Financial innovation
makes sense when economy needs liquidity or it wants to raise funds. When the
economy is in blues and wants to boost consumption or facilitate a particular
level of consumption, say subsistence-living or some form of social-security.
Innovation of financial instruments make best sense when the economy is
experiencing high inflation because it sucks liquidity from customers' hand and
place it to more responsible hands. Interest or gains from financial
instruments are partially, from the point of view of the composition of rich
and poor in a population, a reward for postponing consumption, and partially a
reward for accumulating wealth. But, when the onus is on Central-Banks the
former is a bigger concern because it directly adds to inflation, in the form
of prices of basic goods and services, and higher rate of inflation is direct
hit on poor stomachs earning subsistence wages or earning very-low. Therefore,
on occasions of high inflation the Bank may choose to reward better for
postponing consumption than just accumulation of wealth in a discrete way. At
last, to conclude, financial-instrument-innovation makes a better sense in
times of high inflation rather than creating it, meanwhile the poor is busy
with his two-squares of meals and save very little to reach banks.
Subscribe to:
Post Comments (Atom)
"TRY TO CARVE OUT A DEAL, YOUR PURPOSE, AND NOT TERROR, LOWER TARIFFS WOULD INCREASE TRADE AND INCOMES..... GLOBALLY..."
INDIA's now is the biggest as per the human resources and is rival to China and part of China plus 1 policy and more open and a de...
-
Speculators bet on market behavior in order to gain from an investment though everybody is speculating on one thing or the other and largely...
-
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 ...
-
An education system should be such that you are valuable to your country and the world which actually depends upon the perception o...
This is a Great Website You might find Fascinating that we Motivate A person.
ReplyDeleteMoney Lender Singapore
very nice blog to read and to get inform i like it very much and impressed from it you know that you are so beautiful about your work so keep it up
ReplyDeleteMoney Lenders Singapore