Emerging Economy should Consume More & Save Less Developed Economy Should Save More & Consume Less.

1. Emerging Economy should Consume More & Save Less
Developed Economy Should Save More & Consume Less.
Presented by Deepa Chandrasekar

2. TWO STAGES OF MARKET ECONOMY
• Growing Market Economy
• Declining Market Economy
TWO FACTORS OF MARKET
• Demand & Supply

5.  Producer wants
his demand always
to be high
 Consumer
wants his buying
cost always to be
low

6. Recession
When your neighbour Loses his job
• Depression
When you lose your job
• Recovery
When you go shopping at Big Bazaar
• Boom
When Kishor Biyani stops shopping at
Big Bazaar.

7. Recession

8. • Gross Domestic Product
(GDP)
• Employment
• Investment spending
• Capacity utilization
• Household incomes
• Business profits

9. • The Two Major Reasons For Recession
• Over Production
• Low Confidence Level

10.  Low confidence level Word of Mouth
WORD OF MOUTH
• Cost Reduction Activities
• Producer Do not stock materials
• Consumer Hear lot of job cuts
• Consumer will get the fear of lose of job
• Less confidence to spend money
• Demand is Reduced

12. • US Corporate Equities
• 1999: $19.4 Trillion (2.1 GDP)
• 2008: $15.2 Trillion (1.1 GDP)
• US HH Net Worth
• 1999: $42.1 Trillion (4.4 GDP)
• 2008: $51.7 Trillion (3.6 GDP)
• Peak Unemployment
• 1999: 4.4%
• 2008: 7.2%
• June 2009: 9.5%

13. • What caused the Global Recession?
 Financial Crisis
• What caused the Financial Crisis?
 Easy Credit & Lax Regulation
• What caused Easy Credit & Lax Regulation?
 Savings Glut, Too much money chasing too few
opportunities
• What caused the Savings Glut?
 Too much saving in Asia, and too little in the US
• Why Too Much Saving in Asia?
 Asians like to save
• So what can we do to get out of the recession?
 Asians should save less; Americans should save more
Will it work?

14. • Geo-Political-Organization
– The opening of China
– The opening of India
• Technological Innovations
– Communication & Transportation in
the 21st
Century

15. • Chinese factories can compete directly with US
Factories
• Workers from India can directly compete with workers
in the US
• Workers in Developing World can participate in the
Developed World’s labor market without moving
• Huge increase in the Worlds’ labor supply in a very
short time period

16. * Corporate = non-agency non-government debt

17. To Come out of Recession
• Emerging Economy
Consume More & Save
Less
• Eg . China , India
• Developed Economy
Save More & Consume
Less
• United States

18. Government Plans
• Fiscal Policies – by Government
The Government Influence the Economy
by changing how it spends and collects
money
• Monetary Policies – By RBI
RBI Manipulates the available supply of
the country.

19. Emerging Economy – Fiscal Policies
• Tax Benefits for the businessess &
individuals – More Money available for
spending
• Government Spends more to create jobs -
Individuals get salary & spend more.
• Unemployment Insurance – Some income
for the unemployed people to spend.
Demand Increases – Market can Recover

20. Monetary Polices for the Emerging
Economy
• Reduced the Cash Reserve Ratio
• Increasing the Liquidity
• Banks can provide more loans to the
consumers
• Lower interest rates
• Individual take more loan
Demand Increases – Market can Recover

21. • A Stylized Model of Offshoring ……
• Money Flow through better Financial engineering.
• Tightening of Credit....
• Encourage savings in the U.S.A, and not subsidize housing.
• Development of institutions to channel savings within
China,India, … into productive activities.
• Corporated invest in the skills of their staff.