How stubborn can Central Bankers be? It is surprising – and I am not saying it is easy to be a central banker..just commenting.
Inflation in the US and UK are about 5% – if you ask the people living there (increasing ‘consumer confidence’ is inflation assisted). However the Central Banks are refusing to believe this. With interest rates pegged at 1-2% in both the places, the Central Bank is making a mockery of the ‘smart’ people who ‘saved’ money. Money is losing value real fast – and asset bubbles are getting created ONCE AGAIN…in both these countries.
China holds its currency low, so the Chinese guys who export are INVESTING the money outside (Money is brilliant, it finds the best risk-return avenues). If a Chinese company has exported to Singapore, it buys more properties in Sing rather than bring it to China. Now the average Chinese who cannot do this kind of stuff happily buys gold. Gold here is not an investment – it is a way of saying ‘I do not know what will happen to the yuan’.
Our own RBI CANNOT control inflation, prices of real estate, prices of other non essential commodities. The Government of India is in sleep mode and doing nothing to reduce inflation.
We have a huge supply constraint – 30 years CTC for a house (clearly a bubble? I do not know) or complete failure of infrastructure (5 hour power cuts in parts of the suburbs of MUMBAI) cannot bring the prices below Rs. 90 lakhs for a 2BHK – 40 kms from South Mumbai!!
So at best we can only say what a tough job it is to be the Governor of the Central Bank, do sensible things with your policies, hope that the government will do sensible things, – and talk to the media on a quarterly basis (sounding smart too!),….God…are you listening!!
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