Credit Crisis

The credit crisis

Everybody has heard of the credit crisis lately, it has been in the news for several weeks now and it is almost as if there is nothing else on the news. There are a lot of different views on this crisis and there are several ways to solve it. I personally do think that this crisis is going to get worse coming year but on the other hand, it is a well known fact that in every economic cycle a recession pops up every now and than. There are however, various ways to deal with this crisis and this is in fact what I would like to discuss. The thesis statement is: The government should intervene in the credit crisis. I will try to persuade you that is in fact true and I will use the following main arguments for it:

1. It prevents companies from going bankrupt
2. It will create consumer confidence
3. It is positive for the employment rate

After there arguments, a short conclusion will be given in which it becomes clear that government should indeed intervene in the credit crisis.

1. It prevents companies from going bankrupt
It is obvious that whenever a credit crisis occurs, companies are having some difficulties with their finance. What happens if companies don’t generate enough money anymore to cover its costs is that they will need to cut costs. If the government, at this moment gives a capital injection to such a company, it gives the company a buffer and it will thus prevent them of cutting jobs for example.

2. It will create consumer confidence
For this argument government intervention in the banking world is mainly important. When consumers notice that the government financially supports the banks, it will show the consumers that they will not let banks go bankrupt. This adds to the confidence in banks, which will lead to less mass withdrawing of savings. This is good for the market of course because this money can be lend to businesses in trouble.

3. It is positive for the employment rate
If consumption is stimulated and the government can support important businesses financially, these businesses are less likely to let go of employers.
Adding these arguments up, it is obvious that government intervention is good for the tackling the recession. Therefore, the government SHOULD intervene in the credit crisis.