"Everybody is worried about rate cuts and nobody for lower interest rates on savings, when all save and few borrow..."

Growth is sacrificed when the value of the money is sacrificed because spending goes down due to inflation, and people buy less due to high prices. However, inflation expectations may increase spending which further increases inflation. Normally, people expect inflation to go up in the long run because they assume that the population would increase, but experience from Japan shows that advanced stages of growth increase supply, and demand goes down due to a lower population growth rate, US, Europe too... However, if the central banks increase the value of money by increasing interest rates it may help create low inflation and expectations people could delay spending and actual inflation would be low which means higher demand... Lower prices are more expansionary, it is the law of demand...

 

This age monetary policy has missed the goal of increasing savings and, then, investment... The people whose savings are invested are poorer than the people who are using their resources... This is a partiality... Wealth is being destroyed by using inflation as a policy... Central banks must target low prices by higher interest rate, it is the only way to create real wealth..."

 

The inflation expectations have been stable around five percent, but the RBI wants lower inflation expectations for low inflation and continued expansionary policy... The central bank shall target value for money by maintaining prices/inflation to increase/decrease demand/supply to achieve full employment, and growth, and expectations... Our ultimate object is price stability with full employment...

 

"Household savings had touched a peak of Rs 23.29 lakh crore in 2020-21 -- the year which saw the second wave of the Covid pandemic. Following that it has been on a decline. It then fell to Rs 17.12 lakh crore in 2021-22 and further to Rs 14.16 lakh crore in 2022-23.9 May 2024. According to the National Account Statistics 2024 from the Ministry of Statistics and Programme Implementation (MoSPI), net household savings dropped a massive ₹9 trillion over the three years leading to FY23, now standing at ₹14.16 trillion.30 Oct 2024"

 

In the US, Fed wants investors to expect no rate cut in hindsight and continue to invest, a rate cut is not expected until an exception arises that it wants them to not delay spending in the expectation of a rate cut and lower cost... A strong dollar makes imports competitive and could boost domestic demand for imports... A strong dollar increases exports uncompetitiveness... Probably others are not imposing higher tariffs on US exports... Dollar is very costly..."

 

RBI is now more concerned about inflation expectations due to investment demand and spending and rate cuts, while consumption demand is lagging due to higher inflation and also due to higher interest rates... If interest rates are maintained or increased a little it could help lower inflation and lower prices increase demand and spending... A lot of consumption demand would increase... It would also help the capitalists who save more than common people... Interest rates have lost the lustre as wealth creators... Real interest rates are 2% pa and if we calculate the speed to double investment it will take 72/2% years is 36 years all because of inflation, same for debtor... People have moved to more risky assets... Lower interest rates are an important concern for risky investment... Inflation and expectations to increase spending is rejected by the law of demand which says lower prices increase demand (and growth) and higher prices actually lower demand... Its a mirage...

 

If the RBI increases interest rate to 15%pa prices would definitely go down to 3%... Business is done by rich.. it would not matter much. It would make people rich real incomes and wealth would go up... demand and growth could increase if people understand this... Good old days of double money after five years... Higher demand would also create employment...

 

Industry must reduce consumers' prices and cutting rates is just an artificial remedy, high interest rate expectations could lower price expectations which means more supply and actual low prices... Low prices would increase demand and growth...

 

The only way to increase profits is to increase scale or sell more and more without increasing prices and reducing demand... Without innovation, a firm could increase investment to lower average cost due to cost inflation and prices... Lower average costs and prices would increase demand for exports... one could sell more... The ability to invest more is quite an advantage in business...

 

Low price expectations could increase supply and lower actual prices... Low prices increase demand... and growth expectations... also due to a low base... This is done by every business... During inflation when demand is low low prices could help increase demand... also if due to high interest rates...

 

INDIA is not demand deficient which makes the fundamentals strong but supply-side is weak, inflation tells... High inflation expectations have also reduced supply...

 

Demand is low due to high inflation... higher prices low demand... When demand is high we need a high supply which could be carved out with low price expectations, high inflation expectations would not let supply materialise, people may hold or spend less or save more for the future... High inflation reduces expenditure/spending... Year over year demand would go down or have a very low real income or growth rate... Like real interest rates... With 2% real interest rates rates it would take 36 yrs to double deposits... Poor people would work their whole lives to double their wealth... INDIA needs a 2% inflation target to increase the real growth rate and high interest rates to lower price expectations and increase supply... Capitalists save more than common people... Even if the RBI maintains the status quo it could lower demand and price expectations and increase supply which actually could reinforce low prices...

