Cline reported

But the impact has not been limited to America. The International Monetary Funds (IMF) World Economic Outlook published in Jan 2009 painted a bleak picture of the world economy in general: They predict that the real global growth will be close to zero; in the same report, growth in advanced world economies was projected at -2%. In his report, presented to the V Symposium on International Trade (Feb 20, 2009) Cline reported that the economic crisis in America has triggered a highly synchronized global recession, which has seen a contraction in all economies (see the Graph below showing global growth over 3 decades (Cline, 2009).

Figure, 3 Showing the Synchronization of Global Recession Taken together, commentators are unanimous that, in term of severity, this recession is still mild vis-a-vis The Great Depression. Shiller (2009) writes that a lot of the upheavals in the economy have not been seen since the Great Depression. He cites the stock market volatility, the bank failures, the housing bust, the breakdown in intermediation, and the near zero interest rate.

Besides the statistical comparisons, the current debate and research effort is focused on how the how the crisis started. The proximate consensus is that: the mortgage security backed housing boom in America it to blame and that the origination and distributions of this paper assets is at the heart of the problem (Markus; 2008; Grotty, 2009; Bernanke, 2009; Gapper, 2009) at the same time, researchers maintain that the crisis in the banking sector, was not independent, but resulted from distortions and incentives created by past policy actions.

Blundell-Wignall, etal (2009), in there paper presented at a Reserve bank of Australia conference, averred that the current financial crisis is caused by global macro policies affecting liquidity and by very poor regulatory frame work. More specifically, economists recognize that any theory of causality, must, among other things, explain how the housing boom started, describe the factors behind the explosion of the residential mortgage backed securities (RMBS), how the banking crisis was triggered and the policy distortions that made it possible (Tett, 2007; Rajan 2009; Grotty, 2009).

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