Politics & Economy - The Perilous Duo

Uncle Sam in one of his speeches delivered after S&P's downgrade of the US Credit rating said, " The present status is a result of nothing else but the downgrade of US Politics from AAA Level to AA Level..." - This statement was enough to highlight the predicament of the world's most powerful nation when it came to passing economic policies with the interference of bad politics.

This is just one of the countless examples when bad politics interferes with the normal economic chores in a nation. This statement shall become more firm with the next few citations.

Beginning with the gravest danger lurking in the world markets today - Euro Sovereign Debt Crisis -  and a more dangerous cloud that worsens the situation is the EU Politics - where the healthy northern nations are not ready to come to terms with the deteriorated southern nations (PIIGS - Portugal, Ireland, Italy, Greece & Spain) and the southern nations are not ready to accept the measures that can in a way rescue them from their plight to some extent.

Greece as some say has witnessed the worst politics ever with the government playing foul by faking the austerity measures concurred upon them by the Troika comprising of the EU, ECB & IMF.
Germany on the other hand continues to act as the plenipotentiary; ready to decimate Greece & other members of PIIGS by prevailing over the Troika's decision. (Thanks to the robust German economy even during these times.)

Coming to our very own nation India - traversing to the end of 2011 - The markets were down, the INR faced the wrath of the USD, 'inflation' was inflating ( cited in the previous posts ) - the UPA thought of a cunning step to revive markets by allowing 51% FDI in multi brand retail - a move that could have proven to be a boon for the markets - a drug that revive the economy, bolster the agriculture et al;
but again came the clouds of bad politics with the opposition in connivance with 'true traders in disguise' openly vituperated the government's move - leading to a withdrawal of the decision.

The move further defamed Indian government's stance on the global stage - with the investors losing faith in Indian politics forcing them to further stay away from the 'desi' market.


What the above discussion and examples connote ? A simple fundamental - for the economy to work smoothly it is primordial that the polity that runs a nation should play healthy and work for the development of a "nation as a whole"; keeping aside their personal interests.




PS: The Indian economy today has healed to a large extent - something I'll cover in my next post. Stay glued.

2012 - Reforming the Status Quo

No wonder what the Mayan Calendar says about the world coming to an end in 2012; no wonder what the economists or trade pundits predict about the economy; for common men like me 2012 marks the beginning of reformation. Strange ?! Let's retrospect as to how the year 2011 ended...

• The INR faced the wrath of the appreciating US Dollar, with the exchange rate touching to an all time low of around Rs.54/- per $1 - thanks to the phenomenon of the Debt Crises and Arab Uprising - investors started to withdraw their money from the stock markets.
• Share markets becoming bearish, touching the 15000 mark as the year ended with the Indian GDP rate falling to 6.9%.
• Inflation - the contemporary economic witch (daayan).
• Gold touched an all time high of about Rs.29,000/- with prices still hovering between the 25k-28k mark - thanks to the lost faith in the USD time and again.
• The Indian polity's worst year in the recent past - FDI in multi brand retail (yes/no); corruption (yes/yes); profits to the Swiss Bank(many folds); downgraded politic games (yes/yes).
• Rising fuel prices - blame it on the Arab world.
• Hovering fear of another Global Recession !!!

The world economy has faced its worst fears in 2011 and the last point is enough to throw light on the state of affairs of the world economy. We entered 2012 with almost all of the aforesaid points still making their presence felt.

If this was not enough; some economists predict that the INR might touch the Rs.60/- per $1 mark by March 2012; and the share market falling to a new record low of 12000.

No matter what the world says; the "dear optimist" still believes in the theory of the BUBBLE. No one can really predict where an economy might land as time passes, but one thing that one can surely tell is that an ever inflating bubble will reach its limits and ultimately burst.

Here we are talking about "Bubbles" - the extreme points of hopelessness in an economy that 2011 witnessed. The "bubbles" have been inflated to the extremes - what next ?!

What goes up, comes down; the "bubbles" have reached their limits and the optimist predicts that the market will soon begin to normalize naturally. High prices, down markets will revive their status quo and mark a new beginning. 

Though the actual prediction is still impossible, but this post can at least make the reader a little hopeful about the near future.