The world economy
Every nation is looking for debt relief solutions in today’s recession. Recently CNN did a complete workup of the world crisis and what each country is doing to handle the sluggish economy. Here is a breakdown of tactics.
The United States
Home values fell drastically, causing banks’ holdings to lose value. In addition, lenders lent without question and many loans defaulted, bringing the economy further into a slump. In an effort to cut the value loss, many lenders stopped lending altogether. On top of that, employees felt the sting of lay-offs and cutbacks sending 4.4 million people to the unemployment lines.
The solution began with government intervention. A bank bailout of $700 billion was sent carousing through the financial industry, in hopes to reinvigorate the system. Even more billions were channeled into the auto industry. It is hoped that the money will trickle down throughout the economy and bring about a change.
The United Kingdom
The beginning of this year, the value of the pound fell to a drastic 23-year low against the US dollar. Their banking system too, faltered and the country’s home values declined. The UK too was experiencing a heavy recession.
In efforts to handle the situation, Prime Minister Brown issued a $63 billion bailout for their banking system. The Bank of England decided to buy into the private sector, in an effort to increase assets. Their plan also included creating an insurance program that could potentially save banks from future loss and guaranteed bank assets.
Russia
The prices of natural gas and oil declined, which caused exports to suffer. Banks in this area of the world were also hard-hit because Russian banks hold more foreign debt than assets. This put them in particularly perilous standing for survival. Extreme inflation has caused a crisis situation for consumers.
The solution for Russia was first to structure a $50 billion lending facility for banks. Though this money was substantial, it quickly disappeared into the economy and banks were given an additional $28 billion a month later. In an effort to get a handle on debt relief, the central bank also put a cap on interest rates to help consumers manage.
Mexico
The Mexican economy and the US economy are closely aligned with each other and in a recessive economy, the result isn’t good. With the US economic problems, Mexico suffered greatly, especially due to the cut in price for oil exported to the US. Creating an ancillary problem is the US cut in budgeting that no longer is able to hamper drug-related violence at the border of the two countries.
The solution to this problem was also a stimulus plan. The Mexican government put $54 billion into the economy and froze prices of gas, natural gas and electricity. Future plans are to put more money into the small business sector to hopefully reinvigorate the lagging employment rate.
Japan
Japan also saw a housing crisis and exports fell sharply. This caused a domino effect that increased the number of unemployed citizens. Items that were highly demanded that the country relied on to bring in large revenues, no longer were lucrative. Sharp world declines in demand, hampered growth.
Their solution to ease the recession was to first cut interest rates. The Bank of Japan also came up with a $100 billion decision to buy bank loans. In addition, there is a $270 stimulus package fused into the economy that combines small and mid-size business loans and tax rebates for consumers.
The recession is a world issue
Overall the recession is a world issue that has hard hit every economy. Governments worldwide have spent billions in stimulus packages and consumer rebates in an effort to bring debt relief to their nations. Hopefully, once their actions work their way into the economy, the world will once again see an upswing in financial growth.
