1. GLOBAL ECONOMY IN REVERSE GEAR
TEAM MEMBERS:
VEKU GAUDE (ROLL NO: E2010012)
PREMNATH NAIK (ROLL NO: E2010033)
SANDESH PAWAR (ROLL NO: E2010039)
NAVESH SHIRODKAR (ROLL NO: E2010048)
MANDAR SHIRSAT (ROLL NO: E2010049)
VIRAJ NETRAVALKAR (ROLL NO: E2010051)
PRICE SINGH ( ROLL NO: E2010052 )

2. The money needed by an individual to run his daily life should be less than the
money he earns daily. Similarly the money needed by the businesses, large and small,
and by the professionals and traders to run their activities should be less then the money
they generate. Likewise the money needed by the government to run the national set-up
should be less then the revenues available with them from taxation. When all the 3 above
mentioned entities find that their earnings or the income is less then their expenditure or
projected expenses it develops in a situation called as “deficit”. The right thing to do
when trapped in such situation is to indulge in cost cutting, and to avoid the temptation of
growth by debt.
Looking at the picture of our global economy, the total production of all the final
goods and services taking place within our global economy, the industrialized nations
including USA and Japan with only 15% of the global population are contributing 70% of
it. The other 30% of all the goods are and services taking place within our global
economy , the emerging and poor backward nations including China and India with 85%
of the global population add to the global economy.
There are warnings of other bigger financial crises approaching and serious
people are laughing. Sincere and earnest people concerned with important matters are
making jokes of these warnings. This is because of the large number of the conflicting
signals and considerable amount of confusion as to where the global economy is headed.
This is a picture of all that is wrong in the world pf business that is built on debts.
Government recapitalizing banks, throwing funds into frozen money markets and
reviving their economies .It has already cost them a fortune in excess of 500 billion USD.
Market fears these are signs of worse coming .75% of the global economies are still
contracting and the growth appears to ne imbalanced. A global growth is being built on
debts ticking to explode. The Central Bank of the Central Bankers “ The Bank of
International Settlements” has warned that the world that the path pursued by fiscal
authorities in a number of industrialized countries , is a path build on debts & staggering
under massive deficits , their recoveries uncertain yet continuing to borrow trillions ,
testing the world’s patience with their huge debts and their unsustainable paths. Serious
and reputed economist expresses happiness seeing recovery popping all around the global
economies failing to get their government spending under control and instead continue
adding to their debts.
World’s biggest economy – USA: from 2001 onwards the business is slow in US.
For last more then 6 years US economy only imported. The number of jobs created by the
economy was zero. In these years the economic gain for average American family was
very less (less then 1%). Economic gains from the stock were zero. Its recovery now is
propped up by money received from the sales of treasury debts, Tax collection and
simply through printing of new money. From 3007 to 2009 US economy lost 80000 odd
jobs and ten out of every hundred Americans were unemployed. In 2010 US found that
the funds available with it are not enough to meet the needs of the country’s
administration. It finds it has a deficit of 1.56 trillion USD.In USA 700 out of every 1000
Americans own a car. This important industry is now unable to move or work. Thousands
of cars worth millions of dollars re stocked in increasingly crowded port properties. US

3. auto industry is paralyzed. US are a chronic trade deficit nation and the recovery now is
going take along time.
Let’s take a look at Japan. It’s the world’s second largest economy. Japanese
recession began in the year 1990 and by numerous bailout programmes Japan has
invested trillions into its economy. Japanese economy is dependent on overseas demand.
Global economy is weak and overseas demand has fallen by 46%. Its exports have
stopped and there is no pick up demand. Economic activity in Japan is reduced resulting
in lower level of output and low investments. To clear its excessive inventories Japanese
companies have reduced production. Its output have contracted by 25% . Growth has
begun slowing further and reduction in economic activity and lower levels of output is
further throwing its economy in confusion. The market is worried of its high level of
debts. Japan has plowed trillions into its banking system and yet the banks are scrambling
to raise cash. With debts continuing to rise, Yen might fall.
