RECESSION
What is RECESSION??? <ul><li>Recession is a decline in a country's gross domestic product (GDP), or negative real economic...
Recession sets in……. <ul><li>The ‘Leveraging’of the late 1980s –early 2000s </li></ul><ul><li>Rising stock prices, rising ...
<ul><li>Unsustainable factors driving the spending boom since 1980 </li></ul>
<ul><li>Long term consumption trends </li></ul>
<ul><li>The Deleveraging of late 2000 </li></ul><ul><li>Falling stock prices, falling home prices, credit crunch, change i...
The Current recession in context 1970Q1- 2008Q4
Why recession set in???? <ul><li>Sub-Prime Lending </li></ul><ul><li>This involves lending to borrowers who do not meet pr...
<ul><li>New Financial Architecture (NFA) </li></ul><ul><li>This refers to a seemingly ingenuous set of bogus financial pro...
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Recession The Downturn

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Recession The Downturn

  1. 1. RECESSION
  2. 2. What is RECESSION??? <ul><li>Recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. </li></ul><ul><li>Some economists prefer a more robust definition of a 1.5% rise in unemployment within 12 months. </li></ul><ul><li>Recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment, and corporate profits. </li></ul><ul><li>To ordinary men recession only means hard times. </li></ul>
  3. 3. Recession sets in……. <ul><li>The ‘Leveraging’of the late 1980s –early 2000s </li></ul><ul><li>Rising stock prices, rising home prices, low interest rates, easy access to credit, plunging savings rates resources, spending resources spending </li></ul>Resources Spending Resources Spending
  4. 4. <ul><li>Unsustainable factors driving the spending boom since 1980 </li></ul>
  5. 5. <ul><li>Long term consumption trends </li></ul>
  6. 6. <ul><li>The Deleveraging of late 2000 </li></ul><ul><li>Falling stock prices, falling home prices, credit crunch, change in apetite for risk </li></ul>
  7. 7. The Current recession in context 1970Q1- 2008Q4
  8. 8. Why recession set in???? <ul><li>Sub-Prime Lending </li></ul><ul><li>This involves lending to borrowers who do not meet prime underwriting guidelines and therefore more likely to default on payment including those with a history of limited debt experience or even bankruptcy. </li></ul><ul><li>Deregulation </li></ul><ul><li>Apparent relaxation of Regulation with the removal of oversight functions on mortgage institutions, in particular, Fannie Mae and Freddie Mac, so they would have more money to issue home loans </li></ul>
  9. 9. <ul><li>New Financial Architecture (NFA) </li></ul><ul><li>This refers to a seemingly ingenuous set of bogus financial products including collaterized debt obligations and Credit Default Swaps which overleveraged the balance sheets of a globally integrated system of poorly regulated bank conglomerates </li></ul><ul><li>Other Causes </li></ul><ul><li># Expansionary Monetary Policy: </li></ul><ul><li>Large increase in the amount of money in circulation to lower interest rates </li></ul><ul><li># Over production </li></ul><ul><li>Overproduction of goods caused by globalization </li></ul>

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