Boomarang

Individual assignment#2

2012-11091

경영학과 박원영

I just read the book called ‘BOOMARANG’ after professor 이관휘’s recommendation. This book covers the stories of bankrupted countries because of financial crisis in 2008, Island, Greece and Ireland and Germany, economically powerful county among EU and U.S, the main culprit of 2008 financial crisis. Ireland banks excessively attracted foreign capital beyond their economic capabilities. They invested in foreign asset using foreign capital very aggressively. As 2008 financial crisis occurs and value of their own currency decreases, they had increased debt and became bankruptcy. Greece bankrupted because the government was too weak, not because bank invested too aggressively, like Ireland’s case. Their government liabilities ran to nearly 1 trillion dollars. The government was too corrupt and they couldn’t collect taxes well. Public officials regarded bribe as a matter of course. Ireland banks also lent money foreign capital to their own property developers and became bankrupt because of real estate bubbles. Serious real estate bubbles arose and foreign capital went out. The liabilities of banks moved to the liabilities of the government.

Island is a small country whose population is almost 3 hundred thousands. People traditionally worked in fishing industry and their main industry is aluminum refining industry. One day, they started to work in financial investment business discarding fishery working. With low interest rate of Yen and USD, they borrowed foreign capital and invested in their own currency, krona. Also, they invested in foreign asset and made a lot of money. This was the start of real estate and stock market bubble in island. As the financial crisis occurs in 2008, the value of krona currency decreased and stock also decrease to 85%.

This case shows how powerful and horrible when financial systems didn’t work properly. So the specialist in the financial industry have to construct the basis of financial system so that it do not broke when serious crisis happens. Also, capitalist have to reduce their greed. They are very smart and intelligent that they deceive people legally and people even don’t know they are deceived. When everything goes ruined, people blame them but it is too late. Also government and financial supervisory have to supervise them very tightly.