Friday, September 25, 2015

59. Great Recession

59. Great Recession

The Great Recession is a global economic crisis still being felt after the international financial crisis precipitated by the collapse of traditional American investment bank Lehman Brothers. In a domino effect, other large financial institutions broke in the process also known as the subprime crisis.
Some economists, however, believe that the subprime crisis has its first issue in the burst of the Internet bubble in 2001, when the Nasdaq plummeted.
Anyway, Lehman Brothers was followed within a few days, the technical failure of the largest insurance company in the United States of America, American International Group (AIG). The U.S. government, which refused to provide assurances that the British bank Barclays to acquire control of the tottering Lehman Brothers, alarmed by the systemic effect that the failure of this traditional and powerful financial institution - abandoned the "market solutions" - provoked in global financial markets, it decided, in twenty-four hours, inject eighty five billion dollars of public money to save AIG in its operations. But within weeks, the U.S. crisis has already crossed the Atlantic: Iceland nationalized the second largest bank in the country, passing by serious difficulties.
The most important financial institutions in the world said they had huge losses on their balance sheets, which aggravated the climate of distrust, which became widespread. In Brazil, Sadia, Aracruz Celulose and Votorantim companies announced billions in losses.
To prevent collapse, the U.S. government nationalized mortgage agencies Fannie Mae and Freddie Mac, privatized in 1968, which will now be under the control of government indefinitely.
In October 2008, Germany, France, Austria, the Netherlands and Italy have announced packages totaling 1.17 trillion euros in aid to their financial systems. The Eurozone GDP fell by 1.5% in the fourth quarter of 2008 compared to the previous quarter, the biggest contraction of the history of the area economy.
The most recent development of the international financial and economic crisis of 2008-2009 was the insolvency of developed nations. The large accumulation of government debt has burst the debt capacity of these nations and caused a huge financial turbulence to cause the fear that these nations could not honor their commitments and enact a debt default. The main result of the sovereign debt crisis was the great social instability caused by cuts in social benefits.


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