Reasons for Global Recession: In plain simple English

By
Manoj
-
354
3285

Economic Depression

These days the most talked about news is the current financial crisis that has engulfed the world economy. Every day the main headline of all newspapers is about our falling share markets, decreasing industrial growth and the overall negative mood of the economy.  For many people an economic depression has already arrived whereas for some it is just round the corner. In my opinion the depression has already arrived and it has started showing its effect on India.

So what has caused this major economic upheaval in the world? What is the cause of falling share markets the world over and bankruptcy of major banks? In this article, I shall try to explain the reasons for recent economic depression for all those who find it difficult to understand the complex economics lingo and are looking for a simple explanation.

It all started in US…

In order to understand what is now happening in the world economy, we need to go a little back in past and understand what was happening in the housing sector of America for past many years. In US, a boom in the housing sector was driving the economy to a new level.  A combination of low interest rates and large inflows of foreign funds helped to create easy credit conditions where it became quite easy for people to take home loans. As more and more people took home loans, the demands for property increased and fueled the home prices further. As there was enough money to lend to potential borrowers, the loan agencies started to widen their loan disbursement reach and relaxed the loan conditions.

The loan agents were asked to find more potential home buyers in lieu of huge bonus and incentives. Since it was a good time and property prices were soaring, the only aim of most lending institutions and mortgage firms was to give loans to as many potential customers as possible. Since almost everybody was driving by the greed factor during that housing boom period, the common sense practice of checking the customer’s repaying capacity was also ignored in many cases. As a result, many people with low income & bad credit history or those who come under the NINJA (No Income, No Job, No Assets) category were given housing loans in disregard to all principles of financial prudence. These types of loans were known as sub-prime loans as those were are not part of prime loan market (as the repaying capacity of the borrowers was doubtful).

Since the demands for homes were at an all time high, many homeowners used the increased property value to refinance their homes with lower interest rates and take out second mortgages against the added value (of home) to use the funds for consumer spending. The lending companies also lured the borrowers with attractive loan conditions where for an initial period the interest rates were low (known as adjustable rate mortgage (ARM). However, despite knowing that the interest rates would increase after an initial period, many sub-prime borrowers opted for them in the hope that as a result of soaring housing prices they would be able to quickly refinance at more favorable terms.

Bubble that burst…

However, as the saying goes, “No boom lasts forever”, the housing bubble was to burst eventually. Overbuilding of houses during the boom period finally led to a surplus inventory of homes, causing home prices to decline beginning from the summer of 2006. Once housing prices started depreciating in many parts of the U.S., refinancing became more difficult. Home owners, who were expecting to get a refinance on the basis of increased home prices, found themselves unable to re-finance and began to default on loans as their loans reset to higher interest rates and payment amounts.

In the US, an estimated 8.8 million homeowners – nearly 10.8% of total homeowners – had zero or negative equity as of March 2008, meaning their homes are worth less than their mortgage. This provided an incentive to “walk away” from the home than to pay the mortgage.

Foreclosures ( i.e. the legal proceedings initiated by a creditor to repossess the property for loan that is in default ) accelerated in the United States in late 2006. During 2007, nearly 1.3 million U.S. housing properties were subject to foreclosure activity.  Increasing foreclosure rates and unwillingness of many homeowners to sell their homes at reduced market prices significantly increased the supply of housing inventory available. Sales volume (units) of new homes dropped by 26.4% in 2007 as compare to 2006. Further, a record nearly four million unsold existing homes were for sale including nearly 2.9 million that were vacant. This excess supply of home inventory placed significant downward pressure on prices. As prices declined, more homeowners were at risk of default and foreclosure.

Now you must be wondering how this housing boom and its subsequent decline is related to current economic depression? After all it appears to be a local problem of America.

What complicated the matter?…

Unfortunately, this problem was not as straightforward as it appears.  Had it remained a matter between the lenders (who disbursed risky loans) and unreliable borrowers (who took loans and then got defaulted) then probably it would remain a local problem of America. However, this was not the case.  Let us understand what complicated the problem.

For original lenders these subprime loans were very lucrative part of their investment portfolio as they were expected to yield a very high return in view of the increasing home prices. Since, the interest rate charged on subprime loans was about 2% higher than the interest on prime loans (owing to their risky nature); lenders were confidant that they would get a handsome return on their investment. In case a sub-prime borrower continued to pay his loans installment, the lender would get higher interest on the loans. And in case a sub-prime borrower could not pay his loan and defaulted, the lender would have the option to sell his home (on a high market price) and recovered his loan amount. In both the situations the Sub-prime loans were excellent investment options as long as the housing market was booming. Just at this point, the things started complicating.

With stock markets booming and the system flush with liquidity, many big fund investors like hedge funds and mutual funds saw subprime loan portfolios as attractive investment opportunities. Hence, they bought such portfolios from the original lenders. This in turn meant the lenders had fresh funds to lend. The subprime loan market thus became a fast growing segment.  Major (American and European) investment banks and institutions heavily bought these loans (known as Mortgage Backed Securities, MBS) to diversify their investment portfolios. Most of these loans were brought as parts of CDOs (Collateralized Debt Obligations). CDOs are just like mutual funds with two significant differences. First unlike mutual funds, in CDOs all investors do not assume the risk equally and each participatory group has different risk profiles. Secondly, in contrast to mutual funds which normally buy shares and bonds, CDOs usually buy securities that are backed by loans (just like the MBS of subprime loans.)

Owing to heavy buying of Mortgage Backed Securities (MBS) of subprime loans by major American and European Banks, the problem, which was to remain within the confines of US propagated into the word’s financial markets. Ideally, the MBS were a very attractive option as long as home prices were soaring in US. However, when the home prices started declining, the attractive investments in Subprime loans become risky and unprofitable.

As the home prices started declining in the US, sub-prime borrowers found themselves in a messy situation. Their house prices were decreasing and the loan interest on these houses was soaring. As they could not manage a second mortgage on their home, it became very difficult for them to pay the higher interest rate. As a result many of them opted to default on their home loans and vacated the house. However, as the home prices were falling rapidly, the lending companies, which were hoping to sell them and recover the loan amount, found them in a situation where loan amount exceeded the total cost of the house. Eventually, there remained no option but to write off losses on these loans.

The problem got worsened as the Mortgage Backed Securities (MBS), which by that time had become parts of CDOs of giant investments banks of US & Europe, lost their value. Falling prices of CDOs dented banks’ investment portfolios and these losses destroyed banks’ capital. The complexity of these instruments and their wide spread to major International banks created a situation where no one was too sure either about how big these losses were or which banks had been hit the hardest.

Mayhem in the banks….

The effects of these losses were huge. Global banks and brokerages have had to write off an estimated $512 billion in subprime losses so far, with the largest hits taken by Citigroup ($55.1 billion) and Merrill Lynch ($52.2 billion). A little over half of these losses, or $260 billion, have been suffered by US-based firms, $227 billion by European firms and a relatively modest $24 billion by Asian ones.

Despite efforts by the US Federal Reserve to offer some financial assistance to the beleaguered financial sector, it has led to the collapse of Bear Sterns, one of the world’s largest investment banks and securities trading firm. Bear Sterns was bought out by JP Morgan Chase with some help from the US Federal Bank (The central Bank of America just like RBI in India)

The crisis has also seen Lehman Brothers – the fourth largest investment bank in the US and the one which had survived every major upheaval for the past 158 years – file for bankruptcy. Merrill Lynch has been bought out by Bank of America. Freddie Mac and Fannie Mae, two giant mortgage companies of US, have effectively been nationalized to prevent them from going under. Reports suggest that insurance major AIG (American Insurance Group) is also under severe pressure and has so far taken over $82.9 billion so far to tide over the crisis.

