Higher prices and expectations further increase prices and price expectations which lowers demand or increase supply and lower price expectations and lower prices and expectations further lower prices and expectations and increase demand or lower supply and increase price expectations… therefore, trade cycles are imminent, in the stock markets and in the economy, too…
For example, if a stock market investor expects higher prices based on past data s/he increases investment (or demand) and would delay supply which further increases prices and expectations, similarly if s/he expects lower prices s/he would delay demand and could increase supply, which would further lower prices and expectations...
Foreign investment inflows also work in the same way if they expect inflation and higher interest rate and expectations based on data they are likely to sell which further increases inflation and depreciation and interest rate expectations, outflow of foreign exchange would again increase depreciation and inflation and interest rate and expectations…
On the otherhand, if foreign investors expect lower inflation and interest rate and expectations they increase investment which further increase foreign currency inflows and appreciation and lower interest rate and expectations.
Nonetheless, higher prices to an extent are good for investment in stocks and also in the case of broader economy; it increases the pricing power of businesses… Higher prices are good for supply and demand if real wages or price of labour or incomes increase, but too much higher prices might increase supply or lower demand and price expectations,
Moreover, lower prices are also good to a degree for investment in stocks and the broader economy; it also reduces the cost for businesses. Lower prices are also good for demand if real wages or price labour increase, at lower prices people would demand more or supply less, but too much lower prices might increase demand or lower supply and increase price expectations.
The trade war is actually a tariff war... which has actually benefited the US... Higher tariff makes domestic industry competitive in the country... Even with the tariff war the US has been able to carve a strong growth...
Trump should look within for answers... a strong dollar is one of the reasons of uncompetitive US exports... Rupee is depreciating every year and dollar becomes strong making US exports shrink... Higher tariff on imports increase the cost and prices of US exports which increases inflation and interest rate expectations... The US economy is too costly... and lower growth expectations...
Too much lower prices (stocks, too) or inflation point lower demand due to higher real interest rate and confusion created by monetary policy signals due to lower oil prices, demonetisation and lower growth and expectations... Lower oil prices, though not full to consumers and demonetisation and now lower food prices all lowered inflation and inflation expectations, but not resulted in rate lower interest rate and expectations, however with a 25 basis points reduction only recently... INDIA...
People do not know that they can bid and offer equity prices and if everybody bid to buy low and sell or offer high they can control equity prices in a bigway... People should always wait for high price... and lower price to buy...
Credibility of rating agencies is also important... During the US Recession 2008 rating agencies underestimated the risk of too much debt and defaults... Even INDIA''s growth rate highest in the world has not been reflected in the rating agencies ratings... Moody has improved INDIA''s rating after a long period but Fitch has not changed its rating just a notch above the lowest investment grade...
1000 or 2000 Rs is just a piecemeal to discourage unemployment, but could be sufficient to spend on education and skills training... In the US unemployment is measured by demand for unemployment benefits which could help target basic income only to the unemployed... Education and training are the best response to the problem of low productivity and wages and demand...
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