The Plunging World Stock Markets, Reality in the Proceeding.

(Belajar Ekonomi.Com HQ Bandung) As predicted before, the world stock markets have tumbled beyond all recognition. This is because Bush’s USD 145 Billion Stimulus Package, still waiting for congressional approval which meant to cut tax rates to boost the consumption rate, is believed by the world market to give only small impact.

The London market (FTSE Index), one of the prestigious stock market of Europe and one of top indicators of the European Market yesterday fell 5.48 %. Paris’s CAC 40 decline 6.83%. While German’s Frankfurt DAX fell 7.16%. The Madrid Stock also went 7.54% lower.

The south American Market took effect after the European market. Sao Paulo’s index fell 6%, Buenos Aires index fell 4.64% and the Mexican fell 4.77%.

Previously the Asian market fell in concerning figures. The Tokyo Nikkei closed 3.86% lower to 13,325.94. The Hanseng Index of Hongkong fell 5.5% lower. Chinese Shanghai Composite declined 5.1% and the Indian 7.4 %.

Last week’s 4.5% lowering of the Dow Jones is the market’s reaction of the Bush policy that analyst consider as too little (in value) and exercised too late and could not change the mind of investors. They think it would not do much to avoid a recession in the US Economy.

The policy was meant to give business incentives, cut tax, and other actions to increase economic growth. The symptoms towards a recession were first triggered by the Sub-prime Mortgage Crisis which there was an increase in high risk property mortgage.

An economic recession is when there is a negative economic growth for 2 quarters subsequently. The market expected some surprises from Bush. But it turned out to fall beyond expectations.

The deepest impact will be for countries such as Japan and China whom has high volume of export to the US. For other Asian countries there has been a diversified export destination. But there are still threats that China will divert their products to other countries with large markets like Indonesia.

The traditional effect is that local industries will fail to compete, layoffs to occur and further impacts of uneven trade.

Redaksi BelajarEkonomi