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The recent Federal Reserve Board decision to not raise interest rates is being speculated to have bigger and deeper reasons behind it, global reasons. If the decision had come out positive this would have been the first raise in the U.S in nine years but after causing such a big concern not just for the citizens of the country but for anyone if any sort of investment is in the U.S currency, Chair Janet Yellen stated that the decision is being postponed due to a slowing global economy, which even includes the economic superpower China.
Instead of subsiding concerns, the outcome brought more heightened concerns that can be summarized with the phrase ‘global recession’. The two words are shaking the world of economy and all financial participants as a relatively simple motion may indeed carry a ground breaking reality and that is the world’s finances might all be possibly heading for a devastating downward spiral.
Analysis shows that the GDP has been slowly but steadily going down since 2010 and at the moment Russia stands as having the worst economy worldwide, followed by Brazil. Economists have stated that behind this global plunge is the weak demand and low oil prices. Due to the fact that eight out of ten of the top oil producing countries are smaller, emerging economies, when the oil prices crashed the effects on these smaller countries were so great that they echoed back to the global financial standing.
Even though recession is just a part of what is called the business cycle, its consequences aren’t in any way underwhelming. Recession causes the involving country’s unemployment to rise tremendously which then equals to a reduced demand for goods and services and the list of the catalysts goes on and on. The lesser demand for commodities is one of the areas affected by a recession as again a weakened need for these products equals to a slower economy. The lack of demand works as a set of dominoes where each time one tumbles another follows shortly after, and oil, as it was stated before, was just the first piece.
Having the business cycle in mind means that eventually things will start heading upwards the problem and there is no way any economic speculator, expert or administrator can predict when the next turn of the cycle will take place or how long the current one will last. There is also no way to estimate the damage that could be caused if in fact we should be preparing for a global downhill dash. Information, data and events taking place around the world can only cause speculations but nothing can ever be certain until the actual damage is done and the price needs to be accounted for. So for now, fingers need to be kept crossed and hoping that the next turn in the financial ride will come soon and it won’t be as abrupt as we fear.
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