Are we heading towards Second Global Depression?

Are we heading towards a second global depression, which seems would have a much bigger impact than the Great Depression on 1929, as the aftermaths are already been shown with Company’s posting huge losses, employees are being laid-off, company’s going to cost cutting mode, banks are reluctant to lend money to investors which in turn is affecting company’s day-to-day operations. Each and every stock markets across globe are bleeding with losses be it NASDAQ, Nikkie, Sensex etc.

Every investor/common man has just one question in his mind, as to when the mayhem will stop? Billions of wealth has wiped off from investors coffers.

Many are surprised and shocked by massive impact of this economic crisis, investors and the common public were shown rosy picture about the financial situation and now suddenly they are finding themselves at the receiving end of the economic crisis.

History has repeated itself as US has become the virtual source for the economic crisis for the second time after it was considered the source for the Great Depression of 1929 whose effects were felt till the end of 1940’s.

In my opinion, it all started with the bankruptcy of the one of the biggest investment bank i.e Bear Stearns, which was sold to JP Morgan with the help of Fed Govt and the main reason for the fall out of Bear & Stearns was the Sub-Prime Mortgage crisis.

And then adding insult to injury was the bail-out of Fannie-Mae, the financial institution which has the distinction of being the highest lender of the housing loans and this particular event sent shivers in the markets across globe.

To top this another crisis hit the market was that of the bankruptcy of the Lehman Brothers, one of the largest and oldest investment bank, which did not see any reds in its balance sheet, until this particular quarter which hit the bank so hard that it had to file for the largest bankruptcy in the history of the mankind or the modern era.

These incidents did not go well with market, which has resulted in markets tumbling down and in the process breaking many records of the highest falls in a day, lowest in years and so on.

The global scenario is so bad that it prompted in Govt’s coming up with bail-out plans to provide life-support to the ailing world economy by infusing credit into market. The main aim of the bail-out plan is to provide Liquidity and many countries has have cut their CRR rates i.e Credit Reserve Ratio’s (lending rates), in order to infuse credit in the market.

This credit crunch has not spared any country whether developed or developing. The US has really been the hardest hit nation in this credit crisis, where the country is experiencing higher un-employment rates, industrial and economic growth rates have nose dived, higher tax regime, various state Govt taking a cut in their budgets.

Its great to see that developed countries are coming forward to form an alliance to ponder over the ways to resolve the economic crisis.

Hope so the strategy of the so called bail-out plans are successful, as it money involved are from tax payers pockets, who would feel let down if the bail out plan fails..