It is fair to say that the 2007 Credit Crisis was born a year ago, in August 2007. Since its onset, economists and finance experts have been conjecturing whether as a result, the world economy will be moving into a depression and at what final cost? By the end of 2007, the United States and other Western economies have already been entrapped in the complex dynamics and negative externalities of the Credit Crisis. However, the extent of the crisis effects, if not its end, is not clearly in sight, while the solutions presented have focused on the short-term, that more often than not bail-out the guilty, thus encouraging moral hazard that leads to a repeat of the crisis. But if this is the case, then the onset of the Crisis must have been twenty years earlier, at the time of the Savings and Loan Crisis of the late 80s that was followed by the Tech Bubble of the late 90s. This article focuses on the economic and sociopolitical forces that brought about the 2007 Credit Crisis and explore its consequences. It investigates how the Western banking systems, including their central banks, reached the present messy situation with its negative local and global consequences? The article focuses on three factors that seem to be behind the rise of the present financial crisis and its reoccurrence with increasing negative outcomes. The first factor is the pressure of the political system for short term and biased solutions that degenerate the ethical system. The second factor is the weakness if not the perplexity of the present regulatory mechanism, both technically and politically that let lenders ignore basic rules and regulations, locally and globally. There is a need for an independent International Financial Regulation Authority (IFRA). The third is the need for more comprehension and anticipation of the role of Globalization in the processes of global finance and development. The 2007 credit crisis provides important lessons for financial development and control in the ERF region and the rest of the world.
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