Global Recession to Global Recovery with Opportunity,

Global Recession is a period of global recovery slowdown. The international monetary fund (IMF) takes many factors into accounts when defined the global recession, but it states that the global economic growth of 3% or less is Equivalent to global recession. A national recession is a period of declining productivity. In the United States, the National Bureau of Economic Research (NBER) is regarded as the authority which identifies a recession and which takes into account several measures in addition to GDP growth before making an assessment. In many developed nations other than USA, the two-quarter rule is also used for identifying a recession. Whereas a national recession is identified by two quarters of decline, defining a global recession is more difficult, because developing nations are expected to have a higher GDP growth than developed national. Countries in East Asia (including China) have suffered smaller declines because their financial situations are more robust. When a in the recession occurs, there is a decline in the GDP of a country for two consecutive quarters. This had a gruesome effect in real income, employment, industrial production, and wholesale-retail sales in economy. As per the National Bureau of Economic Research, there have been ten recession 1945. There are various factors that flush an economy into the weird state of recession but inflation is the main factor which contributes more towards the situation. Inflation is the condition in an economy when the price of goods and services rise of immensely over a certain period of time. The higher the rate of inflation, the smaller the percentage of goods and services can be purchased with the same amount of money. It may be because the increased production costs, higher economy costs and national debt. When the price of goods

reach to the higher state, people tends to cut down their spending habits and restrict themselves towards their necessities only and save as much as possible during this period. As a result, GDP declines when people cut down their expenditures in order to cut down costs. This makes the companies to cut down their costs as well and they chuck out workers which brings unemployment. There are certain causes that push an economy towards recession:1) Credit crunch, which means shortage of finance. 2) Falling house prices. This is related to shortage of mortgages and credit crunch. 3) Costs push inflation squeezing income and reducing disposable income. 4) Collapse in confidence of finance sector causing lower confidence amongst real economy. Recession has a serious impact on the global economy. One of the major effects of recession is inflation. Recession comes into effect with inflation while on other hand. It is one of the after effects of recession. Commodities will reach to their highest price and people will cut down their costs. Hence, inflation becomes the major effect left out by recession. Another strong effect of recession is lower income and as a result fewer profits or no profits. Mortgage rates also go up during the recession period. Lenders will increase the mortgage rates so that they can cover some of the losses experienced during the recession period. Employment opportunities are also one of the major targets when the economy is burning under recession. In order to reduce the costs, companies cut down the employment opportunities thereby creating more and more unemployment in the economy market. When an economy enters into recession, companies experience very less or marginal profits during this period. The reason is that the tendency for price war to develop in a recession. Firms get encouraged to cut down the price due to the low sales and falling sales leads to lower revenue.

There are some effects of financial crisis on Indian economic (1) Share markets were falling, if our share markets ever touched new heights, it was due to investments from international banks. Now that-due to recession banks faced shortage of liquidity; they started to withdraw their investments from India (2) The Indian currency got weakened against dollar: before recession, banks continued to buy stock from India but now they are selling. The same stock thus converting rupee into Dollars and weakening our currency. (3) Banks faced huge shortage of funds and soon collapsed: As banks kept giving loans and funds at reasonable terms. At end of the day, they were left with nothing. Comparatively, Indian faced much lesser effect of this hazard. On the other hand, Iceland has become completely bankrupt and a country such as America is under a dreadful shock. Worlds greatest banks suffered losses and thousands of people lost their jobs. Statistics say 4000 jobs cut at Motorola, 100 at Google, Louis Vuitton cancelled the idea of setting up a mega store in Tokyo. Chanel have putdown 200 staff in Paris and many other huge companies have done the same. Banks are short of money and capacity of run huge stuff become impossible. Global Recession To Global Recovery:The global recession has slowed development and progress towards achieving the Millennium Development Goals (MDGs). A recession is all the more reason to cut costs and become more competitive on quality. Hence, more need to outsource the International Monetary Fund (IMF) estimates that the global economy contracted by 0.6 percentage in 2009 and the implications of this have been severe for many. Economic growth in developing countries was only 5.6 %

The International Monetary Fund estimates that the global economy contracted by 0.6

per cent in 2009 and the implications of this have been severe for many. Economic

growth in developing countries was only 1.7 per cent in 2009 compared with 8.1 per

cent in 2007. However, if China and India are excluded, the economies of developing

countries actually contracted by 1.8 per cent3. The World Bank has estimated that an

additional 64 million people will be living in extreme poverty on less than US$1.25 a day

by the end of 2010 as a result of the global recession.4

The capacity of developing countries to respond to the crisis varied considerably.

