Financial Crisis Will Not Deepen Further
Financial crisis occurs when the value of financial institution or asset price drops quickly. (Investopedia US, 2013) Today the world financial system is undergoing economic recession. It is assumed to have begun in the year 2007-2008. After the great depression US economy suffered a short term recession in 2001 but came out with it adequately. It also wide stood dotcom bubble bust, attack by terrorists and accounting scandals. Federal government decreased it rate 11 times from 6.5 in 2000 to 1.7% from the year 2000 in order to increase its liquidity in the economy. A man with no job, no income and no asset was able to afford a house mortgage. This rate was decreased to 1% in June 2003. In 2004 country’s elite banks like Lehman brother, Goldman sacs, Merrill lynch, Morgan & Stanley were relaxed with the net capital requirement 30-40 times. (Sivakumar and Krishnaswami, 2012)But after saturation point problem started rising with the rising interest rates. In 2007 it turned out to be a bad new when federal fund rate reached 5.25% in 2006. Many banks got erupted and with shortage of money. Central banks in several countries like UK, Europe central, Sweden, Canada, Switzerland, china etc help in adding world economy but failed. This economic crisis also exploded the economies of Arab nations, Japan, UK, Ireland, Greece, China etc. The consequences faced by these countries in the meltdown were low GDP, high inflation, low deflation, volatile stock market, increasing unemployment, crash in real estate sector, low corporate profits, depreciation of assets and many more. These outcomes are affecting world economy since last few years but now there is an optimistic indication for coming years. (Shah, 2010) (Canstar Research, 2012)
US economy point is towards an upbeat track of recovery, although it was at uneven pace in 2009 but the uncertainty decelerated in 2011. Strong consumer spending was the biggest contributor in building the economic growth which fostered at an annual rate of 2%. Higher federal defence spending with a growing rate of 13% annually also contributed in the recovering the financials of US. According to McKinsey & co a study household in US reduced their disposable income debt by 15% and is assumed to reach at sustainability within 2 years (Censky, 2012) (Zakaria, 2012). Increased Corporate profits in domestic product are a good sign to the economy. The companies are having cash balance of $1.7 trillion on the balance sheet.US households have reduced their debt relative to disposable income by 15 percentage points, more than in any other country; at this rate, they could reach sustainable debt levels in two years or so (Elwell, 2012).There is a steady improvement in manufacturing activities during the recovery years but is stuck since 2012, hoping to be in motion. Capacity utilization has risen to 76% in 2012 from 64% in mid 2009. Similarly since 2009 non- farm payroll has augmented by approx 4 million jobs in 2012. US Growth has outpaced amongst the other economies affected by the global meltdown. There is a growth seen in exports in 2012 by 2.9% since 2009 (Treasury, 2012) (appendix 2, 3).since last two years in Chile (a part of Latin America) number of tourists have increased to 3.5 million from 2.7 million. In view of the fact from 2005 this boost tourist growth rate has not been witness, where tourist arrivals increased by 13.4%. Similarly Brazil the biggest economy of Latin America was up 14.3% from 11%, the further adding to it 18.6% tourists climbed in Colombia. Increase in arrival of tourist may help the economy to escort towards development. (MercoPress, 2013)
In 2010 in Mexico, new jobs were produced as exported records quantities of appliances – which were more than 700,000, reduced the jobless rate. Debt levels and inflation rate got low and in 2012, for the first time ever Mexico’s net migration to USA has plunged to zero. The GDP of purchasing power of Mexicans was 1.5919 trillion US dollars in 2009 which has increased to 1.667 trillion in 2011 gives a positive insight for the recovery. (CIA, 2013). In December 2012 U.S. factory output rose % comparing with November, maintain by more output of electronics, business equipment and autos: states Federal Reserve. This output rose consecutively in second month, giving hope that manufacturing could climb up after struggling 2012.(Commercialappeal, 2013) Recently in the second week of January 2013 the U.S Bureau of Labour Statistics released the much anticipated jobs report, which depicted 155 thousand jobs increments during December, despite the fact that unemployment rate was 7.8% (unchanged). This increment in December improved the labour sector. The report data also denoted the rise in and hourly earnings and working hours thus proven a benefit for retail sales, seeing that large retailer in the U.S market signified rising sales volume throughout the month. The federal’s decisive factor for US economy’s recovery is labour sector and forecast represents a gradual improvement in the labour sector performance throughout 2013 and also claims for decline in Unemployment levels, especially after the overcome of fiscal cliff issue. (ICN.COM, 2013)

