World financial crisis - how will it affect the Internet users?

We decided to find out how will the world crisis affect the people running business on the Internet and on the common users of world wide web. Today nobody tries to be over-cautious speaking about the global financial and economic crisis. The world financial system has shaken and continues to rock and hardly managing to slow down the chops and changes which threaten to block it. However, 90% people cannot say at once whether this crisis situation will affect them or not. So, Ecommerce Journal will try to help you to understand how the talks about the crash of the world economy are dangerous for you.

What has happened?

Let’s put off all the figures, graphs and hysterical shouts of the experts and try to understand the situation. Some time ago the USA has faced the boom of mortgage loans and a boom on the housebuilding market. The developed financial system of the United States that time could enable almost every citizen to take out a mortgage. Banks were offering the contracts with the most favorable conditions for the clients, in which they put in small print the main points of the contract. according to them that points didn’t worth the clients’ attention. One of such important points was a question of interest, which the borrowers were to pay on the mortgage loan. So, very often the banks were indicating in the contracts that the interest depended on the refinancing rate of the FRS. And as the refinancing rate was changing frequently the borrowers paid different interest. The inflation of dollar and floating interest rate in 2006 has led to the situation when the number of non repayments started to increase catastrophically. As soon as the number of non repayments has reached the critical point, the mortgage crisis began. The first victim of this crisis was the American mortgage bank New Century Financial Corp. The collapse of this financial corporation made people think that the American economy was is not all roses.  

However that it was not so very serious. The thing is that during the mortgage loan boom the mortgage loan notes turned into the liquid payment tool in the world economy as whole. People were selling them, paying by them for the merchandise and even used them as an instrument to speculate on the stock market. The scheme work wonderfully and very effective: a strong American economy was a breeding ground for the growth of the volume of the mortgage loan notes which were successfully circulating on the world market.  

However when the mark of the non-payments of the mortgage loans has left behind all the possible and impossible levels a panic in the world financial system began. The liquidity of the mortgage loan notes has dropped and cost less and less, though just a few years before the crisis the liquidity of such mortgage loan notes was very high. As a result of this drop the price of many companies backed by the loan notes has dropped as well. The stock market responded immediately by the mass sales of the bonds. Here the liquidity crisis started. The money stock became insufficient and hence the banks were at stake. The state financial institutions have managed to keep the situation within a shaky but more or less stable framework. But it couldn’t last forever and the bankruptcies began. The most significant ones were the collapses of Bearn Sterns and Lehman Brothers. Logically, the bankruptcy of such giants should lead to a domino effect in the world economy. That is why even today people talk about the bankruptcy of a famous insurance corporation AIG.

How the crisis will affect the population and a small business? 

Probably the rush on the markets, closure of market places and the crisis of liquidity will not immediately and directly affect the common people and businessmen. The provision in the supermarkets won’t go up and the life won’t become hard at once. However, here one should think of the core of the crisis. The erosion of world economy threatens firstly the economies of all the countries worldwide. If the banks collapse lots of other corporations will crash following the domino effect. And at the minimum many of us can appear to be in dry dock. The liquidity crisis will surely result in world inflation and hence lead to a rise in cost of living. In 3-6 months one can expect the rise in prices for the food products, consumer goods and for the other goods as all those who work in high risky segments of the economy will prefer to fix their income and to withdraw their funds to put them on ice until better times. Such a monetary stock deficit will surely lead to rise in credit cost and this will result in difficulties at opening the private business and its development. The offshore banks may also suffer from the liquidity crisis and this can probably result in the collapse of the online processors. The economy slowdown is also possible and this means that due to the decline in living standards people will prefer the primary commodities to some services on the Internet.  

What to do?

At the moment population can almost do nothing to influence the crisis. However everybody should pay a fixed attention to his or her funds. One should be very careful while choosing a bank and to keep the money only with the proven payment processors. 

Just keep in mind that there is nothing permanent under the sun and hence, even the reliable and proven financial partner can go into pieces. Today the USA can become such a partner for everybody as it not only fails to inspire but also does nothing to save the situation. It is obvious that during the liquidity crisis the first move should be a reduction of the refinance rate to make the money stock cheaper for the banks and hence to eliminate the money deficit on the market. Unfortunately, such simple principles are not an argument for the USA anymore. It brings the world economy to the grave without any attempts to save the situation and the first who will suffer is the USA itself.  

Should you worry about the crisis if your activity is tied up with the Internet? There is a great probability that you shouldn't as the overwhelming pace of business growth on the Internet grants us a hope that the nightmare in the economy will be compensated by the high dynamics of a virtual economy development. In other words if the market on the Internet grows more than 50% a year then the collapse of the world economy will slow the economy down but won’t kill it. But let’s be optimistic as even after the most dreadful falls come rapid and successful ups!