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Most of the world’s stock markets
in late 2007 and early 2008 were touching sky. Even Indian stock
market made hay while the sun shone on its horizon. Speculation
was rife in many corporate headquarters that, this over
exuberance and huge flow of money does not justify stock indices
of several countries. There were signals of herd mentality and
greed looming all over. Those signals finally came to life in
early 2008. It started with IMF prediction of world growth
falling to 4.0 percent from 4.9 percent. 4.0 was still a
respectable prediction but that announcement was changed just
after two months.
USA is a dominant force in world economy and as per data it
represents 21 percent of the world economy. Changing economic
statistics pointed towards a possible USA recession and that
signified a global downtrend in economic cycle because of
domineering impact of American economy. Many countries,
particularly developing ones are heavily dependent on USA and a
hint of slowdown in America spelled doom for them. The average
spending of American consumers reduced significantly and that
resulted in reduced demand for imported items.
Oil is extremely important for any country and 2008 witnessed
highest ever increase in oil prices. Due to high oil prices,
food prices also increased significantly. Crude oil prices rose
to $ 147 per barrel from $ 80 per barrel in a span of 6-7
months. That fuelled global inflation to a dangerous mark. 2008
also witnessed unprecedented credit crisis across the world
which resulted in closure of several established investment
banks.
Things started getting worst with U.S. sub prime-mortgage
market. This induced a tremendous housing market correction of
huge implications for pushing up credit costs worldwide. Because
of this correction, a good number of Americans, European and
Asian banks had to write down billions of dollars in holdings.
In fact, few banks filed for bankruptcy and that includes name
like Lehman Brothers. It was biggest ever bankruptcy case in US
history. More than 81 companies have filed for bankruptcy in
USA.
Unemployment rate also increased substantially in USA and many
people had to leave job. Another 1, 57, 000 jobs were lost in
September 2008. Many developed and developing countries are
struggling with low GDP and decreasing economic growth. Credit
crunch has spread all over the world. However, world over,
policy makers are putting in extra liquidity and several other
measures to stem the fall but nevertheless, we seem to be going
through economic recession.
.. Author - Mritunjai kumar,
expert economist and prolific writer..
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