f_0016602_14354 - Tectonic Shifts and Systemic Faultlines:...

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Alternatives: Turkish Journal of International Relations, Vol. 8, No. 1, Spring 2009 19 Tectonic Shifts and Systemic Faultlines: A Global Perspective to Understand the 2008- 2009 World Economic Crisis Bülent GÖKAY* The last months of 2008 witnessed what is being called the worst financial crisis since the Great Depression of 1929-30. The first indications of a serious crisis appeared in January 2008. On 15 January, news of a sharp drop in the profits of the Citigroup banking led to a sharp fall on the New York Stock Exchange. On 21 January a spectacular fall in share prices occurred in all major world markets, followed by a series of collapses. A number of American and European banks declared massive losses in their 2007 end of the year results. Later months of the year witnessed the bankruptcy of Lehman Brothers, a 158-year old investment bank, the takeover of the stock-broking firm and investment bank Merrill Lynch, and the move by Goldman Sacks and Morgan Stanley to seek banking status in order to receive protection from bankruptcy. During the same weeks, the remaining four investment banks on the Wall Street all went under in one way or another. To stop further collapse and to ward off total economic catastrophe, the US government made its most dramatic interventions in financial markets since the 1930s. Only the infusion of hundreds of billions of dollars into the US banking system, coinciding with equally colossal interventions in Europe, staved off an entire crash of the world’s financial markets. The collapse of financial markets is now being matched up by the decline of the real economy. The world appears headed for a period of inevitable economic stagnation/recession (a period of negative economic growth). After a year of financial shock and sharp economic loss, 2009 is likely to be extremely difficult for the global economy. Many observers commented that the turmoil in world financial markets has lead to a severe and still unfolding economic downturn in most of the Western economies, and as a result, the world has come on
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Alternatives: Turkish Journal of International Relations, Vol. 8, No. 1, Spring 2009 20 the brink of the ‘worst economic downturn’ since the Second World War. In November 2008 the IMF released an update to its October 2008 World Economic Outlook in which it highlighted the fast deteriorating economic environment and downgraded global real GDP growth forecasts for 2008-2009. 1 Many developed countries are now expected to face a deeper recession than had been anticipated. IMF downgraded its predictions for economic growth in 2008 and 2009, with world GDP growth expected to be 2.2% in 2009 instead of 3.0% predicted in October, and 3.7% in 2008 instead of 3.9% predicted in October. In the new forecast, the advanced economies are expected to contract by ¼ percent on an annual basis in 2009. This would mark the first annual contraction in the post-WW II period for these countries as a group. There are substantial downgrades for 2009 real GDP growth even for
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This note was uploaded on 02/01/2012 for the course PHIL 101 taught by Professor Anchustegui during the Fall '11 term at Boise State.

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f_0016602_14354 - Tectonic Shifts and Systemic Faultlines:...

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