Saturday, December 15, 2007

the Next Time You make A killing On the Stock Exchange, think Of Marx!

Socialists are a sorry lot these days. with the inflows and the Projected growth of the indian Economy pegged at around 10 per cent, i would be called a fool if a i were to say that Socialists are partly responsible for the Economic growth. Sounds Silly ? read on then !

Any one keen on financial scene will tell you that the Northern Rock going down in the Sub Prime crisis was one of the most disturbing news of 2007. (Citibank was only recently bailed out by the cash rich Abu Dhabi SWF and DSP Merill Lynch had to "pink Slip" a few of its top execs)

Of Course the depth of the Sub Prime Crisis is still not known but its pretty much clear that the Banks granting loans reposing faith on easy interest rate regime ( not for nothing is Ben Bernanke called " the big Bull") were one of the factors responsible for the Sub Prime Crisis; in other words, cheap availability of Credit and excessive liquidity in the markets lulled the lenders in underestimating the Credit Histories of their borowers precipating the Crisis. So when the Fed or the Bank Of Japan suddenly upped the interest rates, there was relative credit Squeeze and the banks and other lenders tripped because suddenly the assets were not yielding like before. the macro? less regulation was responsible for the Sub Prime Crisis.

And what was the scene in India ? Compared to say the UK where interest rates fluctuate between 5-5 and a half, we are a nation consistently ranked highest in terms of high interest rates,Cash reserve ratio and the statutory liquidity ratio ( in a nutshell these instruments are a like a banking tax) that translated in less liquidity in the market and a conservative lending approach. the Macro? more regulation saved the India Growth Story from being stalled.

the next time you make a killing on the Stocks, remember marx!


Vishal said...

Although am not keen on the finance scene, the crux set out in the 'macros' was certainly logical...Here's to Karl then!

Talented Idiot said...

I really do not agree with your ideas this time my friend..... its just that india hasn't yet been hit by the credit crunch because of some extremely misplaced confidence in the indian economy. It's just a matter of time.

Further, I think the bailing out of Northern Rock by the Bank of England shows how capitalists are still protected... noone would have bailed me out if i had lost my small business like that......