THE GLOBAL FINANCIAL CRISIS 2008

ABSTRACT:
Once Famous American Economist and stock broker of all time, Peter Sciff
quoted on the Financial Crisis of 2008 and said that “The United States is
like the Titanic, and I am here with the Life boat trying to get People Leave
the Ship , I see a real Financial Crisis coming for the United States.” But
still the one man and the then IMF chief Economist Dr. Raghuram Rajan
predicted the 2008 upcoming Financial crisis in the United States at the
Jackson hall, and was mostly criticized by the then head of the Federal
Reserve’s Alan Greenspan who mostly avoided Rajan’s remarks by saying
that U.S Economy is plunging at a correct rate and will not go down in the
next ten years . And that made him to be at the ‘TOP 25 PEOPLE TO BE
BLAMED FOR THE FINANCIAL CRISIS ’. The reality came to the dawn later
on in sept 15 2008, one of the largest and the strongest stock exchange of
the world (The New York stock exchange) of the United States of America
fell down and it led to the one of the severe and devastating market loss
of the centuries . The Global Economic Crisis of 2008 is plunged as a bright
example of limitless Pursuit of greed at the expense of caution , prudence
and Regulation, Several steps have been taken to prevent the Crisis at
that time but nothing could save America from being attacked by the one
of the serious crisis of all time. Those 3 words that devastated the lives of
more than hundred billion people in the U.S and the rest of the world is
‘Sub Prime Mortgages’. Now the question arises , How other countries
would have been affected by this Crisis and to what Extent ? and who to
be blamed for the largest crisis of these centuries ? , What is the cause
behind these Crisis ? SO FINALLY

THIS AMERICAN CARNAGE STARTS RIGHT HERE AND

STARTS RIGHT NOW

INTRODUCTION:
The Global Financial Crisis, which started in 2008, is the latest in the series of
economic crises to adversely impact world economies. Unlike the past few crises,
the current crisis has not spared any of the countries or market sectors, and has
devastated economies that were traditionally strong. While the world is slowly
seeing an end to the crisis, it is widely acknowledged that among the financial crisis
of the past hundred years, only the Great Depression of the 1930s had a more severe
and protracted effect on the world economy compared to the current economic
upheaval. The problems that were first noticed in the US subprime mortgage market
quickly spilled over into the real estate and banking sectors. From the financial
sector, it moved on to the real sector in the US market and then into the international
markets. The impact of the global crisis has been transmitted to the Indian economy
through three distinct channels, viz., the financial sector, exports, and exchange
rates. On the financial front, the Indian banking sector was not overly exposed to the
sub-prime crisis. While exports of both goods and services, still account for only
about 22 percent of the Indian GDP, their multiplier effect for economic activity is
quite large as the import content is not as high as for example in the case of Chinese
exports. Therefore, an export slump will bring down GDP growth rate in this year.
And the Third transmission channel is known as the exchange rate and as the Indian
Rupee has come under pressure, it has become very weak . The Indian economy
looked to be relatively insulated from the global financial crisis that started in
August 2007 when the ‘sub-prime mortgage’ crisis first surfaced in the US. In fact
the RBI was raising interest rates until July 2008 with the view to cooling the growth
rate and contain inflationary pressures. But as the financial meltdown, morphed in to
a global economic downturn with the collapse of Lehman Brothers on 23 September
2008, the impact on the Indian economy was almost immediate. Credit flows
suddenly dried-up and, overnight, money market interest rate spiked to above 20
percent and remained high for the next month. Therefore, it is prudent not to
underestimate the severity of the present crisis.

OBJECTIVES:
As for the global economic crisis of 2008 is concerned , this paper is to enhance the
outlooks of the devastating incident that shook the whole world with its everlasting
effect which could not only be as bad but also as for the worst effect concerned. It
shows how a mild financial blow not only wiped out the the United States but also
mildly affected the rest of the world . Rigorous meetings were called in the White
house to make a way to resolve it and get into the immediate affect . This paper also
states that the severity of the crisis and its effect on the other countries other than the
United states i.e. India . How India was affected by the severity of the crisis and to
which extent it shared the loss of the decade .

