Thursday, July 10, 2008

Behind the Frontline : The Rear Enemy

The front line enemy of the global financial crisis is obviously the burst of housing bubble . However , there is a more powerful rear enemy , yet to come with its full force in the front line.

The shift of production of food grains by replacing, it with the bio-diesel related production in the hope of reaching Crude (Oil) heaven could be referred as the rear enemy , who is yet to come in the front line with his full force . Still , it has been responsible for the much damage , which it caused with its silent impact, on the household expenses . The supply of food grains has been reduced in the global market , which has lead to inflation of the necessary commodities in the common household cost structure . The effect was drastic in the countries of middle-east and far east Asia. In normal cases , the 1/3 of the household budget goes for debt servicing . However with the rising food prices and related commodities , that 1/3 budget has to be cut off, into smaller budget and at the end no-budget , due to priorities of recurring expenses, related to essential commodities much higher, than the debt servicing budget . The end product is the bursting of the housing bubble which lead to global financial crisis.

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