Countries with a heavy reliance on export revenue and foreign investment were most

exposed to the impacts of the downturn. Those with stronger economies and more

financial resources were able to implement effective policy responses to support the

economy and weathered the global recession relatively well. Others, including many of

the Pacific Island countries, had less capacity to respond.

Although uncertainty remains, the global recovery is underway, with major developing

economies such as China, India, Indonesia and Vietnam leading the way. The World

Bank estimates that developing economies will expand by 6.2 per cent and 6.0 per cent

in 2010 and 2011 respectively.5 The key challenge now for the Australian aid program is

to help our developing country partners build long-term economic resilience and regain

momentum towards achieving the MDGs. Conclusion: - Recession is not something to deal with easily. Major economies and renowned economists are looking forward to solutions. Noble prize winner Paul Krugman said up to $5 trillion money can be expedite recovery from recession and projects such as more solutions have been talked about but things will not recover soon. In case all turns out to be in vain, time is greatest healer. Lets whish time moves faster than ever expected and the wounds get soon. At the end I would like to share a phrase I read somewhere on net that says Recession is Greed of some, woes of Billions.

Since 2010, the global economic recovery has gained strength, although emerging markets continue to outperform the subdued growth of major advance economies. In 2011 new challenges have emerged which will pose risk for some of the worlds largest GDP growth is 5.1% in 2010 The five biggest challenges for the global economy include a weakening US economy, signs of overheating in emerging markets and continued uncertainty about the Eurozone debt crisis. However, there are some positive signs. Some European countries as such Germany have rebounded quickly and global commodity prices have stabillised , although pressure remain on the upside. The climate of uncertainty will have a negative impact on already cautious consumers. With rising inflation also squeezing disposable incomes, consumer spending is likely to remain below potential into 2012 Discover the five biggest challenges facing the global economy. (1) A weakening US economy (the largest economy and consumer market in the world) could have global repercussions. High unemployment and a potential government debt crisis will weigh on economic growth. (2) The crisis in japan, following the earthquake and Tsunami in march 2011, also impacted global supply chain and resulted in a downturn in the worlds third largest economy. (3) Fears of government debt crisis contagion to large Euro zone economies such as Spain and Italy continue to weaken investor confidence in the region, despite

bailouts to Greece, Portugal and Ireland since 201o, and a second bailout to Greece in July 2011. (4) Inflation is one of the biggest challenges facing governments as rising food and energy price in early 2011 put pressure on economies around the world. There are signs of overheating in emerging markets, in lline with fast growth and rapid capital inflows. With annual at 6.4% in Chain in June 2011 , worries about the second largest economy in the world have also emerged. (5) Uncertainly remains significant in the middle East and North Africa region (MENA) following revolution in Egypt and Tunisia and the conflict in Libya in the first half of 2011. If social unrest spreads to larger oil producers such as Iran or Saudi Arabia, this would result in pike in world oil price and heightened inflationary pressure.

The effects it had on India were: 1) share markets were falling: If our share markets ever touched new heights, it was due to investments from international banks. Now that- due to recession banks- faced shortage of liquidity; they started to withdraw their investments from India. 2) The Indian currency got weakened against dollar: Before recession, banks continued to buy stock from India but now they are selling. The same stock thus converting Rupee into Dollars and weakening our currency. 3) Banks faced huge shortage of funds and soon collapsed: As banks kept giving loans and funds at reasonable terms. At the end of the day, they were left with nothing. Comparatively, India faced much lesser effects of this hazard. On the other hand, Iceland has become completely bankrupt and a country such as America is under a dreadful shock. Worlds greatest banks suffered losses and thousands of people lost their jobs. Statistics say 4000 jobs cut at Motorola, 100 at Google, Louis Vuitton cancelled the idea of setting up a mega store in Tokyo, Chanel have put down 200 staff in Paris and many other huge companies have done the same. Banks are short of money and capacity to run huge stuff has become impossible. Recession is not something to deal with easily. Major economies and renowned economists are looking forward to solutions. Nobel Prize winner Paul Krugman said up to $5 trillion money can expedite recovery from recession and projects such as Freight rail could bring fast money. Many more solutions have been talked about but things will not recover

