Global Financial Crisis II

7/28/2019 Global Financial Crisis II

1/14

Global Finance Crisis


2/14

PRESENTATION OUTLINE

Meaning of Global Finance Crisis

Over view of Global Finance crisis

Consequences- U.S.A

- UK

- India


3/14

GLOBAL FINANCE CRISIS

The global financial crisis of 2008 is theworst of its kind since the Great Depression

Began with failures of large financial

institutions in the United States

Morgan Stanley, Goldman Sachs, Merrill LynchDeutsche Bank ,Barclays.

Rapidly evolved into a global crisis resulting in anumber of European bank failures


4/14

MEANING OF GLOBAL FINANCIAL CRISIS

The term financial crisis is applied broadly to

a variety of situations

Usually, some financial institutions or assets

suddenly lose a large part of their value

Banking Panics (and recessions)

Stock market crashes

Bursting of financial bubbles

And biggest organizations


5/14

September 7, 2008:Federal takeover of Fannie

Mae and Freddie Mac

September 14, 2008:Merrill Lynch sold to Bankof America amidst fears of

a liquidity crisis andLehman Brothers collapse September 15, 2008:Lehman Brothers files for

bankruptcy protection

September 16, 2008:Moody's and Standard andPoor's downgrade ratings

on AIG's credit onconcerns over continuing

losses to mortgage-backedsecurities, sending thecompany into fears of

insolvency.

September 17, 2008:The US Federal Reserve

loans $85 billion toAmerican International

Group (AIG) to avoid

bankruptcy.

September 19, 2008:Paulson financial rescue

plan unveiled after avolatile week in stock and

debt markets.

September 25, 2008:Washington Mutual wasseized by the Federal

Deposit InsuranceCorporation, and its

banking assets were soldto JP Morgan Chase for

$1.9bn.

September 29, 2008:The House rejected bail-out bill, DJIA down 7% October 3,2008: The

House pass the bail outbill

Sep-08 Sep-08 Sep-08 Sep-08 Sep-08 Oct-08

GLOBAL FINANCE CRISIS- "Red September"

Created by Robin Thieu, 2008 Fall


6/14

Banking Panics (and recessions) Commercial banks suffer a sudden rush of with drywalls

by depositors, this is called a bank run

September 7, 2008:

Two United States Government sponsored enterprises(GSEs), Fannie Mae (Federal National MortgageAssociation) and Freddie Mac (Federal Home Loan

Mortgage Corporation), into conservator ship run byFHFA

September 14, 2008

Lehman Brothersfiles for bankruptcy.

Sale ofMerrill Lynch to Bank of AmericaSeptember 16, 2008

AIG faces severe liquidity crunch

Financial institutions lost a large part of their value

incoming days and weeks


7/14

1 year ago RBS paid $100 billion forABN Amro.

For this amount it could now buy:

Citibank$22.5 billion

Morgan Stanley$10.5 billion Goldman Sachs $21 billion

Merrill Lynch $12.3 billion

Deutsche Bank$13 billion

Barclays $12.7 billion

And still have $8 billion change......with which it would be

able to pick up GM, Ford, Chrysler and the Honda F1 Team.

WHAT`S HAPPENING IN RECENT YEAR


8/14

IMMEDIATE EFFECTS OF CURRENT CRISIS

IN THE UK

Unemploymentincreased by164,000between Mayand August 2008; almost a 10 % rise from 1.63

million Most hard hit is London where number of jobless

looking for jobs increased by42 % in September2008

Some estimates put 1.5 million additionalunemployment generatedby end-2010 leading toan unemployment rate of10% from current5.7 %.


9/14

IMMEDATE EFFECTS OF CURRENT CRSIS

IN THEUSA Slowdown in GDP

Current 2008 projection 1.6 % (down from 2.8 %

projection in April 2007) 2009 projection: 0.06 %

Consumer confidence lowestsince 1978

October 2008 consumer sentiment index: 57.5

from 70.3 in September Construction activity much worse: Q208 new

constructions starts are 40 % less than post 9/11(Q401)


10/14

IN INDIAN..??

STOCK MARKETDOWNINDIAN CURRENCYVALUE 1$=49.89

IT PROJECTS

INFLATION RATE [HIGHEST IS 12.6%]

GDPTOWARDS DOWN

INCREASING FUEL, METAL AND FMCG GOODS


11/14

11

India: Vibrant Capital Market

India is among the

major destinations

across the globe for

inflow of US Dollar

Sensex has risen

20 times in the

period 1990-2007

SensexThe Bombay Stock Exchange index rise 20 times from 1990s to

reach 20,000 mark in November 2007.

FIIs have infused

large investments

into the Indianstock market

Encouraging

industry

performance

Increased local

investors

confidence

Emergence of

industry and

confidence of local

investors along

with the FIIs has led

to upsurge of the

Sensex

0

5000

10000

15000

20000

25000

1-Jul-97

1-Jan-98

1-Jul-98

1-Jan-99

1-Jul-99

1-Jan-00

1-Jul-00

1-Jan-01

1-Jul-01

1-Jan-02

1-Jul-02

1-Jan-03

1-Jul-03

1-Jan-04

1-Jul-04

1-Jan-05

1-Jul-05

1-Jan-06

1-Jul-06

1-Jan-07

1-Jul-07

1-Jan-08

11 December2007 Crossed

20,000 mark

07 February 2006

Crossed 10,000 mark30 December 1999

Crossed 5,000 mark


12/14

12

India: Fastest Growing Free Market Democracy

GDP Growth Forex FII Flow FDI Per Capita Inflation

1990 4.9 % < USD 1 billion USD 1 million(1993)

USD 97 million USD 390 9 %

2008* 8.7 % USD 309 billion ason Mar 28, 2008

USD 16.1 billion

in 2007-08

USD 12.7 billion in

2007-08 till

December (USD 16

billion in 2006-07)

USD 740 6.4 %as onJAN 15, 2009

Source: Times of India, RBI, DIPP, Indian Budget, Rediff* Annualized data used to show comparison with 1990
http://epaper.timesofindia.com/Daily/skins/TOI/navigator.asp?Daily=CAP&login=defaulthttp://rbidocs.rbi.org.in/rdocs/Wss/DOCs/83782.xlshttp://www.dipp.nic.in/fdi_statistics/india_fdi_Dec2007.pdfhttp://indiabudget.nic.in/es2007-08/chapt2008/chap12.pdfhttp://www.rediff.com/money/2008/apr/11magic.htmhttp://www.rediff.com/money/2008/apr/11magic.htmhttp://indiabudget.nic.in/es2007-08/chapt2008/chap12.pdfhttp://www.dipp.nic.in/fdi_statistics/india_fdi_Dec2007.pdfhttp://rbidocs.rbi.org.in/rdocs/Wss/DOCs/83782.xlshttp://epaper.timesofindia.com/Daily/skins/TOI/navigator.asp?Daily=CAP&login=default


13/14

INDIAN ECONOMY INDICATORS

BANK RATE 6.0%REPO RATE 6.5%

REVERSE REPO RATE 5.0%

CASH RESERVE RATIO 5.5%

STATUTORY LIQUIDITY RATIO[SLR] 24%PRIME LENDING RATE 12.5%

SAVINGS BANK RATE 3.5%

AND GDP 7.5%

INFLATION 6.4%


14/14

Documents

Global Financial Crisis II