Late 2000s Recession

In 2008, an economic recession was suggested by several important indicators of economic downturn.[1] These included high oil prices, which led to drastic high food prices due to the extremely loose monetary policies and low interest rates of the U.S. Federal Reserve, as well as using food crop products such as corn ethanol and biodiesel as an alternative to petroleum) and global inflation; a substantial credit crisis leading to the drastic bankruptcy of large and well established investment banks as well as commercial banks in various, diverse nations around the world; increased unemployment; and signs of contemporaneous economic downturns in major economies of the world, a global recession.

In December 2008, the NBER declared that the United States had been in recession since December 2007
High prices
Further information: 2000s energy crisis and 2007–2008 world food price crisis
See also: 2008 Central Asia energy crisis and 2008 Bulgarian energy crisis

Medium term crude oil prices, (not adjusted for inflation)The decade of the 2000s saw a commodities boom, in which the prices of primary commodities rose again after the late-twentieth century commodities recession of 1980-2000. But in 2008, the prices of many commodities, notably oil and food, got so high to cause genuine economic damage, threatening stagflation and a reversal of globalization.[3]

In January 2008, oil prices surpassed $100 a barrel for the first time, the first of many price milestones to be passed in the course of the year.[4] In July, oil peaked at $147.30 [5] a barrel and a gallon of gasoline was more than $4 across most of the U.S.A. These high prices caused a dramatic drop in demand and prices fell below $35 a barrel at the end of 2008.[5]

The food and fuel crises were both discussed at the 34th G8 summit in July.[6]

Sulfuric acid (an important chemical commodity used in processes such as steel processing, copper production and bioethanol production) increased in price 3.5-fold in less than 1 year whilst producers of sodium hydroxide have declared force majeur due to flooding, precipitating similarly steep price increases.[7][8]

In the second half of 2008, the prices of most commodities fell dramatically on expectations of diminished demand in a world recession.[9]


[edit] Trade
In middle -October 2008, the Baltic Dry Index, a measure of shipping volume, fell by 50% in one week, as the credit crunch made it difficult for exporters to obtain letters of credit.[10]


[edit] Inflation
In February 2008, Reuters reported that global inflation was at historic levels, and that domestic inflation was at 10-20 year highs for many nations.[11] "Excess money supply around the globe, monetary easing by the Fed to tame financial crisis, growth surge supported by easy monetary policy in Asia, speculation in commodities, agricultural failure, rising cost of imports from China and rising demand of food and commodities in the fast growing emerging markets," have been named as possible reasons for the inflation.[12]

In mid-2008, IMF data indicated that inflation was highest in the oil-exporting countries, largely due to the unsterilized growth of foreign exchange reserves, the term “unsterilized” referring to a lack of monetary policy operations that could offset such a foreign exchange intervention in order to maintain a country´s monetary policy target. However, inflation was also growing in countries classified by the IMF as "non-oil-exporting LDCs" (Least Developed Countries) and "Developing Asia", on account of the rise in oil and food prices.[13]

Inflation was also increasing in the developed countries,[14][15] but remained low compared to the developing world.


[edit] Unemployment
The International Labour Organization predicted that at least 20 million jobs will have been lost by the end of 2009 due to the crisis - mostly in "construction, real estate, financial services, and the auto sector" - bringing world unemployment above 200 million for the first time.[16]


[edit] Return of volatility
For a time, major economies of the 21st century were believed to have begun a period of decreased volatility, which was sometimes dubbed The Great Moderation, because many economic variables appeared to have achieved relative stability. The return of commodity, stock market, and currency value volatility are regarded as indications that the concepts behind the Great Moderation were guided by false beliefs.[17]


[edit] Economic governance
Further information: 34th G8 summit and 2008 G-20 Washington summit
In the final quarter of 2008, the financial crisis saw the G-20 group of major economies assume a new significance as a locus of economic and financial crisis management.

Economic stimulus plans were announced or under discussion in China, the United States, and the European Union.[18] Bailouts of failing or threatened businesses were carried out or discussed in the USA, the EU, and India.[19]


[edit] North America

[edit] U.S.
See also: Subprime mortgage crisis

Number of U.S. household properties subject to foreclosure actions by quarterThe United States entered 2008 during a housing market correction, a subprime mortgage crisis and a declining dollar value.[20] In February, 63,000 jobs were lost, a 5-year record.[21] In September, 159,000 jobs were lost, bringing the monthly average to 84,000 per month from January to September of 2008.[22]

Federal reserve rates changes[23]
Date Discount rate Discount rate Discount rate Fed funds Fed funds rate
Primary Secondary
rate change new interest rate new interest rate rate change new interest rate
Apr 30, 2008 -.25% 2.25% 2.75% -.25% 2.00%
Mar 18, 2008 -.75% 2.50% 3.00% -.75% 2.25%
Mar 16, 2008 -.25% 3.25% 3.75%
Jan 30, 2008 -.50% 3.50% 4.00% -.50% 3.00%
Jan 22, 2008 -.75% 4.00% 4.50% -.75% 3.50%


[edit] Early suggestions of recession
In the early months of 2008, many observers believed that a U.S. recession had begun.[24][25][26] As a direct result of the collapse of Bear Stearns, Global Insight increased the probability of a worse-than-expected recession to 40% (from 25% before the collapse). In addition, financial market turbulence signaled that the crisis will not be mild and brief.

Alan Greenspan, ex-Chairman of the Federal Reserve, stated in March 2008 that the 2008 financial crisis in the United States is likely to be judged as the harshest since the end of World War II.[27] A chief economist at Standard & Poor's, said in March 2008 he has a worst-case-scenario in which the country could endure a double-dip recession in which the economy would briefly recover in the summer 2008.[citation needed] Under this scenario, the economy's total output, as measured by the gross domestic product, would drop by 2.2 percentage points, making it the third worst recession in the post World War II period.[citation needed]

The former head of the National Bureau of Economic Research said in March 2008 he believed the country was then in a recession, and it could be a severe one.[citation needed] A number of private economists generally predicted a mild recession ending in the summer of 2008 when the economic stimulus checks going to 130 million households started being spent. A chief economist at Moody's predicted in March 2008 that policymakers would act in a concerted and aggressive way to stabilize the financial markets, and that then the economy would suffer but not enter a prolonged and severe recession.[citation needed] It takes many months before the National Bureau of Economic Research, the unofficial arbiter of when recessions begin and end, makes its own ruling.[28]

According to numbers published by Bureau of Economic Analysis in May 2008, the GDP growth of the previous two quarters was positive. As one common definition of a recession is negative economic growth for at least two consecutive fiscal quarters, some analysts suggest this indicates that the U.S. economy was not in a recession at the time.[29] However this estimate has been disputed by some analysts who argue that if inflation is taken into account, the GDP growth was negative for the past two quarters, making it a technical recession.[30] In a May 9, 2008, report, the chief North American economist for investment bank Merrill Lynch wrote that despite the GDP growth reported for the first quarter of 2008, "it is still reasonable to believe that the recession started some time between September and January", on the grounds that the National Bureau of Economic Research's four recession indicators all peaked during that period.[31]

New York's budget director concluded the state of New York was officially in a recession. Governor David Paterson called an emergency economic session of the state legislature for August 19 to push a budget cut of $600 million on top of a hiring freeze and a 7 percent reduction in spending at state agencies already implemented by the Governor.[32] An August 1 report, issued by economists with Wachovia, said Florida was officially in a recession.[33]

