5.3 Incompatibility between debt and assets 12 5.4 Failure to regulate 12 5.5 Deceive 13 5.6 Spread .13 III Financial crisis and economic recession in the period 2007-2009 13 Cause .13 1.1 Securitization 13 1.2 Housing market bubble 14 Developments 14 Impact .15 3.1 The impact of the financial crisis on some economies around the world .15 3.1.1 For the United States 15 3.1.2 For some regions of the World 16 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS 3.2 Impact of the financial crisis on Vietnam .18 3.2.1 Impact on import and export 18 3.2.2 Impact on remittances 20 3.2.3 Impact of net capital inflows on Vietnam's economy .21 CHAPTER 2: SIGNS OF FINANCIAL CRISIS 23 I Financial crisis overview: 23 II Signs of financial crisis: .23 Borrowers are unable to fully repay their bank loans: 23 Customer’s deposit cannot be refunded by commercial banks: 23 The government has abandoned the fixed exchange rate regime .23 Financial liberalization 23 The domestic banking system is debilitated and in a downturn: 24 Domestic financial supervision institutions have been reduced as well: 24 CHAPTER 3: CONSEQUENCES AND SOLUTIONS OF FINANCIAL CRISIS 24 I CONSEQUENCES OF FINANCIAL CRISIS: .24 Financial capitalism has been discredited 25 Significant wealth and middle-class decline 25 Unrest in politics: 25 Short-termism in fiscal and policy 25 Protectionism – each country for itself, and foreigners be damned 25 II SOLUTIONS OF FINANCIAL CRISIS 25 Solutions for avoiding financial crisis 25 Solutions to reduce the financial crisis's effects 26 REFERENCES 27 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS CHAPTER 1: GLOBALIZATION AND THE FINANCIAL CRISIS I Concepts and aspects of globalization Globalization is the increasing integration of the world's economies, especially through trade and financial flows Globalization can be identified through a few trends, most of which began after the Second World War Among them is the growing international mobility of goods, currencies, information, and culture; along with developing the technologies, organizations, regulatory systems, and infrastructure for this mobility Key trends in globalization include: - Increasing international trade at a rate higher than the world economic growth - Increased international capital flows including foreign direct investment - Increased cross-border data flows using technologies such as the Internet, communication satellites, and telephones - Increase international cultural exchange, such as the export of cultural products such as movies or books II Financial Crisis Concepts A financial crisis, in general, is a marked and rapid deterioration of all or most groups of financial indicators of an economy such as short-term interest rates, asset values, defaults, and failures of financial institutions Financial crises are one of two types of events: - Mass withdrawals result in government shutdowns, mergers, or acquisitions of one or more financial institutions - If there is no withdrawal, closure, merger, acquisition or large-scale government help for a major financial institution, the strain on other financial institutions will begin Some comparative characteristics between financial crisis and economic crisis Financial crisis Monetary economy Regarding the financial structure Financial asset prices (S&P Economic crisis Real economy Regarding the structure of the economy 500, Output (GDP) NYSE…) Financial investment Real investment 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS Asset price bubbles (stocks, real estate) The general price level of the economy The collapse of financial institutions (inflation, CPI ) Output decline, unemployment, stagnation is production, inventory International capital flows (FDI, FII, Import and export relations of goods and international debt…) Impact on the real economy services Impact on the monetary economy History of financial crisis and the global financial crisis 2.1 - History of financial crisis Dminique Plihon (2008): divides the financial crisis into periods: + Gold standard period (1870 to 1914 centuries), + The period between the two World Wars (1914 - 1944), + Bretton Woods period (1944 - 1971), + Post-Bretton Woods (from 1971 to present) - Research by Luc Laeven and Fabian Valencia (2008): period 1970 to 2007 + 124 systematic banking crises, + 208 currency crises, + 63 national debt crises - Some typical financial crises: + Tulip fever in the Netherlands 1637 + South Sea Company in England 1720 + Great Depression and "Black Tuesday" in the US 1929 + Debt crisis in Latin American countries in the early 1980s + "Black Monday" October 19, 1987 + Speculative attack on the European Exchange Rate Mechanism 1992-1993 + Crisis in Mexico 1994-1995 + East Asian crisis 1997-1998 + Crisis in