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The Mumbai Sensex was down from a high of 20,301 on 1st January, 2008 to 13, 531 on 15th September 2008. The lowest was 7697 on 27th October, 2008.
Capital flows
Immediate Impact
Global stock market capitalization had declined by 41% during 2008, from USD 55.2 trillion to USD 32.6 trillion. The international labour organization (ILO) has predicted loss of 50 million jobs on worldwide basis.
Lending to borrowers with a weak or substandard credit history Sub-prime loans include the financing of homes,cars, credit cards etc. Lower Credit Score FICO less than 620 (Fair Issac Corporation)
German Hyperinflation
Forewarning Signals
Complacency and over optimism contributed to the progressive deterioration in liquidity and consequent resort to leverage unbridled leverage to such an extent that hedged finance became
Declaration of summit on financial markets and the world economy, Nov. 2008, Washington.
Root Cause of Current Crisis:
During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.
- Cheap money policy all over the world. - State intervention through the central banks in all financial markets. - Banks making an all out effort to preempt large scale insolvency and loss of confidence. - Fiscal stimulus to expenditures in the financial sector and also subsidies and guarantees on a large scale between governments and market participants. - Other measures - Protectionism - Innovation through public-private partnerships - Enhancement of IMF resources
Within a week of U.S. joining the G20 declaration to name and shame the
Year of Bailouts
Questions?
Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning Albert Einstein
Using tax payers money for providing bonus during crisis and now bailout from losses Tinkering with market forces without regulation
The epicentre of the earthquake has shifted from the financial system (Wallstreet) to the working system (Mainstreet) The economy would need four to five percent of GDP, which is basically saying $600 billion to $700 billion of stimulus
- George Bush
Under socialism the government took over the banks and in capitalism banks took over the governments.
What choice does the world have if capitalism is on its deathbed and socialism has been a tested failure?
Swedish Model
Sweden has been categorized as middle way between a capitalist economy and a socialist economy. Characteristics: Achieving high levels of social equality without stifling entrepreneurship. Low barriers to free trade. Privatization alongside competitive public services.
This is not an easy task and it will require both diplomacy and
economic cunning to put it past the U.S.
Contd
Mumbai Sensex
Soars 2,111 Pts, Sharpest One-Day Rise Ever By Any Index In World
Source - Times of India Date - 19/05/2009
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