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what is the reason of economic recession in the world today

  1. mardankhan1 profile image53
    mardankhan1posted 8 years ago

    what is the reason of economic recession in the world today

  2. someonewhoknows profile image75
    someonewhoknowsposted 8 years ago

    The worlds central banks,and what is called "free trade" which is not free at all .It always costs the country that is being taken advantage of by what other countries call "free trade". other countries that want to export goods to your country without being chraged a tarrif for doing so.The whole purpose of the tarriff was to protect your  country from competition from outside your country.If,each country had the ability to manufacture whatever they needed within their own country there would be no need for free trade.Only fair trade.

  3. profile image53
    james jenkins jrposted 8 years ago

    Derivatives, dark pools, and several other means of clouding transparency don't help. Yet it would erroneous to imply that there one answer, to your question. However, when everything is tied into one another, you have stocks trading on sentiment rather than fundamentals, and huge positions which are extremely over leveraged.  Problems occur. Then throw in that you may profit from huge drops within the market. And you have an interesting recipe. Greed is the inevitable evil of which capitalism couples with. Hope this helps. Just my opinions.

  4. TylerWill profile image54
    TylerWillposted 8 years ago

    The main root cause of the current recession and economic crisis was the huge increase in subprime adjustable-rate mortgages and the CDO's (collateralized debt obligations) that comprised them. The number of subprime mortgages issued in 2005 and 2006 increased dramatically while prime mortgages decreased.

    Mortgages are securitized; they are pooled together and sold in pieces, which spreads the risk and uncertainty to those who take part. It created a huge web of risk in that the securities are dependent on the underlying mortgage values. The value of the CDO's and their securities decreased and were miscalculated to begin with. Rating agencies could not accurately value them. This is why so many people lost their retirement which was largely based on these securities.

    Worst of all, the federal government encouraged the purchasing of these securities without knowing the underlying risk involved. The web of risk was worldwide, not just in the United States. Major institutions like AIG, Citi, Chase, Bear Sterns, etc. held many of these CDO's.

    In general, borrowing and lending also was at an all time high in the past few years. Inflation and money supply are not really related to the whole situation at all.

    Best,
    Tyler W.

    www.ArmchairEconomics.com

 
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