Macro Eco Project

Macro Eco Project

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  Emerging Economy shouldConsume More & Save Less Developed Economy Should Save More & Consume Less. Presented by Deepa Chandrasekar
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  TWO STAGES OFMARKET ECONOMY Growing Market Economy Declining Market Economy TWO FACTORS OF MARKET Demand & Supply
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  Producer wantshis demand always to be high Consumer wants his buying cost always to be low
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  Recession When yourneighbour 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.
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  Recession
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  Gross Domestic Product(GDP) Employment Investment spending Capacity utilization Household incomes Business profits
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  The Two MajorReasons For Recession Over Production Low Confidence Level
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  Low confidence level 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 WORD OF MOUTH
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  US Corporate Equities1999: $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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  • Whatcaused 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?
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  • Geo-Political-Organization– The opening of China – The opening of India • Technological Innovations – Communication & Transportation in the 21 st Century
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  • Chinesefactories 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
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  * Corporate =non-agency non-government debt
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  To Come outof Recession Emerging Economy Consume More & Save Less Eg . China , India Developed Economy Save More & Consume Less United States
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  Government Plans FiscalPolicies – 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.
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  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
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  Monetary Polices forthe 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
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  A Stylized Modelof 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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