Emerging Economy should Consume More & Save Less
Developed Economy Should Save More & Consume Less.
Presented by Deepa Cha...
TWO STAGES OF MARKET ECONOMY
• Growing Market Economy
• Declining Market Economy
TWO FACTORS OF MARKET
• Demand & Supply
 Producer wants
his demand always
to be high
 Consumer
wants his buying
cost always to be
low
Recession
When your neighbour Loses his job
• Depression
When you lose your job
• Recovery
When you go shopping at Big Ba...
Recession
• Gross Domestic Product
(GDP)
• Employment
• Investment spending
• Capacity utilization
• Household incomes
• Business pr...
• The Two Major Reasons For Recession
• Over Production
• Low Confidence Level
 Low confidence level Word of Mouth
WORD OF MOUTH
• Cost Reduction Activities
• Producer Do not stock materials
• Consume...
• US Corporate Equities
• 1999: $19.4 Trillion (2.1 GDP)
• 2008: $15.2 Trillion (1.1 GDP)
• US HH Net Worth
• 1999: $42.1 ...
• What caused the Global Recession?
 Financial Crisis
• What caused the Financial Crisis?
 Easy Credit & Lax Regulation
...
• Geo-Political-Organization
– The opening of China
– The opening of India
• Technological Innovations
– Communication & T...
• Chinese factories can compete directly with US
Factories
• Workers from India can directly compete with workers
in the U...
* Corporate = non-agency non-government debt
To Come out of Recession
• Emerging Economy
Consume More & Save
Less
• Eg . China , India
• Developed Economy
Save More & ...
Government Plans
• Fiscal Policies – by Government
The Government Influence the Economy
by changing how it spends and coll...
Emerging Economy – Fiscal Policies
• Tax Benefits for the businessess &
individuals – More Money available for
spending
• ...
Monetary Polices for the Emerging
Economy
• Reduced the Cash Reserve Ratio
• Increasing the Liquidity
• Banks can provide ...
• A Stylized Model of Offshoring ……
• Money Flow through better Financial engineering.
• Tightening of Credit....
• Encour...
Emerging Economy should Consume More & Save Less Developed Economy Should Save More & Consume Less.
Emerging Economy should Consume More & Save Less Developed Economy Should Save More & Consume Less.
Emerging Economy should Consume More & Save Less Developed Economy Should Save More & Consume Less.
Emerging Economy should Consume More & Save Less Developed Economy Should Save More & Consume Less.
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Emerging Economy should Consume More & Save Less Developed Economy Should Save More & Consume Less.

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Emerging Economy should Consume More & Save Less
Developed Economy Should Save More & Consume Less.

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Emerging Economy should Consume More & Save Less Developed Economy Should Save More & Consume Less.

  1. 1. Emerging Economy should Consume More & Save Less Developed Economy Should Save More & Consume Less. Presented by Deepa Chandrasekar
  2. 2. TWO STAGES OF MARKET ECONOMY • Growing Market Economy • Declining Market Economy TWO FACTORS OF MARKET • Demand & Supply
  3. 3.  Producer wants his demand always to be high  Consumer wants his buying cost always to be low
  4. 4. Recession When your neighbour Loses his job • Depression When you lose your job • Recovery When you go shopping at Big Bazaar • Boom When Kishor Biyani stops shopping at Big Bazaar.
  5. 5. Recession
  6. 6. • Gross Domestic Product (GDP) • Employment • Investment spending • Capacity utilization • Household incomes • Business profits
  7. 7. • The Two Major Reasons For Recession • Over Production • Low Confidence Level
  8. 8.  Low confidence level Word of Mouth WORD OF MOUTH • Cost Reduction Activities • Producer Do not stock materials • Consumer Hear lot of job cuts • Consumer will get the fear of lose of job • Less confidence to spend money • Demand is Reduced
  9. 9. • US Corporate Equities • 1999: $19.4 Trillion (2.1 GDP) • 2008: $15.2 Trillion (1.1 GDP) • US HH Net Worth • 1999: $42.1 Trillion (4.4 GDP) • 2008: $51.7 Trillion (3.6 GDP) • Peak Unemployment • 1999: 4.4% • 2008: 7.2% • June 2009: 9.5%
  10. 10. • What caused the Global Recession?  Financial Crisis • What caused the Financial Crisis?  Easy Credit & Lax Regulation • What caused Easy Credit & Lax Regulation?  Savings Glut, Too much money chasing too few opportunities • What caused the Savings Glut?  Too much saving in Asia, and too little in the US • Why Too Much Saving in Asia?  Asians like to save • So what can we do to get out of the recession?  Asians should save less; Americans should save more Will it work?
  11. 11. • Geo-Political-Organization – The opening of China – The opening of India • Technological Innovations – Communication & Transportation in the 21st Century
  12. 12. • Chinese factories can compete directly with US Factories • Workers from India can directly compete with workers in the US • Workers in Developing World can participate in the Developed World’s labor market without moving • Huge increase in the Worlds’ labor supply in a very short time period
  13. 13. * Corporate = non-agency non-government debt
  14. 14. To Come out of Recession • Emerging Economy Consume More & Save Less • Eg . China , India • Developed Economy Save More & Consume Less • United States
  15. 15. Government Plans • Fiscal Policies – by Government The Government Influence the Economy by changing how it spends and collects money • Monetary Policies – By RBI RBI Manipulates the available supply of the country.
  16. 16. Emerging Economy – Fiscal Policies • Tax Benefits for the businessess & individuals – More Money available for spending • Government Spends more to create jobs - Individuals get salary & spend more. • Unemployment Insurance – Some income for the unemployed people to spend. Demand Increases – Market can Recover
  17. 17. Monetary Polices for the Emerging Economy • Reduced the Cash Reserve Ratio • Increasing the Liquidity • Banks can provide more loans to the consumers • Lower interest rates • Individual take more loan Demand Increases – Market can Recover
  18. 18. • A Stylized Model of Offshoring …… • Money Flow through better Financial engineering. • Tightening of Credit.... • Encourage savings in the U.S.A, and not subsidize housing. • Development of institutions to channel savings within China,India, … into productive activities. • Corporated invest in the skills of their staff.

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