Keynesian Fiscal Stimulus

You can read the paper at the following link:

http://www.lerner.udel.edu/sites/default/files/imce/economics/WorkingPapers/2011/UDWP2011-11.pdf

CURRENCY-SPECULATION...

Currency-speculation mainly aims at making profit by selling or buying currency on the expected rise or fall in its value. Data points that during 1975, 20 percent of the total foreign exchange transactions comprised of speculation and today’s figure says that the percentage of real economy in foreign-exchange transactions is lower than that of speculation. Contrary to the Economics text-books, individuals and corporations do not compete with each-other for resources and market; rather they struggle for money through market and resources. The floating currency or exchange-rates has made currencies an asset giving rise to a new head for investment by speculating on the future movements of the popular currencies. It has now become a part of the investment portfolios among the other popular assets for investing money. It involves a low transaction cost and one can access the market twenty-four hours.

The unprecedented increase in currency-speculation is, generally, attributed to three interacting factors. The dumping of the gold-standard in the year 1971, by the US paved way for the after-development in currency-speculation, and made the trade in the foreign exchange market responsible for movements in the value of the most acceptable currencies. Economies with their higher stages of development and the efficiency in governance, effective monetary and fiscal policies, were given more value for their currencies than countries bad and in efficient government practices. The deregulation effected in the 1980s and the Baker plan by the World Bank and International Monetary Fund (IMF) gave more scope to the international flow of capital for the organizations that previously resorted to speculation. And, lastly, the innovation in the technology of money-transfer, computerization and electronification, almost revolutionized the money-market all-over the world.

The effects of currency-speculation are scary and a threat to the national governments. Currency-speculation works through expectations regarding the change in the currency or money supply and is now, not only constrained to the expectations rather speculators, actually, affect the money supply by holding or releasing it in large quantities. By doing this they affect the economic-policies just for getting their ends and, in fact, they make the national economic policies ineffective in achieving their desired objectives. It has reduced the power of governance to almost zero. The frequent changes, appreciation and depreciation, in the value of the currencies that are in demand are often credited to large scale speculation. Among the examples, fall of the British Sterling, by George Soros, in 1991, and Mexico’s currency in 1994 are much defamed. George Soros, mentioned above, is the greatest speculator of all times.

Recession may help INDIA...

Article;

http://economictimes.indiatimes.com/news/economy/indicators/recession-2011-2011-could-be-worse-for-india-as-us-recession-looms-large/articleshow/9522482.cms

Comment;

Right now the biggest challenge facing Indian economy is inflation. And, as far as inflation is concerned the drop in investment in WORLD market and economic activity would help INDIA in managing its price situation. Since, Europe and the US are stuck in their own problems and interest rate on government bonds in Europe and the US are falling the chances are that the investors will face INDIA and other emerging markets where interest rate are much higher as compared to the developed world. As far as, growth-rates are concerned INDIA's growth rate at 8% looks more attractive than most developed countries. I do not think there is a need to worry about INDIA's growth rate since our main problem is inflation and it is inflation which has hold INDIA's growth momentum. Moreover, INDIA looks more concerned with domestic demand however fall in exports is a concern form the point of view of balance of payments but imports can accommodate the demand pressure due to rising fiscal expenditure. Since global economy and demand is weak INDIA should see the present crisis as an opportunity to relieve domestic demand for food. If INDIA can not grow 10% then the problem must be attributed to inflation and not external events. However, the present crisis is going to help INDIA in form of lower prices whatever little. But this time i agree that the possibility to escalate demand by lowering repo-rates will not be available due to rising demand without government's will to ease rising prices.

PORTFOLIO-MANAGEMENT

Through his paper, Liquidity Preference as “Behavior Towards risk”, James Tobin popularized the Portfolio Balance Approach, a concept of portfolio management which later became an important post-Keynesian development. He liberated the idea of the speculative demand for money from its dependence on expectations regarding the future changes in the interest rate and has worked away from the assumption that the only alternative of holding cash balances is to hold a single-maturity bonds as well as other assets, apart from money, can be liquid. The discipline concentrates on decisions regarding the mixture of investment and policy to attain the objectives of investment by minimizing risk for individuals and organizations is termed as portfolio-management. It involves SWOT – strength, weaknesses, opportunity, and threat – analysis while considering investment in assets- debt, equity, domestic, international, and so on.


Portfolio-management offers you track of all the investment, assets and cash-flow done by your manager and his team, regularly updated. It gives you a complete account of all the mutual-funds, securities, unit link plans or gold purchases, and keeps information regarding the appreciation/depreciation in their values. It keeps a record of your capital gains in the current and past financial-year and tax-status. It maintains a complete history of the transactions that are done in your ULIPs, mutual-funds, and stocks for different fiscal-years. They help you update your mutual-fund Systematic Investment Plan (SIP) installments, current and future, in two simple-steps. They also follow funds and stocks before deciding for them to invest, and can also set a trigger-price – price at which an order gets triggered from the stop-loss book, where orders are placed to minimize the loss. The team compares the portfolio against various indices, and, finds out the historic and current dividends for your stocks. Asset risk calculates capacity for risk taking and its tolerance-level.


Portfolio-management can be divided into, active-management and passive management. Active-management entails analysis, technical, fundamental and many others, to trade regularly. The manager and his team decide about the securities to include it in the portfolio or mutual-fund. Very often, active portfolio-management work under a set of rules, for instance, sometimes the money-manager might buy growths stocks for a certain amount and blue-chip for another. Nonetheless, the basic foundation of active-portfolio-management still remains the same that the return for the investor can be maximized by trading securities on a regular basis. To cite an example, a manager or his team may buy share X after selling Y, then, on the next day the team may buy Z by selling X, and so on. On the other hand, under passive portfolio-management the manager and his team take decision to include a particular security in a portfolio or fund and leave it unchanged over considerable length of time, e.g., they buy shares of company XYZ and hold them for a period of five or ten years.