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Nervous Breakdown Grips Financial World

Monday, September 26, 2011

Mayhem prevailed across the financial world on recession fears on Thursday last week, a day after the US Federal Reserve warned of significant risks facing the world's top economy. And amidst panic and despair the world reacted by indulging on a massive selling spree. Statistically, not a single market across any sector on the globe remained in the green. The signs reflected that the financial world was going through a nervous breakdown.

Back home, the Sensex got absolutely hammered down that day and dropped by 704 points. Friday was less brutal and amidst high volatility it lost an additional 199 points. Overall, it lost a total of 903 points over those two days combined.  That represents the largest two day decline that we have seen since November 2008, and the worst week in this year. Over the two days, more than 2 50,000 Crores of “investor wealth” has eroded in India alone. In the US an estimated $1 trillion was wiped off the value of US stocks last week. Ditto were the erosion levels across all global equity markets.

And it was not just the equity market’s front, which saw investor wealth eroding. Darling metals Silver and Gold also lost sheen as panic prevailed on that front too. Silver lost a shocking 10%, while gold also took a major knock and slipped below the Rs 28,000 mark. The metal on the world market lost 6.7%, its biggest drop since December 2008. It had touched a record USD 1,923.70 on September 6, this year. Oil slid more than 7%. The rupee fell to a 28 month low of 49.90 and then recovered marginally to close at 49.43 per dollar….All simply just headed down.

As of now pessimism is everywhere and as the fear spreads and panic heightens, it is only going to make global financial instability even worse. In fact, other than during the financial crisis of 2008, we have never ever experienced as much financial turmoil as is being seen right now. Suddenly it seems like almost everyone is predicting that another “recession” is coming….Incidentally, a recent Harvard Business Review survey, revealed that  70% of global business leaders believe that a global recession is “somewhat likely” or “very likely” in the coming months. And that’s the last thing the global economy needs right now…

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