aoa boundles f thnks.the link reaaly proved usefull.
but since economics is not my subject,i need a little more elaborated approach....
i actually want to know:
a- what were the causes f global recession f last year.
b- how these crisis are linked w/ Dollar,i'v got know from this article how to adress this problem,but the basic querry is still there.

pls also throw some light on Americ's own financial crisis n then thier link w/ global crisis.thnx

Regards

@ Kawish

The Global Financial Crisis is a dynamic phenomena.
-- In order to grab the core of phenomena, One needs to understand the very basics of Accounting ( as the crisis circumscribes "Debit" and "Credit", "Lending Money", "Borrowing Money" etc and Economics (as it involves "Financial Markets") (Micro and Macro).
-- But for a general understanding, i am posting here an easy to understand-the Crux-of the crisis, to provide you with the pertinent dots. For a complete picture, however, as i said One needs to study Economics and Accounting first.
I read this article on Internet five minutes ago..
It Says:

The world financial crisis that is before us today, is taking place since long ago, but has become more noticeable since September 2008, when they start to happen a series of unprecedented events that are reorienting the system Global Financial. The current global crisis has several aspects. Firstly, there is a strong American economic crisis of productivity and competitiveness in Asian markets. The second aspect would be the obvious speculative economy ( in general terms it means when people or financial institutions predict the future behavior of stocks etc) in which the relationship of the international money supply, not commensurate with the actual production of goods, and thirdly the strong energy crisis due to high energy consumption levels are not commensurate with the existing reserve levels.

Another aspect that has fueled the current crisis is related to food, and which are known to one third of the planet has severe feeding problems, and this is a crisis that further increases daily. With the collapse of Lehman Brothers, the crisis reached other dimensions, as it also revealed the collapse of U.S. housing sector. This sector was the biggest growth, this because the financial institutions gave large sums of money to purchase homes, and brought with it that people began to buy homes, causing an increase in demand for these, this led to Homes are trading at high prices in many instances came to the speculation. People borrow to buy your home, then expect the price for the same rise and sold, which obtained the money to pay the debt owed to the bank and demanded a new loan to buy another home, this phenomenon called “housing bubble”. This lasted a short time and interest rates began to climb to try to lower the high levels of inflation, obtaining credit was no longer so easy, and housing demand fell and prices of these. Now it happened that financial institutions could not collect their mortgages and that it was increasingly difficult to get their own loans and to developers and construction companies. As an example of how difficult the situation in the second quarter of 2007, Citigroup one of the largest U.S. bank, lost U.S. $ 9,800 million committed securities because of the mortgages, whose interests were extremely high.

This crisis now takes hold, there is no turning back, as they say was advised war that for sure do not know the last time, but it shows how vulnerable the markets may be but are addressed adequately and timely their needs.


For further understanding, i am posting a few URL links of youtube vidoes:

1-- This videos explains the crisis visually, find the part 2 in Related Videos. (I loved it)

The Crisis of Credit Visualized Part ONE
http://www.youtube.com/watch?v=Q0zEXdDO5JU

2-- This video explains the Financial Crisis with even more "easy to grab" approach. (very good)
Understanding The Financial Crisis--For Kids and Grownups
http://www.youtube.com/watch?v=h4Ns4...eature=related

3-- This video explains the aspects which led to the Crisis.
http://www.youtube.com/watch?v=GubKe...eature=related

4-- Lecture of Prof: Jaap (Faculty of Economics and Business at the University of Groningen in the Netherlands)
http://www.youtube.com/watch?v=5D9eY...eature=related

5-- CNN's Coverage regarding Financial Crisis - 15 minutes video
http://www.youtube.com/watch?v=_ZAlj...om=PL&index=48

Hope this helps you.
Have a good Day.

@KAWISH

a- what were the causes f global recession f last year.



