The Global Financial Crisis (GFC) can be seen as the biggest event to have happened within the financial world since the Great Depression of the 1930's - 1940's. The GFC created many problems all over the world, however the effects were felt and impacted differently for different countries. The financial markets of the USA and Europe were affected the most, but that being said Australia may have come off better in the end, however they still experienced the devastating impact of the GFC.
             There are a number of factors that contributed to the end results of the GFC, these include the use of fair value accounting as the measurement basis for assets and liabilities, the use of derivatives within the finance sector, deregulation, the lack of auditing internal controls and the limited use of ones that already existed, and the macroeconomic influences concerning monetary policy. In saying all this it is widely known that it all started with the downturn in the US housing which in turn had a flow on effect in the banking system creating a capital (liquidity) shortfall. Although this was the ultimate cause of the GFC deregulation can be seen as actually allowing it to take place.
             As well as this the loosely held monetary policy by the US Federal Reserve during the early 2000s has generated problems with actually designing appropriate measure to analyses the causes and cures for the GFC. Therefore in saying all this we can see that there were numerous factors that contributed to the financial collapse however proving which ones were most important and were the main issue is harder said than done.
             Macroeconomic Environment Effects, Monetary Policy
             After the 2001 recession there was an emphasis on the impact of short term interest rates maintained at low levels for long periods of time (Rahn, 2010; Ellis, 2009). Such monetary policy enabled intermediaries to reduce costs of wholesale funding and hence the ability to build up l...