REVIEW OF LITERATURE :
This literature is on testing for the after effect that arised from the dated newspaper
Nov.8 2005 from the Washington Post which states that “Housing shares drag
Stocks down” . That time the U.S Market executives does not drag much attention
to this arising problem that led to be suffered later on . Starting with the opening
threat given by the then IMF Economist Dr. Raghuram Rajan , who predicted the
upcoming financial crisis but was ignored later on . As the rest part of the history is
concerned the study and further analysis made by the then former United States
Secretary of Treasury ,Mr. Henry Paulson and the then Charman of the U.S Federal
reserve and a noted Economist Dr. Ben Bernake and President of the United States
George W. Bush , the crisis slowed down but a little later it came back with a large
and most disastrous effect . By the help of this literature we will get to know about
the Sub Prime Mortgages and the process of lending of Banks that caused the most
unbelievable crisis of the decade .

DATA SOURCES :
I have been collecting this data from the different sources of the Wikipedia relating
to the Financial crisis and from the documentary related to it entitled “Panic – An
Untold story on the Global Financial Crisis 2008”. These sources tell that how bad
the crisis affected the whole United States and had its effects on other countries such
as Brazil , Germany , Russia , England and most profoundly the developing
Economy INDIA. To update the actual statistical survey of the secondary data that
is used to calculate the three sectors covering the Financial Sector , Exports and the
Exchange Rates which is this survey has become needful for the seminar. The
Methodology that i used here only to find out the way at which the Mortgage lender
companies got to taste the loss of the centuries and some even been protruded to be
at bankruptcy.

A GLIMPSE OF THE CRISIS APPROACHING:

People in United States enjoy their day everyday without of their knowledge that a
grave danger is approaching with the dark clouds wandering over it. Thwy do not
have a slightest sniff that Housing share Stocks would crumble so low and a small
mistake from the mortgage lenders banks would cost the nation in a days time most
devastating . Another factor – “The Sub prime Mortgages” has been the most
accumulating factor and the main reason behind the financial crisis . Thus this crisis
is otherwise known as the Sub Prime Mortgage crisis of 2008 . During the first half
of 2007 , The Telegraph newspaper once was spotted quoting that “Global Stock
Market Tumble as Sub- Prime Mortgage contagion Spreads ”. Thus it has been said
that in the early starting of the 2007 not only was a dark cloud for the unioted states
but for those all countries who have their greatest shares with the Largest stock
exchange of the world which is known as the The New York Stock exchange . Thus
it made a large bad effect on the India’s developing Economy which led to the
largest one day loss in the share market as the Dow Jones Industrial Average fell
to the 777.68 percent . This was the largest single day loss for the Industrial market
and the mostly the greatest for the Dow Jones . Policy interest rates and the bond
yield dropped at a highest rate to the lowest ever possible value and this out of the
expectation for the Indian Economy .

CAUSE OF THE CRISIS IN THE U.S :

In the starting period of the 1990s , countries had been following relatively loose
monetary policies which continued in the period following the dot corn bubble.
During this period, the United States faced a growing current account deficit which
was financed by capital flows from exporting countries. This global imbalance
contributed to the low interest rates in the United States and the resulting real estate
asset bubble. In addition, lenders relaxed their standards for mortgage loans and
financial innovations allowed them to mask the risk of their portfolios. Beginning in
2004, the United States Federal Reserve Bank started tightening the credit markets
by raising interest rates in response to rising inflation, which caused the crisis in the
sub-prime mortgage market. This quickly spread to the entire banking sector in the
United States and other advanced economies, resulting in the liquidation of several
major banks. The banking sector in the advanced economies is estimated to have lost
up to $2.8 trillion between 2007 and 2010. The contagion in the banking sector
caused a near shutdown of the credit markets and the United States economy went
into a severe recession which was reflected in the securities markets. The crisis was
not limited to the United States market - it quickly spread to all other markets,
including emerging markets, through both financial channels (i.e., flow of funds)
and real channels (i.e., foreign trade).