UK showed the sign of coming out from downturn in the third quarter of 2012, with stronger than expected growth of 1%. The London Olympics helped service sector to develop. The service sector grew 1.3% and it accounts for over 75% GDP (Thompson, 2012). The return of growth in construction output was seen in February, though it failed to counterbalance 12.9 percent decline which happened in January. According to the recent fact the numbers of full-time labours reached 21.45 million with an increment of 88,000 labours in it and with a increase by 125,000 part-time workers reach 8.13 million, the highest figure since comparable records began in 1992.unemployment plumed more than it was expected to 7.9pc from 8.1pc. Recent surveys done in UK indicate that many companies are planning to step of recruitments in the coming months in spite of an uncertain economic outlook. The government has hope with private companies that they will create enough new jobs and will balance the job cuts in the public sector (Clancy, 2012) (appendix 5).

In 2012 US economy appeared to be coming out of recession when it grew by 1% according to GDP figures (BBC, 2012) (appendix 1). Facts and Figures of 2012 contribution of Germany in European capitals on accounts for 27% of euro zone GDP .this has rebounded from a drop of 0.2% in late 2011, while France just grew 0.1% dramatically in early 2012. However in March 2012, France by 0.3% and Germany grew by 1.2%. (Elliott, 2012). Likewise, the Euro zone Purchasing Managers’ Index whole Output Index mounted from 45.7 in October to 46.5 in November. This also shows a slight possibility of recovery indication for the economy (Prasad, 2013).

Jobless rate in Italy unexpectedly fell from a high of 12 years in May 2012. The unemployment rate decreased 0.1 % to 10.1% in April. This was the first decline in the unemployment rate since February 2011. Further Economists forecasted it to grow to 10.3% (Vasarri, 2012).Iceland being a small rough country suffered as similar as the developed world because of 2008’s overstretched banks failed .It happened as quickly as eye blinks. The bank got bankrupt, economy fell, the unemployment rose to 10 percent, prices of house fell, the inflation surged, currency value came down etc. During boom period banking was the thing for Iceland nation became illusory. Their economy was almost fuelled by foreign money, face the verge of collapse. The country is trying to recover has been on the road to recovery from the time when the 2008 crisis occur. They utilized the traditional fishing and tourist way to turn it all around. 2012 was the year in which they amused everyone by repaying many international loans. Unemployment got stabled around 6 percent and showing the trend of plunging down. These improvements were named as fortuitous decisions and luck. The decisions took by Iceland brought them out of recession. For instance they concentrated over struggling homeowners and gave them debt release then they also bailed out large bank in failures and also made sure that domestic depositors get their money back. (Nytimes, 2013)

China became the slump since the economic meltdown. This crisis got levelled out in end 2012 as the sale in retail sector rebounded. China’s economy grew 7.4 percent from the year before in September 2012. Economic analysts also pointed growth of 2.2 percent in every quarter, this gain denotes the as a sign of recovery. The senior economist for credit Agricola in CBI Hong Kong claims it as a green flag for the economy of china and he is assertive for future. The Chinese progress gave the hope to U.S housing sector and within a week the department announced than builders should start building houses and apartments for single families. This also affected and slowed the worsening chronic debt in Europe. Another indication of reviving economy was when Beijing cut down the interest rate twice and also injected flow of money in the economy through state companies and also investing on subways, building and other public works. However they avoided huge investment. In china rise in retail stores was seen 14.4 %, accelerating by 0.4% from the first half in the year 2012. Improvement in fixed assets and Investment in factories was observed - 20.5%. Chinese escalation is good information for economies like Brazil, African and Australia as they are connected in factory supplies (iron ore and other commodities). (Foxnews, 2012) .In November 2012 china evidenced an encouraging development it the report of HSBC where Purchasing Managers’ Index rose to 50.5 from 49.5 in October. The index shows measure of the nationwide manufacturing activity has moved into the expansion zone. The fears about retardation of the Chinese economy might calm down by this development in manufacturing activity (Prasad, 2012) there are random rays of optimism where few expect to grow: from the year 2008, 5,000 top companies of Spain have an increasing turnover in compare to the previous year. Recent Iberinform study says 80.4 % of the Spain’s largest corporations have avoided negative net results in their latest financial reports, out of which more than 75.4 % were of general sector. The activities like energy and manufacturing have best handled the crisis in 2012. (Thecorner, n.d.) appendix 4.

