The world financial crisis
Introduction
Since the world financial crisis broke out, some of the words that are heard daily are: speculation, recession, inflation, interventionism, unemployment, expropriation, etc. These days both economic liberalism and capitalism, as well as the system that encompasses them, are under discussion. Capitalism is an economic system in which most of the property is private. In this type of economy, markets are the main instruments used to assign resources and generate income. Capitalism is based on classical economic liberalism.
Developing
This liberal thought argues that the State must interfere as little as possible in economic activity and leave decisions to the market. The role of the State must limit order, national defense and provide certain public goods that companies do not supply. This market economy based on private property of the means of production creates the other distinctive of capitalism that is the benefit or gain as a priority in economic action based on capital accumulation. The history of capitalism is characterized by being full of bubbles.
In which speculative prices have risen above their intrinsic value, ending with the explosion of them that derive in crisis characterized by the recession. Much of the physical and financial assets created in the rise of the cycle are lost in these conflicts. The current crisis places an interrogation sign on the capitalist system as we know it today, where many question the continuity of the same, given the strong state intervention to which the countries were dragged to maintain the system. This large -scale economic crisis unleashed in the USA. UU.
It results from the economic bubble of mortgages, consisting of high -risk loans to people who generally had a doubtful credit history. Thus in the short term, defending capitalism means, paradoxically, state interventionism. Today we have such a great dysfunction of the markets that public intervention becomes inevitable. During the last century in times of crisis, massive liquidity injections by the State and cuts of interest rates to boost investment were made. Several nations have used that recipe again. Keynesian ideas.
So belittled in the last quarter of a century, they are now being applied by those who try to get the economy from the parameters of the conservative revolution and permanent deregulation. In these times, governments are buying banks (or actions in them), because they believe that public capital is necessary to continue flowing credit. This is not something that is happening for the first time: in 1990 the Finns and Swedes nationalized banks to privatize them again later. The rescue we are living has, of course, a different scale, but justification is the same.
The cost of not intervening is much greater;If trust and credit continues to decline, the recession, which is already caught, would probably become depression, which would be very negative for the international community and in particular for the states that could not foresee it. Depression is more serious and lasting than the recession, and is manifested in the dry brake of the activity, the weakness of the demand, the contraction of international trade, the increase in unemployment, the fall of purchasing power, etc. All these very painful processes and contrary to progress. Until that moment predominant economic thought sustained.
Also, that it was the market forces that ensured the balance and full occupation of productive factors, and that state intervention caused no more than disturbances to harmony guaranteed by the invisible forces regulating economic life. However, another reality was lived and the great depression was impossible to evade and even less explained. Neither the crisis nor the high levels of unemployment could be conceived within classical thought. The financial and real estate bubble in Japan constituted a process of revaluation of financial and real estate assets.
Occurred in Japan from 1980, and which ended in 1990. Earth prices and actions began to grow spectacularly. The real estate market made the stock market grow, and these, in turn, caused the growth of real estate assets. The mechanics of the process consisted of revaluing the actions of a company determined from its real estate properties, and that revaluation was used to buy more real estate. The current financial crisis is being essential as an effect of an exaggerated expansion of indebtedness.
Especially of mutual mortgages, but not only of these, which has resulted in a rapid increase in insolvency and breaches of debtors. They accumulate in this way in banks and credit entities, debt titles that lack value, or lose it in significant proportions. A loss of assets of banks and creditors in general is generated, which causes the distrust of investors and holders of titles, bonds and actions, which rush in getting rid of these threatened papers, and seek refuge in assets that provide themgreater security.
With all this, the ability to give and receive credits decreases, which translates into economic contraction and recession. Thus understood the crisis, it is a normal and recurring phenomenon, which happens periodically in the markets. What could differentiate the present crisis from other previous ones, would be only its depth and its extension. We maintain that this is what is currently happening. The current financial crisis is a great economic crisis, whose fundamental cause lies in the distortion and change that has occurred in the essence and functions of money. And that, if so.
The crisis will not be overcome until money recovers its ability to correctly fulfill its essential functions. In this sense, the financial bailouts that are currently implementing the governments of many countries only aggravate the crisis and postpone their overcoming, since and in a very important way, accentuate the distortion of money and make it difficult to fulfill their essential functions. It is in this last sense that it is said, to explain the current financial crisis, that it originates in the bubble of the prices of mortgaged real estate as a guarantee of credits, which have not maintained their value.
Given its close relationship with the United States, Mexico’s will be one of the Latin American economies most affected by the world crisis. It is estimated that GDP could fall between 1% and 2% although, according to other sources, the contraction will be 4%, with an important loss of jobs. It is argued that, instead of speculating on the possible quantitative effects of the inevitably uncertain crisis because there has been no bottom and the real scope of the various compensation programs of the Mexican Government is unknown, it makes more sense to evaluate its impact on the employerDevelopment built in Mexico.
After the structural reforms of the 90s. The control of the fiscal deficit and inflation, for example, gives a certain margin to implement anti -cyclical policies, but the weakness of exports -based growth and the fragility of the banking system create serious problems to face the crisis. The current crisis generates impacts of different magnitude in the different regions of the world. While Asia is one of the most affected areas, the economy of Latin America also accuses a considerable slowdown, especially in those countries whose growth had been based on the rise in prices of export raw materials.
In the region, everything indicates that Mexico’s will be one of the most affected economies, given its close interrelation, commercial and other, with the US. UU. In fact, a few years ago the Mexican economy had suffered a slowdown in the rhythm of activity, to the point that in the last quarter the real GDP contracted;The salary mass and average remuneration fell into real terms and the consumer confidence index descended to its historical minimums. The difficult situation that since the end of 2018 is going through the labor market in Mexico, which will undoubtedly deteriorate even more in 2019.
conclusion
Surely the debate about labor reform will revive. In this regard, a solidly argued strategy will have to be defined to respond to pressures in favor of greater flexibility, thereby understanding a reduction of labor through the cut of wages and benefits and the reduction of labor protection schemes. At this point, it is evident that Mexico cannot and should not seek to improve its international competitiveness on the basis of cheap labor. On the contrary, what the country needs is to have labor with quality employment that is, more and more qualified.
Leave feedback