Health & Wellness, Self Improvement, Self Development, Relationships, Mental Health, Wealth Management, Money Management
A crisis is a crisis. Be it financial, that is raging furiously these days, or a personal crisis.
All crisis originates with some excess/wrong doings/ mistakes on the part of an individual or a company. The financial crisis has its origins in the sub prime lendings in the US and it is engulfing all and sundry. Likewise, a personal crisis too is an offshoot of some mistakes. Like Pravin Mahajan killing his own brother and pulling the entire Mahajan family into a crisis. Or the Ayushi murder case.
Everybody loves distress stories And then the media goes overboard since it knows that and it feeds on the raging fire.
Here are my thoughts on what to do in these troubled times:
I am an eternal optimist. Are you one?
According to the Reserve Bank of India’s annual report, though net household savings in absolute term went up by 8.18 per cent to 5,26,033 crore in 2007-08, as a percentage of gross domestic product (GDP) it is estimated to have fallen by 50 basis points (100 basis points equals one per cent) to 11.2 per cent during 2007-08.
The reason: a robust growth of about 9 per cent boosting GDP during the year.Investments in shares, debentures and mutual funds have seen a healthy growth last year. It also highlighted growing investor preference for riskier but high-yielding investment instruments compared to bank deposits.
The report said that investments in stocks, debentures and mutual funds grew by nearly 51 per cent to Rs 77,073 crore during 2007-08. In terms of share in the household savings it constitutes 10.5 per cent against 6.6 per cent at the end of previous year.
“The flow of household investments into mutual funds and growth in number of accounts with the industry in 2007-08 reflects this trend,” said AP Kurian, chairman, Association of Mutual Funds of India (AMFI).
However, growth is marginal when pegged to GDP—1.6 per cent against 1.2 per cent in 200607.
This growth is also not phenomenal when compared to global standards. “In the US, mutual fund corpus size is equal to over 70 per cent of the US GDP,” Kurian added.
Among the other components of household financial assets, assets in cash and investments in insurance, provident and pension funds went up by 21 per cent and 1.72 per cent respectively. But deposits (including bank, nonbank and trade debt) fell by about Rs 10,000 crore to Rs 4,15,245 crore, while claims on government became negative at Rs 27,042, against a positive figure of Rs 40,627 for the previous year, the central bank’s report said.
The Economist Intelligence Unit estimates India’s economic growth to be at 7.5% this fiscal. This revision is in continuation with the earlier forecasts made by the business intelligence arm of The Economist Group, which clearly indicated the slowdown trend. The Economist Intelligence Unit had pegged the figure at 7.7% in March’08.
The Economist Intelligence Unit expects the Reserve Bank of India (RBI) to remain under pressure to raise interest rates further, despite the sharp tightening of monetary policy in June and July this year. Economist Intelligence Unit believes that in the second half of 2008 the central bank will increase the repo rate from 9% to 9.5%, and the reverse repo rate from 6% to 6.5%. The RBI’s more aggressive approach reflects its growing concern about the sudden acceleration in inflation to nearly 12.7% earlier this month.
“In the absence of other policy options, such as fiscal tightening or currency appreciation, the onus will remain squarely on monetary policy to tackle inflation. The RBI is aware of the balancing act it has to do, as reflected in its policy statement on July 29th, which not only raised the central bank’s inflation target for 2008-09 to 7% (from 5-5.5%), but also lowered its economic growth forecast to 8% (from 8-8.5%). We, however, expect the real GDP growth to noticeably moderate from 9% last year to 7.5% this fiscal” Manoj Vohra, India Director (Research), The Economist Intelligence Unit said.
The Prime Minister’s Economic Advisory Council (EAC) has accepted that India will witness slowdown in growth and revised India’s GDP forecast to 7.7%—something which the Economist Intelligence Unit had forecasted in March this year.
Mr Vohra said that India’s economic prospects will be undermined by higher borrowing and input costs, weaker consumer sentiment and slower external demand growth. Although the slowdown has so far been restricted to the industrial sector, it will spread to the services sector as the squeeze on costs becomes more pervasive and demand slackens.
The Economist Intelligence Unit believes that monetary easing will not occur until 2009, when it expects inflationary pressures to subside. “We forecast two 25-basis-point cuts in the RBI’s key policy rates in the second half of next year”, Mr Vohra added.
