The Boom in the IT Sector in India

Today, there are a number of children in America who no longer take the help of their family for help with their homework! All they need to do is get on the internet and go to an e-tutoring service, which is based out of India's IT hub - Bengaluru. This is just one of amongst the infinite number of examples that are a part of the boom in the IT sector in India. Going back to the homework, the children profit immeasurably with respect to their studies and this change is seen in their classrooms. Such is the case with all the different services offered by IT companies in India. The end user profits and that too at affordable rates!

The IT Services Revolution

In India Bengaluru city is the silicon valley of India. India has been in the throes of an IT revolution for a very long time now and the bubble has not yet burst. It keeps changing the face of India, and keeps affecting the world of business through it new technological advancements, day-in and day-out. There was a time very many years ago that the only thing that could be traded across border would be goods. Services could not be imported or exported as they were not tangible things and thus services of any country had no pressure from international competition. In Bengaluru city you will find companies in almost every street.

However with the arrival of the internet, every aspect of business was affected and very quickly services emerged as one of the fastest-growing sectors as far as international trade is concerned. Countries like India began offering low-cost services and the advantage of an increasing talent pool, to big companies, who saw the innate benefits of outsourcing their services to India. They realized that it was infinitely cheaper to outsource IT jobs like support, accounts, and payroll management etc to India.

Even in today's recession time people are moving to Bengaluru to explore the various opportunities available there. Business Process Outsourcing and Knowledge Process Outsourcing companies have become the key drivers of the IT boom in India.

The Indian Advantage

There are quite a number of reasons that have contributed to the boom in IT sector in India. One of the foremost reasons for this is the tremendous amount of workforce, most of whom are well-versed in the English language. English as we all know is the language of business. Moreover, all major cities in India have well-etched internet connectivity and the international data communications links are reliable and efficient.

Global Financial Crisis of 2008

On the one hand, many people are concerned that those responsible for the financial problems are the ones being bailed out, while on the other hand, a global financial meltdown will affect the livelihoods of almost everyone in an increasingly inter-connected world. The problem could have been avoided, if ideologues supporting the current economics models were not so vocal, influential and inconsiderate of others' viewpoints and concerns.

A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world. Furthermore, other weaknesses in the global financial system have surfaced. Some financial products and instruments have become so complex and twisted, that as things start to unravel, trust in the whole system started to fail.

The extent of the problems has been so severe that some of the world's largest financial institutions have collapsed. Others have been bought out by their competition at low prices and in other cases, the governments of the wealthiest nations in the world have resorted to extensive bail-out and rescue packages for the remaining large banks and financial institutions.

Some of the bail-outs have also been accompanied with charges of hypocrisy due to the appearance of socializing the costs while privatizing the profits. In the meanwhile, smaller businesses and poorer people rarely have such options for bail out and rescue when they find themselves in crisis.

To some extent risky borrowers bear some responsibility, but overall they have lost out; lenders are being bailed out, while those taking out risky loans either have lost their homes, or face a real threat of losing their home in the near future.

There is the argument that when the larger banks show signs of crisis, it is not just the wealthy that will suffer, but also potentially everyone. With an increasingly inter-connected world, things like a credit crunch can ripple through the entire economy.

Many have blamed the greed of Wall Street for causing the problem in the first place because it is in the US that the most influential banks, institutions and ideologues that pushed for the policies that caused the problems are found.

America is still immensely attractive to skilled immigrants and is still capable of producing a Microsoft or a Google. Even its debt can be overcome. It has enormous resilience economically at a local and entrepreneurial level.

For the developing world, the rise in food prices as well as the knock-on effects from the financial instability and uncertainty in industrialized nations is having a compounding effect. High fuel costs, soaring commodity prices together with fears of global recession are worrying many developing country analysts.

Many believed Asia was sufficiently decoupled from the Western financial systems. Asia has not had a subprime mortgage crisis as many nations in the West have, for example. Many Asian nations have witnessed rapid growth and wealth creation in recent years. This lead to enormous investment in Western countries.

In recent years, there has been more interest in Africa from Asian countries such as China. As the financial crisis is hitting the Western nations the hardest, Africa may yet enjoy increased trade for a while.

While the media's attention is on the global financial crisis (which predominantly affects the wealthy and middle classes), the effects of the global food crisis (which predominantly affects the poorer and working classes) seems to have fallen off the radar. The two are in fact inter-related issues; both have their causes rooted in the fundamental problems associated with a neoliberal, one-size-fits-all, economic agenda imposed on virtually the entire world.

Borrowing at a time of recession seems risky, but the idea is that this should be complimented with paying back during times of growth. Likewise, reducing interest rates sounds like there would be less incentive for people to save money, when banks need to build up their capital reserves. However, as the real economy starts to feel the pinch, reduced interest rate is an attempt to encourage people to take part in the economy.

