Introduction to global financial crisis

A Sun Tears In Clamorous Rays,
Declining Comfort Of Man, In Summits Of Life
A Sun Whispers Now And Again,
Evoking Canonical Melodies, Human Shrieks,
And A Summit To Global Crisis

The global economy remains mired in a deep crisis. The IMF, which in January had forecast the global economy to grow by just 0.5 per cent in 2009, now predicts a contraction. Developed countries will see their economies shrink while developing countries will grow but in a much slower rate than what they have been used to. There is near unanimity that the world economy will not recover until the raging financial sector crisis is brought under control.
The term “Global Financial Crisis” refers in the present context to a severe credit, banking, currency and trade crisis which emerged in September 2008. The crisis was triggered by sub-prime mortgage crisis of 2007-08. The crisis became manifested with the failure, merger or crash of several financial institutions, mainly in the United Sates of America (USA). The banks and the other financial institutions faced an insolvency threat. Across the globe, millions lost their jobs.
The failure of large financial institutions in the US led to a global credit crisis, deflation and sharp reductions in trade - related activities. It further led to a number of European bank failures and decline in various stock indices, and large reductions in the market value of stock equities and commodities worldwide. The housing boom which had been centre - staging the global financial scene for a long time has witnessed a reversal.
However, the symptoms of the financial crisis had been pointed out much earlier by some financial experts. It really started to show its effects in the middle of 2007 and into 2008.
The collapse of Lehman Brothers is seen by some financial experts as the first manifestation of the staggering proportions of the crisis. It resulted in the loss of funds by other financial institutions, as the banks ceased to lend each other.
A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialised economies have had a ripple effect around the world. Furthermore, other weaknesses in the global financial system have surfaced. Some financial products and instruments have become so complex and twisted, that as things start to unravel, trust in the whole system started to fail.