 

Lower prices increase demand and growth... Interest rate cuts do not increase consumption spending, though demand for loans might increase... Increasing consumption spending may require low prices or inflation... People could also delay spending in expectation of lower rates which could lower demand and growth in the short run...

 

Rate cuts are literally possible when we have inflation and expectations between 2-4%... Savings are down too by Rs 9 trillion which could lower the credit multiplier and demand also due to higher interest rates... Higher interest rates and savings are important for lower prices and higher demand and economic growth...

 

As far as, inequality will always be there because people who are poor today take time to become rich and by that time, the rich will be a lot richer... The only way to reduce inequality is to increase interest rates on savings and investment. This would be reaped from the capitalists and given to the masses, though capitalists would also gain by interest income on savings... Higher interest rates would also lower inflation and expectations and low prices increase demand and growth, poor people would also save a lot... While other things remain constant, low prices with sufficient employment would increase the real value of money and demand and supply and growth and expectations... This could be a better way of income distribution... Not only, taxing the rich, but timely distributing it to the poor makes the goal complete, the outcome would be lower equality and poverty... Higher interest rates could definitely help create long-run wealth and lower prices and expectations could make the process self-fulfilling...

 

The economy is finely divided into producers and consumers, and a rate cut would benefit the former, while a higher rate would benefit consumers in the form of lower prices and higher interest on savings which would also increase demand and employment. Politically mathematics supports consumers, though capitalism is a part of the economy, but governments are run by numbers and money... Political favorism and donation are common... Favoring the rich is unjustified on political and economic grounds... It is simply not feasible...

 

 

Economists believe inflation cuts real variables...

Economists believe inflation cuts real variables like real wages, interest rates, and exchange rates in order to gain competitiveness, but it is against the law of demand that lower prices increase demand and higher prices lower demand... Nonetheless, inflation expectations are self-fulfilling... Moreover, a country where the value of money is losing 5% every quarter shows a weak supply side or high demand... Higher interest rates can control food and fuel inflation through higher unemployment and lower economic activity... Inflation means food and fuel inflation because they reduce poor people's real wages and savings... and investment in the economy... and lower supply means further higher prices... If Inflation is 5.4%, nominal growth is 10% and real GDP is much low due to high inflation... unemployment rate is 8%... The rate cut is justified to increase the 5% growth rate...

 

We are losing competitiveness fast due to food and fuel inflation because they add to inflation and higher wage, and interest rate expectations... Other things constant, inflation and a stable currency would not let exports grow because prices would increase relative to the rupee exchange rate, which would lower export demand... If we really want to increase demand and growth in real terms we should improve productivity and competitiveness where we are weak, in INDIA's case food and fuel inflation... If we had a good supply in INDIA we could expect that lower borrowing costs could increase supply and lower prices and increase demand and growth and expectations... But, India is both demand-dominated and/or supply constrained, inflation tells the story...

 

INDIA is demand-dominated and supply-constrained because of higher prices and interest rate expectations even though we have an 8% unemployment rate and the economy is overheating when there is excess labor supply, we could imagine inflation at full employment which is directly not achievable since full employment would further increase demand and prices... RBI Guv’s never helped include the unemployment rate in the RBI commentary since growth results from trade-offs between inflation and unemployment... What is INDIA's full employment? It is important for inflation, interest rate, spending, growth, and expectations.

 

The Government may bring instruments that could prove attractive to delay consumption, small sacrifices, paid fast and higher, could help lower inflation. During inflation, spending could be reduced by aiding savings... poor people's savings... Saving ideas must be attractive to beat inflation...

 

Due to poor supply and high inflation, India is losing its competitiveness fast. High inflation means that money is losing value fast, and spending will go down. Due to high borrowing costs and further lower supply, prices will increase again. It is cyclical...

 

Inflation is a loss in competitiveness and demand, it makes people poor... The argument is that inflation cuts the value of real variables like real wages, interest rate, and exchange rate and increases competitiveness to increase investment demand at the cost of devaluing savings and since the capitalists save themselves... the trade-off involves the choice of lowering the value of money to increase investment and employment... which lower real wages and demand... IS FLAWED... Inflation creates inflation expectations means the trend of losing the value of money would continue... A simple hospitality worker gets a $ 200 tip a day in Germany, but Indians are struggling to earn the same in a month... There is no end to lowering the value of money... The trend we have observed is that in rich countries the value of money has increased over time with a lower population growth rate and good supply side... Poor people lose savings faster than rich due to inflation and expectations...

