MADAM YELLEN KEEPS THE STOCK MARKETS TICKING

Though our budget hangover is still on, Madam Yellen and Sir Draghi have ensured that the party goes on. The stock markets all over the world had already discounted the FED decision a day earlier and thus all the major indices have risen considerably insensitive to prevalent deflationary conditions everywhere. But how long will the dancing stock markets make us feel better. Mr. Kuroda has indicated cutting rates further, even up to minus 0.50% to revive growth and spur inflation. Did John Maynard Keynes recommend negative interest rates. I think he needs to check…. Yes he did ask the governments to borrow and spend to induce growth but he also indicated that demand will increase only when households, businesses and government all go for a spending spree. But is this happening… NO….. At the time of Sir Keynes, the financial world was not so complex with derivatives of all kinds, credit default swaps and of course the financial scandals in almost every country big or small. If Keynes would have foreseen all of this, he would have helped to set up an institution especially for financial scandals like IMF and World Bank with membership on the basis of ineptitude of respective governments.

But we don’t have to worry.. Hamare paas deflation nahi hai….. stagflation bhi nahi hai……. Abb to inflation bhi nahi hai…… So what do we have……. Don’t know… growth is also some 7.6%. Anyways the recent IIP index which has contracted again will now be changed with respect to value added concept similar to GDP and hopefully variations will be less. Exports have contracted at a lower rate and trade deficit has also narrowed further, not to forget the passing of real estate and aadhar bills . With all this in the backdrop and domestic indices prancing everyday, feels like holi has arrived early for us. Hopefully Mr. Rajan will join us and extend the holi celebration till Ugadi.