Pegasus

While doing an assignment for my Intro to Financial Management Course on Recession I came across a number of insightful articles on recession, so I thought why not to put it here !!

Let's see what events precipitated the recession in September in 2007 n which is still pervasive through out the economy. The whole thing started will falling of prices in housing sector which lead to default of a number of loans as the debtors realized that the assets they are holding on to are not the worth of loans they are servicing to prevent its foreclosure. This itself would not have hurt the financial hurt but the geniuses from Harvard , Stanford etc at so called " 2 big 2 fail " gambling houses had devised most ingenious ways to trade in these loans in the form of securities and made pervasive this stinking loans. So " all was well " until prices were soaring but as soon as prices started to fall and foreclosures started, these toxic assets started to choke these banks. So these banks started to fall one by one. Though Bear Stearns was saved by taxpayer's money , Lehman Brothers was not as lucky( Henry Paulson made it a scapegoat to wake up the snorer at D.C) . The stock prices of L.B crashed 93 % in a day.The immediate fallout of the banking crisis was the complete freeze of lending on the WALL STREET. Companies couldn’t find money to finance their day to day operations or couldn’t reef up enough funds for further expansion.The crisis mirrored itself in the form of volatile stock markets throughout the major economies of the world and matched only by the equally volatile global currency markets. This marked the first phase of " The Global Recession" which is the sustained decline in economic activity in the economy. Sustained recession may lead to depression eventually. Now the extravagant american consumers realized the importance of thrift coupled with the reasons of job losses and already stripped of their little bit savings servicing those loans which finally went the road of default, started cutting on their expenditures which in turn caused cut in production , bankruptcies of companies , jobs looses etc .... So this is how the whole thing started.

Keep looking ...next time I plan to put sth on what lead to 1997 crisis.

Bye!!