 

INDIA is losing its competitiveness fast since the exchange rate is relatively stable. Other things equal, higher inflation means a loss in productivity, competitiveness, and demand. The rupee is stable, but inflation is increasing, which means a loss in comparative advantage and market share. Simply, higher inflation means lower demand, but higher inflation expectations mean further higher prices because people would prepone demand and push prices further. If people expect that domestic inflation is going to increase but the exchange rate would be stable they would consider it a loss in purchasing power in future if the rupee does not depreciate...

 

As far as Chinese competition is concerned, most notably Indian products might not be a cheap and better substitute for Chinese products... We are a cheap currency, and we have an advantage in the Chinese territory, too... But investment is not there, especially in terms of scale. If we produce at lower prices, the same products, then only we have a scope to increase market share... Even when Chinese products involve transport costs and import tariffs... INDIA's 4% inflation tells that we could expect the INR to depreciate 4 % to keep exports competitive but only inflation has made exports uncompetitive but currency is stable... Inflation and higher prices mean that we have lost competitiveness... Higher prices mean a loss in demand and growth and expectations...

 

Supply is increasing and population growth is going down, a phenomenon observed in advanced economies that points to a special quantity theory of money where supply increases and prices fall due to lower borrowing costs..., which means low price expectations... To lower inflation it is important to create low price expectations for the future... Higher interest rates/borrowing costs might increase cost lower supply and increase prices... INDIA is food and fuel supply constrained... Prices are too volatile creating uncertainty for growth... Both, are in the hands of the govt... Provide DBT for ration and reduce taxes on fuel which is also a kind of spending... Without savings and without printing money same investment is not possible, printing money means more inflation, lower investment, and supply further increased prices... The special quantity theory is a long-run trend...

 

The divergence in the share of wages, profits, and taxes provides evidence of the growing monopolisation of the economy. 4-to 5 companies are dominating the whole credit, though business is done by way of loans only, it is the central bank's money... Savings of the poor are either taken away by profits or taxes... The government is too a big monopoly... Businesses instead of increasing productivity find excuses for raising prices and the same with the government and taxes... People are supporting an uncompetitive business and government... With time production and supply shall increase and control prices when population growth is decreasing, but profiteering and taxes have spoiled the demand... Greed is also self-fulfilling because it makes people poor, poor men will be greedy...

 

INDIAN cannot benefit from low interest rates abroad as the banking sector is protected from foreign money... At this nascent progress, this could be a boon for foreign investment... INDIA is 80 times in terms of currency and wages... which could solve the unemployment problem... INDIA should follow the model of a strong currency and cheap imports...

 

INDIA's not even in the top 50 of the top real per capita income countries, though it has the largest labour pool and youngest population... Without investment, we cannot cash on the country's comparative advantage...""India ranks 158th in the world for its investments in education and health care as measurements of its commitment to economic growth, according to the first-ever scientific study ranking countries for their levels of human capital. Why give tax?

 

Low growth and expectations give space to low inflation expectations due to lower economic activity and a slowdown ahead. Lower actual growth than the projected growth rate would lower expected growth, and low investment could be self-fulfilling. Low inflation expectations due to a high base and low growth could be verified by the RBI before cutting interest rates."

 

There are enough poor people's votes and space to work for their betterment... Caste politics for votes is an outdated idea, reservation should only be given to poor people... There is a great divergence between the number of educated people and spending in INDIA and abroad... INDIA has mastered the art of providing unproductive jobs for unskilled labor in agriculture and construction which lies in the unorganized sector... More than 50% of the labor market is unorganized and informal where the minimum wage is too low...

Food inflation has been a headache for governments since 2010...

Every year, floods, limited irrigation resources, bad food distribution and procurement policies, and missing storage facilities threaten financial stability, leading to higher wage demand and higher price and interest rate expectations... Food inflation is the main cause of inflation expectations in the economy... People say higher interest rates would not control inflation, though higher unemployment might reduce demand and inflation expectations...