From this point, a chain reaction of panic started. Since banks and other financial institutes are like backbone for other major industries and provide them with investment capital and loans, a loss in the net capital of  banks meant a serious detriment in their capacity to disburse loans for various businesses and industries.  This presented a serious cash crunch situation for companies who needed cash for performing their business activities. Now it became extremely difficult for them to raise money from banks.

What is worse is the fact that the losses suffered by banks in the subprime mess have directly affected their money market the world over.

Now what is a money market?

Money Market is actually an inter-bank market where banks borrow and lend money among themselves to meet short-term need for funds. Banks usually never hold the exact amount of cash that they need to disburse as credit. The ‘inter-bank’ market performs this critical role of bringing cash-surplus and cash-deficit banks together and lubricates the process of credit delivery to companies (for working capital and capacity creation) and consumers (for buying cars, white goods etc). As the housing loan crisis intensified, banks grew increasingly suspicious about each other’s solvency and ability to honour commitments. The inter-bank market shrank as a result and this began to hurt the flow of funds to the ‘real’ economy. Panic begets panic and as the loan market went into a tailspin, it sucked other markets into its centrifuge.

The liquidity crunch in the banks has resulted in a tight situation where it has become extremely difficult even for top companies to take loans for their needs. A sense of disbelief and extreme precaution is prevailing in the banking sectors. The global investment community has become extremely risk-averse. They are pulling out of assets that are even remotely considered risky and buying things traditionally considered safe-gold, government bonds and bank deposits (in banks that are still considered solvent).

As such this financial crisis is the culmination of the above mentioned problems in the global banking system. Inter-bank markets across the world have frozen over. The meltdown in stock markets across the world is a victim of this contagion.

Governments and central banks (like Fed in US) are trying every trick in the book to stabilize the markets. They have pumped hundreds of billions of dollars into their money markets to try and unfreeze their inter-bank and credit markets. Large financial entities have been nationalized. The US government has set aside $700 billion to buy the ‘toxic’ assets like CDOs that sparked off the crisis. Central banks have got together to co-ordinate cuts in interest rates. None of this has stabilized the global markets so far. However, it is hoped that proper monitoring and controlling of the money market will eventually control the situation.

How it has affected India?

In the age of globalization, no country can remains isolated from the fluctuations of world economy. Heavy losses suffered by major International Banks is going to affect all countries of the world as these financial institutes have their investment interest in almost all countries.

As of now India is facing heat on three grounds: (1) Our Share Markets are falling everyday, (2) Rupee is weakening against dollars and (3) Our banks are facing severe crash crunch resulting in shortage of liquidity in the market.

Actually all the above three problems are interconnected and have their roots in the above-mentioned global crisis.

For the last two years, our stock market was touching new heights thanks to heavy investments by Foreign Institutional Investors (FIIs). However, when the parent companies of these investors (based mainly in US and Europe) found themselves in a severe credit crunch as a result of sub-prime mess, the only option left with these investors was to withdraw their money from Indian Stock Markets to meet liabilities at home. FIIs were the main buyers of Indian Stocks and their exit from the market is certain to wreak havoc in the market.   FIIs who were on a buying spree last year, are now in the mood of selling their stocks in India. As a result our Share Markets are touching new lows everyday.

Since, the money, which FIIs get after selling their stocks, needs to be converted into dollars before they can sent it home, the demands for dollars has suddenly increased. As more and more FIIs are buying dollars, the rupee is loosing its strength against dollar. As long as demands for dollars remain high, the rupee will keep loosing its strength against dollar.

The current financial crisis has also started directly affecting Indian Industries. For the past few years, the two most preferred method of raising money by the companies were Stock Markets and external borrowings on low interest rates. Stock Markets are bleeding everyday and it is not possible to raise money there. Regarding external borrowing from world markets, this option has also become difficult.

In the last fiscal year alone, India borrowed $29 billion from foreign lenders and got $34 billion of foreign direct investment. A global recession has hurt external demand. International lenders who have become extremely risk aversive can limit access to international capital. If that happens, both India’s financial markets and the real economy will be hurt in the process. Suddenly, the 9% growth target does not seem that ‘doable’ any more; we should be happy to clock 7% this fiscal year and the next.

However, one positive point in favor of India is the fact that Indian Banks are more or less secured from the ill-effects of sub-prime mess. A glance at Indian banks’ balance sheets would show that their exposure to complex instruments like CDOs is almost nil. In India, still the major banking operations are in the hands of Public Sector Banks who exercise extreme cautions in disbursing loans to needy people/companies. As a result, we are not likely to see a repeat of sub-prime crisis in India. Though there have been a presence of big US/European Banks in India and even some Indian banks (like ICICI) have some foreign subsidiary with stake in the sub-prime losses, there presence is miniscule as compare to the overall size of Indian banking industry. So at least on this major front we need not worry much.

However, a global depression is likely to result in a fall in demand of all types of consumer goods. In 2007-08, India sold 13.5% of its goods to foreign buyers. A fall in demand is likely to affect the growth rate this year. Our export may get affected badly.

A negative atmosphere, shortage of cash, fall in demands, reducing growth rate and uncertainties in the market are some of the most visible aspects of an economic depression. What started as a small matter of sub-prime loan defaulters has now become a subject of global discussion and has engulfed the global economy scenario.

Greed of some…woes of billions

If you think about this with a cool mind, you will find that the underlying cause of this depression is the greed of those who failed to anticipate the consequence of their actions. On a more ideological front, it is high time to have a rethink on the very idea of free markets and capitalism. I think the time has come to evolve a capitalism where everything works under a broad regulatory framework and we do not see a repeat of this condition where greed of some people can affect the lives of billions.

So here concludes my attempt to explain the current economic crisis which has started to affect the lives of all of us. The above explanation is very simple and by no means it presents an accurate picture (i.e the one that includes all the micro/macro factors)  of the crisis. However, I hope that it must have given you a broad idea of the reasons behind current economic depression. Feel free to post your comments on this issue.

Update : Owing to the overhelming questions/suggestions of the readers, I have written a second article in this series : Reasons for Global Recession – Part Two. This article tries to explain the reason for easy credit situation in US that leads to the emergence of sub-prime mess. It also offers comments on why curbing the recession is taking longer than expected. Read it here.

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354 COMMENTS

  1. You have detailed the issues very well.

    Greed is a basic human trait and cannot be wished away. Such upheavals have taken place ( not necessarily in economics/finance} and humankind has found ways to overcome it.

    21st Century mind is well equipped to take up the present challenge and overcome the setback. New systems and proceeses will be evolved to bring in order. Pressent state of information technology has made it easy for information to go around and ideas to overcome are pouring in from all corners of the globe.

    Rest assured before long life would be as usual.

  3. Good article put up in a simple way to understand the reasons behind the Global recession and its effects on Indian Economy.

    Rightly stated that Indian Banks mostly constituting PSU’s exposure is almost nil to the crises .The only major concern is the FII investments that had been made which is leading to our stock markets to fall and depreciation of our currency.

  5. Amazing description of the current conditions. Best part about your article was that it was simple to understand.Good work!!

