In those circumstances, imbalances such as the increase in credit and leverage as well as the rise in asset prices accumulated worldwide. Developments since last autumn can be described as essentially the adjustment of the accumulated imbalances; in other words, the bursting of a global credit bubble. Nevertheless, world economic conditions have been showing signs of leveling-out since the spring of this year.
That is because the global financial markets have gradually started to stabilize because the provision of ample liquidity by central banks around the world, the aggressive public capital infusion and debt guarantees by the governments for U.S. and European financial institutions, have dissipated market participants’ extreme anxiety.