White House budget director Jim Nussle said the U.S. avoided a recession following revised GDP numbers from the Commerce Department showing a 0.2 percent contraction in the fourth quarter of 2007 down from a 0.6 percent increase and a downward revision to 0.9 percent from 1 percent in the first quarter of 2008. The GDP for the second quarter was placed at 1.9 percent below an expected 2 percent.[34] Martin Feldstein, who headed the National Bureau of Economic Research until June and serves on the group's recession-dating panel, said he believed the U.S. was in a very long recession and that there was nothing the Federal Reserve could do to change it.[35]

In a CNBC interview at the end of July 2008 Alan Greenspan said he believed the U.S. was not yet in a recession, but that it could enter one due to a global economic slowdown.[36]

A study released by Moody's found two-thirds of the 381 largest metropolitan areas in the United States were in a recession. The study also said 28 states were in recession with 16 at risk. The findings were based on unemployment figures and industrial production data.[37]

In March 2008, Warren Buffett stated in a CNBC interview that by a "common sense definition", the U.S. economy is already in a recession. Warren Buffett has also stated that the definition of recession is flawed and that it should be 3 quarters of GDP growth that is less than population growth. However, the U.S. only experienced two consecutive quarters of GDP growth less than population growth. [38][39]


[edit] Recession declared by economists
On December 1, 2008, the National Bureau of Economic Research (NBER) declared that the United States entered a recession in December 2007, citing employment and production figures as well as the third quarter decline in GDP.[40][41] The Dow Jones Industrial Average lost 679 points that same day.[42]


[edit] Rise in unemployment
On September 5, 2008, the United States Department of Labor issued a report that its unemployment rate rose to 6.1%, the highest in five years.[43][44] The news report cited the Department of Labor reports and interviewed Jared Bernstein, an economist:

“ The unemployment rate jumped to 6.1 percent in August, its highest level in five years, as the erosion of the job market accelerated over the summer. Employers cut 84,000 jobs last month, more than economists had expected, and the Labor Department said that more jobs were lost in June and July than previously thought. So far, 605,000 jobs have disappeared since January. The unemployment rate, which rose from 5.7 percent in July, is now at its highest level since September 2003. Jared Bernstein, economist at the Economics Policy Institute in Washington, said eight months of consecutive job losses had historically signaled that the economy was in a recession. "If anyone is still scratching their head over that one, they can stop," Mr. Bernstein said. Stocks fell after the release of the report, with the Dow Jones industrials down about 100 points after about 40 minutes of trading. ”

CNN also reported the news,[45] quoted another economist, and placed the news in context:

“ Job losses are still mild by recession standards, but the losses are relentless and they are accumulating. If job growth had paced with population growth during this year, it would have meant 1.3 million new jobs would have been created. Instead 605,000 were lost. That means about 2 million fewer people are working than if the economy were on a steady path. And that's a big number." But while economists generally study the payroll numbers most closely, it's the unemployment rate that registers with most Americans when they think about the labor market.[45]
-- Bob Brusca of FAO Economics ”


[edit] Liquidity crisis
Main article: Financial crisis of 2007–2008
From late 2007 through September 2008, before the official October 3rd bailout, there was a series of smaller bank rescues that occurred which totalled almost $800 billion.

In the summer of 2007, Countrywide Financial drew down a $11 billion line of credit and then secured an additional $12 billion bailout in September. This may be considered the start of the crisis.

In mid-December 2007, Washington Mutual bank cut more than 3,000 jobs and closed its subprime mortgage business.

In mid-March 2008, Bear Stearns was bailed out by a gift of $29 billion non-recourse treasury bill debt assets.

In early July 2008, depositors at the Los Angeles offices of IndyMac Bank frantically lined up in the street to withdraw their money. On July 11, IndyMac, a spinoff of Countrywide, was seized by federal regulators - and called for a $32 billion bailout. The mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. That day the financial markets plunged as investors tried to gauge whether the government would attempt to save mortgage lenders Fannie Mae and Freddie Mac. The two were placed into conservatorship on September 7, 2008.

During the weekend of September 13–14, 2008, Lehman Brothers declared bankruptcy after failing to find a buyer, Bank of America agreed to purchase Merrill Lynch, the insurance company AIG sought a bridge loan from the Federal Reserve, and a consortium of 10 banks created an emergency fund of at least $70 billion to deal with the effects of Lehman's closure,[46] similar to the consortium put forth by J.P. Morgan during the stock market panic of 1907 and the crash of 1929.[citation needed] Stocks on "Wall Street" tumbled on September 15.[47]

On September 16 2008, news emerged that the Federal Reserve may give AIG an $85 billion rescue package; on September 17, 2008, this was confirmed. The terms of the rescue package were that the Federal Reserve would receive an 80% public stake in the firm. The biggest bank failure in history occurred on September 25 when JP Morgan Chase agreed to purchase the banking assets of Washington Mutual.[48]

The year 2008, as of September 17, has seen 81 public corporations file for bankruptcy in the United States, already higher than the 78 in 2007. Lehman Brothers being the largest bankruptcy in U.S. history also makes 2008 a record year in terms of assets with Lehman's $691 billion in assets all past annual totals.[49] The year also saw the ninth biggest bankruptcy with the failure of IndyMac Bank.[50]

The Wall Street Journal states that venture capital funding has slowed down which in the past led to unemployment and slowed new job creation. [51]


[edit] Bailout of U.S. financial system
Main article: Emergency Economic Stabilization Act of 2008
On September 17, 2008, Federal Reserve chairman Ben Bernanke advised Secretary of the Treasury Hank Paulson that a large amount of public money would be needed to stabilize the financial system.[52] Short selling on 799 financial stocks was banned on September 19. Companies were also forced to disclose large short positions.[53] The Secretary of the Treasury also indicated that money market funds will create an insurance pool to cover themselves against losses and that the government will buy mortgage-backed securities from banks and investment houses.[53] Initial estimates of the cost of the Treasury bailout proposed by the Bush Administration's draft legislation (as of September 19, 2008) were in the range of $700 billion[54] to $1 trillion U.S. dollars.[55] President George W. Bush asked Congress on September 20, 2008 for the authority to spend as much as $700 billion to purchase troubled mortgage assets and contain the financial crisis.[56][57] The crisis continued when the United States House of Representatives rejected the bill and the Dow Jones took a 777 point plunge.[58] A revised version of the bill was later passed by Congress, but the stock market continued to fall nevertheless.[59] [60]

As of mid-November 2008, it was estimated that the new loans, purchases, and liabilities of the Federal Reserve, the US Treasury, and FDIC, brought on by the financial crisis, totalled over $5 trillion: $1 trillion in loans by the Fed to broker-dealers through the emergency discount window, $1.8 trillion in loans by the Fed through the Term Auction Facility, $700 billion to be raised by the Treasury for the Troubled Assets Relief Program, $200 billion insurance for the GSEs by the Treasury, and $1.5 trillion insurance for unsecured bank debt by FDIC.[61] (Some portion of the Fed's emergency loans would already have been repaid.)


