Saturday, July 11, 2009

Financial crisis

Recently I went through the economic and news reports of some of the economic institutions and organizations such as South Asian Association for Regional Cooperation (SAARC), World Bank, European Union, Asian development bank, International monetary fund and Federal Open Market Committee and I found that the overall economy is slumped.

All nations suffer in some or the other way from the financial crisis with some variations depending up on the economic policies of that country. Some accuse the capitalism for these economic crisis and some blame financial institutions and their policies for being so apathetic and unvigilant in their activities.

I would also be somewhat in the favor of blaming capitalism; I don’t know that how long the world’s hungry businessmen will continue their greedy quests for growth in their businesses and wealth. In my point of view this perpetual growth is very destructive in long term even though they do facilitate and modernize today’s life of the people.

As we know according to the classical theory which says that, “supply creates demand” is correct but only for unsought and luxury products only I suppose, the basic and necessary commodities like food, medicine and things like that have their own demand even if they are not produced and supplied, because we human beings are alive by consuming them.

On the other hand the Keynesian theory states that, “demand has its own life” is also correct because once a persons needs are satisfied he/she may not buy or seek to demand that particular item. I will justify it with a simple example; suppose you are neither hungry nor thirsty as well as have no appetite for taking anything, so will you be willing to spend money on anything edible? Absolutely not, you will not buy anything until and unless you become hungry, so this is what demand has its life.

I am quite confused when I hear perpetual growth and development, increase in production and things like that around the world from every single business and businessman. Don’t they think that how long will this growth of everything continue and how long will they be selling all the things in increasing manner not even in an even and stable manner.

Definitely one day it will face recession and trough due to the completion of demand. That day is exactly today; it had come once in the near past, and will definitely be coming in the future too. The economy itself will recover when the people consume bought products and or the products become obsolete, thereafter people will tend to buy.

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