The Economist Intelligence Unit is the business-to-business arm of The Economist Group and provides geopolitical, economic and business analysis on more than 200 countries, as well as strategic intelligence on key industries and management practices....the return of inflation is the biggest scourge of paper money and the biggest argument in favour of gold. Therefore, to look back at history and discredit gold is not very rigorous since, I believe, inflation resurgence makes the case now for gold, if it did not do so earlier.India's first online weekly on personal financeEquities are denominated in paper money and when paper money loses its sheen, so would paper-backed assets. At least partially, that anxiety drives the campaign to discredit gold as a potential alternative asset for investors.
Small investors could soon call the shots in India’s equity markets say some analysts, who expect up to $32 billion (Rs1.26 trillion) of household savings to have flowed into the market in the 12 months to March 2008. This could insulate India’s markets from global shocks, much like China’s and South Korea’s.This amount is almost double the record $17 billion purchases of Indian equities by foreign institutional investors (FIIs) this year, till mid-December.
[I]ndia has not yet had a crisis deriving from the inconsistent monetary policy regime. Monetary and fiscal reform is required to achieve a consistent speculation -proof policy framework, to smooth the process of India's integration into the world economy. The ideal scenario for the 2007-2010 period involves are that puts a sound macroeconomic framework into place before such a crisis comes about.
Cowen says all these figures don't quite get at Iraq's real cost. Indeed, we usually don't even frame the question the right way. We'd do better to recognize what we've lost, rather than focusing only on what we've paid.
We often think of cost simply in terms of dollars spent, but the real cost of a choice -- what economists call its "opportunity cost" -- consists of the forgone alternatives, of the things we could have had instead.
The human toll of the war is dreadful: more than 3,800 U.S. soldiers dead and more than 28,000 wounded, plus more than 1,000 private contractors killed and many more injured. It's harder to know how many Iraqis have died; some estimates claim that the war has caused a million or more Iraqi deaths, and even if that's an overstatement, the toll is still very high. But it's not just the lives that are gone; we've also lost the contributions that these people would have made to their families and to humanity at large.
The logic of “exports, good—imports, bad” seems straightforward at first—after all, when a factory closes because of foreign competition, there seem to be fewer jobs than there otherwise would be. Don’t imports cause factories to close? Don’t exports build factories?But is the logic really so clear? As a thought experiment, take what would seem to be the ideal situation for a mercantilist. Suppose we only export and import nothing. The ultimate trade surplus. So we work and use raw materials and effort and creativity to produce stuff for others without getting anything in return. There’s another name for that. It’s called slavery. How can a country get rich working for others?
Agents are often better informed than the clients who hire them and may exploit this informational advantage. Real-estate agents, who know much more about the housing market than the typical homeowner, are one example. Because real estate agents receive only a small share of the incremental profit when a house sells for a higher value, there is an incentive for them to convince their clients to sell their houses too cheaply and too quickly. We test these predictions by comparing home sales in which real estate agents are hired by others to sell a home to instances in which a real estate agent sells his or her own home. In the former case, the agent has distorted incentives; in the latter case, the agent wants to pursue the first-best. Consistent with the theory, we find homes owned by real estate agents sell for about 3.7 percent more than other houses and stay on the market about 9.5 days longer, even after controlling for a wide range of housing characteristics. Situations in which the agent’s informational advantage is larger lead to even greater distortions.
"The basic point is what is India going to do about capital controls. Do we want to become a modern market economy, do we want to integrate into the world economy, do we want to harness the benefits of globalisation or not?There is a school of thought which thinks that the good old days were better, the good old days when we did not particularly have capital flows and we were more cutoff from the world. That is the point of debate that all of us face today."
Makes a lot of sense to me. It also calls for greater efforts to bring about higher levels of financial literacy and makes me proud of my own humble site.What do you think? Is there a case for personal finance education in the schools?
- The American Economy is based on a private enterprise system in which the millions of individual choices made by consumers, workers, and citizens, in sum, affect the decisions made by business owners and government officials.
- The preservation and effectiveness of such a system depends on the ability of individuals to make wise economic decisions related to their personal financial affairs, the successful operation of organizations, and the economic activities of the country.
