Recession is the economy shrinking for two consecutive quarters (=6 months) with a decrease in the GDP (=Gross

Domestic Product). A recession is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. A recession is generally considered less severe than a depression, and if a recession continues long enough it is often then classified as a depression. GDP = Value of all the reported goods and services produced by the people operating in the country

CONTD.
GDP is a good indicator of economy; Other indicators could be; -Unemployment Rate -Consumption Rate

-Actual Personal Income

-Etc.. If GDP is growing, then market is growing due to increased demand;
GDP=MONEY VALUE OF {C+I+G+(X-M)} C=CONSUMABLES, I=GROSS INVESTMENTS, G=GROSS SPENDINGS X=EXPORTS, M=IMPORTS

DEVELOPING GLOBAL FINANCIAL CRISIS

Beginning with bankruptcy of Lehman Brothers on Sunday, September 14, 2008, the financial crisis entered an acute phase marked by failures of prominent American and European banks As the financial panic developed during September and October, 2008 there was a "flight to quality" as investors sought safety in U.S. treasury bonds, gold, and strong currencies such as the dollar and the yen

ECONOMIC ASPECTS AND PROJECTIONS

Global aspects A number of commentators have suggested that if the liquidity crisis continues, there could be an extended recession or worse

US aspects Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 0.3 percent in the third quarter of 2008

Events of 2008
January 2008 stock market volatility Global financial crisis of SeptemberOctober

2008 (beginning with the Bankruptcy of Lehman Brothers)

Large losses in financial markets world wide throughout September and October Emergency Economic Stabilization Act of 2008 passed The three major banks of Iceland are nationalized. Banks in several other countries partially nationalized

Trade
In mid-October 2008, the Baltic Dry Index, a measure of

shipping volume, fell by 50% in one week

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

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

Return of volatility
For a time, major economies of the 21st century were

believed to have begun a period of decreased volatility

 Liquidity crisis During the weekend of September 1314, Lehman Brothers declared bankruptcy after failing to find a buyer The year 2008 as of September 17 has seen 81 public corporations file for bankruptcy in the United States

EFFECTS ON CONTINENTS
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.

Iceland

The Icelandic krna has declined 40% against the euro during 2008 and has experienced inflation of 14%.

United Kingdom
The economy of the United Kingdom has also been hit by rising oil prices and the credit crisis.

Sweden

Sweden has not been severely affected, and no banks or financial institute has had real trouble

NORTH AMERICA

Canada
U.S.

In May 2008 Canada's GDP was reported to have

decreased 0.1 percent

Possible recession In the early months of 2008, many observers believed that a U.S. recession had begun 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

The United States entered 2008 during a housing market correction, a subprime mortgage crisis and a declining dollar value

ASIA

China

In China, a struggle was underway to see who would swallow the losses on US Agencies and Treasuries. In Japan exports in June declined for the first time in about five years falling by 1.7 percent. Though economic recession may not hit India as hardly as in other countries in Europe and North America, growth is projected to drop significantly to 5.7% next year 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.

Japan

India

Pakistan

Singapore

Singapore's economy saw its biggest drop in five

Sri Lanka

years in the second quarter, falling by 6.6 percent

Sri Lanka too is affected with the global

Taiwan

recession as the demand for their major products such as garments, tea, rubber, coconut based products and agri products and tax cuts due to declining growth and a 26 percent slump in the stock market in 2008

Taiwan announced billions of dollars in spending

AUSTRALIA AND AFRICA

New Zealand

New Zealand Institute of Economic Research's quarterly survey showing New Zealand's economy contracted 0.3 percent in the first quarter

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.
Moody's Investors Service warned on July 7, 2008 that South Africa could slip into a recession by the turn of the year

South Africa

INDIA AND THE GLOBAL FINANCIAL CRISIS

When

the financial crisis erupted in a comprehensive manner on Wall Street, there was some premature triumphalism among Indian policymakers and media persons If India is not in the same position, it is not to the credit of our policymakers, who had in fact wanted to go along the same route The recent crash in the Sensex is not simply an indicator of the impact of international contagion

ECONOMIC DOWNTURN After a long spell of growth, the Indian economy is experiencing a downturn. Industrial growth is faltering, inflation remains at double-digit levels, the current account deficit is widening, foreign exchange reserves are depleting and the rupee is depreciating.

Sensex fell from its closing peak of 20,873 on January 8, 2008, to less than 10,000 by October 17, 2008

FALLING RUPEE

Between January 1 and October 16, 2008, the RBI reference rate for the rupee fell by nearly 25 per cent, even relative to a weak currency like the dollar, from Rs 39.20 to the dollar to Rs 48.86 A second route through which the global financial crisis could affect India is through the exposure of Indian banks or banks operating in India to the impaired assets resulting from the subprime crisis

LOW CONFIDENCE LEVEL

OVER
PRODUCTION

LOW CONFIDENCE LEVEL

Consumers are fearing that they may lose their jobs; So, they have less confidence to spend money and buy goods; This will result in reduction in demand in the market; Consumers start saving money instead of spending money; This is a downward spiral in the economy.

OVER PRODUCTION
A situation in which the supply exceeds the nations ability to consume what has been produced; SUPPLY > DEMAND

The reasons indicates to say a nation is in a Recession are : People buying less stuff Decrease in factory production Growing unemployment Slump in personal income An unhealthy stock market

It is unhealthy for any nation to be in Recession; So, Government will take certain counter measures to eliminate or reduce the Effect of recession for turn around

PRODUCERS

CONSUMERS

PRODUCERS :- can produce and sell at their prices CONSUMERS :- can decide to,buy or not

Hence, Government does not have direct control on Producers & the Consumers behavior; But, they can influence millions of Producers & Consumers with Governments policies

GOVERNMENT HAS 2 PLANS

FISCAL POLICY (BY GOVT.) MONETARY POLICY (BY RBI)

Government influences the economy by changing how it (Government) spends and collects money. More Spending by Govt. to create jobs

RBI manipulates the available supply of money in the country. Reduce reserve ratio for more money available for bankto give loans

Recession is generally caused by three factors: Fear, Uncertainty and Doubt. Economy will be good if people put money into the market such as investing or buying this etc. If something happen on the market, like housing crisis, that make people feeling fear, uncertainty and doubt, people will stop spending their money and attempt to hold their money. Then the economic chain effect will happen and make the world go into recession.So the situation has not turned for the worse, there are concerns over profitability, growth and asset quality

Nations recession is controlled by the actions of everybody living in that country.