The Global Financial CrisisThe Global Financial Crisis

Created By:

Islam Basheer

Ibrahim Abuoda

Content:Content:

Introduction

Cause of the crisis

Impact of financial crisis

Solution Of financial crisis

INTRODUCTIONINTRODUCTION

INTRODUCTIONINTRODUCTION

♦ On February 7, 2007 one of the world’s largest banks, HSBC, announced losses related to U.S. sub prime mortgage loans. A couple of months later, on April 3, New Century Financial, a sub prime specialist,, Bear Stearns told an incredulous financial community that two of its hedge funds suffered large losses related to sub prime mortgages .

INTRODUCTIONINTRODUCTION

♦ Other Wall Street standard-bearers also started reeling from bad investments, . Before the end of August the crisis had spread to some French and German banks, and prompted the Federal Reserve and the European Central Bank to pump liquidity into the banking system and to reconsider their interest-rate policies.

Cause Of The CrisisCause Of The Crisis

Cause of the crisisCause of the crisis

Expanded U.S. financial institutions to grant housing loans largely on the one hand, and increased the percentage of loans to the value of the property (housing) on the other. Has provided financial institutions such loans to a large number of consumers

owners credit bad in the sense that their willingness and ability to repay loans is low and thus stumble upon solutions dates of repayment of loans, which affects the development of financial institutions that granted loans, and then not being able to fulfill their obligations and collapse.

Cause of the crisisCause of the crisis

There is a particular property is characterized by financial and banking institutions a large degree of overlap between them.On the other hand, there are other characteristic features of the financial sector is that when the collapse of the financial institution because of a bad situation affectsthis affect to another financial institutions depositorsWhich the financial position of the most good.

Cause of the crisisCause of the crisis

Cause of the crisisCause of the crisis

And then resort to withdraw their depositsThus, the sudden withdrawal of deposits lead to the collapse of the financial institutions even if it is placed well and healthy. This is called the domino effect, so that if she broke down and one sheet of paper to the rest of the dominoes game cards collapsed, so we find that the intervention of central banks in these cases is essential.

Cause of the crisisCause of the crisis

Launched the start of the new crisis with the announcement of a giant financial institution, is the Lehman Brothers' bankruptcy for a symbolic beginning of the dangerous, because of this great institution was one of the few companies that survived the massacre of the Great Depression in1929.

The Impact Of Financial CrisisThe Impact Of Financial Crisis

Impact Of CrisisImpact Of Crisis

◊ For many developing countries, the U.S. credit crisis will mean slower growth and rising inequality. The effects will be protracted. And the nature and degree of impact will vary widely. Some countries, notably those with extensive foreign exchange reserves and strong fiscal positions, will be much better able to cope than others. But overall the crisis is very bad news for developing countries and especially for the poor.

◊ Impacts felt through two channels. First, lower growth in the industrial countries will mean less demand for developing countries’ exports, both manufactured goods and most commodities (gold will be a notable exception). A few developing countries are growing based on domestic demand but many are growing based on exports, and for them sagging rich-world demand will be a problem.

Impact Of CrisisImpact Of Crisis

Impact Of CrisisImpact Of Crisis

◊ The second channel is reduction in capital inflows to developing countries. Because the U.S. crisis has created a global credit crunch, investors are becoming more risk averse and thus less willing to invest in developing countries. As uncertainty and risk have increased in international capital markets, investors will continue to shift the composition of their portfolios, away from riskier assets, such as emerging markets securities, and into traditional stores of value, such as U.S. treasury bonds and gold.

Impact Of CrisisImpact Of Crisis

A crisis of liquidity in global financial markets.

Reduced demand for raw materials and especially the oil resulting in a lower price.

Bankruptcy a large number of major international companies in several areas linked.

Impact On Arabian Area Impact On Arabian Area

(Arab gulf states & Egypt ) are the most Arabian countries affected by the global crisis. Due to close contact with global economy.

Decline in oil prices and the Arab Gulf States are still suffering from this inflation in the financial crisis . This led to a decline in exports to 300 billion . Many of the large projects that were interrupted by the financial crisis.

Impact On Arabian Area Impact On Arabian Area

Generally the impact on arab countries differs from one country to another, especially the non-oil countries, and also closely associated with global markets fell gradually affected by the financial crisis than other countries.

Solution Of Financial CrisisSolution Of Financial Crisis

Solution Of CrisisSolution Of Crisis

The U.S. government's rescue plan presented to the House of Representatives $ 700 billion and, after deliberations between rejection and acceptance was approved by the Council of Representatives and the Senate.

The emergence of incorporation companies (fusion) and sales of a number of big companies to save it from bankruptcy.

Many of large central Banks provides large number of countries around the world with billions to ease the liquidity crisis , such as the U.S. Federal Bank and Japan's central bank and the German Central Bank .

Solution Of CrisisSolution Of Crisis

The crisis continues, and continues .................. The crisis continues, and continues ..................