The Great Recession and the current situation

The Great recession is a global economic decline that began in December 2007 and took a particularly sharp downward turn in September 2008.

The outbreak phase of the crisis, manifested as a liquidity crisis.

The bursting of the U.S. housing bubble caused the values of securities tied to U.S. real estate pricing  to plummet, damaging financial institutions globally.

The global recession has affected the entire world economy , with greater difference to some countries than others.

The proximate cause of the crisis in 2008 was the failure or risk of failure at major financial institutions globally. The European housing bubbles began to deflate during the 2007-2009 period, depending on the country.

The origin of these housing bubbles involves two major factors:

-Low interest rates in the U.S. and Europe following the 2000-2001 U.S. recession;

– Significant growth in savings available from developing nations due to ongoing trade imbalances.

These factors caused a large increase in demand for high-yield investments. Large investment banks  fueling housing bubbles in the U.S. and Europe

The crisis in Europe generally progressed from banking system crises to sovereign debt crises, as many countries elected to bailout their banking systems using taxpayer money.

Several countries received bailout packages from the European Commission, and European Central Bank, which also implemented a series of emergency measures, but five years after this great recession the world economy is still struggling to recover.

During 2012 a growing number of developed economies have fallen into a double-dip recession:

– firms and households is holding back normal credit flows and consumer and

investment demand;

-unemployment remains high;

-fiscal austerity responses to deal with rising public debts are further deterring economic growth, which in turn is making a return to debt sustainability all the more difficult;

-bank exposure to sovereign debts and the weak economy are perpetuating financial sector fragility, which in turn is spurring continued deleveraging.

This are the causes and the current situations.

 

 

 

 

Authors: Antonella Cassarà, Tedi Marković, Isabel Tina Braun, Ivana Mišura 

Sources:

http://www.un.org/en/development/desa/policy/wesp/wesp_archive/2012wespupdate.pdf

http://en.wikipedia.org/wiki/Global_economic_crisis

 

4 thoughts on “The Great Recession and the current situation

  1. I think the current problem and the cause of the crisis come also from Speculation. As everybody knows, Speculators play the primary role on the financial market. There are any beficits from speculation but the disadvantages are more important. Actually speculation creates economic bubbles but also increases the volatility and creates a winner’s curse, just to see which speculators can make it worse…

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  2. The other problem is that the economic system of the USA is still a growing bubble.They are trying to heal the effects of the crises but they don t want to make efficient changes.The American habitants are used to a life on high standards and they don t want to get out of it so the government can hardly do anything against these problems,in case of regulations the people will protest.
    Yes and also the speculation can make the crisis deeper.

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  3. The term “Great Recession” was originally coined by Joseph Pierri, an economist at Washington State University. The conditions leading up to the crisis, characterized by an exorbitant rise in asset prices and associated boom in economic demand, are considered a result of the extended period of easily available credit and inadequate regulation and oversight
    The global recession has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices. In December 2008, the National Bureau of Economic Research(NBER) declared that the United States had been in recession since December 2007. Several economists predicted that recovery might not appear until 2011 and that the recession would be the worst since the Great Depression of the 1930s.
    European Focus on Labour Market

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  4. The global recession has obviously affected the entire world economy but with greater damage to some countries than others. Concentrating particularly on Europe the economic side effects of the European sovereign debt crisis, high levels of household debt, high unemployment, trade imbalances, austerity and limited prospects for global growth in 2013 and 2014 continue to provide obstacles to full recovery from the Great Recession. As I have just mentioned this recession may prove to have some long-term consequences but that does not make them insolvable however. I think the best option is for investors to stay as informed as possible, stay diversified and be opportunistic when new ideas show up.

    Reply

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