Student Lounge The state of the global economy

The state of the global economy

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      With all the gloom and doom by the press on UK losing it’s credit rating, Euro-zone crisis, China’s manufacturing growth slowing, India’s cut in GDP growth, Japan’s decades long deflation, US fiscal crisis and budget cuts, etc etc….

      What are your thoughts on these? I basically started my career right before the big crash (2007), and things been like that (or worse) ever since, it’s hard to imagine there is light at the end of the tunnel! What is your assessment of your country’s economic situation? How long more do you think the global economy needs to readjust, restructure before it grows again?

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      I think India faces more of a political structural paralysis rather than a financial crisis per se. It has positives and negatives, but you can’t just keep selling “potential” to prospective investors. I always believe that “Potential is useless until and unless you can harness it”. I read somewhere that even though there was a downgrade in UK’s credit rating, it didnt have a huge impact on the bond prices as the market had factored in the general credit environment. Having said that, the markets move on sentiments, and more often than not, the press and the rating agencies do play an important role in directing those sentiments. On the overall picture, although it seems that there might be signs of recovery in some places, its sustaining that recovery that will decide on how fast the economy gets back on track. Given the bottlenecks and roadblocks, I think the recovery of the global economy will be painfully gradual.

    • Avatar of policedogpolicedog
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        gloom and doom has been the way of living since I started working. Never known how a boom is like.

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        Thanks @AjFinance, @Reena. It’s great to hear about India’s development in detail, from a local perspective.

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        The Eurozone crisis, in my opinion, is not so much of a financial crisis as it is a cultural crisis. Here you have several countries with several centuries’ worth of history in which they’ve hated each other, and now you’re asking them to all band together and play nice. Do I think they’ll work it out? Sure, I’m an optimistic guy that believes in the human capability to “work things out.” Plus, it’s important to remember what they were trying to ensure with the Maastricht Treaty: the prevention of another world war. I think that alone will ensure that the European Union will succeed in the long-run.

        As for Japan, Abe is taking a page from Ben’s playbook and engaging in expansionary monetary measures, i.e. it’s printing time! Now correct me if I’m wrong, but they’re doing this for two reasons: 1) to inject some inflation to get them out of their 20-year long deflationary spiral and 2) to boost economic growth via a depreciating yen. This should help in the near-term but they have two major structural issues that will curtail long-term growth: a declining birthrate and an aging population. That means less tax-payers, an over-burdened retirement and health care program, a shrinking workforce, and ultimately, a less productive economy.

      • Avatar of ReenaReena
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          India’s in a limbo it seems. For an emerging market it has quite a lot of structural issues to sort out. It’s still not business-friendly, discouraging foreign direct investments; and recording trade and budget deficits…. not great either!

        • Avatar of Maroon5Maroon5
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            In the US, there’s just endless debates and struggle about cutting the budget and establishing some fiscal discipline. Politics…

          • Avatar of Maroon5Maroon5
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              Yup, that’s my understanding on Japan to @DollarsToDonuts. But you need to add that to the ever changing prime minister and lack of political leadership in the mix too. One finally tried to do something about the decades long of deflation. Isn’t most countries experiencing the same problem of declining birthrates and aging population? e.g. UK, Singapore.

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