What countries would benefit from the current financial crisis?

**Shuimo** · 02 Dec 08,, 13:19

What countries would benefit from the current financial crisis?

It is an ill wind that blows nobody good, isn't it?

**KenMac** · 02 Dec 08,, 16:51

Depends how long it lasts for, & how long before various goods & raw materials start returning to a higher level...

Most analysts are picking a world recession for the next year, with things improving towards the end. Prices rise back to higher levels by the start of 2010, with oil moving towards the $90 per barrel mark.

Who comes out better in this scenario?

Basically the country's that have not got into serious debt, & have used that tough times to crack down in inefficencies, as well as concentrating on keeping spending focused on infrastructure projects.
Another major factor will be respective costs in dealing with the fallout of the downturn, ie. unemployment, restructuring, keeping wages & manufacturing going, etc.

China, Russia & Brazil could look pretty good in this scenario, probably India as well, depending on political instabilities.

China is reasonably well insulated from the market, so what is most effecting it is major downturns in foreign investment & manufacturing for export.
To combat that it has focused on massive infrastructure projects, & promoting domestic markets.
How well it comes out it depends on how efficient management is on this, which is more than a little problematic considering the major scandals that have been coming to light in production/construction/mining etc..
However, they are still in one of the best positions around due to their massive reserves & very large production capabilities. Even a moderate increase in efficiency puts them in a very good position.
They're the most likely to increase their position in a major way by the time the crisis is over in my opinion.

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Russia also has the reserves to see them through downturns for a few years, & while not as insulated as the Chinese, the major hits to the economy is in falling materials prices, especially oil, & downturns in foreign investment.
Pluses are that they can reign in a lot of the oligarch's;
have the political mandate now to force through already ongoing reforms against corruption & inefficiencies;
push through more consistently in market & law reforms;
develop financing not so dependant on foreign speculative capital;
push through further with needed infrastructure projects.

How well they come out depends on how well all these reforms are handled, but are likely to be in a good position if the downturn doesn't last too long & don't totally screw things up. Raw materials wise, they're in about the best position on the planet, & are a very attractive market expansion for many major firms, especially European ones
- many major investment projects are still continueing despite the downturn...

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Brazil - still got some reserves, & are pretty widely diversified, as well as rapidly expanding. As the largest economy in South America, rapidly expanding & relatively stable, they are likely to come out pretty well.
Like the rest of the BRIC, the better they use the tough times to push through reforms in efficiency & against corruption, the better they come out of it.

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India - pretty much the same as the rest of the BRIC. Maybe a little more exposed to the market, but with solid banking fundamentals, & a pretty widely diversified, rapidly expanding market.
Problems are possible major political instability/faction fighting complicating reforms & investment, but are still likely to come out pretty well.

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Worst hit - countries that were already in debt, & don't have the political stability to push needed survival measures through.
Ukraine & Pakistan maybe the worst off.

Many Eastern European countries, that got all the bad parts of EU membership without the reserves or depth to see through major bad patches. Welcome to free market capitalism, hope you're enjoying your stay...

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The major market economies of the US & the UK will be interesting.

While they'll undoubtedly be hit hard, especially in debts, they are so intertwined in world markets they have the leverage to borrow, deal, print money, etc. to get themselves out of things in a pretty good position.
How well they handle reforms in the tough times will determine how long they can stay in such a high position regarding world markets...

**Helium** · 03 Dec 08,, 07:41

The US will benefit the most and so they should

Never underestimate the adaptiveness of the US people. From the top floor of Citibank to the man on a street in New York flogging "I hate the recession" t-shirts they are all incredibly adaptive and fluid, glass if half full people, they say how can capitalise on the current situation.

Mark my words the US banking system and the economy as a whole will adapt and overcome the recession lightyears ahead of Europe, and in doing so drive economic growth as they have been doing, bringing Europe out of recession earlier than if they had were on their own and not in a global economy. Soon that guy in New York will be selling "I survived the Credit Crunch".

I believe that Europes scenario is the same for Russia especially, China and India, but being a smaller part of the global economy ironically insulates them to an extent from the larger problems.

**KenMac** · 03 Dec 08,, 15:41

Current US debt is officially at about 10.7 trillion dollars, with quite a number of analysts putting it much higher.

In order to come out of the downturn in reasonably good position, this will rise substantially. All signs are that the Obama administration will try to spend it's way out of the crisis, continueing the previous administration's policy of just keep printing money, & sell it off on the strength of it being the world reserve currency.

That will only work if countries are keep buying treasury bills/dollars, & are willing to lend to service the US debt.
Companies/banks were buying treasury bills/dollars in the short term, as there was nowhere else to go as positions unravelled, but this is very unlikely in the medium/long term.

The US banking/financial system is simply no longer trusted on the world stage
- but as it is so intertwined with the world economy there is basically no choice but to deal with it, as there are few viable alternatives at the moment.

There is however a very large movement that it trying to come up with options - blocks such as the BRIC & major mainland European countries, ASEAN, are all looking for alternatives in world trading/banking.

The world has gotten very wary about financing US debt & spending, & there has been no signs as yet that there is any major change coming in US financial policies/structure.

How this all shapes up in the next year or two will be very interesting..

**Equilibrium** · 03 Dec 08,, 17:08

The trust in the US currency and its financial institutions has only been validated by the crisis. Despite the fact that the crisis started in the US, foreign deposits in the US Treasury have increased while those in foreign currencies and countries have fallen.