[edit] Canada
In May 2008 Canada's GDP was reported to have decreased 0.1 percent due to decline in mining, oil and gas industry by 1.2 percent and fall in automobile production by 3.6 percent. Construction output in Canada declined 0.4 percent, utilities 1.3 percent, and farms produced 0.9 percent less.[62] In the first quarter of 2008 Canada's economy shrank by 0.3 percent and the Bank of Canada said second quarter growth would likely be less than 0.8 percent projected.[63] Canada later revised its first quarter GDP showing a contraction of 0.8% and gave second quarter GDP showing an increase of only 0.3%.[64] In early December 2008, the Bank of Canada, in announcing that it was lowering its central bank interest rate to the lowest level since 1958, also declared that Canada's economy was entering in recession.[65] Unfolding of this prospect will take until late Spring 2009, as Q3 GDP was announced as a 0.3% gain on December 1st by Statistics Canada.


[edit] Mexico
Mexico is well managed by the incumbent government with strict fiscal discipline. However, the effects of the financial crisis originating from the United States has already impacted on Mexico's export sector. Reduced demand and high unemployment in almost a decade and the depreciation of the Mexico peso has caused analyst to revised growth estimates officially from 1.8 percent to somewhere closer to 0. [66][67]


[edit] Europe
Denmark showed a contraction of 0.6 percent in the first quarter of 2008 following a contraction of 0.2 percent in the fourth quarter of 2007.[68] Estonia similarly saw an economic contraction of 0.9 percent in the second quarter, following a 0.5 percent contraction in the first quarter.[69] Latvia's gross domestic product fell 0.2 percent in the second quarter following a fall of 0.3 percent in the first quarter.[70] Sweden's economy showed zero growth in the second quarter of 2008.[71] The entire economy of the European Union declined by 0.1 percent in the second quarter.[72] A European Commission forecast predicted Germany, Spain and the UK would all enter a recession by the end of the year while France and Italy would have flat growth in the third quarter following second quarter contractions.[73]

Chairwoman of the Association of Estonian Food Industry, Sirje Potisepp, warned the Estonian food industry would probably face bankruptcies citing two major beverage companies in Estonia filing for bankruptcy.[74] Ratings agency Fitch warned Ukraine could be headed for a currency crisis as economic fundamentals deteriorate and the country enters another period of political uncertainty. Fitch said the current account deficit was likely to widen further as prices of gas imports rise and prices of its steel exports fall and said Ukraine was likely to need to borrow more at a time when global debt markets have ground to a virtual standstill. Ukraine's central bank chief, Petro Poroshenko, said he saw no need to intervene to protect the currency.[75] Only a few countries retained their high GDP predictions for the year 2008, and can be mentioned Romania and Slovakia. Despite high economic growth for this year (8.7%), Romania will be touched by the crisis, analysts forecasting only 4.7 growth for 2009.


[edit] Iceland
Further information: 2008 Icelandic financial crisis
The Icelandic króna has declined 40% against the euro during 2008 and has experienced inflation of 14%.[76] Iceland's interest rates have been raised to 15.5% to deal with the high inflation and the króna's decline is reportedly only beaten by that of the Zimbabwean dollar.[77] This depreciation in currency value has put pressure on banks in Iceland, which are largely dependent on foreign debt. On September 29, 2008 Iceland's Glitnir was effectively nationalized after the Icelandic government acquired 75% of the bank's stock. According to the government the bank "would have ceased to exist" within a few weeks if there had not been intervention.[78]

Iceland's Prime Minister Geir Haarde in a television address on October 6, 2008 said credit lines to Icelandic banks had been cut off and that "the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy" and that the government was looking to other countries for sources of liquidity.[76] Iceland's parliament responded to the crisis by approving a bill giving the Government wideranging powers over the banks, including the ability to seize their assets, force them to merge or compel them to sell off their overseas subsidiaries.[79] The parliament went on to seize control and nationalize Iceland's second largest bank, Landsbanki, on October 8, 2008.[80] The Parliament also extended a £400m loan to the nation's largest bank, Kaupthing, in hopes that it would strengthen the institution's balance sheet.[81]

On 8th October UK Prime Minister Gordon Brown announced that the UK government would launch legal action against Iceland, whose government announced that they had no intention of compensating any of the estimated 300,000 UK savers after the nationalization of Landsbanki and its online brand, Icesave.[82] Chancellor of the Exchequer Alistair Darling announced that the UK government would foot the entire bill, estimated at £4bn,[83][84] and that he was taking steps to freeze the assets of Landsbanki.[85] The following day, Darling used the Anti-Terrorism, Crime and Security Act 2001 as the basis for seizing the assets of Landsbanki Islands hf, an Iceland-based bank.[86] Icelanders launched an on-line petition drive to protest this action, which as seen as comparing Icelandic banks with Al-Qaida.[87]

Iceland's GDP is expected by economists to shrink at least 10 percent as a result of the crisis, putting Iceland by some measure in an economic depression.[88]


[edit] United Kingdom

People queuing on September 15, 2007 outside a Northern Rock bank branch in the United Kingdom, to withdraw money from their accounts.The economy of the United Kingdom has also been hit by rising oil prices and the credit crisis. Sir Win Bischoff, chairman of Citigroup, said he believes that house prices in Britain will keep falling for another two years. The Ernst & Young Item club predicted growth of only 1.5 percent in 2008, slowing to 1 percent in 2009. They also predicted consumer spending would slow to only 0.2 percent, and forecast a two-year drop in investment. The Institute of Directors’ quarterly business opinion survey showed business optimism at its lowest level since the survey began in 1996.[89] Deputy Governor of the Bank of England, John Gieve said inflation would accelerate "well over" 4 percent while economic growth is "slowing fast." Bank of England Governor Mervyn King said there may be "an odd quarter or two of negative growth," following the first quarter of 2009. Gieve said he couldn't rule out the U.K. economy heading into a recession, adding the economy was "quite a long way" from the end of the slowdown.[90]

Nationwide, the UK's biggest building society, warned the UK could head into a recession after house prices in July fell 8.1 percent from the previous year. Housing prices declined by 1.7 percent in July, double the decline recorded in June. Standard & Poor's said on July 30, 2008 that 70,000 homeowners were in negative equity and it could rise to 1.7 million or about one in six homeowners in the UK based on an expected 17 percent decline into 2009. The Bank of England reported that mortgage approvals fell by a record of nearly 70 percent.[91] In Northern Ireland, house sales saw a fall of some 50 per cent according to a survey by the University of Ulster/Bank of Ireland and housing prices fell on average by 4 percent.[92] British manufacturing activity declined by the most in almost a decade in July, the third consecutive month of declines. The number of companies that went into administration in May–July was 938, an increase of 60 percent compared with the same period in 2007. The number of company liquidations in the second quarter rose to 3,689, a 16 percent increase and the highest quarterly figure in five years. House builders expect the number of houses built in 2008 in England and Wales to be the lowest since 1924. The declines are seen as an indication the United Kingdom has high chance of entering a recession.[93] Factory production in the UK dropped 0.5 percent in June when twelve out of 13 categories of factory production fell. The economic output of the UK was reported to have increased by just 0.2 percent in the second quarter, the joint-slowest pace since 2001.[94] The Office for National Statistics later gave a revised number saying growth in the British economy was at zero, the worst since the second quarter of 1992.[95] The current slowdown has ended 16 years of continuous economic growth, the longest period of economic expansion in Britain since the 19th century.[96] A report from the National Institute for Economic and Social Research said the economy contracted by 0.1 percent in the period from May to July and 0.2 percent from June to August.[97]

A voter backlash due to the personal financial effects of the global credit crunch was widely attributed by politicians of the United Kingdom Labour Party, which had been in power since 1997, as the reason their political fortunes took a dramatic downturn through May 2008, with a succession of defeats in by-elections and the London Mayoral election, and the worst opinion poll result in their history.[citation needed] Political opponents countered this apparent excuse by pointing to the fact that the incumbent Prime Minister Gordon Brown, who had taken office in June 2007 just before the crisis broke, had been the country's 'Iron Chancellor', and had allegedly not ensured the country had sufficient monetary reserves to be able to lower taxes and ease the burden on voters, despite overseeing one of the longest sustained periods of economic growth in the country's history. In August 2008 the party also faced calls to impose a windfall tax on the utility companies, who were reaping record profits due to the fuel crisis, perceived as in bad taste given rising food and fuel prices.

