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Global financial crisis in November 2008 facts for kids

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The financial crisis of November 2008 was a very challenging time for the world's economy. Many countries faced serious money problems, like businesses struggling and people losing their jobs. Governments and banks around the world had to work together to try and fix things and prevent an even bigger economic disaster. This period saw major changes in how money was handled and how countries tried to support their economies.

Economic Slowdown in Early November 2008

Car Sales and Job Losses Hit Hard

In October 2008, many people in the United States stopped buying new cars and trucks. Big companies like General Motors, Ford, and Toyota saw their sales drop a lot compared to the year before. A main reason was that customers found it hard to get loans to buy cars. Other stores, except for Wal-Mart, also saw fewer sales. Overall, retail sales were down quite a bit.

The job market also took a big hit. By early November, reports showed that about 500,000 jobs were lost in the United States during September and October 2008. This caused the number of people without jobs (unemployment) to rise to 6.5%. This was a much faster rate of job loss than earlier in the year. In the United Kingdom, car sales also dropped sharply, following a similar decline in September.

Central Banks Take Action

As experts predicted a "deep recession" (a time when the economy shrinks a lot) in the UK and Europe, central banks decided to act. On November 6, the Bank of England lowered its main interest rate from 4.5% to 3%. This was a big cut! The European Central Bank (ECB) also lowered its rate to 3.25%. Lowering interest rates makes it cheaper for people and businesses to borrow money, which can help the economy grow.

Around the same time, the International Monetary Fund (IMF), a group that helps countries with money problems, predicted that the economies of developed countries around the world would shrink in 2009.

Key Events in Mid-November 2008

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George W. Bush speaking about the financial crisis on November 13, 2008.

China's Big Economic Plan

On November 9, China announced a huge plan to boost its own economy. They planned to spend about $586 billion over the next few years. This money would go towards building new roads, railways, airports, and power grids. They also wanted to improve social welfare, like building affordable homes, and protect the environment. This plan aimed to help China's economy, which had also slowed down.

Helping Big Companies and Consumers

On November 10, the US Treasury Department announced it would invest $40 billion more into AIG, a very large insurance company that was in trouble. This was part of a bigger plan to help AIG, bringing the total government support to $150 billion. The money came from the Troubled Asset Relief Program (TARP), which was a government fund set up to help stabilize the financial system.

A few days later, on November 12, US Treasury Secretary Henry Paulson changed how the TARP money would be used. Instead of mainly buying bad investments from banks, the focus shifted to helping people get loans for cars, student loans, and credit cards. This was meant to help everyday people and keep money flowing in the economy.

Stock Market Rollercoaster and Auto Industry Worries

On November 13, the Dow Jones Industrial Average, which tracks how well big US companies are doing, had a wild day. It dropped below 8,000 points but then shot up by over 900 points in just a few hours, closing much higher. This showed how uncertain and volatile the stock market was at the time.

Meanwhile, major American car companies like General Motors were struggling badly. There was a big debate about whether the government should give them money to prevent them from going out of business. Many people, including some politicians, were against a bailout for the auto industry.

World Leaders Meet to Discuss Crisis

On November 15, leaders from the G-20 group of major economies met in Washington, D.C. They talked about the global financial crisis and agreed to work together to solve it. They made a plan for what needed to be done right away and in the future to support and improve the world economy. This meeting was a big step towards international cooperation during the crisis.

Economic Challenges Continue in Late November 2008

More Signs of Economic Trouble

In the third quarter of 2008, Japan's economy also shrank, following a similar drop in the previous quarter. Other places like Hong Kong, Germany, and the European Union had already reported similar economic slowdowns. This showed that the crisis was affecting many parts of the world.

In the United States, it became clear that the economy was in a recession. By November 20, the number of new applications for unemployment benefits rose to over 500,000 per week, showing that many more people were losing their jobs.

Auto Bailout Fails and Stock Market Drops Again

On November 19, plans for the US government to bail out car makers failed. Politicians couldn't agree on a solution. This meant that car companies still faced serious problems. Car sales were also down in Europe, and some European governments were considering helping car companies there, especially those linked to General Motors.

The stock market continued its bumpy ride. On November 19, the Dow Jones Industrial Average fell sharply, closing below 8,000 points for the first time in over five years. Major financial companies like Citigroup saw their stock prices drop significantly. The next day, November 20, the Dow dropped even further, reaching its lowest point in six years. Citigroup's shares fell even more, along with other big banks.

However, on November 21, the Dow Jones Industrial Average recovered about half of its losses for the week, closing above 8,000 points again. Still, the stock prices of major banks like Citigroup, Bank of America, and J.P. Morgan Chase continued to decline. There was a lot of worry about Citigroup's financial health. By this point, stock market losses in the US during 2008 were similar to those seen in 1931 during the Great Depression.

Citigroup Rescue Plan and Market Rebound

Government Steps In to Help Citigroup

Late on Sunday, November 23, the United States government announced a major rescue plan for Citigroup. The United States Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation worked together on this. They agreed to invest an additional $20 billion into Citigroup and to help cover potential losses on $306 billion of risky loans and investments held by the bank. This plan was put in place to strengthen the financial system and protect the US economy and taxpayers.

Stock Market Sees Big Gains

Following the news of the Citigroup rescue, the stock market saw a significant rebound. Friday, November 21, and Monday, November 24, marked the Dow Jones Industrial Average's largest two-day gain since October 1987. The Dow jumped by 891.10 points, or 11.8%, closing at 8,443.39 points. This showed that the government's actions helped calm some of the fears in the financial markets.

See also

  • Global financial crisis in September 2008
  • Global financial crisis in October 2008
  • Global financial crisis in December 2008
  • Global financial crisis in 2009
  • Subprime crisis impact timeline
  • Timeline of the 2000s United States housing bubble
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