Real Causes For US Financial Meltdown and Global Recession
By Jonathan Wang, Ph.D. Contact Author

Current economic recession in the United States and all around the world is seen as the worst downturn since the great depression. There is little doubt that this global recession was caused by the financial meltdown in the United States and quick spread out to touch almost every corner of the world. It appears to be a commonly accepted theory among economists that this episode of US recession was a direct result of sudden busting of house bubble, and the house bubble was created by rapid growing yet unregulated subprime mortgages.
These are all true. But the real questions are, as shown in Fig 1, the house bubble, if any, started to emerge in the closing years of 20th century, why has it not been busted until year 2007? and during that over a decade long period, were there any indications that had signaled this crisis might happen eventually? With these unanswered questions, we must think deeper and much deeper so to make sure this type of sad economic drama will not recur.

It is the reduced affordability of average consumers that has busted the bubble in house market.

I am not an economist, but it does not take a economist to understand one simple plain word, affordability. It is a common sense that the economy of a nation is supported by domestic spending of average consumers. It is equally clear that growth of the house market can not be sustained without synchronized growth in household incomes. When the growth in household incomes under pace that of the house market, the affordability becomes an issue. With the gap between two growth rates trending wider, affordability problem is inevitably escalated and will result in a collapse of the house market eventually.
That was exactly how the house market in the US was collapsed.
Let's divide the recent history into two periods, Clinton era and Bush era. A division timeline lies right in year 2001 when Bush took the office. Apparently as shown in Figure 1, chart of S&P home price indices, shift of power did not cause the growing pattern of the house market to change. Moreover, the indices even kept its climbing pace during 2001-2002 recession. I recall many economists and economic commentators even used this fact to argue validity of the recession. Unfortunately, Figure 2, chart of real median household income for the same period paints a completely different picture.
According to S&P, between 1995 and 2000, the Home Price Indices increased 24.29%. During the same period, the data from US Census Bureau show the adjusted real median household Income were up nearly 10% from $46034 to $50557. An 15% offset between two sets of the growth rates still appears to be in healthy range although arguably a small house bubble might have been rooted. However, the Home Price Indices jumped strikingly over 122% between 2000 and 2006 while the real median household income inched 2% lower from $50557 to $49568. A huge bubble was formed as a result. After that, affordability became a non-existence; mortgage delinquencies and foreclosures continued its journey of rapid rise; banks and financial markets started to fall and consequently, the entire financial market collapsed and global recession was officially commenced in 2008.

What has caused house price and household income to run in opposite directions?

Many argued that house market always delays its reaction to the overall economy. This argument seems difficult to withstand scrutiny. Consumer's confidence is a key factor in any marketplaces. House market is supposed to be as sensitive to consumer's confidence as the overall economy.
It is reasonable to believe that multiple Fed interest cuts during 2001 to 2003 period, as seen in Figure 3, in attempt to pull out the nation out of recession had in part contributed to the uninterrupted rise of house prices. I must challenge the necessity of the interest cuts of that scale, particularly in 2002 and 2003, considering a severe house bubble had clearly come to sight. The 2001 recession was relatively mild, which was predominantly determined by contractions of the gross domestic products. It is arguable that GDP is one of important macro economic indicators, its significance, however, should not be overlooked.
What is GDP? I learned a great story from by a real MBA student.
Once upon a time, there were two business school students, A and B, walking in campus. They suddenly discovered a pile of dog shit sitting on the street. A joked with B by saying I will give a million dollars if you swallow the pile. B pandered for a moment and determined it is a great deal. So he moved the entire pile into his stomach. He asked student B for one million dollars. A shook his head and replied, "put it on my account". Several days later, they discovered the same thing while walking together again in the campus. B said to A, if you do what I did last time, your account will be cleared. A swallowed it immediately with a relief as he felt he wouldn't have to carry the debts for life. They then went to see their professor and told professor the story. The professor jumped from his chair and shouted, "that great, congratulations, you two have contributed two million dollars to our nation's GDP!"
Now come back to the topic. It is conceivable that the interest cuts during 2001 to 2003 had escalated house bubble, however, they are not the fundamental causes for the financial meltdown and severe global recession we are now facing.
Human history tends to repeat itself. The capital market is of no exception. When comparing patterns of certain economic data, it is not difficult to find out that this economic down turn and the great depression took place in the 20's have surprising similarities. Comparison studies often can reveal facts and solve mysteries.
Although causes for the great depression are still uncertain, one thing is clear that house market did crash during that period. Specific data measuring house industry did not become available until 1950's, but an over 90% drop in homebuilding between 1925 and 1932 was well documented.
There must be a single troubled issue that could cause a system to collapse "overnight". Combined causes would have damaged the system in a much slower and possibly manageable pace. Considering house market is the only capital market that touches vast majority of consumers, it is logical to infer it was financial difficulties in house market that triggered the great depression.
As a long term Republican, I have always believed in non-compromised free market; believed that capital market could always work its way out any crisis without government interventions and, inequality is a blessing baby that free market has naturally delivered. Nearly disastrous outcome of the recent financial crisis, however, has greatly shaken my ideology. After searching for dynamic reasoning for this sudden change of the world, I am sadly convinced that blessing baby had dropped a huge bomb directly onto the body of its beloved mother.

