Recent Credit Problems in the Financial Markets Essay

Recent Credit Problems in the Financial Markets - Essay Example Certainly, since then, this crisis gave way to far-reaching alterations in the Western economies. Still a wide range of questions remain unanswered. People still doubt as to the possible outcome of the integration of international economies and the potential limitations of the free market system in the times to come (Larry, Teather & Treanar 2010). During the beginning of the credit crunch in the financial markets, commoners and experts doubted as to the validity of the capitalism in a highly globalized and interdependent world (Larry, Teather & Treanar 2010). The effigies of bankers were put to flame in mass protests. The skyrocketing interest rates in the United States pushed many middle-class homeowners affiliated to sub-prime mortgages to default on their financial commitments towards their lenders. The news eventually spread like a raging and uncontrollable wildfire as the banks and financial institutions desperately cringed from extending further loans. The statutory bodies and organizations started to pump massive funds into their economies to breach the fast-widening crisis of trust in the financial markets. The small investors begin queuing before the local bank branches to withdraw their savings and investments at the earliest. The situation was marked by a sense of chaos, right from the domestic kitchens to the plush offices of the top-notch banks.The ramifications of the drying up of credit sources were immense. Banks and financial institutions collapsed like packs of cards.