Redit And Development Financing For Low-Income And Minority Communities Another Great Depression May Be Knocking Our Door

You are searching about Redit And Development Financing For Low-Income And Minority Communities, today we will share with you article about Redit And Development Financing For Low-Income And Minority Communities was compiled and edited by our team from many sources on the internet. Hope this article on the topic Redit And Development Financing For Low-Income And Minority Communities is useful to you.

Another Great Depression May Be Knocking Our Door

Introduction: Current symptoms in the world market remind us of the Great Depression of the early thirties, when markets were flooded with goods but prices were falling, and customers were not available to buy the goods. Total demand in the market was lagging behind total supply. Lord Keynes pointed out that lack of effective demand was the only factor that started the Great Depression. The lack of effective demand has been attributed to the delay in investment savings. The passive part of total savings was not compensated through autonomous investment based on deficit financing, which lagged behind investment savings. The problem was solved by adopting deficit financing and pump priming as suggested by Keynes.

Current problem: The current situation of the world market also points to the lack of effective demand. However, this time, the reason for this is the lack of investment or in other words, the irreplaceable passive part of savings has not been taken. In all developing and developed economies, budget deficits have not only grown exponentially, but are also believed to have outpaced passive savings. At the same time, producers have not found enough effective demand and the threatening entry of another great depression into the world is suspected. There are three factors most responsible for making deficit financing effective in curbing the current depressed trend in global markets, which are discussed below.

(1) In the late seventies, a group of prudent economists warned the developing world that the inequality of income distribution was increasing as it progressed on the path of development. They said that this will create a strong obstacle in the way of economic development and economic growth. Their warnings were ignored for two reasons. First, policymakers had the misconception that slowly rising inequality would create a strong pool of wealthy investors to feed future growth based on large investment plans. Second, the policy makers were either under the influence of the rich group who reaped the benefits of distribution inequality or some of the policy makers belonged to the rich group who usurped the fruits. So some people from high income group started getting rich fast but their number decreased along with it. Due to the growing inequality of income distribution, the growth rate of their income has been much higher than the growth rate if the national income. In the rapid race to get rich quick, the rest of the rich were relegated to the lower middle income group and added to the number of people in the middle income group.

On the other hand, poverty alleviation programs have helped people from the low income group to move into the middle income group. Thus the population of the middle income group grew rapidly and thus the middle income group became the major consumer group. The middle income group has become so broad and influential that today the word ‘market’ means the market for consumption goods related to the consumption of the middle income group, unless otherwise specified. The wealthy minority has invested heavily in the production of goods related to the consumption of the vast middle income group. However, due to the growing inequality of income distribution and high competition among producers that squeeze the purchasing power of this market-dominating group, the consumption goods of this group have grown at a lower rate than the growth rate. Because of this, we are experiencing a slowdown in the consumer goods market, especially for the middle-income class.

(II) During the days of the thirties when the world was suffering from the great depression, a large part of the total passive savings was completely passive and a small part was used in speculations which were mostly limited to commodity speculations. According to Keynes’ ‘Liquidity Preference Theory’, liquidity involved in speculation was responsible for high interest rates. Therefore, it was suggested to check the assumption that the prevailing rate of interest could fall rapidly enough to induce productive (i.e. induced) investment and, secondly, to fall below liquidity (marginal efficiency of capital). (purchasing power) used foresight may, to any extent, be diverted to consumption expenditure so as to add to the declining less effective demand in the commodity market. At present only a small fraction of total passive savings is fully passive and many times deficit financing is practiced throughout the world. Moreover, the amount of deficit financing may also be greater than the sum of purely passive savings and savings used in commodity speculation. However, today a large part of the passive savings which are said to be converted into active savings are being used in non-commodity investments like shares and debentures. The total sum of purely passive savings, savings used in non-commodity speculation, and savings used in non-commodity speculation constitutes the total volume of passive savings. I do not think that total deficit finance, however large it may be, has yet accelerated worldwide passive savings to the above-mentioned total mass. Therefore, the current situation, thus, is not very different from the result of the Great Depression of the early thirties. Real passive savings are not compensated by deficit financing, so that a depression pressure may come to the same standing as during the early thirties.

(III) Commercial banks and many other financial institutions are always interested in business and commercial financing rather than consumers because not only are consumer loans less secure but also the interest rate is generally lower, especially on consumer loans. developing countries. Thus, real financing in trade and commerce has remained above its desirable level and consumer credit has remained below its desirable level for a long period of time. This led to the rapid expansion of the market and increased the profits of the middlemen to make goods more expensive without increasing the profits of the producers. Rising prices ultimately reduce aggregate demand in the market.