On 17 September 2008, news emerged that the banking and insurance group HBOS (Halifax Bank of Scotland) was in merger talks with Lloyds TSB about creating a UK retail banking giant worth £30bn. The move received the backing of the British government which stated that it will over-rule any claims from the competition authorities.

According to the Office for National Statistics unemployment claims in August 2008 increased by 32,500 to reach 904,900. The wider Labour Force Survey measure found joblessness rose by 81,000 to 1.72 million between May and July, the largest increase since 1999.[98]

In September 2008, British bank Bradford & Bingley's £20billion savings business was acquired by Spanish bank Grupo Santander. While its retail deposit business along with its branch network will be sold to Santander. The mortgage book, personal loan book, headquarters, treasury assets and its wholesale liabilities will be taken into public ownership.

By November 2008, unemployment had risen to over 1.8 million and is projected to surpass 2 million by Christmas and perhaps even as high as 3 million by 2010.

From 1 December 2008, the UK Government made the decision to cut VAT from 17.5% to 15% for 13 months in an attempt to encourage a big spend from UK shoppers before Christmas.

On 4 December 2008, the Bank Of England cut interest rates from 3% to 2%, which amounts to the lowest level since 1951.[99]


[edit] Russia
Please help improve this section by expanding it. Further information might be found on the talk page. (November 2008)

Further information: 2008 Russian financial crisis
The 2008 crisis in the Russian financial markets stemmed from the US sub-prime mortgage crisis and has been compounded by the plummeting price of oil, which has lost more than two thirds of its value since its record peak of USD 147 on 11 July 2008.[100] While according to the World Bank Russia’s strong short-term macroeconomic fundamentals make it better prepared than many emerging economies to deal with the crisis, its underlying structural weaknesses and high dependence on the price of a single commodity make its impact more pronounced than otherwise. Prudent fiscal management and substantial financial reserves have protected Russia from deeper consequences of this external shock. The government’s policy response so far — swift, comprehensive, and coordinated — has helped limit the impact. [101]

On December 13, The Minister of Economic Development Andrei Klepach said that the country had entered into recession, as they have recorded a drop in production for two consecutive quarters. He recognized that the GDP growth rate would be lower than the expected 6.8% at the end of 2008. He clarified that the industrial production would be around 1.9% this year, well below the government forecast 4.7%.[102]


[edit] Sweden
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Sweden has not been severely affected, and no banks or financial institutions have had real trouble. However, some effects have been visible, mostly based on distrust and similar psychological mechanisms. The stockmarket has declined heavily, because of influence from New York and other markets. Some banks, especially Swedbank had invested heavily in US housing bonds.

The banks did not trust each other well and the difference between the interbank interest rate and the state interest rate has gone up at least 1%. The housing loan interest rates have gone up even further. The global sales especially of cars has gone down, forcing the Swedish car industry to lay off staff and contractors. The increased fear of enduring recession and the increased financing costs have lowered company investments and private consumption.

Sweden entered recession after a two consecutive quarter of economic contraction. The Swedish GDP contracted by 0,1% during both the second and third quarters of 2008.[103] Sweden's economy sank into recession in the third quarter of 2008. In October retail sales dropped 0.6 percent in the month, and household consumption fell 0.2 percent in the third quarter.[104] The Riksbank offered 60 billion kronor ($7.71 billion) in loans to financial firms at an auction, after having opened credit facilities to maintain the liquidity in the banking sector.[105] At the beginning of December, the government launched a financial stability package to rev up the economy,[106] while the central bank, urged by the OECD,[107] cut down its interest rates to 2%[108]


[edit] Ukraine
Further information: Economy of Ukraine#Ukraine and the economic crisis of 2008
Ukraine was hit heavy by the economic crisis of 2008, analysts say the plights of Ukraine are slumping steel prices, local banking problems and the cutting of Russian gas supply in January 2009.[109][110] Key industries such as metallurgy and machine building are laying off workers, and real wages have started to fall for the first time in a decade. This makes it hard for Ukrainians to make payments on loans, many of which, especially mortgages, were issued in dollars. Since most people are paid in hryvnyas, they have to buy dollars with the weak hryvnya and are paying back much more on the loans than they had expected. The share of problem loans in bank portfolios grew to 10.3 percent by December 11 and is continuing to grow. Banks have all but stopped issuing loans, and clients have hurried to withdraw deposits. In October the National Bank of Ukraine introduced a moratorium on withdrawals ahead of schedule.[110]

Mid-December 2008 the International Monetary Fund (IMF) has lowered the forecast for Ukraine's GDP in 2009 from a 2.5% growth rate to a 5% decline,[111] the same day the Cabinet of Ministers worsened the GDP growth forecast to 0.4% from 6% for 2009.[112]

In November 2008, the IMF approved a stand-by loan program for Ukraine to the tune of $16.5 billion.[113]


[edit] Eurozone
In the eurozone as a whole, industrial production fell 1.9 percent in May, the sharpest one-month decline for the region since the exchange rate crisis in 1992. European car sales fell 7.8 percent in May compared with a year earlier.[114] Retail sales fell by 0.6 percent in June from the May level and by 3.1 percent from June in the previous year. Germany was the only country out of the four biggest economies in the eurozone to register an increase of activity in July though the increase was sharply down. Economic analysts from RBS and capital Economics say the decline raises the risk of the eurozone entering a recession in 2008.[115] In the second quarter, the eurozone's economy was reported to have declined by 0.2 percent.[116] The economy declined again in the third quarter putting the eurozone in a technical recession.


[edit] Ireland
Ireland in the first quarter of 2008 reported a contraction in GDP of 1.5 percent, its first economic contraction since it began reporting by quarter and first recorded contraction since 1983.[117] However, Ireland's Central Statistics Office reported growth in GNP of about 0.8 percent, Ireland's government considers GNP a better measure of the economy. Analysts have predicted Ireland's economy will contract further in the rest of the year.[118] A report from NCB Stockbrokers predicts gross national product will fall by 1 percent in 2008 and by 0.4 percent in 2009 due to a decline in multinationals hit by the global economic slowdown. An economist from NCB said non-residential investment would fall by 5 percent in 2008 and by 12 percent in 2009.[119] Ireland's GDP saw a contraction in the second quarter by 0.5 percent making Ireland the first member of the eurozone to enter a recession.[120]


[edit] Spain
Spain's Martinsa-Fadesa, a construction company, has declared bankruptcy as it failed to refinance a debt of €5.1 billion. The two banks with most exposure to Martinsa-Fadesa are reportedly Caja Madrid, at €900m, and Banco Popular Español, at €400m. Spain's finance minister Pedro Solbes has said it would not bail out the company. In the second quarter in Spain house prices reportedly fell 20 percent.[121] In Castilla-La Mancha some 69 percent of all houses built over the past three years are still unsold. Deutsche Bank said it expects a 35 percent fall in real house prices by 2011. Spain's premier, Jose Luis Zapatero, blamed the European Central Bank for making matters worse by raising interest rates. More than 98 percent of home loans in Spain are priced off floating rates linked to Euribor, which has risen 145 basis points since August. Housing accounts for over 10 percent of Spain's economy. The Bank of Spain is concerned about the health of smaller regional lenders with heavy exposure to the mortgage market.

