The year 2008 turned out to be a notable year of the global history. One of the most popular and horrendous word of this year was introduced to people, thanks to the most strongest (now dwindling) economy of the world. From striver to far-famed business tycoons, mostly being unaware of the word 'recession’, now held responsible this downturn for sluggish business. For some it also emerged as a justification for salary cuts, demotion or pink slips.
Marked by sudden outburst, the housing bubble in the US was held responsible for the downturn, the roots of which lie back in 1993. The bubble which started forming with booming share market and sub-prime lending, led to the hornet's nest. Sub-prime lending refers to distributing loans to sub-prime borrowers which are considered to have a bad credit report and possess risk in repaying loans. However, these sub-prime borrowers (includes people as wells as financial institutions) were offered loans on account of purchasing property, the rates of which were roaring heights (from 2000-2005, increased about 125%) as large number of people invested in real estate after earning from share market. Hence it was conceived that such borrowers would easily repay loans (with a higher interest amount to bank) after a considerable gain. The idea was of notion that it'd benefit both- the borrowers as well as the lenders. However, abrupt downfall in the real estate prices (by 20%) in the year 2007 made the situation perplexed for both. It was then the bubble burst and made the situation adverse leading to bankruptcy and bailout of some of the biggest financial institutions like Lehman Brothers, Goldman Sachs, Morgan Stanley and Washington Mutual.
Marked by sudden outburst, the housing bubble in the US was held responsible for the downturn, the roots of which lie back in 1993. The bubble which started forming with booming share market and sub-prime lending, led to the hornet's nest. Sub-prime lending refers to distributing loans to sub-prime borrowers which are considered to have a bad credit report and possess risk in repaying loans. However, these sub-prime borrowers (includes people as wells as financial institutions) were offered loans on account of purchasing property, the rates of which were roaring heights (from 2000-2005, increased about 125%) as large number of people invested in real estate after earning from share market. Hence it was conceived that such borrowers would easily repay loans (with a higher interest amount to bank) after a considerable gain. The idea was of notion that it'd benefit both- the borrowers as well as the lenders. However, abrupt downfall in the real estate prices (by 20%) in the year 2007 made the situation perplexed for both. It was then the bubble burst and made the situation adverse leading to bankruptcy and bailout of some of the biggest financial institutions like Lehman Brothers, Goldman Sachs, Morgan Stanley and Washington Mutual.
An image explaining all the events.. courtesy: http://www.wikipedia.org/
The worst bulged with US stock market loosing points and it did hit the Asian and other global markets. Oil Prices rose unexceptionally high and inflation was accelerated to reach heights. The worst wasn’t over yet. The prey to such a crash was none other than employees who faced salary cuts and lately were given pink slips. Countries started taking stringent actions to overcome the situation. Reserves of many nations ejected support in form of bail-out packages. The defensive strategy of many countries effected the globalization all over the world leading to a sharp fall in GDP of developing countries.
However, the New Year, 2009, did come with some hope as the stock markets gained momentum on a positive note. The oil prices are now reduced to double digits (at a normal level) and inflation is nearly inconsiderable. Growth rate for Q1 of the new fiscal year remained ahead of the Q4 (2008).As for India, the market hitting upper circuit twice with 17.34% gain from previous close(highest gain ever, globally) did show some signs of growing confidence in investors. But whether this green signal is on political grounds or technical know-how of the people is still dubious.
Recession did symbolize panic all over and was on the hook but consequently it did guide us intangibly to be stringent in our policies, be effective while following guidelines and possess prognostication to some extent :)
However, the New Year, 2009, did come with some hope as the stock markets gained momentum on a positive note. The oil prices are now reduced to double digits (at a normal level) and inflation is nearly inconsiderable. Growth rate for Q1 of the new fiscal year remained ahead of the Q4 (2008).As for India, the market hitting upper circuit twice with 17.34% gain from previous close(highest gain ever, globally) did show some signs of growing confidence in investors. But whether this green signal is on political grounds or technical know-how of the people is still dubious.
Recession did symbolize panic all over and was on the hook but consequently it did guide us intangibly to be stringent in our policies, be effective while following guidelines and possess prognostication to some extent :)
hey nice content..very well executed..i feel it was the strong government formation that has resulted in the upper circuit..hope we see more and more upper circuit so that everyone can revive soon and recession gets over..:)
ReplyDeletewell therz no doubt tht it was on political grounds..the next circuit to be expected is after d budget plan is announced:)
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