CDOs Research Papers - Academia.edu (original) (raw)

Western economies gave birth to two major crises; one in the United States and the other in the European Union in the years 2008 and 2010. Economists emerged for weathering the storms and presented several acts that bind governments, banks, public and private sector stakeholders. Falling back and re-watching those actions held between 2008 and 2011 with a clear mind today will tell us many things about their successes, failures, and complications behind. We can see, now, those steps have changed nothing major regarding the economic system and thinking, instead being steps of escaping crises with the same usual Western economic thought. Now is the time for re-thinking fundamentally the reasons for the crises and reactions to the crises, in order to avoid similar collapses in the future. A new economic perspective grounded on the real economy is concluded in this chapter, it is introduced as the way to exit from the loop of crises. This study in its initial nature follows a method to understand the two major recent economic crises with their applied reforms. Those reforms and their results are assessed from Islamic economics and Islamic finance point of view by using the basic principles, pillars, and objectives of Islamic economics and finance. Therefore, this is qualitative research that investigates the official data which are prevailed to the public and the previous scholars' perceptions, perspectives, and ideas on these two crises. Primarily, the well-known reforms which were applied during and after the crises and their consequences are used as the basis for understanding the degree of achievement. The consequences are evaluated from the Islamic economics perspective, and the weak points are addressed for a substantial result. Approaches to both 2008-GFC and 2010-SDC by the scholars and the basic discussions on their reforms were covered in the literature review of this study. Mainly the resources are categorized under two headers; 1. References about the Global Financial Crises in 2008 and its related reforms, 2. References about the European Sovereign Debt Crises in 2010 and its related reforms. Also, the official websites of the Federal Deposit Insurance Corporation (FDIC) and the European Stability Mechanism (ESM) were visited to derive direct information from these institutions’ original sources. This study is organized under three sections, followed by the conclusions. The basic information on 2008-GFC in the U.S. will be provided in the first section along with the examination of three major reforms designed by the U.S. government namely ‘Emergency Economic Stabilization Act’ (EESA), ‘Troubled Asset Relief Program’ (TARP), and ‘Dodd-Frank Wall Street Reform and Consumer Protection Act’ (Dodd-Frank & CPA). At the end of the first section, these reforms will be evaluated in relation to the causes of the 2008-FC. Similarly, the second section will do the same kind of process on the 2010-SDC and the three major reforms designed by the E.U. governments namely ‘European Financial Stability Facility’ (EFSF) and ‘European Stability Mechanism’ (ESM) and ‘Labour Market Reforms’ (LABREF). In the last section, I will go outside-the-box and present the findings of the first two sections in a critical approach that points out their lack of root-cause analysis and will invite the readers to in-depth thinking on the matter. In the conclusion part, the essence of the matters for those two crises and their reforms will be stressed, and the recommendations will be revealed to the readers.