Global Financial Crisis Ppt

Pree Pr eent nted ed by by::

Titles you can't find anywhere else

Try Scribd FREE for 30 days to access over 125 million titles without ads or interruptions! Start Free Trial Cancel Anytime.













Outline of the Presentation y y y

y y y y

What is Recession? What is Financial Crisis? The Genesis of the current problem Impact on US Causes of Sub-Prime Crises Economic Imbalance Impact of the th e Crises

y y y y

Effects on Pakistan Current scenario across the globe Alternative View Conclusion















What is

Recession?

A recession is defined as a period of time when the economy contracts (negative economic growth) for 2 consecutive quarters. A recession is characterized characterized by y

Lower Output

y

Lower investment

y

Higher Unemployment















What

is a Financial Crisis?

The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. y

In the past financial cri crises ses have been generated generated by combination of factors such as :



y

Overshooting of markets markets

y

Excessive Excessive leveraging leveraging of debt, and credit booms

y

Miscalculations of risk















WHAT HAPPENED? Low interest rates, high leverage leverage and overconfidence led to the creation of bubbles which then burst««.

y

It all started a decade back with a booming housing market in America.

y

The boom was later fueled by expansion expansion of liquidity in the system in the form of Mortgaged backed backed Securities and Collateralized Debt 















Effective Federal Funds Funds Rate, Rate, June 1954 - Jan 2010 2010 nterest I nterest 20

15

10

5

Rates have gone from 2% to 20% and then down to 0.12%, They have nowhere to go but up now«..

















Sub-prime Mortgage Crisis y

Mortgage brokers and Mortgage Lenders were more than happy to look for anybody and everybody who wanted a mortgage (Which in simple terms means home loan).





























y

y

The value of CDO started s tarted going downward. It was unable to pay neither the capital nor the returns. During the year 2007, the balance sheet and profit account of investment bankers, bankers, banks & financial institutions was favorable favorable and





























y

People were were buying buyin g as if there was no tomorrow tomorrow.. In year 2005, boom in economy was halted. In year 2006, there was marginal increase in property prices.













































US Housing

Bubble















IMPACT

ON US



































































































































































































What ntervened I ntervened

Did Governments Do?

in order to prevent a systemic collapse and an economic depression«««.



Governments responded swiftly and decisively to save the system



Central banks stepped in and provided liquidity to the banking system allowing it to keep functioning



Expanded the money supply Governments provided bailouts for major financial institutions to





























Effects on Developing Countries y

Trade And Trade Prices: y

Growth in China and India has increased imports and pushed up the demand for copper, oil and other natural resources, which has led to greater exports and higher prices, including from African countries. Eventually, growth in China and a nd India is likely to slow down, which will have knock on effects on other poorer countries.















y

Foreign Direct Investment (FDI) And Equity Investment: These will come under pressure. W hile hile 2007 was a record year for FDI to developing countries, equity finance is under pressure and corporate and project finance is already weakening. The proposed Xstrata takeover of a South African mining conglomerate was put on hold as the financing was harder due to the credit crunch. y

y

Commercial Lending: Banks under pressure in developed countries may not n ot be able to lend as much as they have done in the past. Investors are y

















Aid:

y

y

Aid budgets are under pressure because of debt problems and weak fiscal positions, e.g. in the UK and other European countries and in the USA. W hile hile the promises of increased aid at the Gleneagles summit in 2005 were already off track just three years later, aid budgets are now likely to be under increased pressure.















Worl Wo rl

onomii onom

er cent cent (%)

8 7 6

r owth owth

r owth, owth,

-

nd

r ojecti ojections ons f or

&















Declaration of the Summit taken place in November November 2008: 1) To enhance cooperation among the nations and work together

to restore restore global growth and achieve needed reforms in the















Impact y

Capital y

on Pakistan

Flows and W orkers Remittances: A stressed international economic environment has held back Foreign Investment as it posted a decline of 47.5 per cent during the first ten months of 2008-09















y

External

y

Financing:

The global crisis has restricted restri cted Pakistans ability to tap the international debt capital markets to raise funds.

















Fiscal

Year 2008-09















Current Scenario Across the Globe:















Alternative

View















Governments

and Central Banks around the world must be active in















Conclusion















Global Financial Crisis Ppt

Recommend Documents