What are the real reasons for this economic slowdown?

How did this come up suddenly?

Why IT is the most affected sector?

What an individual can do to improve the situation?

These are few questions that crop up in our minds. I did some research on the whole issue which I would like to share with all of you guys. All the things are interrelated to each other. Have we ever wondered how real estate /financial institutes/IT related to each other? It is nothing but a circle. If one is affected then it will affect other also.

In US there was a high time in IT sector every techie was paid like anything. High salaries mean high expenses. The expenses were like spending on buying products, more hang outs more outside food more buying of property. Due to this all other sectors also started growing in a way they were never before .As people have more money so they tend to buy property which increased property rates also. There is a simple concept in finance, the concept of demand and supply. As more people were buying property demand got increased and supply was less which resulted in high property rates. This created boom in real estate sector. As people were buying property so financial institutes came up with housing loan schemes which large people opted which resulted in financial gains in banking sector. As people were travelling more frequently for project purpose aviation industry also gained momentum. Till this time you can see all sectors were in boom. Then terrorism came up, that Pentagon attack (September 11th, 2001). This attack was the starting of the slowdown. In reply to that attack US attacked Afghanistan then Iraq and started spending more on defense activities. Now the money and resources that were to be spending on the development activities in IT sector was now going for military activities. This didn\'t affect IT instantly as there were already lots of resources in IT. As more resources were spending on military activities the tax and other benefits given to IT was cut in order to maintain economic conditions. Due to this the percentage salary hikes decreased. This started restlessness among techies as they were the most affected. IT companies then started their lay off processes which resulted in non payment of loans taken by people. This started affecting financial companies. At the same time the oil prices went up and US is totally dependent on import of oil from other countries. Now people were not able to pay off their loans so banking institutes went in trouble in terms of recovering their loans. Due to this slowdown the same IT projects which were generating lots of revenue now started showing slowdown in terms of revenue generation. To maintain their quarterly results the IT companies initially laid off their bench force and then people working on projects. For all foreign projects for which companies used to send people abroad now shifted to other conventional resources like using Video conferencing when talking to clients and developing their project being in INDIA only rather than doing onsite development. This affected aviation industry as well as hospitality industry as now fliers were less. There were some companies which used to create bonds against the housing loans and sell it in market to earn double. As economy was going down and people were not able to invest in bonds as well as pay off their loans these financial companies went in debts which resulted in their bankruptcy (Lehman brothers etc). Due to this the market started moving down as more pople tends to take out their money they invested in market. FIIs started taking out their money and resulted in more market slowdown.

Guys the story does not end here. The future can be really dangerous. Think about this more jobless people more frustration more crime and we all know our great politicians they are expert in taking advantage of such situations.

We all need to wake up as a common man can do wonders.

There are few things we can work on to improve the conditions-

1.      Spend less on perishable goods.

2.      Spend more on non perishable goods like property/metals etc.

3.      Maintain enough liquidity in your accounts to cope up with any situation.

4.      Invest more in market. If you have enough resources to invest then invest in good shares as currently market index is half than it was a year back.

If every individual invest in market then demand will increase and supply will decrease which will result in increase in market index and thus help us fighting economic terrorism.

I am not a financial expert this is just a small out come of my research. Comments from people are invited. As through this blog my aim is just to contribute a bit against economic terrorism.