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  • 1. The world economy has stopped falling, now what?The Economist October 3, 2009
    A Dull, Heavy Calm
    Presentation by:
    RajdeepMajumdar Faculty:
    RhohanChaterjee Dr. TamalDattaChaudhuri
    RajiAlam
    RinkiMusaddi
  • 2. Introduction
    Recession 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 country
    GDP = MONEY VALUE OF {C + I + G + (X – M)}
    C = Consumables, I = Gross Investments, G = Government Spending,
    X = Exports, M = Imports
  • 3. Causes of Recession
    Sub Prime Mortgage
    Inflation & Reducing Disposable Income
    Economic Slowdown
    Global Credit Crunch
  • 4. Revival Phase
    Aaron Wildavsky’s “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 imports
    Rely on Fiscal Stimulus
  • 5. Lessons learnt from Financial Disaster
    Poor data
    Predatory borrowing
    Lack of regulatory oversight
  • 6. Market knows best & Everything
    • Lack of transparency and confidence
    • 7. Collapse of Long Term Capital Management
    • 8. Moral hazard
    • 9. Asymmetry of
    information
  • 10. How to manage the Disaster ?
    • Stricter norms
    • 11. Creating market by expanding the set of eligible collateral
    • 12. Credit history assessment
  • WHY IS USA BETTER PLACED THAN JAPAN ?
    USA economy is bigger in size
    Different policies of handling distressed loans
    USA government acting more aggressively
    Bank`s troubled debtors are different
  • 13. Global Slowdown – What Next?
  • 14. What Needs to be Done?
    Create Inflation
    Generate Employment
    Increase Government Spending
    Fiscal Policy
  • 15. Conclusion
    The World Will Recover
    “When it is over there is Calm ,but a dull, heavy calm”.
    - Alfred Marshall
  • 16. THANK YOU