Economic recession: American perspective
I as an old retired banker love to avidly go through all economic and financial news that appears daily in your newspaper. Of late, sub prime house loan disaster in the USA is a hot topic of discussion in the financial circle. The sharp downturn of the housing sector along with the sky-high oil prices and huge deficit due to the phenomenal increase in war costs in different world theatres have precipitated recession in America's economy. Since the housing sector has a substantial share in GDP growth of the US economy, its downturn triggers a chain effect in other sectors too. Manufacturing activities dwindle down along with consumer confidence. Many industries cut down their capacity. Due to the oil price hike, a good number of airlines grounded hundreds of their carriers, cut down number of routes, a few sought bankruptcy protection etc. Automobile industries shut down some of their facilities. A large number of employees have been given marching orders with a pink slip in hand. Unemployment rate has swelled. Common men's suffering knows no bound. The economic slump in the USA has a simmering ripple effect on world economy in general inasmuch as the US economy is considered to be the growth engine of global economy, other developed European economies are also hard hit by US recession. Developing economies like that of China, India, Brazil, Indonesia etc. are also in the fray. About the least developed economies like that of Bangladesh, the less said, the better.
I understand that the banks lent billions of dollars at sub prime rate to the borrowers with poor credit history. The guy who never dreamt of owning a house got a house overnight with the blessings of a benevolent bank (!) Eventually when he failed to pay back the loan as per stipulation, the bank went for foreclosure and evicted the poor guy from his long cherished home. This happened on a massive scale all over the USA. Billions of dollars in mortgage loan got stuck up. Several giant banks have to write off billions of dollars as bad debt.
These things put the bank in a severe credit crunch. I think these banks have, as if, doled away money like a charitable organisation, a disservice to the depositors, equity holders and, above all, throwing a large number of unsuspecting borrowers to a fathomless despair.
I believe in this election year in the USA the lame duck president, with only a few months left of his tenure, would not be able to implement any drastic package to reverse the slide.
However, since a vibrant, booming US economy is in the greatest interest of the entire world populace, I sincerely hope that the US economy will again start shining and beaming.
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