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Contradictory statements?

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Kris
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Contradictory statements? Empty Contradictory statements?

Post by Rishi Sat May 10, 2014 12:18 pm

We need to immediately drop interest rates … doesn’t mean that we do it in one go … there can be a road map but businesses must know that cost of capital will come down.”
Deposit rates, on the other hand, need to rise, according to Dr. Swamy. “Bank account holders must get assured 12 per cent interest on deposits of three-year duration.”
http://www.thehindu.com/business/Economy/rajan-has-failed-will-have-to-go-says-swamy/article5994079.ece?homepage=true
>>>I don't know much about Economics.
Are the two statement not contradictory? 
If the intrest rates are brought down, how can the banks raise the interest rates on deposits?

Rishi

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Post by truthbetold Sat May 10, 2014 12:32 pm

Rishi
i am no economist. but what you said makes sense.

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Post by rawemotions Sat May 10, 2014 12:50 pm

Rishi wrote:We need to immediately drop interest rates … doesn’t mean that we do it in one go … there can be a road map but businesses must know that cost of capital will come down.”
Deposit rates, on the other hand, need to rise, according to Dr. Swamy. “Bank account holders must get assured 12 per cent interest on deposits of three-year duration.”
http://www.thehindu.com/business/Economy/rajan-has-failed-will-have-to-go-says-swamy/article5994079.ece?homepage=true
>>>I don't know much about Economics.
Are the two statement not contradictory? 
If the intrest rates are brought down, how can the banks raise the interest rates on deposits?
Swamy is making a mistake by giving such statements. First they have to even form government. Otherwise all this is moot. Why then make such statements, which will sound like empty gas bags, if they cannot form government ?

Modi's philosophy is work with whoever is the bureaucrat as long as they are hardworking and sincere. This guy goes about talking big throwing his weight around. Even if they have a better person in mind, they  should talk about these things only if they form the government. At the moment the consensus is that they will be lucky if they cross 200 and even reach 220.

Regarding the matter, unless GOI foots the subsidy and keeps the bank credit spreads same, this is not possible. Housing Loan costs will now go to almost 15%.

rawemotions

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Post by Kris Sat May 10, 2014 12:59 pm

Rishi wrote:We need to immediately drop interest rates … doesn’t mean that we do it in one go … there can be a road map but businesses must know that cost of capital will come down.”
Deposit rates, on the other hand, need to rise, according to Dr. Swamy. “Bank account holders must get assured 12 per cent interest on deposits of three-year duration.”
http://www.thehindu.com/business/Economy/rajan-has-failed-will-have-to-go-says-swamy/article5994079.ece?homepage=true
>>>I don't know much about Economics.
Are the two statement not contradictory? 
If the intrest rates are brought down, how can the banks raise the interest rates on deposits?

>>>Under this scenario, the banks' cost of borrowing goes up and revenue goes down in the near term. So the net is lower net income. On another note, I wouldn't be so quick as to get rid of Rajan. The reference to his Chicago background seems a little weird. It is not like he is dumb to the point of not knowing the nuances of the economic situation he is dealing with. There are inflation considerations that need to be factored in when you flood the market with cheap money. There needs to be some calibration of this. Rajan is smart and has international recognition. I hope these guys have a dialogue when they get to power instead of swinging with a meat axe prematurely.

Kris

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Post by rawemotions Sat May 10, 2014 1:08 pm

Kris wrote:
Rishi wrote:We need to immediately drop interest rates … doesn’t mean that we do it in one go … there can be a road map but businesses must know that cost of capital will come down.”
Deposit rates, on the other hand, need to rise, according to Dr. Swamy. “Bank account holders must get assured 12 per cent interest on deposits of three-year duration.”
http://www.thehindu.com/business/Economy/rajan-has-failed-will-have-to-go-says-swamy/article5994079.ece?homepage=true
>>>I don't know much about Economics.
Are the two statement not contradictory? 
If the intrest rates are brought down, how can the banks raise the interest rates on deposits?

>>>Under this scenario, the banks' cost of borrowing goes up and revenue goes down in the near term. So the net is lower net income. On another note, I wouldn't be so quick as to get rid of Rajan. The reference to his Chicago background seems a little weird. It is not like he is dumb to the point of not knowing the nuances of the economic situation he is dealing with. There are inflation considerations that need to be factored in when you flood the market with cheap money. There needs to be some calibration of this. Rajan is smart and has international recognition. I hope these guys have a dialogue when they get to power instead of swinging with a meat axe prematurely.
Yes that is the right approach! Why replace a capable guy, as long as he can find solutions to the problems at hand and execute policies with out of box thinking? No future government should do that.

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Post by confuzzled dude Sat May 10, 2014 1:34 pm

rawemotions wrote:
Rishi wrote:We need to immediately drop interest rates … doesn’t mean that we do it in one go … there can be a road map but businesses must know that cost of capital will come down.”
Deposit rates, on the other hand, need to rise, according to Dr. Swamy. “Bank account holders must get assured 12 per cent interest on deposits of three-year duration.”
http://www.thehindu.com/business/Economy/rajan-has-failed-will-have-to-go-says-swamy/article5994079.ece?homepage=true
>>>I don't know much about Economics.
Are the two statement not contradictory? 
If the intrest rates are brought down, how can the banks raise the interest rates on deposits?
Swamy is making a mistake by giving such statements. First they have to even form government. Otherwise all this is moot. Why then make such statements, which will sound like empty gas bags, if they cannot form government ?

