The Great Recession in the year 2008

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Recession 16Specifically, Freund (2009) defines global downturns as years when world real GDP growth is (1) below 2 percent, (2) more than 1.5 percentage points below the previous five-year average, and (3) at its minimum relative to the previous two years and the following two years. 1975, 1982, 1991, 2001, and 2008 Freund (2009) describes the evolution of world trade following four previous global downturns. She finds that the size of the decline in world trade during these episodes is almost five times the corresponding decline in world GDP. She also finds that, while world trade growth resumes quickly following a global downturn, it takes more than three years for trade to reach predownturn levels. Referance Freund,…show more content…
Later the same day, the Bank of America announced that it would be purchasing Merrill Lynch. Due to the above factors, there was major instability on the global stock markets with major decreases in market value between the 15th and 17th of September 2008. On the 16th September, the American International Group (AIG), which suffered due to its credit rating being reduced, was helped by the Federal Reserve which created an $85 billion credit facility to stop it from collapse. Over the next two weeks, more banks failed and the two remaining banks-Goldman Sachs and Morgan Stanley converted into 'bank holding companies ' so that they had more access to market liquidity. Numerous plans were put forward with intent to solve the crisis and in the end President George W. Bush and the Secretary of the Treasury announced a $700 billion financial aid package intented to limit the damage that the previous few week 's events caused. The plan was received well by investors on Wall Street and around the world. Read on On 28th September it was announced that Fortis, a large banking and finance firm would be semi-nationalized with Luxembourg, Belgium and the Netherlands investing over 11 billion Euros into the company. On Monday 29th September, it was announced that the US bank Wachovia would be bought up by Citigroup (this
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