Table 1 – Economic Indicators for the selected markets 2005-10

GDP(Annual 2005 2006 2007 2008 2009 2010
% change)
World 4.48 5.09 5.17 3.00 -0.80 3.10
Advanced 2.63 2.99 2.72 0.56 -3.20 1.52
Economies
Emerging 7.09 7.84 8.31 5.99 2.10 5.08
and
developing
Economies
Developing 9.03 9.83 10.59 7.50 6.50 7.35
Asia
Germany 0.73 3.18 2.52 1.25 -4.80 0.34
United 2.17 2.85 2.56 0.74 -4.80 0.91
States
United 3.05 2.67 2.14 0.44 -2.50 1.52
Kingdom
Current account balance (% of GDP)
2005 2006 2007 2008 2009 2010
Advanced -1.18 -1.26 -0.92 -1.26 -0.66 -0.40
Economies
Emerging and 4.18 5.20 4.30 3.88 2.02 2.84
developing
Economies
Developing 4.16 6.09 7.03 5.90 4.99 5.24
Asia
Germany 5.15 6.13 7.52 6.41 2.91 3.61
United States -2.62 -3.31 -2.70 -1.73 -2.04 -1.95
UnitedKingdom -5.92 -6.00 -5.16 -4.89 -2.59 -2.21

Unemployment (% of total labour force)

Advanced 6.20 5.79 5.40 5.80 8.20 9.89

Economies
Germany 10.62 9.83 8.38 7.40 8.02 10.69
United 4.79 5.39 5.40 5.55 7.65 9.33
Kingdom
United 5.08 4.62 4.63 5.81 9.26 10.15
States

Trade Volume of Goods and Services and the annual % change

World 7.80 9.10 7.33 2.95 -12.30 2.47

Table 1 shows the economic indicators for selected markets during 2005-2010. The
deterioration in the economic conditions is evident in all the indicators and in all
markets. The world economy, represented by the change in Gross Domestic Product
(GDP), was growing at a healthy rate of about 5% from 2005 to 2007. In 2008, the
year when the financial crisis started, the GDP grew at a rate of only 3%. In 2009,
when the crisis was at its peak, the world economy contracted by 0.8%. For 2010,
the growth rate is projected to be 3.10%, well below the average growth rate that
existed prior to the crisis. Similar trends are evident in all the markets shown in the
table. The advanced economies, including United States, United Kingdom and
Germany, were growing steadily prior to the crisis, but deteriorated significantly in
2008 and 2009. These economies are projected to grow in 2010, but at a very small
rate. The emerging economies as a group and developing Asian countries were
growing at impressive rates in the years leading up to the financial crisis, but the
growth rates were curtailed in the subsequent periods. Although they are projected to
grow faster than the advanced economies in the next few years, it will be some time
before they can match the growth rates they had prior to the crisis. There was a
moment in the between crisis moment when the world’s third richest man and the
CEO of Berkshire Hathaway WARREN BUFFET was at the moment in saving a
moment of the crisis but he turned that offer down at the last moment . As Lehmann
brothers was about to break and loose to fall , the CEO finally gave up and contacted
Warren Buffet and asked with a offer to invest in that company on a new basis so
that part of the Economic crisis could be saved , but after noticing some glitches in
the investing and the shares of the people he turned up the offer at the last moment
saying that it could make him loose more.
The volume of the trade in goods and services across the world was significantly
affected by the crisis. It was growing at a rate of 9.1% in 2006. It fell to 2.95% in
2008, and shrank by 12.30% in 2009. Contraction in trade volume across countries
can exacerbate global imbalances and cause financial distress in firms that depend
on international trade for selling their output and for sourcing their resources. This is
also reflected in the unemployment numbers reported for the different markets. The
unemployment rate for the advanced economies was projected to rise to 8.20% in
2009, and 9.29% in 2010. Such high unemployment rates for protracted periods in
the US and the UK are unprecedented in the post-world war period.

