globalEDGE Blog - By Tag: financial-crisis

Throughout the pandemic, countries within the European Union (EU) have been providing a great deal of financial support to businesses. Although this assistance is crucial in keeping many of the companies alive, some economists worry that a majority of these countries may be allocating an excessive amount of their funds toward aiding their nation's businesses. With bankruptcies down to levels that haven’t been seen in decades, some fear that there may be a delayed wave of bankruptcies approaching as soon as governments stop monetarily assisting these companies.

As the stock markets begin to take a turn for the better with news on a potential vaccine, the Financial Stability Board (F.S.B.) warns that vulnerability in the global markets still persists. With many company’s stock prices rising comes more volatility as the coronavirus has left a lasting impact on global businesses.

After a sixteen-month investigation, the International Consortium of Investigative Journalists (ICIJ) has announced that major banks throughout the world have taken part in allowing dirty and illegal money to pass through their institutions. The ICIJ’s investigation has concluded Bank of New York Mellon, Deutsche Bank, HSBC, JPMorgan, and Standard Chartered Bank as the five main financial institutions responsible for authorizing the moving of crime-financing funds.

The coronavirus outbreak has spread into countries all across the globe. Despite international efforts to engage in social distancing, the number of people with the virus has continued to rise. The coronavirus, which is most dangerous to the elderly, has now has infected over one and a half million people globally. It has been the cause of a massive shutdown of businesses, as well as a massive drop in the stock market.

In the wake of the pandemic and desperate times, governments throughout the world have turned to automakers with the hope of increasing the global ventilator supply. As auto factories continue to stop making cars, the general public clamors for the transition to ventilators with hospitals, more specifically ICU wards across the globe, feeling the mounting pressure of increasing patients ill with coronavirus.

Over the past decade, undetected corruption has lead to instability throughout markets around the globe. In 2012, many banks began to struggle as a result of the London Interbank Offered Rate. More commonly referred to as LIBOR, this interest rate serves a much larger purpose than any other before it. The rate acts as a benchmark for almost all other interest rates to be based on throughout the world. However, due to the rate fluctuating for unknown reasons throughout past financial crises, suspicions emerged questioning its reliability. These speculations ended up leading to an investigation of a global market manipulation scandal that came to light in 2012.

Expert analysts predict tough times ahead for the world’s global economy. Although only predictions, there are many factors throughout the world that support these anticipations of the future; undoubtedly, the most significant is the number of nations at risk of entering a recession. If the predictions were to end up being correct, factors like this would be the prime cause of what experts are calling a “global recession.” 

This month marks the 10-year anniversary of the ‘Great Recession.’ The subprime mortgage crisis ignited the 2008-09 financial crisis in the US, which rippled through almost every market in the world causing a global meltdown. America itself is estimated to have lost about $4 trillion from the financial crisis and its labor market has not yet recovered ever since. So, what should we expect this upcoming year?

The Aussie real-estate market is an increasingly mercurial frontier for investors and home-owners alike. Housing markets are no stranger to high rates of default and bad debt, but Australia’s uniquely volatile real estate business has been steadily oscillating toward bubble status since 2001. The whole world was crippled when America’s housing bubble, launched to dangerous heights by massive collateralized debt obligations and junk bonds, eventually exploded in a manner that shook the global economy. Australian default rates are nothing short of shocking and have narrowly avoided causing American 2008-esque crashes in the past several years. The uncertainty from this part of Australia’s economy adds fuel to its fire, but other times it serves to strengthen its own currency and outperform other sectors of the global economy. But everything has a cost, and though Australia might not be facing the immediate risk of a bubble, a slow and painful demise is usually in store for those who mistake healthy credit margins for insurmountable housing debt.

After a tedious war that took a toll on its people, Chechnya remained under the control of Russia following its annexation. After a very close outcome on the 2012 referendum, Scotland remained a loyal entity of the Queen’s monarchy. While both attempts of secession were predictably unsuccessful, it seems Spain’s biggest problem isn’t going to be a gruesome war or rioting masses in the streets. If Cataluña is successful in efforts of secession from Spain, it’ll be out of the frying pan and into the fire for the Iberian democracy.

Alas! After months of waiting and a volatile year in the global markets, the Federal Reserve announced Wednesday that it will be increasing rates from close to zero to between 0.25% and 0.5%. This is the first interest rate rise in almost a decade, and the effects of the increase will spark volatility in domestic markets as well as international markets. The rate hike is meant to signal economic strength in the United States by showing that the economy is strong enough to handle larger borrowing costs. Janet Yellen, the Federal Reserve chair, explained that further rate hikes will be “gradual” in an effort not to slow economic recovery.

