
Porsche's Mueller takes reins at Volkswagen: Here's how lar
Days after admitting that the world's top-selling carmaker had rigged diesel emissions to pass US tests during his tenure, longtime CEO of Volkswagen, Martin Winterkorn stepped down on Wednesday. Winterkorn, VW's boss since 2007, had come under intense pressure since the Environmental Protection Agency's (EPA) di[...]

From 'digital dinner' to FB townhall: Why PM Modi's Silicon
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Small banks mark the biggest banking revolution in India si
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AAP MLA Somnath Bharti faces arrest after Delhi High Court
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Bengaluru first Indian city to get Uber car-pool service
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Ranbir Kapoor's special working birthday on the sets of 'Ae
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Konkona Sensharma: My mother is shy around my son
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Manpreet Kaur breaks national shot put record on road to Ri
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Champions League: Chelsea cruise but Dinamo Zagreb stun 10-
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Sanjay Bangar is right: We have been too quick to judge Roh
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2015 Frankfurt Motor Show: 2016 Suzuki Baleno to be showcas
The 66th Frankfurt Motor Show will witness the world debut of the all-new Baleno. Suzuki plans to showcase their new "ideal hatchback" to the media on September 15, 2015. The motor show will be open to public from September 17-27, 2015. In its new form, the Baleno takes after the IK-2 concept that was shown at th[...]

