US and Euro Crisis: Pandora’s Box

Europe and United States of America have long been the dream-destinations for people in the developing parts of the world. Now, those economies have been facing turbulence impacted each region of the world. They have not been silent observers; it’s just that their efforts have not worked out well.

Euro area is still facing a high level of unemployment and it is too frustrating to acknowledge that the recovery seems almost invisible in the straight economic highway of the region. Structural unemployment has become tedious challenge for the European economy because the organizations have not been able to generate the required jobs in the market meeting the job demand. At a glance, this situation looks like provoking the social imbalance and insecurity very soon as the situation is adversely affecting the social security of the region. A bigger threat is that the recovery measures are not working well and this situation would worsen the unemployment situation in the coming years too. Organization for Economic Cooperation and Development expects that the jobless rates in Spain and Greece to remain above 25 percent in 2014. Won’t this be a threat to those who live with some comfort level? Italy also showed up jobless rate of more than 12 percent. The only economy standing with sufficient confidence is the German economy with a two-decade low jobless rate.

Fiscal and monetary policies have to accompany each other to meet the overall development objectives of a country. But, in this adverse situation in the USA, Fed Chairman does not want to link the fiscal problems in the country with the central bank’s policy. And as always, the civilians are the ones who will be suffering from the same. However encouraging the recovery news of the USA were, the first step of idling 800,000 federal employees, the startup of the economy shutdown contradicts all previous positive news. The action has resulted negative repute to the overall policy making body, now the race would be to retain the credibility of the policy makers of the volatile economy.

How do you think is it going to project to the investment sector globally? Upto now, the stocks have not shown much volatility but commodities have and look at the major commodity exchanges in the world- London Metal Exchange, Chicago Mercantile Exchange, Dalian Commodity Exchange- Europe, USA, China respectively. We saw how Europe has been suffering, USA has been struggling and China, the largest trade partner to the globe and largest creditor to USA-when the big economies suffer, how can the partner remain unaffected? The investors in the USA and Europe would rather look to hold money for a precautionary motive and China- may god grace the economy to be patient enough to wait and watch. If this condition holds, the global prices might seem stable now but in the long run, let’s get ready for Vulnerabilities!

Note: This article was published in PERSPECTIVES of The Himalayan Times daily newspaper dated 6th October, 2013