"Social progress can be
measured by the social position of the female sex."
—Karl Marx (German,
1818-1883)
Word for the day
Isonomy (n)
Equality of political
rights.
Malice towards none
How and when Dr. Vijay
Mallya will be suspended from Rajya Sabha and his privileges, inlcuding
diplomatic passport, be withdrawn?
First random thought this morning
Reuters reported yesterday that Chinese banking regulator (PoBC)
is contemplating a equity for debt swap scheme to get over the problem of
burgeoning NPAs.
The move may allow indebted corporates to reduce their leverage,
reducing the cost of servicing debt and making them more worthy of fresh
credit. It would also reduce NPL ratios at commercial banks, reducing the cash
they would need to set aside to cover losses incurred by bad loans.
Being Chinese, the plan prima facie looked like a huge ponzi; till
the time I realized that it is nothing but a copy of our own SDR scheme!
Market paradigm shifting
This Wednesday, I started an exercise to understand the current
pattern of market movement (see
here). I earnestly believe that the global market paradigm is shifting, and
India could get a much larger role to play in this shift, that is if we as a
nation are willing to assume larger responsibilities.
The paradigm shift is happening regardless of our commitment. I
wrote yesterday (see
here) that current government, especially PM, has perhaps recognized the
opportunity and committing to it.
When I say that the paradigm is shifting in global markets. I am
certainly not suggesting "it is different this time". What I am
essentially saying is that "it is the same as always".
I have also written this couple of times before (see
here), the global market paradigms have shifted every few decades. The
shifts have been caused by a variety of factors. Sometimes it has been led by
shift in strategic and geo-political power (spread of European empires in
17-18th centuries and strength of US post WWII). Sometimes technology
innovation (industrial revolution in Europe and US, post-war Japanese manufacturing
renaissance and then internet revolution in US) caused the shift. Rise of oil
economies post 1970's in middle east Asia and Chinese and Korean manufacturing
revolutions have also caused material shift in global markets. Nature has also
played vital role in causing tectonic shifts in global power equations and
market balances. Decline of great Roman empire is case for study.
In most of these market transition phases, currencies have played
a key role. Therefore it is pertinent to evaluate the current transition in
global market paradigm from this angle also. In most earlier instances the
emerging currency (including gold and silver in earlier instances) has changed
its relative global value during the course of the shift. Sometimes strength in
the currency or gold & silver stock played a critical role, as in case of
British and Portuguese dominance in earlier centuries. In some cases weakness
in currency supported the shift, as in case of the rise of Korean and Chinese
manufacturers causing decline of Japanese dominance.
The present case appears no different. Japanese are trying to
regain their lost market share in global manufactured goods market by
depreciating their currency. Germans are struggling to retain their market
share by forcing the Euro down. While US has so far been successful in reigning
its currency without compromising the supremacy of dollar.
In my view, demographics are playing a major role in the shift of
the economic and market context this time. Most developed and even large developing
countries are struggling with demographic imbalances presently. The problem is
particularly severe in Europe and Japan.
In Europe on one hand population is aging fast and thus straining
the fiscal and economic growth (pension, healthcare, lower income growth, low
taxes and lower consumption); on the hand the mass migration to west is causing
concern over change in socio-religious structure of the population (see here).
India, which has the largest pool of educated & skilled young
English speaking people, may therefore be natural partner in bringing the
desired demographic changes....to continue next week
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