Home > Financial Markets > 5th Anniversary of Global Financial Crisis

5th Anniversary of Global Financial Crisis

September 14, 2012 Leave a comment Go to comments

August 2008 signified the start of the GFC when the French Bank BNP Paribas froze three money market funds which had taken heavy losses on US subprime mortgages. Immediately the ECB and the US Fed entered the fray and injected cash of 90bn to ensure that bank lending didn’t grind to a halt. The subprme debacle was merely the first in a series of major failures.

Keynes said in 1931

“We are today in the middle of the greatest catastrophe – due almost entirely to economic causes – of the modern world”

When Lehman brothers collapsed in 2008, even cautious forecasters expected recovery in three or four years. However, governments are grappling with an appropriate policy that will achieve growth when you are trying to implement austerity measures at the same time.

Even in 2007 the US the Fed was concerned about the looming threat of a credit crunch and proceeded to drop its key borrowing rate by 50 bps to 5.75%. Although soon after Ben Bernanke stated that the housing market collapse would have a limited impact on the economic growth in the economy. Bernanke obviously was too optimistic about the state of the US economy and soon after the Lehman Brothers collapse the credit crisis had officially begun.

Total debt levels in the US, UK and the eurzone are now higher than in 2007.
We are currently seeing soft data in all three time zones. The Week magazine came up with some thoughts about this:
* Too much saving – the results of exorbitant imbalances in trade and capital flows
* Asia’s saving growth flooded the global bond market, which enabled the West to continue running huge current account deficits until the economy was slowed.

Categories: Financial Markets Tags:
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: