Commodity Online
The century’s biggest financial crisis is plaguing several nations and almost all industrial, services and manufacturing sectors across the world. The severity of the economic crisis as an aftermath of credit crisis has become apparent with the a slew of extreme weak economic indicators being reported around the world.

The world’s biggest economy, the United States, is the most badly bruised country caught in the economic meltdown.

Here is a take on the US debts and the Indian foreign reserves:

United States

The impact US bailouts and other stimulus plans could widen the budget deficit to uncontrollable levels. The United States total public debt (commonly called the National debt or U.S. government debt, is the amount of money owed by the United States federal government to holders of U.S. debt instruments) is burgeoning.

As of November 19, 2008, the total U.S. federal debt was $10.6 trillion, which is about $37,316 per U.S. resident. The October 3rd, 2008 bailout bill has raised the U.S. debt ceiling from $10 trillion to $11.3 trillion.

The federal government’s debt has been going up in a straight line, which is extremely dollar negative.

Foreign countries have been financing US spending/consumption, which seems to be impossible to last forever. The risk of servicing inability of escalated debt by US amid low growth rates could emerge as a key factor for diversification out of US dollar denominated assets by Central Banks to other assets like gold as the world comes out of a deep recession.

The US has unknowingly engineered a deep protracted trouble in an effort to come out of its financial crisis, which could take years to repair investment community’s sentiment and in the process could take a toll on its currency in the form of losing the reserve currency status.

India

India's foreign exchange reserves that showed a rising trend throughout last year have indeed helped in limiting the impact of the crisis. If India had gone into the crisis with $100 or $150 billion of reserves instead of $300 billion, the rupee could have declined more steeply, more quickly.

India's $1 trillion economy, Asia's third biggest, has shown overt signs of slowing after growing at 9 percent or above for the past three years. Factory output has fallen sharply contracting for the first time in more than 13 years, companies have shelved expansion plans and laid off staff, and exports shrank for the first time in nearly three years.

Tax receipts too have slowed in the later part of the year. Economists and government advisers and officials expect growth to slow to around 7 percent this fiscal year and the central bank's chief said earlier this month that 2009/10 looked like being an even more challenging year.

Courtesy: Commtrendz Risk Management Services

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