Financial crisis 2008

By Bünyamin Güler
 CONTENT

INTRODUCTION
GREAT DEPRECION (1929-1933)
PRIME AND SUB-PRIME CREDITS
CAUSES OF RECENT WORLD FİNANCIAL CRİSES
EFFECTS OF CRİSES
EFFECTS TO USA
EFFECTS TO OTHER COUNTRIES
EFFECTS TO BUSINESS SECTORS
EFFECTS TO GLOBAL MONEY MARKET
EFFECTS TO CONSUMERS
PREDICTIONS ABOUT CRISES
CONSEQUENS OF CRISES
POSIBLE SOLUTIONS OF CRISES (ITS ALSO
DISCUSION PART)
INTRODUCTION
GREAT DEPRECION
 GREAT DEPRECION

The stock market crash in October devastated the U.S .

Next three years changed America and Americans forever.
From 1929 to 1933;
6.000 banks went out of business.
9 million savings account vanished.
85.000 business went bankrupt.
15 million people were unemployed.
400.000 family farms were repossessed by the bank.
2.600 schools were closed.
Admissions to mental hospitals went up 300%.
2 million man became homeless.
Suicides went up by 30%.
Drought in the Great Plains caused crops to die.
Huge dust storms.
 GREAT DEPRECION

1941,the great depression unfortunately

ended with the U.S entry into WW2.Factories
that made cars, clothes and other consumer
goods changed to war production.15 million
American joined to army and new job
opportunities for woman.
 PRIME AND SUB-PRIME CREDITS

Differences in Prime and Sub prime mortgages

INTEREST: Nonprime loans have a higher interest rate than prime loans.

PENALTY: Prime loans are much less likely to have a prepayment

penalty than their sub prime counterparts.

APPROVAL: It is more difficult for home buyers to get approved for prime
mortgages, especially if they have minimal income and/or a mediocre
credit history.

DECEPTION: A sub prime mortgage lender is more likely to charge

unreasonable fees or try to deceive borrowers into paying more interest
than they need to.
DETERMİND PROBLEM:SUB PRİME
…
NO COMMENTS…
CAUSES OF RECENT WORLD FİNANCIAL
CRİSES

 Boom and bust in the housing market

 Speculation
 High-risk mortgage loans and lending practices
 Securitization practices
 Government policies
 Policies of central banks
 Financial institution debt levels and incentives
 Credit default swaps
EFFECTS OF CRİSES

 EFFECTS TO U.S.A
 EFFECTS TO OTHER COUNTRIES
 EFFECTS TO BUSINESS SECTORS
 EFFECTS TO GLOBAL MONEY MARKET
 EFFECTS TO CONSUMERS
EFFECTS TO U.S.A

U.S.A
Thousands of workers are fired and unemployment rate is still
increasing.
Value of houses are going downward.
Big discounts on the stores.
Investment banks closed.
Trade
Inflation
Economic governance
Return of volatility
EFFECTS TO COUNTRIES

 Most British banks raise their money for loans from the
deposits of their customers
 On September 15, 2008 China cut its interest rate for the first
time since 2002
 On November 9, 2008 the 2008 Chinese economic stimulus plan
is a RMB¥ 4 trillion ($586 billion) stimulus package announced
by the central government of the People's Republic of China in
its biggest move to stop the global financial crisis from hitting
the world's fourth largest economy.
 Indonesia reduced its overnight repo rate, at which commercial
banks can borrow overnight funds from the central bank, by
two percentage points to 10.25 percent.
EFFECTS TO COUNTRIES

 The Reserve Bank of India added almost $1.32 billion, through

a refinance operation, its biggest in at least a month.
 The Reserve Bank of Australia injected nearly $1.5 billion into
the banking system, nearly three times as much as the market's
estimated requirement.
 Developed economies are somewhat linked together, and with
increasing globalization, if something effects one of the biggest
world economies, it tends to affect everyone to a certain extent,
especially if they are a major trade partner.
 In Taiwan, the central bank on September 16, 2008 said it would
cut its required reserve ratios for the first time in eight years.
The central bank added $3.59 billion into the foreign-currency
interbank market the same day.
EFFECTS TO COUNTRIES

