economic crisis

I'm sure wherever you may be living in the world you've heard about the global financial crisis, the sub-prime crisis, etc... And every day, when the news is on all you see is that markets around the world have loss billions and billions of dollars.

Even down under in Australia, it's hard not to notice these events or stories, particularly when our TV stations and newspapers are constantly talking about the grim state of the global economy. On Friday, our own Australian Stock Exchange (ASX) lost 8% tinkering at 3,920 points. Mind you, I recalled about 3 months ago when our market was over the 6,000 point mark. Business news reports I've been listening to have said that our market compared to the same time last year has lost nearly 40% of it's value. Billions of billions of dollars wiped out! It's pretty grim news. In particular when our own government, the US government (780 billion bail out), the UK and European governments working together to protect people's savings account, etc...all these international actions to try and restore confidence and yet the world wide markets are still in a major panic! I feel so sorry for the people of Iceland, that country has literally gone bankrupt and heading for a recession.

If you're a psychologist, I'm sure you fully understand people's responses and behaviour to this economic crisis. Unfortunately, a lot of us are not and this global panic is certainly impacting all the world's economies. Growth will slow down, unemployment will rise, consumer spending will decrease...which in turn will lead to a recession. All the expert economists I've heard interviewed are also at a loss and don't even know when this panic selling will end and when the bottom of the market is going to be reached so people will come back and start buying shares again.

In Australia we are told that we are in a better position compared to a lot of countries in the world as our banking industries are well regulated. The government recently announced today to protect ALL of our savings that are held in bank accounts (by major institutions) for up to 3 years. I know that they are just trying to ease our fears and to encourage people to remain calm. It's really hard not to notice, especially when our Australian dollar to the US currency is now only worth around $0.66c - when in July of this year it hit $0.98c (what a major drop!).

So how did we get to this stage? Was it greed by banks and corporations to get the best return for their shareholders and themselves? I revisited and read about "The Great Depression". This event in our history started in the US in October 29th, 1929 and it took the markets around the world another 10 years to recover. There were many factors that caused the great depression, but one of the main triggers was apparently DEBT - American consumers and businesses relied on cheap credit. In Australia, our debt levels are higher per household now than they were years ago. One economist even had a grim prophecy that this worldwide economic downturn could be worst than the great depression. I really hope that he is wrong and that we do not repeat that sad and difficult period that people faced in the 1930's. I guess we do need to try and keep calm in the midst of this global turmoil.

How has the global financial crisis affecting your day to day life?