Brazil’s economy shrank 1.7% between July and September, marking the third straight period of economic contraction. As Brazil’s economy has slipped further into recession, it has led to the downfall of its surrounding nations’ economies. Being the largest economy in Latin America, the slowdown could be detrimental to its neighboring nations’ economic growth.

A year into her second term as the President of Brazil, Dilma Rousseff faces an economic crisis in a country that was once a rising star on the global stage. On Wednesday, Standard & Poor’s downgraded Brazil’s credit rating to junk status causing a sell off of Brazilian financial assets. Political leaders in Brazil were quick to cast the blame for this crisis on slumping markets such as China, however this crisis was more self-inflicted than anything else.

The Federal Funds Rate (FFR) is designed to either stimulate saving or spending based on the level of economic growth. Following the 2008 financial crisis, the rate was slashed in attempt to temporarily buoy the markets, but the current economy is calling for an increase in the rate. The series of rate increases proposed by the Federal Reserve were set to be enacted sometime around fall of 2015, although more recently analysts predict that the September 16-17 meeting specifically will reflect any actions taken by the central bank. This rate hike, planned for quite some time now, is becoming increasingly ambiguous as the Fed faces tension following the recent succession of turbulent economic events. Chief among these stressors is the IMF, which is urging the Federal Reserve to cut a little slack for the sake of the global economy.

Greece's woes have been a well-publicized global topic over the past year. Between its staggering debt, its default on these debts, and discussion of its exile from the European Union, Greece has struggled with pulling its way through an web of economic troubles. There is, however, a glint of optimism for the country. On August 14th, Eurozone finance ministers approved Greece for a new bailout package, its third such deal in five years. The package was agreed upon after a half-year's worth of negotiations between Greece's government, the Eurozone, and the IMF. While not all Eurozone countries have yet given approval, the bailout is considered a relief for a situation that threatened to break the Eurozone apart. It is yet to be seen how it will affect Greece and the rest of the Eurozone in the long run.

As the old adage goes “the only way to go is up after rock bottom,” Greece seems unable to stop pushing its economic limits. Despite its previous bailout programs designed jointly by the IMF, ECB, and European Commission, relief arrived coupled with harsh measures. Austerity packages were the fine print for Greece’s lending agreement; yet, unemployment has checked in at 25% this year, while most of the bailout money went toward settling international debt rather than jump-starting the economy. It is perhaps this ineffective past experience that has left Greece resentful toward the idea of another double-edged bailout measure, which is why Greece is currently celebrating its new-found and likely brief freedom from dependence on external problem solvers.

On Monday, March 9, Ghana and the International Monetary Fund made a deal to help stabilize the country’s struggling economy. The three-year plan was proposed after discussion of the government’s failure in reach targets for inflation, the budget deficit, and overall GDP growth. Members of the minority opposition “New Patriotic Party” believe that Ghana’s current economic state is the worst it’s been in over two decades.

The United States has pledged financial support of $2 billion to Ukraine to help them prevent a looming bankruptcy, and boost recovery efforts amidst the financial turmoil in Europe and Asia. Ukraine is trying to recover and stabilize its economy, but the waging conflict in Eastern Ukraine with Pro-Russia rebels is hurting the economy and driving down consumer spending.

The global economy had its projections cut by the World Bank, saying that the United States will not be able to hold up the global economy alone.  The global economy is now projected to grow 3.0% this year, rather than the 3.5% that was formerly projected. However, the United States had its projection increased from 3.0% growth to 3.2% growth. The World Bank cited Europe, Japan, Russia, and parts of Latin America as the source of the struggles leading to the lower projections. While oil prices are low, developing economies who import oil will receive a boost. However, oil exporters will continue to struggle, especially Russia, due to the low price of oil.

In 2008, Iceland’s entire banking structure failed causing a devastating economic recession. This caused the economy to contract by 6.6% in 2009 and an additional 4.1% in 2010. At the time, many thought this situation was incurable and criticized Iceland’s tactics for recovery. However, those critics proved to be wrong. Last year, Iceland’s recovered economy grew faster than both the United States and European economies. Now the country is ranked high in terms of economic and political stability. How exactly did Iceland complete its remarkable economic recovery?

During the Great Depression of the 1930s, world trade declined sharply and employment and living standards plummeted in many countries. In order to avoid a repetition of the same economic disaster, the International Monetary Fund (IMF) was established after World War II to oversee the international monetary system and to encourage its member countries to trade with each other. The IMF was created to assist the worldwide economic recovery and it continues to work on its mission until today.

