Recession 2008
Early 2008 and late 2007, the time when the economy was on a high, it is finally over. Late 2008, big names in banks like Lehman brothers have filed for bankruptcy. More than 81 companies have filed for bankruptcy in the USA.
International Labour Organization (ILO) predicted that at least 20 million jobs will have been lost by the end of 2009 due to the crisis – mostly in “construction, real estate, financial services, and the auto sector” – bringing world unemployment above 200 million for the first time.
Factors for Recession
Credit Crunch: It is because of the sub-prime lending to borrowers by banks. Sub-prime lending in essence means lending to people who were never likely to afford the interest payments in the long-run. Some extreme theories suggest that the banks lend out loan to borrowers even on acknowledging their inabilty to pay back the loan. On an unsuccesful repayment by the borrower it led to seizure of collateral and foreclosure ( it is an asset such as a property that is pledeged as security while applying).
This induced a tremendous housing market correction of huge implications for pushing up credit costs worldwide. Because of this correction, a good number of Americans, European and Asian banks had to write down billions of dollars in holdings.
High Oil Prices: It is an important commodity in all countries around the world, the rising prices of oil resulted consequently in a drastic rise in food prices. This is primarily blamed on loose monetary policies and low interest rate of the Federal reserve.
Sulphuric Acid, an important chemical commodity used in almost all industries had a 3.5 times increase in prices in less than a year. The high prices of basic commodities affected the demand and production adversely.
