The recession in the United States is proving to be far wider and deeper than was anticipated exactly two year ago in August 2007 and while this is mostly bad news for a lot of people it also good news for others.
The year 2008 was perhaps the one of the worst year ever for financial markets all over the world as news about the bad financial condition of major firms like Lehman Brothers, Merill Lynch and AIG crept in.
As the year progressed it saw the demise of the 158 year old investment banking behemoth, Lehman Brothers which filed for the largest bankruptcy ever in U.S history on September 15th. Pictures of employees leaving it’s Manhattan office represented a harsh reality of the current American Economy which goes for it’s Presidential Elections in just a few months. News of a Merill Lynch ( headquartered in NYC and it occupies all 34 stories of the in Manhattan) buyout by Bank Of America for USD $50 billion all stock deal was also confirmed ending the history of the 94 year old company as well. To add to the woes and distress of investors from all around the world the American International Group (AIG), one of the world’s biggest players in insurance and financial services, sought a $ 40 billion bridge loan from the US Federal Reserve as it faces a sharp downgrade from rating agencies. The Federal Reserve did come to the rescue of AIG late on 16th with a $ 85 Billion bailout.
The recession in the United States is proving to be far wider and deeper than was anticipated exactly two year ago in August 2007 and while this is mostly bad news for a lot of people it also good news for others. The bankruptcy of Lehman has lead to layovers of it’s employees across the world and the acquisition of Merill Lynch by BOA is also likely going to result in a lot of pink slips. This in turn had a deep impact on B-School graduates passing out in 2008 and 2009 and also will have a deep impact on B-School graduates passing out this year as there would be a severe dearth of jobs in the investment banking and financial sectors for some time to come. As per IMF chief Dominique Strauss-Kahn the global financial crisis is not over and more banks could close, possibly leading to the disappearance of independent investment houses.
“The fact that a certain number of banks in the United States are restructuring shouldn’t lead to panic, But these events add to the uncertainty, and financial tensions cannot be excluded in the short term” he said in an interview in the wake of Monday’s collapse of major US investment bank Lehman Brothers.
The Recession has also lead to the dollar becoming very weak. Comparing it to the rupee it currently trades around the Rs 46 mark which is at least Rs 3-4 more than what it was a couple of months back. This is probably good news for Indian Software companies and exporters as they would be earning more rupees for each dollar quite in contrast to the scenario about an year back when the rupee had become quite strong trading at around Rs 40 to the dollar.
The weakening of the dollar is also great news for a lot of Europeans and the American tourism industry as people from Europe are flocking to US to take advantage of the strong euro and weak dollar scenario. With a weak dollar, foreign tourists are flocking to the United States — particularly New York City.
Compared with last year, the number of international visitors increased by as much as 12 percent during the first four months of 2009. It’s hard to imagine a city like New York seeming cheap to anyone, but for many foreign travelers, that’s exactly what it is. With every one euro equal to $1.43 and every one British pound equal to $1.82, if there was ever a time for Europeans to travel in the U.S., it’s now.
From The History: During the first four months of 2008, more than 15 million foreign travelers visited the United States and spent $11.6 billion in the month of April alone — a 21 percent increase from April 2007 — according to the U.S. Department of Commerce which tracks travel and tourism statistics. After Canada and Mexico, the largest group of foreign tourists is from Western Europe, and their visits through April of this year have increased by double-digit percentages, the agency reports.
Experts suggest that the current recession will take a while to get over and things are expected to become much worse before they start getting better.
