Introduction

The global financial system literally went into a cardiac arrest after the Lehman Brothers Holdings Inc. collapse and a meltdown was barely avoided through very aggressive policy responses. The entire global economy will contract in a severe and protracted U-shaped global recession that started in 2007. The recession in the US market and the global meltdown termed as Global recession have engulfed complete world economy with a varying degree of recessional impact. World over the impact has diversified and can be observed from the very fact of falling Stock market, recession in jobs availability and companies following downsizing in the existing available staff and cutting down of the perks and salary corrections. The global financial crisis started to show its effects in the middle of 2007 and into 2008. It contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by government. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out.

What is Recession?
Recession or crisis is the part of the normal cycle of business. It is certain that they will sooner or later occur. Recessions are the result of reduction in the demand of products in the global market. Recession can also be associated with falling prices known as deflation due to lack of demand of products. According to the National Bureau Economic Research (NBER), recession is defined as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales.

Characteristics of Recession
A recession is characterized by: Rising unemployment: It takes time for unemployment to rise, but, even when the economy is recovering; it takes time for unemployment to fall. Rising Government Borrowing: A recession is bad news for the government budget. A recession leads to lower tax revenues and higher government spending on unemployment benefits. The UK is forecast to borrow 60

billion; a recession could make this borrowing even worse in 2009. This borrowing means higher taxes and higher interest payments in the future. Falling Share Prices Generally a recession leads to lower profitability and lower dividends. Therefore, shares are less attractive. Note share prices often fall in anticipation of a recession. E.g. the recent falls in share prices are largely because the market expects a recession soon. During the actual recession, share prices often increase in anticipation of the economy recovering. Lower Inflation: Typically a recession reduces demand and wage inflation. This should result in a lower inflation rate. However, this recession is complicated because of rising oil prices. Therefore, the forthcoming recession may actually occur simultaneously with higher inflation - a term known as stagflation. But, a recession will definitely reduce demand pull inflation pressures and encourages price wars on the high street as firms seek to retain consumers. Falling investment: Investment is much more volatile than economic growth. Even a slowdown in the growth rate can lead to a significant fall in investment.

Global Recession
A global recession is a period of global economic slowdown. The International Monetary Fund (IMF) takes many factors into account when defining a global recession, but it states that global economic growth of 3 percent or less is "equivalent to a global recession ". Some economists prefer a definition of a 1.5% rise in unemployment within 12 months. Defining a global recession is more difficult, because developing nations are expected to have a higher GDP growth than developed nations.

Origins of the Global Recession

Growth of the housing bubble Between 1997 and 2006, the price of the typical American house increased by 124%. During the two decades ending in 2001, the national median home price ranged from 2.9 to 3.1 times median household income. This ratio rose to 4.0 in 2004, and 4.6 in 2006. This housing bubble resulted in quite a few homeowners refinancing their homes at lower interest rates, or financing consumer spending by taking out second mortgages secured by the price appreciation. Easy credit conditions

Lower interest rates encourage borrowing. From 2000 to 2003, the Federal Reserve lowered the federal funds rate target from 6.5% to 1.0%. This was done to soften the effects of the collapse of the housing bubble and of the September 2001 terrorist attacks, and to combat the perceived risk of deflation. Weak and fraudulent underwriting practice Testimony given to the Financial Crisis Inquiry Commission by Richard M. Bowen, III on events during his tenure as Citi's Business Chief Underwriter for Correspondent Lending in the Consumer Lending Group (where he was responsible for over 220 professional underwriters) suggests that by the final years of the US housing bubble (20062007), the collapse of mortgage underwriting standards was endemic. His testimony states that by 2006, 60% of mortgages purchased by Citi from some 1,600 mortgage companies were "defective" (were not underwritten to policy, or did not contain all policy-required documents). Sub-prime lending The term subprime refers to the credit quality of particular borrowers, who have weakened credit histories and a greater risk of loan default than prime borrowers. The value of U.S. subprime mortgages was estimated at $1.3 trillion as of March 2007, with over 7.5 million first-lien subprime mortgages outstanding.

Increased debt burden or over-leveraging U.S. households and financial institutions became increasingly indebted or overleveraged during the years preceding the crisis. This increased their vulnerability to the collapse of the housing bubble and worsened the ensuing economic downturn.

Financial innovation and complexity The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the default of a borrower) or to assist with obtaining financing. Examples pertinent to this crisis included: the adjustable-rate mortgage; the bundling of subprime mortgages into mortgagebacked securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions. Incorrect pricing of risk The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be measured by interest rates or fees. For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS

and CDO's or understand its impact on the overall stability of the financial system. For example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450bn of CDO were sold between "late 2005 to the middle of 2007"; among the $102bn of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar.

