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

7. Collapse of Long Term Capital Management

8. Moral hazard

9. Asymmetry of information

11. Creating market by expanding the set of eligible collateral

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

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