Lower real interest
rate increases employment and investment and demand and supply, which lowers
cost and prices, more demand for labour may also increase nominal income if
labour is scarce, which also increases savings... The evidence from China is consistent
with theory, excess savings and lower interest rate...
Lower interest rate
expectations in INDIA due to lower oil and food prices, oil has now a ceiling
of $ 75-80 pb by Saudi domestic deficit instead of three digit oil prices, and
in the US and China lower interest rate expectations are due to low oil and
inflation and tariffs and slow trade deal... which have delayed spending in the
three countries...
Stock markets need
demand and spending in the broader market which depend upon higher price
expectations and bottom price expectations that prices would not fall
further... Lower prices and interest rate expectations may increase supply,
which may further lower prices and expectations, but if the consumers and investors
know the bottom of prices and interest rate s/he might start demand and
spending...
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Higher interest rate
and slow growth are among the reasons for lower margins, loss and NPAs in
INDIA... The commercial banks could also increase demand and growth and
reduce loss/increase profits by increasing transmission of interest rate
cuts... Lower demand and growth has also increased NPAs to a considerable
degree...
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Manmohan was ignorant when
Mukerjee traumatized the investors with too hard economic stimuli which sent
inflation above 20% and 9% interest rate... which led too much depreciation
that was controlled by Rajan with pledging NRI deposits attracting higher
returns...
The economy is in bad
shape because of loans during UPA 1 and 2 that turned to NPAs when the economy
slowed down due to too much higher demand, higher inflation and higher interest
rate, all during UPA... NDA reduced inflation and brought back the rate cut
cycle...
Cong so long in the
power… never committed food security and oil security which are major sources
of inflation and lower real wages and incomes too, including agriculture, which
is also hit by the lack of proper irrigation facilities and banking
facilities... Congress has totally lost the direction to steer the economy...
It has no vision...
Trump has not only
created uncertainty for growth on the trade war front, but also through
sanctions on world's some biggest oil producers... Saudi Arab should try to
increase scale of oil production to increase quantity or exports or supply
instead of reducing supply or quantity and increasing prices and lower
demand... Trump has put global growth in doldrums...
The Fed does not need
to follow China, 'coz the evidence we have that weak Phillips-Curve or
unemployment and inflation relationship from Japan.. The evidence from Japan
shows that supply has outpaced demand, due to lower population growth rate and
demand and prices may still fall after full employment, due to tech advance,
and oversupply...
The Fed itself is aware
of the low demand and prices trap, often called as liquidity trap... The lower
prices and interest rate in the US shows that demand is still low due to
historical gap in productivity and real wages, lower borrowing cost has also
bolstered supply relative to demand, also due to lower real wages...
Keeping the real
interest rates close to neutral near full employment might still increase
demand, real wages and price expectations which may also increase interest rate
expectations and reduce some supply that might further increase prices and
expectations to avoid falling back in the trap...
Recently, the US has criticised
INDIA for higher tariffs on US imports, but it cannot and do not differentiately
treat exports from the US and China, it is unbelievable… The reason behind more
exports from China is that the US dollar and products are very expensive…
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