The Global Financial Crisis ; the Green Signal for a $700-Billion Bailout of Us Banks Wasn't Enough to Turn the Tide in Global Financial Markets. Even Six of the World's Central Banks Coming Together to Release Hundreds of Billions Into the System Couldn't Stem the Panic. It has to Get Worse Before It Gets Better. Puja Mehra Reports.

Summary

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Last fortnight, the US financial disaster- as expected-blew into a full-fledged global crisis. First stop: Nearly all of Western Europe. Just like the US legislation for the over $700-billion rescue package, governments and central banks across the Atlantic, too, launched into bailout mode. Next stop: Asia, with some real estate lenders in Japan getting wiped out; and Singapore's economy, which plunged into recession.

The International Monetary Fund (IMF) revised upwards its projection of the losses of the US banking system to $1.4 trillion. At which point, the financial tornado hit the west coast of India. For a whole week, it had Indian stock, currency and money markets in high panic. The Sensex lost nearly 2,000 points in a week, overnight inter-bank lending rates shot up to 22 per cent (from single-digit rates), the rupee slumped to Rs 48.72 to a dollar and scared investors in debt schemes of mutual funds pressed the redemption trigger. Within days, money and confidence in the Indian economy vanished into thin air. The Reserve Bank of India (RBI) stepped in swiftly with liquidity-releasing steps. Finance Minister P. Chidambaram proclaimed the Indian banks' strong credentials and low vulnerability of the system to the growing global financial mess. The Government cancelled its scheduled borrowing for Rs 10,000 crore from the money market. Chidambaram set up a group of who's who from the financial world to suggest, within a week, ways to ease the liquidity crunch. On October 13, Chidambaram guaranteed liquidity yet again before the opening bell at the stock markets.

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The Global Financial Crisis ; the Green Signal for a $700-Billion Bailout of Us Banks Wasn't Enough to Turn the Tide in Global Financial Markets. Even Six of the World's Central Banks Coming Together to Release Hundreds of Billions Into the System Couldn't Stem the Panic. It has to Get Worse Before It Gets Better. Puja Mehra Reports.

Finally, sanity returned when the Asian stock markets posted relief rallies. But that may have just been temporary relief. The ghost of Wall Street is still...

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