V-Curve and W-Curve
Like it on Facebook, Tweet it or share this article on other bookmarking websites.
Thanks to the recession, we now live in a curvaceous world. Many may not find that too exciting though, since all the talk these days is about humble ‘V’ and ‘W’ curves. However, these linear beauties can apparently help us demystifying much of the mumbo-jumbo surrounding the precious question of ‘economic recovery’, following the worst battering our generation has seen.
To understand how, let’s peep back into the ugly days of 2008, when the ‘credit crisis’ (read: a blind lending binge by banks) in the US sent our unsuspecting world reeling down from giddying heights. And what a fall it was! We hadn’t seen anything like it in eight decades, since the Great Depression of 1929. As the severely debt-laden American economy went kaput, the contagion quickly spread to the rest of the world. The biggest casualty in all this were the ‘bubbles’ called stock markets, as a system of multiplying wealth based on greed came crashing down at the altar of fear. It was simple, really. You and I feared for out money, stopped risking it in the speculative business of shares and even stopped spending in products and services. No demand meant no business, which in turn deepened the crisis. Suddenly, it was as if the markets of the world had been mopped clean of all money! The result was very much like a rapidly dehydrating child without a supply of saline.
The worst part is that this nosedive unravelled at a breathless pace, steeply rather than gradually, like the left leg of a ‘V’. The BSE sensex, the barometer of the Indian economy, for instance hurdled down from 21,000 points to below 10,000 in a matter of months. The wise ones say that when such things happen, there is every chance of a spectacular bounce back, an equally steep upsurge – like the right leg of the ‘V’. Though that appears fantastic, chances are such a recovery won’t be sustainable because it would be a case of too much, too soon. The world would be far happier dealing with a ‘W’ instead: a period of ups and downs before finally arriving at a sustainable high.Other letters are clamouring for attention too: there is the ‘L’ (portending that judgement Day is nigh, and there will be no recovery), and the ‘U’ (indicating a period in the abyss before a sharp rise). Take your pick.