Economic Crisis

Economic Crisis

  • Submitted By: hwa0226
  • Date Submitted: 11/25/2008 2:55 AM
  • Category: Business
  • Words: 328
  • Page: 2
  • Views: 1

In 2008, a global economic crisis was suggested by several important indicators of economic downturn worldwide. These included high oil prices, which led to both high food prices (due to a dependence of food production on petroleum, as well as using food crop products such as ethanol and biodiesel as an alternative to petroleum) and global inflation; a substantial credit crisis leading to the bankruptcy of large and well established investment banks as well as commercial banks in various nations around the world; increased unemployment; and the possibility of a global recession. Inflation In February 2008, Reuters reported that global inflation was at historic levels, and that domestic inflation was at 10-20 year highs for many nations.[6] "Excess money supply around the globe, monetary easing by the Fed to tame financial crisis, growth surge supported by easy monetary policy in Asia, speculation in commodities, agricultural failure, rising cost of imports from China and rising demand of food and commodities in the fast growing emerging markets," have been named as possible reasons for the inflation.[7] In mid-2008, IMF data indicated that inflation was highest in the oil-exporting countries, largely due to the unsterilized growth of foreign exchange reserves, the term “unsterilized” referring to a lack of monetary policy operations that could offset such a foreign exchange intervention in order to maintain a country´s monetary policy target. However, inflation was also growing in countries classified by the IMF as "non-oil-exporting LDCs" (Least Developed Countries) and "Developing Asia", on account of the rise in oil and food prices.[8] Inflation was also increasing in the developed countries,[9][10] but remained low compared to the developing world. Unemployment The International Labour Organization predicted that at least 20 million jobs will have been lost by the end of 2009 due to the crisis - mostly in "construction, real estate, financial services,...

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