Causes of global financial recession

There is little doubt that this global recession was caused by the financial meltdown in the United States and quick spread out to touch almost every corner of the world. It appears to be a commonly accepted theory among economists that this US recession was a direct result of sudden busting of house bubble, and the house bubble was created by rapid growing yet unregulated subprime mortgages. The burst of United States housing bubble were peaked in approximately 2005 2006. High default rates on "subprime lending" and "adjustable rate mortgages" began to increase quickly thereafter. An increase in loan incentives such as easy initial terms and a long-term trend of rising housing prices had encouraged borrowers to assume difficult mortgages in the belief they would be able to quickly refinance at more favorable terms. However, once interest rates began to an adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on a variety of indices. Rise and housing prices started to drop moderately in 2006 2007 in many parts of the U.S., refinancing became more difficult. Defaults and foreclosure activity increased dramatically as easy initial terms expired, home prices failed to go up as anticipated, and adjustable rate mortgage (ARM) interest rates reset higher. The main cause of a recession is a fall in Aggregate Demand. In the US 2008 recession, the main causes of falling aggregate demand have been: Falling House Prices: This reduces consumer wealth and prevents equity withdrawal through re-mortgaging. Also when house prices fall, people lose confidence in spending as their main asset is declining in value. The subprime mortgage loans: Loans were given to people with bad credit history.

Subprime Mortgage Backed securities: A mortgage-backed security (MBS) is an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans through a process known as securitization. In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner who in 2009 became Secretary of the United States Treasury placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls. Further, these entities were vulnerable because of maturity mismatch, meaning that they borrowed short-term in liquid markets to purchase long-term, illiquid and risky assets. This meant that disruptions in credit markets would make them subject to rapid deleveraging, selling their long-term assets at depressed prices. The derivative products produced by investment banks that cast the spell of doom on them. Example -Lehman Brothers

Mortgage Defaults: Many homeowners were sold mortgage products that became unaffordable when their introductory period ended and interest rates increased. This lowered their disposable income and caused many to default on their mortgage payments. Financial Crisis: The prospects of banks like Northern Rock and Bear Sterns in the US going bankrupt have made people less confident about spending and investing. Financial crisis caused an economic

slowdown for US economy decreased US demand for foreign goods + decline in demand due to fall in dollar. Credit Crunch / Difficulty of Borrowing Money: Because of high mortgage defaults in US, many banks lost money. Therefore financial institutions have become very reluctant to lend money; this has led to a shortage of funds in the money markets. This has caused borrowing to be more expensive and difficult to arrange leading to lower investment and consumer spending. Credit Default Swaps: Insurance obligations that were created to save investment banks from loan defaults. This caused the insurance companies get into trouble. Example AIG Rising Costs: Rising oil, energy and food prices have caused an increase in the cost of production. This causes the aggregate supply curve to shift to the left; it leaves lower discretionary income for the average consumer.

Stages of the Crisis

The crisis has gone through several stages. First, during late 2007, over 100 mortgage lending companies went bankrupt as subprime mortgage-backed securities could no longer be sold to investors to acquire funds. Second, starting in Q4 2007 and in each quarter since then, financial institutions have recognized massive losses as they adjust the value of their mortgage backed securities to a fraction of their purchased prices. These losses as the housing market continued to deteriorate meant that the banks have a weaker capital base from which to lend. Third, during Q1 2008, investment bank Bear Stearns was hastily merged with bank JP Morgan with $30 billion in government guarantees, after it was unable to continue borrowing to finance its operations. Fourth, during September 2008, the system approached meltdown. In early September Fannie Mae and Freddie Mac, representing $5 trillion in mortgage obligations, were nationalized by the U.S. government as mortgage losses increased. Finally, investment bank Lehman Brothers filed for bankruptcy. In addition, two large U.S. banks (Washington Mutual and Wachovia) became insolvent and were sold to stronger banks. The world's largest insurer, AIG, was 80% nationalized by the U.S. government, due to concerns

regarding its ability to honor its obligations via a form of financial insurance called credit default swaps.