Look at the picture of China. China is no longer an emerging economy. Its has
already arrived on the international economic platform. It is the world’s third largest
economy. China wants to increase its share of global economy and want to surpass the
economies of US, Europe and Japan. There is enough evidence to support the view that
China wants its economic dominance to influence and control the entire global
economy.it wants to break –up the present world market and build a new global market
controlled by China. When China wants overseas acquisition in any resource rich country
it makes attractive offers with aid packages. Its aid packages include diplomatic support,
arms sales and debt forgiveness. It is a trade driven diplomacy. As part of stimulus
programs it enforced domestic consumption .It dumped goods on people who could not
afford to buy the same and forced consumption. In Hubie province of China it enforced
smoking to boost its local economy via cigarette tax. China is aware that it is sitting on
massive bubble, which could set in motion a course of action that could bring about
China’s economic collapse.
Look at the picture of Eurozone, the world’s second largest economy. July 2010
Italy, France and Germany beat world expectations, showed growth and recovery. Italy
showed 1.0% growth rise, France 1.7% and Germany 2.6%. These three economies make
up two-thirds of Euro zones output. Almost all the other remaining 13 European
economies do not show due care for the consequences of their financial actions or their
attitudes. Some are falsifying statistics and making deficits look presentable. The biggest
problem in Eurozone is that there is still no formula for governing the dangerous political
arena of public sector finances involving management of its money matters, credits and
loans. The banks are in serious trouble comparing their risk indicator to that of US
investment bank Lehman brothers Euro zones bank trouble are six times more worse.
Years 2008 – 2009 Eurozone banks received state aid to help them with their liquidity
problems. These banks now are cutting new loans, calling old loans and restricting and
hindering all economic growth. Year 2010 April, Euro zones finance ministers met to
find ways to halt Govt debt crises. On 15 May 2010, Jean-Claude Trichet president of
European Central Bank warned the world that Europe was facing severe tensions. Interest
on sovereign bonds had soared to 20%, was continuing to increase rapidly and the debt

4. crises has begun Worsening. Exports of the 16 Eurozone members have fallen, Exports to
U.S. has tumbled by 20%. Euro zones recovery is fragile. All signs of worse coming. As
a whole Euro zones continues to suffer a worse financial trouble than the United States.
The years 2010 to 2015 the world will witness a very high unemployment and a grinding
deflation in Eurozone. On the global economy the Eurozone crises is many times more
severe than the US crises.
Look at the picture of Spain. Year 2000 to 2008 there was strong and healthy
growth in Spain. Temporary contract labor was widespread. Hiring and firing employees
was quick and easy. The rapid housing growth brought about a strong job growth and
rapid prosperity. Prosperity brought about an increase in the amount of money in
circulation with a progressive increase in all round prices. Prices of goods and services
rose to 35% and soon got out of line with the rest of Europe. Spain’s exports became
uncompetitive. Next the housing bubble busted. Unemployment soared Ten out of 100
Spaniards were unemployed. Business became debt strapped and pushed down
government income obtained from taxation. Year 2010 the government spending that
exceeded its income was very high. Soon the income government was obtaining from
taxation was so less that it turned into a crisis. Year 2010 Spain witnessed more than
10000 businesses, unable to pay their debts and their properties had to be sold to pay
creditors. Now “For Sale” signs are seen all over Spain. Spain is up for sale but there is
not enough money in Spain to buy everything that is being sold. Owners of small
businesses, struggling to pay corporate debts are searching for investors with new insight
to save their long business. Spains government is helpless. It can do nothing to make
things better. Spain’s economic recovery is doubtful for years to come.
