AMERICAN MELTDOWN AND ITS RIPPLES ON INDIAN ECONOMY

The Department of Economics organized a Guest lecture on the alarming current issue of AMERICAN MELTDOWN AND ITS RIPPLES ON INDIAN ECONOMY on 23^rd October 2008 in the A. V. Hall. The resource person invited for the same was Mr. Rajat Hooja, a post graduate in Economics from Delhi School of Economics.

In the opinion of the speaker, a rather apt term to describe the American meltdown would be the ‘CRISIS OF CONFIDENCE’. The lecture started with the significance and scope of credit in an economy and as per the speaker “credit is the oxygen supply of any economy and choking of this oxygen led to the American crisis”.

The speaker then went on to describe the global financial crisis or the domino effect with the help of 1^st banking structure in US. The sub-prime crisis was explored with the help of selling of Collateralised Debt Obligations (CDO’s) to various investors both in US and foreign economies.

The emphasis was laid on the description of second and third mortgages (Home Equity Extraction) in the US economy and how the crisis started unfolding after the losses were made public. He then talked about the carnage on Wall Street with Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, Goldman Sachs and Morgan Stanley being disturbed as toxic securities ate their reserves.

 Then he threw light on the aspect that when Wall Street trembles, RBI scrambles. He discussed the ripple effect and its tremors on Indian economy with the example of ICICI bank and other economic ramification. He humored that the rest of the world catches a cold every time the US economy sneezes.