Manufacturers have no choice but to woo customers by launching various sales enhancement schemes. These schemes are proving to be somewhat fruitful so far but at the cost of declining profit rates. Today’s producer is more concerned with the rate of profit (the marginal efficiency of capital in Keynes’ terms) than with total profit. Therefore, if this situation continues, the producers will have to reduce production in the near future. This will be a green signal for the entry of a real recession in the world market and will cause less damage to the world economy than the Great Depression of the early thirties.

Suggestion: In order to solve the problem of dangerous delay that blocks the dangerous entry way of the suspected depression around the world, first of all, big investors should be made ineffective in priority setting and planning. Then, their wealth growth must stop. Government investment (autonomous investment) should be directed to create additional overheads (to attract new induced-investment) to create external economies for existing producers of general consumption goods. The expenditure of the middle income class on education, insurance, medical treatment, telecommunication, entertainment etc. accounts for a large share of their income due to which their expenditure on material goods of consumption is low especially in developing economies. Therefore, the government should focus its welfare expenditure on providing the middle income class at a lower cost. Strong measures should be taken to reduce the disparity of income distribution by urgently reducing the gap between the income of the common people and the rich minority. Consumer credit should be made very liberal and investment in trade and commerce should be discouraged. The government should take stricter and stricter measures to strictly curb or suspend speculative activities until the threat of depression subsides. The instruments of monetary policy and fiscal policy should be used in such a way that the consumption expenditure of the rich minority and the income share of the general population increases rapidly. These efforts should be made in good faith until the purchasing power in the hands of the common people matches the supply of general consumption goods in the market.

Video about Redit And Development Financing For Low-Income And Minority Communities

You can see more content about Redit And Development Financing For Low-Income And Minority Communities on our youtube channel: Click Here

Question about Redit And Development Financing For Low-Income And Minority Communities

If you have any questions about Redit And Development Financing For Low-Income And Minority Communities, please let us know, all your questions or suggestions will help us improve in the following articles!

The article Redit And Development Financing For Low-Income And Minority Communities was compiled by me and my team from many sources. If you find the article Redit And Development Financing For Low-Income And Minority Communities helpful to you, please support the team Like or Share!

Rate Articles Redit And Development Financing For Low-Income And Minority Communities

Rate: 4-5 stars
Ratings: 4845
Views: 43557308

Search keywords Redit And Development Financing For Low-Income And Minority Communities

Redit And Development Financing For Low-Income And Minority Communities
way Redit And Development Financing For Low-Income And Minority Communities
tutorial Redit And Development Financing For Low-Income And Minority Communities
Redit And Development Financing For Low-Income And Minority Communities free
#Great #Depression #Knocking #Door

Source: https://ezinearticles.com/?Another-Great-Depression-May-Be-Knocking-Our-Door&id=1619652

Related Posts

default-image-feature

Redeem Bond Is Financing In The Statement Of Cash Flow What Are the Financial Reporting Requirements for Non-Profit Accounting?

You are searching about Redeem Bond Is Financing In The Statement Of Cash Flow, today we will share with you article about Redeem Bond Is Financing In…

default-image-feature

Reddit Why Is Finance So Hard For Me To Understand Precision Market Timing – By The Numbers!

You are searching about Reddit Why Is Finance So Hard For Me To Understand, today we will share with you article about Reddit Why Is Finance So…

default-image-feature

Reddit Where Are The Top Mba Programs Focused In Finance MBA – The Most Popular Master Program in the World

You are searching about Reddit Where Are The Top Mba Programs Focused In Finance, today we will share with you article about Reddit Where Are The Top…

default-image-feature

Reddit Personal Finance Uk Money Transfer Credit Card Investing House Is the Credit Crunch the Fault of America?

You are searching about Reddit Personal Finance Uk Money Transfer Credit Card Investing House, today we will share with you article about Reddit Personal Finance Uk Money…

default-image-feature

Reddit Personal Finance In Order To Get The Lowest Leaset $5,000 Personal Loans For Bad Credit: Three Avenues to Take

You are searching about Reddit Personal Finance In Order To Get The Lowest Leaset, today we will share with you article about Reddit Personal Finance In Order…

default-image-feature

Reddit Personal Finance Getting Out Of Retail Paycheck To Paycheck The Irony of Life As Seen in the Jewelry

You are searching about Reddit Personal Finance Getting Out Of Retail Paycheck To Paycheck, today we will share with you article about Reddit Personal Finance Getting Out…