Counter argument against the article - Carry Trade: Participation of India
By Dipanjan Chatterjee
email: dipanjan30@gmail.com
http://dipanjanc.blogspot.com/
Just have read this. Through Foreign Institutional Investors a share of Yen and CHF carry trades are executed in Indian Market. However, the size of the emerging markets as well as Indian Market is a lot smaller as compared to US Market. The significant share of carry trades targeting US Bond Markets and Commodity Markets can not be completely absorbed by Indian (Asian) Bond Markets. Investments in dollar-denominated assets from yen carry trade might have played itself out. If those open carry trades positions are suddenly closed, yen will appreciate sharply against USD– such trend has been noticed recently. Then, INR must be allowed to appreciate against USD (harmful for still maturing Indian IT exports to US), otherwise YEN-INR carry trade does not remain risk free any longer. None of these two would be a choice of Indian Central (Reserve) Bank.
Another downside to have USD depreciated against INR is commodity – chiefly oil bubble. Reserve Bank is still wary of inflation. Main issue is without the growth in US domestic consumption dollar denominated assets won’t rise in price. The debt level, at individual and national level, of USA is so high that further growth of consumption would not be seen without an (individual and national) income rise. But, credit and consumption driven growth is hitting a wall. It requires a fundamental growth now – along with a healthy asset deflation and a bad debt write off. The believers of "Privatize profits, socialize losses", the crony-capitalists of wall street, the maffias of wall street – and monetarist central bank which is controlled by thug administration won’t let it happen easily.
It is not a socialistic view. I am proponent of free-market - "laissez faire". Ideally market should not interfere. Rather, poking of Government and Central banks could be called socialistic, isn’t it?
Yuan pegging, keeping yen artificially undervalued, unnaturally low real interest rate in US, bogus inflation report (apart from food-energy), suppression of money growth (M3), number manipulation in labor report using feeble birth-death model; always in favor of keeping weak currency – these are all heck. These are pro-asset inflation policy, which boosts speculations and exacerbates misallocation of capital. Marx termed it as "fictitious capital". It is a great trouble for the needy people who do not have assets; who depend on earning their income to finance their own life. Free market is more impartial – from the point of view of providing equal opportunity. Marx failed to realize the power of capitalism, human behavior – but he understood the problem of economic bubble driven by inflation. I suggest Samik to refer to the argument on monetarism from Austrian School in this regard.
email: dipanjan30@gmail.com
http://dipanjanc.blogspot.com/
Just have read this. Through Foreign Institutional Investors a share of Yen and CHF carry trades are executed in Indian Market. However, the size of the emerging markets as well as Indian Market is a lot smaller as compared to US Market. The significant share of carry trades targeting US Bond Markets and Commodity Markets can not be completely absorbed by Indian (Asian) Bond Markets. Investments in dollar-denominated assets from yen carry trade might have played itself out. If those open carry trades positions are suddenly closed, yen will appreciate sharply against USD– such trend has been noticed recently. Then, INR must be allowed to appreciate against USD (harmful for still maturing Indian IT exports to US), otherwise YEN-INR carry trade does not remain risk free any longer. None of these two would be a choice of Indian Central (Reserve) Bank.
Another downside to have USD depreciated against INR is commodity – chiefly oil bubble. Reserve Bank is still wary of inflation. Main issue is without the growth in US domestic consumption dollar denominated assets won’t rise in price. The debt level, at individual and national level, of USA is so high that further growth of consumption would not be seen without an (individual and national) income rise. But, credit and consumption driven growth is hitting a wall. It requires a fundamental growth now – along with a healthy asset deflation and a bad debt write off. The believers of "Privatize profits, socialize losses", the crony-capitalists of wall street, the maffias of wall street – and monetarist central bank which is controlled by thug administration won’t let it happen easily.
It is not a socialistic view. I am proponent of free-market - "laissez faire". Ideally market should not interfere. Rather, poking of Government and Central banks could be called socialistic, isn’t it?
Yuan pegging, keeping yen artificially undervalued, unnaturally low real interest rate in US, bogus inflation report (apart from food-energy), suppression of money growth (M3), number manipulation in labor report using feeble birth-death model; always in favor of keeping weak currency – these are all heck. These are pro-asset inflation policy, which boosts speculations and exacerbates misallocation of capital. Marx termed it as "fictitious capital". It is a great trouble for the needy people who do not have assets; who depend on earning their income to finance their own life. Free market is more impartial – from the point of view of providing equal opportunity. Marx failed to realize the power of capitalism, human behavior – but he understood the problem of economic bubble driven by inflation. I suggest Samik to refer to the argument on monetarism from Austrian School in this regard.
posted by Samik Nath at
11:32 PM
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