A Financial Downturn

A FINANCIAL DOWNTURN

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THE FINANCIAL CRISIS—2007

What is Financial Crisis? – I don’t think there is any universal definition to describe what it is theoretically. But it may be called upon as – A crisis in the financial sector and the financial markets. Rather than just another term it may be regarded such a situation in which where some of the financial institutions or assets lose a large part of their value. The Global Financial Crisis of 2007—2008 initially referred to in the media as a “credit crunch” or “credit crisis”, began in August 2007, when a loss of confidence by investors in the value of the securitized mortgages in the United States resulted in a liquidity crisis which prompted a substantial injection of capital into financial markets by the United States Federal Reserve and the European Central Bank. The TED spread an indicator of perceived credit risk in the general economy, spiked up in August 2007, remained volatile for a year, then spiked even higher in September 2008. (Wakefield 2008; Kilmister 2008) The current crisis represents the most significant set of economic events internationally since the decade spanning the mid-1970s and the mid-1980s. In the space of just 18 months, this crisis has become one of the greatest assaults on global economic stability to have occurred in the three-quarters of a century. It is not simply a crisis facing the world’s largest private financial institutions; it is more than a crisis in the credit markets, debt markets, derivatives market, property markets and equity markets. It is a financial crisis which has become a general economic crisis, which has continued to become an employment crisis with lots of jobs at stake and this in turn has produced a social crisis leading to a political crisis in many countries, United States and UK in particular. This is a crisis of both developed and developing nations. The prevailing neo-liberal orthodoxy of the past 30 years that has underpinned the national...