Most countries' finances are dominated by their respective central banks. This makes their role, in not only their country but in the world, extremely prominent. They make large, macro policy decisions that affect even the smallest businesses. What role do these policy decisions play in the world though? With globalization and the intermingling of economies across the globe, all of these different policy decisions is sure to dictate how the world interacts.

Following six long years of recession, which reduced Greece's economy by a quarter of its size and rose unemployment to 28%, Greece is finally expected to stabilize and begin its economic comeback in 2014. A poll of 35 economists and strategists suggested an expected growth rate of 0.3% for the Greek economy, while analysts at the International Monetary Fund and European Union proposed a slightly more optimistic 0.6% rate.

On Thursday, Greece held its first bond sale since 2010, raising $4.2 billion as investors flocked to secure bonds from the hard hit country. Greece, which stopped issuing bonds in 2010 amid their country’s economic crisis, has hailed this bond sale as a sign that the country is recovering and heading in the right direction. Investors seemed to agree with this outlook, as their high demand reduced the return rates on the bonds to 4.95%, lower than the Greek government had first anticipated. The optimism around the bond sale has encouraged some that Greece is finally beginning to emerge from the financial crisis, although it must be remembered that this is only a small step in the recovery.

Forecasts from the World Bank show that the global economy should experience more growth in 2014 than what was expected seven months ago, showing that the world’s economy is finally turning a corner from the recession of recent years. According to a report released on January 14th, the world’s economy should grow by 3.2%, up from the 3% projection made in June. This is good news to many investors and business people around the world, since it is the first time in three years that the World Bank has revised their forecast and predicted improvement.

While many members of the European Union struggle to recover from the global financial crisis of 2008 and the European debt crisis, the Baltic countries are making a strong comeback. The Baltic countries of Estonia, Latvia, and Lithuania have recently experienced real GDP growth well above the euro area average. While other countries like Greece, Italy, Spain, and Portugal continue to struggle in midst of European debt crisis, the Baltic countries are leading way to recovery. Lithuania and Latvia are predicted to remain the best performers in Europe, with GDP growth surging over 3 percent for both countries. Looking at the recovery path of the Baltic States, many business lessons can be learned from these countries.

The country with over twenty-five percent of its population unemployed has finally climbed out of recession with third quarter growth up 0.1 percent. With an economy that is driven mainly by the tourism sector, automobile industry, and the energy industry, Spain has managed to slow down its rate of poverty and unemployment enough to stop the recession.  The bailed out banking sector is still far from cured and the giant amount of debt will still hold them back in the years to come, but the government has taken steps in the right direction in gaining control of these areas of the economy.

It has been five years since the collapse of Lehman Brothers, an investment bank in the United States, launched the global economy into one of the worst financial crises of all time. Since then, the United States and many other major global financial institutions have taken big steps in securing a safer worldwide financial state. The United States, along with many other countries, have made many reforms that will allow the global financial situation to become more protected. However, there are new areas in the world which could threaten the state of global finance.

In the five years that the globalEDGE blog has been operating, much has changed in the area of global trade and investment. It all began when the global financial crisis came about in 2008 and this led to major changes in the global trade markets. Global trade relative to GDP plummeted around thirty percent during the financial crisis, and the crisis seemed to have come from problems such as poor trade regulation, bad credit, and poor bank strategies. There are many changes that have been made to the global economy and many challenges that have been faced in the area of global trade since 2008. Here’s a look at what has happened.

During the globalEDGE Blog’s first five years, it has served the international business community not only as a resource for global business news analyses, but also as a time capsule for events that significantly influenced international markets. Born in September 2008, the resounding news of the blog’s launching was understandingly dwarfed by other major events of the time, such as the rapid spread of cell phone use and business in Sub-Saharan Africa and, of course, the global financial crisis that’s effect on the global economy was comparable only to the Great Depression. In this blog, we will not only go back and revisit the news that captivated the world’s attention in the first months of the blog, but will also discuss the lasting effects of those events and how they continue to impact the world in 2013.

While the unemployment rate of Spain and Greece roaring extremely high these days and economies in the European Union rest down in the trough, good news has finally arrived from the Office of National Statistics. Recent statistics showed that the United Kingdom's economy grew 0.3% during the first quarter of 2013, which relieves the fear of the British economy falling into a triple-dip recession. Is this a sign that United Kingdom is getting itself out of the European Financial Crisis?

