The global economy stumbled deeper into crisis as stock markets slumped further yesterday, with investors losing confidence that the United States and Europe can rein in their debt burdens quickly and avert a double-dip recession, according to international news agencies. Even as Asian equity markets pulled back from another day of staggering losses as they closed, European shares tumbled for an eighth session running, with news of an unexpected drop in British factory output in June highlighting the weakness of the economy. The worsening market trauma has piled pressure on the US Federal Reserve to announce fresh measures of support for the US economy at a regular policy meeting yesterday, but analysts said its options are limited. Investors fear that, with confidence in the global economy's prospects evaporating, financial markets will remain in a slump, feeding a vicious circle of pessimism. As of Monday, stock losses had wiped some $3.8 trillion from investor wealth globally in the recent rout as buyers rushing for perceived safety in the Japanese yen, the Swiss franc and gold, which hit another record high yesterday. (source: editorial asia post dacca – august 2011).
MSCI's all-country world index was down 1.2 percent, and has now shed about 20 percent since peaking in May. The market rule of thumb is that a fall of that magnitude constitutes a "bear market". As the flight from risk continued in Asia and Europe yesterday, there was more bad news, this time from China, the stuttering global economy's main engine room. Official data showed China's industrial output grew at a slower pace and its annual inflation rate unexpectedly quickened to 6.5 percent in July. The inflation pressure puts the country's central bank in a bind as it tries to keep prices in check without dragging down an economy that already faces increasing threats from abroad. It may not be in a position to reprise its 2008 role of lifting the global economy. When the Lehman Brothers bankruptcy triggered a worldwide slump, China implemented a stimulus package that helped buffer its own economy and buoy the world. However, some analysts called on Beijing to act."It's time for Beijing to announce to the whole world that it will try to stimulate domestic demand again," said Tang Yunfei, an analyst with Founder Securities in the Chinese capital. Global leaders have failed to reverse sliding markets since a blow was dealt to investor confidence by Standard and Poor's downgrade of the US sovereign credit rating last week. (source: editorial asia post dacca – august 2011).
The downgrade heightened concerns that the twin-pronged crisis of a worsening euro-zone debt problem and a faltering US economy raised the risks of a double-dip recession. The European Central Bank (ECB) swept into the bond market to buy Italian and Spanish debt and sling a safety net under the euro-zone's third- and fourth-largest economies on Monday. But bickering has persisted in Europe over a longer-term rescue plan.ECB chief Jean-Claude Trichet defended his institution's decision: "It is the worst crisis since World War II and it could have been the worst crisis since World War I if leaders hadn't taken the important decisions," he said in an interview with the French radio station, Europe 1. (source: editorial asia post dacca – august 2011).
Major indexes in Asia slumped in early trade following a drop of more than 6 percent on Wall Street on Monday, and although some staged a sharp rebound, Hong Kong shares recorded their biggest one-day decline since the 2008 crisis.European bourses put in a short-lived attempted at gains at the open, but succumbed to the bearish mood. The FTSEurofirst 300 index of top European shares lost ground for the eighth session in a row, hitting a two-year low. Concerns mounted that Asia would inevitably feel the cold wind of the West's slowdown."This is the first time in several years that all three major economic regions are feeling economic distress at the same time," said Keith Ducker, chief investment officer of Tora, a dark pool operator. (source: editorial asia post dacca – august 2011).
The world economy is in deep crisis. The question is why it is so? We have no answer ourselves. But something is wrong with current capitalism. The economists need to look into this affair seriously. Capitalism has sponsored irresponsible consumerism, greed for more enjoyment. This has put pressure on world resources, apart from rising population. The role of uncontrolled markets and derivatives require to be re evaluated. (source: editorial asia post dacca – august 2011).
To day’s global eco-crisis perhaps attributed grossly by the historical debt-based economic or financial system with risk transferring mechanisms as as had been so dominant in the world of economy, which gave an opportunity for certain group of capitalists to gain at the expense of others. This eventually ruined not only the backbone of the global economy, but also developed an uncertainty in the future of the world humanity. Resulting of such an undesirable phenomena, the world is encountering grievous soci-economic catastrophe by retrenchment and or other disasters that the innocents are compelled to accept. (source: editorial asia post dacca - august 2011).
To rescue the world of economy & humanity the alternative platform may be suggested and that is, “ASSET BASED ECONOMIC & FINANCIAL SYSTEM WITH RISK SHARING MECHANISMS” within the holistic universal spirit of brotherhood, solidarity & mutual cooperation with utmost share, care and concern among all humanity by waiving the issue of one’s race, religion, color, status or nationality.
Such a holistic economic paradigm with universal call is indeed enshrined by the Divine principles of Islamic economy as ruled out in the Holy Qur’an: … cooperate among you in righteousness and piety, but do not cooperate among you in sin and rancor…” (5:2).
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