Although Spain has avoided recession in the first half of 2008, unemployment in the country has risen by 425,000 over the past year, reaching 9.9 percent. Car sales in Spain fell 31 percent in May.[114] Spain's factory output slumped 5.5 percent in May. The country's business lobby Circulo de Empresarios warned of a "high probability" that Spain's economy would fall into recession in the second half of 2008 due to the housing collapse.[122] Spain had a 7.9 percent decline in retail sales in June compared to the previous year, the largest drop since Spain began registering the results and the seventh consecutive monthly decline. This included a 17.9 percent drop in retail sales of household goods. June food sales in Spain fell by 6.8 percent.[123] Morgan Stanley issued a major alert on the health of Spanish banks and the Spanish economy in a report, saying, "A momentous economic slowdown is now under way. We believe the deterioration in Spain is just in the beginning stages. The bulk of the pain will be suffered in 2009." Morgan Stanley also warned there was 40 percent chance of a 0.5 percent contraction of the Spanish economy in 2009, with a risk of an even more extreme 1.4 percent contraction in 2009.[124] According to Spanish automobile manufacturers' association ANFAC new car sales fell 27.5 percent in July from the same time in 2007, the third consecutive monthly drop of over 20 percent. Spain's government forecast the unemployment rate would rise to 10.4 percent in 2008 and to 12.5 percent in 2009. Spain's second largest bank BBVA predicted the unemployment rate could reach 14 percent in 2009.[125] Spain's Purchasing Managers Index for the manufacturing sector in July fell to a new low suggesting a deep recession.[126] In the second quarter Spain's economy grew by 0.1 percent, the lowest gain in 15 years.[116]


[edit] Germany, Italy, Greece, Portugal
In Germany officials are warning the economy could contract by as much as 1.5 percent in the second quarter because of declining export orders. The economy of Germany contracted in both the second and third quarters putting Germany now in a technical recession. Industrial output in both Italy and Greece has slumped 6.6 percent over the past year. However, Greece's economy will continue to grow for both 2008 and 2009; Eurostat expects the Greek economy to grow 3.1% and 2.5% respectively. Portugal is off 6.2 percent.[114] The country, which was just recovering from a period of economic crisis during the past years, had several industries closing, one bank saved by the state, the remaining banks showing signs of significant unrest and unemployment figures rising to almost 11%. Germany's industrial output was down 2.4 percent in May, the fastest rate for a decade. Orders have now fallen for six months in a row, the worst run since the early 1990s.[citation needed] The German Chamber of Industry and Commerce warned of up to 200,000 job losses in coming months.[122] German retails sales fell 1.4 percent in June more than any expectations.[127] The German economy declined by 0.5 percent in the second quarter.[116] In Italy, Fiat announced plant closures and temporary layoffs at factories in Turin, Melfi, Imola and Sicily. Car sales in Italy have fallen by almost 20 percent over each of the past two months. Metalmeccanici, Italy's car workers' union said, "The situation is evidently more serious than had been understood."[122] On July 10, 2008 economic think tank ISAE lowered its growth forecast for Italy to 0.4 percent from 0.5 percent and cut the 2009 outlook to 0.7 percent from 1.2 percent.[128] Analysts have predicted Italy had entered a recession in the second quarter or would enter one by the end of the year with business confidence at its lowest levels since the 9-11 terrorist attacks.[129] Italy's economy contracted by 0.3 percent in the second quarter of 2008.[130]


[edit] France, Finland, Benelux
Other eurozone members saw a decline in their economy in the second quarter. France's economy declined by 0.3 percent, Finland's economy declined by 0.2 percent, and the Netherland's showed zero growth in the second quarter.[116]

According to INSEE, France's statistical agency, the French GDP was projected to decline by 0.1 percent in the third quarter of 2008 with another 0.1 percent decline in the fourth quarter and Eric Woerth, the French budget minister, said France was in a technical recession.[131] However the final estimations gave by the INSEE showed the French GDP actually increased by 0.14 percent thus avoiding a technical recession.[132] In order to fight the economic crisis a €26 billion strong rescue plan was announced by President Sarkozy. This saving plan however includes the scheduled budget for 2009, this makes €15.5 billion in addition to the normal budget for 2009. The French public deficit in 2009 is expected to raise to 4% with of this plan. It is similar in its conception to Obama's rescue plan in that it will be used, to a large extent, for public investments on infrastructures. More precisely railways, waterways, motorways will be improved; Hospitals, tribunals, the Gendarmerie and the Police will be modernised. In addition to these infrastructure the national defence will also benefit from this plan as well as public landmarks. Small business companies will get a tax rebate in 2009. Another part of the deficit will be used to pay for the national debt to French companies. Regulations over the public market, especialy construction and civil engineering, will be softened. Laws on urbanism will also be softened to favour construction and significantly lower delays between the moment a project is discussed and then built.[133]

On September 28, Dutch-Belgian bank Fortis was partially nationalized with a cash infusion from the Benelux countries amounting to €11.2 billion. Fortis' troubles started in the beginning of the year with an announcement that it faced around $1.5bn of losses in the American sub-prime catastrophe. In June, the company announced a selloff of assets to raise €5 bn to improve the liquidity of the organisation. This, however, proved insufficient.[134] On 6 October 2008, the French bank BNP Paribas took over 75 percent of Fortis' activities in Belgium, and 66 percent in Luxembourg, in exchange for the Belgian government becoming the new group's major shareholder.[135]

In May industrial output fell in the Netherlands by 6 percent.[136]


[edit] Middle East

[edit] Gulf Corporation Council
Decreasing oil prices will affect Persian gulf countries.


[edit] Lebanon
Lebanon is one of the only seven countries in the world to have scored profits in 2008.[137] Given the regular security turmoil it has faced in the past, its banks have adopted a conservative approach. The strict regulations imposed by the central bank were crafted to make the Lebanese economy immune to political crisis; and so far, this has applied to the global economic crisis as well. The Lebanese banks remain, under the current circumstances, high on liquidity and reputed for their security. [138]

Moody's has recently shifted Lebanon's sovereign rankings from stable to positive acknowledging its financial security.[139] Moreover, with a Beirut stock market increase of 51%, the index provider MSCI, ranked Lebanon as the world's best performer in 2008.[137] Analysts are, nonetheless, skeptic about the future indirect effects of the crisis, but so far, the direct consequences have proved to be positive.


