d downs or fluctuations in business / economic activit

HASES OF TRADE CYCLE :-

PRESENTED BY ,
PIYA CHATTERJEE
rosperity or Boom PUSPENDU NAG
SANDIP MANNA

Recession or Decline

Depression
Recovery
 Trade before the 16th
Øcentur
Continentaly trade only (Europe-Middle East-
Asia);
ØAround 1000 AD Europe was relatively
underdeveloped relative to Asia and the Islamic
world;
ØLimited manufacturing activity, trade relies on
primary goods, materials and simple manufactured
goods.
 Interregional trade flows ( around year 1000 ) ( source :
Findlay & O ’ Rourke , 2007)
to West East Islamic Central Sub-S South SE Asia East Asia
from Europe Europe World Asia Africa Asia
West swords slaves, _____ ______ _____ ______ ______
Europe swords
East slaves, slaves, furs, ______ _____ ______ ______
Europe furs, furs, silver swords
Islamic silver
spices, textiles textiles salt tex, War gold spices
World textiles silver manuf, horses
Central silk, sil
______ silver Paper, swords Silver,
______ ______ horses
Asia silver, reexport
Sub-S ______ _______ slaves
Gold, ______ Timber, ______ _______
Africa slaves, iron
South ______ _______ Spices, Peper, textiles Textiles, Textiles
Asia silk, tex textiles pepper
SE Asia ______ _______ Spices, ______ ______ Silk spice, Perfume
perfume rice spices
East Asia ______ _______ Silk, Silk, tea ______ Silk, Silk, wood
porcelan porcelan copper
THE ECONOMIC CRISIS
Spread of the Economic Crisis and Impact
•Meltdown of stock prices across the globe
•Market price of stock in Freddie Mac plummeted from
$63 on October 8, 2007 to $0.88 on October 28, 2008.
•Capital base of banks shrank and severely
curtailed their ability to make more loans : Lead to Credit Freeze.
•Lead to rise in Demand for Dollar and fall in currency value of other
countries.
•Collapse of Financial Institutions in several parts of the world
üLehman Brothers; AIG, Freddie Mac and Fannie Mae etc.
üCentral Banks in vulnerable countries such as Iceland become
Bankrupt
•Investors across the globe lost huge amount of their investments
•Severe Credit squeeze and Liquidity crunch for the industry
Housing; Automobiles; Retail; Services etc.
•Leads to drop in international trade in commodities and services.
•Job cuts and serious unemployment problem followed.
Global Response to
the
q Crisis
Government take over of Banks and Financial
Institutions on the verge of Collapse to prevent
the financial system collapsing . Examples -

qEfforts were made to coordinate interest rate

cuts , and pursue actions to restart and restore
confidence in credit markets .
qFacilitation of mergers and acquisitions .
qLarge Scale Government bailout packages for
affected industries .
qUS Bailout package for affected Industries .
•Banks and FIs exceeds 1 trillion US$ .
•Major economies such as European nations : Japan ,
Russia , China come out with huge bailout packages
and stimulus packages to bail out institutions and
kick start their economies .
IMPACT OF THE CRISIS ON INDIA

qSignificant Currency devaluation

qDemand side problem
qDrying up of external demand for goods and
services due to major problems in US and Europe:
India’s major trading partners
qLower domestic demand due to buyers hesitation to
spend.
qExports down by about 20%
qIndian Bankers are also in great danger as their
foreign operations crashed.eg :-

qMajor affected sectors are: Real Estate; Auto

Industry, Textiles; Gem and Jewelry; Chemicals and
Allied Products; Iron and Steel; Capital Goods etc.
INDIA’S RESPONSE
TO THE CRISIS