  6. Thank you for an enlightening article.

    I agree with your inter-banking situation. The banks have become very myopic in their vision due to their losses in sub-prime crisis and are unable to lend hands to others to tide over the crisis.

    It is incumbent on the government of the respective countries to intervene and set directives for their financial institutions.

    I am confident that we will tide over this crisis in a year or so.

  7. I found this article very enlightening and without any circumlocution. The interbanking situation mentioned is very rightly described.
    Though i feel that the repercussions that world may have to face in the coming years because of this recession could have also been elborated upon.

    • Hello Manisha,

      The article was an attempt to understand the causes of recession. The repercussion or ill effects will be described in a subsequent article if possible.

      Regards

  10. mate,
    you have described the reasons for the present crisis very well and detailed.
    on the contrary i would like to add that asian markets are not going to be much affected with this especially pakistan and india because as u mentioned that
    indian banks pledged loan very soundly and to those companies who provided good interest rates. while in US
    everyone started purchasing things on credit which created a big liquidity crunch when the banks claimed their amount and thus created a hectic job for the US banks.

    • I would like you to know that all Americans did not purchase things on credit. We are a married couple in our early 40’s. Home, car, all things are paid, no debt. Our retirements saving accounts are funded via automatic payroll deduction at the maximum amount that our government allows. Most of the people we know are like us.

      Approximately 1 in 10 families are the ones who took advantage of these loose lending practices. Actually, 1 in 10 families having poor financial discipline is nothing new. What was new was over the 5 years in the early part of the decade these people were given loans as described in the article.

      We saw real estate values climb to crazy levels. Home prices have now returned to where they should have been. Some areas are still a bit too high, some have overcorrected and are a bit too low, but now the market is at levels consistent with long term history.

      My reason for posting is so you don’t think all Americans are reckless sped free people. We are as upset with this situation as you are upset.

      • Sir,

        Thanks for posting your valuable comments. I appreciate your concern about image of your countrymen abroad. This article is not intend to paint a negative picture of Americans. It is just an attempt to present the main reason of current global crisis in the simplest language possible. I also feel that nowhere in this article, I have tried to blame Americans for this mess. In fact I think even sub-prime lenders are also not responsible for this. The problem starts when big investments banks started buying CDOs without exercising any common sense on their part.

  11. Hats off!
    Probably the best reasoning possible…
    The crucial point of MBS and CDOs and mutual funds and their differences are well covered…
    This is a very satisfied and complete article on reasons for global recession

  12. This article has made me to understand the reasons for the global meltdown to a greater extent.
    From this one can predicts what ills can happen to the global economy in future if cupidity of human is not capped.
    Great Job.

  17. The article presented by you is apparently simple and interesting.

    your endeavour to present the broad reasons behind the current economic recession has been successful. Your attempt to save it from using economic jargons and lingo is also acknowledged.
    great job done and thanks ………..

    sumant
    ceo-htpl

  18. matter has been well discussed by you but could you explain why other Europion Countries like Germeny,france ,Italy,uk have also faced this situation which they could not since 2nd worldwar and they are not the countries with substantial subprime deal like USA

    • Hello Debabrata,

      As I mentioned in the article, the prime reason for this global crisis is heavy buying of Mortgage Backed Securities (related to subprime loans) by major International Banks and Financial Institutions. Since these securities turned into heavy loss making properties, the credit facilities of these banks/institutions got severely affected. Owing to the presence of these major International Banks and Financial Institutions in all parts of Europe, a tight situation of liquidity crunch has emerged in the financial sectors of these countries.

      As I already stated, in today’s globalized world no country can remain immune to the financial upheaval in other countries/major markets. As such what affects one, will affect another. That’s why seeing this phenomenon of financial turmoil even in those countries with negligible subprime deals.

    • Shobhit,

      As already mentioned by Ekalavya that credit crunch in banking industry does not limit its affects only to banking sector even IT industry also gets affected.Even IT industries need to borrow money for various investments, and when banks become incapable of lending money to IT companies the growth of IT industry stops.

      One more major reason why IT industry is affected is because of the projects. 70-80% of the projects with the IT industry are banking projects. When banks have no money to outsource project from where will that 70-80% revenues come? Similarly as credit crunch affects other industries like steel,construction etc,retail so it indireclty affects IT companies as well since IT companies have projects with several steel, construction ,retail,medical industries as well.

      This credit crunch has also affected the job market largely.Since most of the jobs are with IT industry, and as IT industry has lost several projects owing to credit cruch there have been lay offs because of unavailibilty of work (projects).

      Regards,
      Arun

  20. thank you so much for the over simpified view of the much talked about financial crisis. i had been looking for an understandable explaination for quite some time….and yipeeeeeeee the search ends here. thank u!

  21. Thank you so much!! your article has been a life saver! it is so easy to understand and the explanation is very explicit and just what is needed.

  24. All I knew before reading this article was the current depression has its roots in the US housing loan fiasco. Now I see the big picture – the beginning, the spread and the Indian market.
    Well explained.

  26. The article is really good and very easy to understand.
    Please keep writing about the present issues in such simple ways.
    I could very clearly understand the zist of the global recession.However why did you wrote that last line
    “The above explanation is very simple and by no means it presents an accurate picture of the crisis.”
    Isn’t the article represents the accurate picture of crisis?

    • Hello Piyu ! I admit that this line is a bit confusing. Yes this article represent the accurate picture of the crisis. From that line, I intended to say that the above explanation is simple and covers only the major background reason for the current economic crisis. However, it does not contain other micro/macro causes that might have contributed in the global recession.

      I have made some modification in that line to make it clearer.

      Regards,

  27. well explained and informative article.It has a big weight on the teaching side.I add here that its effect on India will b very big. The foreign reserve in india is more than 250 billion$ and if the $ keeps on exiting like this than very very doomms days are ahead.And also lot of our highly paid executives work for these foreign companies and if they can not pay for their EMIs than the situation can b like USA. Not only that lots of our people who have taken loans under the expectations that they will pay as their businesses improve, will b defaulters now.so it is just the start of the vicious circle.I think u can explore a bit deeper this lead.

    D Kumar

  28. thankzz a lot…. u have done really good work…. i m really happy to know the genuine cause of this recession… would u explain ur thoughts that how to solve the biggest problem “recession” b solved….

  29. Your article clearly defined how we got into this mess.

    Question is: what are the possible solutions to correcting the problem? You have such a great grasp on the problem I hope that you can provide also some suggestions as to minimize the time for recovery.

    CNN and other cable channels just add fuel to the fire with their fair and balanced opinions about the situation and who is at fault but no solutions are provided.

    The consumer who has been the backbone of the economy is truly scared to death and are pulling back from making purchases that would positively stimulate the situation even if they can afford to do so.

    I pray every day that Obama and his advisors will take the correct steps in the US and work globally to resolve these issues.

    My retirement will occur in just a few years and I look forward to it being a happy time with few things to worry about – today I am really worried.

    thanks

    • Sir,

      Governments all over the world are already taking actions to tackle with the situation. Since the problem has wide spread ramification, it will take some time to become normal again. Just as the positive cycle of housing boom did not last, the negative cycle of depression will also not last forever.

      Ups and downs are part of life. I don’t think you need to worry a lot. By the time your retirement comes, in all likelihood the economic condition will come back to normal.

      If time permits, I shall try to write an article on the possible solutions for economic recession 🙂

  31. thank u sir
    a very good description which helps us to have a clear picture of current scenario also a good description with simple language.