Modi's philosophy is work with whoever is the bureaucrat as long as they are hardworking and sincere. This guy goes about talking big throwing his weight around. Even if they have a better person in mind, they  should talk about these things only if they form the government. At the moment the consensus is that they will be lucky if they cross 200 and even reach 220.

Regarding the matter, unless GOI foots the subsidy and keeps the bank credit spreads same, this is not possible. Housing Loan costs will now go to almost 15%.
-> of course, what do you expect from the king of empty threats.

"But what Mr. Modi started was then carried to absurd limits by BJP leader Subramanian Swamy who demanded that Bangladesh should compensate India by giving away parts of its territory if it could not take back illegal migrants."

http://www.thehindu.com/opinion/lead/raising-the-bogey-of-illegal-immigration/article5993925.ece

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Post by Marathadi-Saamiyaar Sat May 10, 2014 2:33 pm

truthbetold wrote:Rishi
i am no economist. but what you said makes sense.

Swamy is referring to lending rates by the banks and credits available to Builders and manufacturers. EVERYONE borrows to build, manufacture, produce. The brrowing rates are around 10 to 15%.

banks now give around 3 to 4% while lending rates are around 13%. That is what he is referring to.

P.S. Yes..I am an economist too.

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Post by Merlot Daruwala Sun May 11, 2014 8:14 am

Rishi wrote:We need to immediately drop interest rates … doesn’t mean that we do it in one go … there can be a road map but businesses must know that cost of capital will come down.”
Deposit rates, on the other hand, need to rise, according to Dr. Swamy. “Bank account holders must get assured 12 per cent interest on deposits of three-year duration.”
http://www.thehindu.com/business/Economy/rajan-has-failed-will-have-to-go-says-swamy/article5994079.ece?homepage=true
>>>I don't know much about Economics.
Are the two statement not contradictory? 
If the intrest rates are brought down, how can the banks raise the interest rates on deposits?

Swamy is a moron. Banks source funds through deposits, and then lend them out. Unless the cost of funds i.e. deposit interest rate is lower than their lending interest rate, they'll go out of business.

That said, I do believe monetary policy attempts at taming inflation are futile, because the causes are structural i.e. rising rural wages and supply side shortages. The RBI is stifling growth without anything to show for it.
Merlot Daruwala
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Post by rawemotions Sun May 11, 2014 9:03 am

Merlot Daruwala wrote:
Rishi wrote:We need to immediately drop interest rates … doesn’t mean that we do it in one go … there can be a road map but businesses must know that cost of capital will come down.”
Deposit rates, on the other hand, need to rise, according to Dr. Swamy. “Bank account holders must get assured 12 per cent interest on deposits of three-year duration.”
http://www.thehindu.com/business/Economy/rajan-has-failed-will-have-to-go-says-swamy/article5994079.ece?homepage=true
>>>I don't know much about Economics.
Are the two statement not contradictory? 
If the intrest rates are brought down, how can the banks raise the interest rates on deposits?

Swamy is a moron. Banks source funds through deposits, and then lend them out. Unless the cost of funds i.e. deposit interest rate is lower than their lending interest rate, they'll go out of business.

That said, I do believe monetary policy attempts at taming inflation are futile, because the causes are structural i.e. rising rural wages and supply side shortages. The RBI is stifling growth without anything to show for it.
Yes that is correct. If Banks have to give 12% to retail, but get funds at 7-8%, they will end up charging higher rates on housing loans and in addition would need subsidies to maintain their spreads. It is not feasible, without huge subsidies to banks, including private ones, which the regulatory environment will not permit, unless it is modified. Perhaps this is also his objective, if housing loans are difficult to obtain, then speculative pricing on housing will disappear and house prices would go down, which can also have a calming affect on inflation.

On RBI, the problem here is that unlike the Fed Reserve which has twin goals Limiting unemployment and monetary policy, the RBI' goals are limited to monetary policy , contain inflation etc.. So goals for RBI need to be re-defined.

Inflation is a hydra-headed monster in India. Your points on the sources of inflation are correct. In addition, there is a also a thriving black money economy that contributes to it. Transportation and energy cost increases also contribute to it.

That is the reason tying the NREGA funds to agricultural work is a master stroke that can have a calming affect on the inflation. But that is just a small improvement. More innovative ideas for structural improvement are required.

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Post by Marathadi-Saamiyaar Sun May 11, 2014 9:21 am

Rajan's statement in Swiss has to be seen in the contextof Swamy's blabbering.

Swamy - a speciast in chinese economics and china admirer much like MODI - is dreaming of Finance/commerce/industry. he is showing off his "expertise" to Modi just in time. Rajan is also interpreting it along the same lines and rebutting it angrily (high level people dont make such angry statements openly).

Swamy should be made in charge of Minister of Vigilance - which will keep him busy with Sonia, Vadras, MK, JJ, Jagan, Janardhan cases. Last week he again won some case in the supreme court.

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Post by Kris Sun May 11, 2014 11:35 am

Marathadi-Saamiyaar wrote:Rajan's statement in Swiss has to be seen in the contextof Swamy's blabbering.

Swamy - a speciast in chinese economics and china admirer much like MODI - is dreaming of Finance/commerce/industry. he is showing off his "expertise" to Modi just in time. Rajan is also interpreting it along the same lines and rebutting it angrily (high level people dont make such angry statements openly).

Swamy should be made in charge of Minister of Vigilance - which will keep him busy with Sonia, Vadras, MK, JJ, Jagan, Janardhan cases.  Last week he again won some case in the supreme court.
>>> I think that is what it is. It seems too strong a statement otherwise.

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Post by Propagandhi711 Sun May 11, 2014 12:21 pm

I think this fukwit iyer will get his ass handed to him soon

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