In 2008, a crisis swept the world. The beginning of global financial problems began with the collapse of the stock market. From January 21 to January 22, chaos reigned on all exchanges. Not only stock prices collapsed, but also the securities of companies for which things were going well. Even such large corporations as the Russian Gazprom suffered losses. Shortly after the fall of stocks in the world oil market, oil began to fall in price. In the stock markets, a period of instability began, which left a significant imprint on the commodity markets. Despite the attempts of economists to justify the situation (they publicly announced the adjustment of stock prices), on January 28 the whole world had the opportunity to observe another stock market crash.
How did the crisis begin?
In 2008, the crisis did not begin on January 21 with a fall in stocks, but on January 15th. Citigroup banking group recorded a decline in profits, which was the main impetus for the decline in the value of shares on the New York Stock Exchange. The following events took place:
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The Dow Jones Index fell 2.2%.
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Standard & Poor's - by 2.51%.
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Nasdaq Composite - 2.45%.
Only after 6 days the consequences of price changes manifested themselves on the stock exchange and left their mark on the situation around the world. Most of the players in the foreign exchange market finally saw that in reality many companies do not feel very well. Chronic losses are hidden behind high capitalization and high stock prices. Many economic experts back in 2007 predicted a crisis in 2008. It has been suggested that Russia will have difficult times two years later due to the fact that the resources of the domestic market will never be exhausted. For the global economy, a recession was predicted at an earlier time.
Bulletins of world problems in 2008 and the development of the situation
Although the global crisis of 2008 began with the fall of stock exchanges, there were many prerequisites for its appearance. The fall in stocks was only a warning signal of a dynamically changing situation. In the world, commodity overproduction and significant accumulation of capital were recorded. Exchange instability indicated that there were certain problems with the sale of goods. The next damaged link in the global economy was the production sector. Global changes in the economy that the crisis brought in 2008 significantly affected the lives of ordinary people.
The global economy was characterized by a situation where the opportunities and prospects of the markets were completely exhausted. Despite the possibility of expanding production and the availability of available funds, earning income has become very problematic. Already in 2007, one could observe a fall in the income of the working class in countries such as the United States and Great Britain. The narrowing of markets could hardly be restrained by an increase in both consumer and mortgage lending. The situation became tense when it became obvious that the population was not able to pay even the interest on loans.
The first global crisis in human history
In the period from 2008 to 2009, most of the countries in the world faced a financial and economic crisis, which led to the phenomenon becoming “global”. The 2008 crisis, remembered for a long time, swept not only the capitalist countries, but also the economy of the post-socialist states. The last regression in the world until 2008 of such a large scale occurred in 1929-1933. At that time, things were going so badly that around large American cities settlements grew out of cardboard boxes, since most of the population could not provide a living wage due to unemployment. The specifics of the development of each individual country in the world determined the consequences of the phenomenon for each people.
The dense coexistence of the economies of the world, the dependence of most countries on the dollar, as well as the global role of the United States in the global market as a consumer, have led America's internal problems to be "reprinted" into the lives of almost all countries. Out of the influence of the "economic giant", only China and Japan remained. The crisis was not like a bolt from the blue. The situation flourished gradually and systematically. A possible economic collapse was indicated by strong uptrends. In addition, during 2007 the United States managed to lower the interest rate by 4.75%. This is a phenomenon uncharacteristic of a period of stability, which did not go unnoticed by fundamentalist speculators. It is worth saying that the fact that there was no reaction in the foreign exchange market to the rate cut in America as such was also talking about future difficulties. What happened on the eve of the crisis is just one of the standard initial stages of the phenomenon. States already have problems during this period, but they are hiding and do not make themselves felt clearly. As soon as the screen was moved and the world saw the actual state of affairs, panic began. There was nothing to hide, which led to the collapse of the economy in most states.
2008 financial crisis in different countries of the world
The main characteristics of the crisis and its consequences are general in nature for every state in the world. At the same time, there are also important differences that are characteristic of each country. For example, in 9 out of 25 countries of the world, a sharp increase in GDP was recorded. In China, the indicator grew by 8.7%, and in India - by 1.7%. If we consider the post-Soviet countries, then the GDP remained unchanged in Azerbaijan and Belarus, Kazakhstan and Kyrgyzstan. The World Bank focused on the fact that the 2008 crisis led to an overall fall in GDP in 2009 by 2.2% worldwide. For developed countries, this figure was 3.3%. In developing countries and countries with emerging markets, it was not a recession that was seen, but growth, albeit not large, of only 1.2%.
The depth of the fall in GDP varied significantly from country to country. The biggest blow came in Ukraine (the fall was 15.2%) and in Russia (7.9%). This has led to a decrease in the overall competitiveness of countries in the global market. Ukraine and Russia, which had hoped for self-regulating market forces, suffered more severe socio-economic consequences. States that chose to maintain either command or strong positions in the economy suffered “economic chaos” easily. These are China and India, Brazil and Belarus, Poland. The crisis of 2008, although it left a certain imprint on each of the countries of the world, but everywhere it had its own strength and individual structure.
