Wednesday, January 23, 2008

US crisis does not spell crisis for world economy

I have been saying this for a while now and am glad to have the formidable backing of financier George Soros, writing in the FT:

Although a recession in the developed world is now more or less inevitable, China, India and some of the oil-producing countries are in a very strong countertrend. So, the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the US and the rise of China and other countries in the developing world.

The danger is that the resulting political tensions, including US protectionism, may disrupt the global economy and plunge the world into recession or worse.

If you accept this, then it follows that what we are seeing in the Indian stock market is an over-reaction and the market should bounce back.


Mayank Chhaya said...


I caught your piece on the Dalai Lama. Thank you for the reference.

I wrote an analysis on the stock market panic for IANS. I have believed for 30 years now that all stock markets are inherently brainless enterprises run by scheming traders. There is no point in weighing in the goings on in the markets.

If a dog died of rabies outside the Mumbai stock exchange and a trader stepped on the carcass, the market will drop a few points.



Krishnan said...

Protectionist sentiment is running rampant in the US now. Democrats and Republicans are eager to blame India, China and illegal immigration for all of the ills of the US. Never mind that till recently the unemployment was very low and that productivity growth has always been very good ...

Hearing the national discourse, makes me worry about the serious recession that may hit the US - Ben Bernanke is a student of the events that led to the 1930's debacle and so I hope he reminds Lawmakers that closing the US to trade is not the way to get ourselves out of recession - and to remind everyone of Smoot and Hawley and how they plunged the country into a depression.

The good news is that India and China CAN and SHOULD buck the trend. The world (a lot of it anyway) seems to be learning the benefits of free markets, free people while in the US we seem to have started a way back from those ideas and may chop off our noses inspite of our faces.