The global crisis of 2007-9 was, actually, a confluence of unrelated problems on three continents. In the United States, investment banks were brought down by hyper-leveraged investments in ill-unders… The global crisis of 2007-9 was, actually, a confluence of unrelated problems on three continents. In the United States, investment banks were brought down by hyper-leveraged investments in ill-understood derivatives. As stock exchanges plummeted, the resulting devastation and wealth destruction spilled over into the real economy and caused a recession which is bound to be mild by historical standards. Depending heavily on imported energy and exported goods, Europe’s economy faced a marked slowdown as the region’s single currency, the euro, appreciated strongly against all major currencies; as China, India, and other low-wage Asian countries became important exporters; as the price of energy products and oil skyrocketed; and as real estate bubbles burst in countries like Spain and Ireland. Additionally, European banks were heavily leveraged and indebted – far more than their counterparts across the Atlantic. Governments throughout the continent were forced to bail out one ailing institution after another, taxing further their limited counter-cyclical resources. Simultaneously, in Asia, growth rates began to decelerate. Massive exposure to American debt, both public and… Read full this story
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