A Global Recovery Without Growth

OECD Expects A Period Of Stunted Growth Over The Course Of 2010

First Published: ADawnJournal.com Published Date : July 1, 2009

The good news first, so no-one loses hope: Next year will see, in Canada and the rest of the industrial world, an economic recovery from the recession we currently find ourselves in. Now, the bad news: there will be little or no growth in the economy as part of this recovery. So says the global Organization for Economic Co-operation and Development in a report published this week which will leave many people wondering whether to smile or frown. The general consensus has been that the recession is heading for an end later this year with a cautious but pronounced period of growth next year. The Bank of Canada for its part claims that growth may even reach 2.5%, but the OECD thinks differently.

This report seems to be more pessimistic in general than the assumptions of the World Bank, with the OECD expecting a period of stunted growth over the course of 2010 which will see the Canadian economy grow by a small margin of 0.7%, lower than the USA’s figure of 0.9% and the world in general at 2.3%. The World Bank, which does not have a breakdown for Canada, expects the US to have growth of 1.8%. Things could be worse of course as, according to the OECD, the United Kingdom will experience no growth at all. It should also be noted that the OECD forecast is just one of many, and the most pessimistic of them all so far – forecasts certainly do not always reflect the eventual truth.

What does seem universally accepted is the belief that the latter part of this year will see an end to the market contraction which has characterized 2009. Aside from that, it is difficult to know what to believe, with market figures completely failing to provide a uniform indicator of how the future will pan out. Goods and retail purchases have been rising in Canada and above, for example, but the housing market, particularly in the United States, has failed to perform as well as had been hoped. Reading the trends is likely to remain a lottery for some time to come, although news that the recession is soon to be over will hopefully become a self-fulfilling prophecy, with consumer confidence expected to grow as a result.

On the last point, the OECD and the World Bank seem at least to be of one mind. The global recession does not have long to run, whichever way you read the figures. OECD member countries have seen market contraction in the region of 4.1%, expected to be the overall figure for this year. In March, this figure was estimated at 4.3%. Given the horrors of 2008 and much of this year, the recession was inevitable, but it looks to be nearing its end. Economic strategists seem to be of a single mind on stimulus packages too, giving the concept a cautious thumbs up, urging that the governments implement the programs included under those packages, and advising against further action to pump economies up once recovery does appear – correction is good, micro-management may be detrimental.

Is Now The Right Time To Buy?

The credit Crisis And You

First Published ADawnJournal.com : May 10, 2009

The fact that the financial markets are currently in a total mess has led many people to question whether getting on the real estate ladder is quite safe. As the news reports continue to resemble some kind of reality TV show by the title of “When Mortgages Go Toxic”, it is only to be expected that people should be reserved in terms of going after that new house – if things go wrong they could end up in poorer financial shape than they ever had imagined. But as with everything, there are two sides to the situation. You need to take into account things other than the turmoil that the market is in, and get an idea of exactly where you stand – because the truth of the matter is that no two situations are exactly the same.

The people who will really lose out in the current market are those who have a poor credit score along with those with a dubious score. As little as one missed or incomplete payment, or any reduced payment agreements with creditors and you could be judged as a credit risk in the current market. If, in addition, you need to sell to buy, then you are looking at getting less for your current house, and the shortfall may be too much to make up. It is not the time to upgrade your living arrangements, nor get into property developing for profit if you are in any of the above situations. Aside from people in these cases, however, there is still some scope. After all, the banks cannot stop lending completely – it is still an important income for them.

The credit crisis has meant that banks need to be more careful about who they lend to. Seeing it from their point of view, it is entirely reasonable that they could look at an individual’s credit file, see black marks against their name and be more than a little bit reticent about lending large sums of money. They need to protect their investments, and it was irresponsible lending on the part of major banks that precipitated the crisis in the first place.

If, however, you have an excellent credit history – the longer the better as it is long-term control of lending and repayment that they are looking for – you still stand a good chance of getting a loan, and the market is depressed at the moment, meaning that the speculator with access to funds is in a very advantageous position.

If you have recently taken out a loan, it may be wise to wait a little while to take out another. If you have the ability to pay off all or most of the loan, it is less important, as the thing that the lenders are really looking out for is overcommitment. Even people in very good jobs are still prone to downsizing – so large monthly repayments are still undesirable. The banks and the borrowers have been given a sobering lesson in the last couple of years, and it would be naïve to think that the rules could stay as they were.

What Is A Recession ?

Definition Of Recession

First Published : May 13, 2009 ADawnJournal.com
Simply put, recession is the opposite of economic growth. A recession can be defined as a decline in the GDP (Gross Domestic Product) for more than two consecutive quarters spreading across the country or across the globe.