Interest rate controls unemployment and demand, therefore it is wrong to say that it would not control food inflation... Lower interest rates and higher employment would increase demand for food and vice versa... Nonetheless, food and fuel inflation directly adds to prices and wage demand, though inflation expectations are also self-fulfilling through a wage-price spiral... We need to break this because inflation means a loss in competitiveness, demand, and growth... Inflation and expectations reduce demand - people spend less and also save more for the future- though low prices and expectations increase spending and also reduce future savings... Inflation lowers spending and lower prices increase spending... A loss in the value of money lowers spending and savings, and a higher interest rate is compensation, inflation also lowers exports...

Food inflation and high imports, especially edible oil and pulses tell the real story... INDIA has a deficit in food supply and pledges to be a food surplus country by 2047... False comments could not sway people who read and access the internet... It is more important to make people conscious and aware of the facts... it is the duty of a citizen... We are in an age which could spell trouble for liars, though the information could be changed too by people in power, it is a personal experience... If you raise you voice against those your survival would be in question...

India's food inflation is seasonal; it happens every year. The government of India demands too much for its public distribution, which increases the cost of supply and storage problems, which should actually be done through DBT."

After Covid all countries experienced inflation, but food inflation continued to remain high in INDIA even after years... All countries including China and the US controlled food inflation...

INDIA's inflation is not on a glide path it is sticky at 5% and given the 6.5% policy rate, the real rate is 1.5% which does not make room for big rate cuts... INDIA's supply side is not up to mark therefore we cannot assume that lower borrowing costs would increase supply and disinflation expectations which would increase demand and inflation expectations and could further increase inflation...

What an idea if inflation is high due to food inflation, reduce food weightage in the CPI... excellent to drive monetary policy with an agenda, and reduce interest rates when inflation is still 5%... If income is increasing 10% a year, 5% of inflation would be would be like a 50% tax... The inflation target should be 2%... Higher interest income is just for higher inflation and could help reduce spending and inflation... If the RBI reduces interest rates, it is a different matter...

In August 2024, without the base effect, the situation becomes even worse, 3.54% is on the 5.08% base and if we replace the 5.08% base with the 0, the base effect would gone and the inflation would be 8%...Probably if we calculate inflation on the same base year as the last print inflation would be 8%... We see not inflation but rate of growth of inflation...

Inflation is low given the base effect as the base on which the inflation was calculated was higher than normal. However, if we calculate inflation on the same base year on which the second last month's inflation was calculated we get a higher inflation print that may be double what we get now... Food inflation and taxes on fuel are hurting the (real) wages and demand and productivity... When inflation is high the central bank must compensate through higher interest rates... There is no other way of protecting financial stability... and loss in demand...

When we have high inflation and interest rates, how the economy would behave? The media and some people think everything is hunky dory, election season is over let us face the reality now... Inflation and unemployment, the twin objectives of the economic policy are on board negative...

RBI often considers base period as potent justification for low or high future inflation or expectations... it just got it right this time that September inflation would be high when it explained the cause of too low inflation in August which generated higher inflation and interest rate expectations... which underlies the RBI's understanding of prices/inflation and expectations.. If RBI could rightly predict inflation, it could bring a lot of certainty to the business group investment decisions... and most importantly interest rate decisions and expectations... it directly adds to spending and growth, though information about prices affects everybody... when have money... profit from a price move or motive... We do not always want higher prices buyers need low prices and sellers need higher prices, but the actual outcome would be only in favor of one this time either buyers or sellers... Time chooses the winner between sellers or buyers... in the short run...

Demand and Supply are Intertwined...

 Like recession, periods of high growth are also self-reinforcing due to EXPECTATIONS. This time inflation expectations, in the US were that it would subside soon, therefore people did not cut spending. The memory of the last decade's lower than 2% inflation reinforced those expectations.

If we know the expectations we could avert a negative outcome or even reinforce a positive outcome by the way of some economic stimuli.

This time people believed that inflation would come back soon so they did not cut spending and it did not cut the supply by lowering employment which kept reinforcing lower price expectations.

Prices are the oldest most reliable indicator of recessions and low prices could soon turn into a full-fledged recession, and the Fed thinks that may help avert a recession by cutting the interest rates.

Nonetheless, price expectations could help manage demand, supply growth, and expectations. It is a dichotomy that high price expectations are managed by high interest and lower price expectations by lower interest rates due to stress on the demand side and could reinforce expectations.

However, from a supply-side perspective, high price expectations must be dealt with by lowering interest rates and lowering price expectations by increasing interest rates, which could diminish expectations by affecting the productivity of capital, demand, supply, and growth.

