Causes of Global Economic Crises

By: Rajat Jhingan

Economic Meltdown; By: Rajat Jhingan

Global Economic Crises – Expert Belief

Sub – Prime Crises.

The U.S. Housing Market Collapse.  Easy Access to credit.  Relaxed lending standards.  Inadequate regulations.  Complex Credit Derivatives.  The Housing Sector Market Collapse.
Economic Meltdown; By: Rajat Jhingan

Global Economic Crises
Sub prime Mortgage Crisis
Housing bubble Ballooned & then Burst FED lowered interest rates sharply since 2000 Easy credit encouraged weaker borrowers to assume mortgages

Excessive use of credit and debt leverage

Economic Meltdown; By: Rajat Jhingan

Global Economic Crises

Some Other View Points……Likely causes.

New Bank Capital requirements. Role of Credit Rating Agencies. Banks – Riskier Investment Decisions.

Economic Meltdown; By: Rajat Jhingan

Global Economic Crises

Some Other View Points……Likely causes.

Mark – to – Market Accounting Rules. Misleading Economic Statistics.

Economic Meltdown; By: Rajat Jhingan

Global Economic Crises
“The

Cocktail Crises”
Liquidity

Equity Crises Housing Burst
Economic Meltdown; By: Rajat Jhingan

Credit Crises

Global Economic Crises

First Ingredient – “L i q u i d i t y ”

Selling of Bear Stern. The Lehman Factor. Standards & Poors Rating. Stock Exchange Closures.
Economic Meltdown; By: Rajat Jhingan

Global Economic Crises

The Second Ingredient – “C r e d i t C r i s e s ”

  

Fannie Mae, Freddie Mac – “Nationalized”. Dramatical increase in LIBOR from 2 % to 6%. Effects on overnight inter bank borrowing. Collapse of 22 commercial banks all across United States.

Economic Meltdown; By: Rajat Jhingan

Global Economic Crises

The third ingredient – “H o u s i n g B u r s t ”

Loan given to Sub-prime borrowers. Banks unable to recover their loans. The decline of creditworthiness. Loss of Liquidity. Banks become insolvent – “22”.

Economic Meltdown; By: Rajat Jhingan

Global Economic Crises

Economic Crises – Enters India.
The collapse of global share markets.  FII tries to withdraw from Indian Markets.  Thus they stimulated bearish trend.  FDI was lower as compared to FII.  Corporate sector lost market value.  Panic amongst retail investors.  “C o s t - C u t t i n g ” – Job Cuts.

Economic Meltdown; By: Rajat Jhingan

Global Economic Crises

Economic Crises – Enters India.

Other Impacts.

The Correction in Real Estate

Sector.

Lack of infrastructure investments.

 

The Auto sector is badly hit.
Gradual decline in exports.

Economic Meltdown; By: Rajat Jhingan

Economic Meltdown; By: Rajat Jhingan