The economic slowdown has been happening since 2008 and a financial crisis was very much anticipated following that. The credit crunch has squeezed the credits and directly affected the debts and led many countries in situations of bankruptcies. As economy exposed shrinking conditions, US economy realized that it would need domestic and global intervention as it had impacted the other countries like Europe, China and UK in the entire business transactions.
Several companies and customers preferred immediate foreclosures of bonds and this affected the business.
Most importantly, it took a deep and negative toll in the developing countries. The development level was as low that they had larger population levels below the poverty lines (Clyde and Wilson, 2009).
The sub Saharan region is known as a reputed center for international trade. However, the crisis inflicted the financial situation and banks had lost asset values. As a result, low capital and asset ratio were observed.
The spillover effects of US credit crunch on US and other developed as well as developing countries clearly show that big banks have been bailed out by the governments. In order to secure the available assets, the banks and governments looked for securitization. Soon after bailout schemes were started and legislation proposals were passed across the countries for better regulation, the commitment towards purchase of loans, assets, direct investments and securities increased among lenders. It is during the reign of Obama in US that the stimulus package was initiated to manage the economy and taxations. This had eventually controlled the foreclosures and the sales rate slowly increased (Ocayo, 2012). The G-20 meetings had definitely proved efficient in tightening the financial regulations and eliminating the barriers in international trade so as to empower the economic situation of all the affected countries.
From this essay, it is understood that the spillover effects of credit crunch had shook the economic levels of all the countries. While the developed countries had quickly risen with proper legislations, it is essential for the developing countries to get treated with relevant measures. Over a period of time, it is seen that the spillover has decreased the value of loans and lenders around the world hesitated to come forward for any form of investments and the phenomenon of securitization made it even complex. It is eventually observed that the entire world is a victim of the credit crunch.