8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 1/12

Causes o f Globa l

Economic Cr i se s

Economic Meltdown; By: Rajat Jhingan

B y : R a j a t J h i n g a n

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 2/12

Global Economic Crises – Expert Belief 

Sub  –  Prime Crises.

The U.S. Housing Market Collapse.

Easy Access to credit.

Relaxed lending standards.

Inadequate regulations.

Complex Credit Derivatives.

The Housing Sector Market

Collapse.

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 3/12

Global Economic Crises

Sub prime Mortgage Crisis

FED loweredinterest rates

sharply since

2000

Easy creditencouraged

weaker

borrowers to

assume

mortgages

Excessive useof credit and

debt leverage

Housingbubble

Ballooned &

then Burst 

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 4/12

Global Economic Crises

Some Other View Points……Likely causes. 

New Bank Capital requirements.

Role of Credit Rating Agencies.

Banks – Riskier Investment Decisions.

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 5/12

Global Economic Crises

Some Other View Points……Likely causes. 

Mark  – to – Market Accounting Rules.

Misleading Economic Statistics.

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 6/12

Global Economic Crises

“ T h e C o c k t a i l C r i s e s ”  

HousingBurst

CreditCrises

Liquidity

Equity

Crises

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 7/12

Global Economic Crises

First Ingredient –  “L i q u i d i t y ” 

Selling of Bear Stern.

 The Lehman Factor.

Standards & Poors Rating.

Stock Exchange Closures.

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 8/12

Global Economic Crises

 The Second Ingredient –  “C r e d i t C r i s e s ” 

Fannie Mae, Freddie Mac –  “Nationalized”. 

Dramatical increase in LIBOR from 2 % to 6%.

Effects on overnight inter bank borrowing. Collapse of 22 commercial banks all across United

States.

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 9/12

Global Economic Crises

 The third ingredient –  “H o u s i n g B u r s t ” 

Loan given to Sub-prime borrowers.

Banks unable to recover their loans.

 The decline of creditworthiness.

Loss of Liquidity.

Banks become insolvent –  “22”. 

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 10/12

Global Economic Crises

Economic Crises  –  Enters India.

 The collapse of global share markets.

FII tries to withdraw from Indian Markets.

 Thus they stimulated bearish trend.

FDI was lower as compared to FII.

Corporate sector lost market value.

Panic amongst retail investors.

“Cost-Cutt ing ” – Job Cuts.

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 11/12

Global Economic Crises

Economic Crises  –  

Enters India.

Other Impacts .

 The Correction in Real Estate

Sector.

Lack of infrastructure

investments.  The Auto sector is badly hit.

Gradual decline in exports.

Economic Meltdown; By: Rajat Jhingan

8/4/2019 Causes of Global Economic Crisis by Rajat Jhingan

http://slidepdf.com/reader/full/causes-of-global-economic-crisis-by-rajat-jhingan 12/12

Economic Meltdown; By: Rajat Jhingan