It is the extreme inequality that has resulted in the great depression in 1929 and again caused the global recession today

Figures 3 and 4 charted the shares of total income going to top one percent and top ten groups in the history of nearly one century. These are the best indicators of capital inequalities. There are two peak points appearing on each chart, precisely pointing to the years when the great depression and recent recession took place.
These graphs are striking. When the share of total income going to top 10% was quickly approaching 50%, the great depression officially started without sending out any warning signal. The history repeated today. When the same parameter was once again sprinting towards the 50% mark, a swirl of financial tornado suddenly raided the "booming" capital market
Two episodes of extreme inequalities led to two episodes of economic disasters. This is no coincidence. There is mechanism in it. The mechanism is still pertaining to the house market.
As being discussed earlier, the house bubble was created when house prices rose rapidly while average household income stood still. What had driven house prices up when average consumers did not gain any more spending power? Many believe that excessive liquidity and unregulated lending in the financial market had promoted the continuing expansion of the house market. That means "reckless spending" by average consumers and "reckless lending" by financial institutions are the ones to blame. I don't think that is very accurate. The causal relationship seems to have been reversed in this theory. In fact, it was rapid rise of house prices that had prompted financial institutions to excise "reckless" lending practices as they had plenty of reasons to view houses as appreciating assets. There is another fact. The financial market was already tightened up in 2005 and 2006. As I recall, many lending agents were forced to close door due to sharp decline in lending business. Why house prices did not reverse their jumping course during that period? Actually, my marble business enjoyed the best time in 2006 and early 2007. Why? Because luxury homes had dominated the house market. Perhaps, average households never even dreamed of those types of prestige.
Figure 6 Top Bracket
Federal Tax Rates
1914-2009
Recent reports suggested that severe house crash only occurred in handful cities such as Los Angeles, Las Vegas, Miami and Phoenix. Let's not forget these were the major areas favored by extremely wealthy people and birthplaces of booming celebrity-style home markets several years ago.
It is evident that the extreme inequality was an "invisible hand" that had constantly pulled up house prices until average households could not afford average homes.
Let's compare Figure 2 and Figure 4. There was virtually a "recession" in the real median household income between 2001 and 2007. However, the share of total income going to top 10% group jumped from 45% to nearly 50% during the same period. Especially since 2003, such inequality expanded in a incredible pace resembling the episode right before the great depression.
There is no doubt that the spending power in house market from top 10% group has been on constant rise. This group of people might not have bought many homes but many of them have built their mansions that occupied huge pieces of land. Land occupations certainly drove up land prices. Moreover, most of those luxury homes were built in the newly developed areas. Infrastructure development added significant amount of dollars to price tags of the houses. When seeing house prices rose on a daily basis, it was really difficult for the average households to sit back. Motivated by basic consumer psychology, the middle class had to participate in the market actively. All these factors combined constituted strong power to drive the average home prices up continuously. When the average home price reached a point that the average households could no longer afford, house market started to collapse.
Therefore, the extreme inequality is the real cause for today's financial meltdown. Presumably, such inequality was also a triggering factor that eventually evolved into the great depression in 1929.
We have so far discussed the real cause for the current recession and for the great depression. Next question is,

Did government play any roles in the recession or depression?
Absolutely.

