...to The Real Estate Bubble, the causing factors of The Financial Crisis of 2008 and the likelihood and implications of an Economic Recession in 2016 Karan Sharat Nath Pace University, Lubin School of Business Kn31474n@pace.edu ------------------------------------------------- Table of Contents 1. Abstract 2. Introduction 3. The Real Estate Bubble and Great Recession 4. Signs that point towards a Global Economic Downturn 5. Conclusion: Consequences of a recession in 2016 6. Work Citied ------------------------------------------------- Abstract This research paper aims to briefly recap the events that led to the real estate bubble and global financial crisis of 2008, collect data that could indicate a financial downturn that could lead to a recession that is sparked in 2016 and understand the implications that a recession in 2016 would have upon the Global Financial System. The recession that ensued in 2008/2009 was the worst widespread downturn witnessed since the Great Depression of the 1920’s and 1930’s. Since the peak of the downturn the S&P has almost doubled and unemployment has dropped by nearly half. But at present many vital indicators that monitor US growth and economic activity are displaying so very troubling signs. With the majority of this growth over the last decade being enabled by central bank support and cheap money, expansion is not sustainable. Eventually the fundamentals of the economy must be...
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... 1 Introduction The real estate market, like other markets, is subject to the pressure of supply and demand. When speculation runs wild, prices can inflate rapidly. This is a "housing bubble." The danger in this situation is that the market will not be capable of sustaining the inflated prices, so the value of properties begins to come down, sometimes rapidly. Definition of a Housing Bubble * A "housing bubble" is a cyclical economic event where high trade volumes inflate prices, which ultimately become unsustainable, causing a lowering, or "crash" in values. Economic bubbles may be called by a variety of terms, including a speculative bubble, a market bubble or a balloon. Economic cycles of this nature are not exclusive to real estate. They have occurred throughout history in a variety of markets, including stocks, tulips and pottery. Contributing Factors to Unstable Housing Conditions * It could be argued that a housing bubble is really an example of a credit bubble. Although real estate is the underlying commodity, most house buyers use credit -- in the form of a mortgage -- to secure the property. Lax lending guidelines, rapidly inflating values, speculative buyers and the use of adjustable rate mortgages (ARMs), which can adjust to higher rates, are all factors in accelerating the likelihood of borrowers defaulting on their loans. The Effect a Housing Bubble Has on Local Markets * Tighter credit is likely to...
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...Tianshu Chen, Li Li, Li Ouyang and Yan Wang for support in the production and dissemination of this report. The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views of the Executive Directors of the World Bank or governments they represent. This report takes into account information available up to end of March 2012. Questions and feedback can be addressed to Philip Schellekens (pschellekens@worldbank.org). EXECUTIVE SUMMARY RECENT ECONOMIC DEVELOPMENTS The Chinese economy is in the midst of a gradual slowdown. A weaker global economic environment and tighter domestic policies combined to slow GDP growth from 10.4 percent in 2010 to 9.2 percent in 2011. Slow growth in the Euro area and sluggish recovery in the US limited the contribution of net exports, as exports decelerated more rapidly than imports. Tighter domestic policy conditions dampened investment – particularly in infrastructure and real estate. In contrast, consumption growth remained robust as consumer confidence was sustained and household income continued to grow rapidly. Inflation, which was a policy concern over 2011, has been on a declining...
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... Korean household debt total expanding The economic stimulus measures announced by the South Korean government in July, 2014, included a substantial easing of housing loan restrictions. Bank of Korea also fell in step with the government and lowered its policy interest rate twice. As a result, the expansion of household debt has been reined in. ■ Household debt total 1,060 trillion won ＜Household Debt＞ It has been pointed out for some time now that the （Trillion Won） Household debt burgeoning household debt total constitutes a potential 1,200 Disposal Income risk factor for the Korean economy. The household debt Household Dept to Disposable Income Ratio 1,000 total passed the 1,000 trillion won mark at the end of 2013, and was 1,060 trillion won in September, 2014. 800 Meanwhile, household incomes have failed to grow apace, due to the failing economy, and the household 600 debt to disposable income ratio reached 145% by the end of September. This is a fairly high level in comparison 400 with other industrialized countries. Along with the increase in household debt, the burden 200 of interest payments and repayments is becoming heavier. 0...
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...Marriott Corporation 02/11/15 BUS 590: Innovative Business Models for the ‘Next’ Economy Team A: Congying Ling | Devon Nobles | Sai Prashant Boy Reddy | Snehal Ramtekkar Introduction J.W. Marriot founded the Marriot Corporation (MC) in the year 1927. The main business of this corporation was developing hotel properties around the world and selling them to outside investors while retaining lucrative long-term management contracts. By 1991, MC had around 202,000 employees ranking it as the 12th largest employer in the United States. The 1986 tax reform act ended most of the tax incentives for real estate investment. In order to maintain its reputation, MC continued to invest in Real Estate development activities till the market collapsed in 1990. MC started focusing on contract and management opportunities that required less capital. This along with a complete halt of real estate operations helped MC to improve from its position in 1990 but it was not still very far from its former glory. Bollenbach had served as treasurer of MC in the early 1980s and returned to MC as CFO in February 1992. His proposed solution to bring MC out of its troubles is “Project Chariot”. Under Project Chariot, MC would become two separate companies. One of the companies would be named Marriott International Incorporated (MII), which would comprise of MC’s lodging, food and...