Look at the picture of Dubai. Dubai is an important global financial centre. It is
a place growing strongly with great commercial activity. Dubai is praised as a highly
successful example of an outstanding method of organizing businesses and developing an
economy. It has been chosen as the most desired and suitable destination for large and
considerable business operations by 18 out of 50 companies from “Global Fortune 500”
list and 100 International banks including Citi Group, Deutche Bank, Lloyds, Goldman
Sachs, HSBC, Samsung, Honda, Nissans, Siemens and GE. Dubai has the world’s tallest
and swankiest building “The Bhurj Khalifa” with rooms for 30,000 people. It “Armani
Hotel and Residences” has 800 apartments, 160 floors, night clubs, office and
commercial spaces on its 144th floor. It stands 818 meters tall, has the worlds 54 fastest
elevators. It is an engineering surprise and wonder. Dubai has the best through breeds and
the best jockeys. Dubai world with its innumerable high rise buildings can house half of
shanghai and all of Mumbai. It is the Las Vegas of the Middle East where everything is
bigger and brighter. Dubai is the most desired destination for non-stop heavy duty
partying with its tax-free life-style. Big international events and major make over plans
are in place. It recently held the priciest horse racing event on the earth. It invited 500
celebrities including the British Prince Andrews, Liz Hurley’s business and media
emperors from all over the world. 60,000 spectators watched the horse race and millions
globally watched on TV the horse races and the synchronized fireworks. T he global
crown’s jewels are all owned by Dubai. They are Dubai’s prized assets. Year 2006
“Dubai’s World’s” annual revenues were just $ 5,400,000,000. It is ruler controlled

5. government owned company with no worthwhile assets. Nevertheless it generated
revenues. Another Organization “Dubai Holdings” is the personal investments vehicle of
the Emirates ruler Sheikh Mohamed Bin Rashid Al Maktaum. It borrowed from
International banks. On 14 December 2009 to avoid an “Islamic Bond” default linked to
“Nakheel” the builder of man made “Palm Island” Dubai again borrowed from Abu
Dhabi. On 25 July 2009 “Dubai World” forced these banks to restructure debts until year
2016 with interest of 20%. These banks were blamed for encouraging “Dubai World”
lending in a debt trap. These banks were also asked to write off 40% of their loans.
“Dubai World” has ring fenced its prized assets by refusing to sell these assets to raise
money to pay these banks. When giving loans these banks had not asked for any
collateral security and now with Dubai’s prized assets not up for grabs these banks are
shell-shocked. Dubai’s regional banks “Emirates NBD” and “Mashreq Bank” the two
pivotal fund givers to UAE’s economy have maintained complete silence about their
exposure to the trouble. The other 97 International Banks too are not making any public
statements to their exposure to crisis. Dubai and the Dhabi are maintaining secrecy about
the extent and depth of the crisis.
A Greece is a tiny Country, smallest European Union. It accounts for 2%
European GDP but has effect on the economics of European, UK, US and Japan.
Greece spends more than its affordable that leads to more and more borrowing without
due care for consequences of its spending. There was no proper accounting
administration .The govt borrowing are rising and unable to get finance under control the
citizen of Greece have also shown no interest for the consequences.
Greece had huge debt, most of it towards Europe. It has defaulted in its payment towards
debt. Greece formally requested EU Partners for a bail out. Also European FM planned to
raise a fund. Income obtained by government through tax collection is less then its
requirement to run the country. There is decline is production of goods and service each
year by 4%-5%.and its more parts goes to payment of interest towards loan. On one hand
Greece GDP is declining while other hand debt owes to public are rising. Greece
economy is struggling and declining it recovery is difficult task. Greece arise has
impacted the banking sector of UK Spain, Portugal, US and Japan..It has also impacted to
Germany and France .Greece needs long time to recover from its crises, may have to
withdraw from European Union. Review its own Currency, devalue the stimulate growth
and ease fiscal burden.

