As per a proverb “Economists are pessimists: they have predicted 8 of the last depression” (Barry Asmus). Believe or not this proverb tells a lot about the economist and their expertise. We know that Economics is the name of money and consumption, more precisely we can define economics as “How to earn the money and how to consume it” which known as the main concept of economics.
Before the arrival of the financial crisis the economy of the entire world was going with a very decent pace as, different economic indicators showed green signals for about every economy. Satisfactory balance of payment, underestimated unemployment rate and foreign direct investment (FDI) are some of the indicators which are on top of the building. The world leader, who dominated the world at that time, was USA (Still Dominating) had a very strong economy and currency. The global financial crisis crunch came to the screen in September 2008, when a number of American giant financial institution are failed to sustain or merge with some other institution mainly due to not meet with the regulatory requirement or unable to compliance with them pertinently. Due to the dominating power and instinct of USA, the country must leave a positive or negative impact on the world economy whenever the country’s economy plunges or hike, because the country provides a platform to most of the countries to indulge in exports and imports with each other. American economy mainly emphasizes on credit as even, about every household borrow money for homes and loans frequently. Government of USA didn’t apply any limit on the credit cards of the banks which is the main reason the current credit crunch hit them badly.
The failure of the major financial institutions like Leman Brothers and Morgan Stanley and the mortgaging companies like Fannie Mae and Fredric Mac played a vital role to push the United States of America towards the brink of default. The severe crisis in USA left a very bad impact on the economy of the world as a whole and after the plunging of the USA’s economy, the economy of every country envisaged a deeper recession.
United Kingdom (U.K) is one of the countries which are badly hurts by the current financial turmoil which is the 2nd worst after the 1930’s great depression. The estimated gross domestic product of Britain is £1.275 trillion which is 0.63% higher as compared to the last year but the main concerned for the country is its deteriorating currency value because the sterling has collapsed against major global currencies by 30%. The economy of UK is in great recession, the said argument can be observed from the current forecast by International Monetary Fund (IMF) for the economy of United Kingdom. The IMF has revised its GDP growth for UK FY 2009 -1.5% to -2.8%. The largest industry in Britain is the financial industries which are the main victims of the financial crisis. The financial sector of the United Kingdom slashed hundred of thousands of jobs across the country which crosses the amount of 6 million peoples.
A year ago finance official thought that the British economy had become particular resilient to shocks, but after the shrinking currency value and persistently condensing deposits in the banks, the perceptions seems to be not working for the Britain. The financial constraint’s mounting pressure and fear of bankruptcy still intervene between the banks and borrowers, as the banks of UK are still reluctant to lend the money to the borrowers. The current interest rates of UK’s banks are 1% but it is unable to attract the foreign investors as well as the domestic investment influence them to cut down the interest rate further to stress the investors to put their money in the banks. Recently the US did the same and cut the interest rates to 0.25% merely to attract investments. United Kingdom is one of those countries who are heavily rely on the exports and the export are collapsed severely all over the world, the 1929’s financial crash was one of the evidence of export collapse and protectionism.
The chancellor of exchequer Mr. “Alistair Darling” seems wonderfully optimistic about the recovery of the economy; he totally rejected the negative anticipation from IMF and said that the economy will shrink in the year 2009 by 3.5 percent, but we will see a growth of 1.25 percent in the year 2010 because as per him “There can be no quick fix or overnight solution of the abating economy”. The prime minister of the country Mr. Gordon Brown says that.