Objectives of the proposed studyCredit crunch in UK
The proposed research issue is very topical and has a great value in the context of human society. The problem is old as well as very new. The economy is the basic of a nation. So if the civilization exist the issue of the research will remain be the valuable. Though lot of studies and research has been done on this topic, still it is unsolved issue. It is not a new problem but present recession is too deep which could stay long and affect all over the world in a large scale. Some people have the different argument compare to other about causes and remedies. Though there are different argument about the above research problem it is commonly acknowledged that credit crunch bring recession and economical depression. All the problems happened from credit crunch and its causes might view in different perspectives. But the solutions of credit crunch are more complex. Because the influential groups and indicators are very tough to disclose or some sort of political relevance is occurred. We need to assess and find out the way of possible solutions for the betterment of social issues and for economical knowledge for the academic career. That's why the proposed research will carry out with the following objectives.
- To understand the trade and different relative economic theories may reliable for the credit crunch.
- To disclose the actual means and influential groups of credit crunch including poli-psychological factors.
- To find out the influential factors of economic difficulties.
- To find out there's any alternatives tool to face credit crunch and solve it.
- To discover the global aspect in the UK context regarding the proposed research.
- To identify the possible remedies before and after credit crunch.
- The Context(s):
A credit crunch is known as credit squeeze. When finance crunch or crises in credit reduce the general availability of loans or sudden tightening conditions required to obtain a loan from the banks, then it is accepted as a credit crunch period. The reasons behind credit crunch are innumerous but it is obvious that credit crunch bring the recession. Credit crunch changes the relationship between interest rates and credit availability. Basically it is accompanied by a flight to quality by lenders and investors because they seek less risky investments. The research also will try to find out the poli-psychological issues relating to the problem of credit crunch.
Financial world is changing rapidly. Northern rock has nationalized. Banks fell in crises of liquidity. Street markets are struggling and few of them already shut with largest brand name like as; Woolworth. Some of them are merging to continue their operation. Unemployment rate is crossed the historical record in UK. First world countries alliance G-20 declared $1.1 trillion rescue budget for the largest financial institutions and others(ukbengali.com, 2008).
Yet credit crunch is an unsolved and critical issue. Though it is an economical term but a mostly concerned with political, socio-cultural and psychological issues as well. Noam Chomsky (2006), discussed, unfortunately all too credible, brings to prominence a fourth critical issue. According to him the fourth critical issue is the growing democratic deficit which refers the gap between public will and public policy. It is a sign of failure of functioning formal democratic institutions in a democratic culture with vitality and substance. We can see it when too credible democratic countries like UK fall in crises.
Father of modern economist Adam Smith(1776) criticized tradesman as they acting together within the guilds. According to him, they want to form and constitute a power block and manipulate the state into regulating special interests against the general interest. We see in real picture that the companies become weak and bankruptcy but the owner and director are becoming rich in comparative phases of time. The crucial scenario is the banking sectors in UK. Most of the banks are saved by public money but the bosses are taking unbelievable bonuses in a known language becoming fatcat.
A great philosopher, economist and politician Karl Marx's(1867) identified, labour at an adequate level of productivity is able to create and conserve more value than it costs the employer to buy. Employers buy labour to preserve and augment the value of capital at his command. It is like an unpaid labour which makes misappropriation of wealth among the people and makes the class differences. That's why we see, rich is becoming richest and poor is becoming poorer. So massive differences make lot of people unable to meet the living standard and lost the economic credibility. We see a lot of differences in income in UK. The council beneficiaries are becoming large. And the government is in critical situation to meet the social welfare demand.
The macro-economic factors are also liable for credit crunch. We saw the impact of USA credit crunch immediately affect the UK. It was happened previously as well. In a findings of Annelena Lobb(2007), the external reason of black Monday(1987) was disputes between US and European particularly Germany about foreign exchange rate. As a external factors of UK the war in Iraq and Afghanistan is the speech of mouth.
