GLOBAL MELTDOWN/ RECESSION

If you plan to start this GD get a clear picture about how you gonna define this topic. But before that try and start it with a QUOTE

START: QUOTE It's a recession when your neighbour loses his job; it's a depression when you lose yours.

Global meltdown means economic slowdown of the economies of the countries around the world. Average decrease in GDP would be around 2%. We had similar scenario back in 1929 during the great depression (always talk a little bit about the history of any topic but only in the start)

Then form a framework by saying “ Lets go through this discussion in the following manner to get a detailed approach first lets discuss what was the cause behind this recession, then we can discuss it effects and later on the ways to come out of this recession.”

This would take around 30-40 seconds and would fetch you full marks to start a GD

And also remember if you lay down a framework for a GD always try and follow that and if people go off the track bring them back in line.

Cause: Subprime mortgages: This typically relates to unprecedented lending by banks. Subprime lending allowed people with less than ideal credit record to become house owner (eg: a person who would have declaredbankrupcy in last 5 years was eligible for a subprime). This lending were done on higher interest rates and moreover such loans/credits can be used for financing other things like cars, furnishings or another house.

Subprime mortgages had increased by 292% from 2003-07.

This resulted in increase in housing rates all over the world.

Grahm leach Bliley act: This act was signed by Bill Clinton in 99-01 that weakened the regulation of Fannie Mae (Federal National Mortgage Association) estb in 1938. This was the reason for getting the loans easily.

Oil Prices: This was a cause or effect cant be said but because of this, price of most of the commodities increased by leaps and bounds.

To know the increase I will give some figures. In 1987 it was around 40$, till 2007 it increased upto 60$ but in just a year in 2008 it went up to become more than 120$. That is 50% increase in 2 decades and 100% increase in 1 year.

Sulphuric Acid prices: This is a chemical used in steel processing, Copper production, bioethanol production etc. Price of H2SO4 increased by 3.5 fold.

Effects: Because of increase in oil and sulphuric acid prices, cost of food products and various FMCG products increase leaps and bounds.

Because of subprime loans banks were unable to recover the money and various banks declared bankruptcy and that lead to sincere –ve effect on economic situation of US and other countries

Automobile industry was severly impacted, inability of middle class to buy the vehicles was one of the major reason. And it still going on eg: expected Nano bookings 5lakh cars by Tata group but it were shocked to see bookings as low as only 2lakh this year.

Industrial production world over saw a decline. In March 09 Japan saw a decrease of 31% whereas Russia saw of 16%.

Unemployment In 2008, US lost 2.6 million jobs. International Labour organisation predicted that at least 20 million jobs will be lost in 2009.

Tourism Industry Because of cost cutting on corporate and personal level various business trips and vacations were cut off because of which aviation and tourism industry suffered a lot. Famous eg: of Jet airways giving pink slips to 1900 employees last year. Moreover low priced air ticket was not seen any more.

Solution: Bailout plans have been really useful, may it be $700 billion in US or 25000 crore plan for farmers in India,

Cost cutting or cost management by MNC’s has been the major tool to fight recession. This meltdown has been an eye opener to various IT companies was they have started saving on very basic things like electricity and stationery. I will give an eg through my personal experience. I used to work for TCS, when I joined in 2007 whenever we asked for notebooks we used to get beautiful spiral binded book with a cover page of TCS, but now we get stapled left over pages at the printer (I also happened to see some of the salary slips in those print outs).
Salary cuts and no promotion policy is also used by many companies.

This much information is more than sufficient for you to talk on any topic related to recession.

Throughout the GD give out some eye-openers like grahm leach Bliley act, some figures like oil prices over the decades, some rarely known facts like cost of Sulphuric acid and get the WOW effect I talked about in previous post