Impact of the crisis on Emerging markets :

Several Emerging Market or the EMEs were severly affected by the Financial crisis
that originated in the advanced Economies and are also crumbled to the ground by
them. EMEs had been growing at very high rates prior to the crisis. They were able
to finance their growth by borrowing in global capital markets, and by exporting a
growing part of their output to the advanced economies. This made them very
vulnerable to the availability of credit and the demand for their output. When the
crisis started and a severe credit crunch ensued in the advanced economies, it
became difficult for the EMEs to continue to finance their foreign debt. Eventually,
the liquidity crisis transferred from the advanced economies to the domestic sector
of the EMEs and many of them had problems borrowing in the domestic capital
markets. Since the advanced economies contracted, the EMEs experienced a decline
in the growth of their exports. In the last few years , it was assumed that EMEs had
sufficiently decoupled from the rest of the world and that they could withstand
downturns in the advanced economies. But the events of the last two years have
shown that EMEs and developing countries are still linked to the advanced
economies of the world, albeit to a lesser extent compared to the economic
interdependence among the more advanced economies. Dooley and Hutchinson find
that while the emerging markets were detached from the US at the beginning of the
crisis and were sufficiently insulated, the economic and financial linkages
reappeared subsequently and adversely affected them in both the real and financial
sectors.

Global Response To the Crisis :

Many world economies have been adopting different reforms and the different
Economic policies to response to the shocks caused by the crisis. These initiatives
include tax rebates and tax cuts at both the corporate level to spur investment, and at
the personal level to increase consumption and to bail out households with
diminished wealth and income. While most of the economic indicators portended a
bleak outlook for the world economy and for individual markets, the severity of the
crisis in the affected countries and their responses to tackle the problems were not
uniform. While the advanced economies either contracted or had no growth during
the crisis, the emerging market economies continued to grow, although at a lower
rate. The impacts of the crisis on the financial and real sectors of the economy were
also not uniform across the countries. Some of the Economies that were structurally
strong were better able to withstand the crisis while the others went on a bailout
mission with the extensive and the multiple stimulus packages to overcome the
adverse effects on the domestic economies. The countries that did not adequately
penalize risky behavior and those that had high rates of consumption were more
severely affected. One of the EMEs that performed relatively well during the
financial crisis and recovered quickly from its effects was India. The strength of the
economy, the structure of regulation in the financial markets, and the timely and
appropriate responses to the financial crisis by the monetary authorities in India
allowed the country to contain the adverse effects of the crisis and continue on the
expansionary path it was on prior to the crisis.
COMPANIES AFFECTED BY THE CRISIS:

Announcemen Acquired Company Acquirer Type of Value(USD,EUR

t Date company O GBP)
acquired
January 3, Ownit Mortgage Chapter 11 Mortgage
2007 Solutions Inc bankruptcy lender
and
Liquidation
January 29, American freedom Chapter 11 Mortgage
2007 mortgage bankruptcy lender
and
 Liquidation
April 2 , 2007 New Century Chapter 11 Mortgage
bankruptcy lender
and
liquidation
September 28, Net Bank ING Direct Savings $14,000,000
2007 and loan
associatio
n
April 1 , 2008 Bear Streams, New JP Morgan Investmen $2.2×10^9
York city Chase, t bank
New York
City
July 1, 2008 Countrywide Bank of Mortgage $4×10^9
Financial, Calabasas America , lender
, California charlotte
and North
Carolina
September 7, Fannie Mae and Federal Secondary $2×10^11
2008 Freddie Mac Housing mortgage
Finance market
Agency
September 14, Merill Lynch , New Bank of Investmen $4.4×10^10
2008 York City America , t Bank
charlotte
and North
Carolina
September 16, American United Insurance 1.82×10^11
2008 International Group , states company
New York city federal
governmen
t
September 17, Lehmann brothers , Barclays Investmen 1.3x 10^9
2008 Newyork city t bank

Thus there are different banks and the mortgage lender companies that are affected
the most by the deadliest crisis of 20th century . But the above listed are the some of
the Mortgage lender companies and are the some of the most renowed Investment
Banks of the united states that crumble over the slightest move in the New York
stock market . and thats why just and only just these American investment banks and
the some of the lender companies get to the deadliest loss of the centuries.
This above table shows the list of the companies that are affected by the crisis of
2008 in the united states of the America but there are more than 100 ever banks
companies all over the world who have suffered at a large rate dur to the crisis
effect.