The global sovereign debt crisis has impacted our world economically almost like a 3rd world war.  And because money was thrown out with rabid fury, it is boomeranging back with a vengeance.  In his quintessential narrative-style nonfiction book, Boomerang, Michael Lewis presents to the reader four case studies: Iceland, Greece, Ireland, and Germany.  Lewis travels the world examining how each of these countries dealt with the collective problem of debt and how their cultural characteristics impacted the citizens.

Charlie LeDuff’s Detroit: An American Autopsy is brutally honest. In a story filled with corruption, anger, and even laughter, LeDuff goes into detail about the crumbling of an American city, and what is left of it. After leaving a job with the New York Times, LeDuff comes to find what was once a city that represented the American Dream, now rotting and broken.

The European Union gave a €10 billion rescue to Cyprus, a small island country in the European Union. It is the fourth of seventeen Eurozone states to receive a bailout by the European Union and the International Monetary Fund. In order to gain more time to convince parliament to back a new tax on deposits, Cyprus said that they would not open up their banks until Thursday the 21^st of March.  This controversial tax is on bank deposits and in order for it to come into effect they must have the support of parliament.  Investors reacted poorly to the news as shares fell, and there was a run on cash machines over the past couple days.  

While the majority of European countries are experiencing the “nightmare” debt crisis, Germany is actually in an optimistic mood and is pleasant about its extraordinary trade surplus. Although Germany was hit hard initially by the global financial crisis, its exports helped the country's economy recover the by dropping unemployment to 3 million in 2012, the lowest level seen in 20 years. Its fast economy rebound left the rest of the European world in envy, and therefore triggered an argument on its role in the European Union (EU).

Economic turmoil in Europe has many concerned for the future of the Eurozone and the stability of its individual members. In need of some reform, European Union leaders congregated to enact a single banking supervisor for the union. The leaders agreed that the European Central Bank will be considered supervisor-in-chief, and this bank has intervention power over all 6,000 Eurozone banks. The plan is to have the banking union functional by the first of January so the Eurozone’s rescue fund, the European Stability Mechanism, can begin with a bang at the start of the New Year. The Stability Mechanism is essentially a firewall system for the EU, and it focuses on dealing solely with bailout applications, leaving transfer and monitoring to other European stabilizing facilities. The initial concerns of the banking union and the European Central Bank will be to rescue failing Spanish banks, and then deal with the pending Greek debt crisis. But of course, European leaders are facing opposition in regard to the new banking union decision.

As most of Europe still feels the fiscal repercussion’s from the debt crisis, some companies are leveraging this to target the fiscally conservative consumer. Consumer spending power has declined which means companies are pressed to find ways to squeeze every penny out of the consumer. Many companies are changing the packaging of products to accomplish this.

In the midst of the European Debt Crisis that has has toppled governments and pushed a number of countries into a second recession, Ireland has drafted a new plan to save their housing market and keep families in their homes. With house prices on the emerald isle being 50 percent below their peak value, more than half of Irish mortgages worth less than the outstanding debt, and about 39% of homes in default, the Irish government has been forced to take steps that many economists would deem as far too risky to enact. The government is expected to sign a law that would encourage banks to substantially lower the amount that borrowers owe on their mortgages, which could prevent mass-scale foreclosures, and also a blueprint for other nations seeking to resolve their housing dilemmas.

The economic growth outlook for developed countries has gotten much worse in the past few months. With the amount of globalization in the business world today, economic concerns abroad can have profound impacts at home. A lot of experts in the field are beginning to wonder: will these events lead to another global recession?

Two weeks ago, the European Central Bank (ECB) raised its benchmark interest rate from 1 percent to 1.25 percent, putting it at odds with its counterparts in the United States and Britain. This move has sparked a debate as to whether the ECB jumped the gun with the interest rate hike.

Just two years ago the second worst depression in history hit us. Recently we have started pulling ourselves out of it, albeit slowly. Looking around at the depression’s results, the question is almost begging to be asked, did we learn anything from the first one?

Following the recent financial crisis, many people are blaming the large banks almost solely for the collapse. Many feel that the banks must split their commercial banking divisions from their investment banking ones. People think that the banks should not be allowed to use the money they hold for customers in speculative investments for the bank's potential profit. Do these concerns sound familiar?

In the recent recession, many companies slashed jobs, some by more than 20 percent. When a corporation slashes their workforce by more than 20 percent, this is called extreme downsizing. But companies that have made these deep job cuts may suffer in the longer term.

Recently a study released by Ernst and Young, looks in detail to how leading global companies have dealt with the recession and are looking ahead. The report compiles conversations that over 500 of the firms senior partners had with clients around the world.

