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If Usa Goes Into Recession: - Business - Nairaland

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If Usa Goes Into Recession: by 2ceSharp(m): 9:07am On Jan 23, 2008
let's see, the implications are dire for many countries if USA goes into recession. By recession, we mean a period of decline in national output or productivity. Recession means bad times for the people because, wages fall in the real sense, prices crash as there is no money to buy goods and services, investors lose money in business hence investors pull out, people have to compensate for fall in wages by selling their stocks to maintain their living standards so the stock exchange also crashes. this is particularly bad for USA since the stock exchange has already crashed on account of the subprime mortgage debacle. The implications of a recession in USA for Nigeria, China and the world at large are numerous:-
1) For Nigeria, it might translate to a fall in oil revenues. USA buys more than 30% of our oil. with a recession, they'll have to cut purchase and possibly push some of their own unexploited oil fields in North Caroline into exploration to compensate. that would be cheaper. We would thus be left with oil to sell. Fortunately, China is ready to take up whatever USA doesn't buy off us so we can sell to China. But China is having export problems due to the 'lead' in toy issue they have so their products are not getting easy access into the USA and European markets again. Though they have huge foreign reserves, they are safeguarding its use for investment in other economies.
2) For Nigeria also, it might mean trouble with exports. We are currently net exporters. If goods dont move well in the States, due to wage reduction, exporters over there will reduce prices and dump them in Nigeria who obviously has enough foreign reserves and is currently (on IMF rankings) the country with the lowest external debt to GDP ratio in the world.
3) it would also mean, America will have to curb spending on IRAQ. This will spell trouble in the mddle east and push pressure on the peace brokering mission Condoleeza Rice and Bush have taken on themselves. Because the eastern countries will see America as weak to prosecute any serious action on them for not keeping to the peace accord. With the elections this year, Bush's power is totally gone so it might be a bad time for security talks.
There's more but the issue is this, with analysing implications, the operative word is always a 'maybe or might lead to' because of the human variable in the equation. People think and can create solutions. The Recession is real but it wont last long. if you've ever taken time to study the American economy, its resilient and robust. it has withstood the greatest recession ever known to man and came out of it. It will shake this one off too, what do u think?

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