Global Crisis
Global Recession,
Is it Possible?

“The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s,” claims the International Monetary Fund (

It appears that the IMF, the European Union, and World Bank have been quite busy bailing out one country or another. The latest $25 billion financing package for Hungary comes on the heels of two other financing packages distributed as emergency loans to Iceland and the Ukraine. These countries are dealing with their own problems of oversees borrowing and rapid credit growth.

The IMF has a $200 billion loanable fund and other resources from which to draw to stem the fallout from the global financial turmoil. The IMF works by parachuting in when a member country faces extenuating circumstances that threaten its financial stability. A rapid response is needed to contain the damage to the country or the international monetary system. Judging by all the money loaned out so far, there’s indication that some countries are either in a recession or tipping into one. In early October, the world’s central banks administered emergency measures, including a round of coordinated interest rate cuts.

If that weren’t enough, the financial turmoil is already beginning to slow growth in some emerging markets, such as China. When emerging and developing economies are feeling the impact of the global financial crisis, it is an indicator of a major slowdown in the global economy. This, coupled with global growth slowing down sharply, all point to a global recession. The following are some of the factors that can cause crises in emerging countries:

- collapse of export prices
- drastic increase in import prices
- anemic foreign investments and capital flows
- large depreciation or devaluation of the currency of a close trading partner. In this case, the U.S.
- sharp increase in interest rates in world markets

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