There is no such thing called real free market. Government intervention has always been there. Government's key leverage on the capital market is taxation. Good tax policies would help healthy expansions of economy. But on the same token, any bad decisions or abrupt changes in policies by government could take the economy to a wrong direction. I believe government made a same mistake that had escalated today's recession and the great depression in the 1920's.
Figure 6 included two comparison charts, exhibiting the top bracket federal tax rates from 1913 to 1931 and from 1992 to 2009. These two charts show a rather interesting similarity that certainly calls for our attention. There was a large tax cut for the richest group in 1925. Four years later, the great depression began. There was also a tax cut for the richest group, five years before the economy started to collapse.
Is it reasonable to deduce that government had cut taxes in wrong times and for wrong groups of people ?
Yes, they did. Just like pouring a barrel of gasoline into a raging fire, those two episodes of tax cuts for the top bracket group, as shown in Figure 6, had clearly accelerated expansions of the extreme inequalities in terms of real spending power, which consequently pushed the house market into a "no way out" position.
In theory, economic expansions are essential to maintain social prosperity. Certain level of inequality is infallible outcome of any economic expansion and is a positive element in the entire system of capitalism. However, when the inequality becomes extreme, government must step in and take all necessary means to pull it back to a sustainable level. Otherwise an ultimate consequence would be what we are facing today and what we had gone through in late 90's. It only takes one catastrophic economic downturn to wipe out entire wealth accumulated from decades of expansions. We are yet to know where current crisis is heading towards, but the great depression should have given us a great lesson on this. If government were able to determine as early as in 2002 that the inequality had reached a level that took economy into the depression in 1929, certain effective regulatory interventions could have been planted to prevent this ugly recession from happening.
Considering the extreme inequality had already been in place in the beginning of this century, it is my opinion that government had chosen a series of improper approaches to stimulate economy in 2001-2003 period.
In order to put a stop on the emerged recession while avoiding escalations of the rapidly growing inequality and house bubble, right government interventions should be treasury, not monetary. To be specific, instead of cutting taxes on the top 10% group, government should have raised them to strengthen the abilities of direct government investments. It is redistribution. But redistribution can be a life saver of the broad economy in many cases and can be a great recipe even for the long term financial well being of the richest group.
In terms of monetary policies, government should have left interest rates alone instead of lowering them. In an economic down turn, what we need most is orderly stabilization, not unpredictable expansion. History has repeatedly taught us that government investing is the most effective way to stabilize economy no matter it is in a socialist system or in a capitalist market. Any attempts to speed up free market expansion in a recession will like create new bubbles or enlarge the bubbles that have already existed.
I would like to end this article with a call. Let's abandon all ideological believes, political stands and take the approaches best for a quick economic recovery and for the sustained prosperity of our society in the future.

Conclusion:

1. Two major economic expansions led to two episodes of extreme inequalities in the United States. Both ended in severe economic crisis.
2. When the share of total income going to top 10% group approached 50% in 1929 and again 2007, the capital market crashed in the United States. Does this suggest 50% is a threshold separating expansion and turmoil? Should we develop an inequality index as an key indicator measuring health of the capital market? Please debate.
3. It is the extreme inequality that had led house market to crash in 2007 and most likely in 1920's.
4. Government's improper interventions in the capital market before both episodes of crisis had accelerated the extreme inequalities and ultimately intensified the crisis.
5. It is author's opinion that government must focus on stabilization rather than expansion in any economic crisis. The most effective measure to stabilize a down turning capital market is direct investment. In order to do so, raising taxes on top income groups becomes necessary. Such tax increases can also reduce inequalities so to prevent bubbling economy from happening.

