Global Financial Crisis Essay - 1644 Words

Issue Due to the effect, of the global financial crisis of 2008-2009, advanced economies have seen a significant increase in public debt. Canada risks a repetition of this experience and prominent voices are calling for an additional round of fiscal austerity. Without enhancement, the problematic habits of Canadian governments, such as deficit spending and growing government debt, bear short- and long-term consequences for the country and its population. The biggest problem in Canada is primarily the mounting costs of an aging society and not so much to yield a balanced budget and gradually reduce debt in the recovery. Background â™ £ In the mid-1990s and late 2000s, Canada’s federal and provincial governments made substantial advancements†¦show more content†¦In the long run, productivity could be improved by increasing public investments, and backing private investment and innovation in further effective ways than costly across-the-board corporate tax cuts. â™ £ Additional spending on debt servicing costs inevitably translates to fewer resources available for public priorities. (Lammam, MacIntyre, Ren, Hasan, 2017) â™ £ Empirical research has found that a negative relationship exists between government debt and economic growth (Reinhart and Rogoff, 2010; Cecchetti et al., 2011; Checherita and Rother, 2010; Woo and Kumar, 2014; Chudik et al., 2015; Eberhardt and Presbitero, 2015; Égert, 2015). â™ £ Across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes. Much lower levels of external debt/ GDP (60 percent) are associated with adverse outcomes for emerging market growth. (Reinhart Rogoff, 2010) â™ £ The expansion of government debt prompts long-term interest rates to rise. The outcome is a rise in the cost of private-sector borrowing. Private capital investment can be discouraged as a result of higher borrowing costs. This is important since private capital investment is a vital element of long term economic growth.Show MoreRelatedThe Global Financial Crisis Essay2669 Words   |  11 Pagesexperienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. 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