GDP measures the performance of an economy. You get GDP by adding goods and services produced within a country’s borders in a year.

Signs Of A Recession

You will see the following when a recession occurs:

– Demands for products and services decline
– Goods and products start piling up in the factory, as no one wants to buy  them
– Firms start to lay-off employees, as there is no need for full-scale production due to unsold inventories
– Unemployment starts to rise
– Real income declines
– Business profits and confidence start to plummet
– Investors hold off on investing new money
– Goods and services start to get heavy discounted, as no one is buying anything anymore
– Government start to borrow money
– It’s a lose-lose situation for everyone

What Causes Recession

Recession can be caused by internal and external factors.

Internal or Domestic factors: Higher interest rates can cause a recession, as it discourages consumers from spending and therefore factories shut down, resulting in lay-offs. Examples of other causes include harmful government policies, a sudden increase of food and resource prices, natural disasters, and terrorist attacks.

External Factors: High oil prices, wars, global political instabilities, currency crisis can cause a recession as well.

What Is A Depression

A depression is kind of a recession but on a large scale and has a greater impact. Here are the common characteristics of a depression:

– Lasts longer
– Much larger decline in economic and business activities
– Real GDP usually declines by more than 10 percent
– Causes panic and public fear

The Great Depression, as it is commonly known, was the last depression the United States and many industrialized countries experienced from 1929 to 1938. During that period, the unemployment rate in America reached 25% and the GDP declined by 33%. The world hasn’t seen anything like the Great Depression in the industrialized nations since. Millions of people were unemployed, homeless, and facing starvation.

The Asian Financial Crisis of the 1990s caused depressions in many Asian and non-Asian countries. Indonesia, Thailand, and South Korea were affected the most among many other Asian countries. Non-Asian countries such as Finland and Russia were hit hard as well. Russia’s GDP fell 40% and Finland’s GDP fell 11%.

Ten Tips to Survive Global Financial Meltdown

How You Can Survive the Economic Crisis

First Published: Oct 30, 2008 ADawnJournal.com

In light of the recent global financial meltdown, it is imperative that I write a post on how to survive this financial nightmare. The good old days of 2007 are but a memory now and all we can do is to hope that this nightmare will be over soon. In the meantime, here is what you can do to survive the current volatility:

1.   Protect Your Job – Stay put with your current job. A new job is a lot harder to find in a financial crisis like this. Give your boss more than you are required to do on a daily basis; volunteer on a new project, volunteer to stay on some extra hours when required, etc.

2.   Have an Emergency Fund – I recommend setting aside at least six months expenses in a separate account. You should never touch this account unless you lose your regular job or your regular monthly income stops flowing in. If you don’t have an emergency fund, start building it now. This is something you need to do only once in your lifetime.

3.   Reduce Your Debt – When you have debt, you are no longer in control of your life. You are instead working hard to pay interests to your financial institutions. If you lose your job, you will be in a more high-risk position than someone who does not have any debt. Stop borrowing more money and concentrate on paying off your existing debts.

4.   Reduce Your Expenses – Do you really need to have five features on your cell phone that you never use or one thousand cable channels that you never watch? When was the last time you visited your gym? Although your gym membership fees are still appearing every month on your bill, do you go? If you can reduce you expenses here and there for small amounts, it will all add up and turn into a large amount at the end of each month.

5.   Have An Additional Income Flow – Start looking into generating a second income. You can earn additional money on top of your regular nine-to-five job by starting an ebusiness, writing a book, starting a blog, doing a part-time job, starting a home business, etc. I earn additional money from Invest Now and from A Dawn Journal. It’s always good to have a secondary income source and keep increasing it gradually so one day you will earn enough money to quit your traditional nine-to-five-job. Read ADJ regularly to learn more on this.

6.   Continue Automatic Saving Plan – If you are saving automatically from your paycheck or bank account, there is no need to stop it. Continue your long term saving plans. One major mistake we always make in market turmoil is that we stop putting money aside and end up spending this extra money. When conditions return to normal, the automatic saving plan you stopped never gets started again.

7.   Learn To Invest – If you are not familiar with investments, learn how to invest. Asking you to learn investments may sound conflicting in a financial crisis like the one we are going through now, but don’t make the mistake of staying away from investments. There will always be volatility in the market, but when it comes to achieving long-term goals nothing beats the stock market. Research has shown that the stock market has averaged an annual 11% rate of return over the last 120 years. Cash has managed to return only 4% annually for the same 120 years. You may be surprised to know that stock markets actually have outperformed home values by a considerable margin in the long run. Stay invested for the long run—through good and bad times, through market ups and downs. Take a few courses, read investment sites, blogs, and financial books to increase your knowledge. In Invest Now, I discussed how anyone can start investing with $25, and I also provided lots of tools to realize your financial goals.

