Global Recession

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GLOBAL RECESSION

Global Recession

Global Recession

Introduction

Financial Crisis and the Market Cycle

The present international economic turbulences stand as the most negative economic crises in the last century, perhaps with more devastating effects than ever before. The overall international economic system, almost all individual national economies and especially the vulnerable transition economies of South East Europe are affected. It has been observed that during the global economic crisis that occurred in 2008, many countries wanted to hide their level of debt in order to meet the deficit and debt requirement by supra national bodies like EU and IMF and they have used PPPs and PFIs concept. (Akyuz, 1999)

This has created difficulties in accounting treatment of these aspects. This paper would try to explore the effects of misusing PPPs and PFIs approaches during global economic crisis, as well as the problems it has caused in accounting treatment process As unbiased accounting reports is of accounting is of high importance for everyone including foreign, national and local investors as well as common people, so that people would realize the current economic situation of the country and would critically analyze the ongoing policies formulated by government to overcome such issues. (Akyuz, 1999)

Literature Review

Brief history

In October 1939, Winston Churchill said that “Russia is a riddle, wrapped in a mystery, inside an enigma.” Perhaps, that quote can be profitably recycled as we analyze the details of the contemporary world economic crisis, a breakdown of a magnitude not seen since the Great Depression. The crisis, still is in progress and it has been blamed on so many causes that it helps to list them alphabetically: accounting rules, bankers' bonuses, bank leverage, Basel II, business education, business ethics, consumer protection, corporate governance, credit rating agencies, deposit insurance, financial concentration, financial engineering, financial globalization, financial illiteracy, government bailouts, hedge funds, lobbying and influence peddling, macro-economic imbalances, misaligned exchange rates, modern finance, monetary policy, over-the-counter derivatives, proprietary trading, regulation, risk management, securitization, self-regulation, shadow banks, speculation, subprime mortgages, and systemic risk. Financial Accounting Standards Board, Federal Deposit Insurance Corporation, the Federal Reserve, Freddie Mac, General Motors Acceptance Corporation, Goldman Sachs, Lehman Brothers, Northern Rock, Royal Bank of Scotland, the Securities and Exchange Commission (SEC), Union Bank of Switzerland, China, Dubai, Iceland, Ireland, Greece, the UK, and the USA? (Buchanan, 1998)

Capitalism is not a field of study for economists alone. We cannot understand today's man-made catastrophe, I think, unless we allow for its historical context. That context is partly political, social, and cultural. Capitalism was born in the eighteenth century. It has gone through three stages. During the first one hundred years, the prerogatives of the feudal state were rolled back and market forces prevailed. In the second phase, big government became the risk manager for par excellence, humanizing capitalism and protecting citizens from the risks of modern life. Next, during the Reagan-Thatcher years, the pendulum swung once more. A new era of global laissez-faire capitalism started and the state was in retreat. People were told to take ownership of their ...
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