When it comes to stock market; they are also showing optimistic indication over crisis as Standard & Poor's 500 Index recent in first month of year 2013 moved 0.37% high and touched new peak five-year high.(Blaine, 2013)Since May 2011S Goldman Sachs’s shares hit high, their earnings nearly tripled as they lowered compensation expenses and increased revenue by signing deal. JPMorgan Chase said 53 percent net income jumped in fourth quarter and earnings set the record in 2012. Shares of JPMorgan shares rose to $46.82 by 1 percent, whereas Goldman climbed to $141.09 by 4.1%.Both Goldman Sachs and JPMorgan’s solid statistics of the main reason behind the financial momentum. (Valetkevitch, 2013) .November 2012 data depicts world economy on growth; service industries and stabilization in the manufacturing sector are one of reason of sharp growth in the economy. There was increase in the Global All Industry Output Index; which was 53.7 from 51 in October. The recent Purchasing Managers’ Index displays positivity in the service sector, so does the in manufacturing forward-looking indicator suggest the sector should back bounce into growth territory around year-end. There is still Cost-caution in the economy across the globe; however which will continue to hold back employment over the near-term horizon. (Prasad, 2012)

In 2012 Cooperation Council countries vigorously grow with an expected growth of 6%.Gulf Investment Corporation, highlighted bout the two forces which helped the gulf countries to bear the load of the global sluggishness which are fiscal policies and second is firm oil prices. Expansive fiscal policy on current expenditure and various investment projects proved to be a safety weapon for wage earners and consumers. Likewise increased natural gas & oil exports and firm oil prices are helping the financials of the countries to achieve high surpluses and sustained economic growth in fiscal accounts and trade of GCC. In 2011, income earned from oil exports for the all Arab economies reached $625bn from $450bn in 2010. It is also expecting to grow another 10% in 2012. This was revealed in latest OAPEC report. Energy consumption is hoisting up in the GCC economies and demand for electric power in Saudi is rising at around 9% in 2012. Usage of energy by industrial sector is driven by the state of health in world economy. Dubai’s DFM and Abu Dhabi’s ADI both are the gainers of UAE; they gained 2% and 1.71% respectively. Real Estate contributed the most in ADI performance and fundament of the Banks got improved. Dubai had financial and services sector as high in the end of September 2012 with a return of 6.39% and 4.92% respectively. Government launched a programme to support stock market when Kuwait 15 index rose 4.91% because of better fairing by blue-chip companies. The QE index in Qatar was marginally up for a month depicting gains of industrial and service sector gains. Although Oman’s index lagged in the market but the rise in industrial and service sector was seen supporting the index. Industrial sector similarly contributed in the Bahrain’s Bse index. These indexes describe the strong hold of industrial sector in the economy. And can be one of the reasons of moving towards recovery. The banks of Saudi Arabia and Qatar remains in the frame as size of assets continue to increase. Real estate sector in UAE shows a sign of improvement and support market (Khawaja, 2012)