Well-designed regulations may protect us in the short run and encourage real innovation in the long. Much of our financial market's creativity was directed to circumventing regulations and taxes. Accounting was so creative that no one, not even the banks, knew their financial position. Meanwhile, the financial system resisted many of the innovations that would have increased the efficiency of our economy. By reducing the scope for these socially unproductive innovations, we can divert creative activity in more productive directions.

The most powerful international institutions tend to have the worst democratic credentials: the power distribution among countries is more unequal, and the transparency, and hence democratic control, is worse.

Although history often shows that those with agendas of power tend to win out, history also shows us that power shifts. A financial crisis of this proportion may signify the beginnings of such a shift. During periods of boom, people do not want to hear of criticisms of the forms of economics they benefit from, especially when it brings immense wealth and power, regardless of whether it is good for everyone or not.

Managing Your Budget Through a Financial Crisis

As the unemployment rate jumped from 8.5% in March to 8.9% in April, many Americans are finding themselves needing to make major reductions in their financial budget to deal with the loss of income. Let's face it, many Americans are currently living paycheck to paycheck just to keep up with their bills and still provide food on the table. For them to have to take a lower paying job or live off of unemployment benefits could greatly effect their way of life.

Most consumers in today's age being effected by our nation's economic crisis still have a better chance of getting through these rough times than they may think. It's simply a matter of knowing what the difference is between necessity and luxury.
 
With the technological advances made during the last 10 years most people don't even remember life as it was without things like cell phones, DVR, and satellite radio. It's almost as if they are becoming a necessity, but in reality if you had to do without them you would still be just fine. It is possible to cut hundreds of dollars off of your monthly budget by taking a step back, and learning to live life a little simpler.
 
It is something to keep in mind for all of the consumers out there who are at risk of loosing their home because they are behind on their payments. Before further damaging your credit and making it nearly impossible to buy another home for many years to come, stop and think about what luxuries in life that you can live without and you might find that you can still afford your home, and maybe even still have a few extra dollars to spend at the end of the month.

Did Subprime Loans Cause the Financial Crisis?

Over the last two years, we have seen absolute turmoil in the economies of every country in the world.  It all started in the United States when the subprime mortgage crisis was kicked off in late 2007.  The financial books of Bears Sterns illustrated just how bad the banking and financial industry was in the United States.  Almost every major bank and financial institution had some exposure to the subprime market and it was going to cause havoc throughout the work.  Little did many of us realize that almost every single American bank would lose over 80% of their stock value in the next two years after April of 2008.

The reason that the financial books of Bear Sterns and many other financial institutions feel apart is because of subprime loans.  Some of the financial institutions that feel apart did not have direct exposure to the subprime mortgage industry but they were effected in some way or another.  Over 340 banks and institutions have failed since the beginning of the financial crisis and it is very likely that we will see many more to come

Is it possible that this all started because of subprime loans?  Well, in more words or less, yes.  When hundreds of thousands of subprime loans were given out to American citizens who could not pay them, this was the first sign of an economic disaster.  If you make $50,000 a year, you don't need a loan for FIVE times that amount!  There is no way you are going to be able to pay it off unless you get a huge increase in salary in the next few months. 

Subprime loans will never be claimed as the ONLY reason for the financial crisis, but they are definitely what started the economic disaster we are currently in.  

Managing Your Budget Through a Financial Crisis

As the unemployment rate jumped from 8.5% in March to 8.9% in April, many Americans are finding themselves needing to make major reductions in their financial budget to deal with the loss of income. Let's face it, many Americans are currently living paycheck to paycheck just to keep up with their bills and still provide food on the table. For them to have to take a lower paying job or live off of unemployment benefits could greatly effect their way of life.

Most consumers in today's age being effected by our nation's economic crisis still have a better chance of getting through these rough times than they may think. It's simply a matter of knowing what the difference is between necessity and luxury. 
  
With the technological advances made during the last 10 years most people don't even remember life as it was without things like cell phones, DVR, and satellite radio. It's almost as if they are becoming a necessity, but in reality if you had to do without them you would still be just fine. It is possible to cut hundreds of dollars off of your monthly budget by taking a step back, and learning to live life a little simpler. 
  
It is something to keep in mind for all of the consumers out there who are at risk of loosing their home because they are behind on their payments. Before further damaging your credit and making it nearly impossible to buy another home for many years to come, stop and think about what luxuries in life that you can live without and you might find that you can still afford your home, and maybe even still have a few extra dollars to spend at the end of the month.

Surviving the Financial Crisis - Innovations in Information Technology

When you visit a Shopping Mall in Asia, you find a huge range of IT products on offer, and a huge price range for similar products, ranging from unbranded products to the big names in IT. These products are getting cheaper, more diverse and more affordable.

Laptops are one example, over the last ten years when Industries were relocated to the developing World. Innovators in Countries like China, and India took these products they were manufacturing, and tried to make them cheaper and more affordable, creating new markets for their own products.