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...Almost seven years out of the 2008 Financial crisis, the global economy has begun to show signs of modest stability and growth. In fact, the U.S. and other advanced economies have anticipated abandoning quantitative easing and raising interest rates by the end of 2015 or early 2016. However, as many economies show signs of promise, the second biggest economy in the world, China has begun to falter. What had been the shinning spot in the global economic landscape for the past 30 years, 2015 has proven to be a challenging year for the nation. Over the course of the year, China has experienced plummeting stock markets, interest rate cuts and stagnant growth rates compared to years past. As the world has become more financially intertwined the...
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...com/go/ /permissions. To order book or for custom service, pleas call 1(800)-CA ks mer se ALL-WILEY (2 225-5945). Printed in the United States of America. e o ISBN 978- 0-470-56516-2 The Financial Crisis: 2007-2009 Objectives Understand the major influences that led to the 2007 2009 Financial Crises Describe the role that agency cost issues played in the financing of mortgages to developing mortgage backed securities and other financially engineered securities based on mortgages Describe the timeline of events that unfolded during the financial crisis Explain how financial managers must consider the risk, not only the return potential, of their activities Discuss the role of government intervention in the context of economy theory and practice INTRODUCTION How did the...
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...Oil and the U.S. Macroeconomy Prepared by: Thao Nguyen Arizona Western College November 11, 2008 ARTICLE REVIEW December 2001, the average oil price was $19.33. After a brief decline from $74 to $55 per barrel in January 2007, it then resumed its price to $90 per barrel in October 2007. Participants and traders couldn’t foresee the sharp rise in price; however, some economist and analysts correctly predicted the price would go over $100 per barrel and US economy to fall into recession. In his article named “Oil and the U.S. Macroeconomy: An Update and a Simple Forecasting Exercise”, Kliesen shows that if the price of crude oil is permanently increasing to either $100 or $150 per barrel would cause a modest slowing in real gross domestic products (GDP) growth and its major components relative to base line forecast without oil price. The result of this could be somewhat very important due to the weak GDP growth over the first half of 2008. Besides that, in the article, the model which the author use also predict an inflation of 4 percent in 2009 if the price of crude oil rises up to $150 per barrel. From there, forecasters, macroeconomists, financial market participants, and public policy makers always see oil price shock as an early warning because nearly all recession in post-World War II was accompanied by increase in oil price. An oil price shock is typically a large unexpected increase in the relative price of energy that affects the economic decisions...
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...book called The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the United States to China. The Great Financial Crisis and the Great Recession began in the United States in 2007 and quickly spread across the globe, which appear to be the turning point of the world history. The recovery plan was set to two year, however the world economy five years after crisis is still in the sluggishness. The Traid – United States, Europe, and Japan remain caught in a slow growth condition, financial instability, and high unemployment rate. As a consequence, the effects spread globally. Despite the slowdown of the global economy, China is the only country found out to be a bright spot as its economy is still expanding. Different views on the Stagnation In the United States, the focus of financial crisis shifted to the idea of economic stagnation. The idea of stagnation was introduced by authorities and published books as follow. Firstly, Ben Bernanke, chairman of Federal Reserve Board said on his speech in 2011 that the stagnation was not affects only the United States, but the global economy as a whole. He moreover stressed that he do not expect the long-run potential growth of the U.S. to be affected by the recession and crisis if the U.S. takes necessary steps to secure the outcome. Nonetheless his thought might sound useful, yet the necessary steps he mention left the public in doubt with no explanation. Secondly, the president of the America...
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...Indian Economy Submitted to Prof. V.P.Singh Submitted By Sona Nair 38 Shrenik Shah 54 MansiKinjawdekar 32 ParleTilakVidyalaya’s Institute of Management Dixit Road, VileParle East,Mumbai-400057 Index Sr.no Table of Contents Page no 1. Introduction 2. Factors affecting Recession 3. Impact on Indian Economy 4. Corrective Steps taken to check Recession 5. Case Study- 6. Conclusion 7. Executive Summary 8. Bibliography INTRODUCTION What is Recession? A recession is a contraction phase of the business cycle. The official agency in charge of declaring that the economy is in a state of recession is the National Bureau of Economic Research (NBER). They define recession as a “A period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” This is normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. For this reason, the official designation of recession may not come until after we are in a recession for six months or even longer. Some economists also suggest that a recession occurs when the natural growth rate in GDP is less than the average of 2%. Typically, a normal economic recession lasts for approximately 1 year. The newspapers in America often quote theThumbRulethat a recession occurs when real gross domestic...
