The upside of a down dollar

 

Squeezing Liquidity.

Last week, the Fed announced plans to unleash $600 billion into the economy by buying up long-term U.S. Treasuries over the next eight months. Its anyones guess if the rare and controversial move will do more harm than good for the U.S. and other leading economies, but some of the harshest critics say it wont do much to improve Americas jobless problem. If anything, the fresh money could worsen trade tensions as officials from China, Brazil and Germany worry a fresh flood of capital inflows could hurt their own economies.As world leaders including President Obama gather for the G-20 summit in Seoul, South Korea today, policy experts warn that protectionism is indeed a potential weapon in a so-called “currency war” — when economies simultaneously devalue their currencies in hopes of keeping exports competitive in the world market. The last time a full-on war actually broke out was during the 1930s, and what transpired was a flurry of trade barriers that ultimately reduced world trade and worsened the Great Depression. Though there haven’t been any significant barriers to trade so far, todays situation has the potential to pan out similar to the 1930s.In a way, the Feds quantitative easing strategy is in itself protectionist and has added fire to what could easily turn into a currency war. A weaker greenback shouldnt be the only reason to keep tariffs and other trade barriers low. But if anything positive could come out of a questionable economic policy move, its to leverage a weaker dollar at this point and encourage trade rather than block it. (Source: The upside of a down dollar)

It seems to be too early for everyone to start squeezing liquidity from economy.

 

Colossus put together by spit and glue

 

America needs to spend on infrastructure

Normally blasé New Yorkers seemed stunned at the vulnerability of their railroad, but in that, they should not have felt alone. The combination of antiquated hardware and delayed maintenance is far from uncommon in America’s infrastructure, a Colossus often held together by spit and glue. far from uncommon in America’s infrastructure, a Colossus often held together by spit and glue. Consider the nation’s dams, on average a half- century old. Despite their monumental size, the dams can be weakened by foraging gophers and squirrels, whose holes undermine the foundations. (Source: http://www.nytimes.com/interactive/2010/08/28/weekinreview/20100829nwr-grynbaum.html?hp)

india kerala boat people

(Photo credit: FriskoDude)

It is a shame that in-spite of such need for infrastructural improvements, huge financial help has been extended to dishonest institutions. Had the same amount been spent on improvement of infrastructure, the money would have reached people and there would have been more purchasing power in the hands of people. The economic growth would ave picked up. But now they can only pray to those institutions to help the economy. Will it save the ship with so many holes.

© Sandeep Bhalla

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