Those of us who are currently residing in the US know that the American financial crisis had led the US and a major part of the European continent into a major recession – largest since the Great Depression of the 1929-1933. The 2007 recession started in the 4th quarter of 2007 until the 3rd quarter of 2009 – 18 months total. This recession brought about an approximately 10% unemployment (25% during Great Depression) and a significant negative GDP growth rate for the US. The main cause of this recession is the failure of the sub-prime mortgages.
But why does the sub-prime mortgages fail?
Many economists blame the heavy subsidization of mortgage financing by the government’s agencies (Fannie Mae and Freddy Mac) that allow buyers to purchase homes at a lower than normal interest rate (hence the sub-prime). These economists also went further to blame the government regulation of requiring banks to approve a portion of their loans to the local community (including many low income communities) which is why we see clusters of foreclosures in many community instead of evenly distributed losses.
I, however, hold a different view of the cause of this crisis. As pointed out by assistant economic professor Jeffery G. Hummel of San Jose State University, the significant economic growth of developing countries (China, India, Vietnam) caused a significant amount of their savings to flow into developed countries, especially the US. The reason is because the US securities has the lowest default risk in the world, thus it becomes the safest place to store wealth for nations. The enormous flow of funds lower the interest rate and create a bubble in the real estates market as we saw.
There is also an amazing fact about this recession that is overlooked: the US recession no longer causes a world wide recession. In fact, the Asian economies are insignificantly affected. Let’s take a look at the US vs. Vietnam GDP growth rate in the past decade:
The US recession only brought about a slower GDP growth rate in Vietnam due to a decline of import and consumption from the US’s side. A closer look at the GDP per capita will further confirm the notion that Vietnam was not heavily affected the current recession:
As can be observed, the recession brought about a negative growth GDP per capita in the US but only slow down the positive growth of Vietnam’s GDP per capita.
The most fascinating thing for me is the response of the Vietnam central bank to this recession. Many people have a negative outlook toward positive inflation rate. This is, of course, natural because positive inflation rate will erode everyone’s real wealth and reduce any debt amount. However, in my view, Vietnam has been growing significantly (averaging 7% annually for the last decade), the enormous increase in output will cause a fall in all prices that would cause problems in trade and labor contracts that would eventually lead to an increase in unemployment. A positive inflation rate is an attempt of the Vietnam central bank to keep the price level stable. However, to point out how the Vietnam central bank has done a great job during recession, let us look at the inflation rates of the US and Vietnam for the past decade:
We can see from the above graph that Vietnam has experienced an a spike in the inflation rate during the recession. This inflation can be interpreted as a surprise inflation which is caused by the Vietnam central’s sudden increase in the money supply. This surprise raise the prices of many products causing the producers to think that demand is increasing therefore it is profitable to increase their outputs. This surprise offsets the effect of the recession in the short run and therefore is one of the major contributor to why Vietnam’s GDP growth rate did not fall to the negative level like that of the US.
The presented graphs are good indicators of how robust is the Vietnam’s economy. Also, we can observe that Vietnam’s banking system is becoming more sophisticated. Vietnam is on the way to catchup with developed countries. Now, only if the Vietnamese communities around the world connect through OneVietnam Network to contribute to this amazing growth in their own ways, we can see a really bright future for Vietnam coming real soon!
(data source: International Monetary Fund)
The world is balancing itself. The US will no longer be the dominating power!
Economic 'prosperity' without liberty is a strawman.
When we get rid of Obama we will regain our prosperity if he doesn't destroy us before.
Sorry but I don't think the last paragraph is included in the original text, or the text is not from IMF =)) =))
I did not find the article from IMF. I just used IMF data to construct the graph 🙂
Couple of questions: 1. Any number showing the gap between the richest and the poorest in VN? 2. Can Vietnam's economic problems and solutions even be compared to that of the US?
I love how fast this thread got off topic. I guess some people just can't help but to jump at an excuse to climb on top of a soap box. In the last graph, the VN inflation rate jumped from 7% to 23% to 6%. This is an inherent weakness in the VN economy. When you have abnormal inflation, currency becomes devalued, price of goods fluctuate. The day to day lives of people are affected. If we argue that the "surprise" inflation that occurred during this period is a response allowing VN GDP to continue to grow while the US GDP goes into decline. The inflation in VN creates artificial growth that adds no real value to the VN economy. A overreaction to what is occurring overseas.
there are billionaires in VN. there are massive of people with poverty, with homes floored and uprooted because the forestry has been demolished. there's a gap. VN is a vertical geo-country… various climates, cultures & beliefs too.kinda like california haha:D
well, having as long coastline as VN, you can find everywhere on the world. One sixth has.And Nam Nguyen, I guess you don't have any financial experience whatsoever and don't get what the author states at all.
@Hoa"The world is balancing itself. The US will no longer be the dominating power!" If your wish comes true do you think that would be a good thing? Just wondering
Few questions:
Any number showing the gap between the richest and the poorest in Vietnam?
