Economics & Business International Affairs

The year 2008—worst for the global economy

KARACHI: The year 2008 proved to be the worst for global economy, as the year saw even giant multi-nationals going bankrupt, unleashing joblessness and the rate of unemployment skyrocketing. The US sub-prime loan gave rise to the financial crisis. Sub-prime loans are given to those, who are under financial stress and as they were given financial help at an astronomical rate of interests, its payment turned impossible for them, which kept piling up and the loans continued swelling up.

In March 2008, US financial organization Bear Stearns was the first to get hit, which later on was sold to JPs Morgan for $29 billion. Following that the US administration provided $300 billion bailout package to the Federal Housing Management so that the mortgaged securities could be bought.

Later on, the Federal Department bought for $200 billion housing loans providing Fenniman and Frederick Mack. Despite having spent $500 billion, the imbroglio could not be brought under control, when in September 2008 US Investment Bank Leman Brothers formally announced its bankruptcy, followed by several US financial institutions went tumbling down in the tremors.

Global financial management and investors’ consultants, Invest Company Merrill Lynch got struck by financial crunch, which resulted in Bank of America buying it for $50 billion, while the US government permitted the amalgamation of Goldman Sak and Morgan Stanley and provided loans on hard terms under bailout package of $150 billion for salvaging the largest US insurance company AIG.

Investors’ confidence could not be restored even after providing of $700 billion bailout package for surmounting the financial crisis, which saw the global stock markets also sinking.

Following the US, all other countries in the world began announcing bailout packages for overcoming the great crisis, which included Britain’s $656 billion, Germany’s $643 billion, China’s $586 billion and Japan’s $20 billion allocated for surmounting the deep recession menacing the world economy.

This crisis forced except Pakistan, all other countries in the world cutting down their rates of interest to record levels US, of them US 0.25 percent, Japan 0.1 percent, Britain 2 percent, China 5.31 percent and India after slash 7.5 percent.-SANA

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Haroon Akram Gill

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