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Economics

Global Financial Crisis 2008-09
by

Jatann Khona

on 26 April 2015

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Transcript of Economics

Global Financial Crisis 2008-09
&
Lessons Learnt

Brought to you by:
Mithun Sagar
Ankit Dani
Jatann Khona
Rohan Shah
Ankita Medhi
Introduction
One of the worst financial crisis

Led to the failure of the entire financial system and the other sectors in the USA

Subsequently spread to other countries

The shocks of the crisis are still felt across the globe inclusive of the on going Euro Zone crisis
Causes of the Crisis
Easy credit conditions
Growth of the housing bubble
Complex Financial Instruments and Incorrect pricing of Risks associated
Commodities boom
Lack of Government regulations in the financial sector
Miscalculation of Risk Bearing Capacity
Impact of Crisis on USA
Real estate
Financial sector worst hit
Exports crashed
Incorrect Risk assessment questioned credibility of rating agencies
Foreign investment affected
Drastic change in consumption pattern Hence “Some loans should never be made.”
Impact of Crisis on Japan
Cross shareholdings
Exports plunged
Japan banks are opaque to Bank of Japan
Impact of Crisis on Europe

Currency crisis developed due to investors putting their money in Swiss francs,Yen,Dollars.
Output in the 15 euro zone countries shrank On monetary policy, the central banks of Europe coordinated their interest-rate reductions.
European Central Bank, the steward of monetary policy for the euro zone, engineered simultaneous rate cuts with the Bank of England and Sweden’s Riksbank.
For European and U.K. banks, cross border lending to emerging markets, primarily Central and Eastern Europe accounts for between 21% and 24% of total lending.
GDP contracted across four major players namely Germany,France,Italy,SpainThough German economy had not experienced the boom bust scenario in housing market and was comparatively free of debt but still spending of household income in Germany fell steadily which showed clear signs that exports which drive the German economy were struggling.German engineering sector worst hit.Property market collapse had severe impact on Spanish GDP
Impact of Crisis on
Mexico
Mexico despite its relatively strong fiscal position and solid macroeconomic fundamentals, has begun to suffer first from direct links to the U.S. financial fallout, and second, from its vulnerability to a protracted U.S. recession.
Impact of Crisis on Argentina
Reductions in export demand
Capital flight and the recall of foreign and domestic export projects
Fall in businesses and households propensity to borrow and consume, as a result of uncertainty and deteriorating expectations
Impact of Crisis in UK
Liquidity in Banking system took a deep hit
High unemployment rates
Fall in GDP
Double dip recession
Macro economic policy
Financial Systems
Self Insurance
Role of IMF
Securitisation and Basal III Norms
Lessons Learnt
Impact of Crisis on South Africa
Portfolios inflows turned into outflows

Export & import values plummeted

Stock market weakened
Impact of Crisis on China
Rising unemployment due to export oriented manufacturing sector
Stock index fell over 50% (from May to October 2008)
Real estate prices dropped
15% export firms reduced output/ shutdown
Impact of Crisis on India
GDP in 2008: from 7.5% to 6%
Export oriented manufacturing sector hit
SSIs suffered due to external demand shock
Lead to direct bearing on domestic consumption demand
Impact of Crisis on Russia
Sharpest drop in growth among BRICS
Markets froze due to rise in risk aversion
Sovereign credit default swaps also jumped
Collapse of oil prices
Hedging of foreign currency exposures lead to pressure on rouble
Banking outflows and bank failures
Impact of Crisis on Brazil
Stock market fluctuations as F.I. dwindled
Interrupted accelerated growth (Fall in GDP to 0.6%)
Reduction of 24.3% in 2009 as compared to previous year
Thank you!
Full transcript