Continued Global Downturn

The Global economy is currently in the largest financial crisis since the 1930’s and has been since 2008. The crisis began in the United States triggered by a complex interplay of valuation and liquidity problems in the banking system in 2008. This in turn crashed the U.S.housing market which peaked in 2007, caused the values of securities tied to U.S.real estate pricing to plummet, damaging financial institutions globally. Governments worldwide were then forced to bail out there banks and building societies. This banking crash effected all industries and created mass unemployment and a lack of job security for billions.  The official jobless figure stood at 205 million in 2010 and by January 2011 it was reported that more than 1.5 billion people – half the global working population – in vulnerable or insecure jobs. With people not  able to find work and governments constantly cutting benefits the situation has grown. Now in 2012 the global economy seems to be facing further downturn this is due to Persistent high unemployment in the United States and low wage growth are holding back aggregate demand and, together with the prospect of prolonged depressed housing prices, this has heightened risks of a new wave of home foreclosures.  The International Labour Organization reported that “It is unlikely that the world economy will grow at a sufficient pace over the next couple of years to both close the existing jobs deficit and provide employment for the more than 80 million people expected to enter the labour market during this period”. Also youth unemployment has been rising in both developed as well as developing economies, a trend which could have far reaching implications. This has huge economic costs in terms of loss of skills and motivation, and could lead to human capital depreciation there may also be accompanying social implications in terms of increased social strife, riots, illness, and so forth. Therefore it seems governments must put as much money as possible into the youth or this trend and crisis will continue for many years to come due to an aging population and unmotivated youth.

Sources:

http://www.bbc.co.uk/news/business-17890575

http://www.ft.com/intl/indepth/global-financial-crisis

2 thoughts on “Continued Global Downturn

  1. I doubt that the government’s approach to put a lot of effort and money in the education for young people is the right one at the moment. Not to be misunderstood: promotion of the education and training sector in Europe cannot be ignored, but at the current state, other policies need to be made. Europe has not enough jobs to employ a well-trained young workforce at the moment. So why pumping more money into this sector when it is needed elsewhere? Money has to go into creating jobs and it is the government’s task to support economic growth and build new jobs.
    Besides, if the financial markets are not more regulated, the global economy is stuck in a vicious cycle. I think that the current strict austerity measures are not the right track to reduce the high level of unemployment. Unemployment rates won’t decrease if all the money of the saving measures are only put to pay back their debts. Of course, the debt needs to be paid back, but also they have to invest into economic growth, so that the economic situation can improve, that economic growth increases and new jobs are created. The people who lost their jobs and live at the subsistence level need to see the light at the end of the tunnel and they shouldn’t be put out there without a perspective. Otherwise it leads to a rising tide of social unrest.
    To put it all in a nutshell, the EU should not only promote the education of the youth, they have to create new perspectives for today’s generation and future generations.

    Reply

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