financial crisis- kgp
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Thefinancial crisis of 20072009 has beencalled the most serious financial crisissince theGreat Depression by leadingeconomists,withitsglobaleffects characterized by the failure of keybusinesses,declinesin consumerwealthestimatedin the trillions of U.S. dollars,substantial financial commitmentsincurred bygovernments,andasignificant declineineconomic activity. Many causeshave beenproposed,with varyingweight assigned byexperts. Both market-basedandregulatorysolutionshave beenimplemented orare underconsideration, whilesignificant risksremain fortheworldeconomy.The U.S. faceagreatrecessionduring 1957-58.
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What is RECESSION ?
Many individual countries are now in
recession, and the world economy is flagging badly.Leading economic organisations and businessleaders are talking about "a global recession".
RECESSIONS are theresult ofreductionin thedemand ofproductsin theglobal market. Recessioncanalso beassociatedwith fallingprices knownas
deflationdue to lack ofdemand ofproducts. Again,itcould be theresult ofinflation ora combination ofincreasingpricesandstagnant economic growth.
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Even fornationaleconomies theword
"recession" has more than one meaning.
It canapply to two consecutive quarters ofdeclining output (GDP),adeclineinannualGDP, orin the case of the US,it is the
judgement ofa committee ofeconomistsat
the National Bureau of Economic Research.
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The global financial crisis, brewing for a
while, really started to show its effects in the
middle of 2007 and into 2008. Around theworld stock markets have fallen, large
financial institutions have collapsed or been
bought out, and governments i n even the
wealthiest nations have had to come up withrescue packages to bail out their financial
systems.
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Theglobal financial crisis, brewing forawhile,
really started to showitseffectsin the middle of
2007 andinto 2008.
A global financial meltdownwillaffect the
livelihoods ofalmost everyoneinanincreasinglyinter-connectedworld. large financialinstitutions
have collapsed or been bought out. TheworldStock marketsactivities falldown to thedecline
stage..it may cause to unemployment, businessexpansionstops,income,expenditureandprices
are fall.
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Many factorsdirectly andindirectly caused theongoingFinancial crisis of 2007-2009,also knownastheSubprime mortgage crisis,withexpertsplacingdifferent weights uponparticular causes. The
complexity andinterdependence of many of thecauses,aswellas competingpolitical,economic andorganizationalinterests,haveresultedina varietyofnarrativesdescribing the crisis. One category of
causes createda vulnerable or fragile financialsystem,including complex financialsecurities,adependence onshort-term funding markets,andinternational tradeimbalances. Other causesincreased thestress on this fragilesystem,suchashigh corporateand consumerdebt levels.
Causes of the FinancialCrisis of 2007-2009
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Some causesrelate to particular markets,suchasthestock market orhousing market,while others
relate to theglobaleconomy more broadly. These mortgagesenticed borrowerswitha below
market interest rate forsomepredeterminedperiod, followed by market interest rates for the
remainder of the mortgage's term. Borrowerswhocouldnot make thehigherpayments once theinitialgraceperiodendedwould try to refinancetheir mortgages.
Refinancing became moredifficult, oncehouseprices began to declinein many parts of the USA.Borrowerswho found themselves unable toescapehigher monthly payments by refinancingbegan to default
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Impact of global recession
Impact ofglobalrecession on India
Americais the most effected country due to
globalrecession,which comesasa badnewsfor India. Indiahave most outsourcingdeals
from the US. Even ourexports to US have
increased over the years. Exports for January
declined by 22 per cent..
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GRAPHICAL REPRESENTATION OF RECESSION AFFECTED ECONOMY
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Effects on the global economy
Unemployment increases . Banks curtail credit.
Sharp contractionin bank credit.
Decrease theeconomy by bringingdown theincome,expenditure,prices,andprofit.
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Measures can adopt to tackle
the recession
The following measures can beadopted to tackle the
recession:
Tax cutsaregenerally the first stepanygovernment takesduringslump.
Government shouldhikeitsspending to createmore jobsand boost the manufacturingsectorsin
the country.
Government should try to increase theexport
against theinitialexport.
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Possibility of a global recession in 2009
According to the IMFs World Economic Outlook, October 8, 2008, theworldeconomy is enteringa majordownturnin the face of the most dangerousshock to rich-country financial marketssince the 1930s. IMF expectsglobalgrowth (measured usingpurchasing-powerparity), to comedown to 3% in 2009,on the verge ofwhat it considers to beaglobalrecession.
The World Bank saidin December 2008 that theglobaleconomy willenterarecession for the first timesince 1982. International tradewilldecline from 2007levels. The bank saidit expectsglobal GDP growth to decline to 0.9% in 2009from 2.5% in 2008. Any globalgrowthrate under 2.0% is tantamount to arecessionaccording to economist David H. Wang. Global tradeisexpected todecline 2.1% in 2009, the first declinesince 1982, onreducedglobaldemandandexport credits.
Germany, Europe'slargest economy, contracted by 0.5 percent in the thirdquarter of 2008,puttingit inrecession for the first timein five years.
Japan's GDP contractedat anannualrate of 0.4 percent from July to September2008, marking thesecond consecutive quarter ofnegativegrowth. Japan'spreviousrecessionwasin 2001,after thedot-com bubble burst in the UnitedStates.[10]
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CONCLUSION
Globalrecession affected the Indianeconomy it
was mostly affected the I.T. sector.
Most of I.T. professionallost their jobs. It partly affected the Indiastock exchanges.
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BIBILIOGRAPHY
THE TIMES..
WIKI PEDIA
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THANK YOU.!!!!
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