On my previous article I have discussed on various facts of recession. Lets have look on the statistical figures to estimate the quantum of current economic circum. Although few years back few economist dared to predict a possible recession addressing US housing bust and consequent effect on the rest of the world, no one had paid much attention. Today everyone is taken muse concerning the deep dire of the financial disaster & worried upon whether the worst is yet to come.
The fear of recession in US had appeared in early of 2008 & finally floated the floor in April. In January08, IMF predicted that global growth will fall down 4.9% to 4% & two months later they revised the figure announcing the forecast may fall down further. Consequently, as the US economy holds 21% of the world economy, it was obvious that if recession comes it would have world wide impact.
As I have stated in my previous article, correction in US housing market & sub prime lendings ware the major contributors of US recession, the following figures will be relevant to justify my words. In march08 it was estimated that 8.8 millions home owners or approximately 10.8% of the total homeowners had been vacated their place as their home turned worthless than their mortgages. Accordingly, mortgage backed securities of multinational banks gradually lost their values. Hence global banks, investment corporations & brokeing houses have had to book a loss of an estimated $512 billion inspite of earnest effort of the US federal reserve to inject fuel in to the economy. The crisis was led by Bear Sterns, one of the world's largest investment bank was taken over by JP Morgan with some financial assistance from US federal bank & subsiquently Lehman Brothers, the fourth largest investment bank in US had filed for bankruptcy & accordingly followed up by Citi Group & Merrill Lynch on writing off huge amount of losses around $55.1 billion & $52.2 respectively. Further Merrill Lynch was absorbed by Bank of America. Freddie Mac & Fennie Mae ware the two major mortgage cmpanies of US are subsiquently natinalised to prevent them from going under. Henceforth, as the banks & other financial institutions are the backbone of all other industries the rust of recession rattled out over the rest.
The fear of recession in US had appeared in early of 2008 & finally floated the floor in April. In January08, IMF predicted that global growth will fall down 4.9% to 4% & two months later they revised the figure announcing the forecast may fall down further. Consequently, as the US economy holds 21% of the world economy, it was obvious that if recession comes it would have world wide impact.
As I have stated in my previous article, correction in US housing market & sub prime lendings ware the major contributors of US recession, the following figures will be relevant to justify my words. In march08 it was estimated that 8.8 millions home owners or approximately 10.8% of the total homeowners had been vacated their place as their home turned worthless than their mortgages. Accordingly, mortgage backed securities of multinational banks gradually lost their values. Hence global banks, investment corporations & brokeing houses have had to book a loss of an estimated $512 billion inspite of earnest effort of the US federal reserve to inject fuel in to the economy. The crisis was led by Bear Sterns, one of the world's largest investment bank was taken over by JP Morgan with some financial assistance from US federal bank & subsiquently Lehman Brothers, the fourth largest investment bank in US had filed for bankruptcy & accordingly followed up by Citi Group & Merrill Lynch on writing off huge amount of losses around $55.1 billion & $52.2 respectively. Further Merrill Lynch was absorbed by Bank of America. Freddie Mac & Fennie Mae ware the two major mortgage cmpanies of US are subsiquently natinalised to prevent them from going under. Henceforth, as the banks & other financial institutions are the backbone of all other industries the rust of recession rattled out over the rest.
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