Economics shall also concentrate on the distribution of labour according to specialisation and skills in the economy, besides just the distribution of income... According to the labour theory of value the price of something is decided by the amount of labour used...
Adding skills according to the demand of economy could increase productivity and demand and growth... To catchup China on the growth INDIA shall skill labour to reap the demographic dividend...
The investors unconsciously create booms and busts based on price and interest rate expectations... If the majority expects that prices could increase they buy more that actually increases the prices and vice versa...
Though if they remain invested and increase investment, at significant corrections, they could increase gains by lowering the average cost... Higher interest rate expectations in the US would increase inflows and lower the interest rate and vice versa...
Higher inflation adjusted yields and exchange rate in the US coz of its safe heaven image could increase interest rate and exchange rate expectations in the emerging markets to stop the exodus...
The arbitrage between the US and INDIA could equalise by the investment behaviour... Higher interest rate expectations in US could increase interest rate expectations in INDIA in a competitive global economy and vice versa...
The liquidity doesn't directly add to the financial assets' demand, but only through long-run debt and interest rate and then lower the short term interest rate and higher money supply lowers long term interest rate and then short term interest rate... which increases the productivity of capital... and profits/margins and earnings...
The RBI during out flows could sell dollars to contain inflation and depreciation and outflows... The investors’ expectations about the central bank policy affect the investor behaviour which could be self fulfilling, rate cut expectations could delay demand and increase supply which would further lower prices and vice versa...
If people expect appreciation they buy which further increase appreciation and vice versa... Around the globe we have evidence of convergence in real exchange rate, the long run trend has been strong exchange rate as the time pass and the economy grows...
It could start a virtuous cycle of investment and inflows... It would increase domestic demand due to high real wages/lower inflation, higher real interest rate due to lower inflation and increase exports due to low inflation/ domestic-prices...
If the pre pandemic growth was 8% then growth in June 21 would be 8% plus 1.5% = 9.5%.... Overall this fiscal, India would be among the fastest growing large economies, a GDP of 9.5% but shorn of the underlying low-base effect, the economy will be only 1.5% above the pre-pandemic level seen in fiscal 2020... The growth rate would be 9.5%...
Higher transport cost and inflation and depreciation and higher import prices could make the export sector uncompetitive...
The Fed's message is clear that it is there to take care of people's money, during slowdown it would increase liquidity and demand/supply and investment/employment and increase prices and during high growth it would contain liquidity and demand/supply and investment/employment and prices...
It is consistent with Fed's objective and feasible... People should not worry about their investments; the Fed would take care of their investments...
No comments:
Post a Comment