The work of central banks is to reinforce positive expectations and diminish negative expectations though it is a time consistency problem since at times it wants high inflation and sometimes low inflation because prices are variable.

Nevertheless, it is a long debate whether we are managing demand or supply, but both are intertwined. During low growth, demand, supply, and price expectations we cut interest rates and during high growth, demand, supply, and price expectations we hike which could be self-fulfilling and could be avoided by maintaining stability in the interest rates.

Stocks’ Nash Equilibrium

Speculators bet on market behavior in order to gain from an investment though everybody is speculating on one thing or the other and largely all are investing time and money on something in expectation of something, nonetheless, it is largely not pointed that speculators’ behavior makes the market behavior that their aggregate actions decide where the markets would move which depend upon their expectations ie aggregate expectations and that is how the subconscious of the market works or the underlying subconscious of the investors. The aggregate expectations decide the market behavior and actions and outcomes based on the available information. On a micro level, a person increases spending and investment if he sees that prices are going to go up in the near future and vice versa and we could easily generalize it on a macro level that people increase spending or investment when they expect prices to go up which actually increases the price and the other way, too. That is, aggregate expectations and actions are self-fulfilling. 

Inflation and interest rate changes are self-reinforcing, higher inflation means people would demand more and supply would go down and prices would go up again and a higher interest rate means lower employment and demand and supply, too, which further increases prices. Demand and supply are not two, the person who supplies, demands, too. Our ability to supply depends upon how much we demand, what we demand is what we supply, and if demand goes down supply goes down, too. Demand could not be met without supply. Maintaining stability proactively fosters the central bank's credibility and for stability; a top and bottom of inflation and interest rates are assigned to manage demand and supply. At the bottom, everybody would increase demand and at the top everybody could supply which would help stabilize demand and supply and prices and interest rates. Prices and interest rates would move around the Mean or Average of the demand price and the supply prices. It would help reduce uncertainty about prices and demand and supply. Everybody would demand and supply at the same price or interest rates and maximize returns. Excess demand and supply determine future prices. Prices and interest rate expectations could increase volatility, but the central bank's job is to curb this volatility. 

Stock Market is a place where the purpose of bids and offer is to maximize gains from trading shares and require a strategy to satisfy all which is commonly missing, since in the stock market everybody misses the lowest buy price and highest sell price in the short run which leads to missing the long-run highest price targets. Most people regret to buy at higher price and sell at lower prices in the short-run. Both, the people who are buying and selling and even the companies want higher prices for their shares, there is no opponent, everybody is a trader which requires strategy to benefit all by increasing price of a stock. Everybody needs a strategy to excel in the stock market so that prices reach high prices range in the short-run.

If everybody follows profit maximisation behaviour, returns for everybody would increase... Means that people shall set buy limit order lowest of the price range and set sell limit order highest of the price range... If everybody does the same profits would be maximised...

Everybody wants to invest in the stock markets, but very few know that if they follow the profit maximisation behaviour they might be able to get the maximum returns… Yes, if everybody set same buy limit price (lowest) and set same sell limit price (highest) according to price range, profits could be maximised and everybody would gain…

If everybody follows profit maximisation markets could stabilise because when prices are significantly low investors could buy which could increase prices and when they are significantly high investors could sell which could lower prices...

If everybody sets a same limit price for buy and sell, everybody would gain... bid price should be the low price range and the offer price should be the high price... It is like giving some bargaining power to the investors if investors bid and offer at same prices... It would help predict stock prices right…

The strategy of a stock market has not originally taken from the Nash Equilibrium but has semblance with the theory and the strategy discussed here satisfy all Nash Equilibrium conditions that a participant has no incentive to move away from the optimal market strategy for two players, in the stock market the buyers and the sellers.

Economic growth around...

 Food and fuel inflation is high in INDIA... the main sources of inflation... Lower fuel taxes could help lower inflation and increase productivity and demand and growth... Lower taxes could also help... Government is not a family business... It is there to increase happiness and prosperity... productivity increases when the cost goes down, the government is a big cost at present... The government has failed on employment and inflation... There are not enough skills to increase productivity and employment... Personal loans are available easily, but business loans lack as the govt discourage risk taking... One reason for higher prices or inflation is the fiscal deficit, 6.5% of it could increase inflation expectations by economists.