  33. well that’s a good effort taken, describing the roots of the global recession….in the most simplest way.

    well i could just come out with the most simple understanding is that, generally specially americans who are most assumpted to have dignified with the moral instincts of mankind were such reckless creed causing the worst.

    the only thing is that, unless and until if humanbeing finds a solution to overcome this kind of greed or an excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth.. there is absolutely no solution for an even more disaster to overcome…

    • Well it is not appropriate to blame all Americans for this. The real culprit is an unbridled system of free markets where greed often prevails and make even the most judicious person a complete foolish.

      Your conclusion is most appropriate. We all need to find a solution to overcome this kind of greed or an excessive desire to acquire or possess more than what one needs or deserves.

  34. Hi,

    You have made it as simple as it can be..I had been trying to understand the whole credit crunch mechanism and your article explains it all…

    Thanks a lot for this work..

    keep writing..
    Cheers

  36. Great explanation of the crises (thanks!) but it doesn’t explain why governments haven’t forced banks into exposing their liabilities to the sub-prime CDOs etc, surely a forced transparency would have killed this question of potential risks at an early stage? Instead the governments have spent billions trying to increase liquidity?

    Secondly there is the question of the inflated economy, the link to the FED bank (its control by the 12 privately owned banks) and the question about the ‘Federal banking system’ (After the 1913 act) verses a system linked to a ‘precious metal’ (like the gold standard) in light of recent events.

    • To be honest, I wanted to focus just on the main cause of this crisis. That’s why I did not cover the secondary causes of this crisis.

      Feel free to elaborate on these causes if you like. It will be an additional knowledge boosters for all of us.

  38. My Nane is Anoop K Joseph and I Was an Underwriter For an Us Based Mortgage Called Phh. I Would Like to Mention Something about.

    ” Underwriting Credit , Income , Property and asset Related Documents For the Mortgage From India “Outsourced” Without Quality Is the Main Reason For this turmoil

  41. I was unaware of the causes of Recession and how it is related to IT field , being an IT employee myselves.

    This article explained clearly abt the Reasons and the post effects.

    Thanks a lot.

  42. WE INDIANS WISH AMERICAN ECONOMY SPEEDY RECOVERY. LET US ALL LEARN THE LESSON FROM THIS EPISODE AND HAVE FINANCIAL DISCIPLINE SO AS TO AVOID ECONOMIC INCONVENIENCES TO THE MILLIONS OF PEOPLE ACROSS THE WORLD

    • No US war tendency is not the prime reason for this global recession. A war requires enormous amount of money to sustain itself. A country at war requires all kinds of good to support its army. You require weapons to fight, fuel to fly jets & drive tanks, food for soldiers, spare parts for machinery and many more related products. As such a War turns out to be a huge stimulus for demands and boosts the economy. This is quite ironic but in fact a bitter truth.

      Of late, owing to many domestic and International reasons, the capacity of US forces to fight long protracted wars in remote battle field has been affected. A decrease in war activity will actually harm the US economy as it will result into low demands for goods.

      Hope you got the point as to why I did not consider this factor.

  44. this is the most simplest and easy explanation available in the net for understanding subprime crisis and global recession. Thanks for your superb efforts to explain complicated things in the simplex way, even the people who are not aware of jargons of financial world. will find it easy…good work…keep it up.

    regards
    Amit

  45. The description of currnet finnacial crisis which is presented by you is surely a masterpiece , although everybody is having a little idea about this. But your article makes the whole picture crystal clear.
    Today due to globalisation most of the econimies are interlinked and banks are the institutions which manage the life blood of economy ,ie: the money . This current fiscal crisis is the result of not anticipating the natural trend of eocnomic growth. And investment in risky portfolios to get higher returns in lesser time.

  46. The article is certainly the best and in the simplest form to understand the crisis.

    If someone has to be optimistic, by when can the US federal bank take control of the situation and resolve it? Since you have also mentioned that the indian banks are not much effected (though a bit), am I right in saying that there is a lot of speculation in india about the global meltdown and as a result the consumer/SMBs are hesitating to spend their money on new initiatives?

    If that is right, shouldnt there be someone (government or the banks or someone) make the public aware about it and ensure our enconomy grows by people spending their money? I think one should do it on priority.

    I am in IT industry and the speculation of meltdown hitting indian markets is making the SMBs hesitate to spend on new projects in a ignorance that this might not be the right time to start those initiatives. This infact, is impacting other businesses which are dependant on the SMBs. People are talking about hiring freeze, travel freeze, expense freeze, etc..

    I think something should be done about it. Does anyone agree to me?

    Thanks
    Ravi

  49. Its one of the simplest article i have read.
    Thanks a lot .
    2 question, Did rising crude oil Prices also contributed to this recession? & how much Iraq war contributed to it?

  50. Hi,

    Your article really worth. It clearly explains the process in a simple and easy understandable way. Even a common man can get a nice picture about the present global financial melt down. But, still i have a doubt related with the banking instituitions investment policy. How the world leading banking institutions invest in such kind of high risky sub-prmime loans with out forecasting the possiblity of a future down fall of demands which in turn leads to the price fall as it happened.

    Thanks for the article, a very good work, keep it up..

  52. tahnks, very good article to understand abt global turmoil in layman language. in my opinion gred is human basic nature to some extent .there should remain regulatory measure so that , this will not repeat in future.
    at global level there is need of coordinated efforts ,to overcome this problem.

  54. Hi Dude, It is very concise cronology of events that effected all. I thank you for bringing this forward. The solution seems that the loans should be against fixed asset rather than paper or documents that is the theme of Islamic banking system that would have resisted any recession or greed of few capatilist that become sufferings of millions in US and the world over.
    Thanks,Abdul Wasay

  56. Thanks a lot. Your article has given me a broad perspective on the global recession, something which I was not too clear about earlier. The newspapers and magazines use a lot of economics jargon, making it hard for ordinary people like me to understand. Your article has given me excellent preliminary understanding, which I can bolster through other sources. Thanks again.

  59. hi, this article did gr8 help..thank you.
    could you let me know which are the indian investment banks affected to a large extent due to recession?

  61. Dude, I am a student of Economics and I want to thank you deeply for the article. No one else has explained this current economic turmoil in a better way.
    Thanks again, cheers…

  62. The Best article for the causes of global recesion I have found in the net.
    Too Good!!! Excellent explanation in simple english..
    Now I have sufficient knowledge on this subject and I feel I can talk to anyone regarding this..
    Great Job mate!!!

  66. The reason for the recession has been very well explained by you.Thanks for this article.

    The crisis has effected many of us in some way or the other. I just hope that the situation does not worsen further. do you think this situation will somewhat get better in the coming months, both here in India & world over?

    Many of the people i know are losing their jobs or seeing heavy paycuts. a few of them are probably in a worse situation after having lost their jobs are selling their belongings such as cars, electronics etc. to earn some money.

  68. The discourse of recession was a too complex to comprehend.Nevertheless, You made it simple yet forceful to penetrate to minds to reach a conclusion.Greed of capitalists is destroying human value all the way around historyas well.

    As a behavioral scientist,I want to throw light on another dimention of this recession.

    Do you know why did top researchist and economist of US not anticipate its intensity to take measures for cure to this economic epidemic?

    The answer is simple ; this recession has not knocked at through financial statements but took a behavioral track of consumers which is always too complex to predict.

  70. The article was very simple and informative. Now things are very clear though it seemed to be intricate before i could read this.
    Thanks for sharing the knowledge.