[edit] Asia

[edit] China
In China, the IMF predicts GDP growth for 2008 will be 9.7% and drop to 8.5% in 2009.[140] A struggle was underway to see who would swallow the losses on US Agencies and Treasuries.[141] On November 9, 2008 China announced a package of capital spending plus income and consumption support measures. Four trillion yuan ($586 billion) will be spent on upgrading infrastructure, particularly roads, railways, airports and the power grid; on raising rural incomes via land reform; and on social welfare projects such as affordable housing and environmental protection.[142][143]


[edit] Hong Kong
The Hong Kong economy officially slid into recession in the final quarter of 2008. The economy is predicted to grow at 2 percent in 2009. Hong Kong is an advanced tertiary economy built on services, retail, tourism, transport and financial industries. Hong Kong's manufacturing industry is located in Guangdong province which employs over 11 million people.[144] The Hang Seng has lost over 60 percent of its value, property market lost over 40 percent in value and unemployment is at a record high of 4.8 percent. [145]


[edit] India
India's economy is expected to grow about 6.8% during FY2008 and as low as 5.5% in FY2009.[146][147] India's economy grew at an annual rate of 9% or more in the past three years, second only to China among the major economies, and the projections for FY2008 indicate that India's economic growth has been affected by the economic crisis.[148] The former Indian Finance Minister P. Chidambaram, however, said that he expected India's economy to "bounce back" to 9% during FY2009.[149] This prediction has been met with skepticism by observers.[147][150] The Asian Development Bank predicted India to recover from weakening momentum in 4-6 quarters.[151] At the G20 Summit, India called for coordinated global fiscal stimulus to mitigate the severity of the global credit crunch.[152] India said that it would inject US$4.5 billion into the financial system to help exporters.[153] Some analysts pointed that India's growing trade with other Asian countries, especially China, will help reduce the negative impact of the crisis.[154] Analysts also said that India's high domestic demand and large infrastructure projects will act as a buffer reducing the impact of the global downturn on its economy.[155] Economists argued that India's financial system is relatively insulated and its banks do not have significant exposure to subprime mortgage.[156] In an editorial, the New York Times praised the strong regulations placed on the Indian banking system by the Reserve Bank of India.[157]


[edit] Japan
In Japan exports in June declined for the first time in about five years falling by 1.7 percent. Exports to the United States and European Union fell 15.4 percent and 11.2 percent respectively. The decline in exports and increase in imports cut Japan's trade surplus $1.28 billion a decline of 90 percent from the previous year. An economist at the Royal Bank of Scotland said the decline means the Japanese economy most likely declined in the second quarter.[158] Taro Aso, secretary-general of Japan's ruling Liberal Democratic Party, said he believes Japan had entered a recession.[159] Japan's economy declined by 0.6 percent in the second quarter of 2008.[160] This was later revised to a decline of 0.7 percent.[161] Japanese exports grew 0.3 percent in August of 2008 compared to a year before down from 8 percent the previous month. Exports to the U.S. fell 21.8 percent, the biggest decline on record, and exports to Europe fell 3.5 percent.[162] Two Japanese banks appeared on the list of major Lehman creditors.[163] On November 17th, the Japanese Economy Minister announced that the nation was officially in a recession.[164]


[edit] Pakistan
In Pakistan the central bank's foreign currency reserves, when counting forward liabilities is said to only amount to as little as $3 billion, sufficient for a single month of imports. Corruption and mismanagement have combined with high oil prices to damage Pakistan's economy. Pakistan's rupee has lost more than 21 per cent of its value in 2008 and inflation is at 25 per cent. The government has failed to defer payments for Saudi oil or raise favorable loans. President Asif Ali Zardari claimed Pakistan needed a bailout worth $100 billion which he was expected to ask for at a meeting in Abu Dhabi in November. Ratings agency Standard and Poor's rates Pakistan's sovereign debt at CCC +, only a few ratings above the default level, warning the country may be unable to cover about $3 billion in upcoming debt payments.[165] This led a change in economic managers,and politically elected finance minister Naveed Qamar was replaced by a financial advisor, Shaukat Tareen, a former banker belonging to Citigroup on October 8, 2008. The new finance advisor led the Pakistani delegation to IMF-World Bank meeting in USA with a hope to obtain a loan from the World Bank which has been stopped now due to reservations from IMF on World Bank for releasing this nature of Loan to any country.


[edit] Singapore
Singapore's economy saw its biggest drop in five years in the second quarter, falling by 6.6 percent; however, the Managing Director of Singapore's central bank said a technical recession was not likely.[166] Singapore cut its 2008 GDP forecast to between 4 and 5 from 4 to 6 percent before, and then again down to 3 percent.[167] Singapore's economy contracted in the third quarter, placing the country in recession.[168]


[edit] South Korea
By September 2008, the crisis threatening the GSEs (US mortgage lenders Fannie Mae and Freddie Mac) began to have consequences in Asia. The foreign exchange reserves of South Korea's central bank contained many depreciating "Agency bonds" from the GSEs, threatening a currency crisis and leading to depreciation of the South Korean won against the US dollar and other major currencies,[169]. Samsung Electronics has been reported to be posting a decrease in sales for the first time since the 1997 Asian financial crisis that home appliances saw a decrease in the domestic market of up to 20 percent since mid-June compared to the previous year. Domestic auto sales also saw a decrease in the second quarter. Auto exports also posted a loss and exports of home appliances were also reported to be in decline.[170]


[edit] Sri Lanka
This section does not cite any references or sources.
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Sri Lanka too is affected with the global recession as the demand for their major products such as garments, tea, rubber, coconut based products and agricultural products are at a downturn. At the moment, tea is severely affected and it is analysed that the country is experiencing 35% drop in the exports presently.also tourist industry also downsise. last year 7% downsise the industry. most of the europian are cut of their unimportant expenses.


[edit] Taiwan
Taiwan announced billions of dollars in spending and tax cuts due to declining growth and a 26 percent slump in the stock market in 2008.[171] The bankruptcy of Lehman Brothers raised concerns about global exposure to the assets and stock of Lehman Brothers and the potential for the bankruptcy to cause further tightening of credit. Taiwan, despite reporting few losses from the subprime mortgage crisis, was said to have Lehman-related exposure for its companies and retail investors totaling $2.5 billion.


[edit] South America
As it mainly consists of food exporters, South America was not directly affected by the financial turmoil, even if the bond markets of Brazil, Argentina, Colombia and Venezuela have been hit.[172]

On the other side, the continent has known a tough agricultural crisis at the beginning of 2008.[173] Food prices have increased a lot, due to a lack in arable land. One of the main reasons for the loss of agricultural land was the high value offered by the production of biofuels. Food prices, rising since 2002, ascended from 2006, reaching a peak during the first quarter of 2008. In one year the average price of food rose by about 50%.

Then South American countries were affected by both the slowdown in most developed countries and the decrease in food prices due to the declining demand.[174] In June 2008, the Economic Commission for Latin America and the Caribbean (ECLAC) declared it expected a 4% growth for 2009. However at the end of the year it predicted that the year 2009 would put an end to six years of prosperity during which Latin America has benefited from high raw materials prices.[175] The production in the region is likely to decline and unemployment to increase.[176] Among the countries expected to suffer most, these include Argentina, which should see its growth rate reduced from nearly 7% in 2008 to 2.5% in 2009.[177] However, the Center for Economic and Policy Research has estimated that the region may be able to cope with the global downturn with right macro-economic policies, as these countries no longer depend on the U.S. economy.[178]

Please help improve this section by expanding it. Further information might be found on the talk page. (December 2008)


[edit] Brazil
Brazil is Latin America's largest economy and biggest exporter of raw materials such as iron ore and agricultural products such as coffee, sugarcane and oranges.[179] The economy is predicted to grow between 2.4 to 3 percent next year down from 5 percent originally forecast. [180]


[edit] Ecuador
Ecuador is seeking ways to default on sovereign debts incurred under the government of Gustavo Noboa, which the present government deems to have been incurred illegally.[181] If Ecuador defaults, it will be the first developing country to default on sovereign debt since the crisis began.[182]


