Understanding the Global Finance Crisis: Causes, Impact, and Future

2. Global Finance Crisis

3. PRESENTATION OUTLINE • Meaning of Global Finance Crisis • Over view of Global Finance crisis • Consequences - U.S.A - UK - India

4. GLOBAL FINANCE CRISIS • The global financial crisis of 2008 is the worst of its kind since the Great Depression • Began with failures of large financial institutions in the United States Morgan Stanley, Goldman Sachs, Merrill Lynch Deutsche Bank ,Barclays. • Rapidly evolved into a global crisis resulting in a number of European bank failures

5. MEANING OF GLOBAL FINANCIAL CRISIS • The term financial crisis is applied broadly to a variety of situations • Usually, some financial institutions or assets suddenly lose a large part of their value • – Banking Panics (and recessions) • – Stock market crashes • – Bursting of financial bubbles • And biggest organizations

6. Created by Robin Thieu, 2008 Fall

7. Banking Panics (and recessions) • Commercial banks suffer a sudden rush of with drywalls by depositors, this is called a bank run September 7, 2008: • Two United States Government sponsored enterprises (GSEs), Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), into conservator ship run by FHFA September 14, 2008 • Lehman Brothers files for bankruptcy. • Sale of Merrill Lynch to Bank of America September 16, 2008 • AIG faces severe liquidity crunch • Financial institutions lost a large part of their value incoming days and weeks

8. WHAT`S HAPPENING IN RECENT YEAR • 1 year ago RBS paid $100 billion for ABN Amro. For this amount it could now buy: • Citibank $22.5 billion • Morgan Stanley $10.5 billion • Goldman Sachs $21 billion • Merrill Lynch $12.3 billion • Deutsche Bank $13 billion • Barclays $12.7 billion • And still have $8 billion change......with which it would be able to pick up GM, Ford, Chrysler and the Honda F1 Team.

9. IMMEDIATE EFFECTS OF CURRENT CRISIS IN THE “UK’’ • Unemployment increased by 164,000 between May and August 2008; almost a 10 % rise from 1.63 million • Most hard hit is London where number of jobless looking for jobs increased by 42 % in September 2008 • Some estimates put 1.5 million additional unemployment generated by end-2010 leading to an unemployment rate of 10% from current 5.7 %.

10. IMMEDİATE EFFECTS OF CURRENT CRİSISIN THE“USA’’ • Slowdown in GDP • Current 2008 projection 1.6 % (down from 2.8 % projection in April 2007) • 2009 projection: 0.06 % • Consumer confidence lowest since 1978 • October 2008 consumer sentiment index: 57.5 from 70.3 in September • Construction activity much worse: Q208 new constructions starts are 40 % less than post 9/11 (Q401)

11. IN INDIAN……………………………………………..?? STOCK MARKET DOWN INDIAN CURRENCY VALUE 1$=49.89 IT PROJECTS INFLATION RATE [HIGHEST IS 12.6%] GDP TOWARDS DOWN INCREASING FUEL, METAL AND FMCG GOODS

12. India: Vibrant Capital Market Sensex – The Bombay Stock Exchange index rise 20 times from 1990s to reach 20,000 mark in November 2007. India is among the major destinations across the globe for inflow of US Dollar Sensex has risen 20 times in the period 1990-2007 Emergence of industry and confidence of local investors along with the FIIs has led to upsurge of the Sensex FIIs have infused large investments into the Indian stock market Increased local investors’ confidence Encouraging industry performance 12

13. India: Fastest Growing Free Market Democracy 13 Source: Times of India, RBI, DIPP, Indian Budget, Rediff * Annualized data used to show comparison with 1990

14. INDIAN ECONOMY INDICATORS BANK RATE 6.0% REPO RATE 6.5% REVERSE REPO RATE 5.0% CASH RESERVE RATIO 5.5% STATUTORY LIQUIDITY RATIO[SLR] 24% PRIME LENDING RATE 12.5% SAVINGS BANK RATE 3.5% AND GDP 7.5% INFLATION 6.4%

15. MAN OF BEST ATTITUDE [MBA]