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...KAIST, College of Business Chinese Financial Market (FIN681) Term paper China’s New Normal Economics & Declining Growth Rate 1. Backgrounds of Chinese New Normal Economy Policy At the opening of the annual National People’s Congress (NPC), Chinese premier Li Keqiang officially announced that the growth target for China in 2015 will be of “approximately 7 per cent”, considerably lower than in the past. The announcement came as no surprise as it had been anticipated in a speech by Mr Li in Davos in February stating that the country had “entered the stage of the new normal, shifting from high speed to medium-to-high speed”. The new growth target set by Beijing is now lower than last year’s 7.5 per cent, and more than 2 percentage points lower than in the past two decades. The government’s ambitions therefore align with the recent slowdown experienced by the Chinese economy since the beginning of the financial crisis in 2008. After the first two years of Xi Jinping’s term, the Chinese economy grew by 7.4 per cent ‘only’ in 2014 – the lowest rate since 1990 – low enough to convince Chinese policy makers to shift to a new policy stance, as they realize previous growth targets are no longer sustainable. The shift to a lower but more sustainable growth target came soon after the International Monetary Fund (IMF) warned last year that a series of danger signs suggested that China would probably face a hard landing in the absence of crucial reforms. More specifically...
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...1 How Amazon and Same-Day Delivery Will Effect Retail Commercial Real Estate by: Ryan Mitts FIN 5433 Dr. Tony Ciochetti 03/30/2013 2 TABLE OF CONTENTS EXECUTIVE SUMMARY....................................................................................Pg. 1 INTRODUCTION.................................................................................................Pg. 2 THE STATE OF RETAIL REAL ESTATE.........................................................Pg. 3 THE THREATE OF E-COMMERCE TO RETAIL REAL ESTATE..............Pg. 4 IMPLICATIONS OF SAME-DAY DELIVERY.................................................Pg. 7 THE FUTURE OF RETAIL REAL ESTATE.....................................................Pg. 9 CONCLUSTION...................................................................................................Pg. 11 REFERENCES......................................................................................................Pg. 12 1 EXECUTIVE SUMMARY Real estate throughout the world suffered a huge shock during the financial downturn of the late 2000's, and while the vast majority of other sectors are on the mend, the retail sector still seems to be having a bit of trouble getting back to where they were before the crash. A large reason for this has to do with Amazon and other online retailers taking up a larger and larger share of the available sales forcing many companies into rethinking their business plan, leading to store closures, downsizing, and even...
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...The Effect of US Financial Crisis on India Lehman Brothers is no more. Merrill Lynch has gone down the Bank of America maw. AIG too could go belly up. With a doubt, these developments in America are the most shocking events to have hit global financial markets. So where did it all begin? And what does it mean for the Indian stock markets? Find out. . . What is (or was) Lehman Brothers? America's fourth-largest investment bank Lehman Brothers Holdings Inc has filed the biggest bankruptcy petition known to mankind. The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer Lehman, Jewish immigrants to the US from Germany, in 1850. Henry set up a general store in Alabama in 1844 and was later joined by his brothers. In 1850 they set up the merchant bank in New York after having made money in railway bonds. So what went wrong? Compiled by Rediff Business Desk Lehman Bros, which till June 2008 had not reported a quarterly loss even once, had earlier survived many an economic crises, like railroad bankruptcies of the 1800s, the Great Depression in the 1930s, and the collapse of Long-Term Capital Management in the 1990s. Thus the collapse of the giant investment bank came as a major shock for the entire world markets that plunged after Lehman filed a Chapter 11 petition with US Bankruptcy Court in Manhattan. The $613 billion (some estimates put the size at $639 billion) bankruptcy thus throws up the question: why did the Wall Street giant go bust? Here's...
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...Another case of decoupling of debts from assets is liquidity trap in Japan. Richard Koo argues that deep recession in the Japanese economy is connected with balance sheet recessions – when bubble burst wealth of private sector declined but debts remained unchanged. As a result large number of private companies faced defaults leading to the credit...
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...fiscal policies used in order to maximize their effectiveness. The global nature of the current crisis and the different capacities of the worldwide governments involved imply the necessity to coordinate the stimulus plans in order to yield better and quicker benefits that will help out the countries with lower abilities (free-rider externalities effect). By analyzing the situation from 2008 to end 2010, it appears that the recovery is on track but risks and uncertainty remain. The next move then is to consolidate and create an adequate environment for balanced and sustained economic growth, fiscal sustainability and financial stability on a worldwide level. Using short term fiscal policies, the governments should first increase their credibility and consolidate their budgets by employing fiscal rules. Second, the exit from the exceptional fiscal policies used should be well timed to a strong growth or delayed if conditions are still weak: “difference between US - Europe vs. Japan”. Third, the fiscal policies used in developed countries will generate capital inflows towards emerging countries. These inflows will boost real-estate sector, increase the value of the stock market, and strengthen the local currency which will affect their competitiveness on the international trade level and might create a resilience to let the currency appreciate. If this were to happen, they might suffer counter measures from their trading partners. By taking...
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