The world financial market has undergone huge turbulence during the last few days... the biggest names of Investment banking- Lehman and ML exists no more.. The biggest insurance Company in the world AIG, has been nationalised for all practical purpose.. it is an institution with $ 1 trillion in assets and is one of the largest financial institutions in the world. So institutions which grew and and prospered for centuries had failed.. if we take the India equivalent it is something like LIC and SBI failing.
This brings out the moot question..what is the sort of regulation, risk management they have in the US? They are worse than any third world nation in terms of regulation.. US, the biggest economy and the most developed nation, has the control mechanism, which is shameful, to say the least. How can AAA rated papers by S&P, Moody turn into junk overnight? There will never be any answers.
I guess entire financial community is to be blamed - brokers, banks, rating agencies. The Dow is in bear market zone, which will have a huge impact on the real economy. India will also suffer, without any fault. The US Financials have successfully put the entire world at risk. The 1929 Great Depression started with the Wall Street crash.. This current mess will lead to job losses, and economic depression.
Hopefully, India will be able to avert the depression. But one can never say, as history shows that Dow levels and depression are greatly interlinked.
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3 comments:
Thanks for an informative insight of the current global scenario.
Can such financial crisis occur in India too? As even in India lengthy repayment period & higher interest costs could affect the ability of borrowers to repay, which may lead to similar situation as in US.
History shows that the entire world economy depends on US. The recent tumbling by all means is going to affect our Indian economy. Now time has come to work together and develop a parallel independent economy to avoid such US onslaughts in future. Economists can show us a way to come out of the present gloomy situation.
Nice writing Mr. Dev
Hi Ask,
I do not think in India we will have such a mess. People are less leveraged.
As a thumb rule the EMI you pay towards house, car and other loans should not be more than 33% of your net income. Else one may be headed for trouble in the days to come.
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