The Durga Puja Pill
Hey there KGPian,
Well, It’s been a while, and boy has a lot happened these past few weeks! We’ll pick up right where we left off.
Rajan Does, Yellen Doesn’t
Raghuram Rajan, who so far had been fastidiously averse to cutting interest rates to prop up growth, said “just kidding” on the last tuesday of September, slashing interest rates by an unprecedented 50 basis points.
The assumption is that as it becomes cheaper to borrow money, people do just that, and put that money to productive uses. However, for this to actually happen, banks need to pass these cuts onto customers by lowering their own interest rates. Something which most banks did promptly, though by lesser than 50 basis points. The rationale for this was the low Inflation rates, coupled with lowered growth prospects for the future.
The Indian 10-yr Bond Market reacted sharply and quickly, as this screenshot from Bloomberg shows. Yields fell from ~7.7 to ~7.55. Here’s a nice article on why this happens.
Also, Here’s what the Fed didn’t do.
Less than Zero
Like India, the Euro Zone has also seen some very low inflation recently. It dipped to -0.1%. Significantly lower than the ECB’s target of 2%. A meeting this week on Thursday would be closely watched for possibly increasing the Stimulus package which obviously hasn’t been enough.
Here’s a lovely graphic to get an overall idea of the Euro-Zone right now, courtesy, the Economist(And its three free articles a day)
Trans Pacific Partnership
Advocates of free trade were found making merry when about a fortnight back 12 countries from Asia and America struck the Trans Pacific Partnership. But not everyone seemed happy, like nobel laureate Joeseph Stiglitz. This comes as good news especially as WTO talks seem to be going nowhere. Interestingly, neither India nor China are a part of this Trade Partnership. Bummer.
Chug, Chug, Chug
ABinbev the world’s largest brewer of beer, takes over its closest competition, SABMiller; signalling the arrival of probably the scariest monopoly(sorta) since Standard Oil.
Dell took over EMC, for about 67 Bln $. One 0f those companies you know because of its “accidental damage protection”; the other you’ve never heard of, and don’t need to, because now, its just Dell.
PS: Co-founder Jack dorsey is back at twitter. While simultaneously being CEO at square and filing for an IPO. Talk about hedging bets eh?
The Nobel Prize In Economics: Angus Deaton
Angus Deaton, the British Born, Cambridge Educated, Princeton Situated Economist, won the Nobel Prize for Economics in 2016. His research has attempted to answer three important questions: How do consumers distribute their spending among different goods?How much of society’s income is spent and how much is saved? How do we best measure and analyze welfare and poverty? Here’s what the Nobel Prize committee had to say.
Towards the latter part of his career, Deaton has been specifically focused towards India as well. And you can read more about him in his latest book: The Great Escape: Health, Wealth, and the Origins of Inequality.
That’s All Folks!
In case you feel there’s something we have missed out on that we should have included, do let us know why by dropping us a mail at [email protected], or ping us personally over social media.