Now Microsoft have already partnered with an Indian designer to create an energy efficient 200 US Dollar Laptop, and the Indian designers have successfully made a 10 dollar Laptop, Asus in Taiwan, are selling innovative mini-laptops, at 289 US Dollars.  

There is no doubt, that innovation in the IT Industry will create new customers, who will join the Internet Revolution experienced in places like Hanoi, Calcutta, and Dhaka. Along with this change, is the realization that educating people to use this technology, will become a boom in the next few years.  

Technology will become smaller. Mobiles will only sell if they contain a lot of extras that a few years ago no mobile manufacturer will consider cost effective. Now Manufacturers in the developing World, are creating their own Mobile brands, that are inexpensive, loaded with extras and bring technology to people who ten years ago, could barely afford a basic phone.  

The technological revolution that started in the early 1990's marches on, but in Countries that never were part of the IT revolution, and tech savvy Citizens of these Countries will compete with their counterparts in the USA, and Europe, bringing ever cheaper innovations, that only will wire up the World, even if it is currently in relative gloom.

Reasons For the Financial Crisis part 2

Our government imposes excessive taxes and regulations on businesses.

Simply put our government makes it difficult or usually foolish to hire workers to make things. It's better to do it overseas. Ironically the government usually does this to 'protect' workers, but the media never considers the result of the 'protection' is that the jobs no longer exist. Our government imposing excessive taxes and regulations explains why it's not profitable to hire people to manufacture things.Continuing back up the chain we arrive at the final result: Financial Crisis.

I don't think most people look at things like this so they don't understand the reasons for our current situation, and they have no idea what the solution is. When it comes to our current crises they just 'react' they get upset about giving money to bankers, or maybe they get scared enough that they are willing to give money to the bankers. Either way most people are simply reactive in nature and that solves nothing. We need as a culture to reward substantive dialogue. Instead, I believe substantive thinking has come unfortunately to be often punished in our culture. Pure symbolism and social talk is a waste of time but it's the level most people find themselves on most of the time, deviating from it is breaking the collective rules of behavior we seem to have either decided on or arrived at.

Now I am a person that likes to generalize get abstract a bit. I have kept it simple to this point. But I want to explain the financial crisis from the viewpoint of a larger theory. Sort of like relativity compared to Newtonian Mechanics. My big generalization for what is going on is called 'socialism'. Everyone acts like they know what it means but it would be foolish to assume the average voter could give you a good definition of it. The average voter understands words like "change" the democratic slogan, but even then they misapply the principle because the democrats don't represent change but just more of the same thing the republicans gave us: socialism. But before I get distracted again lets define socialism:

Socialism is a form of collectivism where the government controls what would otherwise be private property ostensibly for the good of society and usually for the purpose of promoting equality.

That's my definition anyway you can check the dictionary to see if I'm close.

I am going to present a single argument against socialism. I have many but I have one that suffices and is really simple. I call it the 'empirical' argument. Empirical because it is based on a single undeniable universal observation:

All nations that went the socialist route and to the extent they did suffer financial crisis.

There are also other observations. For example, inequality is not eliminated in socialist systems but always dramatically increased. The reason, of course, is when you're in financial crisis every penny really counts and for the have-nots socialism is a real tough situation. I have traveled a few socialist societies. In Laos, for example, the hotel clerks at a relatively nice hotel make about $45 a month. I think there is a bit of arrogance almost bordering on racism in America when we assume we can go the same socialist route without the same thing happening to us. We can't.

Most voters don't recognize America as socialist. They don't want to admit we are a socialist nation and members of the left usually say something like: 'The best theory is a mix of capitalism and socialism.' When you consider that the endpoint is less than $45 a month I don't think anyone wants to experience pure socialism. Even the Lao people enjoy some free market reforms or they wouldn't make nearly such a high wage.

Imagine a continuum where on one side you have freedom and on the other pure socialism. When one considers the sheer magnitude of US government spending we are a good way towards socialism in the continuum. I would argue regulations also have to be factored in, and due to our relative prosperity the left has managed to impose more regulations on business than occurs in many more purely socialist societies. In fact we may have more burdensome regulations than has ever occurred in any society for all history. In a way it's quite an astounding liberal achievement. But when you factor in regulations and place us in the continuum we are nowhere near the freedom side and getting closer and closer to the socialist side. So following the empirical argument we should be suffering and we are

Reasons For the Financial Crisis part 1

Seems to me that people talk a lot about things but they rarely investigate reasons, causes, and solutions. For example, bailing out the banks neither addresses the reason for the crisis nor is it a solution to the original causes that created the crisis, but recently it's all people talk about. Thus time is wasted on the topic and it comes to be perceived, at least by some, as a 'solution'. It's far more acceptable to talk about events and then hint at some usually one line liberal sounding solution than it is to engage in an actual substantive analysis. In fact, I would argue that in recent times it has become somewhat unacceptable to even talk about certain issues, but maybe that's another article. In this article I would like to investigate some of the reasons for the financial crisis. Without getting political (yet), one can formulate a 'by definition' cause:

We borrow more than we can responsibly pay back.

