Description
globalization of finance leads to many crisis.Covers all major global financial crisis situations.Sub Prime,asian crisis,dotcom burst etc.
During the late 19th and early 20th centuries, there was little coordination of international finances. ? The world’s financial capital was London, and most major trading nations were on the gold standard. ? This system worked reasonably well before World War 1. ? World War I involved vastly larger international capital flows than ever before. ? Britain left the full gold standard permanently in 1931, as did the United States two years later.
?
World War 2 happened , the most costly war ever fought, disrupted world trade and led to international cooperative arrangements to facilitate economic stability and growth. ? At Bretton Woods conference(1944), Keynes and Dexter, proposed the formation of IMF and WORLD BANK. ? Financial integration was further advanced by new institutions like European Payments Union , Organization for Economic Cooperation and Development (OECD), G7, G20, ADB, WTO etc.
?
Advances in IT
Globalization of national economies
Liberalization of financial and capital markets
Competition among intermediary service providers
The Great Depression (1930) Wall street stock crash. Monetary policy by Fed.
Latin American Debt Crisis(1980s) Oil Prices. Huge Debts.
Japanese Asset Price Bubble(1990) . Huge speculation
Asian Financial Crisis (1997).
Financial Crisis (2007-2010).
Thailand Currency Devaluation. US Economy turnaround.
Demand – Supply Mismatch.
? PROXIMATE
CAUSE:
-Sub-prime sector lending
? FUNDAMENTAL
CAUSE:
-Persistence of large global imbalances
Dot-Com Bubble burst 2000
Loose Monetary policy
Rise in Demand esp. Real estate
Financial Mistakes
Deviation from Taylor rule
Met by Asian Countries
Large-Current account deficit (USA)
Large current account surplus (China, Gulf countries)
Credit Crisis
Equity Crisis
Consumption Crisis
Unemployment Crisis
Company Defaults
IMPACT ON THE WORLD
21.5% Mexico Iceland Suffered largest Suffered loss of banking $1 trillion on collapse toxic assets and from bad loans. Unemploym Real GDP ent rate decreasedto increased by 6% 10.2% 7.4% -.1%Property .1% 14.4% 9.8% UK,Irelan UK German Euro 18% Euro prices d,Spain Area Latvia Area ydipped by 6.8% Shares held by Bank Rising of China fell by 6.4% value of 4.1% in and Rupee Stock Hongkong and damage Shenghai Markets 0% ArabMarket exports 15.2% world lost Fallouts Combodi a Japan $3 trillion
3-4% Kenya
Annualized rate of GDP decline Weak GDP Growth
Central banks around the world have taken steps to expand money supplies
Large fiscal stimulus packages
Emergency and shortterm responses US federal reserve and European central banks purchased US$2.5 trillion of government debt and troubled private assets from banks
Governments bail out
RESPONSES TO FINANCIAL CRISIS
Volcker Rule (in US) •Endorsed by President Barack Obama •Proposal to restrict banks from making speculative investments that do not benefit their customers
Break-up institutions that are "too big to fail" to limit systemic risk
Simon Johnson
Regulatory proposals and long-term responses
Warren Buffett
Require minimum down payments for home mortgages of at least 10% and income verification.
Paul Krugman
Regulate institutions that "act like banks" similarly to banks.
What’s The Crisis
What Can Happen
The Trigger
Beginning 2012, risky ,high-yield corporate debt worth $700bn comes due during 3 year period
1. Huge bills hitting the US Govt and firms 2. Some firms may default.
1. Easy availaibility of loans. 2. The payment becomes due in next 5 yrs
TOM YUM GOONG CRISIS
-Large NPA’s - South Korean Won weakened to 1700 from 800 -National debt to GDP @30% from 17% -High Foreign debt -Excessive float of Thai Baht -Collapse of Baht -Free exchange rate regime in 1997. -Collapse of Rupiah. -Long term debt declared Junk Bond by Moody’s
Market: Stock market collapse. 2. Monetary :Loose monetary policy followed by Fed. 3. Keynesian: Low expenditures policy of Government.
1.
Personal income, revenues, prices fell. 2. Unemployment increased by 25%. 3. Crop prices decreased , wiping many farmers. 4. Construction halted, cities depending on heavy industry.
1.
Causes:
Effects:
1. 2.
3.
Oil crisis of 70s. Unfettered borrowing by Latin countries. Lack of standard loan disbursement policy.
1. 2. 3.
Big cuts in social spending. Currency devaluation. Privatization of public industries.
Causes:
Effects:
1. 2. 3.
Excessive saving. Large trade surplus. Speculation in real estate.
1. 2.
3.
Crowding out of investments. Low consumption resulting deflationary cycle. Manufacturing firms lost their technological edge.