soon. In case all turns out to be in vain, time is the greatest healer. Lets wish time moves faster than ever expected and the wound gets healed soon. At the end I would like to share a phrase I read somewhere on net that says Recession is Greed of some, woes of Billions.

Dating back to 1997-98, the economies of various countries of Asia such as Thailand, Malaysia and Indonesia suffered major economic crisis due to huge investment in real estate. The money for investment came from not very renowned foreign sources and thus it led to crisis due to poor banking practices. Meanwhile Crony Capitalism (where a borrower is backed by the government. For example, a presidents son could open up abank easily and attract borrowers to involve their money as it would be in safe hands due to official connections behind) came into being. With these crisis in existence, the Asian countries soon realized that there requires a need for Foreign Exchange Reserve also called Forex Reserve. Forex reserve deals with conversion of currencies between the countries and thus allows easy money flow. As a result, Asian countries started to buy a lot of reserves and the U.S. securities to build a good foreign exchange reserve from international banks. Thus, the countries made a tendency of saving as much money as possible and expenditure became much lesser. The global demand crumpled and led to an imbalance in the global economics. According to many illustrious economists, today high Forex has become one of the very important reasons for the current recession. If today recession has taken place, the Asians share the blame too. Let me explain it to you. After 1997-98 crisis, the Asian economies started to buy the U.S. securities as mentioned above. This led to dispense of dollars into the U.S. The American economy got so flooded with dollars that it needed an outlet. The outlet came in form of a borrowing and spending splurge. The U.S. financial system works that what ever loans or schemes they offer, hides the flaws and risks with such erudition that a borrower is lured to buy them. The two main reasons that attracted the borrowers were low interests and huge funds that helped easy loans for people. With such attractive promises, people took more and more loans to build houses and invest money. Since there was surplus amount of money in the banks, all the terms were relaxed and the demarcation between the prime and sub prime loans came at par. Banks merely looked for borrowers irrespective of their background, returning capacity and poor credit history. Borrowers were lured with incentives and bonus offers. The interest rates were also kept low initially and were meant to increase after the initial period. Despite of this borrowers continued to buy even those with a poor credit history called NINJA (No Income No Job No Assets). The house prices started to soar due to huge investments. The splurge proved a good time for all. The lenders and borrowers believed that the interest rates that would increase gradually or the soaring house prices will help in recovering of the loans. In case the borrower is unable to pay the interest, the houses could be sold off until the prices are soaring. Now begun the complication when the overbuilding of houses caused a decline in the prices thereby grasping the returning capacity of the borrowers. The borrowers had no money to repay the loans and meanwhile the interest rates continued to soar. The situation became worst when the loan amounts exceeded the total cost of the house and gave way to the current recession. Recession in economics means a general slowdown in economic activity in a country over a sustained period of time, or a business cycle contraction. During recessions, many macroeconomic indicators

vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization household incomes and business profits all fall during recessions. During recession sub prime loans came under immense limelight and turned out to be an excellent option for the banks. Many big investors bought such loans from the original lenders thus helping lenders with fresh funds to raise again. These investors were not only from America but also from the other parts and as a result the phenomenon remained no more confined to the U.S. The limelight of the loans remained until the prices soared. But as soon as there saw a decline, loans became unbeneficial and dicey. Investors from all over the world who took loans faced major losses. These losses trickled down to other banks that were in chain with the international banks of America who formed the backbone of many banks. As the banks were left with no money, the major industries and companies worldwide that depended on loans from these banks for their activities faced closure. The recession became hazardous for the world market soon.