When others are constrained, govt spending would increase employment and income, interest rates are record low... Price of capital, interest rate is different from commodity prices; higher interest rate expectations would increase supply of funds because everybody would try to resolve their debt which reinforces lower price or borrowing cost... Nonetheless, higher prices would also increase savings which would also help lower borrowing cost... The central banks actions would reinforce lower prices and demand and increase supply, and vice versa... It would do the opposite...
Lower taxes are like heaven for foreign investors... To attract foreign investment lowering taxes could help... Lower borrowing cost could converge to the lower borrowing cost abroad... The evidences from developed countries show that the long run borrowing cost has gone down and so the short run interest rate... Higher money supply has lowered interest rate...
Investors are more concerned with what the RBI “WILL” do if inflation and expectations spin out of control and their investment, they try to be proactive or preemptive in order to gain... It is per the rational expectations theory... RBI actions' expectations affect investment and consumption today...
The RBI has no data for unemployment rate, so it would be difficult to justify the rate hikes, since there is bound to be output gap till we reach full employment and prices or inflation are likely to go down with stable interest rate regime... Das has no clue of the UNEMPLOYMENT-RATE... The objective of monetary policy is price stability and full-employment... and growth is the underlying objective...
INDIA's inflation expectations are too high to and a neutral stance is what is needed now to control inflation and expectations, the RBI may shun its accommodative stance...
Higher inflation expectations would increase demand and lower supply which could further reinforce higher prices... In this supply induced slowdown it is important to keep supply increasing by lowering and stabilising inflation expectations which is likely also likely to lower demand furthering lower prices... Higher borrowing cost would also be self fulfilling... The objective is to find the r* or the neutral real interest rate, neither inflating nor deflating the economy...
If the RBI commits a gradual stronger exchange rate by selling dollars it could help limit foreign exchange rate outflows, higher prices expectations could help increase spending or demand for exports... Lower supply of rupee could further reduce domestic inflation or prices... Strong exchange rate would also reduce imported inflation...
Depreciation and expectations would delay export demand and increase supply which would reinforce depreciation whereas appreciation and expectations could delay supply and increase export demand and reinforce appreciation... Strong exchange rate means prices or inflation has gone down relative to the real exchange rate which would increase export demand... Even China's huge export led growth is followed by a strong exchange rate... In the long run a strong value of money could help maintain growth in the face of lower population growth rate...
Inflation is in the RBIs target... Between the 4 /- 2 the monetary policy could remain neutral to use low and stable inflation growth rate and expectations... Investors expectations low/high could help time investments according to the rational expectations theory... little inflation/deflation and expectations help increase returns on investment...
Inflation in INDIA is not sticky or rigid atleast not supported by commodity price inflation, higher prices also increase supply and contain inflation every year, and it is more seasonal... Oil supply would increase if prices increase... OPEC has cut supply in the hindsight of oversupply and lower oil prices... Inflation is a problem if real wages do not increase...
Low real interest rate is an oppourtunity for fiscal spending; when others are constrained the govt spending would crowd-in private spending... The govt Rs 100 trillion infra push could help drive a long way... Roads have a direct affect on productivity and demand... Implementation is the key for demand...
Food and fuel have highest weightage in the inflation indices... This is high time when the govt should bring oil under the GST... Expectations of arrival of ethnol blended petrol have the capacity to limit demand of imported fuel...
Fed is consistently reinforcing the signal that it would maintain financial stability, an environment that would increase safety of people's money and jobs... People should be easy on the outcomes and avoid overreact... sky is not going to fall... The United States Consumer Inflation Expectations show that it is expected to go down as the base year normalises...
Higher inflation and lower real interest rate, actually negative real interest rate, zero interest rate - inflation equals negative real interest rate, 0-7=-7, and if investors increase investment demand, supply would reinforce lower prices and interest rate... Lower money supply would help bottom-out negative real interest rate and increase investment demand... Higher interest rate would increase savings and investment and employment and consumption demand...
The Fed shall make only gradual moves to avoid a sudden crash and overkill demand and growth and try to stabilise inflation consistent with the inflation target... Some inflation expectations is good for spending... Lower growth is often associated with deflation or low prices and higher growth is associated with higher inflation or prices as observed in the stock market...
Investors are missing that growth has returned to normal, when actual growth surpasses warranted growth, investors shall invest more which could be self-fulfilling... These rate hikes are justified because demand and inflation have outpaced demand and inflation in the recent past, therefore few rate hikes are healthy, the Fed needs rate hikes to slash it during a downturn... Normalisation may increase investment and returns...
Low price expectations due to rate hike expectations sooner could help increase supply and delay in demand which would help lower inflation and expectations, both, consumption and investment... The equity markets have responded first... If one has money corrections would help increase returns... Otherwise wait...
To earn in stocks investors must use rules of thumb 1) buy significant correction during significant market corrections in good stocks 2) which have achieved forecast earnings and revenue consistently mom and yoy...
If investors follow few rules of thumb like buy on significant corrections and sell on significant appreciation in the stock indices everybody would gain... that would also help stabilise the markets... Business and investments are forward looking and depend upon forecast, past quarter data shall not affect investment decisions...
Short term investors, less than a month, shall pick a price to exit 2%, 3%, 5%, long term investors shall stay invested... Short term is a play of quantity and price... Higher quantity of good share would help increase returns in the short run... Quantity of shares is also important than the right price...
Depreciation expectations could delay demand for exports, though a gradual strong exchange rate expectation would help increase exports... Depreciation and expectations would delay investment and demand, foreign exchange inflows and exports, too... Too much govt expenditure could increase depreciation and expectations...
The farm quota is used in the US to control prices of agricultural produce to protect farmers' income and living, in INDIA everybody is producing cereals and dump the market hurting marginal farmers due to the absence if proper storage and holding facilities... The ability to hold stock could help gain farmers because they would be able to sell on high price... If OPEC could restrict supply to boost prices, farmers’ organisation shall be able to restrict price fall...
A Universal Health Care is the need of the hour, during Covid holes in the healthcare system were visible, Sitharaman must devote larger funds for strengthening health, it would help increase productivity...If INDIA wants to increase its productivity it must provide universal free education upto secondary level and universal food security... Not only distribution of income, but distribution of labour according to skills and specialisation is equally important for increasing productivity and competitiveness...
Crypto currencies’ underlying value is currency it is purchased with and what could be done with the money... It has an income, investment and spending multiplier value... It is an investment asset than a medium of exchange... its value is determined by the same factors of demand and supply... Anything's value or price is determined by its demand and supply or quantity they are its underlying base...No other asset prices move 150% in three days...Expectations about the crypto’s work in the same way as other stocks they are self sustaining and self reinforcing just like other price expectations...
We have abandoned gold standard long back... Today's fiat currencies, sovereign issue, are also not back by anything... Its demand and supply in the market determine its value... Like stocks it is backed by its demand and supply... Crypto’s are not derivatives so to derive its value; their price is demand and supply dependent...