8.   Live A Simple Life – Simplify your life—live rich, live longer. It’s that simple. Do you really need that latest iPhone, HD Plasma TV, BMW, and gigantic house? We spend our precious life energy on the weekdays to earn money so we can spend it on the weekends. We work to pay our daily expenses, but we end up spending more than we make on things we do not need. So we go back to work to get money to pay interest on money we’ve already overspent. Stop using credit cards, live within your limits, help other people, and donate to charity whenever possible .

9.   Diversify, Diversify, Diversify – The old adage “Don’t put all your eggs in one basket” is still true to this day. Regardless of market conditions, some sectors will always go up and some will always go down. Try to spread out your investments across different sectors such as index funds investing across a variety of businesses, cash, real estate, bonds, cash, natural resources, and so on.

10.   Relax: Don’t Panic – Relax—this is not the end of the world. Avoid unnecessary risks by not making panic-filled emotional decisions. We survived the Great Depression , the 1970s oil shock, the 1980s crash, the 2000 tech crash, and we will survive the 2008 meltdown as well.

Why Are Poor Countries Poor and Stay Poor?

Why Are Poor Countries Poor?

First Published: ADawnJournal.com : July 9, 2013

Although it sounds like an easy question to answer, in reality this is not something so simple. There could be hundreds of bizarre reasons why some countries are poor and stay that way. Also, this is one of the most controversial and debated topics on earth, and everyone can come up with their own arguments. Today, I will discuss my own three reasons to touch base on this.

1. Lack of Specialization

If you look at majority of the poor countries on earth, you will see that most of them are agricultural or are a raw material-based society where the majority of the population make a living based on agriculture or raw material production. If they want to produce these more to make money, it simply won’t happen due to the diminishing returns to scale. It simply means that if poor countries will produce more to make more money, they will actually make less money. This is because when you produce something that does not require any specialization or innovation, producing more without increased productivity will lower its prices – and each additional worker assigned to produce without productivity and innovation will produce less than the person before. Thus, producing more will decrease prices – making things even worse.

2. Corruption

Regardless where you look at, from Bangladesh to Burundi or Philippines to Paraguay, one thing all these countries have in common is corruption. There is corruption everywhere on most of the world’s poor countries, including in all levels of government, police, and the very anti-corruption departments that are supposed to look after corruption. When the government can not guarantee the basic rule of law, everything falls apart in the society. Think of this: Why would be a police officer interested in catching a robber who just killed a businessman for $100? He won’t – because he knows if he tries to prosecute the robber, he would lose his job as the robber looks after interests for one of the ministers. So it makes more sense for the police officer to grab $20 (of the $100 the criminal robbed) and let him go. It’s a win-win situation for all, except the businessman who just lost his life for such a small amount. Find it hard to believe? If you are from one of the top least corrupt countries on the Corruption Perception Index list, you will have a hard time believing it. But if you are one of the worst corrupt countries on the same list, you already know that this is very common in your country.

3. Poverty Itself

This may sound little a bit bizarre, but poverty itself may be the reason that prevents countries from getting out of poverty. Populations in poor countries are engaged in securing enough income to feed their families. It’s not an option for lots of them to enhance their knowledge in education, science & technology, arts, specialized skills, etc. to go beyond their boundaries to earn more income. If you look at it on a larger scale, the same applies to the government level. Government does not have enough money to invest in research and development to secure a better future and higher standard of living for their citizens. Even though if there was enough money, government would not spend it for the benefits of its citizens because politicians are occupied stealing money from every possible resource to buy properties, increase their bank balances, and securing higher education for their kids in 1st world countries. If you look at the high-ranking government officials in any of the poor countries, you will find out that their families and children are going to the universities in countries such as Canada, America, Australia, and so on. These families and children do not rent to live in those 1st world countries – they own their properties and drive high-end cars that even impossible to afford for many people in the first world countries.

What I have discussed so far are just some of the highlights from many reasons why some countries are poor and will remain poor. Actually, this topic can be neverending, as there are so many other factors that can come into play. However, my belief is that corruption is one of the most important factors (if not the most important) that makes countries poor and keep them poor for good. If you think deeply, you will see that most of the obstacles poor countries have (that keep them poor) can be easily avoided if bad people stop stealing money, which will stop the leakage that drains out the money. You can not fill up a tank, regardless how much water you pour in, if there are holes in the tank. It does not matter if you buy new tanks, color the tanks, use better material to build better tanks – because you are ignoring the basic fact, which is you have to close the leaks in those tanks first.