How recession would affect enterprise in Asia

University Degree Business and Administrative studies

Assignment 1 (Q1)

Over the past two decades, the world had enjoyed some of the benefit such as political stability, low inflation and a large expansion of the global economic. However, at this time the global economy is becoming unsteady. We can observation that circumstances from the economic of America, for example in the year of 2007 the Dow has declined from its peak in October 2007 to about 37.5%. From that case we can verify that America is heading into recession and soon or later it would likely widespread inflation spell distress into worldwide. Figure 1 has showed that since October 2008 a global financial crisis led to the bankruptcy of many financial institutions in the US and European countries, threatening the global financial system.

Figure 1

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Recession are often said to be cause by the natural variation in the business climate refereed as the “economic cycle”. There are some reasons that would cause the recession happen in a country such as customer loss interest in purchasing as the company have over production and increase the price of product, and happening that have large influence on the economy or will damage several company or industry( banking, credit and mortgage industries). The other reason is that over consumption of the country, if the country have spend more than what they produced they would have to borrows from other country to solve their over consumption problem. Those factors were the main reason that affect the economic of US and cause the recession happened. The effect of recession is that it would make increase bankruptcies, foreclosures and unemployment rate, bank lending less money to the industry for trade, deflation, reduced sales, and stock market crash. (A.C. West, Oct 2008)

In 1930s, that has a similar scenario can compare with the current economic situation which we call as “Great Depression”. On that time, America government has used the protectionist policies such as tariff act to remedy its economic. However, this method had caused America economic became worse, it purely tie up the global trade only rather than help out America passed the recession. Therefore, the people who wealth pulling out their money from the market and the unemployment was increased and consumers would not spent more on that time. Because of the tariff could not solve the recession problem, US government had came out with more solution scheme which as New Deal (National Recovery Administration). The role of NRA was to help up the government spending and provide work for the people; moreover, it was also setting the minimum price or wages and encouraging companies to raise the wages. Although those solution were successful solved the problem but it were just few year time only. In 1937, the recession had attacked on US again, and the unemployment rate was the higher between the years of 1929 to 1937. (Wikipedia, )

If we looking back to the history, we can see that normally the Asian economic was affect by the economic of America. In 1997, Asian Financial Crisis happened, it was start from the Thailand and spread to other Asian country. When the US economic start recovered back from the recession, US government has begun to raise the US interest rate to offset the inflation of the country. Because of that many of the Asian people go invest in US and the value of US dollar increased. However, the export of US would go down while the exchange rate of US ...

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