Wall Street, Recession and Inflation

These days watching Wall Street is like riding a roller coaster ride....you never know what is going to happen next! As expected, the subprime issue and financial credit issues continue to plug the Wall and the Street in America, forcing many investment bankers to downgrade their earnings or even incur or write off significant losses. Yesterday was another occasion where Wall Street tumbled 2.6% (or 360 points)! Sentiment has not been helped by skyrocketing crude oil price... it is really a matter of time crude oil will hit USD100 / barrel!

Inflation surely is inching up, like it or not, but to what extent is the question. In some countries where certain controlled items such as petrol price are subsidized, perhaps the higher costs will not be passed down to consumers but there is also a question of how much longer can this last? It is certainly a huge burden for Government to continue with the excess baggage and this certainly does not augur well for the overall balance and free will of trade.

On the other hand, question will be asked if the current US credit woes will lead to a bigger and wider issue, that is, a possible economic slump and recession? Occurrence of this scenario will surely inject shivers in the spine of the rest of the world, given that a good portion of the global exports are absorbed by US.

That being said, the Asia growth story led by both China and India will likely extend a buffer to the sustainability of global economic growth. Besides, latest data posted by US Government in the form of better than expected worker productivity growth rate for the third quarter suggests that growth in US is encouraging and putting inflation in-check. So it is not doom and gloom all the way at the moment. Also, US Federal Reserve seems determined to rescue the economy, given the recent measures to cut interest rates by as much as 75 basis point.