This is a rather obvious cause of the financial crisis we are in. We do it both individually and as a nation. Our government sets a bad example by spending more each year than it receives. Our money then flows overseas to foreign nations in the form of interest on loans. US consumers borrow more than they can pay back, and banks let them do it.

This is simple enough and hard to disagree with. Now there are probably several reasons why we borrow more than we can responsibly pay back, but let's just consider one good one.

We produce less than we consume.

This is rather strait forward. We don't make things anymore. It has been said that America is a paper economy. Some people seem to be able to ignore basic laws of physics. You can't go along producing nothing and consuming everything for long until things start to get out of whack. But that's exactly what America has been doing. We have been running a trade deficit for years and it only seems to get worse not better. As a result nations like China have all our money. We send it to them in the form of the trade deficit. Producing less than we consume explains why we borrow more than we can responsibly pay back. Now why do we produce less than we consume?

It's not profitable to hire people to manufacture things.

Again that's sort of by definition true and I have so far avoided getting political. We don't manufacture things in America because it's not profitable to do so. I think there are many ingenious Americans that could probably invent some really good manufacturing processes. In fact they did, but unfortunately the processes were exported overseas and other countries get to enjoy the business advantages of using the technologies. Anyway since it's not profitable to hire people to manufacture things we produce less than we consume. So why is it not profitable to hire people to make things in America?

World Financial Crisis Saga? I Think Not!

The current financial hurricane that is sweeping across the world has forced many world leaders to increase efforts in finding solutions to save their country from a total economic meltdown. Each day headlines on our televisions and radios and in our newspapers are filled with the latest in redundancies, bankruptcies and financial scandal resulting in despair and hopelessness in the eyes of the community.

The economic downturn has left many people without homes and the rise in unemployment has given wings to an increase in delinquencies. It has also forced many credit lenders to beckon help from Federal Governments, or, to humbly sell out to their competitors. The collapse of solid and wealthy companies and corporates such as Lehman Brothers and GMH and even banking institutions is a sign to the financial world that will never be forgotten. We are told that the situation will only worsen before it gets better. Surely this must mean there is no hope for us right?

While the present financial crisis will be one of the worst in the last one hundred years, we truly believe that no matter what happens we are in charge of our destiny - do you?

Why is it, that with all the economic difficulties around the world, some people still prosper and grow? Who are these people and what do they do? Let's use the infamous Sir Richard Branson for example who has just launched yet another airline and also a luxury resort!! How can this be? I mean, aren't we in the grip of the most economically challenging times of our time at the moment? All the news says so. Did you know that it has been said by those that predicted this current economic downturn that more millionaires are created in times like these than at any other time in history?

Global financial crisis part 3

If through either of the above instruments, crises can relatively easily be prevented or stopped then it is clear that they are much less dangerous and less important. Indeed, since one could include such government actions as part of the actual financial system, then one could conclude that the system endogenously prevents crises from occurring.

Concluding, I believe that the financial market has in fact shown remarkable resilience and adaptability in the face of the condition of the real economies, the shocks experienced and the rapid deregulation. The issue of financial instability is and should be a concern but probably the best policy towards that objective is to have a healthy and stable "real" economy. How to achieve this is indeed another question.

It may be useful to summarize the argument. A system of financial regulation was crafted out of the financial turmoil of the 1930s. It had two defining characteristics, the restriction of competition and government protection. This institutional structure was created in conformity with the concrete conditions at the time (low debt, high liquidity, low inflation, and low interest rates). It was successful in the postwar period in the United States in part because of that conformity. The high profit rates in the early postwar period also helped to create a situation in which no financial crises occurred.

Eventually, however, those conditions changed: debt increased, liquidity declined, profits fell, and inflation and interest rates increased. The worsening financial conditions in the later postwar period contributed directly to the reemergence of financial crises. The old institutional structure, rather than leading to stability and profitability for financial institutions, resulted in instability and financial difficulties in the context of these new conditions. Banks and thrifts found themselves in a difficult situation intensified by the tight monetary policy beginning in the early 1980s. Financial crises increased, as did failures of thrifts and commercial banks. Eventually the banks and thrifts searched for riskier, potentially more profitable, but ultimately more speculative areas of lending.

Global financial crisis part 2

Eventually, some insiders decide to take their profits and sell out and the increase in prices begins to moderate. A period of "distress" may then occur until speculators realise that the market can only go downwards. The crisis may be precipitated by some specific signal such as a bank or firm failure or a revelation of a swindle; the later are quite frequent in such circumstances as people try to escape the imminent collapse. The rush out of the real or long term assets ("revulsion" in Minsky's terms) lowers the prices of these real assets which were the object of the speculation and may develop into a panic. The panic continues until either the price falls so low that people are tempted to keep their illiquid assets or a lender of last resort intervenes and /or manages to convince the market that money will be made available in sufficient volume to meet the demand for cash.