[edit] Caribbean Islands
The IMF said as soon as February 2008 that a U.S. slowdown would hurt the economies of the Caribbean Islands, especially those in the Eastern Islands. Indeed, the sector of tourism makes up a large part of the Islands' economies, so that they are heavily dependent on the number of U.S. visitors each year.[183] However, the lower inflation and currency depreciation in several Latin American and Caribbean nations can have offset this impact of the financial crisis, sustaining the activity.[184]


[edit] Oceania

[edit] New Zealand
New Zealand Institute of Economic Research's quarterly survey showing New Zealand's economy contracted 0.3 percent in the first quarter and Treasury figures suggested the economy also contracted in the June quarter putting New Zealand in a technical recession.[185] The Treasury says the economy could recover in the second half of the year under the impact of high dairy prices boosting farmer incomes and cuts to personal tax rates, which come into effect on Oct. 1.[186] About 23 financial companies in New Zealand have filed for bankruptcy in a year. Housing starts in New Zealand fell 20 percent in June, the lowest levels since 1986.[187] Excluding apartments, approvals dropped 13 percent from May. Approvals in the year ended June fell 12 percent from a year earlier. Second-quarter approvals dropped 19 percent. The figures suggest a decrease in construction and economic growth. House sales fell 42 percent in June from a year earlier.[188] The New Zealand Treasury concluded that the country's economy had contracted for a second quarter based on economic indicators, putting New Zealand in a recession.[189] New Zealand's central bank cut rates by half a percent arguing the economy was in recession.[171] New Zealand's GDP declined by 0.2 percent in the second quarter putting the country in its first recession in a decade.[190]


[edit] Australia
In Australia, Hans Redeker, currency chief at BNP Paribas has said Australia would have to generate 4 percent of its GDP to meet payments to foreign holders of its assets. National Australia Bank on July 29, 2008 cut a A$850 million bond sale by two thirds following investor flight and opted for a 100 percent write-off on a clutch of "senior strips" of AAA-rated collateralized debt obligations (CDO) worth A$900 million.[187][191][192] Approvals for loans to build or buy homes and apartments decreased 3.7 percent in June of 2008. Housing prices in Australia fell in the second quarter of 2008 for the first time in about three years. Consumer confidence in Australia fell to a 16-year low in July and retail sales fell 1 percent in June.[193] High profile casualties of the credit crunch include Allco Finance, MFS, ABC Learning, Babcock & Brown and Centro while numerous other institutions have lost a significant part of their value.[194]

Sources such as the IMF and the Reserve Bank of Australia predict Australia is well positioned to weather the crisis with minimal disruption, sustaining more than 2% GDP growth in 2009 (while many Western nations go into recession). The World Economic Forum recently ranked Australia's banking system the fourth best in the world, while the Australian dollar's 30% drop is seen as a boom for trade, shielding from the crisis, and for helping to slow growth and consumption.[195][196]

Some analysts have forecast the Australian economy to dip into a recession due to the worsening economic conditions in western economies such as Western Europe, United States and Japan. Unemployment will increase because of slower growth, declining profits and government revenues.[197]


[edit] Africa

[edit] South Africa
Moody's Investors Service warned on July 7, 2008 that South Africa could slip into a recession by the turn of the year. Moody's cited electricity shortages, high interest rates, soaring inflation, a slumping housing and vehicle market and lower business and consumer confidence indicators. Growth in South Africa's gross domestic product for the first quarter of 2008 slowed to 2.1%. CPIX inflation, the monetary-policy inflation target measure, rose 10.9% on a year-on-year basis in May, its highest level since November 2002.[198] South Africa's National Treasury criticized the statement by Moody's saying, "It's not possible that we'll end up in recession." He added that the government may revise lower its 4 percent growth forecast for the year following growth of 5.1% in 2007. Car sales in South Africa dropped an annual 22 percent in June due to higher interest rates.[199]


[edit] Financial markets

[edit] January 2008 stock market volatility
January 2008 was an especially volatile month in world stock markets, with a surge in implied volatility measurements of the US-based S&P 500 index,[200] and a sharp decrease in non-U.S. stock market prices on Monday, January 21, 2008 (continuing to a lesser extent in some markets on January 22). Some headline writers and a general news columnist called January 21 "Black Monday" and referred to a "global shares crash,"[201][202] though the effects were quite different in different markets.

American stock markets were closed on Monday, January 21 for Martin Luther King, Jr. Day. Seemingly in response to the fall in non-U.S. markets,[203] the U.S. Federal Reserve announced a surprise rate cut of 0.75% on Tuesday at 8 a.m. This rate cut is believed to have been influential in preventing large declines in the American stock markets, with the Dow Jones Industrial Average down only 1.1% for the day, never closing that week worse than a 1.6% decrease from the previous Friday, and indeed closed up for the week. Later it was announced that Société Générale, one of the largest banks in Europe, accused its employee Jérôme Kerviel of fraudulent trades costing it €4.9 billion, and causing it to sell approximately €50 billion in European equity derivatives from January 21–23.

The effects of these events were also felt on the Shanghai Composite Index in China which lost 5.14 percent, most of this on financial stocks such as Ping An Insurance and China Life which lost 10 and 8.76 percent respectively.[204] Investors worried about the effect of a recession in the US economy would have on the Chinese economy. Citigroup estimates due to the number of exports from China to America a one percent drop in US economic growth would lead to a 1.3 percent drop in China's growth rate.


[edit] Market downturn Fall 2008
Main article: Global financial crisis of 2008
As of October 2008, stocks in North America, Europe, and the Asia-Pacific region had all fallen by about 30% since the beginning of the year.[205] The Dow Jones Industrial Average had fallen about 37% since January 2008.[206]

There were several large Monday declines in stock markets world wide during 2008, including one in January, one in August, one in September, and another in early October.

The simultaneous multiple crises affecting the US financial system in mid-September 2008 caused large falls in markets both in the US and elsewhere. Numerous indicators of risk and of investor fear (the TED spread, Treasury yields, the dollar value of gold) set records.[207]

Russian markets, already falling due to declining oil prices and political tensions with the West, fell over 10% in one day, leading to a suspension of trading,[208] while other emerging markets also exhibited losses.[209]

On September 18, UK regulators announced a temporary ban on short-selling of financial stocks.[210] On September 19 the United States' SEC followed by placing a temporary ban of short-selling stocks of 799 specific financial institutions. In addition, the SEC made it easier for institutions to buy back shares of their institutions. The action is based on the view that short selling in a crisis market undermines confidence in financial institutions and erodes their stability.[211]

On September 22, the Australian Securities Exchange (ASX) delayed opening by an hour [212] after a decision was made by the Australian Securities and Investments Commission (ASIC) to ban all short selling on the ASX.[213] This was revised slightly a few days later.[214]


[edit] Causes of the contemporary economic crisis
On October 15, 2008, Anthony Faiola, Ellen Nakashima, and Jill Drew wrote a lengthy article in the Washington Post titled, "What Went Wrong".[215] In their investigation, the authors claim that former Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and SEC Chairman Arthur Levitt vehemently opposed any regulation of financial instruments known as derivatives. They further claim that Greenspan actively sought to undermine the office of the Commodity Futures Trading Commission, specifically under the leadership of Brooksley E. Born, when the Commission sought to initiate regulation of derivatives. Ultimately, it was the collapse of a specific kind of derivative, the mortgage-backed security, that triggered the economic crises of 2008.