The global economic crisis in Russia: the beginning
The causes of the 2008 crisis for Russia were not only external, but also internal. To knock the soil out under the feet of a great state was the decline in the cost of oil and metals. Not only these industries were put under attack. The situation was significantly aggravated due to the low liquidity of the country's money supply. The problem started back in 2007, from September to October. This was a clear signal that the money in Russian banks was almost over. Demand among citizens for obtaining loans at times exceeded the available supply. The crisis of 2008 in Russia was marked by the fact that domestic financial organizations began to borrow funds abroad at a percentage. At the same time, the Central Bank of Russia offered a rate of 10% for refinancing. By August 1, 2008, the amount of external debt in the country amounted to 527 billion dollars. With the onset of the global crisis, in the fall of that year, the Western states ceased to finance Russia in connection with the situation.
Russia's main problem is liquidity of money
For Russia, it was precisely the liquidity of the money supply that formed the crisis of 2008. General reasons, such as the fall in stocks, were secondary. Despite the annual growth of the monetary ruble stock over 10 years by 35-60%, the currency has not strengthened. When the global crisis of 2008 was just about to manifest itself, the leading Western countries formed a certain state of affairs. So, 100 cu The GDP of each state corresponded to at least 250-300 cu bank assets. In other words, the total assets of banks were 2.5-3 times higher than the total values of the GDP of states. The ratio of 3 to 1 makes the financial structure of each of the states stable in relation not only to external changes, but also to internal ones. In Russia, when the financial crisis of 2008 began, no more than 70-80 rubles of assets per 100 rubles of GDP. This is approximately 20-30% less than the money supply of GDP. This led to a loss of liquidity in almost the entire banking system in the state; banks stopped lending. A small malfunction in the functioning of the global economy adversely affected the life of the country as a whole. The situation in the country brought about by the crisis of 2008 is fraught with repetition until the liquidity problem of the national currency is completely eradicated.
The Central Bank of Russia itself caused a crisis
The crisis of 2008 in Russia took place mainly due to internal factors. External influence only increased the regression in the country. At the time when the Central Bank of the Russian Federation decided to increase the interest rate, the level of production dropped sharply. The number of defaults in the real sector even before the 2008 crisis manifested itself varied within 2%. At the end of 2008, the Central Bank increased the refinancing rate to 13%. In plans, this was to balance supply and demand. In fact, this led to a rise in the cost of loans for small, medium and private businesses (18-24%). Loans have become unbearable. The number of defaults increased by 3 times due to the inability of citizens to repay debts to banks. By the fall of 2009, the percentage of defaults in the country had grown to 10. The result of the decision on the interest rate was a sharp reduction in production volumes and the suspension of a large number of enterprises throughout the state. The reasons for the 2008 crisis, which the country created to a greater extent, led to the collapse of the economy of a developing country with high consumer demand and high economic indicators. The consequences of global chaos could be avoided by injecting funds into the reliable banks by the financial unit of the state. The stock market crash did not have such a significant impact on the state, as the economies of companies have little to do with stock market trading, and 70% of the shares are owned by foreign investors.
The causes of the global crisis of a global nature
In 2008-2009, the crisis covered almost all sectors of the state’s activities, especially the oil industry and those that were directly related to industrial resources. The trend that has been successfully growing since 2000 was nullified. Prices for agro-industrial goods and "black gold" rose. The price of one barrel of oil peaked in July and settled at $ 147. More than this cost, the price of fuel has never risen. With rising oil prices, gold prices rose, which has already formed investors' suspicions of an unfavorable outcome.
For 3 months, the price of oil fell to $ 61. From October to November, another $ 10 price drop was observed. The fall in fuel prices was the root cause of declining indices and consumption levels. In the same period, a mortgage crisis began in the United States. Banks gave people money to buy a home in the amount of 130% of their value. As a result of lower living standards, borrowers were not able to pay debts, and collateral did not cover the debt. The contributions of US citizens simply melted before our eyes. The aftermath of the 2008 crisis left its mark on most Americans.
What was the last straw?
In addition to the events described above, some phenomena that took place in the world during the pre-crisis time left their mark on the situation. For example, you can recall the misappropriation of funds by a regular trader of one of the largest French banks Societe Generale. Jerome Carviel not only systematically ruined the company, he clearly showed the public all the shortcomings in the work of the largest financial organization. The situation clearly demonstrated how free full-time traders can manage the funds of the firms that hired them. This stimulated the 2008 crisis. Many associate the reasons for the situation with the financial pyramid of Bernard Madoff, which has strengthened the negative trend of the global stock index.
Agflation exacerbated the 2008 global financial crisis. This is a sharp increase in prices for agricultural products. The FAO price index has systematically increased amid global stock market downturn. The index reached its maximum peak in 2011. In an attempt to somehow improve their own state of affairs, companies around the world began to agree to very risky transactions, which ultimately caused great losses. It can be said about the reduction in purchases of automotive products. Demand fell by 16%. In America, the figure was 26%, which led to a decrease in demand for metallurgical products and other related industries.
The last step on the path to chaos was the increase in the LIBOR rate in America. The event took place in connection with the cheapening of the dollar in the period from 2002 to 2008. The problem is that in the heyday of the economy and its development, it would be superfluous to think of an alternative to the dollar at an incredibly fast pace.
