Category: Economy

Economy is a system by which the people make their living. Every family, every institute, every city, every country has an economy. There are different kinds of economies such as capitalism, socialism and mixed economy. Capitalism is a kind of economy in which the people own the means of production and the government does not interfere at all in this. Socialism is a kind of economy in which only the government owns the means of production and people don’t have the right to interfere in this at all. Nevertheless they are allowed to work under the government. Mixed economy is a kind of economy in which some means of production are owned by people and some are owned by the government. In India we follow Mixed Economic system. This is the reason why some sectors like railways are owned by the Government while some others like Reliance, Godrej et al. are owned by people. As  [...]

On Friday, fears of the possibility of the mounting debt crisis in Europe affecting the fragile economy and the banks in the United States ruled, as markets plunged. Although fears of a slide back by the US into recession were soothed by a government report in July on employment. The Dow Jones average also showed a rise of 171 points right after the beginning of trading. After rising early on, the Dow Jones average plummeted more than four hundred points down to 243 just prior to noon. Then it rose again by 400 points in almost one hour’s time and was up 135. The rest of the day, the index of blue chip stocks kept bouncing. At times, it varied by as high as 100 points in thirty minutes. The Dow Jones Industrial Average ended up at 61 points, or about 0.5 per cent. The bouncing was due to worries about weakening economies all over the world. The slow down is affecting even countries  [...]

In what can only be dubbed a very surprising move, the price of stocks and commodities took a tumble as China's central bank implemented an interest rate hike that no one ever saw coming. After weeks and months of being pilloried by the Western world to act as a more global citizen instead of just looking out for their own interests, China has taken cognizance and begun to move along the path to being a better economic citizen of the world. Investors had a lot to mull over, with mixed housing data, corporate earnings and selling reports by influential groups of bondholders making things even more murky. Many of these bondholder groups have been posturing with the Bank of America to pick up bad mortgages to the tune of $47 billion. These bad mortgages had been looked after by Countrywide, a division of the Bank of America that is now a problem child for big daddy. China hiked its Prime  [...]

In a quick response to the monetary policy as exercised by the Federal reserve, Pacific Investment Management Co. (PIMCO) has recently announced that it will indeed be selling U.S bonds. This is a sign that investors might be starting to lose faith in American instruments as the economy shows no real signs of strengthening after a period of prolonged weakening and erosion. The report first ran in Bloomberg, and they specifically reported that Bill Gross, the top dog of the world's single largest bond fund, reduced his interest and holding in government debt to 33% of all the assets he holds as opposed to 36% the month before that. Gross pulls the strings of the $252-billion Total Return Fund, and he also maneuvered to increase his interest in mortgages to 28% of his assets, up from a previous figure of 21% the month before. PIMCO's Chief Operating Officer (COO) Douglas Hodge declared in  [...]

If you want further proof of the growing clout of Asia as an economic force, look no further than the bond markets of these countries, for they are booming and have expanded over the course of this last decade. The west all too often takes for granted the manner in which they can borrow in their local currency, and symptomatic of this is the ease with which the Federal Reserve was able to issue 30 year Treasury bonds even at the height of the crisis that grips the world. Not many nations can claim to do this, for it is a luxury. And emerging nations just aren't able to do it on the same scale as the U.S. has. More often than not they turn to the foremost capital market in the known world, namely the U.S. Dollar market. South Korea is a prime example of just how Asian markets have developed. Let your mind wander back to 1997 when the Asian financial crisis pummeled the region like a boxer  [...]

Everyone loves the short term in today’s day and age. All fund managers are judged based on how they perform over a short period of time, usually 3 months, and television shows talk about stock markets in the here and now, most not even bothering to talk about the long term. And hedge funds measure time in milliseconds, investing one moment and disinvesting the next. Commentators pontificate long and hard into the night, maintaining that a history of markets is a history of waves in economies and markets that move in different directions at different times. Back in 1929, there was an investment adviser named Roger Babson who postulated that markets are driven by the third law of motion as stated by Newton; “every action has an equal and opposite reaction.” But then, this is the same person that wrote a passionate pamphlet with the catchy title, “Gravity—Our Number One Enemy”.  [...]

It was not even a few months ago that Europe’s sovereign debt crisis had worked investors into a frenzied panic over sovereign risk. At the time, all signs pointed to the dollar being the currency of choice. Benjamin Franklin smiled strongly from the face of paperbacks and he had good reason to; Uncle Sam was faring exceedingly well against the yen, the pound and the euro. The dollar was safe in its role as the world’s reserve currency of choice, and it was the safest bet for investors looking for a haven for their money. In the land of the blind, the one eyed man is king and the US Dollar reigned supreme despite the domestic economy looking shaky. The dollar was all set to stage a rally. How a few months can change everything. It was August 11th when the American dollar collapsed to a 15 year low against the Yen’s value of ¥84.7. The dollar has similarly lost much ground to the  [...]

It doesn’t take a rocket scientist to figure out that the Japanese economy is primarily export-driven to sustain a demand for its unending line of consumer products that it keeps on churning out (which reminds me…must buy that Wii sometime!). And so it comes as no surprise to see the decision of the Japanese government to wade into the waters of the currency markets and weaken the Yen to offer greater support for its economy. But it is a losing cause for the Japanese powers that be since Japan is ploughing a lonely furrow since none of its usual trading partners are in the mix. This is the first time that Japanese moteary authorities and figureheads has intervened and directly influenced its national currency since 2004 when it propped up the US dollar. That was the beginning of a widespread rally that saw the dollar soar and close 2.55 % above the previous days close. The Japanese  [...]

The picket signs have been put away and the rabble-rousing masses are conspicuous by their absence. Wall Street is the world’s largest stock market and it is running as smoothly as Usain Bolt does the 100 metres race, but there is a worrying trend developing on the bourses. Investors are no longer playing the markets with the kind of gay abandon that marked out their approach some time back and its not just because playing the market has become tougher to win in and more fickle than ever. It’s a domino effect of a worse kind for the market with investors lopping off stocks they own and reducing their holdings in favor of safer investments such as that provided by the bond markets. There is a very real fear that this will remain a lingering sentiment; as they say, a crystal vase once broken can be fixed, but the cracks will always remain. This might be a lost generation of investors  [...]