  73. wow brilliantly described..i mean i was reallly not getting the picture of what was going on in the world! what was the crisis about? i wanted to know the reasons and you have very well elaborated them. Good job!

  74. Its an excellently written article – that makes it very clear for me to understand why all my investments and retirement plans are in a royal mess. Not only that even the principal amount has shrunk by about 40%. I am in the oil industry industry –

    – is there any connection of the Sub Prime effect and the Oil prices falling from 150 USD/BBl in July 2008 to 36 USD now??
    – Also, Shouldnt the fall in Inflation levels some what self heal the situation, at least as far as the common man is concerned?

  75. Hi,

    Thanks a lot for the excellent explanation on the recession.I would appreciate if you could my following queries:

    1.Companies also depend on internal accruals and cash flows for keeping their operations on-going so why is a tight inter-bank market affecting the industry in India and in the US so much.Please if possible give me a detailed answer.

    2.The US govt. had pledged a spending of $ 825Billion.How much time do you feel will this spend will take to pull the US economy out of the recession.

    Would appreciate your early reply.

  76. I never tried to understand the coz of recession because of “tricky financial terms” (which I don’t understand). Thanks to you for the simple and brilliant explanation.

    Would you please comment on How it will impact Indian/Global IT industry?

    Thanks

  78. Please, lets not be afraid to tell our American brothers and sisters the truth: that this global problem is a direct result of their greed. It is true that they did not want this thing to happen. But seriously, if they dont minimize their greediness this thing will happen again and again…

    • No my friend. Global problem is not entirely because of America. Kindly read part-II of this series to know how Asian countries have also played a role in it.

  81. Thanx..
    i really got a simple n a perfect thought about recession. Bt i wanna knw more about how to get rid out of this increasing recession.
    as much soon possible..

  83. Hey thanks a lot…. very nice explaination… please keep on describing such issues so that we can read and can get good knowledge like this… i was unaware of many terms we used in our daily life and conversations this article made many of them clear.. thanks a ton…

  84. hiii..
    seriously the information here is very useful and factual i was reading newspapers from last 1 year only about financial crisis but till today i was not knowing the exact reasons and secondly on other sites it either so complicated or they provide links which either distract the concentration from the matter or
    seems to be more tedious…
    so i am very thankful to u as u provided all the information together

    i wanna suggest you to plz drop some articles about india also like what are the effects of financial crisis on recovery of subprime loans in india?

    challenges and opportunities in indian banking sector
    during recession……..

    well thank you once again
    pooja arora
    student
    mba

  85. Hi,

    It was nice to go through the blog & it threw some light into the reasons that led to the current scenario of economic crisis all over the world. Thanks. It could have been better if you could explain how this situation can improve & some say that the situation is going to improve within 18-24 months? Based on what this is predicted?

  87. The article is very good and logical too. Except that why did the property prices start falling in USA, the reasoning wasn’t convincing. You have mentioned that the supply was more than demand, but when prices were rising, demand would be rising too, so the supply would have been taken up. I feel there has to be some other contributing major reason for the fall in prices of property in USA.

  89. wow i am doing a senior thesis paper on economic depression and why its the gorvernments fault and this just helped me soo much with the breakdown of everythng of why we got here and whats going to happen…thank you so much!!!!!!

  92. Good information .its really very useful. thanks ………………………………………………….can provide much better information

  93. Very good article. Just a short comment. I’m in the electronic manufacturing business. Most everything has been out sourced from the USA This created a huge retail sector which is now colapsing. We’ve always had products made over seas, but when you start a wholesale movement of all the factories. That leaves nothing for the enconomy to fall back on. Contruction jobs gone. Manufacturing jobs gone. Service sector retracting. Banking industry in shambles. Hopefully the insurance industry will hang in there.
    Good luck to all, were gonna need it. Bob

  99. If you were to be my professor for Economics classes in those days of my university programme, I could have written before you did.

    You should visit the small companies and colleges for delivering a real time seminar. Ofcourse volunteer-service!! (Cost cuttings due to Recession…Haha)

    Thanks a lot.

    Anselo

  100. wow, thanx it really sumed up the whole crisis. It helped beacuse I was writing a paper on it for school,and i needed some info on how it started, so… thanx! 🙂

  102. Excellent article brother …. i had no idea, before reading this article, that happened to the world economy …. but now i have a very good idea of what happened to the world ….

    keep up the good work.

  105. wow… done a good job..
    after reading your article i came to know the real culprit were the CDO’s.
    Your arcticle is apparently simple,interesting and easily understandable…
    You have provided the brief overview of the factors which led recession.
    Thanks dude…

  107. Hi..tis was really great..I had been wandering around speaking the word “Hi its recession time yar”..without its main reson unknown,.Nw i hv a clear idea.Thanks for it..

  108. I want to thank you for such a nice article.

    I am not an economist neither I have enough knowledge about money market that is why I was reading your article today to find out what caused this global crisis that made our lives so difficult.

    I just have one question in mind –
    We saw the recession(money and business crunch for me) arriving all of a sudden, almost overnight. As per your words due to human greed its the basic supply and demand imbalance of real estate market in USA that led to this crisis which affected the sub-prime lenders and CDO investors. Hence, drained back to foreign nations our nation India had to give out dollars keeping back rupees weakening the Rupee rate against Dollars.
    Don’t you think, if this was the case then real estate price must have started decreasing gradually and investment institutions would have lowered their risk lending gradually and this situation wouldn’t have ever arrived? I believe US investors and economists have that much competency to forsight, if this was the case. Is their any other factor that we are missing out?
    I apologize here if I have asked a silly question, however this struck my mind.

  109. some other important factors responsible for recession

    AMERICAS NEEDLESS WAR ON IRAQ AND ITS FINANCIAL IMPLICATIONS

    AMERICAN ARMY BASES BEING MAINTAINED IN MORE THAN 100 COUNTRIES SO UNDERSTAND HOW MUCH THY SPND ON ARMY RATHER THAN THE WELFARE OF COMMON CITIZENS

    AMERICAN MILITARY BUDGET IS SO MUCH HUGE THT IF THY EVN GIVE 40% OF IT FOR THE WELFARE OF ITS CITIZENS THEN THE CURRENT CRISIS CAN BE PREVENTED FURTHER OTHRWISE IT WILL BECOME A BLACK HOLE AND NO RETURNING FROM A BLACK HOLE

    AMERICAN MILITARY BUDGET EXCEEDS THE COMBINED BUDGET OF INDIA , RUSSIA , CHINA , IRAN , JAPAN AND MANY OTHER COUNTRIES

    LET THE AMERICAN GOVT CONCENTRATE ON THE WELFARE OF ITS PPL BY SPNDING ON THM RATHER THAN SPNDING MONEY DAY IN AND DAY OUT JUST TO DEVELOP AND AMASS WEAPONS OF MASS DESTRUCTION AND HITECH WEAPONS

    I DONT UNDSTAND WHT THREAT DOES IRAQ OR IRAN POSE TO AMERICA AS THR IS ATLANTIC OCEAND AND PACIFIC OCEAN GUARDING THE AMERICANS FROM IRANIAN MISSILES IT WUD BE A JOKE TO TELL THT THESE MISSILES CAN TRESPASS SUCH A HUGE AREA

    AND LASTLY AMERICANS JUST DONT BELEIVE IN SAVING MONEY AND SPNDING IT RIGHTLY SO THT THE FUTURE IS INSURED AS THY JUST PARTY ALL THE TIME UNLIKE ASIANS WHO ARE VRY CAREFULL WITH THR MONEY AND BELEIVE IN SAVING IT AND LEADING A MODEST LIFE STYLE

    • Dear Vicky,

      Seems you are obsessed with an anti-US ideology. I request yo to kindly read the second part of this series to know how Asian countries are equally responsible (though unknowingly) for this crisis.