Can Vietnam’s economic problems and solutions even be compared to those of the US?
Yall know, with Bill Gate, Warren E. Buffet and my assets, we can take over the entire country of Vietnam's economy.
Great plan Calvin. Let's proceed with a deal. 🙂
Economic prosperity without liberty is still a straw man.
Politics aside, it's ridiculous to blame one man for the cause of the current American economic situation.Supposedly, China will overtake the USA economy in terms of economic output by 2020, and India will replace China as the fastest growing economy in the world in 2020. If the two big Asian giants grow like this, I wonder how that will affect Vietnam.The Vietnamese government used to be worried about being in the middle of the US-China economic relationship. Now, they have to worry about a US-China-India economic relationship.But maybe it's good for VN, India identified Israel and Vietnam as their top 2 countries for international investment and aid.
Geo: Aren't you describing Singapore?
The US recession also cause Vietnam and the rest of the world to fall into a recession. A recession is two consecutive quarter of negative GDP as the graph above indicated.
Barry Obama makes it the current econ crisis much, much worse; he just quadrupled the US national deficit in only one year. As if that wasn't enough, it cost $52 billion for Barry to buyout General Motors; (B.O. has no idea how wealth is created. *sigh*) ….. But what is worse, Obama has declared war on American prosperity (he calls it "stimulus") = $1.2 trillion dollars. Worse for us, BO's "stimulus" has failed to accomplish a single positive goal — except to increase the size of government and our deficit, –but BO's response to this failure? –"We need another stimulus." *verybigsigh* America desperately needs the spirit of Ronald Reagan to give us optimism again. :-/
The economic downturn clearly started midway through Bush's second term (or slightly before). It was in a clear freefall before he left office.
Whose Barry?
hahaha i think mel was referring to direct consequence of Obama's programs like the health care act…. and the hundreds of billions of dollars pumped into it 🙂
Barack – Barry
@David: –And BO's solution is to accelerate the freefall? …. *sigh* Somewhere in America there is a small-business owner who has paid his taxes and wants to create jobs. He just needs Obama's federal government to get out of his way.
barry – barack
Sorry. Blackberry issue. I didn't mean to ask twice. He calls himself Barry? I never heard that before.
'Barry' is the name Obama's grandmother called him. His grandparents had to raise him, –his parents abandoned him as a child.
Obama's full name is Barry Hugh Obama
Barack Hussein Obama is the president's newest name.He was born Barack Soetoro to a radical muslim from Indonesia. Later, he was shipped off by his mother to be raised by his white grandparents in Hawaii.
Radical? Give me evidence.
Economic of business is call the Business of Business is Business. If I and 10K plus Vietnamese student association clubs entire U.S.A begged President Clinton during his administration to lift embargo toward Vietnam, VN won't progress as quickly as we are speaking today..!
Yes, –and that illustrates my point that Economics is not an airtight discipline, but is influenced from the outside, in this case, –the politics of lifting an embargo.
I'm glad to see such a diverse group we have here as fans of OVN… different demographics, backgrounds, ethnicity, religious & political views… those from inland Vietnam and those from around the world. (Politics is still the "touchy" subject here and will be a major challenge for OVN)"Prosperity", as the result of economic growth in Vietnam China and India, is only happening to a few who already have power. That is why there are people who are able to enjoy worldwide traveling 4+ times a year, able to buy $200 bottle of XO in a nightclub, and able to have the latest versions of Iphone or iPad, they spend top money to gain the title of "Top Spender". I guess that is "Survival of the Fittest".I'm glad to see Vietnam's fast growth and potential. The author suggests if we all can "contribute to this amazing growth"…we can see a bright future for VN. I want to add, how about for the rest of the other unfortunate people in VN.
Anh, you say, "politics aside" as if economics takes place in a vacuum. ….. Define 'economics' for me and you will find that it is not an isolated field of study tucked away in an airtight compartment. But just like science it is influenced by other apparently 'un-related' disciplines. ….. I'm not describing Singapore, but am describing any nation. True economic prosperity must be linked to liberty, or else it is not long-term, it is only a straw man.
Hmm… Why on earth is Vietnam's model similar Singapore's?. Sorry for my ignorance but logic somehow tells me that If my saying about anything, knowing my country has the highest execution rate, will result me from becoming a headless ghost I'd rather shut my ##$ up. So therefore are the people of Singapore really "willing" to let their gov't control them or they just have no choice but to live in what's so called prosperity. Unless you're the gov't yourself are you willing to live in such country?Anh-Minh please enlighten me. Thanks.
Or anyone.