Argentina 2001 – 2002 + Global financial crisis since 2007 + Eurozone debt crisis 2010 – 2012 2.2 Global financial crisis 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS Import 8.22 Balance -0,86 of trade 2012 Export 6,5 Import 6,6 Balance -0,1 6,18 9,06 9,06 9,01 8,79 8,40 10,1 9,58 9,24 -1,23 -1,49 -1,49 -1,66 -0.21 1.0 -0.7 -1,38 0,81 8,2 9,0 -0,8 9,8 10,0 -0,2 9,7 9,8 -0,1 9,2 9,3 -0,1 8,6 9,0 -0,4 9,1 9,8 -0,7 9,8 9,9 -0,1 9,6 9,5 -0,1 9,58 9,36 -0,65 -0.26 10 11 12 9,9 10,2 10,4 10,4 10,3 10,6 -0,5 -0,1 -0,2 of trade Source: Compiled from the monthly “Import and export situation” of the General Department of Customs At the same time, Vietnam's imports are also significantly affected: In order to export, our country must have raw materials, but most of them are imported from abroad and account for 70% to 80% of the total The crisis caused the price of oil, steel billet, technological equipment to drop sharply In February 2009, the economic stimulus package was implemented by the state As a result, by March, the trade deficit increased again Vietnam was disadvantaged in that context because our country had a growing trade balance deficit due to importing raw materials for production To solve this problem, money sources are injected in our country to make up for that shortfall, but the risk is reduced Therefore, the risk of increasing debt and reducing national foreign currency reserves 3.2.2 Impact on remittances Remittances are important as they are one of the major cash flows to our country The most obvious source of money is those who export labor, international students, and relatives abroad Currently, the amount of remittances is increasing year by year (about 10%) per year, it is expected to grow even more Remittances in the period 1996 - 2011 (Unit: million USD) Source: IMF (2011) 20 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS The source of remittances is increasing over time due to More and more people are going to work abroad, Vietnamese experts, and international students to work and study abroad; There have been many changes in policy and because the money transfer procedure is also becoming simpler, the forms of money transfer are more and more diversified, and the institutions that carry out the money transfer are more and more diversified The source of remittances in 2009 decreased because: The export labor market is and will face many difficulties Many laborers must return home due to lack of work; Vietnamese relatives living abroad also have their incomes reduced due to the financial crisis Moreover, the source of remittances not only supports relatives but also invests in production activities, securities, and real estate These are the areas where the rate of return is falling, so they no longer attract remittances as before Currently, Vietnam does not have an effective solution to attract remittances into official remittance channels 3.2.3 Impact of net capital inflows on Vietnam's economy Through the policy of loosening investment barriers, accelerating the opening of capital markets and liberalizing financial markets, Vietnam's net capital inflows have increased rapidly year over year, especially since 2007 In the structure of capital inflows, direct investment capital (FDI) still accounts for a large proportion and has relatively stable growth Indirect investment (FPI) has only appeared since 2005 but has shown its flexibility and danger to the foreign currency flow of the economy FPI rose sharply in 2007 (US$6.243 million) when the Vietnamese stock market exploded at the same time that Vietnam became an official member of the WTO, then quickly reversed in 2008 (US$-578 million) when the stock bubble burst and fell sharply in 2009 Other investment capital (OI), with the majority being credit and bank assets, is the capital flow that is increasingly accounting for a high proportion in the capital account balance Net inflows from 2000 to 2011 (unit: million USD) 20000 15000 10000 5000 11 20 10 20 09 20 08 07 20 06 20 20 05 04 20 03 20 20 02 20 01 00 20 99 20 19 98 19 97 19 96 19 19 -5000 95 21 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS Source: IFS (2012) However, capital inflows also have notable effects: First, massive net capital inflows put pressure on the money supply, causing inflation to rise The massive amount of indirect investment capital in the second half of 2007 and the first quarter of 2008 led to a decrease in the exchange rate and in order to keep the exchange rate stable, the State Bank made intervention transactions in the market Forex As a result, the amount of money circulating in the economy increased rapidly, leading to a high CPI with a peak of 27.7% in the third quarter of 2008 and up to 23.9% at the end of 2008 Capital