Tuesday, March 10, 2009

The Global Economic Meltdown

The ripple effect of the present global economic downturn is causing a reverberating effect that is having a negative impact on the countries concerned with the inclusion of the mighty U.S.A in the North America, England in Europe and our beloved country Nigeria is not left out of this debacle.
Unlike minor business contractions that may occur in one country independently of business cycles in other countries, this recent incessant downturn has been worldwide in scope. This persistent downturn has been regarded as the most severe in recent times and is even considered to be more severe than that of the great depression that took place in 1929(used to be regarded as the most widespread depression in the 20th century).
This situation has led to a financial credit squeeze condition all over the world in which the amount of credit in the world economies is restricted and so slows down economic activity. This current global financial crisis started from the U.S.A. in banks and other money lending institutions who had high liquidity and then started giving out mortgage loans (loan installment to be repaid, also called risky loans) to borrowers. Most borrowers due to their low level of income were not able to pay back their borrowed loans and this resulted into bad debts (in finance are debts which are almost impossible to recover) which had to be written off by such financial institutions. Since we are living in a globalized world the reverberating effect circulated to other parts of the world where companies that bank with such financial institutions have subsidiary companies thereby making the crisis global in scope.
The economic setback has caused the income and spending of households and businesses to decline, even though not all businesses and households experience actual declines in income but their expectations about the future becomes less certain and thereby causes the delay of making of large purchases and investments. This economic setback has forced notable corporations in the U.S.A. to close down and even the liquidation of some in Nigeria. It has affected the foreign exchange rates of different countries some positively and others negatively.
There has been change in recent times brought about by the implementation of various policies by different countries involved in the meltdown. We are looking forward to more noticeable change, improvement and finally an end to this crisis in the long run.

Babalola Oladapo

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