An economic crisis enveloping the world

  • A big question mark has emerged on the West’s fiscal policy. Before finding what has gone wrong and where, a short horrible picture of present scenario. The European Union, the tarrif reliefs’ was meant to stablilize the European economy. Of late, a negative trend started showing up. The common currency Euro effected the national currencies of states. The most sufferer was UK Pound which started sliding down in foreign exchange world. Same happened to Germany’s Mark. This trend adversely affected European Stock markets. The first uproar was in UK where a mass campaign started to leave EU. So much so, it resulted into referendum and final outcome thereof was “Leavies” won over “Remainies”. David Cameron has decided to resign as a rule in come October. The side effects has started right now. The German industrial and business houses’s share slumped, and so is the trend in all the other EU countries. This is not all said and done – it adversely affected the US economy. CNBC adds:
    “U.S. stock index futures tumbled Friday as results from Thursday's referendum showed the U.K. had voted to leave the European Union (EU). Dow Jones futures broke below an implied open down more than 700 points overnight, before paring losses to show an implied opening decline of about 500 points.
    The referendum result stunned markets, which had expected the U.K. to vote to remain in the EU. The leave camp secured 51.9 percent of the vote.
    At around 3:30 a.m. ET, U.K. Prime Minister David Cameron, who campaigned for the remain vote, announced his intention to resign by October.
    The U.S. Securities and Exchange Commission's limit-down rule comes into effect when equity securities fall by 5 percent or more. This is designed to control market volatility by preventing trade in securities after large and sudden price moves.
    London's benchmark FTSE 100 stock index accelerated losses after it opened at 3 a.m. ET to trade as much as 7.9 percent lower, before trading about 5 percent lower. The French CAC traded more than 8 percent lower and the German DAX was down 7 percent.
    The STOXX Europe 600 Banks index traded more than 14 percent lower to more than 40 percent below its 52-week intraday high. The worst day for the index in history going back to 1987 was a 10.39 percent decline in October 2008.
    "It is important to keep things in perspective, but in the short-term, we need to brace ourselves for more volatility," Andrew Sentance, senior economic adviser at PwC, said in a note on Friday.
    Sterling fell as much as 10 percent against the U.S. dollar early on Friday, before paring some losses to trade 6 percent lower at $1.3695.
    A bid for "safe-haven" assets early on Friday saw 10-year U.S. Treasury note yields hit a low of 1.406 percent, its lowest since July 26, 2012. The yield recovered to near 1.49 percent as of 6:57 a.m. ET.
    The 2-year yield hit a low of 0.499 percent, its lowest level since April 17, 2015.
    Spot gold prices rose about 5 percent to near $1,327 an ounce, after earlier hitting its highest in more than 2 years.
    Brent and WTI crude futures for August fell about 5 percent, to around $48.28 a barrel and $47.63, respectively.
    U.S. stocks closed more than 1 percent higher on Thursday, with the pound near year-to-date highs against the dollar, as expectations rose that the U.K. would vote to remain in the EU.”
    So why this sudden economic crisis the world is facing? I don’t think it is sudden. It is all about politics. The EU was running its economic affairs quite satisfactorily. Then, came the Ukraine crisis and tussle between Russian Common markets versus Europeans. EU won Ukraine by offering many advantageous facilities to the disgust of Putin. This done well, but it totally disbalanced the balanced economy of EU. May be, there are other factors as well, but this crucial cause cannot be ignored.

  • There is a very likely scenario that comes Monday morning when the markets re-open for trading we could very well see another Lehman moment of 2016.