Shifting focus from Dollar to China
The ghost of global meltdown seems to be knocking at the doors once again as the European economic crisis started getting graver with some of the top economies of the European Union including Ireland, Portugal and Greece, alarmingly reeling under the debt crisis, and on the other, China continues threatening global economies of its rate hike and currency devaluation to safeguard its growth interests, which may prove as a disaster for the western countries.
The global recession witnessed during 2008-09 is regarded as the worst global economic crisis since the World War-II. Employment opportunities declined, manufacturing activity stagnated, stock markets bottomed out and the world witnessed its one of the worst period in the modern economic history.
In the post World War-II era, the world economies had recognized the superior powers of the United States with huge resources and large scale demand potential making it the super power, which started dominating the global commercial as well as political relations.
The west started proliferating its ‘Capitalist’ school of thought and expanded commercial relations across the world on that basis. The world, in turn, accepted the US Dollar as an undisputed universally acceptable currency, making it the official reserve instrument for central banks of most of the emerging economies.
But in the recent past, considering the sub-prime crisis and the strong repercussions of the event that pushed the global economy into the darkness of the recession, the Dollar’s acceptance as a universal reserve currency has come under threat.
Considering the ailing weakness in the US economy and the Federal Reserve still struggling to bring back the economy on track by offering quantitative easing measures, one after another, has added to the worries of the ‘rest-of-the-world’ about their holding of the Dollar and its worth in the current scenario.
With recent visit of the US President Barack Obama in the Asian region says much more in action than what has been said on the dais. A president of the most powerful economy in the world makes a visit to the emerging countries like India, Indonesia and South Korea is a sign to be read between the lines.
Quite significantly, President Obama specifically raised concerns about China’s currency devaluation plans and boosting its manufacturing-led export growth. This indicates that the super-power is plugged into a situation, for which China holds the switch!
Post World War-II, Russia, formerly, the United Soviet Socialist Republic (USSR) diluted its policies to be more liberal, while another Asian giant, India adopted a mix of capitalism, i.e. market economy and a state-backed model of growth, i.e. socialist pattern. But China maintained its staunch communist school of thought and adopted growth model based on that.
Now, over six decades down the line, the West, which had pushed in all the resources to fuel market-led economic and industrial growth and followed a pure capitalist ideology, seems almost collapsed and a complete failure in bringing the happiness.
On the other hand China and some-what socialist India and Russia had continued growing on a rather conservative model over these sixty years and successfully sailed through the troubled times of the global meltdown of 2008.
The focus seemed shifting from currency strength, which dollar represented, to the country strength, which now China is seen showing by threatening the global community from its rate hike moves and currency devaluation plans.
Over last few trading sessions on the commodity and equity bourses, the markets across the world are seeing red due to China fears.
An interest rate hike in South Korea earlier Tuesday had caused sharp sell off in metal sector. The participants are worried that China may soon follow suit. If China, a top consumer of copper and aluminium, adopts a rate hike measure to cap its galloping inflation, it would hurt the industrial consumption, thereby leading to reduced imports by the country.
On these worries, base metals had slumped more than 5% in past trading sessions, while on the equities front, the Asian equities are among the worst hit in past few trading sessions.
Shanghai markets tumbled over 10% in past couple of trades. The sentiment is weak in the wake of the speculation that the government would hike interest rates for the second time in two months to tame the rising inflationary pressure. China’s annual inflation rate jumped to a 4.4% rate in October, 2010 one of the highest in past two years.
The global recession witnessed during 2008-09 is regarded as the worst global economic crisis since the World War-II. Employment opportunities declined, manufacturing activity stagnated, stock markets bottomed out and the world witnessed its one of the worst period in the modern economic history.
In the post World War-II era, the world economies had recognized the superior powers of the United States with huge resources and large scale demand potential making it the super power, which started dominating the global commercial as well as political relations.
The west started proliferating its ‘Capitalist’ school of thought and expanded commercial relations across the world on that basis. The world, in turn, accepted the US Dollar as an undisputed universally acceptable currency, making it the official reserve instrument for central banks of most of the emerging economies.
But in the recent past, considering the sub-prime crisis and the strong repercussions of the event that pushed the global economy into the darkness of the recession, the Dollar’s acceptance as a universal reserve currency has come under threat.
Considering the ailing weakness in the US economy and the Federal Reserve still struggling to bring back the economy on track by offering quantitative easing measures, one after another, has added to the worries of the ‘rest-of-the-world’ about their holding of the Dollar and its worth in the current scenario.
With recent visit of the US President Barack Obama in the Asian region says much more in action than what has been said on the dais. A president of the most powerful economy in the world makes a visit to the emerging countries like India, Indonesia and South Korea is a sign to be read between the lines.
Quite significantly, President Obama specifically raised concerns about China’s currency devaluation plans and boosting its manufacturing-led export growth. This indicates that the super-power is plugged into a situation, for which China holds the switch!
Post World War-II, Russia, formerly, the United Soviet Socialist Republic (USSR) diluted its policies to be more liberal, while another Asian giant, India adopted a mix of capitalism, i.e. market economy and a state-backed model of growth, i.e. socialist pattern. But China maintained its staunch communist school of thought and adopted growth model based on that.
Now, over six decades down the line, the West, which had pushed in all the resources to fuel market-led economic and industrial growth and followed a pure capitalist ideology, seems almost collapsed and a complete failure in bringing the happiness.
On the other hand China and some-what socialist India and Russia had continued growing on a rather conservative model over these sixty years and successfully sailed through the troubled times of the global meltdown of 2008.
The focus seemed shifting from currency strength, which dollar represented, to the country strength, which now China is seen showing by threatening the global community from its rate hike moves and currency devaluation plans.
Over last few trading sessions on the commodity and equity bourses, the markets across the world are seeing red due to China fears.
An interest rate hike in South Korea earlier Tuesday had caused sharp sell off in metal sector. The participants are worried that China may soon follow suit. If China, a top consumer of copper and aluminium, adopts a rate hike measure to cap its galloping inflation, it would hurt the industrial consumption, thereby leading to reduced imports by the country.
On these worries, base metals had slumped more than 5% in past trading sessions, while on the equities front, the Asian equities are among the worst hit in past few trading sessions.
Shanghai markets tumbled over 10% in past couple of trades. The sentiment is weak in the wake of the speculation that the government would hike interest rates for the second time in two months to tame the rising inflationary pressure. China’s annual inflation rate jumped to a 4.4% rate in October, 2010 one of the highest in past two years.
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