Cutting Blob to size

Brave Ms Merkel has proposed a ban on “destructive” financial market practices like naked short selling. “The lack of rules and limits can make behaviour in financial markets driven purely by the profit motive destructive and lead to an existential threat to financial stability in Europe and even the world,” Merkel told lawmakers in Berlin today. “The market alone won’t correct these mistakes.”

As expected, in a passive aggressive behaviour, world stock markets sulked in deep red to show their displeasure and for lawmakers to give in and rollback.

At various times, leaders world-over have felt and expressed their desire to curb this menace but Blob has rudely stopped them short of the action.

Hope, the iron lady will not get intimidated by the tantrums of Blob and deal with it sternly to treat market ills once and for all.

Greece Bailout

Markets are on a trip after yet another infusion of usd1trillion into failing European economy. The recent dependency on infusions or bailouts is a contagion in itself, which will tantamount to addiction due to induced tolerance and acute withdrawal symptoms. Such infusions of money in developed markets will prolong their agony.

In free trade environment, the one sided build up of trade deficits was an inevitable development since the developed countries were at a great disadvantage due to their high labour cost and demand size vis-a-vis their counterparts in the lesser world. Progressively, these flourishing zones turned unproductive on account of unprofitability. And it was matter of time that they ran out of gas.

Now, feeding these markets with money or diluting liquidity may help trigger the demand elasticity but in macro run the drug will not help rescue the developed economies. While pushing the demand up and diluting past debts, it can not deal with almost inelastic productivity in these areas. Their trade deficit will increase and money will flow to strengthen BRIC and other developing economies round the world. But still, it will be an Herculean task to bring the world at par without considerably chopping off the long arm of the economy, provided the big brothers are ready for the sacrifice, which may be expecting too much from the old lion, presently, on a trip.

Future is dark and horizons threatening. Do you hear the war cries (end of free trade) or another one bites the dust and free trade goes on.

Euro pains

Sinking Euro is a good news for Eurozone as the depreciating currency would make them more competitive in the world market. However, other crackling bones of Eurozone viz. Portugal, Spain, Ireland are still a cause of concern, which may pull the entire zone in deep recession, bankruptcy and hyperinflation.

For now, Yuan, Yen and USD are threatened by the crumbling Euro. Tumbling markets, world over, will try and readjust to the changing equations. But certainly, the party seems to be over for China and India, since Europe, by the way of Greece bailout, has chosen to fight out the war collectively rather than biting the dust one by one. USA will also be forced to get it's act right rather than simply printing paper.

Print, baby, print

Print baby print. How does it matter? In layman's lingo, inflation is erosion of value for money. It's a vicious circle out there as inflationary economy always encourages debts, and rising debts lead to further inflation. Inflation helps hoarders, middlemen and speculators to breed and prosper. That implies, inflation favours the most unproductive people of the society the most. And as a result when there is appreciable fall in the productivity of the whole system, defaults become the order of the day. Printing more money is nothing but blowing up the vicious circle.

We have become so obsessed with money and economy that we give a damn to society. Hyper inflation supports uneven and unjust distribution of wealth which leads to social ills and erosion of social values. We are falling in a pit. Will somebody stop that mint please.