inflows and quarterly CPI for the period 1999 - 2011 6000 30.00% 5000 25.00% 20.00% 4000 15.00% 3000 10.00% 2000 5.00% 1000 0.00% -5.00% Luồồng vồốn vào CPI (%) Source: Compiled from IFS (2012) Second, capital inflows into Vietnam contribute to overheating the economy, creating asset bubbles, and affecting system liquidity Along with massive capital inflows, credit growth in Vietnam in the 2007-2010 period was always high, with an average rate of 36.5% Third, the massive capital inflow poses the risk of a currency crisis Although FPI has just appeared, it has shown its erratic volatility when it continuously increased strongly in 2007 and then reversed rapidly in 2008 on the balance of payments That volatility is due to the following reasons: In the context of a global recession, financial institutions and investors had to rethink their investment strategies and portfolios, leading to the sale of securities to recover capital Foreign investors, who are holding 40% - 50% of transaction value and about 25% - 30% of stocks on Vietnam stock market have withdrawn capital; The psychological impact of the global financial crisis on the global stock markets, reflected in the VN-Index continuously finding new bottoms and falling to a record level of 252.57 points on February 24, 2009; the economy showed signs of going down and there was a sharp and rapid change in monetary policy such as rising inflation, the SBV tightened 22 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS monetary policy, the trade deficit became more and more serious, reserves decreased; Foreign organizations provide unfavorable information such as Fitch Ratings lowering the credit rating of Vietnam from "stable" to "negative", Morgan Stanley believes that a currency crisis may occur in Vietnam CHAPTER 2: SIGNS OF FINANCIAL CRISIS I Financial crisis overview: Financial crisis is the tumble of financial markets or financial corporations mislay their liquidity, leading to a chain collapse in the financial system II Signs of financial crisis: Borrowers are unable to fully repay their bank loans Customer’s deposit cannot be refunded by commercial banks The government has abandoned the fixed exchange rate regime Financial liberalization Weaknesses in the financial system, particularly among domestic banks Poor supervisory institutions Borrowers are unable to fully repay their bank loans: Consumers get a loan from the bank and they inability to pay this loan, late payment or just pay only part of the loan, that induce bankruptcy Customer’s deposit cannot be refunded by commercial banks: Financial or business risks lead to loss of the bank’s asset, a decrease in profit or the bank must spend a cost to solve those risk problems Among the risk faced by commercial bank, credit risk is the greatest impact on the financial position of the bank When the credit risk is happening, banks unable to recover capital, which cause revenue and expenditure imbalance and maybe falling into insolvency, cannot give back the client’s credit This will cause insolvent of commercial bank system The government has abandoned the fixed exchange rate regime Fixed exchange rate is the structure adopted by the authority or central bank to keep the value of another currency at a specific rate If the government is given up the fixed exchange rate regime, the central bank would be free to increase (decrease) money supply, which would result in inflation and long-term inflation will cause financial crisis Financial liberalization 23 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS According to the International Monetary Fund (IMF): “Financial liberalization is the process of reducing and ultimately eliminating State control over the functioning of the national financial system, making it operate more freely and more efficiently according to the laws of the market" The process of liberalization will make the financial markets of countries; especially developing countries are more affected Financial liberalization may increase the likelihood of a financial crisis even further Two problems arose: Firstly, the domestic financial market is not yet fully developed, which is open to financial integration with foreign partners that will be vulnerable to external financial attacks Secondly, financial integration also increases the chain crisis from the outside market to the internal country’s market The domestic banking system is debilitated and in a downturn: Many credit institutions are experiencing liquidity issues, and high bad debts are threatening the stability of the banking system and causing temporary liquidity shortages at banks This destabilizes the system, resulting in the failure and insecurity of banking operations beyond the State's control Domestic financial