Maruti Suzuki launches S-Cross
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CCI slaps Hyundai with fine of Rs 420.26 cr for restricting
New Delhi: Coming down hard on carmakers found to be restricting sale of spare parts in open market, fair trade regulator CCI on Tuesday imposed a penalty of Rs 420.26 crore on Hyundai Motor India and asked two others -- Reva and Premier -- to 'cease and desist' from anti-competitive practices. This follows penaltie[...]
Zuckerberg Vows to Daughter He’ll Donate 99% of His Facebook Shares
SAN FRANCISCO — Mark Zuckerberg, the co-founder and chief executive of Facebook, announced on Tuesday that he and his wife would give 99 percent of their Facebook shares “during our lives” — holdings currently worth more than $45 billion — to charitable purposes.From Our AdvertisersThe pledge was made in an open lett[...]
Mark Zuckerberg and Priscilla Chan announce baby girl – and massive charity initiative
In a Facebook post to newborn child Max, the Facebook CEO says he will administer the initiative himself using 99% of shares in company’s stock. The Zuckerbergs announced two births on Tuesday: a baby girl, and to one of the world’s biggest charities. That sterling spoon you might have been considering f[...]
Osama cited Bapu as inspiration in 1993 speech
cassettes were discovered. The cache soon passed many hands from an Afghan family to a cassette shop and then to a CNN cameraman, finally making its way to the Afghan Media Project at Williams College in Massachusetts, who asked Flagg Miller — an expert in Arabic literature and culture from the University of Californ[...]
Water on Mars? Here’s why Nasa believes there can be signs of life on the red planet
Recently, planetary scientists detected hydrated salts on these slopes at Horowitz crater, corroborating their original hypothesis that the streaks are indeed formed by liquid water. Image Credit: nasa.tumblr.com The dark narrow streaks called recurring slope lineae are up to few hundred meters in length.[...]
Ranbir Kapoor's special working birthday on the sets of 'Ae Dil Hai Mushkil'
The baby-faced, towel-dropping Saawariya debutant turns 33 today. And in the 8 years since Ranbir Kapoor's debut film, he has been a part of many films. However, the birthday boy recently started shooting for Karan Johar's Ae Dil Hai Mushkil in London, and had a working birthday this year. However, tha[...]
Why the world economy is crashing and why India should benefit from it
After the sub-prime crisis in the US and the steep fall in markets following the Lehman Brothers bust, the world has tried to solve the problem by throwing more and more money at the problem – money printed and lent out at near zero interest rates almost all over the developed world.
The US, after seven years of grappling with the problem, is still making only intermittent noises about raising interest rates; if the markets continue to crash and the global economy slows down, it may yet chicken out; Europe is keeping near zero rates in the hope growth will revive even as Greece is trashing about for survival; Japan kept the money-printing presses working overtime for more than a decade, but has, under Shinzo Abe, gone back to the same trick of monetary expansion; China, with its export engine struggling, has been extremely unsuccessful in shifting its emphasis to domestic consumption-led growth.
Why isn’t the medicine working? And why are the markets crashing today? The answer is complex, but the following are the prime reasons for this failure by the world to cure itself after Lehman.
First, the purpose of making money cheap was to ensure the credit markets do not choke up and prevent a recovery. But in the absence of a more fundamental re-balancing of real economy incentives and the return of covert mercantilism among countries, it is the financial markets that fed themselves on zero-cost money. Put another way, the cheap money was used by companies and financial institutions not to lend to companies creating jobs, but to make money from money – which means financial investments like stocks and bonds.
More financial wealth has been created over the last seven years than probably in the previous seven – and this when the world isn’t growing too strongly. The Dow Jones Industrial Average hit a new all-time high of 18,312 this May, up from the November 2008 low of less than 7,450.
When there is so much money to be made from money, who in his right mind will put up factories and roads in the hope that they will yield a positive return? The sharp fall in the Dow over the last two sessions by nearly 1,600 points suggests that the smart money is trying to lock in its profits before it evaporates. In the process it is causing prices to over-correct. The same thing is happening with Indian stocks.
Second, while keeping money cheap after Lehman was the right short-term response, the obvious mistake western governments made was to let monetary policy do all the hard work, and letting fiscal policy hibernate. If you want to revive growth, you need people to invest and consume, not speculate. When the private sector was unwilling to invest and people in excessive personal debts were trying to bring leverage levels down, the logical thing for the US to do was to invest in infrastructure – which is what India is trying to do now – in order to correct what is called a balance-sheet recession.
By first world standards, US infrastructure sucks, and a half trillion dollars spent there would have done more to revive growth than spending the same in rescuing banks and no-hopers.
This is where doctrinaire approaches to what government should do or not do does not help. When economic confidence wanes, the only entity that can act is the government, which technically can spend even without having the money. The Right may not like it, and the Left will crow, but that isn’t the point. When nothing works, the government has to work.
The US government left the Fed to do the heavy lifting instead of chipping in with public investment boosters. The Tea Partyists and the Paul Krugmans and Occupy Wall Streeters got into a Left-Right argument which didn’t help.
Related posts:
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- Small banks mark the biggest banking revolution in India since nationalization
- Gold bonds are a clear winner but high chances of deposit scheme becoming a flop show
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- Porsche's Mueller takes reins at Volkswagen: Here's how largest emissions scandal unfolded
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Zuckerberg Vows to Daughter He’ll Donate 99% of His Faceboo
SAN FRANCISCO — Mark Zuckerberg, the co-founder and chief executive of Facebook, announced on Tuesday that he and his wife would give 99 percent of their Facebook shares “during our lives” — holdings currently worth more than $45 billion — to charitable purposes.From Our AdvertisersThe pledge was made in an open lett[...]

Mark Zuckerberg and Priscilla Chan announce baby girl – an
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Osama cited Bapu as inspiration in 1993 speech
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Water on Mars? Here’s why Nasa believes there can be signs
Recently, planetary scientists detected hydrated salts on these slopes at Horowitz crater, corroborating their original hypothesis that the streaks are indeed formed by liquid water. Image Credit: nasa.tumblr.com The dark narrow streaks called recurring slope lineae are up to few hundred meters in length.[...]

Ranbir Kapoor's special working birthday on the sets of 'Ae
The baby-faced, towel-dropping Saawariya debutant turns 33 today. And in the 8 years since Ranbir Kapoor's debut film, he has been a part of many films. However, the birthday boy recently started shooting for Karan Johar's Ae Dil Hai Mushkil in London, and had a working birthday this year. However, tha[...]

Modi’s tears only drama? Why is it so tough to believe a st
There was nothing unusual in the way Prime Minister Narendra Modi broke down at the Facebook Town Hall in San Jose. After all, this is not the first time that the country’s strongest political leader bared his emotional side to an audience that came to appraise him. What was unusual this time was the fact that h[...]
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