Financial implosion is it possible By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

January 7, 2015 | Posted by bobbysrinivasan << back to blog

The fall in the oil prices of this size in a short period of time could be a foreboding sign of what is to come. Some of the economic commentators warn and I quote, that this drop in prices could give a fatal jolt to one of these ready cocked triggers. What these commentators are worried about is the 236.8 trillion world of derivatives, the massive currency mismatches, threatening the structure of global sovereign and corporate debt. This is not counting what is happening in the Russian energy sector. Just combines this with all other factors, whether known or more often unknown which, like the subprime mortgages are potential triggers for financial implosion.

Some experts believe that it is only a matter of time before the banks, derivatives and worse credit derivatives are going to be responsible again for the next catastrophe.

From all the arguments and opinion of experts the following easily can be concluded.

The drop in oil price of this size is bound to impact the banks who may have advanced money for oil exploration.
The oil revenue annually is a multi-trillion dollar business. Millions of people in Venezuela, Russia, Nigeria, Iran, Iraq to name a few will have to accept lower standard of living.
The Consumption which is the main driver of the global economy will significantly drop in the months to come because of lower disposable income in oil producing countries.
Any money given to any of the oil related business such as exploration refinery will in all probability turn out to be sunk cost.
Jobs on the oil related industries will become scarce. Some of the existing jobs could even disappear.
The sovereign debt denominated in US dollars in the oil producing countries may need to be restructured.
The sensitive areas in the middle east namely Iran, Iraq, Syria which is home for terrorist could face serious internal strife.
The OPEC solidarily which has been in existence for four decades is now seriously weakened.
The drop in the price of oil could push the price of other commodities downward.
Finally we need a trigger for a global recession. This has been postponed globally through lowering interest rates, quantitative easing etc. For all we know, this is it. If so how do we survive this global slowdown, I hope the economic experts in the world will do their thinking before it is too late.

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