Click to play videoNew Delhi: There is financial turbulence all across the world. What started as a banking crisis in America has now ballooned into a full scale global financial tsunami washing away several major financial institutions and creating huge panic in the stock markets.
Unstoppable selling has sent global markets crashing to new lows.
- On Friday, India's benchmark Sensex fell seven per cent to close at its lowest in 27 months
- In the US, The Dow ended a wild week with a drop of 1.5 per cent
- UK's FTSE 100 slumped to its worst week ever; down 8.8 per cent
- Germany's Dax went down 7 per cent
- France's index fell by nearly 8 per cent
- Japan's Nikkei DOWN 9.6 per cent
- And Hong Kong's Hang Seng fell by 7 per cent
The scale of the crisis is such that global policy makers have been forced to take drastic steps.
On Wednesday, six of the world's biggest central banks including the US Federal Reserve and the European Central Bank took the unprecedented step of co-ordinating a cut in interest rates in an effort to ease the credit crunch.
But despite rate cuts and hugh cash injections, the market mayhem has not eased. It seems the fears about international recession dominate the investors mind.
The financial crisis has also seen governments spending billions of dollars on rescue packages. The United States where the crisis began, announced a $700 billion rescue package to buy troubled assets from banks and in the UK, leading banks are set to get a at least £50 billion government bailout.
UK Prime Minister, Gordon Brown said, "Our plan is to invest in taking capital in the banks which require this money, so we are buying shares in the banks themselves."
But is this too little too late? The International Monteary Fund (IMF) has predicted that America and Europe are headed for a recession very soon. The IMF has also warned that high growth countries like India may not be immune to the crisis.
So how will all this affect us? Will India be able to weather the financial storm? The Government for now seems optimistic.
India's Finance Minister, P Chidambaram said, "No one needs to fear about the soundness of India's banking system."
The challenge perhaps for all governments now lies in not just issuing more such reassuring messages to depositors, but also to come up with more bold and coordinated measures to avoid another Great Depression.
IMF Managing Director, Dominique Strauss-Kahn said, "All countries have to be involved in the solution, because all countries are involved in the problems, and not only advanced countries. Effectiveness means we need to use the experience and also that we need them to follow up. The worst situation would be that after the crisis, when it would be behind us, we just say, okay, we can go back to business as usual."
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