6. Indian economy is fast growing with its Performance level among BRIC
Countries. Year 2005-2008 it grow at 9%, with global slowdown an next year it grow at
6.7%, September 2009 IIp showed industries output had grown by 9.1%
In year 2010 economy growing by 7.2% .Full blown recovery was expected by end of
2010. Year 2010-2011 economy is expected to grow at 8.5% and double digit growth in
2011-2012.In this economy saving role is 35% and investment role is 37%
India is considered to be top gold holder is world. India has more no. of billionaire’s
wants large portion from middle class. Rising income easy available loan which made
India has largest consumer market in whole world. In spite all this Indian economy is said
and distressing, it is slowly moving and developing into an economy diminishing value.
It is economy that constructs more temples then schools. It is an economy that
manufactures more cell phones then toilets and people cannot afford the basis necessity.
Open area defecation that going into fields river and lakes. People suffer from numbers of
deadly diarrhea and other intestinal disease and leads to their death from contaminated
water and unhealthy sanitation. There are 840,000,000 poor in India of which
contribution to 1/3 of world poverty .This 450,000,000 are living on less then Rs. 65 per
day. This people are notable to efforts 30 kg of grains each month. Every year large
number of people gets added to this group.
Year 2001 to 2010 history has been created by Indian economy in distribution of its
wealth. In this decade their were300000000 people were hungry, malnourished,
underweight, and unable to afford medical care education due to earning of Rs.25to Rs30
per day for their family. Buying food was great struggle poverty level was gradually
rising to pathetic nutrition level.
Indian government has estimated 180,000,000 household for rations 223,000,000
ration cards have been issued. A corruption ridden country with badly run
programmes.There is 40,000,000 ghost cards and still adding. 14,000,000 tones of food is
issued to BPL families 8,000,000 tones never reach the poor. Only 15% reach the poor.
Pre-school meals provided to children goes to fatten cows and buffaloes by upper caste
beaurocrats. Before anything can tickle down to the poorest it is taken away by the rich.
The divide between the rich and the poor is widening gradually to frightening numbers.
The Indian economy is finding it increasingly difficult to reverse the trend.
India’s growth story is MALNUTRISTION. It is a non-inclusive economic
growth. 600, 000,000 Indian’s do not have a bank account.144, 000,000 unfortunate
Indians still practice barter system. Year 2015 projections say 782,000,000 Indians will
be living on less than Rs.100 a day (W.B. IMF report 2010). Indian economy is also
plagued by labors growing careless and irregular attendance. How much will Indian
economy help global recover?

7. Look at the picture of banks. Banks are extremely effective, highly competent,
very complex, frighteningly powerful and potentially strong sector of the economy.
Banks lend money to companies, individuals, and to one another through well designed,
complicated and difficult to understand investment products, involving high risk
exchange trade, bets and losses. Through the services provided by the banks billions of
pounds flow around the world each day. More than £ 10,000,000,000,000 worth of
transaction takes place each year in Europe and America alone. Trillions upon trillions of
pounds flow around the world every year. The transactions are complex and cannot be
understood even by financial experts.
Banks are designed to mange risk, to make economies efficient and stable, to
offer services for the safe keeping and lending of money, to create financial products to
make home ownership easy and simple to mange for millions of home less people
longing for home of their own, to set up internal rates that govern procedures of financial
behavior, to be client centered and work for the enrichment of mankind. The picture of
today’s banks is different. They are more preoccupied with their own concerns and less
client centered.
Today’ banks deliberately act in a way different act in a way different from what
is regarded as normal or proper. They put their banks own interest and profits ahead of
their clients. Their new ideas and methods of business is followed by relentless
advertising and propaganda which gives an impression that they are observing the highest
standards of correct business behavior in a cultivated and refined society and take
advantage of those less informed.These banks home loan schemes with teaser interest
rates encouraged millions of jobless, homeless people to borrow money and buy their
dream homes giving the bank an undertaking in the agreement of handing over
possession of the home to the bank in the event of the borrower’s inability to repay the
loan.
