We can see that Asia has managed to survive this crisis by itself as we can see the manufacturing and industrial sector stepping up their game. In addition, there is further support from positive export to the United States during the last month which is most likely triggered by the rush for the festive season, namely Christmas Day.
It is definitely not surprising that General Motor expects China to surpass United States by next year. China is the main consumer of the aircrafts made by Boeing, they are essentially supporting Boeing’s development by mass-ordering their aircrafts. In addition, China’s local demand has been strong and it needs to be because there has been weak demand for exports due to the current financial crisis which has obviously hit United States badly.
Let’s look at the few examples in Asia, Japan’s economy has rose by 3.7%, China’s by 8%, and we see that the semiconductor business in Malaysia is surging, accompanied by the rise in demand for real estates in Hong Kong and of course not forgetting the rise in automobiles demand in the superpower India.
The West, on the other hand is badly hit by the crisis. They are seemingly like a patient lying on the bed waiting for recovery and currently living on medicines such as the stimulus package plus a myriad of cash-for-clunkers program which has been consistently pushing consumer demand up the charts. This growth in demand however, should never be taken for granted because one thing for sure, it is not sustainable.
Statistics has shown that 77% of the people are still cutting down on their spending and 58% of the people are still paying off their debts.
With the subprime mortgage crisis over, people are still struggling to pay off their mortgage loans and businesses are initiating Initial Public Offering to increase their liquidity. Individuals, teams and even organizations at all level are all trying their best to come up with as much capital as possible to help them get past this tough period of time.
We can obviously see the government helping out by providing job credit schemes where the company gets money for each worker hired and they lower their interest rate so that businesses can make loans to help them sustain their business through this post-crisis period.
However, right now, people are both cynical and sceptical about whether it really is over, therefore, the spending is definitely slowing down and I do not believe that it is going to pick itself up anytime soon.
People cut down spending, consumer spending drops and business stop hiring and they start closing down outlets which are losing money at a rapid rate. At this rate, unemployment is still going to be on the rise. Without employment, people are not going to spend and the economy will still be languished for quite some time.
In conclusion, I believe that only sustainable growth will be able to help the economy to get past the crisis. In order for sustainable growth to happen, the exit strategy used by the United States, in terms of withdrawing credits and stimulus, has to be extra carefully and sensitive. It is going to be painful as usual, but it must be done. The knife has to be taken out before excess blood is lost. But is it more important to stop the bleeding first, before you take out the knife? The question is, when are you going to take out the knife? When sales are low, or when sales are at an all time high? If you take it out when the sales are low, won’t it go down even further and demoralise more? If you take it out when the sales are at its highest, won’t it plummet all of a sudden and cause a lot of companies to incur huge debts and collapse in the end? It is indeed going to be an arduous journey ahead, but the United States has to be assiduous and determined otherwise they will take a long time to get out of this recession.
Credit -Straits Time, -ldrinvestments, -travelblog, -transactint
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