__________________
"You Can Analyse The Past But You Have To Design The Future"
Miss Writer

@KAWISH
b- how these crisis are linked with Dollar

Dollar touches two-year peak as risk trades unwound
CURRENCIES

* Euro hits two-year low vs dollar, six-year low vs yen
* Weak stocks underline recession fear, hurt risk demand (Recasts, changes byline, dateline, previous LONDON)
By Lucia Mutikani

NEW YORK, Oct 23 (Reuters) - The U.S. dollar touched a fresh two-year high versus a basket of currencies on Thursday as investors off-loaded risky assets like stocks in favor of reserve currencies on worries of a severe global recession.
The greenback scaled a two-year high against the euro, while the low-yielding yen hit a six-year peak versus the euro zone single currency. The yen also recorded its strongest performance versus the dollar in seven months.
Both the dollar and the yen have surged against higher-yielding currencies this week as risk demand has shriveled. Evaporating liquidity has led to severe volatility in most markets, and analysts said currencies remained vulnerable to erratic moves.
"What is going on is that investors are still very panicky and very much in a trigger-happy mood. The market is still dominated by risk aversion flows and and we are pretty much trading off what equities are doing," said Boris Schlossberg, director of foreign exchange research at GFT Forex in New York.
"The reason we have such volatility is because visibility is completely clouded. Almost all asset classes are being priced for a very serious, almost depression-like scenario and the market is waiting to see if this is going to happen."
The ICE Futures U.S. dollar index rose as high as 86.120, a level last seen in late 2006, according to Reuters data. The index, which measures the dollar's value against a basket of six currencies, was last up 0.3 percent at 85.710 .DXY.
The euro slumped to a two-year low of $1.2726 on electronic trading platform EBS. It was last down 0.3 percent at $1.2808 EUR=.
EMERGING MARKET TROUBLES BUOY DOLLAR
The dollar was bolstered as trouble in emerging markets compounded worries about the outlook for the global economy, with countries such as Hungary and Argentina taking desperate measures to shore up their ailing economies.
"We are going to see the recent pressures maintained as emerging markets tensions continue. The dollar will remain supported and the high-yielders will stay under pressure," said Ian Stannard, senior currency strategist at BNP Paribas in London.
Some market participants said dollar strength was being driven by demand from U.S. funds, including hedge funds, selling debt for dollars in preparation to pay out upcoming redemptions.
Weaker global equities handed the yen strong gains across the board.
News that the number of U.S. workers filing new claims for jobless benefits rose by a larger-than-expected margin to a seasonally-adjusted 478,000 last week from a revised a 463,000 the prior period also dampened the mood for investors.
The dollar traded 0.7 percent lower at 97.19 yen JPY=, after falling to a seven-month low of 96.85 yen according to EBS. The euro was down 0.8 percent at 124.37 yen EURJPY=, having hit a fresh six-year low of 123.40 yen.
With one day still left in the trading week, the euro has already tumbled more than 8 percent against the yen since last week and looks set to clock its worst five-day run on record.
The yen has shot up drastically versus the euro and other high yielders like the Australian and New Zealand dollars as investors dump positions that had used the low-yielding Japanese currency to buy assets in higher-yielding ones.
Sterling GBP= fell 1.1 percent to $1.6113, after tumbling to a five-year low against the dollar around $1.6046 as concerns about the country's vulnerability to the financial crisis remain.

Reference:http://www.reuters.com/

__________________
"You Can Analyse The Past But You Have To Design The Future"
Miss Writer

MFN, in economics, means that if u r givin certain trade concessions to some other country those should b given to the MFN also..for example we assume that pak is MFN for india..now if india grants certain concessions to china(lowers tarriff, etc) then it will grant those concessions to pak as well..
now adding reciprocity to it...if india grants some concessions to pakistan, pak should reciprocate n grant same concessions to india..this is basically done to balance the concessions although some least devloped countries may b granted exemption from this clause.. i hope its clear now!

__________________
Khird mandon se kya poochon k meri ibtida kia hay
K mein to iss fikr me rehta hoon meri intiha kia hay!!