A group of twenty finance ministers and central bank governors, nicknamed the G-20, will be meeting in London this weekend to discuss the future of the global economy. Australian treasurer Wayne Swan provides an overview of some of the proposed directions the G-20 wants to take the global economy in.

A recent Businessweek Ranking listed Hong Kong as No. 9 of the "World’s Gloomiest Countries" with respect to economic outlook, with exports, profitability margins, investments, turnovers, and selling margins all expected to fall in a negative manner. Despite the hard hits that Hong Kong and the other Asian markets have taken in the financial crisis, Hong Kong can and will bounce back.

It is a fact that the world is in a financial crisis. It is a fact that many are losing jobs; that many have lost money; and many more will find themselves having to pay back loans that they do not have the money for. Every one knows that, but what are we doing about it? It is time for the world to look into some positives about the financial crisis because pointing out the negatives is not helping out anyone.

The world is still in a financial crisis and it is highly unlikely that it will be over soon. Many nations still blame the problem on CEOs in the United States. After the government bailed many banks out, people ask what is happening to that money. Is it really put into good use or do banks keep on lending more? Everyone knows that the problem is that consumers and businesses are facing huge debts, but it doesn’t seem that CEOs are taking any responsibility.

The terms depression and recession were not even around until after the Great Depression. However, they have been used plenty of times lately. It has been months since the American government has declared the economy to be in a recession and it seems that the world thinks that a depression for the USA is inevitable. But when does a deep recession officially become a depression? Here is a video on this topic:

Over two million people crowded the streets of Paris on Thursday, in protest of President Nicolas Sarkozy’s recent inaction in light of increasing unemployment. Job loss in France, according to the Telegraph, was the final straw in a string of incidents that have decreased Sarkozy’s popularity exponentially in recent months. Critics, including dissenters within his own party, are calling for his removal. In a nation where people depend largely on the “welfare state” to take action, little is being done.

When the economy is bad, it is the time for economists to shine!  During the annual meeting of American Economic Association this year, economic recovery and market restructuring became the central topics among the attendees, among whom included five Nobel economic laureates.

Traditionally, Iceland has been one of Europe’s priciest vacation destinations. However, following the recent financial collapse, vacationing in Iceland has become much more affordable. Since the financial crisis, the Icelandic króna is worth less than half its value a year ago, which, as economics tells us, increases the value of other currencies being used in that country. Some multi-night deals are starting at $400, a sign of both the depressed Icelandic economy as well as the desire of attracting foreign currency in order to help jump-start the economy.

Some people thought that Asia, with high growth rates, huge trade surpluses and substantial foreign reserves could be less affected by the economic storm which originated in the West. Yet, a number of economic indicators show us that Asia in fact could not avoid being hit by such a global disaster because of the fact that it heavily depends on West to fuel it's own economy. For example, exports contribute 45% of Asian countries’ economy and out of these exports, western consumers count for a half of it.Western investors are also the major players in the Asian markets. The depreciation of Asian currencies caused a huge loss on currency-hedging products. Even so, Asia - the source of one third of global GDP - can play a crucial role in bringing the economy back to the prosperity.

Reports are beginning to show up all over the internet of another facet of the financial crisis: the damage done to the agriculture industry. If you check out the agriculture page in the Industries section of globalEDGE, you’ll get an idea of how large the consequences are for relevant businesses. The US alone produces almost $68 billion dollars in agricultural exports yearly. The Netherlands follow with roughly $38 billion, preceded by Argentina, France, and Brazil. It’s no surprise that as consumers try and spend less, the greater agricultural industry would be bearing the brunt of the losses.

Only a few short months ago, national security still appeared to be headline news. News paper articles, news feeds online, and television reports about threats of terrorism, weapons testing, illegal immigration, etc. were inescapable. It seemed strange to think that at some point we would have to pay attention to news about the global economy with the same sort of concern.

The globalEDGE website is run by MSU-CIBER, which is one of 31 CIBERs across the U.S. CIBER stands for Center for International Business Education and Research. Another CIBER at George Washingon University in D.C. recently held a discussion on the origins and implications of the current global financial crisis. It was a very interesting panel discussion with some extremely bright individuals offering a unique perspective not influenced by the mass-media. There is a video you can watch here: http://business.gwu.edu/financialcrisis/. Be sure to check it out!

Football, or soccer as the Americans call it, especially in England is the second most important thing after family in life; it is like a religion. Europeans follow it closely because it is part of their lifestyle. But what happens when t-shirt sponsors go bankrupt? When team sponsors suffer huge financial setbacks because they hold stakes in Icelandic banks?