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A Dull, Heavy Calm

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rinkimusaddi

The document summarizes the state of the global economy after it stopped declining. It discusses that while the recession has ended, the recovery will be slow as households and companies reduce debt from high levels. It also analyzes lessons learned from the financial crisis, such as lack of oversight and risky borrowing, and discusses approaches governments can take to further stimulate their economies and manage the aftermath of the crisis.

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The world economy has stopped falling, now what?The Economist October 3, 2009A Dull, Heavy CalmPresentation by: RajdeepMajumdar Faculty:RhohanChaterjee Dr. TamalDattaChaudhuriRajiAlamRinkiMusaddi
IntroductionRecession is the economy shrinking for two consecutive quarters (=6 months) with a decrease in the GDP (=Gross Domestic Product)GDP = Value of all the reported goods and services produced by the people operating in the countryGDP = MONEY VALUE OF {C + I + G + (X M)}C = Consumables, I = Gross Investments, G = Government Spending, X = Exports, M = Imports
Causes of RecessionSub Prime Mortgage Inflation & Reducing Disposable IncomeEconomic Slowdown Global Credit Crunch
Revival Phase Aaron Wildavskys Searching for Safety : resilience was sometimes a greater virtue than prescience. Will it bounce or is it broken?Household will resume spending.Companies will restock their inventories.Debt of banks and households will take years to repay.America can take following two steps: Tariff on importsRely on Fiscal Stimulus
Lessons learnt from Financial DisasterPoor dataPredatory borrowing Lack of regulatory oversight
Market knows best & EverythingLack of transparency and confidence
Collapse of Long Term Capital Management
Moral hazard
Asymmetry of information
How to manage the Disaster ?Stricter norms
Creating market by expanding the set of eligible collateral
Credit history assessmentWHY IS USA BETTER PLACED THAN JAPAN ? USA economy is bigger in sizeDifferent policies of handling distressed loansUSA government acting more aggressivelyBank`s troubled debtors are different

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A Dull, Heavy Calm

  • 1. The world economy has stopped falling, now what?The Economist October 3, 2009A Dull, Heavy CalmPresentation by: RajdeepMajumdar Faculty:RhohanChaterjee Dr. TamalDattaChaudhuriRajiAlamRinkiMusaddi
  • 2. IntroductionRecession is the economy shrinking for two consecutive quarters (=6 months) with a decrease in the GDP (=Gross Domestic Product)GDP = Value of all the reported goods and services produced by the people operating in the countryGDP = MONEY VALUE OF {C + I + G + (X M)}C = Consumables, I = Gross Investments, G = Government Spending, X = Exports, M = Imports
  • 3. Causes of RecessionSub Prime Mortgage Inflation & Reducing Disposable IncomeEconomic Slowdown Global Credit Crunch
  • 4. Revival Phase Aaron Wildavskys Searching for Safety : resilience was sometimes a greater virtue than prescience. Will it bounce or is it broken?Household will resume spending.Companies will restock their inventories.Debt of banks and households will take years to repay.America can take following two steps: Tariff on importsRely on Fiscal Stimulus
  • 5. Lessons learnt from Financial DisasterPoor dataPredatory borrowing Lack of regulatory oversight
  • 6. Market knows best & EverythingLack of transparency and confidence
  • 7. Collapse of Long Term Capital Management
  • 10. How to manage the Disaster ?Stricter norms
  • 11. Creating market by expanding the set of eligible collateral
  • 12. Credit history assessmentWHY IS USA BETTER PLACED THAN JAPAN ? USA economy is bigger in sizeDifferent policies of handling distressed loansUSA government acting more aggressivelyBank`s troubled debtors are different
  • 13. Global Slowdown What Next?
  • 14. What Needs to be Done?Create InflationGenerate EmploymentIncrease Government SpendingFiscal Policy
  • 15. ConclusionThe World Will Recover When it is over there is Calm ,but a dull, heavy calm. - Alfred Marshall
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