Recession 2008

Most of the world’s stock markets in late 2007 and early 2008 were touching sky. Even Indian stock market made hay while the sun shone on its horizon. Speculation was rife in many corporate headquarters that, this over exuberance and huge flow of money does not justify stock indices of several countries. There were signals of herd mentality and greed looming all over. Those signals finally came to life in early 2008. It started with IMF prediction of world growth falling to 4.0 percent from 4.9 percent. 4.0 was still a respectable prediction but that announcement was changed just after two months.

USA is a dominant force in world economy and as per data it represents 21 percent of the world economy. Changing economic statistics pointed towards a possible USA recession and that signified a global downtrend in economic cycle because of domineering impact of American economy. Many countries, particularly developing ones are heavily dependent on USA and a hint of slowdown in America spelled doom for them. The average spending of American consumers reduced significantly and that resulted in reduced demand for imported items.

Oil is extremely important for any country and 2008 witnessed highest ever increase in oil prices. Due to high oil prices, food prices also increased significantly. Crude oil prices rose to $ 147 per barrel from $ 80 per barrel in a span of 6-7 months. That fuelled global inflation to a dangerous mark. 2008 also witnessed unprecedented credit crisis across the world which resulted in closure of several established investment banks.

Things started getting worst with U.S. sub prime-mortgage market. This induced a tremendous housing market correction of huge implications for pushing up credit costs worldwide. Because of this correction, a good number of Americans, European and Asian banks had to write down billions of dollars in holdings. In fact, few banks filed for bankruptcy and that includes name like Lehman Brothers. It was biggest ever bankruptcy case in US history. More than 81 companies have filed for bankruptcy in USA.

Unemployment rate also increased substantially in USA and many people had to leave job. Another 1, 57, 000 jobs were lost in September 2008. Many developed and developing countries are struggling with low GDP and decreasing economic growth. Credit crunch has spread all over the world. However, world over, policy makers are putting in extra liquidity and several other measures to stem the fall but nevertheless, we seem to be going through economic recession.