Causes:
Effects:
doc_792545894.pptx
globalization of finance leads to many crisis.Covers all major global financial crisis situations.Sub Prime,asian crisis,dotcom burst etc.
During the late 19th and early 20th centuries, there was little coordination of international finances. ? The world’s financial capital was London, and most major trading nations were on the gold standard. ? This system worked reasonably well before World War 1. ? World War I involved vastly larger international capital flows than ever before. ? Britain left the full gold standard permanently in 1931, as did the United States two years later.
?
World War 2 happened , the most costly war ever fought, disrupted world trade and led to international cooperative arrangements to facilitate economic stability and growth. ? At Bretton Woods conference(1944), Keynes and Dexter, proposed the formation of IMF and WORLD BANK. ? Financial integration was further advanced by new institutions like European Payments Union , Organization for Economic Cooperation and Development (OECD), G7, G20, ADB, WTO etc.
?
Advances in IT
Globalization of national economies
Liberalization of financial and capital markets
Competition among intermediary service providers
The Great Depression (1930) Wall street stock crash. Monetary policy by Fed.
Latin American Debt Crisis(1980s) Oil Prices. Huge Debts.
Japanese Asset Price Bubble(1990) . Huge speculation
Asian Financial Crisis (1997).
Financial Crisis (2007-2010).
Thailand Currency Devaluation. US Economy turnaround.
Demand – Supply Mismatch.
? PROXIMATE
CAUSE:
-Sub-prime sector lending
? FUNDAMENTAL
CAUSE:
-Persistence of large global imbalances
Dot-Com Bubble burst 2000
Loose Monetary policy
Rise in Demand esp. Real estate
Financial Mistakes
Deviation from Taylor rule
Met by Asian Countries
Large-Current account deficit (USA)
Large current account surplus (China, Gulf countries)
Credit Crisis
Equity Crisis
Consumption Crisis
Unemployment Crisis
Company Defaults
IMPACT ON THE WORLD
21.5% Mexico Iceland Suffered largest Suffered loss of banking $1 trillion on collapse toxic assets and from bad loans. Unemploym Real GDP ent rate decreasedto increased by 6% 10.2% 7.4% -.1%Property .1% 14.4% 9.8% UK,Irelan UK German Euro 18% Euro prices d,Spain Area Latvia Area ydipped by 6.8% Shares held by Bank Rising of China fell by 6.4% value of 4.1% in and Rupee Stock Hongkong and damage Shenghai Markets 0% ArabMarket exports 15.2% world lost Fallouts Combodi a Japan $3 trillion
3-4% Kenya
Annualized rate of GDP decline Weak GDP Growth
Central banks around the world have taken steps to expand money supplies
Large fiscal stimulus packages
Emergency and shortterm responses US federal reserve and European central banks purchased US$2.5 trillion of government debt and troubled private assets from banks
Governments bail out
RESPONSES TO FINANCIAL CRISIS
Volcker Rule (in US) •Endorsed by President Barack Obama •Proposal to restrict banks from making speculative investments that do not benefit their customers
Break-up institutions that are "too big to fail" to limit systemic risk
Simon Johnson
Regulatory proposals and long-term responses
Warren Buffett
Require minimum down payments for home mortgages of at least 10% and income verification.
Paul Krugman
Regulate institutions that "act like banks" similarly to banks.
What’s The Crisis
What Can Happen
The Trigger
Beginning 2012, risky ,high-yield corporate debt worth $700bn comes due during 3 year period
1. Huge bills hitting the US Govt and firms 2. Some firms may default.
1. Easy availaibility of loans. 2. The payment becomes due in next 5 yrs
TOM YUM GOONG CRISIS
-Large NPA’s - South Korean Won weakened to 1700 from 800 -National debt to GDP @30% from 17% -High Foreign debt -Excessive float of Thai Baht -Collapse of Baht -Free exchange rate regime in 1997. -Collapse of Rupiah. -Long term debt declared Junk Bond by Moody’s
Market: Stock market collapse. 2. Monetary :Loose monetary policy followed by Fed. 3. Keynesian: Low expenditures policy of Government.
1.
Personal income, revenues, prices fell. 2. Unemployment increased by 25%. 3. Crop prices decreased , wiping many farmers. 4. Construction halted, cities depending on heavy industry.
1.
Causes:
Effects:
1. 2.
3.
Oil crisis of 70s. Unfettered borrowing by Latin countries. Lack of standard loan disbursement policy.
1. 2. 3.
Big cuts in social spending. Currency devaluation. Privatization of public industries.
Causes:
Effects:
1. 2. 3.
Excessive saving. Large trade surplus. Speculation in real estate.
1. 2.
3.
Crowding out of investments. Low consumption resulting deflationary cycle. Manufacturing firms lost their technological edge.
Causes:
Effects:
doc_792545894.pptx