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Global Economy: The Current Situation

By: Thomas Kerrin5 Thomas Kerrin5

Global Downturn

Many market analysts, particularly those who have found their way into the media, have made a habit lately of predicting a dire future for the world economy, and as a result for the future well-being of every day folk.

If all the information gathered is true, they may well have had a point. Global stock markets are tumbling in response to a sell-off that has been sparked by concerns about the global economy and the recent record price of a barrel of crude oil.

The hardest hit has been the Dow Jones in New York, which closed having lost nearly a percent of value. Paris and Frankfurt closed that day down 0.6% whilst the slightly more extreme Asian markets in China and India dropped by 5.3% and 4.3% respectively. At the same time a barrel of crude oil now costs in the region of $142 after concerns regarding supply have led to another price rise.

The global stock downturn is said to have begun on Thursday when the Dow fell to a two-year low, dropping 3% in the process. This has led to fear on Wall Street that rising prices and tighter finances will force Americans to curb spending and send the economy into recession, though this is not exactly a new worry.

In comparison US consumers received positive news with the economic stimulus package, which will hand out in the region of $107bn to American this year. The news led to a household budget boost and had a knock on effect of consumer spending rising by 0.8%. Some experts have remained pessimistic though as most of the rebates have been placed in savings accounts rather than being spent.

Comparatively speaking things this side of the Atlantic are positive. The FTSE shrugged off early losses and battled up to a 0.2% rise. The current problems in global credit prices find their roots in the American sub-prime crisis and as the economic situation of different elements of the world are so closely tied together the FTSE will only be able to survive a global stock fall for so long before it too begins to suffer. Further it suggests that the current high mortgage rates and difficulty of securing credit don’t look like they’ll be alleviated in the near future.

The global economic situation is a tangled web, finding it’s roots in stocks and shares, global oil prices, and a credit shortfall world wide as institutions try to protect themselves. This in turn leads to higher living costs as petrol becomes more expensive, transport of food leads to increases in supermarket costs etc. Saving money, therefore, seems like the best idea, but it does not help to stimulate the economy.

For the moment, it seems like the global downturn is going to stick, and for many it’s just going to be a case of holding tight and riding it out.

Article Source: Main Articles

Thomas Kerrin is author of this article on current accounts. Find more information about loans here.

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