Is the Worst Phase of Recession Over?
Is the recession over? That’s the question most of us would want to know even as we don’t have a clear answer yet. The worst phase of recession might be over perhaps, but the economy is yet to take off.
The US downturn impacted every one. It impacted every sector of the economy. Since the current world economy is highly integrated, it is no longer the US downturn rather it is more appropriately global down turn. The current recession impacted every one from the laborers in China and India to the automobile workers in Detroit. It neither spared the European and Russian firms nor the outsourcers and the outsourcing destinations. All were impacted alike. The Dow Jones industrial average fell down by 34 percent within months of recession while the investors found their wealth eroded to the tune several trillion. The economic guillotine slashed Germany’s DAX 30 index and Tokyo’s Nikkei index 225 alike tumbling down by 40 and 42 percent respectively. Shanghai share prices fell down by 65 percent. Moscow stock exchange was butchered. They closed down temporarily against a rapid 70 percent slide.
Barack Obama and his team went into an emergency mode with salvage as their top priority even as almost 85 percent of the Americans worried over economic recession according to several EXIT polls. According to "Guardian" of November 6, 2008 published from the U.K service sector collapsed as more than 157,000 jobs disappeared in the month of October alone. As their first official action team Obama pumped almost $800 billion into the fledgling economy. Nancy Pelosi promised $100 billion to generate employment construction of schools, public utilities and transport links. Besides, several other measures like food stamps and relief packages for the poor and indebted along with tax reliefs were promised.
Team Obama showed dedication and urgency to the Congress for early implementation of “American Recovery and Reinvestment Plan” that promised to create more than three million jobs and save the ones that were likely to disappear. The sectors of economy chosen included the priority areas like education, health and energy among others. The package came with the much hyped promise of doubling the alternative energy production within the next three years.
The plan further promised to raise investment in science and technology, schools with 21st century class rooms, and broadband expansion across the nation. The American economy once on right track was expected to pull up the other economies. The recovering banks, financial institutions and industries were expected to create a rippling impact translating into growth globally especially benefitting the textile workers, the motor part industry workers, and the workers dependent upon outsourced economy. Thus, the closed units in the developing world could get back into action once more.
The “Emergency Economic Stabilization Act of 2008” is a special bail out package for the U.S fiancial system whereby the U.S Secretary of the Treasury was authorized under the Act to purchase distressed assets including mortgage-backed securities backed by a fund of $700 billion.
The current recessionary phase has probably impacted the banks the most. Rarely was a reputable domestic or foreign bank that escaped economic slaughter whether it was.Bank of America, JP Morgan Chase or Citibank or any other bank. Those that survived saw an uncertain economic future ahead. In 2008 itself, almost 22 banks collapsed. Even the giant of a bank, Bank of America felt the heat of recession when their share fell steeply 68 percent on the heels of taking over Merill Lynch & Co. Bank of America couldn't afford to fail for huge stakes in various other financial bodies. They had a massive stakeholder interests to protect - no less than 3 trillion in assets and 300000 employees. But the others like Citigroup have not been as lucky.
The bailout package appears to have checked the rapidly downward economic spiral. The businesses are getting back on rails. The retrenched and new employees have begun to get job offers. The stock markets are showing upward trend and the days ahead appear not as gloomy as they were barely a year or two ago.