Discussion A:

When the credit crisis occurred in 2008, bond markets took a huge hit as well. Stocks and bonds were almost useless. Their value sank because the interest rates were increasing and no one could afford the amount paid per bond. The bond market during this time was a total disaster because the government was trying to sell these bonds to pay off their deficit but there was no buyers. A way they could try and attempt to insulate itself from a credit crisis in the future is by doing background checks on the applicants to decrease default on the bonds. There is no rhyme or reason on preventing a credit crisis, but with a stable economy we can do our part to do our best at prevention.

Discussion B:

When the credit crisis hit in 2006-2008, shares in companies fell far. Firms make less profit and pay fewer dividends. Soon enough, the stock market recovered, but there were different effects on the bond markets. As we know, government bonds are usually seen as safe investments, and in times of recession and uncertainty, safe investments are widely preferred. So, when the credit crisis peaked, demand for bonds were high for the benefit of their security. Supply of these bonds will increase as well, as governments sell as they can. If debt grows too much, there will be upward pressure on interest rates and reduce the value of bonds. It is difficult to say how the market can insulate itself from future crises. Many have noticed similarities between the Lehman Brothers collapse and the Greek economic turmoil. However, these have made people realize that despite economic philosophy changes are often not enough to protect a market from shocks, both internal and external. What I believe could be done to prevent and future crises, would be just to keep things in order, meaning keep debt from getting too high, and interest rates from getting too low. Also, bond demand cannot be too high during a crisis, as this lowers consumer confidence in stocks and doesn’t help the economy recover. It is difficult to prevent a crisis, but we can keep our economy strong and be prepared to recover if a crisis hits.