**Shuimo** · 04 Dec 08,, 14:06

I do appreciate KenMac's detailed analysis.
According to your analysis, Brik would be the beneficiary of this crisis, right?

**Tronic** · 04 Dec 08,, 14:29

Originally Posted by KenMac

Problems are possible major political instability/faction fighting complicating reforms & investment, but are still likely to come out pretty well.

I personally think, the ruling government has shed its more instable part in the coalition during the Indo-US deal when they called for a trust vote in parliament; they broke away from their communist parties in the coalition and still managed to survive, I think as of now, they are in a much better condition to carry out reforms without the communists making a hue in parliament; though, elections are 6 months away; before that, they can still make all the reforms they want, it is all fair game.

**KenMac** · 04 Dec 08,, 15:29

In my opinion, yes, the BRIC are in the probable best position, depending on the length & shape of the crisis, as well as how well the countries handle themselves..

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Another major factor is that the big companies, if deprived of the massive profit margins that they gained previously by playing the market game, will need somewhere else to go, as market regulation/speculation is likely to much tighter in another year or so.

In order to get something remotely close to the profit margins that they are used to enjoying, heading back to the BRIC once things calm down is the obvious move.

This is where the massive growth potential is, with much lower wages & taxes than the West, but still with a pretty sophisticated economic infrastructure in place.

RE: Tronic - do you think the Mumbai mess is likely to bring factions together enough to focus on a broader front in dealing with wider problems than terrorism, or exacerbate them?

**entropy** · 04 Dec 08,, 16:00

Developing countries with no industrial base, as they are more stable for investments.

Angola and Nigeria?

**Deans** · 17 Dec 08,, 17:00

Among the BRIC's, Russia and Brazil would be the most affected, because their economies are more dependent on commodity exports and they have a significantly smaller domestic market as compared to India and China.

A significant gain for India would be falling Oil prices, (among the BRIC's - it is the most dependent on oil imports), which would reduce domestic inflation & negate the impact of reduced exports on its trade balance.

India would also be expected to have the lowest job losses, partly because its economy is less tied to the rest of the world's. This would mean that domestic demand for consumer goods would continue to grow, possibly at a rate higher than China's.

**~~GraniteForge~~** · 18 Dec 08,, 06:45

Any country that mines bullion metals (silver, gold, platinum, palladium) or the raw materials used in small arms ammunition. Both bullion and ammunition have become extremely scarce and expensive, and are likely to remain so for the forseeable future.

**Roosveltrepub** · 21 Dec 08,, 00:45

I think no one wins. I do think that the USA borrowing money at o percent intereest is sweet. We should do a 2 trillion dollar stimulus

30 years same as cash is better than any Best Buy promotion I ever saw!
Cobalt is the commodity I'd want if I didnt spend all my mone n Pizza and tanking Mutual Funds. The altenatives they have tried to replace cobalt steel are all to expensive and too brittle from what I have seen. Plus, it's needed in batteries and we are on the verge of a big increase in Demand once we mddle out of the collapsed Ponzi economy

**martinmystry** · 21 Dec 08,, 07:34

Originally Posted by Deans

Among the BRIC's, Russia and Brazil would be the most affected, because their economies are more dependent on commodity exports and they have a significantly smaller domestic market as compared to India and China.

A significant gain for India would be falling Oil prices, (among the BRIC's - it is the most dependent on oil imports), which would reduce domestic inflation & negate the impact of reduced exports on its trade balance.

India would also be expected to have the lowest job losses, partly because its economy is less tied to the rest of the world's. This would mean that domestic demand for consumer goods would continue to grow, possibly at a rate higher than China's.

Everyone in India is saying that economy is less tied to the rest of the world but the ground realities are that companies are deffering joining dates and if someone would not have been too happy to get a 3.6 lakh(10 lakh = 1 million and 1 INR = 47 $ ) job earlier, now he is too happy for even a 2.5 lakh placement as placements have really gone down as also salary increments.

So in all probability on the field it seems that India has gained nothing from this downturn, there have been just losses to the Indian economy.

**Deans** · 21 Dec 08,, 07:59

Originally Posted by martinmystry

Everyone in India is saying that economy is less tied to the rest of the world but the ground realities are that companies are deffering joining dates and if someone would not have been too happy to get a 3.6 lakh(10 lakh = 1 million and 1 INR = 47 $ ) job earlier, now he is too happy for even a 2.5 lakh placement as placements have really gone down as also salary increments.

So in all probability on the field it seems that India has gained nothing from this downturn, there have been just losses to the Indian economy.

I'm not saying India will gain, only that it will be less affected that other countries.
I recruit hundreds of people in India. One of the bright spots of this recession is that expectations of people joining the workforce have become more realistic. Even 6 months ago, salaries had shot up to unsustainable levels, which was a threat to the competitiveness of export industries like IT / BPO or emerging sectors like Organised retail.

**~~Greg~~** · 21 Dec 08,, 22:48

Countries with high levels of domestic consumption will have an edge over countries that depend excessively on exports for their GDP. The US has some natural advantages...it has the capacity to increase domestic spending that cannot be matched by any other country. This will remain the case as long as the world implicitly agrees on the dollar being the predominant reserve currency. Note the fact that US treasury bonds are being bought at zero interest rates because most countries percieve a certain degree of safety in the US treasury.

The potential trouble arises if the spending by the US govt does not create enough of a growth engine for the US (and the world economy). In that case the recovery will be very slow and will have unpredictable winners.