Recession fear as economy shrinks

So far regarding this economic crisis, US is officially in a recession confirming two quarters with negative Gross Domestic Product. As well, the world is greatly affected by United State’s critical condition, as the world economy heads toward a down sloping trend. However, this once powerful nation who is our main economic engine continues to inject large amounts of investments into banks and stock markets. By injecting more money into the economy, we hope to drive up the stock exchange and to increase economic activities so to stimulate our economy. Unfortunately as seen these past weeks, the injections of money have only shown temporary effects as the stock market continues to plunge after government stimulations.

Unemployment rates in US have reached a break-through from 4.8% in 2006 up to 6.1 so far this year and are expected to grow. Housing prices have dropped approximately 16.6% overall while consumer confidence is becoming increasingly low. As well, the US stock markets have also had great downfalls as the Dow Jones index have plummeted about 40%. This all illustrate the severity of this economic crisis and if the governments of major countries do not find an effective solution to combat this crisis, then we are likely to face Depression 2.0.

As for our Hong Kong economy, we are starting to feel the aftermath of this financial crisis as our stock markets are beginning to fail. Over the past year, Hang Seng Index has recorded a drop around 60% with other banks facing major difficulties as well. Although Hong Kong have also lowered the interest rate to a significantly low level, it does not seem to have a great impact in rebuilding the injured economy.