Ben, who is chairman of United States Federal Reserve is hottest man in all financial news at present as he brought down .5% of Fed's, interest rate for lending as reason he quoted as "global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans". And the loans what he meant was sub prime crisis, it was all about not letting the housing bubble burst. The real estate prices in US was ever high, and banks started lending money to people with out looking at their credit history at a high interest rate. And banks became short of money or for some other reason they started pulling money from other funds and banks around the world. And soon there was a turbulence in the market about if the money lend ed would come back as customers are finding really difficult to pay it back. This uncertainty troubled almost all of the financial institutions as nobody had an idea of how much money has gone into these loans. And also, because people are paying a lot of their earning to these loans, the consumer confidence came down affecting the whole economy. This added to the turbulence, and people started pulling out their money from shares and started investing on blue chips. And also because of these intrest rate cuts, the fears are more about weakening of dollar and inflation. And currency carry trade on boom, dollar value is still decreasing.
With US still topping as single largest importer of the world, and the value of Dollar coming down. Those businesses which are depended on US is getting affected. I am sure this years hike, is not going to like last year.
Is it going to affect us over in India ?. I am sure its not, as we have the fourth largest GDP by purchasing power parity and growing at above 9% figures. Money coming more from Banking,Aviation, Telecom, Automotive and growing about 30 % compared to what people think is IT which is growing at slower pace. But those in IT, watch out, if we are slow in going up the value pyramid we are are soon going to be pulled down.
Aura
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2 comments:
I think it will affect India (and other economies too). You might not have seen the BSE index go up and down as a result.
The IT firms are getting affected 'cause of the depreciating $$ but you are correct on that front.
ok
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