 

Unemployment in INDIA is grave despite being the goal of all policies and all governments and central banks around the world try to push infrastructure and construction as it consumes a lot of unskilled labor and creates a lot of employment and gives rise to shadow banks and asset price bubbles or inflation and instability and correction... like US and China in 2008 and 2023 respectively... The unskilled population is a big burden for policymakers around the World... INDIA's cheap labor is its competitive edge which shall be employed productively to meet its unmet demand... Instead of betting on property and real estate to create employment, INDIA shall try to promote other businesses by subsidizing costs... Credit for investment is costly and scarce in INDIA to do business on a large scale... It should promote large scale business though with proper risk management... Cheap credit is must for productive investment...

 

INDIA has $ 620 billion in foreign debt and it has 600 billion in foreign reserves, the debt if not hedged could create uncertainty for the rupee and inflation and employment which could prove self-fulfilling if people expect that the rupee would depreciate. Inflation expectations could increase nominal exchange rate...

 

INDIA needs FTA for itself, for exports, but negotiable trade for imports, this is the diplomacy part... How the government would increase employment?

 

 

In the US, lower price expectations and higher real interest rate expectations could reduce/delay spending and increase supply relatively reinforcing lower prices If the Fed skips the rate hikes it would not lower supply further and could help lower prices and expectations. Higher interest rates could lower supply and increase price pressure and interest rate expectations. A lower base increases price expectations and vice versa...

 

If people expect that borrowing cost could go down in the near future they might delay their spending which could make rate cuts self-fulfilling and earlier than expected because demand would go down and supply could increase relatively. Money demand lower than money supply could lower market interest rates...

 

People have seen that 2% inflation is possible, last decade, Fed policies with ultra-lose policy, quantitative easing, et al., did not produce much inflation. The memory is still fresh. The supply disruption could be attributed to covid and the GDP and prices have recovered. We have observed a special quantity theory that more money supply reduces borrowing costs and increases supply in developed economies as productivity is increasing, too.

 

Expectations shall play an important role in decision-making because consumers and investors spending actions and actual inflation depend upon future prices in order to maximize gains, they are forward-looking. And, inflation expectations are drifting down and demand and spending could go down, relative to supply and prices would come down quickly because people would delay spending in the expectation of lower prices, faster than we expect, as per rational expectations. Fed's impatience to tighten could lead to lower prices than the inflation target. We forget that full employment is 0 unemployment when people have no incentive to switch/swap between jobs ie frictional unemployment and other types of unemployment due to low inflation and wage expectations because their loyalty would be questioned....

 

Prices and growth are connected and have a negative relationship, higher prices and interest rates lower growth and vice versa, and therefore price and growth expectations are connected, too. Lower prices increase demand and growth, but, lower price expectations, including interest rate expectations, delay demand and increase supply reinforcing lower prices and growth. If we have lower price expectations we might have a period of slow demand and growth though it depends upon the level the Fed chooses to offer. 3% interest rates or 1% real interest rates seem reasonable after accounting for 2% inflation. It could prevail as long as people have rate cut expectations and the Fed would not like to push the economy into liquidity trap because rate cuts and expectations could be self-fulfilling, delay in demand could lower prices and interest rates. Therefore, we might have a slowdown...

 

People realised that price and wage expectations are self-fulfilling and unemployment is no solution to higher prices and higher unemployment would reduce supply further reinforcing higher prices. That could be the collective perception.

 

 

Spending is the answer to deflation to increase demand and defend a bottom while increasing price or inflation expectations, in China. Fiscal policy has a higher multiplier than the monetary policy. Higher money supply could lower interest rate expectations and delay in spending though higher government spending would increase price expectations. Higher inflation and depreciation could increase exports, nonetheless, depreciation expectations could delay export demand. This is the time to increase appreciation expectations therefore selling dollars could help... Higher prices and interest rate expectations through higher government spending could help increase private sector spending and multiplier...

Nobody knows how to maximise returns in a stock. Union is also important in the stock market, unison of buy and sell prices. If everybody set same buy and sell prices profit could be maximised for all. The upper and lower circuit are given, low price range and higher price range, use lower circuit to buy and upper circuit to sell, the market price would be either at the lower circuit or the upper circuit and quite predictable.

Ultimately a successful economy would have full employment and low inflation in order to maximise products, investors' concern is what the prices would be in the future in the short run, everybody wants to earn quickly and easily and have more leisure and health at their disposal by technological advancement. The real wages and incomes are higher in the US and people consume more than in China, adjusted for population.

