Although many observers believed that U.S. recession had begun in the early months of 2008 (Quinn, 2008), US financial crisis was officially triggered by the subprime mortgage collapse on September 7, 2008 and caused shock waves in international markets and a serious influence on economic development. The crisis seems to be a tsunami that hit Europe first then headed for Asia, Latin America and other locations in the world. Global stocks plunged as U.S. crisis spread. Many countries experienced their worst market declines. Dow Jones dropped below 9,000 for first time in five years on October 09, 2008 (Thomasson & Kearns, 2008). In Europe, on October 06, the Paris CAC 40 index finished down 9%, its largest one-day loss ever; London's FTSE 100 dropped 7.85 percent, its largest single-day drop since 1987 (Sullivan & Cody, 2008). The Tokyo stock market suffered its darkest day since 1987 as the Nikkei 225 Stock Average plummeted 11% on October 16, 2008 (Rial & Chua, 2008). Because of steep plunge, some stock exchange markets were even forced to suspend trading, such as Russia’s MICEX exchange, Bucharest Stock Exchange and Indonesia Stock Exchange on October 8, 2008 (Lesova, 2008).
Despite negative effects of the global crisis, there are still opportunities. According to Kishore Mahbubani – the dean of the Lee Kuan Yew School of Public Policy, Singapore's former Ambassador to the United Nations and former President of the United Nations Security Council, the turmoil may turn out to be a source of optimism for Asians. “Actually, the effect of the crisis in the United States could be the opposite. The crisis could in fact lead to a change in the mindset of foreign investors in favor of emerging economies”. Thereby investors would see the benefits of doing more business in Asia.
In his tutoring session for IBC course project, my teacher Sheridan Tatsuno also mentioned that foreign investors will have a tendency to increase the investment in China because of U.S. crisis.
In Latin America - the traditional 'backyard' of the United States, while many others will likely suffer from the crisis, some people are searching for a chance in the gloomy period. Mexican tycoon Carlos Slim, one of the world's richest men, said Latin America's markets can be part of the solution for the northern giant at times of crisis and that they are going to become important for the economy of the United States (Sardon, 2008).
"In the past, developed countries had reserved and financed developing countries, while today developed countries, especially the United States, are being financed with resources from developing countries," Mexican billionaire Slim said. That is why he thinks Latin American and other developing countries could help the U.S. through the crisis (AFP, 2008).
The crisis is seen by James Rooney, chairman and CEO of Market Force Company, as a golden opportunity for Korea to become a force in the global market. He indicated that U.S crisis will cause the slowdown in China's exports to the U.S. and make China to boost its domestic market to offset losses from exports. It will be an advantage for Korean economy (Kim, 2008)
The crisis that swept through the world is not over yet and the international consequences will be deep and lasting. Although the Wall Street crisis is seen as one of the biggest threats to most of the world, the situation could change depending on how we react to this. Entrepreneurs should take advantage of the “bad time” to change the position of their business in national and global economy.
References:
AFP (2008, September 30). Mexican billionaire says China should lead crisis rescue. AFP. Retrieved on October 30, 2008 from http://afp.google.com/article/ALeqM5icguECdnrk259WcIOS_N0phnHkQQ
Kim, J. (2008, October 6). US Crisis Golden Opportunity for Korea. KoreaTimes. Retrieved on October 31, 2008 from http://www.koreatimes.co.kr/www/news/biz/2008/10/123_32224.html
Lesova, P. (2008, October 8). Russian stocks plunge again, trading suspended. MarketWatch. Retrieved on October 30, 2008 from http://www.marketwatch.com/news/story/russian-stocks-plunge-again-trading/story.aspx?guid={648BD3E7-9B66-4E79-9413-16530266BC32}
Quinn, J. (2008, January 7). US recession is already here, warns Merrill. Telegraph. Retrieved October 30, 2008 from
http://www.telegraph.co.uk/finance/economics/2782147/US-recession-is-already-here%2C-warns-Merrill.html
Rial, P. and Chua, K. H. (October 16, 2008). Asian Stocks Tumble on Recession Concerns; Nikkei 225 Plunges. Bloomberg. Retrieved on October 29, 2008 http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aT4Eb5Cdztf0
Sardon, V. (2008, October 3). Latin America sees silver lining in US crisis. TheEarthTimes. Retrieved on October 30, 2008 from http://www.earthtimes.org/articles/show/235200,latin-america-sees-silver-lining-in-us-crisis--feature.html
Sullivan, K. and Cody, E. (2008, October 7). World's Stock Markets Plunge. Washington Post. Retrieved on October 29, 2008 from http://www.washingtonpost.com/wp-dyn/content/article/2008/10/06/AR2008100603167.html
Thomasson, L. and Kearns, J. (2008, October 9). U.S. Stocks Tumble, Sending Dow Below 9,000; GM, Insurers Slide. Bloomberg. Retrieved October 30, 2008 from http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=a7Tx3juml8Ys
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