On 15 September 2008, the world woke up to the news that US investment bank Lehman Brothers Holdings Inc. had filed for bankruptcy. Cascading fears about the stability of other financial institutions rattled markets worldwide. Stocks crashed and financial experts such as former US Federal Reserve governor Alan Greenspan termed it a once-in-acentury crisis. As the credit crunch intensified, economic activity slowed in most parts of the world. Banks and other financial institutions wouldn’t lend to companies and each other, and interest rates spiked, affecting demand. Major developed markets went into recession and the pace of economic growth in India and China slowed significantly.
Also See The Green Shoots (Graphics)
This spurred into action governments and central banks around the world—they cut rates and pumped in money to restore liquidity and stoke demand. After bottoming out in the early months of this year, the financial markets have bounced back on hopes of an earlier-than-expected economic recovery. These so-called green shoots may not have grown into saplings because concerns such as rising commodity prices and inflationary threats still remain, but they haven’t withered away either, boosting sentiments among businessmen and investors.
Graphics by Ahmed Raza Khan/Mint