Minsky, unlike many others who otherwise accept much of his model, believes that this process will always result to a crisis. Minsky classifies the demand for credit to "hedge finance" when cash receipts are expected to exceed the cash payments by a significant margin, to speculative finance" when, over some periods, expected earnings are less than payments and to "Ponzi finance" when the payable interest in the firm's commitments exceeds its net income cash receipts; thus a Ponzi unit has to increase its debt to be able to meet its commitments. Once the Ponzi finance situation becomes general, a crisis is inevitable. Others, however, believe that there are ways to prevent Ponzi finance from becoming too widespread.

This model described above implies that crises are in part endogenous and in part outcomes of exogenous disturbances. Whether this conclusion supports the "financial fragility" view depends on the weights given to the disturbance and the endogenous part of the process. If the shocks necessary to set off this process are of exceptional size and rare then obviously the financial system can be thought as stable. Indeed it has been suggested that the recent crises have in fact showed the resilience of the financial system against huge adverse shocks. If instead the speculative forces are triggered by even relatively small shocks we can then blame the financial system even if the shock were exogenous.

This is both an empirical and theoretical issue. Empirically the euphoria-distress-revulsion process seems to conform with the experience of many crises such as the 1929 stock market crash, though many others have not gone through the whole process. Theoretically, we have to explain the assertions of the above model, namely for the existence of speculation and other "irrational" behaviour as implied by "manias" and "overtrading".

Friedman rejects the notion of destabilising speculation completely as a destabilising speculator who bought when the price was rising and sold when it was falling, would be buying high and selling low so that he would be losing money and fail to survive. The answer may be that we can distinguish in two groups of people: the "insiders" who are rational and possess a lot of information and the "outsiders" who may not be "fully" rational and/or not possess adequate information. In such a world, the insiders have incentives to speculate and gain at the expense of the outsiders. We may also distinguish in the 2 phases of the bubble, a first "rational" one based on "fundamentals" and a second where agents' behaviour is best described by 'mob psychology'. Other possibilities are that agents may choose a wrong model of the economy or fail to anticipate the quantitative rather than the qualitative reaction to a certain stimulus, especially if there are time lags.

The question, however, is whether outsiders learn by experience though it can be argued that in rapidly changing complex financial markets such learning may not be very effective. Still "euphoria" arguments may be a little naive when applied, for example, to contemporary bankers who have access to a wealth of sophisticated advice. Indeed a criticism of the Minsky model is that though it might have been true of some earlier time, it is no longer so as big unions, big banks, big government and speedier communications have improved the stability and efficiency of the system. Hansen similarly argues that since the mid 19th century the main outlets of finance were the industrialists rather than the traders and merchants reducing the instability of credit. As we shall see later on, especially after the recent deregulations such arguments are questionable.

The monetarists further object to this theory because they argue that we should distinguish between "real" or "true" crises which were caused by changes in money supply and "pseudo-crises" which were not. For example, Friedman has argued that the 1929-32 crisis was largely due to a fall in the money supply. There is little reason, however, why the supply of money is more than an element in financial flows and stocks and indeed Friedman's explanation of the Great Depression has been challenged.

Minsky has further argued that the fragility of the financial system relative to disturbances and speculator behavior depends on three factors: the mix of hedge, speculative and Ponzi finance in the economy, the levels of liquid asset holdings (what he calls "cash kickers" and Margins of Safety) and the way used to finance Investments of long gestation. He further argues that inherently and inevitably the capitalist system will result in the worst combination of the above as far as financial stability is concerned. Minsky bases such conclusions on what he calls a "Wall street economy" paradigm as contrasted to the essentially barter economy of the neoclassical paradigm. Minsky in fact traces his views on Keynes who also expressed his concern for an increasingly speculative and unstable financial system governed by animal spirits.

In an initially robust financial system, he claims, agents will overestimate the stability and success of the system and will increase their indebtedness (an "euphoric economy"), so that speculative finance will become the norm. Similarly overconfidence will make agents reduce their Cash Kickers although such margins are crucial for speculative finance units. These mean that the economy and the financial system become very sensitive to variations in interest rates. Finally, investment projects which have a long gestation period can be financed either sequentially or by prior financing. For similar reasons agents generally chose the risky way of financing projects sequentially which not only further increase the interest sensitivity of the financial sector but increases the volatility of interest rates themselves as they imply an inelastic demand for finance given sunk costs plus possible effects in the real economy through falls in Aggregate Demand. This, however, does not sound a very robust argument as one would expect that as Wallich argued, once the system becomes fragile, the agents will get scared and reverse the trend towards speculative finance.

Moreover, the Stiglitz paradox argues that destabilising speculation is an inherent characteristic of the system. A financial system is an information infrastructure and as any infrastructure being a public good poses problems in being paid by the price system. Hence "noise" is needed to remunerate active financial markets.

Here we could also mention that many of the disturbances which cause financial crises, may in fact, be endogenously caused by the capitalist system. Nevertheless, this argument cannot be stretched too far and on the other hand one could attribute the apparent greater instability of the financial system the last 2 decades to the hardships of the real economy (oil price shocks, stagflation). In this later case the financial system emerges as particularly resilient , certainly more so than the real economy. Indeed, many people such as Kindleberger, believe that financial disturbances are neither inherent in the system nor is it inevitable that they will develop into crises. Most concentrate on the issues of appropriate monetary policy, regulation structure and lender of last resort facilities.

Monetarists obviously support that a monetary rule is adhered though others, including Minsky, fear the consequences of high volatility of interest rates. The lender of last resort facility has generally proved to be quite effective in preventing financial collapse throughout the post-war period. The problem, however, is that it creates a moral hazard problem as agents are encouraged to be more risky. This problem may increase in significance in the future as the importance of the commercial banks relative to other financial institutions declines and for most of these institutions the moral hazard costs are considered to be much higher and lender of last resort protection is not generally widely available to them. Also in our increasingly globalised financial system, there is none really able and willing to play the role of the international lender of last resort; the collapse of 1929-32 is often partly attributed to a similar lack of lender of last resort as Britain was unable to play this role anymore and the US were unwilling.

The widespread deregulations of the last two decades have also attracted attention regarding their effect on financial stability. On the one hand, it is argued that the subsequent rationalisation not only increased efficiency, the quality and the variety of financial services but helped stability as well by for example allowing a better allocation of risk towards those who can bear it more easily. Others, however, point to the increased difficulties for conducting monetary policy, the increase in indebtedness, the increase in credit risk as business finance shifted towards securities and the greater freedom in speculative behaviour.

Furthermore, as Kaufman feared, completely liberated markets will increase instability by allowing crises to quickly spreading to other sectors and countries. In many respects, the Savings & Loans debacle is typical of the problems of deregulation: Though most people would agree that deregulation was long overdue, its timing (coincided with a crisis in the S&L industry which encouraged speculative behaviour) and the easing of "safety-and-soundness" regulation proved catastrophic. Indeed there is a significant group of economists who while support deregulation, strongly recommend the imposition of restricted safety and soundness regulations to increase the stability of the system.

Global Financial Crisis PART 1

he financial distress of the last two decades has revived interest on the question of the stability of the financial system. On the one hand, the "pessimist" view, associated primarily with Minsky argues that not only that the financial system is prone to such crises ("financial fragility" in Minsky's terms) but also that such crises are inherent on the capitalist system ("systemic fragility"). On the other hand, the monetarists see the financial system as stable and efficient where crises not only are rare but also are the fault of the government rather than the financial system as such. For many others, however, financial crises may be largely attributable to the financial system but they are also neither inescapable nor inherent in a capitalist economy.

Therefore, the issues we have to examine here are how common are such crises from a purely historical perspective; to what extent we can identify a common pattern between all crises which would suggest an endogenous process that leads to crises; a theoretical framework which explains both the process and the frequency of such crises and finally examine the extent to which these financial system characteristics that make it prone to crises are inherent on the capitalist system.

The first question, i.e. the frequency of financial crises partly depends on our definition of crisis. A financial crisis has been defined by Goldsmith as "a sharp, brief, ultra-cyclical deterioration of all or most of a group of financial indicators - short-term interest rates, asset (stock, real estate, land) prices, commercial insolvencies and failures of financial institutions". The question here is of what intensity and/or intersectoral spread should a financial disturbance be in order to be considered a crisis.

In any case, it appears that though major crises leading to the (near) collapse of the financial system are quite rare (the only one being 1929 in the US), more moderate ones are frequent enough to allow the argument that the financial system does suffer from a certain degree of fragility. In the post-war period, after an almost complete absence of crises until the mid 60's, the financial system has been at strain on many occasions including the 1966 credit crunch, the 1969-70 and 1974-75 crises, the 3rd world debt problem of the early 80's and the stock market crash of 1987.

Again a casual observation of financial crises will find a wide variety of different causes and forms as each crisis seems to have occurred in response to a unique set of accidents and unfortunate coincidences. But quoting Kindleberger "for historians each event is unique. Economics, however, maintains that certain forces in society and nature behave in repetitive ways". Indeed, it is not difficult to distinguish a rough pattern which has been graphically presented by Minsky : crises tend to occur at the peak of the business cycle following a period of "euphoria."

This has probably been initiated by some exogenous shock to the macroeconomic system ("displacement") which results in new profit opportunities. The boom is fuelled by an expansion of bank credit as new banks are formed, new financial instruments are introduced and personal credit outside the banks increases. During that period there is extensive "overtrading", a not very clear concept which generally refers to speculation for a price rise, or an overestimation of prospective returns due to euphoria. This stage is also often referred to as a "mania" emphasising its irrationality and "bubble" predicting the collapse.

What the Economic Meltdown Means to the Network Marketing Business

There is a always silver lining even in these difficult economic times. More and more people will be looking for non-traditional ways to earn additional income to help secure their financial future.

Network Marketing is a logical choice.

I am not saying to pray on the desperate. In the the end that will frustrate you even more and never does your business any good in looking to make a quick buck. Now is the time to invest in a long term business and be able to help and mentor others who will looking for ways to secure their financial future.

There is not a better time in history to be in Network Marketing. Right now this industry is approaching 100 billion dollars a year - so it is a legitimate business. In the next 10 years, it is projected that Network Marketing will be a 1 trillion dollar business.

You know, I do not even pay attention to the media or care what is happening in the market, because I am not depending on the Financial industry to bail me out and secure my future, I am securing it myself. Do you think Warren Buffett, Bill Gates, or Larry Ellison watch the markets? HECK NO! They are working on their futures and not hoping or praying they hit the lottery with the stock market or a Financial bailout.

Protect yourself and your families future.

Start your business today and enjoy the tax benefits of a home based business.

The Network Marketing business is the financial protection of choice!

World Economic Meltdown Continuing - Hurting US Diplomacy

The CIA and the Pentagon have both noted that this global financial crisis is taking its toll on World Economies and that is a real problem for world peace. In fact, as economies crumble so do societies, and civil unrest can lead to revolutionary over throw with already weak governments. In the Middle East Oil prices are way down causing huge economic problems. 
  
With China's factories shut down many former farmers are going back to rural communities, where droughts are causing wheat crop failures. In Argentina soybean commodities have collapsed. Rice commodities are way up and 3.5 Billion people eat rice every day, especially the poor. Nations like Nigeria, Iran, Mexico, Venezuela, and Russia are in a severe situation due to oil demand putting oil barrel prices at $35 per barrel. 
  
World Trade is down, our trade deficit is the lowest in years, and shipping lines are almost at a standstill and this is causing extreme hardship in many countries. There are many square miles of cars parked that have been off-loaded at the ports sitting and waiting, with no dealerships that want them. There are cargo containers stacking up. 
  
These issues have barely made it into the mass media, but these little news headlines you are reading really do matter, even if you do not quite see the whole picture. We must all read deeper, ask more questions and think about what we are reading and how this affects our future. 
  
Although in the US we have felt some economic stress, we must not forget our trading partners and allies throughout the world whose nations are literally falling apart as we speak. Think on this. 

The Energy of The Financial Meltdown

We are in a time of financial crisis.  People are anxious. People are seeking solutions. People are scared. With all of this activity, tremendous bursts of energy are being expended, some positive but mostly negative. 

But the energy that we project into the cosmos is not an isolated event. Your energy and my energy either merge or conflict. All of the negative energy that is coming from you and from me and from everyone else from our anxiety, only increases the negative energy in the cosmos and that reduces the likelihood of us finding solutions for a better world. 

Right now both positive and negative energies are being sent out. Which energy stream do you want to contribute to? 

The News: On or Off? 

Do you want to turn off the news about the financial crisis? Would you feel happier if you did not listen to the news each day? Are the stressful news reports about the economy, global warming and wars, causing you to become a nervous wreck or do you feel inspired to try to make changes in the world? 

When you watch the news are you likely to ruin your own day and the day of your loved ones? What does your pulse tell you about your reactions to the news? Is your pulse racing with anxiety or is your heart beating at a comfortable and healthy rate? Are you sending positive or negative energy into the cosmos?

Learn How to Watch the News 

Watch the news enough -- but not too much!  If we stick our heads in the sand or run to the hills to avoid bad news, then we cannot make informed decisions.  If we need to make personal decisions about a crisis in the world, do we really want to act like sheep following the opinions of others, or do we want to think for ourselves?  We have to stay informed by watching the news and by continuing to be informed about our personal  financial affairs.

In the current financial crisis, there are people who are not managing their money well because they can't stand looking at their financial statements.  One woman in her early sixties has not looked at her financial statements since the economic meltdown in the fall of 2008.  "I don't want to know how much I have lost" she says.  Meanwhile, as she keeps her head in the sand she is missing the opportunity to make adjustments in the investments that she needs to support herself as she gets older. 

Another person, a young man, was about to give all of his money over to a money management company that when looked at closely, was going to take advantage of his panic and run with his money. This man almost signed papers that would have caused disaster in his life, because he wanted to be out of the emotional pain he felt as he looked at his credit card bills. He wanted to stick his head in the sand and sign papers without really investigating the company that was about to rip him off.  

When we hide from our problems the results are ultimately negative, and more negative energy is created which is sent out into the cosmos.

We must not hide from the news and information that although painful, we need to hear. 

On the other hand . . . 

When it comes to news, pick and choose!  When you are more aware of what Anderson Cooper is wearing today than your significant other, you have a problem. If you find yourself checking the news ten times a day, you may be on the brink of developing a news obsession. Choose the news you are going to pay attention to. Select a newspaper, television broadcast or internet news site. Perhaps you would like to choose one liberal news source and one conservative news source so that you can hopefully get a more balanced view of the news.  Do not read seven papers, watch six shows and check the news online all day long! 

When you are more aware of the news headlines than the stars in the sky, you are out of balance. Consider that the mountains do not know whether the stock market is going up or down. The ocean does not know if you can pay off your credit card dept or not.  The sky does not know the daily news. No matter what is happening in the material world that human beings have created, the natural world is there to enjoy and heal us if we will only give nature equal time with the news broadcasts.

Create the Best News with your Energy

Each and every one of us is part of the cosmic whole and at the same time, each one of us is an individual. During this time of worldwide financial crisis, every time an individual among us panics and sends out distress signals, stressful energy is sent around the world and out into the cosmos. Every time one of us believes in the future and sees our current world problems as a huge wakeup call to the world, and makes a decision to do things to help the world, positive energy is sent around the world and out into the cosmos.

We are all connected to each other by what I call the Cosmic Connection. Each individual connects to the Divine and to every other living form through the energetic cosmic dimension. The energy of each individual affects the energetic whole of the universe.   

Again, let us contemplate: Right now both positive and negative energies are being sent out. Which energy stream do you want to contribute to? 

Of course times are hard financially and people in need must be helped. But this is not the first time in history that we have had a financial crisis or the last time.  Perhaps as we feel the financial pinch we will develop more compassion for those who have been dying of starvation for years and years.  Perhaps our world needs this financial crisis in order to develop better values.  What do we really need to buy? More things to make us look good, or do we need to take a good look at ourselves and the ways we need to take care of our world and take care of each other? 

Let us calm down. Let us take the bitter news and transform it.  Like your mother told you "when you get lemons make lemonade."  Let us take the financial meltdown and create visions of golden lives for everyone in the world. 

Economic Meltdowns In Various Financial Sectors

Unfortunately, the economic meltdown is going to create some far reaching side effects that will be primarily negative in nature. Consumer confidence is low, sales in every sector are down, and people have begun to place their money under their mattresses for safe keeping. 

Realty or Housing Sector

The economic meltdown is going to severely impact the realty sector in several ways. The tightening of the credit sector is going to make it more difficult for potential homebuyers to locate affordable mortgages. Plus, downsizing due to slower economic growth is going to lead to more unemployed or underemployed individuals, resulting in fewer potential homebuyers. In turn, both of these aforementioned conditions will create a reduction in the need for new housing and the housing market will continue to wind down rather than heat up. In fact, new construction and the issuance of building permits have already decreased to lower levels than have been seen in the last two decades.

Mortgage Sector

With fewer lenders offering even fewer loan vehicles, the mortgage sector is not in a prime spot for growth. Constraints have finally been put in place on who can obtain a mortgage these days along with how much they can qualify to get. As people foreclose on their homes, mortgage lenders stand to lose quite a bit of money further limiting their own spending power.

Labor Sector

As consumers become less willing to part with their hard earned cash, the need for manufacturing goods continues to slow down along with everything else. This scenario, out of necessity, leads to layoffs and fewer individuals obtaining employment. One can only speculate that the mad rush to hire employees for the holiday season will be negatively affected as well. In turn, fewer people will have money to spend and sales will continue to slump. 

Credit Sector

The credit sector has already sustained a great deal of damage with constraints on the amount of credit being given out tightening ever so slowly yet firmly. More and more people are finding it difficult to secure credit, especially those with no credit history to offer or those with only fair or bad credit behind their name. 

One of the resultant facets of the credit crunch is that lenders are initiating higher interest charges on all aspects of credit cards from the interest assessed on the daily balance to the interest assessed on overseas transaction fees to the interest charged on advanced cash fees. Late fees will surely be next to go up as credit card issuers begin to experience less profit as a direct result of fewer people having access to credit cards and the fees that they can generate for the credit card companies. 

SPX standard and poor

ECONOMICS AT A STAKE

As several economists have noted,    blaming the crisis on "greed" is like    blaming plane crashes on gravity....    The current crisis was caused not by    the free market but by the government's    intervention in the market.    This is not special pleading on behalf    of the market, but the clear verdict    of both theory and experience.... As    predictably as night follows day, the    dopes who didn't see the crisis coming    and said everything was fine are    the ones George W. Bush and Barack    Obama alike have looked to for advice    on how to reverse it.     We are in trouble.