Great Recession/Timelines

Prelude (trends: January 2000 to June 2007)

Capital flows:

Flows of capital into the advanced countries, rising from about 8 per cent of world GDP in 2002 to about 16 per cent in 2007

US Monetary policy

Progressive discount rate reductions by the Federal Reserve reducing the federal funds rate from 6 per cent in 2000 to 1 per cent in 2003, followed by increases to 5.25 per cent in 2006)[1].

US housing boom and bust

The average house price rises by 80% [2] between 2001 and 2006 and then falls by 8% from its 2006 peak to mid-2007 .

Financial crisis (June 2007 to November 2008)

June 2007

US Credit rating agencies downgrade over 100 bonds backed by subprime mortgages.

Two of the Bear Stearns'' investment bank's hedge funds are threatened by losses from mortgage defaults [3].

August 2007

The French BNP Paribas bank announces that it is unable to value bonds backed by US house mortgages[4]

The interbank market is near collapse [5].

September 2007

The UK Northern Rock bank suffers a bank run [6]

March 2008

The US Bear Stearns investment bank is rescued [7].

August 2008

The US government-sponsored house mortgage lenders Fannie Mae and Freddie Mac are rescued from bankruptcy [8].

September 2008

The US Lehman Brothers investment bank is bankrupt [9][10][11] with losses of $365 billion to insurers of its bonds. $785m worth of its funds are written off and money market investors suffer a massive loss [12].

There is panic in the money market and a halt in trading in the interbank market.

There are multiple bank failures and rescues in the United States and Europe.

(See The Crash stage 3/September timeline of the Crash of 2008 article).

October 2008

There are nationwide bank rescues, recapitalisations, depositor guarantees by United States and European govermments'

(See The Crash stage 3/October timeline of the Crash of 2008 article).

November 2008

The first G20 summit of leaders of the Group of Twenty countries agree to adopt expansionary fiscal policies.

Recession (December 2008 to December 2009)

(Wikilinks marked thus * are to statistical tabulations))

The governments of the G7 countries announce major fiscal stimulus packages* and their central banks announce monetary and banking measures*.

Recessions develop in early 2009 in most advanced economies, with negative growth rates* of 3 to 5 per cent among the G7 countries (and of over 14 per cent in the the Baltic countries) and unemployment rates* of 10 per cent in the United States and France.

There are falls in world trade* of over 12 percent.

Recession-induced budget deficits raise public debt* to an average of 100 per cent of GDP in the G20 countries.

Economic growth resumes in most countries by the 4th quarter of 2009. The main exceptions are the Baltic States, Greece, Iceland, Ireland Portugal and Spain. There is a return to pre-recession growth rates in most developing countries, but growth rates in the developed countries are generally below-trend, and unemployment rates continue to rise.

Aftermath (from January 2010 to the present)

Background

Twelve Member States of the eurozone had public debt ratios higher than 60% of GDP in 2009, including France (77.6%) and Germany.(60.9%)[27]. Particular concern developed in early 2010 concerning the fiscal sustainability of the economies of the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) following rating downgrades by the credit rating agencies.

(A summary of the financial status of the PIIGS countries is available on the addendum subpage of the article on the eurozone crisis, and further information is available on the eurozone crisis timeline)

April 2010

Greece's credit rating is downgraded to BB+ by S&P[13]

Spain's credit rating is downgraded from AA+ to AA by S&P[14]

Portugal's credit rating is downgraded from A+ to A- by S&P[15].

May 2010

The eurozone governments and the IMF make available €110 billion to Greece[16]

The eurozone launches the €600bn European Financial Stability Facility[17]

The European Central Bank launches its Securities Markets Programme [18]

November 2010

Agreement is reached on an EU/IMF Ireland rescue package[19].

December 2010

The European Central Bank buys Portuguese and Irish bonds[20] [21]

January 2011

The first bond issue by the European Financial Stability Facility[22]

March 2011

A Japanese earthquake and tsunami kills over 9000 people and causes damage estimated to be over $300bn[23].

July 2011

Greece to get 109 billion euro EZ loan[24] in addition to which the private sector is to make a contribution through an agreement to either swap or roll-over their debt

The European Financial Stability Facility's[25] powers are amended to enable it to help countries not officially in receipt of a bailout and to recapitalise Eurozone banks.

August 2011

After prolonged inter-party negotiations, the US Congress agrees to raise the Federal debt ceiling and reduce government spending[26] [27].

The Standard and Poor credit rating agency downgrades US bonds from AAA to AA+[28].

The European Central Bank buys Spanish and Italian government bonds[29]

A sharp rise in the 3 month LIBOR-OIS spread[30] [31] raises fears of new banking crisis and leads to falls on world stock markets.

September 2011

Economic recovery appears to have come close to a halt in the major industrialised economies, with falling household and business confidence affecting both world trade and employment, according to new analysis from the OECD. Growth remains strong in most emerging economies, albeit at a more moderate pace[32].