A Quote by Arundhati Bhattacharya
Demonetisation is a disinflationary process. So, this will bring down prices in the long run. It will also help in bringing down interest rates.
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Since 2008 you've had the largest bond market rally in history, as the Federal Reserve flooded the economy with quantitative easing to drive down interest rates. Driving down the interest rates creates a boom in the stock market, and also the real estate market. The resulting capital gains not treated as income.
If inflation is brought down, interest rates will fall. Once rates fall, we have the opportunity to maybe achieve the goal of 'housing for all' faster; take roads, infrastructure to India's interiors.
Here's the interesting thing: the fact that QE and lowering interest rates almost to zero has worsened inequality, does not mean that raising interest rates will help reduce inequality.
It's sort of like a teeter-totter; when interest rates go down, prices go up.
The Keynesian prescription for unemployment rests on the persistence of a 'money illusion' among workers, i.e., on the belief that while, through unions and government, they will keep money wage rates from falling, they will also accept a fall in real wage rates via higher prices.
Interest rates are to asset prices what gravity is to the apple. When there are low interest rates, there is a very low gravitational pull on asset prices.
You cannot take bank interest rates very sharply down: you will lose your deposit franchise.
God, to prevent all escape, hath sown the seeds of death in our very constitution and nature, so that we can as soon run from ourselves, as run from death. We need no feller to come with a hand of violence and hew us down; there is in the tree a worm, which grows out of its own substance, that will destroy it; so in us, those infirmities of nature that will bring us down to the dust.
The underlying strategy of the Fed is to tell people, "Do you want your money to lose value in the bank, or do you want to put it in the stock market?" They're trying to push money into the stock market, into hedge funds, to temporarily bid up prices. Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it's a pro-Wall Street financial engineering gimmick.
To pump up consumer or government demand would force interest rates up and asset prices down, possibly by enough to destroy more jobs than are created.
If global oil prices or commodity prices are high, then it is bound to create inflation. So, we should not be too worried if the inflation is created by global commodity prices. When they come down, inflation will automatically come down.
As demand goes down, you will see prices come down.
We need to invest in home-grown clean energy that will bring cheaper prices in the long run, shielding consumers from volatile international fossil fuel markets.
If you want to bring down the prices of healthcare and education, the answer will be more innovation, more technology, which will then have the effect of freaking everybody out and saying, 'Oh, my God, you're going to kill all the jobs.'
Stock price multiples are negatively correlated with real interest rates. As interest rates rise, the market multiple will fall.
To investors, job creation is a second-order effect. Market participants care first about interest rates, exchange rates, bond prices and the one great factor that affects all three: the long-term solvency of a bond company called the U.S. government.
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