D-Process or World Financial Crisis explained
January 22nd, 2009
Since Q3 and Q4 of 2008 we have witnessed how the financial crisis progresses. It has since then turned from a so-called ``recession'' into a ``depression'' or D-Process. Ray Dalio coined this term because people tend to understand and interpret depression differently, for more info on that please see the D-Process link. The stock markets throughout the world have plummeted by more than 50% of their original value from 2006 to 2009. This is just the beginning, optimists see a recovery at the end of 2009, negative and realistic thinking though predicts a much longer downturn until 2010 and 2011.
The crisis is a global problem due to the importance of the US Economy on the World Markets. So far I had trouble understanding what really was the root of the problem and those Videos here make an excellent introduction to our current problem. I highly recommend to watch them.
Part 1:
Part 2:
The point and the problem of the current crisis is that the companies, banks, actually everybody has to restructure their entire company and modus operandi to cope with this situation. Many companies don't want to face this and instead fire people to adjust their monthly and yearly targets. This works until a certain point when that is not possible either.
Another effect which we can see is that Banks are getting more and more under Goverment control. What they will do is probably enforce more rules, laws and so on. Past economists like Milton Friedman (Nobel Prize, 1976 in Economics) were fighting for the strict deregulation up to a total free market. This strategy seems wrong and recent economists tend to dismiss this now and focus on reverting this to a mixture of ``commu-capitalism'' and recommend now a shift from the external locus focus to a internal. This means that e.g. countries should focus on their domestic instead of their international markets. This was one reason why Malasia for instance survived the Bubble burst so well in Asia.
I am looking forward to your thoughts on this.
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