01.How Can the World Economic Turmoil be Terminated ? This world is now exploring to find out the answer of this Question like a rapacious person search for food. But unfortunately No One Knows the full mystery of economical market growth. The most influencial English economist of last century John Maynard Keynes’s explanation, most popular among economist, is that in a normal economy, there is a high level of employment, and everyone is spending their earnings as usual. This means there is a circular flow of money in the economy, as my spending becomes part of your earnings, and your spending becomes part of my earnings. But suppose something happens to shake consumer confidence in the economy. (There are many possible reasons for this, which we’ll cover in a moment.) Worried consumers may then try to weather the coming economic hardship by saving their money. But because my spending is part of your earnings, my decision to hoard money makes things worse for you. And you, responding to your own difficult times, will start hoarding money too, making things even worse for me. So there’s a vicious circle at work here: people hoard money in difficult times, but times become more difficult when people hoard money. The cure for this, Keynes said, was for the central bank to expand the money supply. By putting more bills in people’s hands, consumer confidence would return, people would spend, and the circular flow of money would be reestablished..If this is the proposed definition and cure for recessions, then what about depressions? Keynes believed that depressions were recessions that had fallen into a”liquidity trap.” A liquidity trap is when people hoard money and refuse to spend no matter how much the government tries to expand the money supply. In these dire circumstances, Keynes believed that the government should do what individuals were not, namely, spending. In his memorable phrase, Keynes called this”priming the pump” of the economy, a final government effort to reestablish the circular flow of money. The explanation is too simple, not need to be a person related to economy to comprehend it. 02.But the ultrasensitive Question is, How ? How can Goverment intervene to break dire circumstance of economical turmoil ? Or in which way the Central Bank can expand money supply to put more bills in people’s hand ? The main theme is here, spending, production demand increasing. The eminent economist Paul Krugman is advocating WAR as solution of the current economical recession. Economy asimmorality play, in economy, virtue is vice and prudence is folly [ What Mr Krugman wrote in New York times ]. The concept that ” WAR WOULD END ECONOMICAL RECESSION ” first came from world war two which got USA out of great depression 1929. The World war two was a result of Economical turmoil, then world powers went at war against each others due to slove their economical problem.The common view among economic historians is that the Great Depression ended with the advent of World War II. Many economists believe that government spending on the war caused or at least accelerated recovery from the Great Depression, Got the market out of the dire circumstance of recession. However, some consider that it did not play a very large role in the recovery, although it did help in reducing unemployment. The world war two could be a solution of Depression1929 . But it is not applicable for current world situation. How many jobs can USA produce by war ? Their spending on war which would enchance arm demand, could produce some jobs, war can also employ some workers which will then lead country to increase production demand. Moreover, USA may creates market for its product by pushing China through war. Thus USA would break the dire circumstance of recession. USA need to be carefull to take this kind of initiative. IRAQ & Afganistan war could not prevent them to confront with world recession 2007. They would be defeated in war, moreover people will not support war to solve economical recession [ despite they will use other excuses ]. War dont create wealth, it bring destructions. Let U.S military drop first bomb on Mr Krugmanand his loved ones which will prospers USA ? will he accept this ? Any types of wrong move will mark an End for USA. To lead you must command respect. People are more conscious in this world now than anytime before. To intervene in market, to break dire circumstance according to keynes economic school, 03.Bush administration had brought bail out programme. But it is not long lasting solution despite having some immediate result. It has protected corporate world from collapsed, bankruptcy. The recent Barak Obama proposal 447 billion bail out programme will not bring any conspicuous result for USA economy in producing jobs. As all companies will not employ any workers untill their production demand increases. USA government is supplying capital to Corporate company so that jobs can be created, products demand increase. But their all attempts have so far gone into vain. The actuall condition is more worse than what numerical data shows. At current time, unemployment rate is 9.1% and 16% people are living under poverty line, they have already lost consuming power. A recent Report by Annie casey shows the child poverty rate increased 18%, The Global economic cries has hit the average USA citizen much harder with asset decreasing 41 % but for Only rich figure is only 27 percent. The rich poor gap is increasing, it is nowhighest since 1962 [ Economic policy Institute, EPI report]. I am here introducing an Islamic economical policy which would be best application of keynes economical school, I know to break the dire circumstance of world recession.The current USA president & company are also obssesed with this concept. Bush administration 700 billion bailout plan 08, the recent Barak Obama recent 447 billion bailout proposal, these types of several proposals taken by western countries will not work although thats have protected corporate world from collapsed, bankruptcy. But all companies will not creats any job untill their products demand increase. So their spending on evill corporate company to creats jobs will go into vain. This bail not money will go to those people who are directly responsible for this economical turmoil, of course, rich people. Their policy to expand money supply is also flawed. All extra money is going into rich people ‘s pocket. Then they are hoarding their money in Bank. So the ultimate result is, central bank money is going to commercial bank through people hand. 04. The actual trouble is, people want to hoard money, refuge to spend, consequently product’s demand goes at lower level. It is too much clear that the solution is, to increase product’s demand. Keynes accorded us two steps 01. First step, We have to increase products demand by breaking dire circumstance of recession. 02. Second Step. To do so, A. Need to expand money supply to put more bill’s in people hand B. Need Government intervene. But there remains another steps, Keynes economical school dont let us know. ZAKAT is an pillar of Islam & main foundation of islamic economical system as well. Government can get at least 2.5 % of “extra wealth “annually from rich people. The term “Extra wealth ” refers to wealth which remain after a person all expenditure. Islamic goverment can extend this amount in any required limit during worse situation. This Zakat’s money have to be distributed among poor person. In American circumstance, now 16 % people can ask Zakat to their goverment, who are living under poverty line and have already lost consuming power. So this poor people will start to buy service and products. It will increase product demand. One question may arise, if they want to hoard money like others for fear of forthcoming economical hardship ? But it will not happen because Zakat will be given to those, who need to spend, living under poverty line. They dont need to hoard money as they will get it again, not one time only. This types of money distribution by Zakat system, will creates products & service demand in a great extent. Industries will need to employ more workers for supplying increased products. In turn, newly employed workers will start to spend their earnings, so products demand will again further be increased. Thus, the dire circumstance of economical turmoil can be broken and circular flow of money like normal economy will be reestablished. It will not bring any currency inflation but to expand money supply by central bank cause inflation. Government dont need to increase its spending which is extra burden. 05. Implications for the Readers. I am, of course, solely responsible for what I have written. I am not a student of economy, moreover a clumsy person in this direction, but what I have written, my audacious wish inspired, I think to do so, not need to be an economist! But dont get any wrong conceive about Zakat !!!!!!! as this note is not about Zakat. It is my thinking about an appl;ication of keynesian theory.So it is not possibl;e to learn about Zakat from thios note.
