What started the Credit Crunch and what are the effects of it in the Essay

What started the Credit Crunch and what are the effects of it in the UK - Essay Example This describes the financial situation that forms the foundational basis for this study, the subprime mortgage meltdown in the United States that hit the global stage in the Summer of 2007, which accelerated into what is also termed as the credit crunch. In equating the ramifications of the preceding, the United States will serve as the starting point for the foregoing, tracing how the credit crunch became a global phenomenon, then honing in on how this all has and is impacting the UK economy. The financial services sector is often a little understood arena owing to the complexities of how it operates within the context of international economic activity and the variables of the global market. The intricate nature of the ties between differing regions, and how they interact upon one another represents a complex set of macro and micro economic aspects within which this crisis developed and impacted every corner of the globe. In hindsight, the causes of the credit crisis are understood as were the warnings from economists and banking officials as to the potential ramifications of new types of derivative instruments whose long term effects were not understood, and not tested with regard to varied market and economic scenarios. In that instance, the checks and balances of the market failed, leading to wide spread ramifications. The unique nature of the credit crunch make this an engaging study in that this history making event makes the first major failing of markets since th e Great Depression, and serves as a wake up call for the excesses of the past that we are paying for in the present. This study of â€Å"What started the credit crunch and what effects has it been having on the UK economy† represents a series of broad ramification as well as inputs. In order to equate the preceding, it is necessary to delve deeply