Page 81 - Heavenly Signs III by Mel Gable

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Global Effects
Both mortgage-backed securities (MBS) and collateralized debt obligations (CDO) were purchased globally by
corporate and institutional investors. Derivatives such as credit default swaps (CDS) also increased the linkage
between large financial institutions. Credit default swaps were in fact an insurance agreement that would payback
on the failure of these loans becoming insolvent. It was AIG that sold many of the swaps. The de-leveraging of
financial institutions resulted in assets being sold back to payoff obligations that could not be refinanced in the
frozen credit markets. This again further accelerated the solvency crisis and caused a decrease in international
trade to occur. The continuing development of the crisis had prompted many nations to fear a global economic
collapse. However, there was no fear of God for the lack of understanding. There were many prominent
financial sources that remained negative during this timeframe. The financial crisis would ultimately result in the
U.S. biggest bank shakeout. UBS stated on October 6 that 2008 would see a clear global recession, with recovery
unlikely for at least two years. Nevertheless, the world started to make the necessary actions to fix the crisis. This
included capital injection by governments and interest rate cuts to help borrowers. The United Kingdom had
started systemically injecting capital into its country and the world's central banks were now cutting interest rates.

UBS emphasized that these fixes would solve the financial crisis. UBS quantified their expected recession
durations on October 16. It was the Eurozone's would last for two quarters, the United States' would last three
quarters, and the United Kingdom's would last four quarters. This was the optimistic view by the investment
community. Nevertheless, by the end of October, UBS revised its outlook downwards to the forthcoming
recession would be the worst since the early 1980s recession. It was with negative 2009 growth for the U.S.,
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Eurozone, U.K. and it was followed by very limited recovery in 2010.
This resulted in the creation of the Europeans for Financial Reform (EFFR). It is a coalition dedicated to
reforming the financial and banking sectors. EFFR was created in Brussels on September 21, 2009, which was
just over a year after the collapse of Lehman Brothers and a year after the Financial Crisis. EFFR has been
pursuing a campaign called “Regulate Global Finance Now.” The goal of this campaign is to get governments to
adopt reforms to regulate speculative funds, such as hedge funds and private equity funds and to protect
consumers from toxic financial products and predatory lending.

During this same timeframe, U.S. Federal Reserve and central banks around the world had taken steps to expand
money supplies to avoid the risk of a deflationary spiral. This occurs when there is lower wages and higher
unemployment lead to a self-reinforcing decline in global consumption. The governments have enacted large
fiscal stimulus packages by borrowing and spending to offset the reduction in private sector demand caused by
the crisis. The U.S. executed two stimulus packages that totaling nearly 1 trillion dollars during 2008 - 2009.
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Great Recession

According to the U.S. National Bureau of Economic Research, which is the official arbiter of U.S. recessions, the
recession began in December 2007 and ended in June 2009. But, we all know that is untrue. It has now referred

to as the Great Recession, the Lesser Depression, the Long Recession, or the Global Recession of 2009. It was a marked

global economic decline that began in December 2007 and took a sharp downward turn in September 2008. The
active part of this crisis manifested itself as a liquidity crisis. It can be dated back to August 7, 2007 when BNP
Paribas terminated withdrawals from three hedge funds citing “complete evaporation of liquidity.” The bursting of the
U.S. housing bubble, which peaked in 2006, caused the values of securities tied to U.S. real estate pricing to
plummet which resulted in damaging financial institutions globally. The global recession affected the entire world
economy with higher detriment in some countries than others. It was a major global recession characterized by
various financial imbalances which all begun in the Financial Crisis of 2008. As of December 2012, the economic
side effects of the European sovereign debt crisis and limited prospects for global growth in 2013 and 2014
continue to provide obstacles to full recovery from this Great Recession.
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129 UBS AG. "Recession". There is no alternative. Daily roundup for October 6, 2008
130 "BBC – Stimulus Package 2009". BBC News. February 14, 2009.

131 Larry Elliott, economics editor of The Guardian (August 5, 2012). "Three myths that sustain the economic crisis.