MEANT TO SHARE: 2008

Friday, November 21, 2008

Global financial crisis – There’s a reason to be optimistic

This email meant to explain the facts for those worried on recent news on global crisis, potential job losses/ less bonuses and devaluated assets increased living cost ( incl. party’g cost) with a grown up family with medical attention needed elders…. and so on… that too in a foreign land.

(The below abstract is from various websites, reviews, journals and news articles)

Global financial crisis – There’s a reason to be optimistic

Some say we are hearing echoes of great depression of 1930s, even President George W Bush said at the end of the G-20 Financial summit last weekend that it was conceivable that the US could suffer a depression worse than the great depression .

Doubt : the US and money other countries are in recession ? But depression? Most likely not. . There are many reasons why we should see as half full – and not shattered- and focus our minds on the relieving the pain inflicted by the recession.

First the post world war 2 system of economic governance in both developed and developing world, is better equipped to deal with down turns than were the governments of the 1930’s.

Second reason for optimism has to do with the flow of credit. It has dropped dramatically , for sure , driving up the cost of short-term loans, and threatening what the economist has called as” a global financial heart attack’

These days’ people don’t have so much trust in the financial system. But good to see that Banks and government have got together to restore that trust and trying to prevent the Financial melt down. But they can go further to drop its ideologically- inspired objection to sovereign wealth funds acquiring western assets.

Third for the first time Emerging eastern Economies are asked to rescue the current Global Economy by west. They can do because they learnt lessons from 1997 crisis.
China especially can play a positive role it has US$2trillion of foreign reserve, which not fully integrated in to international financial system. It can pump into its local market to stimulate the economy.

India , Brazil and Russia have plenty of foreign reserves to tide over this difficult period.

Due to “made to order” system, the supply chain management allows the manufacturers no longer to saddle with inventories and stocks. So please buy things only when needed. (my dad use to advise me the same I don’t know why ?….now I end up doing things at 11th hour!!... we can call it is as a reason for laziness.) there is a term for it in MRP…( production guys like Ponni / contractor ‘s man Renga/ Sunil …can help ne to recall the term….)

Final Reason for optimism is Economic crises were often result of wars and natural disasters as well as political misrule. We are far from the situations which were existed in 1930s. (even we are collision government we are damn stable! recent examples Lalu and Karunaneethi drama’s)

The mess is due to manifestation of deep seated problems in Wall Street, budget deficits, current account deficit, and huge public and private debts.

Many agreed on the inevitable shift from west to east, of the global economic centre of gravity, year 2008 will be go down to history as an important milestone in that shift , we are now in multilateral world.

“Raja and hairdresser” story on economics but can’t be published in public forum, if you want it send me a request email… I hope that can clear your doubts more clearly.