supervision institutions have been reduced as well: To suit the country's economy, each state will use a different financial model However, if the model is not properly applied or the financial system is not fully developed, the supervisory capacity and legal system related to supervisory activities are in the process of being perfected and are not yet sufficiently strong, resulting in the financial system's inability to develop healthily and sustainably CHAPTER 3: CONSEQUENCES AND SOLUTIONS OF FINANCIAL CRISIS I CONSEQUENCES OF FINANCIAL CRISIS: Although the economic crisis in 2008 broke out more than 10 years ago, it still left many consequences that have lasted until now The cause of the Great Recession that year can be said to have originated from the US real estate market, which a link in the financial system was severed, which set off a chain reaction, pulling a chain reaction Followed by a series of bankruptcy declarations, including the financial firm Lehman Brothers This crippled the entire US and European economies 24 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS Using the Multiple Cause model (MIMIC), which was carried out in 107 countries and synthesized about 60 causes of the world financial crisis The impact of this recession is still present, making the speed of the global economic recovery quite weak It will depend on what it does There are consequences of the financial crisis: Financial capitalism has been discredited • The notion that financiers are competent and, as a result, deserve their fortune • Simple techniques — at the extreme, Bernie Madoff Suspicion that a large number of Madoffs are involved • Concerns about capitalism's ability to distribute wealth and resources Significant wealth and middle-class decline • Less support for property rights and low taxation • A focus on inequality Unrest in politics: • Those who are losing or have previously lost • In the United States, where is the unrest? So far, all of the attention has been focused on the election campaign and Obama's ascension to power • Make a plea for robust government assistance • This is especially problematic for emerging markets, which have experienced rapid growth and have high expectations • Unemployment and health insurance are both weak safety nets Short-termism in fiscal and policy • Fix the problem, the future be ruined — the image of doing something is all that matters • More money is the answer, regardless of spending efficiency — just around $150 billion of the $800 billion plus package will be spent in the United States by the end of fiscal year 2009 Protectionism – each country for itself, and foreigners be damned • Trade • Financial – assurances, now liquidity • Employment • Fiscal – suffocate thy neighbor 25 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS II SOLUTIONS OF FINANCIAL CRISIS Solutions for avoiding financial crisis - Floating exchange rates will take precendence over other types of rates which may collapse - To defend the banks from a liquidity crisis, it is crucial to creat up foreign exchange reserves - Banks and the financial sector should be supervised more carefully - Take initiatives to eliminate debt in the private and public sectors to reduce the risk of insolvency - Structural measures to enhance the competitiveness of the real economy Solutions to reduce the financial crisis's effects To begin, undertake a series of anti-inflationary measures, focusing on maintaining a tight but flexible and prudent monetary policy based on the market mechanism Use monetary tools effectively and alter them as market conditions change Renovating the bank's internal management to make it more resilient to the effects of the global economic crisis Secondly, to increase production and business, as well as to enact laws that exempt and reduce corporate income taxes, particularly for small and medium-sized businesses In the last quarters of the year, focus on removing obstacles and establishing conditions to improve production and commercial activity In the event of excessive inflation and an economic downturn, the government will need to implement suitable stimulus measures to help the economy recover Third, keep a careful eye on the sources of foreign investment money, continue to strengthen the investment climate, and boost promotion of foreign invesment Finally, by bailing out the open market operations within the banking industry and discount from the central bank lending to commercial banks, supply liquidity to the market 26 0 TIEU LUAN MOI download : skknchat123@gmail.com moi nhat GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS GLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISISGLOBALIZATION.AND.THE.FINANCIAL.CRISIS.CONSEQUENCES.AND.SOLUTIONS.OF.FINANCIAL.CRISIS