Important English Vocabulary from “The Economist”-(Day-10):
Dear Readers, to score good marks in English Section first and for most thing is you need to develop your reading skills, while reading a passage you need to highlight the tough words in it and you should know the correct meaning for those words. This will help you understand the passage clearly and also you can learn more new words, it means also you can develop your vocabulary. To help you in this part we have provided a passage along with meaning, synonyms and usages of hard words in the passage, make use of it.
Where might the next crisis come from?
TEN years ago, BNP Paribas, a French bank, temporarily suspended dealings in three funds, citing “the complete evaporation of liquidity in certain market segments of the US securitisation market”. Many people treat this as the start of the credit crunch but one can trace it back to the need for Bear Stearns to rescue hedge funds that invested in mortgage-backed securities in June, or the signs of home loan defaults and failing mortgage lenders that emerged in late 2006. The subsequent tightening of credit and loss of confidence in the banking system eventually led to the collapse of Lehman Brothers, when the crisis reached its height in the autumn of 2008.
The inevitable question on the occasion of such anniversaries is: could it happen again? Total debt has risen, rather than fallen, over the last decade, reaching $217trn or 327% of GDP, according to the Institute for International Finance. But the debt is differently distributed from 2007; more of it is owed by governments and more of it is owned by central banks. Since these banks have no incentive to hassle countries for repayment, the air of crisis has dissipated. Banks have more capital, making them more secure. And low interest rates have made servicing debt more affordable for both consumers and companies.
Nevertheless, we are nowhere near “normal” conditions; although America’s economy has been recovering for a long while and unemployment is low, the Federal Reserve is proceeding very cautiously with tighter rates. And the ECB, Bank of England and Bank of Japan have not even started on the process.
Given all this, where might the next crisis come from? Clearly, the two obvious possibilities are a sharp rise in defaults (causing lenders to lose confidence) or a signficant increase in interest rates (which would trigger the same process). Defaults can occur without a rate rise if the economy goes into recession. That could result from war with North Korea (apparently God has authorised President Trump to do this) or a less frightening but still significant trade dispute with China. It could result from internal Chinese debt problems since that is where recent debt growth has been concentrated. Or perhaps it will happen in the corporate bond markets, which are less liquid than they used to be, and could suffer a panic sell-off by investors in bond funds. Other possibilities include student debt or car-loan debt, where consumers may have become overstretched again.
The more likely possibility is a monetary policy mistake. When the Fed started to use quantitative easing, many people cited the “ketchup principle” for the inflation risk (“shake and shake the ketchup bottle, first a little, then a lot’ll”). The inflation never occurred but there is the risk that in the unwinding of policy, all will seem calm until the market suddenly breaks. Something similar happened in 1994 when the bond market was badly affected by an earlier round of Fed tightening. And the Fed is the most likely culprit, not just because it is first to tighten but because America’s monetary policy has ripple effects through the world, via the dollar and the American economy’s huge weight in global GDP. The next crisis may come from Washington.
Source: The Economist
1). Crunch (Noun)
Definition: a crucial point or situation, typically one at which a decision with important consequences must be made.
Synonyms: moment of truth, critical point, crux, crisis, decision time
Usage: When the crunch comes, she’ll be forced to choose.
2). Hedge (Noun)
Definition: a way of protecting oneself against financial loss or other adverse circumstances.
Synonyms: safeguard, protection, shield, screen, guard, buffer
Usage: He sees the new fund as an excellent hedge against a fall in sterling.
3). Eventually (Adverb)
Definition: in the end, especially after a long delay, dispute, or series of problems.
Synonyms: in the end, in due course, by and by, in time, after some time
Usage: Eventually, after midnight, I arrived at the hotel.
4). Inevitable (Adj)
Definition: certain to happen; unavoidable.
Synonyms: unavoidable, inescapable, bound to happen, sure to happen
Usage: His resignation was inevitable.
5). Owe (Verb) past tense: owed; past participle: owed
Definition: have an obligation to pay or repay (something, especially money) in return for something received.
Synonyms: be in debt (to), be indebted (to), be in arrears (to), be under an obligation (to)
Usage: They have denied they owe money to the company.
6). Hassle (Noun)
Definition: irritating inconvenience.
Synonyms: inconvenience, bother, nuisance, problem, struggle, difficulty, annoyance,
Usage: Parking in the city centre is a hassle.
7). Dissipated (Adj)
Definition: (of a person or way of life) overindulging in sensual pleasures.
Synonyms: dissolute, debauched, decadent, intemperate, immoderate,
Usage: The new heir was a dissipated youth.
8). Nevertheless (Adverb)
Definition: in spite of that; notwithstanding; all the same.
Synonyms: in spite of that/everything, nonetheless, even so, however, but, still
Usage: Statements which, although literally true, are nevertheless misleading.
9). Recession (Noun)
Definition: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
Synonyms: economic decline, downturn, depression, slump, slowdown
Usage: The country is in the depths of a recession.
10). Ease (Verb) gerund or present participle: easing
Definition: make (something unpleasant or intense) less serious or severe.
Synonyms: relieve, alleviate, mitigate, soothe
Usage: He hoped the alcohol would ease his pain.
11). Cite (Verb) past tense: cited; past participle: cited
Definition: refer to (a passage, book, or author) as evidence for or justification of an argument or statement, especially in a scholarly work.
Synonyms: quote, reproduce
Usage: Authors who are highly regarded by their peers tend to be cited.
12). Unwind (Verb) gerund or present participle: unwinding
Definition: relax after a period of work or tension.
Synonyms: relax, loosen up, unbend
Usage: It’s a good place to unwind after work.