STRATEGIC ISSUES

Global Automobile Industry

The 2008 global financial crisis

Question#3

The global financial crisis of 2008 was the worst of its kind since the Great Depression of the 1930's. She rose to the notification in September 2008 with the failure of several large U.S. based financial services companies. His main reasons were reported following the subprime mortgage crisis. Failures of major financial institutions in the United States has rapidly evolved into a global crisis caused by a European bank failures, the decline in various stock indexes, as well as significant reduction marketvalue stocks and commodities around the world. The liquidity crisis has led to problems and de-mobilization of financial institutions, especially in the United States and Europe, which further accelerated the liquidity crisis.

World political leaders and central bank directors have coordinated their efforts to reduce fears but the crisis has progressed into a currency crisis with investors, the transfer of huge resources of capital in a strong currency resulting in many emerging economies to seek assistance from the International Monetary Fund. International Monetary Fund and World Bank structural adjustment programs returned to countries including Pakistan, which made long before the financial crisis of the global financial system consists of institutions and rules. The main players are institutions like the International Monetary Fund and Bank for International Settlements, the national agencies and departments, such as central banks and finance ministries, and private institutions operating on a global scale, such as banks and hedge funds or private equity funds.

Forecast crisis

In addition, many other studies of international financial institutions (IFIs), Deloitte Research study "Global Economic Outlook 2007 (a crisis imminent, or things better than we thought?) Predicted the crisis in these words," the U.S. is investing a lot more than saves ( its current account deficit), and the rest of the world saves more than it invests (the current account surplus). This is a great imbalance in the global economy. It includes a massive influx of capital into the U.S. from the rest of the world. The magnitude of this transfer is unprecedented in recent history, and probably can not be sustained indefinitely. So when it ends, it could have a destabilizing effect on the world economy, if only because of the shift gears. "International financial system failed to deliver on two accounts, (I) to prevent instability and crises, and (II) resource transfer from rich to poor economies.

Global Trends

Global trends, leading to the crisis were:

a. High commodity prices: In 2008, prices for many commodities, especially oil and food, rose so high as to cause genuine economic damage. In January 2008, oil prices topped $ 100 a barrel for the first time, the first of many milestones in prices passed this year. In July, the price of oil reached $ 147 a barrel although prices fell soon after. b. Trade: In mid-October 2008 Baltic Dry Index, a measure of shipping volume, fell by 50 percent within one week, as the credit crisis makes it difficult for exporters to obtain letters of ...