X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
'US will be soon back on its feet' - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 16, 2009

    'US will be soon back on its feet'

    The 'maestro' seems to be at it again. Alan Greenspan, who many feel to be amongst the chief architects of creating one of the biggest bubbles in the history of mankind, has already made up his mind of looking ahead. In fact, he seems to possess one of the most optimistic of lenses. Talking to Moneynews, Greenspan has argued that the US economy could grow as much as 3% in the fourth quarter of 2009. Also, he does not see any further need for more fiscal stimulus. And Greenspan is not alone. Larry Summers, Obama's chief economic advisor has also been seen veering towards a similar view. "I would be very reluctant to accept the idea that the American economy no longer has the potential to grow rapidly", Summers is believed to have said in a recent speech.

    Well, we don't know if they are referring to the same of US of A as us. Because the America that we have come to think of, may not grow at such a fast rate as the figure quoted by Greenspan for few years to come. It should be noted that the 3% growth rate was the rate achieved by the US economy at the height of the boom when leverage was at its peak. Since the bursting of the bubble, there has been a massive deleveraging process underway and despite best efforts by the government to once again inflate a bubble, nothing has come out of it. The US consumer, which accounts for nearly 70% of the country, has chosen to cut back on its spending and unless it once again starts splurging freely, the US GDP growth may continue to be lackluster.

    India: Dilemma of a different kind
    While the US authorities are pulling out all stops to inflate another bubble, their counterparts in India are beset with a problem of exactly the opposite kind. How to prevent one from being created that is. And that too, without harming the country's long term growth prospects. The fiscal and monetary stimuli that both the central government and the RBI had unleashed a few months back have been proven successful in their efforts. India has avoided a massive slowdown in its economy and now looks well poised to achieve a GDP growth well in excess of 6% for the current fiscal.

    However, there are a couple of things that could throw the proverbial spanner in the wheel. The liquidity that the central bank had injected into the economy has now been supplemented by strong capital inflows and this has created a problem of plenty in the monetary system. While excess liquidity is always good as long as it does not lead to rising inflation, that is not currently the case with India. Inflation is on the rise steadily and many believe it could touch the 6%-7% mark by as early as March. Letting inflation run amok may not be the best strategy to have. Not only does it make life miserable for a large number of population, it also creates bigger asset bubbles, the bursting of which could lead to bigger problems in the future.

    Hence, absorbing the excess liquidity and nipping the asset bubble in the bud should be the central bank's foremost priority. In fact, the government could also do its bit by rolling back fiscal incentives. But it is not as easy as it sounds. It has to be done at the right time and has to have the right mix. Overdoing it would mean hurting India's growth prospects and not taking enough measures would mean letting the problem persist. The authorities indeed have a few tough months ahead of them.

     

     

    Equitymaster requests your view! Post a comment on "'US will be soon back on its feet'". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Mughal Money: How a 14th Century Emperor Proves Gresham's Law (The 5 Minute Wrapup)

    Aug 24, 2017

    How a fourteenth century Mughal story holds one of the key essences of safe stock investing.

    5 Attributes Of Lord Ganesha You Can Apply To Your Personal Finance (Outside View)

    Aug 24, 2017

    With Lord Ganesha's attributes and teachings, awaken your inner-self and inculcate these financial habits for a sound future.

    Why Shopping Online This Festive Season Makes Better Sense (Outside View)

    Aug 24, 2017

    Online shopping if done sensibly can help you save money and carries many other advantages.

    Mr Trump Has Been Broken (Vivek Kaul's Diary)

    Aug 24, 2017

    Kelly, Mattis, McMaster, Cohn, and Mnuchin are in charge. But these Pentagon bureaucrats and Wall Street hustlers may be worse than a loose-cannon president.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 24, 2017 03:36 PM

    MARKET STATS