11 August 2008

Business Cycles

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Lehman Brothers goes bankrupt with a debt of $68 bn. Merrill Lynch is under trouble and was bought over by Bank of America to save it from going under. AIG, the worlds largest insurance company went to the fed for funding. The crisis arrives to North America. The head of the Bundesbank Germany said this is the biggest crisis he has ever seen. Watch him below.
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Will a depression follow? If I have to believe the book by Wesley Clair Mitchell, an economist (last edition 1960), yes all crises of this magnitude were folowed by depression in history without any exception! Many lost job in the US and also in UK. The story I read in the news is like a replay of what the book "Business Cycles" described about economic crisis. A while ago I thought it was another theoretical crap. No. The author is a wise man; book is written after a thorough research.
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The problem is not just in US and UK. The French president has been complaining about inaction by the central bank of Europe. Canadian prime minister said yesterday that there are no chances of a depression (he is not an economist and he wants to win the election that is scheduled)! The central bank of Canada website anounced that it will help the US financial system to hold on by provising funding. There is a news that big bankers including citi group have come together to improve liquidity.
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If the US, UK, Canada and some Europian economies go down, Indian economy will head south. There is a talk of IT down sizing in India. 1200 employees working for Lehman's BPO office close to Mumbai have lost job. We all might have to look for another job may be within a year! Who knows?
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