IMPACT OF THE CRISIS IN INDIA –

INDIAN ECONOMY PRIOR TO THE CRISIS :
From the year 1991 India started to implement a policy of Economic
liberalization that opened the Indian Market to the outside world in different areas
and to the different regions of the country. Over the Decades , India has witnessed
many dramatic changes in economic policies and regulation of markets and that
made it the most powerful and the emerging economies of all time. The Bilateral
trade with the rest of the world has grown during this period with the rest of the
world and this has played the most important part in significant increase in GDP of
the country. The Liberalization policies of the government made during the 1990s
has attracted the Growth of Foreign Direct Investments (FDIs) in various industry
sectors and portfolio investments in the Indian capital Markets. Regulatory reforms
introduced in the capital market have increased transparency and that helped to
attract the portfolio investments from the foreign investors . But still prior to the
financial crisis where macroeconomic and the financial indicators sceptically
pointed to a strong and the vibrant economy.

INDIAN ECONOMY DURING THE CRISIS :

In the case of India, the deterioration of all the macroeconomic and financial
indicators occured in 2008-09. Industrial production increased by 2.7%, a significant
drop from the 9.2% average growth in the previous four years. This contributed to
the economy growing at only 6.7%. The BSE Index, which had been rising over a
protracted period, lost 37.9% of its value, adversely affecting household wealth and
the ability of businesses raising money in the capital market. At the same time,
rising commodity prices in world markets contributed to a sharp increase in inflation
rates. As the advanced economies started growing at slower rates and in some cases
contracted, India's bilateral trade stagnated in 2008-09, with exports growing at only
5.4% and current account deficit increasing to 2.6%. The tightening in the credit
markets in advanced economies made it more difficult for Indian businesses to
continue borrowing in external markets. The size of the external debt did not change
much from 2007-08 to 2008-09. In fact, the Indian Rupee had depreciated against
many of the major foreign currencies and the debt service cost was rising. To rectify
the problem, India intervened in the foreign exchange market to support its currency
using its foreign reserves, which declined from US$ 309.7 billion in 2007-08 to US$
252 billion in 2008-09.
The global financial crisis which originated in the advanced economies, spread to
India and other EMEs through financial and real channels. Given the strength of its
economy, India should have been able to withstand the adverse effects of the
financial crisis and avoid any serious and long-term consequences to its economic
growth. However, its increasing dependence on bilateral trade with other countries
and on financing from external markets makes it vulnerable to economic shocks in
the global economy. Although India was not immune to the contagion effects of the
global financial crisis, it was one of the few countries to recover quickly from the
slowdown in the economy and appears to be back on the growth trajectory it was on
prior to the crisis.
The contagion effects of the financial crisis spread from the advanced economies to
the Indian market in three distinct channels - the financial channel, the real or trade
channel, and the confidence channel.

INDIA’S POLICY RESPONSE TO THE CRISIS:

