"We are what we
repeatedly do. Excellence, then, is not an act, but a habit."
—Will Durant (American,
1885-1981)
Word for the day
Palsy-Walsy (adj)
Friendly or appearing to be
friendly in a very intimate or hearty way, e.g., The police kept their eye on him
because he was trying to get palsy-walsy with the security guard.
Malice towards none
Is communism truly and
totally irrelevant in Indian context?
First random thought this morning
The present standoff between
Indian and China is certainly not likely to escalate into a war of any kind,
but nonetheless it has reached a stage where stepping back without a face saving
formula may not be feasible.
The leadership on the both
sides of the border have much to lose, if they appear compromising on this
territorial issue. Indian side though has more at stake since our
administration has certainly overcommitted on this issue.
I hope we find some face saving
escape sooner than later.
Do you want to keep riding the tiger?
The conventional wisdom says when you move up a ladder, usually
the easiest, and mostly the best, way to get down is to take the same
ladder on your way down. Jumping from the roof involves risk, unpredictability
and uncertainty of outcome.
The same is also true for a situation when you travel to an
unknown destination. The easiest and the fastest way back is the same way you
took to reach the destination. Trying a new way would entail risk,
unpredictability and uncertainty.
When you ride on a tiger's back, the best way is to wait and survive till the
tiger dies.
To mitigate the impact of the global financial crisis a decade
back, the central bankers world over created unprecedented amount of money.
The trick did work wonderfully well.
The markets got unfrozen in no time without any major collapse;
1930 like depression, that looked almost certain at one point in time, was
comprehensibly averted; even the thought of hyper inflation that is classical
outcome of such liquidity deluge, has not bothered many in last decade; EU did
not disintegrate as many Oracles portended; peripheral European countries that
were caught in the eye of the storm survived and not doing bad after all.
The conundrum, the policymakers in the developed world now face is
how to unwind the liquidity that has been created in past one decade to
mitigate the global financial crisis.
Well as I said, the easiest and the fastest way would be to take
the same path you took to reach where you stand today.
The central banks should shrink their balance sheets in the same
fashion as these were expanded.
But remember, the effort in 2008-09 was a globally coordinated
one. All central banks and other policy makers worked together.
The policies have however diverged in past five years, as per the circumstances of each individual jurisdiction.
The policies have however diverged in past five years, as per the circumstances of each individual jurisdiction.
In my view, if Fed or any other central bank decides to unwind
liquidity in isolation, it could be highly disruptive. The unwinding therefore
should also be synchronized the way expansion was.
There could be an argument that the circumstances of each
jurisdiction are different. The uneven pace of recovery, say across US, Europe
and Japan, may not permit a synchronized response.
In my view, this argument does not hold good, since the growth was
skewed even before the crisis. US and China were the primary drivers of the growth,
while Japan and Europe were mostly lagging.
The other way is to keep riding the tiger, till either of you die.
More on this tomorrow.
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