  113. I think most of the money should be there in building materials sector eg: cement companies,tiles..etc.US government should find their assests and put back into the banking sector.As an example they can halt those companies withdrawing their money for few years..

  117. @Uday Sarkar
    From what I understood the system collapsed overnight due to fear. Investors fear.
    There were enough people that were cautious and worried, but most of them were gaining (and hoped to gain more) till the last moment. Waiting, watching the fragile market but with no intention of leaving it till it was the “right time”.
    Unfortunately together with Greed goes Ego. Every one of them believed that they had time and that they will have fast reaction. Faster than most of the “others”
    They all were fast, really fast. Hence->overnight collapse

    • @Yiorgos
      Thanks for your answer. You have actually cleared my doubts about “overnight collapse”.
      In your reply, you have mentioned Greed and Ego of the investors. I believe “Ego” is just not an analytical word you have used here whereas it seems to me that you have some knowledge about the investors.
      It would great if you can tell us something more about your experience.

      • Hello Uday !

        I think it would not be proper to tell my personal experience here. I gained my knowledge from a number of resources who have trust in me. So I do not want to disturb that trust quotient. Moreover, I don’t think my experience will improve the quality of this article in any way. It (my experience) is just like that of millions of others 🙂

  119. Excellent article ! I have a good overview of the current recession now and can understand the details better. Thanks !

  121. Thank you very much for your detailed explanation og Global Crisis.ohh god till now really i dont know whats happening around the world and y i am not getting JOB

  122. Hello: First of all thanks for this excellent article, especially so easy to understand in a layman’s language. Now my question to you is, do the Mutual Funds in India are reliable? Is it worth puting our hard earned money into these MFs and not getting any thing worth during retirement??

    It would be very kind of you to explain on it..

    Thanks,
    Sunil Kumar

  123. Very nice article.Thank you so much for giving such a article.Whenever I searched I ended up seeing some articles that using high level words.I never understand anything. All written by those people who know those difficult terms and seams to be meant by the same king of people.

  124. Very simple and understandable use of language, so that even a common man with simple English Knowledge can understand regarding todays Market Pledge.

  125. Hey
    This is a great article. Detailed and yet precise. I am a student of class 10 and am going to give my English board exam. I searched a lot on the topic but could not find anything satisfactory. You helped me a lot. Thanks and all my best wishes to you.
    Preety Kalpana

  126. Hi,

    This article is really great. One amongst the bests explaination in simple wrods in have read.
    Totally unsure of the market now its really difficult to say as to how much time it will take to come back.
    Amercian ecenomy cannpt help now as they are in a down trot, we were expecting Erupoe to pull up but they have made no efforts to devaluate Euro. If that does not have and individual governments do not cooperate it will still take longer time i believe.

    On India i think we are better placed then the rest and due to a bigger population even we have a bigger demand in place. The watch out factor will be the Elections closing on and also on how Govt control costs.

    According to me the best practice now would be not be decerease the purchase cycle ( spending of consumers ) and not to be in an over-saving mode as that will affect the Supply-Demand factor , which will even worsen the price issue.

    But again thatks a lot for the beautiful explaination.

  134. It is a very good article i have been read about the global recession and it clearly understand due to the simple language used by the auther. Thanx a lot and keep it up

  136. Thanks a lot for your great work done by describing the reasons for global recession in such a plain simple language which made the issue understand in a crystal clear manner.Thanks a lot keep it up.

  137. First of Congrats to u for writting such a wonderfull article covery evry minute detail very precisely
    I want to know that is this depression something to do with US qar in afganistan and iraq?
    Thnx a lot

  138. First of all Congrats to u for writting such a wonderfull article covery evry minute detail very precisely
    I want to know that is this depression something to do with US qar in afganistan and iraq?
    Thnx a lot

  142. hi,

    Really nice stuff,its so precise and clear.

    Thanks a million for providing such relevant concepts for global recession.

    I understand very well,Excellent Article.Keep it up

    Rgds
    Vidushi

  143. Thanks for such a nice article……i was so confused and only heard about the recession but i knew What Really is the problem……

  146. Thanks for posting your valuable comments. I appreciate your concern about image of your countrymen abroad

  148. Dear Eklavya,

    Firstly hats off to u !!!!!! I really appreciate your work and the efforts put in by u,u r doing a great work.
    I thought that i had an idea about what is recession,but after reading ur article I realized, I knew nothing.well i cant put in words how helpful these 2 articles have been to be.
    thanking u from the bottom of my heart and on behalf of all the readers who have been benefited from these articles..
    and special thanks for the inspirational lines “For every problem under the Sun,
    there is a solution or is none
    if there is one, try to find it,
    If there is none, never mind it”

    Shoeb K Hurzuk

  152. Hi,
    Your article on global recession has really helped me a lot, because it is written in very simple language. thanks a lot.
    Can you help me understand why did crude oil prices touch $147 per barrell? please reply as soon as possible.

    Thank you.

  155. the article of urz is gr8! it is real helpful for students like us.Thanks a lot for such a well detailed and precise!

  156. the article of urz is gr8! it is real helpful for students like us.Thanks a lot for such a well detailed and preciseinformation…

  157. Who says Ch***** brain is d best??SCREW THEM AND THEIR CONSTIPATED OVERDOSE OF RICE!! INDIANS ROCK AND U R SOMEONE ONE OF ‘EM
    CHEERS BRO.KEEP UP D GOOD WORK

  161. heyy!!!

    wow that was a load of information there!!!loved it, was really detailed and writen sooooo well!!!i really appreciate your fine words and ability to write simply, that otherwise gets the message across to those that have difficulty understanding the process!:):) you have helped me heaps for my Year 10 Commerce recession assignment!!giving me a detailed understanding so that i can word it whilst undersdtandig the concept!!:):):)

    cheers
    Olivia:):):)

  164. thanks a lot for this information and explanation about recession, that solved lot of queries in my mind.

    it helped very much, nice article

  167. Hi,
    The article is excellent, however, would it not give a better picture if the effect of US defence spending, Trade protectionism, Opec’s policies on the oil economy and the effect of population growth are covered.

    Thanks
    S. Sanjeev Kumar

  168. Wonderful!!! Kudos for sharing your knowledge. That greed/desire is an evil and should be curbed is an age old advice. Given by Gautama Buddha atleast 2 millenia back and mankind never realized it and went for the kill and has resulted in the present crisis. Let’s hope this goes away soon. Hat’s off again for such wonderful explanation. cheers!!!

  170. Hi, This article clearly gives the description about the recession effect…..after reading this article I really understood the what is mean by recession…

    Thanks
    Regards,
    Austin

  173. what a jhakkass article yaar!i you must be either an economist or a great economics professor..thank you so much………………………………….

  176. you have explained very well, the reason and the effect, i really apriciated your effort. sorry but you should have post some remedies for the situation, that wud be very good, but thanks man.

  177. great article…….. very comprehensively writtn, n ofcourse in simple language even a layman can understand. excellent work.

