August 17, 2017

A Decade in Charts: Ten-Years on from the Global Financial Crisis

by Ritvik Carvalho

Ten years ago last Wednesday marked the start for many observers of the global financial crisis – a series of rolling credit shocks and bank crashes that led to the deepest world recession for a generation and a decade of slow growth and painful repair.

On Aug. 9, 2007, the European Central Bank flooded its money markets with billions of euros of emergency cash to prevent a seizure in the European banking system after France’s BNP Paribas became the latest to shut down investment funds hobbled by a collapse of U.S. mortgage and asset-backed bond markets.

Serial bank collapses in Britain, the United States, Germany and elsewhere were to follow over the following 18 months. These culminated in U.S. investment bank Lehman Brothers being allowed to go bankrupt in September 2008, triggering a world financial panic, deep recession and eventual rescue package by the U.S. government, Federal Reserve and the rest of the G20 economic powers.

Here are eight charts that illustrate how the global economy has fared since that credit crunch:

GLOBAL TRADE AND GDP GROWTH:
After falling sharply in the wake of the financial crisis, global trade as a percentage of output and overall growth has recovered, but remains below its pre-crisis peak.

GLOBAL EQUITIES RISE, YIELDS PLUMMET
MSCI’s main world equity index has recovered to hit new record highs this month – on course for its longest monthly winning streak since 2003, but only 22 percent above levels 10 years ago. Yields on 10-year government debt benchmarks have more than halved as central banks actively stockpiled bonds.

LAGGARD FINANCIALS
After a near-death experience for the financial industry in 2008, bank stocks have significantly lagged the subsequent global equity rebound ever since.

LOW INFLATION, LOW YIELDS
Despite a return of world growth back close to historical norms, global inflation failed to pick up sustainably as developed country wage growth remains subdued.

Want more charts and analysis? Access a pre-built library of charts for a wide range of commonly used valuation, performance, technical and fundamentals charts via Datastream Chartbook in Thomson Reuters Eikon. 

HEAVY CENTRAL BANK BALANCE SHEETS
Led by the U.S. Federal Reserve, the world’s four main central banks embarked on trillions of dollar of asset purchases to prevent a severe contraction in money supply, ease credit conditions and stimulate lending and growth. The Fed is now gearing up to reduce its $4.5 trillion balance sheet.

Combines the weekly series that stopped in September 2014 and, from then on, the sum of the four assets reported weekly that account for over 90% of the balance sheet by value. Source: Thomson Reuters Datastream. By Michael Ovaska | REUTERS GRAPHICS

BANK BORROWING COSTS AND VOLATILITY SINK
The collapse of trust between banks amid soaring inter-bank lending rates was the epicentre of the crisis a decade ago and financial market volatility soared to record highs amid fears for the stability of the banking system at large. Thanks to prolonged central bank intervention and tighter regulation, interbank lending channels have reopened and equity market volatility has evaporated this year to its lowest in a generation.

GLOBAL DEBT CONTINUES TO BALLOON
Even though a credit bubble and excessive borrowing were the causes of the crash, and attempts at de-leveraging a feature of the painful recovery, figures from the Institute for International Finance show total global debt has continued to rise over the intervening 10 years.

LABOUR SHARE OF GDP FALLS VS CAPITAL, POLITICAL ANGST RISES
As real wage growth has flatlined since the crisis, corporate profits as a share of the overall economy has rebounded sharply. The combination has contributed to voter disaffection and surprising electoral results that have added to economic and political policy uncertainty.

Reporting by Ritvik Carvalho; Editing by Louise Ireland

____________________________________________________________

Thomson Reuters Datastrea

Financial time series database which allows you to identify and examine trends, generate and test ideas and develop view points on the market.

Thomson Reuters offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.

Article Topics

Get In Touch

Subscribe