Impacts of global recession

Unemployment ILO has projected that because of the ongoing economic downturn, global job loss was likely to be to the tune of 18 to 51 million by the end of 2009. A major setback will be an additional fall of 53 million people below the poverty line as a result of the global crisis in 2009 alone. In the United States, 5.4 million jobs were lost between July, 2008 and February, 2009; Spain lost 766 thousand jobs in the first quarter of 2009 and unemployment jumped to 17.4 per cent. A substantial number of job losses in developed economies along with possible reduction of various workers benefits led to reduction of disposable income of low-income working people and consequently had adversely affected demand for goods and services. Business effects The global recession affected the various business industries, such as lather, tourism, garment, etc. Social effects The living standards of people dependent on wages and salaries are more affected by recessions than those who rely on fixed incomes or welfare benefits. The loss of a job is known to have a negative impact on the stability of families, and individuals' health and well-being. Stock market The economy and the stock market are closely related as the buoyancy of the economy gets reflected in the stock market. Due to the impact of global economic recession, Indian stock market crashed from the high of 20000 to a low of around 8000 points. FDI Flow in Developed and Developing Countries Global FDI flow in 2008 has declined by 21 per cent compared to the previous year, and reached US$1.4 trillion. Preliminary data issued by UNCTAD indicated that FDI flow fell by 33.7 percent in EU and 5.5 per cent in USA during 2008, while in developing and transition economies it was 4 per cent higher mainly because of investment opportunities based on cheap asset prices and industry restructuring.

Asias Swift Rebound Leads Global Recovery

A year after the deepest recession in recent history, Asia is leading the global recovery, with growth expected to average 7 percent across the region, the International Monetary Fund (IMF) says. China and India will again lead Asias growth, with 10 percent and 8.8 percent in 2010, respectively. The green shoots of recovery that emerged in Asia earlier than elsewhere in 2009 have continued through the first months of 2010, Anoop Singh, Director of the IMFs Asia and Pacific Department, told reporters in Washington. Key economic indicators are now growing at or above long-term trends, particularly in emerging Asian economies with large domestic demand bases such as China, India, and Indonesia, while there has been a V-shaped recovery in more export oriented economies. Asian low-income countries have well resisted the global crisis. . The IMF will release its Regional Economic Outlook for Asia in the coming days in New Delhi and Shanghai. It is also organizing a high-level Asia and Pacific conference in Korea on July 1213, bringing together finance ministers, central bankers, heads of global and regional banks and companies, as well as prominent academics to strengthen the Funds engagement with all Asian economies.

RECESSION AND IMPACT ON BANGLADESHS ECONOMY Affected sectors: Export Bangladesh is not free from this recession. Three million people might lose their job in Bangladesh in this year, so here poverty is increasing. Exported area like Jute, Leather, Frozen Foods and Garments industrious. This recession affected our export. According to Export Promotion Bureau in seven months, the exporting of raw jute decreased by 15.20 per cent, jute goods by 19.80 per cent, leather goods by 31.80 per cent and frozen food by 5.0 per cent. The overall industrial sector of our economy is thus bearing the brunt of the global recession. Our jute, sugar and spinning industries are in dire straits. Our textile is also in a severe trouble. Out of the 80 mills of jute products, 17 have fully stopped production eleven of these mills are functioning partially, while other mills are also are on the verge of closure. Out of 25 million workers, one hundred thousand has lost their jobs. In the spinning mills, 50 thousand laborers are jobless. The unsold goods of spinning mills are worth Tk 30 billion. The BGMEA said readymade garments (RMG) export decreased in January by 4.98 per cent and in February by 17.58 per cent as our cloth mostly goes to the USA and Europe. So it has greatly affected our industry. Manpower export This recession greatly affected our manpower export, as well. In the meantime, many of our workers have come back from Malaysia, Kuwait, Dubai, and Saudi Arabia. Malaysia cancelled the visas of 55 thousand workers. All the countries that import our manpower are going to cut the jobs of our manpower at overseas. As the world recession affected our manpower export, it would impact our remittance earnings. The remittance income would decline particularly from the Middle East.

Reason behind Less Impact of global recession on Bangladesh

Since the collapse of the United States sub prime mortgage market and the subsequent international global crisis, many developed and developing countries have been plunged into deep recession. Bangladesh though has found itself in a slightly different position. Its economy is not so dependent on international capital and foreign investment, which has helped to lower the immediate impact of the crisis.

Although it is now clear that the on going global crisis will have a significant impact on Bangladesh, its impact is still expected to be less severe than in most other economies. The reasons for this include Bangladesh is relatively limited exposure to the global economy, particularly in export (about 18.0 percent of GDP). Bangladesh largely exports garments which are mainly low priced products for the lower end of the market, demand for which has been relatively recession resistant. The continued importance of domestic agriculture as a driver of economic growth, which performed relatively in a robust manner. The presence of a large informal sector that comprises of domestic trade and commerce which creates some inbuilt resilience in the economy. The positive impact of the plunge in commodity prices, particularly oil and fertiliser, on costs of production. The minimal exposure of Bangladesh to international capital markets making the economy less vulnerable to the withdrawal of foreign capital. The strong macroeconomic fundamentals underwritten by sustainable levels of budget deficit and public debt. Many garment orders are shifting from China to other countries (Vietnam, Cambodia) including Bangladesh. Relatively low retrenchment of Bangladeshi workers in the Gulf and Middle Eastern countries because Bangladeshi workers are engaged mainly in unskilled low paid jobs, not affected by the recession.

The Rescue Programs

Governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. Both market-based and regulatory solutions have been implemented or are under consideration, while significant risks remain for the world economy over the 2010 2011 periods.

Various Stimulus Packages Taken by Partner Governments

As the global financial crisis started to strengthen its grip on the development prospects of countries around the world, governments came up with strategic plans to safeguard their

economies by way of putting in place various initiatives to protect the interest of domestic producers, exporters, workers and consumers. Currently a number of global, regional and national initiatives have been set in motion to stimulate economic recovery in the affected countries. The USs US$700 billion bailout plan was the first among the many initiatives followed by UAEs injection of US$19 billion into the economy, and Frances 10.5 billion rescue plan for six of its largest banks. Among the developing countries, China announced a 4 trillion yuan (US$586 billion equivalent to 7 per cent of GDP) domestic stimulus package for the remainder of 2008, which would be continued till the end of 2010. Vietnam, on the other hand, announced a stimulus package of US$1 billion focusing primarily on stimulating domestic consumption among consumers. The Indonesian government has also come up with a fiscal stimulus package worth about US$6.1 billion. The government of Philippines has announced a US$6.9 billion stimulus package in order to create about one million jobs; of this, about US$5.2 million would be used to support retrenched overseas workers. India has so far announced three stimulus packages with a total support of US$8 billion including various fiscal incentives to affected industries such as textiles, leather, marine products,- particularly SMEs.

Stimulus Packages Taken by Bangladesh Govt

Despite this the Bangladesh government has formed a high-level technical committee and taskforce to monitor and advice on the crisis, and ministries and financial institutions have taken several precautionary measures. Importantly in October 2008 Bangladesh Bank withdrew 90 % of its total investment from foreign banks which has helped to further shield the economy, so that it is only now that the affects of the crisis are being felt. Additionally the Bank has taken measures to stabilize the exchange rate, provide extra liquidity to the financial sector and raised the limit on private foreign borrowing. It has also relaxed the conditions for opening fresh letters of credit (L/Cs). Stimulus Package: FY2008-09 In April, 2009, the Govt. announced the first stimulus package in view of global financial crisis. The underlying objective of this stimulus package was to safeguard Bangladeshs domestic economy from the negative impacts of the global recession by way of maintaining robust export growth, buoyancy in revenue earnings from imports, and resilience in remittance earnings. The

special package was worth of Tk.34.2 billion (US$495.22 million, 0.55 per cent of GDP of FY2008-09) which was allocated to support domestic and export oriented industries and agriculture, generation of electricity and providing social protection to workers during these times of global crisis. Stimulus Package of FY2009-10 The national budget for FY2009-10 has announced a stimulus package to the tune of Tk.50 billion (US$724 million). It would appear that disbursement of this fund for FY2009-10 will be based on the guideline mentioned in the stimulus package of the FY2008-09. These supports are expected to contribute towards boosting domestic industries, and keeping the business of exportoriented industries running in view of falling prices of export products. Such measures would at least indirectly contribute to retention of jobs by workers.

Conclusion
In the globalized market scenario, the impact of recession at one place/ industry/ sector percolate down to all the linked industry and this can be truly interpreted from the current market situation which is faced by the world. Whether a global recession occurs or not, there will be people whose businesses go under simply because of the speculation about a recession. It's incredibly sad but it's a fact and it's happened all throughout history whenever the economy has faltered. These recession strategies won't turn the business around when used independently, but if we combine several of them, they can help to transform one's outlook for the future. This recession have turned down the growth process and have set the minds of many for finding out the real solution to sustain the economic growth and stability of the market which is desired for the smooth running of the economy.

REFERENCES
1. Wikipedia http://en.wikipedia.org/wiki/Main_Page

2. Ministry of Finance, Bangladesh http://www.mof.gov.bd/en/ 3. J.D. Foster, October 22 2009 http://www.heritage.org/Research/Economy/bg2331es.cfm 4. 2008 Financial Crisis & & Global Recession http://2008financialcrisis.umwblogs.org 5. Global Recession http://2008financialcrisis.umwblogs.org 6. Economic Help(07.07.208): The Impact of A Recession http//www.economicshelp.org/2008/07/impact-of-recession.html 7. CPD report, Impact of the Global Financial and Economic Crisis on Bangladesh A RAPID ASSESSMENT www.ilo.org/asia/whatwedo/events/lang--en/.../index.htm