Collective Consciousness Has Never Been So Speculative...

 Changes in prices and interest rates and expectations are self-reinforcing. Higher prices and interest rates increase demand and demand for money relative to supply and money supply which further reinforces higher prices and interest rates and vice versa.  

Similarly, changes in prices and interest rate expectations are also self-reinforcing, lower price expectations delay demand or increase supply which reinforces low prices and interest rates, and demand would go down relative to supply, the opposite is true, too.  

Therefore, our target is NAIRU, an employment level consistent with stable inflation of 2 or 4%, though changes in unemployment and prices or inflation are again self-reinforcing... Higher prices are enough to control demand, if a limit is prescribed, and rate hikes by the central banks would reduce the money supply and supply and further reinforce demand, prices, and rate hikes...  

Instead of signaling agents, the Fed shall directly communicate to act in the way inflation or prices are controlled, to increase demand or not, or lower demand for stable interest rates and borrowing costs and credit. The Fed shall make people economically conscious of how to deal with prices and interest rates and behave in the marketplace...  

Blue-collar workers' employment and wages hurt more because of the impermanent nature of jobs and their income is fixed in the short run. 

The inflation we are seeing is the product of inflation we have in the base periods, base years are the determinant of the current percentage of inflation, how our past had been, decides our future inflation percentage. Inflation percentages are not directly comparable because the base year is changing every quarter and year.  

GDP at constant prices has recovered from the covid trough completely though and we need stable real interest rates or natural real rates when near to full employment at which there is neither inflation nor disinflation.  

1-1.25% real rates are quite good for savings to reduce spending and lower inflation. Stability everywhere is what we want, interest rate stability is akin to financial stability and stability of expectations.

 

Biden's spending provided floor to demand and growth and increased inflation during a disrupted supply which increased inflation and expectations and actual inflation on a low base.  

The US economy has bypassed one of the major reasons for inflation expectations, now it has a sufficient buffer for OIL prices and the other is labor-force which is still there and the labor market is tight that is due to which we have actually is wage-inflation expectations, possible cause of stagnation and interest rate hike expectations even in a lower inflation expectation environment.  

Lower exports due to the strong dollar, have also increased the supply to the domestic market and contained inflation due to uncertainties like Russian war engagement. The US doesn't need foreign exchange and the economy is close to full employment. Lower import prices have contributed to a disinflationary economy and higher real wages which we want.  

If we are at full employment and prices are going down that natural rate theory suggests that we need to stabilize prices while stabilizing interest rates. Lower price expectations could be self-reinforcing and could increase real rates.  

Low prices and the coupled expectations and conditions point to delayed spending, ahead and rate cut expectations... 

 

It is now common for people that price expectations are self-fulfilling because they are factored into wage expectations and cost and prices, again, which further reinforces prices and is self-feeding.

Rate hike expectations have led to lower price expectations which are also significant, lower price expectations are also self-reinforcing.

 

Rate hikes and EXPECTATIONS and Fed's credibility are important for lower price expectations and delay in demand and increase in supply, at full employment, imports too, due to a strong dollar. 

The developed economies have strong currencies and the developing and lower economies' currencies are weak which is self-fulfilling. In an attempt to reduce the trade deficit developing countries use depreciation to increase exports and this depreciation expectation makes consumers delay demand for weak countries and/or currencies and increase demand for developed countries and currencies. Which is self-reinforcing...  

INDIA may commit to a stable currency in order to stabilize export demand and demand for currency and gradually strong currency expectations to internationalize its currency... Its convertibility and store of value credibility would depend upon its stability and responsible central bank. Chinese currency instability has made it an unviable option... 

Dollars demand depends upon the things the US sells/exports and it accepts only dollars. If that is the right model everybody shall buy, the American dollar policy, and follow the same policy, if that is right. Other countries have made dollar, dollar.  

It seems just that if a country exports higher it shall accept its own currency like the US, any government has to spend that money largely domestically to provide public goods. But it has different values for different countries and that is a partiality.  

Money is a standard that is changing with other country exchange. For the poor it is expensive and for the rich it is CHEAP. This is the World we live in. 

Before the advent of the Internet, the collective consciousness never proved so speculative. When people get a piece of information they act if have an opportunity. Information is flowing freely despite maps and differences. Prior to it, the Fed maintained its secrecy, but now people try to get ahead of the Fed Policy... It has made expectations or collective expectations and actions self-fulfilling and self-reinforcing...