A researcher of PIMCO, McCulley (1998) coined a term Minsky moment in which he clarified Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money. He described Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. But as a public institution, a state should consider the factors. As it is experienced before, UK failed to recognize the problem timely. Comparatively to the emerging country and social welfare country UK is facing the critical situation because of failure of policy. The central bank of England declared the historical lowest rate of interest at .5p (telegraph.co.uk). Critics are saying the bad impact of it as well. Obviously it is helping somebody or some sector. But is it good for long run? Or is there any alternative public policy available?
Ludwig von Mises, 1912, translated by H.E Batson analyzed Austrian business cycle theory. In the analysis he showed credit crunch is the consequence of inherently damaging and ineffective central bank policies. Central bank is the agent of state which always represents the government view. The research depicted central policies liable for speculative economic bubbles and lowered savings. The ultimate result causes unsustainable boom.
This boom brings widespread mal-investments, misallocated capital resources into areas that would not attract investment if the money supply remained stable. The UK housing sectors is the perfect example of the analysis which was hit first as a sign of credit crunch.
We saw there are different research, argument and analysis about the causes of credit crunch. The knowing cause can show the solutions of problem. But we see credit crunch is happening in the phases of time like as 1930s most part of the world, 1990s in basically in Japan, 1998s in Russia. Where the end of it? Some economist and analyst gave findings that credit crunch is the way of economic life cycle. It will happen by rotation in a stage of economy. But it is a research finding not a solution. Stuart Calder (2008) gave some measure to control and shape the investment. According to him the key strands are; 1) massive, accessible computing power, combined with vast arrays of data, such as tick-by-tick price histories. 2) Convergence of liquidity into a handful of global super-exchanges that allow 24 hours investment virtually in any asset. 3) Continuous, mobile access to computing power and data through high-bandwidth connections from super-powerful portable devices. 4) Increased use of artificial intelligence to manage the whole investment process, both for individuals, and collective investments.
But the economic crises is a result of policies taking by government of a state, socio-psychological perspective of the people how we look at it, poli-psychological perspective what steps they take and how they feel it compare to others. According to the state policies to their people, we can say them welfare country, fair country, corrupted country and so on. As a diver poli-psychology is a crucial issue for the reign and to handle the credit crunch as well.
Research design (including methods) or critical approach:
The research deserves deductive method. But it is going to produce some new conceptual argument as well. It will survey to find out the generalize valuation. Because the people who directly affected and involve with the situation is more important thought than study thousand pages. The scope of research also will cover different types of secondary data like as; journal, books, newspapers, expert's articles different economic theories and reviews. The research will be conducted through both of qualitative and quantitative methods. Interviewing and questionnaire will be also tools of the research.
Questionnaire will be conducted to gather the mass perception about the research problem. Basically it will convey the quantified result in a sample size. It is essential to assess the general perception for the research objectives. For the qualitative and conceptual data, the research will go for interviewing different types of people representing a specific sector.
The main source of secondary data will be reliable and authentic internet sources. As the modern life mostly depend on technology and most of the aspect could be founded in online, so I think this the easiest and perfect way to gather data and access to the journal, books, newspapers, experts articles and different economic theories and reviews via online.
The research is going to be conducted in a timeframe and with lots of scope to explore. So there are lots of problem may arise. The crucial problem will come from survey. To be satisfied from survey, it is almost impossible to do the research in the given timeframe. In case of interviewing it will be tougher to manage.
To get rid from the above difficulties, the author like to be choose in case of interviewing and will go for a manageable sample size to do the questionnaire.
Special resources required:
Though the research is going to conduct through discussions, there's lot of option to present the collected data in an articulate way. The author is not very skilled in using access and excel. In the other way it will be expensive to hire expertise for that. So in the timeframe, the researcher will give more emphasis on discussion and conceptual analysis with unavoidable data presentation by using Microsoft word, word art, table, chart and graph. The researcher is also facing difficulties to access in the university resources and downloads the full essential text. It should resolve by consulting with librarian hopefully. The author also has some confusion about the referencing style. It must need to be solved. Obviously the researcher will be in regular contact with the advisor
Timetable of main stages of the study:NOTES
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This section should explain the key objectives of the research. This is often presented by a short discussion (minimum 100 words) followed by 4 to 6 bullet points.
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