Greed of Some, Woes of Billions

By Saumik Barua

“In our seeking for economic and political progress, we all go up - or else we all go down.” Franklin D. Roosevelt

Not long ago, many of the world’s economies, including India, were in a state of euphoria ( with hindsight, however, that turned out to be more of a state of utopia) The economies were growing, prices were stable, the job markets were vibrant, consumer expenditure and consumer confidence level were peaking and the stock markets were booming. There was a ‘feel good’ factor which pervaded the world economies. The big boss of the world economy, the USA, was where all the action was. Although such a euphoric state inevitably led to some voices of caution and concern, nobody really paid any heed to such views, brushing aside those voices simply as advocates of pessimism. The economic slump that began in 2007 persists and the Global Economy is yet again entering a dangerous phase of uncertainty. Not only is the level of unemployment in the so called Developed Economies unacceptably high, but the entire world is also at the verge of entering a downward spiral of financial instability, uncertainty and a total collapse of global demand. The Cause - It dates back to the late 1990s when south-east Asian countries like Malaysia, Thailand etc. suffered a major economic setback due to huge investment in real estate. With no proper banking practice and Crony Capitalism emerging, there arose a need for Forex Reserves to facilitate easy flow of money between nations. And thus began the purchase of U.S securities in bulk that flooded the American economy with dollars that needed some outlet. And this outlet came into being in the form of borrowings and spending spree. Low interest rates and easy availability of loans were the prime reason people started investing, mainly in the Real Estate sector. With surplus funds, banks started relaxing terms of credit leaving no demarcation between the prime and sub – prime loans and giving least importance to background of borrowers, returning capacity etc. Real estate prices started soaring with the surge proving a good time for all.

e. So is Europe heading for a Double-Dip recession? – It remains to be seen and the crucial factor over the next few months or quarters will be exports from the Euro zone to . sheer greed was the driving spirit of civilization. the various economic factors notwithstanding.S investors but also outsiders and therefore the recession was not confined to the States alone. Banks & financial institutions have done their bit in adjusting interest rates. Italy is on the brink of a debt-crisis and the list goes on and on.. Not unsurprisingly. unlimited and unrealistic greed was a direct result of unlimited and unrealistic expectations. Greece. a second recession is knocking on our door with Europe on the forefront this time. India & South-East Asian economies). U. and it was just not greed but greed overtaking fear. i. Simply put. But even before we can sit back and relax expecting a stable worldwide economy. loan amounts exceeding total cost of houses. As Friedrich Engels rightly said “From the first day to this. But this has had a larger trickle down impact on countries like Germany where exports represent about 50% of total GDP. Will Europe be able to drag itself out of this dwindling situation? – The question still remains unanswered. With interest rates soaring. Both U. but there’s still no way out. the situation paved the way for the recession. Some believe that Europe’s recovery will not be decided by the Greek debt crisis but by the “export potential” of larger nations like Germany. To mention a few. With no money. Losses were incurred by the investors and that trickled down to other banks that were in chain with the American banks who formed the backbone of many banks. World Bank as also the governments of the major economies of the world. the problem got magnified and went out of control because of one very basic human failing – greed. greed overtaking fear occurred on both sides – borrowers and lenders. inflation control measures etc. this human failing. industries and business houses failed to gain access to loans and thus facing a closure. causing a decline in prices and a decline in the returning capacity of the borrowers. to pave a way for swift recovery from this recession. the Euro zone’s worst performer is facing a sever debt crisis. Interestingly enough.S & European trade has benefitted from fast rising demand for consumer goods in the emerging economies (majorly China.K is facing 17 year high Unemployment.” Since mid – 2008 efforts have been made worldwide by financial organizations like the IMF. Sub-prime loans were bought not only by U. recapitalization.The complication started with overbuilding of houses.

what lies ahead of countries like India & China? According to the experts. So will the Asian Giants be able to deliver? The question is what then lays ahead. Else we’ll have only option left – Time – it heals everything !!! Saumik Barua Market Analyst. the crisis has not really hit India or China in 2008 and the statements made by the fiscal and monetary authorities in India would lead one to believe that India will be one of the least affected countries and the Indian growth story would remain intact. policy makers and the global leaders drag us out of this grave. But disturbing trends have already started to raise their ugly heads in several fronts – growth outlook. more specifically. In other words. The average annual growth in investments in the last six years was 17% and investment growth this year is projected at single digits for the first time since 2002-03. consumption demand. etc. and Brazil among other Emerging nations will have a crucial role to play in this long hard battle. investment and capital expenditure.5% that is surely going to cause a major panic in the world economy.the rest of the world. The Chinese story seems slightly brighter with GDP growth forecasts still at 9 9. countries like China. external financial position. The future remains to be seen with the hope that the world’s best economists. credit availability. External borrowings supported growth in recent years but scope for foreign borrowing to fund projects have already become limited. India. notwithstanding the current hiccup. and there are fears that in the coming few months or so the Communist nation will reduce the figure to 7-7.5%. But with every optimism comes a bit of pessimism. – sure signs that things are definitely on the downturn and need to be urgently attended to. value of the rupee. Hewlett Packard India . Global Analytics.5% but several private forecasters have lowered India’s growth projection to 6% or even lower than that to 5% and that surely would be deeply disturbing. The RBI is still expressing confidence that India’s growth rate will be around 7 7.