  178. great work. very comprehensively written, in a very simple langage it has been decribed..even a layman can understand. EXCELLENT WORK.

  179. great article!!!
    to be frank prior reading this i was unaware of what was happening with recession…….now i say i can defend a discussion on this topic.
    thanx a lot…..
    well i expect few more detailed discussions on current topics in english from ur side…..

    dhanyavad ji

  180. hey thanx alot..
    i am a xth student and i got a matter for my essay writing competition!! u have explained in the best way!
    thanx!

  182. Thank YOU so much ……
    as a student of engeneering we all know “global Recession” but didnt know how and what it is….
    but u made me understand this in such a laymen language that knw i can talk over on recession for hours..

    thanks

  184. Hi…Thanks a lots for providing such a detailed knowledge about recession…really it has clarified all my queries…thanks once again

  186. hats off.
    damn impressed by ur simplified version of recession.
    in india many people knows tat there is something so called recession but most of them dont know how,and where it started.
    the best part is u get everything in simple and plain englih

    good job

    keep doing it.

    thanks a lot

  188. IT’S SO GOOD AND EASY TO UNDERSTAND THE REASON OF IT AND IT IS DEFINED IN DIFFERENT POINTS WITH THE QESTION WHICH EMERGES IN THE RESDERS MIND.SURELY I HAVE UNDERSTOOD THE CAUSE BEHIND RECESSION IN WORLD ECONOMY.

  189. Sir,
    Though i am a Economics student i could not understand articles by others because of the complexity of this global problem but ur explanation is so simple nd easy to understand.Thanks a lot for a wonderful article hope to read more such articles in future

  190. hyeeee
    very well explained the cause and effects of economical turmoil which spread its arm on the developed world bt much worse is the developing world which for no such reasons are facing the consequences because of the business connectivity from developed countries
    recently tata steal has also reported a lose of 2000 crore
    i hope the world to get out of this downturn very soon

  191. Excellent Article man…

    i hope u make the picture clear for every1 who went through ur article and who really doesn’t know about the reality fo global financial recession..

    carry on

  192. you have explained the issue very well and also helped me understand the generation of the problem….I am a MBA student having my summeer internship…..i have to make a project on can we boost up the housing loan sector in todays senario of attractive real estate prices but in contradiction with lesser jobs and earning opportunities….
    can you help me with that as well….

  193. hey thr….gr8 job…it really helped me knw better of the situation and am sure it must hve helped many ppl who just knw that wr are facing an economic depression without knwing its reasons…cntnue wid ur gud wrk…all the best..

  196. thank you very much, for detailed explanation in a very simple language.initially it was very difficult for me to understand this concept,but,your article helped me to overcome this difficulty. Once again thanks a lot.

  198. thank u so much..it really helped me,for it gave me a proper background of what i was trying to understand..now im well acquinted with where global recession sprang from..

  199. Well this is simply a work of a genius
    one thing that comes to my mind is that what ever way the world economists may devise to avert such thing in future, it is only possible if more stress is given on moral building (which is at its ebb now) of human beings in particular the small children which is the future of any nation

  201. The article is excellent and self explanatory.It has helped me a lot to understand what actually led to the subprime crisis.

    I just hope to read your articles in such simple language on many critical issues in future….
    Thanks a lot for my adding to my knowledge.

  204. Hi
    im from NZ
    and im doing a essay on the Global Recession and the impacts on the wider society
    i was just wondering who wrote this article? no name is written and i need a name to reference the writer. since this seems as a good source !
    and if you would be kind enouh to send me a few other links to topics of the recession which could help me if you have time?
    really apreciated
    THANKS

  208. Excellent and informative article. Here in Ireland we are reeling from the devastating effects of a credit fuelled property bubble and subsequent crash. Throughout the course of the bubble there has been the biggest transfer of wealth from the majority to a minority in the history of the state. I’d like to hear more of your thoughts based on your conclusion that: “On a more ideological front, it is high time to have a rethink on the very idea of free markets and capitalism. I think the time has come to evolve a capitalism where everything works under a broad regulatory framework and we do not see a repeat of this condition where greed of some people can affect the lives of billions”. Essentially you are advocating reforms to the system. However if we look at the dismantling of the Glass Steagall Act and its repercussions, causing worldwide economic catastrophe, we would have to say that reforms simply aren’t enough. To disagree with the first comment – I don’t believe greed is a basic human trait, but rather an enforced trait in the presence of artificial scarcity.

  211. your article was really nice and easy to understand,specially when i had to do the explaination of the recession in my french class

  213. Nice..that was the artical i looking for..

    Wel explained, and very easy to understand, now i got informed little bit..but still some confusion,
    can you give some easy example to make it understand? if so, than pls it wil be highly appreciated if you could sent it my email tariqnaz……@yahoo.com

  217. Thanks a lot for such a useful insight on recession.The information are exhaustive and explained in a very simple
    language.I really appreciate your effort.
    If you have any more material which can be realted to micro and macro terms on recession please send it to me,as it can be useful in my MBA course.

    Thanking you once again

    Manish r

  218. hey thanks!! ur explanation was too easy and simple in terms to understand..this explanation has created a clear picture of ongoin recession in my mind.

  222. My sincere appreciation and tribute for writing an article on so complicated issue in simple and comprehending manner and language.Apart from gathering knowledge of various aspects of recession, this article is an epitome of how to write an article.I request you to come with articles on all relevant issues of the world.

  223. it clearly shows what happens if a house is built without
    roof,in the sense, without any security how a loan agency
    can give loans?they deserve it!unfortunately we have become its part.but i hope it will not last for long time
    because the cycle has to continue………..

  229. thanx sir
    your article give me a huge knowledge that will halp me in my futher life.your article is really great in trully detailed.

  231. Very very grateful to you sir. Your article called a halt to all my doubts and confusions on Recession. The treatment of the issue is really systematic and easily comprehensible.
    Thank You

  235. thank you for your information

    can u mail some detail information on the effect of global recession in india.. and steps taken by govt and other financial institutions to over come it…

  236. hey..hi!!
    i was realy not knowing wat exactly is reason bihind
    this recession bt now m clear abt it…
    thanx 4 ur wrk done on this topic…it has helped lots
    of ppl lyk me who r not aware of it…

  239. thank you so much to give such a sweet explanation. i have never understood the concept of recession and its linkage with Indian economy, today u made me clear about it. After some days i am going to present a topic related to recession i hope this explanation of urs regarding recession will help me in making my presentation better.
    thanks!!!!!!!

  240. really nice actually m working on real estate crisis in usa, reasons and impact. through this article i have got some major points which i m going to discuss in my study…..
    thanks!!!!

  244. Thanks for this. it was really helpful with understanding it. i was wondering where you got your information, cause im going to site you in my History essay. My teacher wants me to give a reason why i think you a valid source. I don’t think she is going to take, ” casue he sounds like he knows what he’s talking about”

  248. the article was very informative and full on detailed analysis of all the facts and figures.
    my all doubts were clear.

    thanks a lot

    HIMANSHU GAUR(LECTURER)

  249. Very nicely written. Perfect for a layman’s understanding. I appreciate the simplicity of the article. Hoping to read something related to the post recession effects.

    Regards

  251. The article is really aweful & excellent.Please do write these kinds of articles in future also as these are very helpful in understanding the real facts of the Economy.