Subbarao, Misra and Thorat present the various monetary and fiscal policy
initiatives implemented by the Indian government and its agencies in response to the
global financial crisis and its effects on the domestic economy.26 In its role as the
principal regulator of the financial markets in India, the primary responsibility of the
Reserve Bank of India (RBI) is to ensure the orderly functioning of the credit and
foreign exchange markets in India. The monetary policy response of the RBI was
aimed at containing the contagion effects of the financial crisis from the advanced
economies by ensuring sufficient liquidity in the credit markets. On the fiscal side,
the government's policy responses were aimed at protecting businesses and groups
that were directly affected by the crisis. This was accomplished through relaxation
of some onerous restrictions, tax subsidies and strengthening of social safety-nets.
1. Monetary Policy Responses
The goals of the monetary policy initiatives were three-fold: to provide
sufficient liquidity in the domestic market, to provide dollar liquidity for
businesses financing in the external markets, and to ensure flow of credit to
those industry sectors that were productive. Following the rapid expansion in
the first half of the decade, the monetary policy was tightened in the second
half. This policy had been in place till August 2008 when the initial effects of
the crisis started impacting India in the form of reduced credit availability.
Banks became cautious and started cutting back on their new loan offerings.
To provide more liquidity to the credit markets, the RBI gradually reduced the
repo rate from 9% (in August 2008) to 4.75%, and the reverse repo rate from
6% to 3.25%.27 Table 4 shows the call money rates (an indicator of the
borrowing rates) in India for the last ten years. From 2000-01 to 2004-05, the
rates were declining during the expansionary phase. To moderate the
expansion, monetary tightening was put into effect between 2005-06 and
August of 2008, when the rates increased. In 2009-10, the call rate was
reduced sharply to 3.22%, reflecting the RBI's injection of liquidity into the
market. In effect, this expanded the money supply in India by providing
incentives to banks to increase their loan portfolios. The cash reserve ratio (or
reserve requirement), which had been at 7.5% in 2007-08, was also reduced to
5%, allowing the multiplier effect to expand the money supply. Along with
this, the Statutory Liquidity Rate, a liquidity requirement for commercial
banks, was also relaxed to allow them to provide more credit. To facilitate
availability of sufficient dollar liquidity, the RBI intervened in the foreign
exchange markets to support the Indian Rupee. In the process, the foreign
reserves held by India declined from US$ 309.7 billion in 2007-08 to US$ 252
billion in 2008-09. The rising dollar had been increasing the debt service costs
for businesses that had been using external financing. By stabilizing the value
of the Indian Rupee, RBI was attempting to manage the exchange rate risks by
the borrowers. Further, it initiated currency swaps with businesses that were
exposed to United States dollar payables, and extended export credit finance to
them. With the limited availability of United States dollar funding in external
markets and increased risk aversion on the part of lenders, ceilings on rates at
which businesses could borrow in external markets were relaxed. Finally, the
rates on Eurodollar deposits in India were raised to attract more funds from
foreign individual investors. The RBI, in conjunction with the government,
implemented policies that provided additional credit facilities specifically for
Small and Medium Enterprises (SMEs) that were particularly affected by the
 non-availability of credit. Banks were allowed to reclassify certain
nonperforming assets in a way that allowed them to refinance borrowers who
were behind in their debt service payments. A bailout package was
implemented in the agriculture sector in the form of a farm-loan waiver that
allowed farmers to continue operations facing a mounting debt burden.
2. Fiscal Policy Responses The focus of the fiscal policy responses of the Indian
government to the financial crisis was to stimulate demand for the country's
output and to bailout those industries and groups that were most vulnerable to
the crisis. Starting in December 2008, the government introduced three
stimulus packages in the span of four months that lowered tax rates and
increased tax subsidies, increased capital expenditures and government
spending, and provided incentives that encouraged growth in consumption and
demand. Specifically, the government announced plans for additional public
spending in capital expenditure projects, provided government guarantees for
infrastructure spending, and expanded credit for SMEs and exporters. The
agriculture industry, which supports a majority of the population, was
particularly affected due to rising oil and fertilizer prices, and due to failed
monsoons. The loans that were in default in the farming sector were waived by
the government. The stimulus packages also included tax rebates and subsidies
for some of the affected sectors of the market. Finally, a revised pay structure
for all government employees implemented salary increases that raised the
disposable income for a significant part of the labor force. Subbarao estimates
the size of the fiscal stimulus amounted to about 3% of the GDP.

