US, INDIA, Europe...

The World against the back-drop of the 2008 recession in the US has seen many dramatic turning-points in terms of the stances held by the world’s most important central-banks... The monetary-policy since the crash has been the most favoured tool to boost sagging demand... in line with the fall in economic-activity and growth-rate... The other tool (fiscal-policy) was already too much burdened due to historical low interest rates... Both, the public and the government borrowed heavily and the banks, loosely regulated, lent heavily beyond the reserve requirements... Many banks failed in the West and the government, instead of following economics, followed wrong voices to decide a customary bail-out to large investment banks in haste... without thinking too much... the government did not see the unemployment figures... otherwise it had not used  wrong levers... to correct the problem of unemployment... It should have directly used the fiscal-policy, whatever money it had, to correct unemployment figures... and not balance-sheets... Actually, it was an occasion to teach banks a lesson for theirs excesses... And, this was going to see a major change in the central-bank policies all over the World... Following the United States... And, again, everybody else embarked on expansionary monetary-policy...

Here, in INDIA, too, the government and the central bank gave the economy high doses of stimulus to avert a downturn... These stimuli helped the economy to achieve its potentials, but, INDIA is a developing economy and more than half of its population still survives on $ 2 per-day.... Nevertheless income levels have also risen but not in accordance with inflation which remained the dominant story in the region since the stimulus 2008... The government, totally, ignored over-employment and this created pressure on domestic-resources when markets are not that developed and due to the supply-side-bottle-necks... The government did not see the economy overheating...  Which affected our savings and sent the interest-rates high which stifled the Indian growth-story later... Nonetheless, changes at the RBI and the government recently have now turned the economy... Close to low inflation and low interest-rates... good for economic-growth... The new RBI Chief in INDIA loaded with latest insights, inflation-targeting and all... has succeeded in sending the right signals... He agreed everybody that he is conscious about inflation and has guts to convince the government about its policy... Moreover, the fiscal-stimuli which is nothing other than public-spending, revenues apart, has also been better-targeted to the poor, to reduce the inflationary pressure with the demand it is generating...  This has reduced inflationary expectations, too, actually the wage-push-inflation because higher inflation will lead to demand for increase in wages and incomes, the economy would lose demand internally and the exports will lose competitiveness globally... current account deficit becomes unfavourable... We have always tried to take a gauge of variables affecting the economic growth but never included price-level as a major force driving demand and economy... Which has lately become the most important factor in shaping expectations,. Firms supply when they expect higher prices ahead... even agriculturists... But, this does not mean that lower prices are against the idea of growth, actually, growth-rates. Lower-prices, very few would tell you, are more expansionary, but a Harvard economist would not disagree, completely...

The long-term data for the developed countries has shown us that, despite, so massive increase in the monetary-base the price-level in the regions has gone down significantly and they have actually excelled the rest of the world... The standard of living has improved a lot, beside a lower level of unemployment and temporary blips in the full-employment, the nairu-rate... developed countries are a good example, and especially Germany, that lower prices are helpful in maintaining demand and employment, and ultimately the growth-rates...  According to experts, if Germany had its own currency, it would be more right footed vis-a-vis dollar and euro, actually stronger... lower prices in Germany has increased the value of euro in Germany relative to regions having more inflation... Euro is more successful in Germany that rest of the peers in the Unions... which also calls for a fiscal-union... Without which euro is destined to fail... The point is every country has many states which have a common national currency... And, they survive with each other... but, there should a fiscal-union to match spending with revenues... If you have not control of revenue how you will manage expenditure, especially government... it is like hitting the bird with closed-eyes... Monetary policy indirectly affects income which is the single most determinants of the level of all types of taxes... You have lost control over you country’s people income; you cannot increase it with monetary-policy... World is moving toward decentralization, and Europe is moving back.... Europe is moving towards a fiscal-union or a monetary-disunion...????