Are we not doging ourselves - Economic Flux and Tendency of Economic Slavery - No Lessons Learned

Theory and need of social cult , social justice, equitable distribution and right to live and grow are finding difficult to sustain and are getting defeated in the hands of self interest, capitalism , politics and international supremecy.

Lehman Brothers, US Real Estate Bubble, derivative bubble etc have been dealt by subsiding the wrong done inspite of all disclosures , audit , monitoring by agencies and strong Central Banks worldover and all sorts of Risk and Basel norms. Sensitivity analysis, Z scores, beta and insider trading norms are all existing and still themost developed economies, departments, agencies, regulators, monitoring units and governments have failed time and again.

Money Supply is the answer to all the problems and power to print notes is derived from the notional assets which may or may not have been productive any more. GDP itself has become a misnomer as the turnover and income from markets - Capital, Foreign exchange (Fx), Commodity , Money Markets (MM) are all hijacked by Speculators.

More than 90% of the trades are speculative and derivatives based transactions. Price discovery is just a name sake and delivery based transactions are merely 10% of the total trades taking place.This makes the world wide transactions across all the markets notional and most of the actual users either gain or loose due to hedging and has to continously fght to be discovering the natural demand supply based price of iputs and output.

On the Economic Front US Debt Trap has been talked about for years and fearing this Major economic gurus and speakers discounted and analysed to reach to the conclusion that USD will depreciate over the years and emerging economies will do well and currencies will appreciate.

On the Fx Currency Front, parity and basis of the parity is getting on to a state of flux due the fact that the underlying transactions and economic state are not dependable. same is the case with Equities, commodities and other markets. Money Market is essentially and by and large are still isolated in most of the economies due to high level of localisation and reduced number of cross border transactions. And hence it is one of the least talked about and least written topics internationally.

US debt trap is not an issue which will lead to debt crisis as US hold the supreme position and incase there is a default in USD either with in US or outside US, banks , corporates and Government all will stand and save the situation just as the Government bailed out the banks and corporates.

As i see, the state of confusion and directionless movement of the economies and currencies will continue as the state of affirs of the Europe, Japan and US are in doldrums and there is no clear indication and there is no consensus and resolve on the issues of inflation, money supply, planned and non planned expenditure, expansionary money supply and growth numbers. The Adhoc and temporary and localised solution is what is leading to the confused state of affairs and this will lead to a situation where Capital Adequacy ratios will cross 20%. The same should be seen in the light of the volumes, size of the transactions and size of the economies. Stress testing even now is based on the present state of transactions without taking into account the existing probability of default on account of Economic crisis / currency movements. This creates a dynamic situation and defaults and crisis is faster than predicted.

Happy investing!!
Dinesh Goel