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Dec 28, 2008

U.S. Will Recover In A Year

Andrew Solocha, Professor of Finance at the University of Toledo, speaking at a function organised by the Indian Chamber of Commerce and Industry and the Coimbatore Management Association on Saturday. The U.S. is likely to recover from its current financial crisis in a year and the financial sector in India is expected to recover along with it, Andrew Solocha, Professor of Finance at the University of Toledo, said here on Saturday.


Talking on the “US Financial Crisis and Indian Markets” at a meeting organised by the Indian Chamber of Commerce and Industry, Coimbatore, and the Coimbatore Management Association, he said that the financial crisis and the problem for automobile companies in the U.S. started about three years ago. Explaining the impact of the crisis in the U.S. on other countries, he said that Canada and Mexico would be badly affected, and this would be sector-specific.



Much of Canada’s exports to the U.S. were automobile components and in Mexico, components from the U.S. were assembled and sent back. With the automobile companies in the U.S. in trouble, the related sectors in Mexico and Canada would be hit. While the automobile companies were likely to take a longer time, recovery from the financial crisis was expected in a year or two.



Very large banks that were into speculative activities were in trouble in the U.S. However, there were a number of small and medium-scale ones that were flush with funds. These were not lending now due to the uncertainty. It might take a while for these banks to lend, and when they do so it would stimulate the companies in other sectors, he said. Almost once a decade the U.S. faced a financial crisis and recovered after a short period. Countries such as Russia were relying on commodities such as natural gas and oil and were not diversifying their economies. These countries might be affected due to this. China and Japan had problems such as aging population and large exports, he said.

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