Unfortunately, Rhineland and other purveyors of SIVs fell into the classic trap of borrowing short and lending long. Most SIVs were financed by issuing commercial paper, a form of short-term financing that typically carries low interest rates. They then invested in high-yielding CDOs backed by subprime mortgages. In normal times, the SIVs benefited from the spread between the two interest rates. But a perfect storm soon hit the U.S. mortgage market. The Federal Reserve Bank began to worry more about inflation than recession. In June 2004, it raised the federal funds rate, then 1.00 percent, a quarter of a point. This modest increase was a harbinger of future rate hikes. In the ensuing two years, the Federal Reserve Bank increased the federal funds rate 16 times, reaching a peak of 5.25 percent in June 2006. As the federal funds rate rose, so too did other short-term interest rates, raising the borrowing costs of many SIVs. These higher short-term interest rates also elevated the borrowing costs of homeowners who had utilized an adjustable rate mortgage to finance their home purchases. Higher borrowing costs caused housing prices to begin to fall in many markets—particularly ones that had enjoyed the greatest increases in prices, such as in Florida or Southern California—leaving some borrowers who put little or no money down for the homes in the unhappy position of owing more on their mortgage loan than their home was worth. Homeowners increasingly choose to—or were forced to—default on their mortgages. A vicious cycle developed: As defaults increased, the inventory of unsold housing rose, which intensified the downward pressure on housing prices, which then caused more homeowners to default.
In this frenzied market—where housing prices were rising and were a “sure thing” to continue to rise—many mortgage lenders relaxed their traditional 20 percent down payment requirement and began to offer no down payment, interest-only, adjustable rate mortgages. These so-called subprime mortgages began to become increasingly common. Of course, the easy lending standards of the subprime market boosted demand for homes, further raising prices. This boom-time mentality encouraged developers to build more inventory; by the third quarter of 2007 there were a record 2.1 million housing units available for sale.
This has to be good news if you’re planning a move any time soon and intend paying less than £937,000 for your new home.So, what’s changed?As of 4 December 2014, rather than paying a single rate of SDLT in respect of the whole purchase price, SDLT will be payable at different set rates on the portion of the purchase price that falls within each band.
The economy however, was well positioned to recover from the global downturn. Even though the oil output and prices were low, there was surplus in the current account and fiscal balances which provided a good financial foundation. Moreover, the United Arab Emirates had a large asset base in foreign countries to draw on even though it was apparent that they too had suffered due to the collapse in the prices of assets allover the globe. More importantly, the government of the United Arab Emirates quickly responded to the evolving crunch in liquidity by moving fast to inject liquidity in the banking system and taking necessary measures to fill the gap that had emerged in funding due to the curtailed access to capital markets internationally. These measures coupled with provision of various fiscal stimulus packages by the government of the United Arab Emirates helped a lot in cushioning the federation’s economy from plummeting into outright recession. Among the measures taken by the government included the lowering of interest rates, making it easier to access funds from the central bank and guaranteeing all interbank lending and bank deposits for a period of three years (Chief Economist, 2010).
Both the federal government and the governments of Dubai and Abu Dhabi made considerable efforts to provide fiscal stimulus and liquidity support mainly targeting banks. At this time, many of the ongoing large scale projects in the United Arab Emirates had to be put off or cancelled and especially in the real estate sector where more than $260 billion worth of projects suffered the fate. The output in the oil sector dropped by up to twelve percent due to the policy of the Oil Producing and Exporting Countries (OPEC) that was enacted to control oil production. The real Gross domestic Product growth fell sharply to one percent in the later half of 2009, down from seven percent in the first half of the same year (Chief Economist, 2010).
These recessions lasted for no more than a year or two and then the situation became stable and the countries experienced the economic growth again. The latest global recession occurred in 2009 and was associated with the global financial crisis. Recession is characterized with the number of interconnected problems.
Global recession is the issue on economics and it means the reduction of the economic growth of the majority of countries of the world simultaneously. Evidently, any economy exists separately from the world’s economy, so it is natural that if there is recession in one country, it influences the situation of the other one and as a result there is a crisis of a global size. Since World War 2 there were already four global recessions which caused negative impact on the international economics.
As a result, there is crisis in production, or overproduction. There are many products, but there is no demand for them, as no one has money to buy them. Next, there is the crisis in oil consumption, the oil becomes more expensive or loses its price (depends on the situation). Finally, recession is associated with the lack of investment as investors are afraid of giving money for the development of business in the troublesome crisis areas.
Global recession is the problem which is useful for the students who are involved in economic studies and want to improve their knowledge in numerous branches of macro and micro economics.
The student can dwell on the explanation of the term “global recession” supporting it with the arguments and evidence. One can think about the cause and effect of recession, its importance for the international economic relations, the human well-being and financial development of different countries. Then, it is possible to observe the matter from the historic point of view comparing the previous global recessions with one another.
The main advantage of a free example term paper on global recession is the opportunity to observe the right manner of writing and research of the matter from the point of view of the well-educated writer.
According to Chief Economist (2010), the recent global recession left the world’s mature markets grappling with the greatest financial shock since the great depression of 1930s. Due to the economic crisis, major international banks collapsed prompting governments to undertake extraordinary efforts in a bid to stabilize the global financial markets. The output in a majority of the advanced economies was expected to shrink by at least two percent with some economies expected to pick up later due to the large financial stimulus packages by the governments of those countries. Even in the emerging markets, growth was observed to slow down sharply with the trend expected to continue through the year 2010 and beyond.
The United Arab Emirates (UAE) has the second largest economy in the Arab world after Saudi Arabia and is a federation of seven emirates that include Abu Dhabi, Sharjah, Dubai, Umm al Qaiwan, Ajman, Fujiarah and Ras al Khaimah. The federation’s economy was estimated at $273 billion in 2008 and had a total population of four and a half million people. The economy of the federation is mainly dominated by Dubai and Abu Dhabi which account for ninety percent of the Gross Domestic Product (GDP) and sixty six percent of the population. Abu Dhabi, with ninety percent of the oil reserves, remains the key player in the federation’s economy.