The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

From credit crunch to global recession

The bad news: in 2008 a global recession is bound to set in. The scant good news: the oil price will fall back and the development of environment-friendly technology will fuel investment.

The story of 2007 was the credit crunch. The story for 2008 will be global recession. Last year, the US home prices collapse was the worst since the Great Depression – a fall of 6% year on year. Starting with the sub-prime defaults, this led to huge markdowns in asset-backed securities and special investment vehicles owned by banks globally.

The sub-prime debacle spread to other credit markets, including inter-bank lending, causing a liquidity squeeze that drove up interest rate spreads to abnormal levels despite the efforts of central banks to inject liquidity and cut policy rates. Eventually, the combined efforts of the Federal Reserve, the European Central Bank and the Bank of England managed to engineer a return to some semblance of normality in inter-bank lending. But the cost of borrowing or insuring against defaults in companies or in their bonds continued to rise sharply.

And there is still a long way to go in the credit crisis. We reckon that ultimate losses to the banks and other leveraged investors across all credit markets could reach more than $600 billion. So far, only $100 billion has been announced.

That is the raison d’être for my forecast of global recession this year.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree