macro eco project

8/7/2019 Macro Eco Project

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

Presented by Deepa Chandrasekar


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TWO STAGES OF MARKET ECONOMY

Growing Market Economy Declining Market Economy

TWOFACTORS OF MARKET

Demand & Supply


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`Producerwantshis demand always

to be high

`Consumerwantshis buying cost

always to be low


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Recession

When rnei hbour oseshis job

Depression

When ou lose our job

Recovery

When ou oshopping t Big B z r

BoomWhen Kishor Bi ni stopsshopping t

Big B z r.


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Recession


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Gross Domestic Product(GDP)

Employment

Investment spending

Capacity utili ation

Household incomes

usiness profits


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The Two MajorReasons ForRecession

Over Pr du ti

L w C fid ence Level


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` 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


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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%


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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

Willit work?


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Geo-Political-Organi ation The opening of China

The opening of India

Technological Innovations Communication & Transportation in

the 21st Century


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Chinese factories can compete directly with USFactories

Workers from India can directly compete with workersin the US

Workers in Developing World can participate in theDeveloped Worlds labor market without moving

Huge increase in the Worlds labor supply in a veryshort time period


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* Corporate = non-agency non-government debt


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To Comeoutof ecession

EmergingEconomConsume More & SaveLess

Eg . China , India

Developed EconomSave More & ConsumeLess

United States


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Government Plans

Fiscal Policies by Government

The Government Influence the Economy

by changing how it spends and collectsmoney

Monetary Policies y RBI

RBI Manipulates the available supply ofthe country.


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EmergingEconomy FiscalPolicies

Tax Benefits for the businessess &individuals More Money available forspending

G

overnment Spends more to create jobs -Individuals get salary & spend more.

Unemployment Insurance Some incomefor the unemployed people to spend.

Demand Increases Market can Recover


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onetaryPolices for theEmergingEconomy

Reduced the Cash Reserve Ratio

Increasing the Liquidity

Banks can provide more loans to theconsumers

Lower interest rates

Individual take more loan

Demand Increases Market can Recover


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A Styli ed Model ofOffshoring

Money Flow through betterFinancial engineering.

Tightening of Credit....

Encourage savings in the U.S.A, and not subsidi e housing.

Development of institutions to channel savings withinChina,India, into productive activities.

Corporated invest in the skills of their staff.


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macro eco project

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