The interest rates of the home loan schemes was too difficult and the scheme too
complex for average borrower to understand. This complex scheme is designed with
hidden knowledge of a list of items for certain failure and collapse of the home mortgage
market.Giving money to a homeless poor person to buy a home, a loan which last only a
short period, with knowledge that the borrower will not be able to repay, knowing also
that the borrower has no idea of the what is happening, or what is about to happen with
list of hidden items in the agreement. Next on borrowers default at some later date
dragging him to court and forcefully and suddenly seizing his home is a well planed
crime difficult to prove. It’s an intelligent and indirect financial behavior improper and
unsuitable of any financial institute, as the behavior goes around the outermost edge of
crime but avoiding involving directly in a criminal act.
Next banks issue credit cards to people, without having asked for the same.
Issuing unsolicited credit cards banks adopt the “NINJA POLICY”. No income
verification, no investigation to check the truth of the job and no through inquiry in order
to discover the truth of the assets of the people given the credit card. The people are
carelessly issued credit cards and on default banks take advantage of the card holder.
Lawless violent persons who resort to intimidation trouble and annoyance are employed
for debt collection. A unsuitable and improper behavior having no space in civilized

8. society and criminal in nature.The ultimate logical end of such investments was the
steadily rising NPA’s of banks, as those who borrowed are not able to pay. Every bank
saw a sharp rise in NPA’s and it distributed many economies.
With levels of bad debts rising banks have begun focusing on debit cards and are
slowly winding up their exposure to credit cards.To solve the problems of rising NP’s
chiefs of Indian banks have approached R.B.I. for policy level intervention. It was
because of NPA’s that in May 2008 the world saw the worst financial crisis in living
memory. U.S. consumers are showing continued weakness and inability to pay debts.
Year 2010 Bank Of America Corporation posted a loss of $ 1,000,000,000 on account of
NPA’s.
Nevertheless the banks thinking, actions and ways of business has not changed.
They show no respect for risk control. With rising NPA’s they want access to cash
without end. To get this continuous access to cash they resort to unpleasant and annoying
financial methods. They indulge in excessive risk taking and operate undercapitalized.
From the basket of assets held by banks they take some quantity of one type of assets and
change it to a new asset. This new asset created by the banks does not have a original
source. They are poisonous assets created by pooling risky, secondary in value NPA’s.
Using dishonest accounting behavior banks give an impression of greater importance to
these toxic real-estate assets than is justified and manipulate balance sheets. They provide
rating agencies with false information and get better ratings for these toxic assets than the
original NPA’s and mislead investors. Standards & Poor, Moody’s Services & Fitch
ratings gave excellent and superb ratings to such securities that had turned bad.
The banks have found a lop-hole and are still taking advantage of legal technicalities and
coming out with more complex products. The rate of change today is six times than the
gross world product.
Another method adopted by the banks to have access to cash is use of complex
financial engineering, legal technicalities and unhealthy accounting methods to make
balance sheets appear better. Their assets port folios are mostly junk value assets. No one
is willing to accept these harmful NPA’s. The banks also hold some high quality assets in
the form of government bonds and other high graded securities. These valuable securities
bank sell to their rivals only for a few days giving an undertaking of buying back the
same after just a few days. And thus they access to cash. It is a loan from a rival bank
with good securities as collateral which is treated as a sale without admitting the liability
clause. A short-term reducing of assets and risk. These misleading financial statements
were certified by senior bank staff. This method helped banks avoid regulatory bodies.
They changed healthy established accounting standards to such degrees that banks
themselves could not make sense of their own balance sheets. Total risk taking and
operating fully undercapitalized.