CONCLUSION-
According to the FED , the lowering in the Housing rates were the root reason
behind the Recession of 2008 . But to make or revive a cure to solve this major
problem of this , once American economy came up a better solution for this
problem i.e. to appoint Henry Paulson ,the former head of Goldman Sachhs to be
the United states Secretary of Treasury. And here comes to the turning point
where U.S also changed the head of the FED and appointed Dr. Bern Bernake to
take the chair as early as possible and they will also bring a better solution to this
problem
Evaluation of Policy Responses Starting in 1991
, India had been implementing economic reforms that were aimed at moving from
a centrally-planned economy to a market based economy. In the process, it had
been cautious in opening up its markets and allowing risky innovations in the
financial markets. While encouraging the private sector to play a more dominant
role in the economy, it was also in the process of strengthening and streamlining
the regulation of markets. The banking sector, which plays a pivotal role in the
savings and capital formation functions in India, was heavily regulated to limit
overly risky behavior by the participants. Consequently, while the global financial
crisis is having a protracted and devastating effect on most of the economies of
the world, its impact on the Indian economy is not that severe. The strength of the
Indian economy along with the timely and appropriate monetary and fiscal policy
responses by the government helped manage the adverse effects of the crisis.
Mohan estimates the monetary policy responses to the crisis injected liquidity that
amounted to about INR 4,900 billion or 9% of GDP.29 On the fiscal side, the
spending initiatives amounted to INR 2,928 billion, and tax subsidies cost INR
1,600 billion. These policy responses stabilized the financial markets and
facilitated a quick recovery of the economy. One negative consequence of the
various stimulus packages is that the fiscal deficit is at 11 percent of GDP and
will continue to be at this level for some time. This limits the policy options
available to the RBI to manage future shocks to the economy in the near term.
Known as the Three Muskeeters of the Global economic crisis 2008 Ben Bernake
, Timothy Geitner and Henry (Hank Paulson ) mostly subguided the economic
crisis and intended find an alternative solution to this problem . These various
meetings were chaired by the then president of the United States- George W.
Bush who not only played a main role in turning the tides of the Economic crisis
and bringing it to a speedy Economic halt . This paper has been most efficiently
prepared to entangle the most past deeds of the crisis and revisit them in a most
efficiently way. Aftermath of the crisis to the month of the june 2009 still the
American Economy was at a halt as the unemployment rate was still above the
rate of the 9%. Recent economic history has taught us that financial crises that
simultaneously affect several economies occur frequently, and that prudent
policies and appropriate responses by monetary authorities help in managing the
crises. However, the task of containing the adverse effects becomes more
challenging when all the economies of the world are affected by the crisis. The
current global financial crisis, which started in 2008, has been adversely affecting
all the world economies and the magnitude of its impact is exceeded only by that
of the Great Depression of 1930s. In response to the crisis, the various national
monetary authorities and international financial organizations have implemented
fiscal and monetary policy initiatives to alleviate the problems and soften the
impact on the affected sectors. The global financial crisis has had a more severe
impact on the advanced economies compared to the rest of the world. The
economic indicators in the United States and the European Union countries point
to a severe contraction in these markets. At the same time, the slowdown in the
emerging markets has been smaller. Within the emerging markets, countries such
as India, China and Brazil have even managed to expand during the crisis, albeit
at a lower rate compared to their growth prior to the crisis. They have also
successfully avoided a protracted slowdown and are projected to achieve higher
growth rates. In the foreign exchange market, the Indian Rupee has rebounded
against currencies of the major trading partners. The fiscal stimulus provided by
the government has helped cushion the decline in private investment and
consumption in the real sector. Although preliminary estimates of the
nonperforming assets of banks have been rising, they are still at manageable
levels. In the meantime, industries that were facing rising unemployment in 2008-
09 have been reversing the trend. The stock market, which is an indicator of the
strength of the economy, has risen by 80% in the first three quarters of the current
fiscal year (2009-10), after falling by 38% in the previous year. Finally, IMF's
consensus estimate for the GDP of 7.7% and 7.8% for 2010 and 2011,
respectively, is evidence that India has recovered from the global financial crisis
and is back on the growth trajectory. Although India has been liberalizing its
markets since 1991, it has adopted a cautious approach by opening up its markets
slowly and implementing reforms after studying their effects on the domestic
market. Unlike many other emerging economies, the banking sector in India is
still highly regulated and continuously monitored. The Reserve Bank of India has
at its disposal a number of tools to control the money supply and to infuse
liquidity as needed. The size of its foreign reserves allows India to intervene
effectively in the foreign exchange market to support its currency. To Conclude
that once the great Economist of all time PAUL SAMUELSON was quoted
saying “WHAT WE KNOW ABOUT THE GLOBAL FINANCIAL CRISIS IS
THAT WE DO NOT KNOW VERY MUCH.”

BIBILOGRAPHY:
1. Editorials related to the date of the Financial crisis 2008 in
THE NEW YORK TIMES and the WASHINGTON POST
2. Refering to the documentary on the global financial crisis 2008
entitled – : PANIC – AN UNTOLD STORY OF THE
GLOBAL FINANCIAL CRISIS 2008 .
3. Refering to the K G Vishwanathan –
GLOBAL FINANCIAL CRISIS AND ITS IMPACT ON
INDIA
4. Federal Reserve annual report on the Financial crisis 2008
5. Other internet blogs ...