Some facts which emboss the point of recovery are: the first is the sale of automobile sector where the US Company Ford Motor had 14 percent high sales in February 2012 in contrast to February 2011 with 179,119 vehicles sold and an increment of 19% in retail sales.Not only is this but the total auto industry highly concentrated. In 80% of total top 10 automaker worldwide productions approximately 90%are sold in US. The Three Detroit automakers – Ford, general motors and Chrysler are the commanders of the lion's share of auto market in US, rebounded with the growing recovery in the global market (Media.ford, 2012). After severely hits by the world financial meltdown these companies reorganised their strong pent-up demand and product portfolios in the US. Federal bailout funds were also rewarded to Chrysler and general motors. In fact GM has high expectation in industry sales of approx 14 to 14.5 million and ford expects industry volume of approx 14.5 to 15 million in the year 2012. (Minyanville, 2012) it’s not only the US which has shown a positive trend in the car production but UK has also hit a four year high, despite of the fact that there was sluggish car sale in Europe. The car exports were record high that is 8% with a production of 9%. According to the expectation of SMMT 2013 will be a progressive year for UK and this may counter balance weaknesses of Europe economy. The production figure was boosted because of strong domestic demand even though more than 80% of manufactured cars exported. In 2012, there was a rise in Total new car registrations - 5.3%.Other than the UK’s car export which went to EU, 16% imported to Asia: in this 8% was in china, US imported 13% and rest 15% went to rest of the Europe.(BBC, 2013).

Second fact is Chinese overtaking US grocery market and becoming world’s biggest grocery is indicator of growth in Chinese purchasing power. According to the IGD the grocery researcher firm Chinese grocery sector will continue its fast growth over the next few years with a target approx £1 trillion by 2015. According to the IGD estimates, there is a possibility that international grocery retailers could open – around 13 stores a week in china, which aggregates as approximately 2,700 stores over the next four years .This news shows that the above step is taken to steer the economy, to develop it into growth model with method to boost people’s incomes, to increase access to credit of population and to maintain good social welfare system.(Allen, 2012) As above mention the increase in buying is directly proportionate to purchasing power of the customer which indirectly render their income. Globally growing E- commerce sales states the growth in the world. In 2011 there was 20% increase in e-commerce sale that is $961billion. United States is ranked as world biggest e- commerce market where UK and Japan stands behind it with a growth rate of 10-15% per annum: say IMRG. In 2011 growth of china in the same market was more than 130%. It will not take time when Asia will be the largest market of the world. (Internetretailer, 2012)

.There was a forecast said Technology forecasts suggest that a green revolution, surging e-commerce and advanced Auto designs can boost 2015 and lead world economy out of recession. Supporting this certain glimpse of these forecasted were noticed in the story of US and UK where there was high demand in auto mobile sector and also growth business of e- commerce around the globe. (Halal, 2009)A newspaper article of IMF released in the year 2010 claims that economy will grow faster than expected. IMF also suggested the measure that government should take it order to build up their capital base, slow down the budget deficit and expressed their concern for the global economy policies.(BBC, 2010) This crisis also elucidate one thing that in this globalised world if all countries are somewhere connected to each other, so any good or bad will affect all over the place. So taking this into consideration if all collectively put efforts to emerge out of crisis they can succeed it. In order to sustain recovery countries just have to investigate their weekend areas and work to overcome all the obstacles and also plan for the next step after the recovery. All these indicator and reasons highlighted above in the report assert to be optimistic about the revitalization of economy from world global crisis. The examples and statistics prove economy’s movement towards the brighter side.
Surely the regular drumbeat of cascade economic and financial failures since 2007- 2008 is certainly demoralizing and such big hazard and its effects cannot be diminished very fast but world is almost suffering it from last five years which is not a small period. After considering many constructive activities and forecasts one can surely conclude that the economy is not going to get deeper in its financial crisis. World economy has proved it by sowing its brighter side happing around the world. If the meltdown was still continuing then global economy wouldn’t have seen the rise in GDP of several nations neither the growing businesses in different sectors like automobile, housing sector , e commerce etc. There was also a positive outlook witnessed in exports, income level and purchasing power of the population which directly prove the healthy and positive flow of the economy. Hence crisis will not deepen further as fast economic activates will build the economic gap again.

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