9. Lehman Brothers 158 years old bank, Goldman Sach, Wall street giants and
clients centered for 140 years, Morgan Stanley, UBS, Citi Group, Credit Suisse, Deutsche
Bank, Credit Agricole and Merril Lynch all indulged in these practices. Using this
method in months of Oct/ Nov/ Dec 2007, Lehman Brothers in a careless manner sold
assets worth $ 38,600,000,000. In year 2008 without proper care it sold assets worth $
49,100,000,000. And year end 2008 it disposed assets worth $ 50,380,000,000. This
misleading and cheating came to an end when J.P.Morgan and H.S.B.C. pushed Lehman
Brothers into a confined corner only to protect their own banks endangered interests.
Another unpleasant and disgusting method of getting access to cash was
leveraging. In a takeover the target company clubs its assets with a bigger company,
gains advantage, influences investors and raises money needed for the takeover bid.
There are too any banks resorting to this method and getting access to cash. Globally the
banks leveraged are very many and their debts significantly more than their equity base.
These banks have got the economies of many countries into lot of trouble. It was these
financial engineering methods that in May 2008 lead the world to witness the worst
financial crisis in the living memory. It pitched global economy into a black hole from
which it is not able to come out even after 2 years.
Millions lost their lively hood. Millions lost homes. Economics got crippled. It
brought about the collapse and national bankruptcy of Iceland. On Oct.2008 Dutch
government bailed out ING Group Financial Services with € 10,000,000,000 in
emergency funds and asked it to purchase the shares the shares issued as bailout by Jan
2009, and to pay than balance by year and 2011. After the crises created by these banks
the World – Economic- Forum at Davos discussed new financial regulations to check the
activities of these banks. Barrack Obama announced intentions to impose a fee on more
than 20 of the countries largest banks for crisis brought to U.S. economy and to recoup
tax payer’s bailout money.
In August 2010 a civil suit was filed by Securities and Exchange Commission
calming Goldman Sach had created and sold mortgage investment that was devised to
fail.
On April 26, 2010 U.S. senate investigation committee lead by Carl Levin,
democrat of Michigan, claimed Goldman Sachs had bet against its clients putting its own
interest and profits ahead of the interest of its clients. Andrew Coumo the New York
attorney general has led an investigation into eight banks to determine the truth. The
model of the “Big Bank” has failed. They have to be repeatedly bailed out by tax payers.
The bank methods have transformed the entire financial reforms. It has changed the entire
art and science of governing finance. However these bankers are least affected by the
crisis. They had a year to figure out how to participate in the global recovery. But they do
not seem to have got the message. They continue with their methods already found
offensive to every accepted standards of decency or modesty.

10. These big bankers and financers are the least loved in any economy. Public anger
will support anything even up to burning these banks. These banks ignore these most
overt signs of public anger. They are not afraid of any possible civil unrest. They are
fighting vigorously against all reforms designed to restrain their taking and
compensation. They are resisting every attempt to impose self regulation. They have
eliminated only 50% of their poisonous assets. They continue fighting the deregulation of
the financial sector so much that they want full freedom to operate under capitalized and
free of controls and complete non intervention by government in commerce. They are
warning the world that too many rules and too many controls would hurt global economic
growth.
They continue to gamble and bet against their clients knowing that “Success” they
will walk away with profits and “loss” taxpayers will bail them out. Their lending is
drying up. Their economies are still struggling but they are not willing to forgo their
bonuses and profits. Year 2010 Wall Street bonus season may be one of its largest even
though banks holding European debts are facing heavy loses.
They continue asking for bailout and are seeking debt forgiveness. None of these bankers
responsible for creating the disaster have gone to prison for their financial wrongful
behaviour.
Some of them were forced to retire in shame with huge payments to ease their
pains.$ 55,000,000 was given to Ken Lewis of Bank America. £ 25,000,000 was given to
Fred Godwin of Godwin of Royal Bank Of Scotland. The bank employees are being huge
bonuses. It is the people who are suffering the most by the economic slowdown. The 20th
century regulatory structure has become ineffective. Every intelligent person understands
these things but does not think it necessary to unite to force the world to reinvent finance
to protect global growth.