In the year 2008 US was hit by one of the worst economic recession it ever witnessed after the great depression. What started out as something that was seemingly isolated to the housing sector got blown into a full grown global crisis.
Some people feel that the time before the crisis was a fairly stable and a booming phase however this wasn’t very true. On the contrary between the period of 1970 and 2008, there were: 124 systemic banking crises; 208 currency crises; 63 sovereign debt crises; 42 twin crises; 10 triple crises; a global economic downturn about every ten years; and several prices shocks* . Small time deposits steadily grew from 1140 billion dollars in October 2006 to about 4500 billion dollars in November 2007. Large current deficits which rose from $398.3 billion (3.9% of GDP) in 2001 to $803.6 billion (6.0% of GDP) in 2006 , global imbalances and very lose monetary policies were some more characteristics of this period.
The surge of external finance in various forms such as export revenues, remittances, private capital flows that fed a consumption boom in advanced economies and a surge in investment and exports in the developing world led by China and other emerging economies. Overall, the increase in credit flows pushed the cost of capital down(DATA). Such a growth experience bred a sense of …show more content…
Interest rates in the US stood at just 1 per cent in 2003 which, in fact, was the largest deviation since the 1970s, however it is considered to be below 0% in real rate terms i.e including the effects of inflation for 31 months (October 2002 to APril 2005). This ensured that the 2001 recession was shallow and short-lived, but it sowed the seeds of the global recession of
Some people feel that the time before the crisis was a fairly stable and a booming phase however this wasn’t very true. On the contrary between the period of 1970 and 2008, there were: 124 systemic banking crises; 208 currency crises; 63 sovereign debt crises; 42 twin crises; 10 triple crises; a global economic downturn about every ten years; and several prices shocks* . Small time deposits steadily grew from 1140 billion dollars in October 2006 to about 4500 billion dollars in November 2007. Large current deficits which rose from $398.3 billion (3.9% of GDP) in 2001 to $803.6 billion (6.0% of GDP) in 2006 , global imbalances and very lose monetary policies were some more characteristics of this period.
The surge of external finance in various forms such as export revenues, remittances, private capital flows that fed a consumption boom in advanced economies and a surge in investment and exports in the developing world led by China and other emerging economies. Overall, the increase in credit flows pushed the cost of capital down(DATA). Such a growth experience bred a sense of …show more content…
Interest rates in the US stood at just 1 per cent in 2003 which, in fact, was the largest deviation since the 1970s, however it is considered to be below 0% in real rate terms i.e including the effects of inflation for 31 months (October 2002 to APril 2005). This ensured that the 2001 recession was shallow and short-lived, but it sowed the seeds of the global recession of