 Bank of Japan pumped $29.3 billion into the financial system

on September 17, 2008 and the Reserve Bank of Australia
added $3.45 billion the same day.
 The European Central Bank injected $99.8 billion in a one-day
money-market auction.
 The Bank of England pumped in $36 billion.
 Altogether, central banks throughout the world added more
than $200 billion from the beginning of the week to September
17.
EFFECTS TO BUSINESS SECTORS
NAME OF COMPANY NUMBER DATE
Citigroup Inc 52.000 17 Nowemb.
JPMorgan Chase 9.200 1 Dece.
Commerzbank 9.000 1 Sept.
GMAC LLC 5.000 3 Sept.l
HSBC 1.100 26 Sept.
UBS 2.000 3 Octo.
Barclays PLC 3.000 10 Octo.
National City Corp 4.000 21 Octo.
Goldman Sachs 3.300 23 Octo.
Credit Suisse 500 28 Octo.
American Express 7.000 30 Octo.
DBS Group 900 7 Nowemb.
Fidelity Investments 1.700 14 Nowemb
HSBC 500 18 Nowemb.
Bank of New York Mellon 1.800 20 Nowemb.
Credit Suisse 650 2 Octo.
HSBC 500 2 Octo
Credit Suisse 5.300 4 Octo
Nomura Holding 1.000 4 Octo.

Total 108.450
EFFECTS TO BUSINESS SECTORS

 HYUNDAİ is going to decrease the production.

 TOYOTA has already decreased the production. Toyota closed
three car factory.
 HONDA is going to fire it’s labors in U.K and in Japan.
 GENERAL MOTORS is going to fire 31 thousand workers till 2013.
 SUZUKİ is also going to fire 1.200 workers in Hungary.
 AT&T,American monster company is going to decrees the 4% of the
work force which means 12.000.They are going to start this bad
operation whit the beginning of the new year 2009.
EFFECTS TO BUSINESS SECTORS

 HEWLETT PACKARD is going to do big regulation on its company

based in North America. They are going to fire 24.600 labor.
 BRİTİSH TELECOM announced that they are going to fire 10.000
workers.
 DHL is going to fire 9.500 workers.
 ARCELOR MITTAL, steel company is going to fire 9.000 workers.
 ADOBE SYSTEMS, fired 600 workers.
 CREDİT SUİSSE announced that they are going to fire 5.300
workers from the part of investment.
EFFECTS TO BUSINESS SECTORS

 NOMURA the Japan company is going to fire 1000 thousand

workers in London.
 TELEKOM ITALIA is going to fire 4.000 workers till 2013.
 DUPONT is going to fire 2.500 workers.
 EFFECTS TO GLOBAL MONEY MARKET

Daily Q.VIX
VIX: Chicago Board Options 02.01.1990 - 12.11.2008 (GMT)
Price
BarOHLC; Q.VIX; Last Trade
Exchange Volatility
12.11.2008; 61,52; Index i.e.
67,19; 61,52; 66,46 Highest Level Ever Seen: 90 84

Index of Investors Fear! 80

76

72
Today: 67
68

64
Default of Russia 9 / 11 Iraq War II
60

56

Far East Crisis

52

48
First Signs of the Crisis
44

40

36

32

28

24

20

16

12

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1990 2000 [Delayed]
 EFFECTS TO GLOBAL MONEY MARKET
03.05.2006 - 13.11.2008 (UTC)
Yield

4,8

4,6

4,4

4,2
November 2007: 4% p.a.
4

3,8

3,6
3 Months US Treasury Bill 3,4

Another Sign of Fear? 3,2

2,8

2,6

2,4

2,2
Today: 0,15% p.a.
2

1,8

1,6

1,4

1,2

0,8

0,6

0,4
October 2008: 0,03% p.a.
0,2
.1234
16 01 16 03 17 01 16 01 18 02 16 01 16 01 18 02 16 01 16 01 16 02 16 01 16 01 18 02 16 01 16 04 17 01 16 01 16 03 17 01 16 01 19 03 17 01 16 01 16 02 16 01 16 01 18 02 16 01 16 03
Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008
 EFFECTS TO GLOBAL MONEY MARKET
Currency Analysis
25.12.2006 - 24.11.2008 (GMT)
Value
IPP; QTRYUSD=R; Bid(Last); Specified Date; 01.01.2007; 100,0; USD
13.11.2008; 86,8592
IPP; QBRLUSD=R; Bid(Last); Specified Date; 01.01.2007; 100,0;
13.11.2008; 92,2947 220
IPP; QXAU=; Bid(Last); Specified Date; 01.01.2007; 100,0;
13.11.2008; 112,0384
IPP; QEUR=; Bid(Last); Specified Date; 01.01.2007; 100,0; 210
13.11.2008; 94,7269
IPP; QGBP=; Bid(Last); Specified Date; 01.01.2007; 100,0; 200
13.11.2008; 76,2663
IPP; QCLc1; Last Trade(Last); Specified Date; 01.01.2007; 100,0;
13.11.2008; 91,5315 190

