Economics

The word of economic recessions is not a new one for the entire world, especially for the peoples of US, as economic recessions have occurred all throughout the history of modern economics. A large number of people are still unaware with the term financial and credit crisis. From an Economist view point, a financial crisis occurred when a conflict disordered the money supply and wealth of the economy, or in laymen terms it can be said that, when a shortage of cash and liquidity prevails in the economy, it is referred to as financial or credit crisis (Krugman, 2001). The term financial crisis is applied to a number of scenarios or situations where the financial institution of a country abruptly looses a large part of their asset. The world suffered enormous number of severe financial crisis after the World War II but not a single one resulted in shrinking the world economy in an offense, like the current financial crisis did.

The National Bureau of Economic Research (BER) defines the term in this manner that an abrupt decline in the economic activity proliferates all over the economy, not older, more than a few months. The people of the U.S. are so familiar with the term economic recessions inevitably the United States (US) is not the only county who envisaged this imbroglio as almost every country that has even a robust and remotely modern economic structure has suffered to some extent from the hazards of the economic recession.

United Kingdom is among the big economies in the world. United Kingdom is in the top 4 economies of Europe and the main victim of the current liquidity crisis because the financial sectors are the biggest industry in Britain, which are in severe distress due to the current financial turmoil. United Kingdom (U.K) is one of the countries which have been badly hurts by the credit crunch as almost every industry continuously slashing jobs from the past 8 to 9 months. The rate of unemployment manifests a horrible figure and shows that over 6 million people lost their jobs due to unavailability of work and credit in the industries. The main threat for the UK economy is that, their currency value consistently collapse against the major currencies in the world. Mounting unemployment rate, unavailability of adequate credit, declining stock market, deteriorating export and shrinking currency resultantly loose the confidence of the investors, as neither the enterprises nor the individuals are willing to borrow money form the banks, although the banks of UK cut down their lending interest rate to 1 but still unable to win the previous confidence and moral of the customers. The International Monetary Fund (IMF) has revised its Gross Domestic Product (GDP) for the country FY 2010 of -1.5 to -2.8.

The bankruptcy of the financial institutions, manufacturing companies, and other industries has been surged with a robust pace and the filings of bankruptcies rose 38 percent in April-June from a year ago. The same has been revealed by the court of US, whose data released on Thursday 13 Aug, 2009, as consumers and business were hit by rising unemployment and a lack of credit.

You will be astonish to read that, 381,073 bankruptcies were filed as a whole, in the second quarter FY 2009, triggered by 15 percent from the first three months of the corresponding year and overall up by 38 percent as compared from the same period of last year.

Finance professionals thought a year ago that the UK economy is strong enough which had become particularly resilient to shock, but after the dwindling value of currency and continuously abating deposits in the banks, the perception doesnt seem to be work for Britain. Recent strong actions by the UK government and Bank of England (BOE) seem to be worthwhile to stabilize the economy (Bernanke, 2009). Increasing the tax rate on the corporation up to 50 and guaranteeing every person under age of 25 who has been out of the job from last 12 months will be offered a job looks like a brutal and major action to bring the economy back on track. Mention below is some recommendations to excrete out from this situation plausibly.

The government must induce the people to borrow ample amount of money from the bank, to keep circulate the money.
Must keep the interest rate and discount to a lower level to encourage the investors.
Must intervene while giving the bonuses to the executives.
Must do some thing to pledge the deposits of the banks.
Government must take major actions to increase the dilemma of exports within the country.
Must do something regarding enhancement of employment rate.
Keep a hawk eye over the literacy rate.
Must constrain the companies to follow the rules and regulation appropriately.
Inflation rates must be kept stable due abnormal conditions.
Must give ad hoc relief in the taxation issues pertain to corporations.