Expectations are self fulfilling and self reinforcing... If people expect higher demand and prices they hold supply and increase demand which further increases prices and if people expect lower prices they supply more and hold demand and that further lower prices... Though, investors are more forward looking for investment decisions and have surplus than consumers who save less for consumption decisions... if money supply and income increases... Lower prices and expectations are followed by higher prices and expectations and higher prices expectations are followed by lower prices and expectations... it is a cycle... Over supply lowers prices and expectations... and over demand increases prices and expectations... Demand and supply affect prices and prices also affect demand and supply, and expectations and spending decisions...
The RBI has more fire power left in its armory, it could also help lower interest payment on pub-debt and more borrowing if the pvt-sector lags... lower interest rate could increase productivity of capital and investment... The Commercial Banks are sitting on their growth when the RBI is trying to increase competitiveness, productivity of capital to increase demand, but transmission is not happening, rate cuts are not being passed to the borrowers to increase scale... CBs are hesitant to lend directly, but through NBFCs which is riskier and increase cost... CBs must take lead to lend directly... NPAs increase during the slowdown, but it is also an oppourtunity to put fresh capital when the borrowing cost is low...
Buying dollars would work when it is cheap and sell when it is high to stabilise the exchange rate... If there is cad and the rupee weakens imports would become costlier and exports cheaper which could increase domestic inflation... but, if the rupee becomes strong it would reduce domestic inflation and also increase domestic competitiveness and exports... like the US... strong dollar means cheaper imports and inflation... $s safe heaven image is one of the reasons for demand and strong dollar... This is the time to sell $s... to contain rupees international value....
Lower real interest rate could increase investment in debt and equities linked saving schemes... In this poor people suffer more than others because the income on their savings goes down... They save less in equity, gold and debt... The RBI must bring schemes that could help shore up investment of poor people in asset class other than fixed deposits...
Probably, Modi govt confused isolation of patients with the isolation of people... Now, we are more infected and the risk is greater... Economic activity was stopped when the danger was little and resumed when it is much higher.... which means that lockdown was useless... hit in the foot... like demonetisation... It is not difficult to understand... it is dichotomy...
INDIA only needed a good unemployment benefit like PM-Kisan, only for those who lost their jobs during cov19 shutdown... There couldn't be oppourtune time than when the slowdown has been waived in a gradual manner... When both demand and supply would go up due to higher demand and prices expectations when money supply would go up... Fiscal policy could increase demand and monetary policy supply...Free ration for 5 months could increase real wages and spending for 5 months, people would spend less on food and more on other items... Savings could go up,too...
MGNREGS directly provides employment and unemployment benefits would directly provide income for survival for those who lost jobs during the shutdown to make up for the lost demand and supply and growth... The govt needs to provide income when there are no jobs....
Food inflation at 8% means that rural income and demand could go up... Agricultural still provides employment to 50% of the population... Farm activities had been waived from the lockdown way back... Higher inflation expectations could increase spending...
90% of the times when Dow increases the INDIAN stock markets go up, too... The same with correction it coincides with Dow crashes... If Sunday has something encouraging besides Dow increase on Friday stocks may still go up... Though, it is difficult to predict the stock market moves, which market is driving which market, sometimes Dow also follows the Sensex also because INDIA market starts earlier than Dow on the same date... Stocks which could be bought with Margin Trading are safe because people get easy money to buy more at significant corrections to reduce the average cost.....
Vaccines are in line, waiting to be tested on humans, many claims have been made... Confrontation with China has been mild... No doubt china is responsible for cov19... Every country must impose high tariffs on imports from the country to generate funds to fight the virus...
China has withdrawn from Galwan and the other sites, the tension has receded... But, be careful Chinese had backstabbed INDIA last time... Ban on Chinese apps has created an oppourtunity to fill the void, demand and supply gap is quite visible, investment could increase... we could create a domestic avatars...
China has blindly followed the western market economies despite being a communist regime... It has used cutting real-wages with inflation using shadow data, and lower exchange rate or depreciation to increase exports at the cost of domestic demand and a protected economy… China has only recently pledged to open its economy, from outward looking to inward looking... It has worked against the Communist ideology... to protect the working class and wages from exploitation...
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