Phuong: I think you're right. People in Singapore have learned to deal with the dichotomy of little social liberty but high economic prosperity. I mean, if I can access everything that a Western country can give, why would I complain? Being under an oppressive government is not new to Asia. And Singapore is far from "oppressive", in Singapore, if I lost my job, the government will train me, provide healthcare for me, and get me a new job. It's a very efficient system.Vietnam is trying to to do what Singapore is doing. Keep the population satisfied but quiet with no protests, and is a one party system. The reason why Vietnam's current VISA policy is getting more strict is partly due to copying Singapore's model 30 years ago.I personally don't mind living in countries like Singapore, Vietnam, etc. I don't do things that disobey international law standards, and I don't have a need to protest and internet is always open to be able to exercise one's human right to free speech.
Geo: I think the Vietnamese government persecutes ethnic minorities in general, not just because they're Christian. Singapore executes people for carrying marijuana. There's some different policies happening here.
Singapore is just a tiny island country, I only admire is their laws very strict and well clean everywhere when I visit. I only disagree for not allowing to chew gum which I think it's so stupid but the country's treasure is still under U.K's…for profit sharing!
Yes, Vietnam's rapid growth can be a source of national pride. But economic prosperity is not good—in and of itself. It must be cultivated on the virtue of its citizens. If Vietnam does not cultivate public virtue –that will be the greatest threat to its national prosperity. Study American history on your road to economic recovery.The 'unfortunate people of Vietnam' as you call them, are the minorities of a country. Minorities are groups having little power or representation relative to the majority. ….. Morality is essential for Vietnam's economic prosperity to be a GOOD thing. Otherwise, you are merely looking at a straw man. ((( Missionaries to Vietnam )))
Geo: When I said "politics aside", I meant "democrat or republican politics aside". My main statement meant, don't blame only Bush for everything or only Obama for everything. Ultimately, I meant that this current situation is very complex, which already follows your reasoning. So you're preaching to the choir.When you say "economic prosperity without liberty is a straw man", I think you do need to study Singapore. A place where economic prosperity is very high, but social liberty's are very low. People in Singapore don't actually have a right to free speech, but they are willing to let their government do this because they appreciate the way their government has shepherded their economic prosperity into the 21st century. I think Vietnam's model is in some ways similar.Phuong: Prosperity in India and China will certainly benefit the rich the most, but I think it's trickle down effect will bring benefits to people "down below" or nations in the surrounding areas too.
Anh: Your idea is important; "they are willing to let their government…" Yes, –Singapore's citizens value the nation over the individual, (sort of like Japan, but that's their prerogative) and are free to let their government take care of them. Indeed Christianity thrives on account of religious tolerance by the Singapore government. I would wish that Vietnam's model could be similar to Singapore's, but, sadly, the VN government severely persecutes ethnic minorities who are Christian.
Due to freedom of speech, VN still not allowing others to say freely anything that will offense and toward the communist government period. My dream is that I hope one day, female can become high official as commander in chief of the entire country of Vietnam!
Geo: Well, it's complicated. LKY wasn't exactly a "benevolent dictator", he forced people into silence. Singapore may not have many human rights violations, but their citizens have very limited rights, dictatorial party power, and one of the highest execution rates in the world.Can you send me news articles about Christian ethnic minorities being persecuted by the VN gov? I haven't read anything about that yet…
Calvin: Haha. Who do you think will be first? USA or Vietnam? Luckily in Vietnam, the Women's Union is the third strongest political institution in Vietnam.
Anh, a good beginning can be found here:http://www.persecution.com/public/restrictednations.aspx?clickfrom=bWFpbl9tZW51You know, when we no longer see anything greater than ourselves, we turn inward; we worship our own thoughts, and our own inventions. Let it never be!
Calvin: True, but at least Singapore does a really good job of educating its people.
As much as I support “freedom of speech” and “democracy” I really laugh at how people here are already jumping from economics to politics.
First of all you individuals don’t live in Viet Nam so I don’t know why you are complaining about the minorities being “oppressed” and such because I’ve been to Viet Nam many times and I had relatives in Viet Nam, I also went to the minority villages and they were doing everything out of the blue. Like they were almost forcing tourist to buy their goods, which if I was to “oppressed” them it would make a good image for Viet Nam as a country of less “beggers”.
A lot of “Vietnamese American” wants to come to Viet Nam to do “Politics” but always disguise themselves as doing “Business”. Just don’t do it, save yourself the trouble because at the end of the day you’ll make their policies harsher and because of your action make consequences affect Viet Kieu going there to do strictly business. The worlds largest Chip producers wouldn’t be investing their blood and sweat in Viet Nam if it is as bad as you people describe.
Listen, I can see that Viet Nam is opening itself up quite fast and it is willing to do more so as long as “oversea” stop trying to invade their political practices. You cannot force another country into your beliefs but you can always advise them.
Agree with me or not, in the end of the day we are not the one to make the decision. What we can always do is make a significant economic achievement for our people back home and then you can complain when that goal is violated. I would doubt any investment would be violated if it’s for economic benefits. Don’t turn Viet Nam into rampaging political monopoly like Thailand.
Agree with Peter