Thnx Xenia but i wud like one more post frm u nd i guess things ll get more clear

As per my info (least in this field) India has given us MFN status while we have not given to them nd India keeps on askin us to give her the MFN status. Now we must have given MFN status to China (as per my assumption, if im wrong plz correct me). Now if we have then any concession we might be giving to China as our time tested friend, tht ll be automatically applicable to India as well coz she iz a member of WTO. Then y India asks us fr MFN status to her.

Second will u plz differentiate fr me over two these two scenarios
A) Pak gives MFN status to India
B) Pak sign a reciprocity agreement with India

what ll be the difference???

__________________
What lies behind us and what lies before us are tiny matters compared to what lies within us.

You were not born a winner, and you were not born a loser. You are what you make yourself be.

i m sorry i m noy sure abt the 1st part..i dont think india has given us MFN status..there were som negotiations during composit dialogue but ther has been no improvmnt n this regard..we r not having trade with india even in those items which are mutually beneficial owing to political reasons..(i will try to search n come back)
no.2..u seem to b quite idealistic..i mean in actual relations there r long periods of negotiations n the rules arent strictly observed..

MFN status applies to the list of items(goods n services) prescribed by WTO but we can have reciprocity arrangemnt in one area or more..this is the differenc i thnk...n if u r talking in the previous context if one state gives MFN status to other itshould reciprocate(this is morally plausible + balance of payments has to be maintained)

__________________
Khird mandon se kya poochon k meri ibtida kia hay
K mein to iss fikr me rehta hoon meri intiha kia hay!!

@Xenia
I think you have mixed the things.
@Shahzad
In simple words, one of the rules under which WTO regulates the trade is the MFN status.
Under the Most Favoured Nation rule, should WTO member state A agree in negotiation with state B, which needs not to be a WTO member, to reduce the tariff on the same product X to five percent, this same tariff rate must apply to all other WTO members as well. In other words, if a country gives favourable treatment to one country regarding a particular issue, it must handle all members equally regarding the same issue. Most favoured nation treatment makes it possible for countries to import from the most efficient supplier, in accordance with the principle of comparative advantage. MFN allows smaller countries, in particular, to participate in the advantages that larger countries often grant to each other, whereas on their own, smaller countries would often be not powerful enough to negotiate such advantages by themselves.

Then comes the other rule i.e. Reciprocity. Only that nation will enjoy the benefits of those lower tariffs by a particular nation (A) if it reciprocates the same way.

And yes India has given MFN status to Pakistan. And if Pakistan wants to benefit from it it will have to reciprocate. IF Pakistan gives MFN status to India on particular products it will have to do the same with all WTO members
And I think Pakistan hasn’t given MFN status to any nation.
MFN status can be given on a particular product with regards to particular duty or tariffs.
Same nation can give MFN status to different nations on different products.

And I think in this case there is no difference between reciprocity and MNF(as response).
But in terms of products or services yes there may be difference.......

Hope it helps.

__________________
Whatever mind can conceive,it can achieve - W.Clement Stone

That was the line i was looking for. It solves my maximum problems.

__________________
What lies behind us and what lies before us are tiny matters compared to what lies within us.

You were not born a winner, and you were not born a loser. You are what you make yourself be.

i was trying to explain these as economic phenomenas..probably u dint get me..
MFN(also called NTR-normal trading relations-a better name)means non-discrimination among ur trading partners..WTO grants exceptions to developing countries n Trading blocks..almost 70% of member states are developing counties n almost all are a part of one or other trading block..so theoretically who is left?

US has given MFN to almost all coutries n pakistan has not reciprocated , still we are benefitting from lower tariffs n duties etc..basically under WTO all countries are reducing tariff n non tariff barriers in phases to the benefit of all..its more of a multilateral arrangement.

if Pakistan does so, the arrangemnt will b under SAFTA (a trade block again) n so we dont have to extend it to all others
there is a big difference..MFN is a kind of tariff legislation n reciprocity is a tit-for-tat kind of thing..

@s_ranjha
just read the principle once on WTO website..the language is quite simple n intelligible

__________________
Khird mandon se kya poochon k meri ibtida kia hay
K mein to iss fikr me rehta hoon meri intiha kia hay!!