On October 17, 2008, attorney Timothy D. Naegele wrote an article in the American Banker entitled, "Greenspan's Fingerprints All Over Enduring Mess," which argues that Alan Greenspan's actions and inactions triggered the economic crises of 2008. The article discusses 'the economic tsunami that has been rolling worldwide with devastating effects'; and the author asserts that 'Greenspan is the architect of the enormous economic "bubble" that burst globally'. The author cites Giulio Tremonti, Italy's Minister of Economy and Finance, who said: "Greenspan was considered a master. Now we must ask ourselves whether he is not, after [Osama] bin Laden, the man who hurt America the most."[216]

While Greenspan's role as Chairman of the Federal Reserve has been widely discussed (the main point of controversy remains the lowering of Federal funds rate at only 1% for more than a year which, according to the Austrian School of economics, allowed huge amounts of "easy" credit-based money to be injected into the financial system and thus create an unsustainable economic boom[217][218]), there is also the argument that Greenspan actions in the years 2002-2004 were actually motivated by the need to take the U.S. economy out of the early 2000s recession caused by the bursting of dot-com bubble - although by doing so he did not help avert the crisis, but only postpone it.[219][220]

Many libertarians, including Congressman and former 2008 Presidential candidate Ron Paul[221] and Peter Schiff in his book Crash Proof, predicted the crisis prior to its occurrence. They are critical of theories that the free market caused the crisis[222] and instead argue that the Federal Reserve's printing of money out of thin air and the Community Reinvestment Act are the primary causes of the crisis.[223] However Alan Greenspan himself has conceded he was partially wrong to oppose regulation of the markets, and expressed "shocked disbelief" at the failure of the self interest of the markets, which according to neo-liberal economic theory should have protected shareholder equity.[224]

It has also been argued that the root cause of the crisis is overproduction of goods caused by globalization.[225] Overproduction tends to cause deflation and signs of deflation were evident in October and November, as commodity prices tumbled and the Federal Reserve was lowering its target rate to an all-time-low 0.25%.[226] On the other hand, Professor Herman Daly suggests that it is not actually an economic crisis, but a crisis of overgrowth beyond sustainable ecological limits.[227]


[edit] Other countries in economic recession
Many countries experienced recession in 2008.[228] The countries currently in a technical recession are Estonia, Latvia, Ireland, New Zealand, Japan, Hong Kong, Singapore, Italy and Germany. Despite the contention that the United States of America has been in a recession since 2007, GDP growth has remained positive until the second quarter of 2008.

Denmark and Iceland went into recession in the first quarter of 2008, but came out again in the second quarter.[229]

The following countries went into recession in the second quarter of 2008: Estonia,[230] Latvia,[231] Ireland[232] and New Zealand.[233]

The following countries/territories went into recession in the third quarter of 2008: Japan,[234] Sweden,[235] Hong Kong,[236] Singapore,[237] Italy [238] and Germany.[239] As a whole the fifteen nations in the European Union that use the euro went into recession in the third quarter.[240]

The following countries experienced negative growth in the third quarter 2008 and all are expected to go into recession in the fourth: United States and Britain.

If all of those countries stay in recession, then of the seven largest economies in the world by GDP, only China and France would avoid a recession in 2008. In the year to the third quarter of 2008 China grew by 9%. This is interesting as China has until recently considered 8% GDP growth to be required simply to create enough jobs for rural people moving to urban centres.[241] This figure may more accurately be considered to be 5-7% now that population growth is declining. Growth of between 5%-8% could well have the type of effect in China that a recession has elsewhere.


[edit] Official forecasts in parts of the world
On November 3, 2008, according to all newspapers, the European Commission in Brussels predicted for 2009 only an extremely low increase by 0.1% of the GDP, for the countries of the Euro zone (France, Germany, Italy, etc.).[242] They also predicted negative numbers for the UK (-1.0%), Ireland, Spain, and other countries of the EU. Three days later, the IMF at Washington, D.C., predicted for 2009 a worldwide decrease, -0.3%, of the same number, on average over the developed economies (-0.7% for the US, and -0.8% for Germany).[243] Economically, the car industry is especially concerned; as a consequence, several countries have already launched immediate help-packages, each involving several billions of dollars, euros or pounds.

According to new forecasts of the Deutsche Bank (end of November 2008), the economy of Germany will go down by more than 4% in 2009.[244]


[edit] Timeline of countries in recession
July 1, 2008: Denmark
Denmark becomes the first European economy to confirm it is in recession since the global credit crunch began. Its GDP shrinks 0.6 percent in the first quarter after an 0.2 percent contraction in the fourth quarter of 2007. In the third quarter, the economy again contracted. This time it was by 0.5 percent.

August 13, 2008: Estonia
The Baltic state slides into recession with a 0.9 percent fall in second-quarter GDP after a drop of 0.5 percent in the first quarter. It falls deeper into recession in the third quarter when the economy contracted 3.3 percent.

September 8, 2008: Latvia
Latvia joins its northern neighbor Estonia in recession as GDP falls 0.2 percent in the second quarter from the first quarter, when it fell 0.3 percent. Property markets and construction have suffered in both Baltic states.

September 25, 2008: Ireland
The "Celtic Tiger" becomes the first country in the euro zone to slide into recession, with a 0.5 percent fall in second quarter GDP, following a 0.3 percent decline in the first quarter. Its last recession in 1983 saw thousands of people leave Ireland to seek work overseas.[245]

September 26, 2008: New Zealand
New Zealand falls into a recession for the first time in more than a decade, with a 0.2 percent fall in seasonally adjusted GDP for the second quarter. First-quarter GDP dropped 0.3 percent.

October 10, 2008: Singapore
First Asian country to slip into a recession since the credit crisis began. Singapore's export-dependent economy shrinks annualized rate of 6.8 percent in the third quarter after a 6.0 percent contraction in the second quarter, its first recession since 2002.

November 13, 2008: Germany
Europe's largest economy contracted by 0.5 percent in the third quarter after GDP fell 0.4 percent in the second quarter, putting it in recession for the first time in five years.[246]

November 14, 2008: Italy, Hong Kong and the Eurozone.
Italy

Italy plunges into recession, its first since the start of 2005, after GDP contracts a steeper-than-expected 0.5 percent in the third quarter. Second quarter GDP dropped 0.3 percent.[247]

Hong Kong

Hong Kong becomes the second Asian economy to tip into recession, it's exports hit by weakening global demand. Third-quarter GDP drops a seasonally adjusted 0.5 percent after a 1.4 percent fall in the previous quarter.

The Eurozone

The 15-country euro zone officially slips under, pushed down by recessions in Germany and Italy for its first recession since its creation in 1999.[248][249] These 15 countries are:

Austria
Belgium
Cyprus
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Malta
Netherlands
Portugal
Slovenia
Spain
November 17, 2008: Japan
The world's second-biggest economy slides into recession, its first in seven years. Its GDP contracts 0.1 percent in the July-September quarter, as the financial crisis curbs demand for its exports. It shrank 0.9 percent in the previous quarter.[250]

November 28, 2008: Sweden
The Nordic nation announces it is in recession after GDP shrinks 0.1 percent in both the second and third quarters.

December 1, 2008: United States of America
The US economy has been in recession since December 2007, the National Bureau of Economic Research said. The bureau is a private research institute widely regarded as the official arbiter of US economic cycles. It said a 73-month economic expansion had come to an end.[251]

December 9, 2008: Canada
Bank of Canada officially announced that Canada's economy is currently in recession.