180

170

160

150

140

130

120

110

100

90

80
.1234
01 16 01 16 01 16 02 16 01 16 01 18 02 16 01 16 03 17 01 16 01 16 03 17 01 16 01 18 03 17 01 16 01 16 02 16 01 16 01 18 01 16 01 16 03 17
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 [Delayed]
EFFECTS TO CONSUMERS
U.S.A

 The formerly unsinkable American consumer is taking on water, hit

by high prices for food and energy, rising unemployment and fewer
assets to sell or refinance.
 And with the household sector accounting for about three-quarters
of the U.S. gross domestic product, an end to American shoppers'
remarkable run will have a big and self-reinforcing effect.
 Excluding gasoline, U.S. retail sales dropped at an annual 2.2
percent rate in the first quarter.
EFFECTS TO CONSUMERS

 It looks as if we are heading for a transition in the United States to a

slightly less consumption-oriented economy with a higher rate of
savings and investment. That may be a good thing in the long run,
but will be painful while it is happening.
PREDICTIONS ABOUT CRISES

 House prices will continue to fall (median house price) another 20-
30%.
 Unemployment will dramatically increase. Current unemployment is
around 6.1%. I foresee this to increase to 10-15%.
 Prices will fall as consumers tighten their belts (consumers provide
2/3 of economic growth in USA).
 Gold will rally probably breaking the 1000 ceiling.
 Oil will continue to drop and stabilize around 60-80 dollars a barrel.
PREDICTIONS ABOUT CRISES

 Companies in Power, Infrastructure, Environmental, Alternative

Energy, discount stores, etc will do well over the next 24 months.
 Companies in Defense, financial, airlines, travel, luxury goods, "mall
stores", etc will not do well over the next 24 months.
 Taxes will increase.
 Other commodity prices will fall dramatically (Steel, Copper, Grain,
Corn, etc).
CONSEQUENS OF CRISES

 UNENPLOYMENT
 INFLATION
 INSECURITY
 FEAR OF INVESTMENT
 EVERY CURRENCY LOSE IN VALUE AGAINST DOLLAR
 HAUS PRICES GOES DOWNWARD
 BIG DISCOUNTS IN STORES
 POSSIBLE SOLUTIONS

Which solution do you think it’s best to solve this crisis?

Bringing the troops home, cut military spending.
Stop borrowing, Reduce U.S debt.
Begin a major program of investment in infrastructure–a trillion
dollars worth–that will begin to provide jobs by the end of next year.
A new monetary order.
Tax cut for lower class people, hike tax for richer.
More economic stimulus package to boost the consumer spending.
Shut down Enron-type companies like AIG.
Stop funding some troubling small regional banks.
Put Ben and Paulson to jail and reform Fed.
A huge global rate cut.
POSSIBLE SOLUTIONS
 Injecting billions more dollar to aid the credit market.
 Encouraging people to save more and spend less to build up capital,
until they feel ready to start spend again.
 Don’t invest speculatively, stabilize the stock market. We don’t need
spectators. We need activists who will try to come up with innovative
economic solutions.
 Stop building the house, up the inventory, get housing market
stabilized.
 A super big salary reduction for wall street CEO.
 Create more market, and business for more jobs.
 Start printing money, inflate us out of this crisis
 Officially announce the new currency.
 Stop lying
 Other
THANK YOU FOR YOUR ATTENTION

By Bünyamin Güler
 RESOURCES

 http://en.wikipedia.org/wiki/Economic_crisis_of_2008
 http://en.wikipedia.org/wiki/Global_financial_crisis_of_2008
 http://www.hurriyet.com.tr/ekonomi/10506705.asp?gid=229
 http://www.imf.org/external/index.htm
 http://www.wto.org/
 http://www.vestel.com.tr/global/index.html
 http://www.scribd.com/