  252. I would like to add to this article that the key to “fixing” the economy is to, in short, rebuild this nation.

    The reason the economy has crashed is becasue people without morals were given control of people’s money. They abused this power and lost that money, and everyone now (by everyone, I do mean EVERYONE, this is a global disaster) pays the price.

    Why do these people have no morals? Well, regardless of what they were taught, some will always choose to sin. But I do not believe this is the case. Most of these people probably did not think what they were doing was wrong. They thought it was good, and that it would land them lots of money. But it only crashed and burned.

    In general, the more and more I see and read of politics, the more I realize how bad off America is. Nations like Bangladesh, India, Thailand, etc, they have excuses, they were not founded upon the same principles that America has been founded upon, the result is horribly ineffective politicians, military coups, and corruption everyonewhere. But Americans should know better, and yet all we can come up with is two men who will, in the end, do nothing for the better. I’ve heard various people say that all McCain will do is destory the country, but a bit slower than Obama. At this rate, I think I’d rather vote for my Youth Pastor (who is running, btw) than two… well… people who don’t have what it takes. They won’t make the right decisions, they will play the political games that ALL politicians (or at least most of them) play.

    For years and years, the West has been seen as a place of great immorality, evil, and well, bad things by the East. (yet they all want to go there… go figure). To be honest, we deserve that title. America, in my eyes, has failed its job as the lone superpower of the modern world. We have done nothing in my eyes to deserve this title.

    My question to everyone else, all other citizens of the United States that is, is what are you going to do about it? Right now, my goal is to complete my studies, but after that, I know what my goals are. I don’t know if politics on the scale of Washington is what God has in store for me, but I do know that I’ve been called to be a leader. To bring the West (especially the nation of America) out of its fallen state. To recreate what we once were, the light in the darkness (okay, fine. We never were a true light in the darkness, immorality and sin have been part of our culture since the fall of the Roman Empire, before that even). If that means I end up president of the United States, CEO of Coke, Blizzard, McDonalds, whatever, I will do it.

    What am I saying? To be honest, I’m not sure. Well… I’m rambling, that’s for sure. But the 2008 election had gotten me so disgusted. Obama won’t and isn’t doing anything he promises (and if he does, I don’t want any of it) and McCain, no matter how he says it, is just a combination of Bush (who, no matter how good of a person he is, is/was a horrid president. Thank God he can’t stay in office!) and Obama…it makes me want to run for president.

    Now, when I say that, you have to understand where I am coming from. I am not a politician, and I’m a horrid diplomat. I don’t mince words. Furthermore, I don’t like politicians. Bangladeshi politics have given me a bad taste in my mouth for ANY politician. Tarique Rahman spent the past five years ROBBING THIS COUNTRY BLIND. And for that, instead of kicking him out of the country, throwing him in jail (or better yet, shooting him for all the people he indirectly killed because they didn’t get the right government aid!) we send the man to England because he is “sick.” And we did pretty much the same thing with every other politician in this nation. It’s disgusting. America is by far doing a lot better, but still, Obama and McCain disgust me. The best we can come up with is a liberal conservative and a liberal liberal? Oh, but McCain has Palin! Palin is a good VP. Well, since the VP doesn’t actually do anything. 🙂

    Fine, I think I’m going to stop now. I’m not even sure what the point of this is anymore. Oh well.

  255. I have read many articles on the causes of global recession and your article simplified it so well. Fantastic. With my new found understanding of what caused the global recession,I now feel confident to hold/join/voice an opinion on the subject thanks to your article. Very well written and put together indeed. Thank you.

  261. this country wasn’t in a fix until the fuel prices went over $2 a gal. when the fuel went to $3 and $4 and higher, the truckers had to raise the cost of shipping, which raised the cost of food, clothing and everything else so much that after people paid for the fuel to go to work and feed themselves they didn’t have enough to pay the mortgage. And until the cost of fuel comes back down to where it was in 2007, this country will never get any better
    The goverment needs to get their head out of their ass’s and do something to lower the fuel back down

  263. great job dude :::::
    the best article i have ever read about the recession, in a very simple and meaningful manner you have designed the content.
    it has really enhanced my knowledge about the topic…

    thank you ::::::::::::

  265. sir please give me possible information on market u have really described this article in simple language and i want to learn more things feom you!!
    pls send information on my email id!!!!

  266. Like most other people said: GREAT JOB!!

    Simple put and in words us humans can understand free from medial and political twisting.

    If you could toss me some links to some of your sources, it would be most appreciated, since I’m probably choosing a similar topic in an MA essay about global media (in short; about how one nation’s banking system was communicated as the whole west’s – or even the whole world’s – problem and how the workes and regular employed people now have to clean up the mess with banks still paying out huge bonuses while sacking employees ).

    /Peter

  273. […] Computer Applications First, if you don’t have a gmail account, Click here to create your gmail account. Next, subscribe to Circuits, the New York Times’ weekly technology review. Wrap up: begin analyzing Reasons for the Global Recession: In plain simple English. […]

  278. Excellent efforts….. the best and simplest article that i read about The Subprime Crisis ….. great help … Thanks …. keep writing and en lighting… !

  279. I have read so many article to understand the root of recession but m nt getting it properly,but now i knw n understood very much about this.Really its great work done by u.

    in the last,i can say that ur article is”SHORT AND SWEET”

  282. It could have not been more lucid than this. I’v read so many articles but none has been so simple, yet so damn explanatory. GREAT WORK

  285. Stupendo, Fantanbulously, Fantastical……
    Amazing explanation in a simple language.. this article has solved all my queries n doubts in my mind regarding recession 2008…
    thankyou so much n keep being the way u r ……….

  286. Thank you for easy understanding article.
    Wow, why they couldn’t see this result in the past? Such a stupid thing, they employ many economists who should have seen this danger. We never will restore these lost money, market lessened. Big stap back. But we are just people 🙂

  291. awsome is the word!!
    no book or magzine could explain it so precisely and clearly as u did.
    Im very thankful to u fr enriching my knowledge.

  294. Great article on recession causes and how did it took place in US specially,,,,,,,,,,,, Thnx for providing such knowledge,,,,,,,,,,,,,,,,,

  296. i am really thanking you for your simplified & apprehencive writing on causes for global recession i read so many news paper & magazine to understand this but i had nt from your writing i really understood the reason for this big cricis thanku

  299. dear sir i m a law student but i have understood article because it is in simple language. sir i m doing my phd on inflation and high level of NPAs

  300. NICE ARTICLE BY THE WAY, IT IS AN EYE OPENER FOR MY KIND OF GUYS RELYING ON US STUDIES & ITS DOLLAR GLAMOUR. IS AUSTRALIA IS SAFE ENOUGH TO MAKE A ABROAD MOVE FOR ACADEMICS & PROFESSION?. PLEASE DO REPLY ME IT WILL BE QUIET HELPFUL FOR ME.

    THANK YOU!!! KEEP UP THE EYE OPENING TASK GOING.

  301. Your simplified version of RECESSION is very much educational and enriching.I hope you will write on current effects of FDI in INDIA.waiting………………………

  302. Hi, It is a great article to understand easily. i also red many article about ongoing economic recession in the world and its affect to developing nation like India and Sri Lanka. but all are not come directly to the point as your article elaborated.

    It is a great job for us from you. I am doing a research on it for completion of MBA.

    keep it up in the future as well.

    Best wishes from me. Take care

  306. Bravo…I stumbled on to this while trying to find a simple explanation of 2008 recession..it is just that. Very well written.. hoping to find more of such articles from you.. Thank you.

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