Are We Looking at a Global Economic Meltdown?

global economic meltdownSome very deep global reasons have been attributed to the recent decision of the Federal Reserve board not to raise the interest rates. This would have been the first interest rate in a whole period of 9 years should the decision has been positive. However, Janet Yellen, the Federal Reserve Chair stated that the decision to shelve raising the interest at this time is as a result of the slowing global economy which also includes China. This development has become a source of worry to the US and for others who have investments denominated in the US currency.

In fact, this news did little to douse tension about the state of the global economy instead it brought to the fore that we may be facing a real global recession. Unfortunately, the term “global Recession” is shaking up the world economy in such a way that there is an indication that the world’s finances will likely head to a very uncomfortable downward zone.

This is not to say that the downward movement of the global economy is just happening now. In fact, it has been on this trend since 2010 looking at the GDP figures. The two countries hardest hit by this situation happens to be Russia and Brazil as low oil prices and weak demand becomes a contributing factor. Realistically speaking, majority of the top oil producers are small emerging economies and the effects has seen them getting weakened which has also affected the global financial standing.

The reality remains that recession is just like an unavoidable part of a business cycle even though it comes with a lot of devastating consequences. For example, countries can expect a tremendous rise in the unemployment rate during recession as the demand of goods and services continue to decline. This puts pressure on the affected countries as the possibilities of mass and civil unrest stare at governments at all levels. It is important to understand that recession in itself causes the demand for commodities to reduce drastically because the need is weakened leading to an unfortunate slowing economy. In fact, this whole thing works chains in such a way that as demand slows, it becomes a catalyst of other unfavorable indices. In the case of the top oil producing countries, the weakened demand for oil was the first piece that became a catalyst of the wider problem.

Like said earlier, recession is part of the business cycle and with that in mind, it is important to understand that things will start going upwards at some point. However, there seems to be no actual way to predict accurately when the next cycle will likely come up or when the current one will likely end. There is also no way to know the kind of damage that could come if it becomes necessary to prepare for the downturn. Even though there are a lot of analyses, information etc. available, the reality is that knowing, how it all plays out and damage it can cause remains a thing of speculation and can only be done when it has already come. Therefore, as it stands, we should just hope that the next global economic downturn will come soon and will not be devastating as thought.

Written by: CentroFX

Note: CentroFX can provide you excellent tips on the best practices for managing and operating a forex account today.

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