The world has been witnessing for the last one year with dismay, the sudden reversal of capital flows from the capital accumulation mechanisms all across the world. The private capital routed through the stock markets are flying out to so called safer asset classes ,only to find out that nothing is safe anymore except hard cash. However with the cash crippled governments printing money to meet the deficits , the cash itself is getting depreciated at such an alarming rate .This has triggered debates about the limitations of private capital based systems and its failure to to stem the bubbles formed in the process early enough and to avoid a bust which wrecks many a one's life beyond repair.
However once again it appears that there is no viable alternative to it in totality other than increased policing("policing" a word tabooed??) of the financial markets and close monitoring of its data points to pre- empt formations of such bubbles. Hopefully the current crisis will pave the way for better and more efficient financial systems across the world.(The self correcting rule needs to be applied early in those systems of future to avoid the possibility of correction turning out to be an Armagodden in itself)
Till that happens,and till confidence is back in the system, which of course takes some time to clean itself up considering the flywheel effect, many possible scenarios can be though about.
Many with a pro leftist and anti American philosophy are having a laugh saying their point is finally proven. Many would gladly see Americal imperialism trapped in its own devices that hither to helped it grow at such a fast pace. Many are still seeing it as an American only crisis and at best ,as a crisis that is limited to the developed economies of the world.
However if one take a look at it, he can see that the reality is far from it. What one has to keep in mind that USA , though one may dislike it , is the biggest consumer in the world. And decrease in its purchasing power is bound to have serious repurcussions on all the produser countires and export based economies.(That include China , Russia, SE Asia, Far East etc..)
Now, many had assumed till recently that , irrespective of what happens in the rest of the world the Gulf countires won't be impacted, since they produse the most wanted commodity of the world - Oil. Remember, when the credit crisis was peaking , the oil also peaked along with, raising to 150$ per barrel. Many talked about shifting of the economic power from West to the middle east as the west was collapsing and oil was on the boil. Alas! , 3 months down, we have oil at 46$ per barrel (forget 150$ or 100$) .
What this means to the petro based economies is a striking revelation that a definite possibility exists that at any point of time the price will fall below the break even for oil production. Considering that the rigs are getting older and efficieny is coming down, and with the crude mines are getting deeper and difficult to opeate and that the crude from deep is having more sulphur content and hence least refinable, it is quite possible that many rigs will find themselves working at near zero margins.
So what!!! How does that effect we ,as keralites , who have no direct stake in Global cerdit markets or Crude business, We will still watch that 'tamasha 'that unveils in the west . If one thought so he could be potentially wrong in the future.
With the possibility of an oil price crisis, the Gulf countires might opt for austerity measures . The grand govt funded projects might take a back seat till global demand for oil comes back. The Opec might decide to cut the oil, and that would defenitely impact the total oil output and hence the GDP of these economies.In short it may not be far fetched to assume that the contsruction workers in Gulf, the semi skilled labouror, those who works in MNCs which migh scrap their expansion plans in Gulf , a small percentage of them would face either a cut in jobs or a cut in their salaries. Or else there could be increased taxation, And may be a law that part of the income should be spent in those economies itself to spurt the growth.
All this means a lot to a state like kerala which depends a lot of the NRI remittance to sustain its economy and flows to its exchequre.So the typical Kerala Gvt Employee , with a liberal and anti imperialistic , anti american .. (so forth) outlook might end up hearing from his Govt that his salaries may be delayed for the month because the Treasury is short in cash. And he should not be surpriced if someone told him that , it is because somewhere in the west a few americans didnt have enough money to fill gas for their cars..
So before celebrarting the US credit misery, let us look back and guage what is coming after us. After all we all are in a connected globalised world ..!
PS: Ofcourse the situation is far fetched at this point. But yet, what seems to be far fected some times is much more closer .Just like they print on those rear view mirrors!! :-)
- San
