Homework for Eco Essay Example | Topics and Well Written Essays - 250 words

Homework for Eco - Essay Example It is only through capital investment and not capital consumption that growth can be experienced in the economy (Callum). In the Chinese and Middle East context, Faber notes that the Chinese economy is a growing economy due to its investment and increased production rather than consumption. Additionally, China exports to the developing and emerging economies totally by passing the old world order. However, its overdependence on the raw materials such as oils from the Middle East could be an undoing in the future. Middle East is known for its instability and therefore the overdependence on their oil for production could greatly affect the economy (Callum). The approach reduces the moral hazard by ensuring that the creditors do not experience losses. This is due to the fact that losses on the creditors’ side have more detrimental effect on the institution than the loss of Equity by the institution. Creditors impact more on the company than the equity holders. The Creditors can easily cause more losses in case they themselves incur losses. It is ideal than a rescue that protects both creditors and equity holders (Mark). This approach eliminates the problem completely due to the fact the owner who has all the liberty to invest on behalf of the creditor and who has access to more information acts responsibly. This is due to the fact the owner incurs charges and possible losses in case of poor investment options. Senator Lincoln proposed that the commercial banks be forbidden to trade derivative securities in 2010. This is with the intent of preventing the banks from using the cheap deposits to subsidize risky derivative businesses. The proposal also prevents banks from using emergency banking facilities. This proposal encourages financial intermediaries to divest their derivatives by forbidding the government from giving these banks assistants such as tax breaks (Yves). Despite the fact the