Saturday, December 21, 2013

World Economy - more discussion

Certain areas of the economic world are showing a high growth rate. Demand for goods and services, outstripping supply, is creating an inflationary situation. Too fast an economic growth is not a very good thing to strive for. That which grows fast also dies out fast. Many economic areas are showing a retarded growth rate. We must never forget that resources are limited in supply, energy resources being the most important of these. A very judicious use of such resources is absolutely necessary, keeping in mind a balanced and equitable growth rate while formulating plans and policies. Changing our lifestyles may bring some long-term beneficial effects.

Too much of capital is remaining sunk in assets that have gone unproductive. This has given rise to a scarcity of capital underneath. Too much optimism is responsible for this. Who does not want to grow and prosper? The faster the demand for a thing grows, the faster it dies also. Once it dies, the capital sunk in the production of those goods lose their economic value.

Excessive competition of goods and services is responsible for this. Excessive consumption and consequent demand gives rise to over-optimism among producers and investors. But optimism in an area is dying out very soon. Its place is taken over by some other. Rapid change in lifestyle is a key factor that is responsible for this.

Judicious management of fiscal and monetary policies is of utmost importance. Fiscal measures, backed up by a sound direct tax management policy, a smooth system of distribution of goods and services, prudent energy management policies, long-term environment control measures and their utilization, and above all, a high level of mutual understanding among nations is necessary for the upliftment and smooth functioning of world economy as a whole. Collective well-being is very important.

Monetary measures can bring short-term positive results but that does not last long. Fiscal measures are of prime importance.

Some oil markets are tending to come under stressful conditions. However, nothing can be taken up in isolation. All are interconnected.

Countries are incurring debts, rapid growth is threatening the pool of future resources, both natural and man-made, rapidly changing consumption pattern is putting producers in a difficult spot, business houses, driven by over-optimism, are unknowingly trying to outgrow themselves.

Social, political and economic situations have to be taken up and assessed in totality. One affects the other. A widespread socio-economic-political transformation is necessary to bring back the world economy to a smooth track.

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