I remember that as a young Engineering student I used to read Bussiness world magazine regularly.And I used to get happy whenever latest data of India's foreign exchange reserve used to be published.India crossed $200 billion..next month India crossed $230 billion mark.I never understood the real intent behind such enormous reserves but used to get happy that country is becoming strong. The latest same data for China is $3 trillion. That is 10 times bigger than India. It so happens that India is a very small player in the USD currency market.
Now what does this really mean.Does it mean that the amount should get indefinitely higher.In fact experts now worry about the enormous amount of USD currency held by Asian countries.We all know that currencies are very vulnerable to movements.Just like the stock market.Consider the scenario what happens if US goes bust.What will happens to such huge reserves.They will just be worthless paper. To avoid such a scenario countries all over the world have been giving debt to US by buying US govt. securities and bonds which in turn are guaranteed by the US govt.This means that we all have come to take the US government as the master of us all. What if US says i do not have any money left.Who will bail out the world then? Recently rating agencies warned that they might lower the rating of US govt from AAA to AA.
This is a very worrying scenario which the governments all over the world realize but fear to admit as this would lead to wide panic in the market.And by market i mean Stock/Capital markets.The recent stock market crash in India shows the dependence Indian market has on FIIs.The Indian investor appears to be just a small fry in this huge ocean.We can just ride the wave if our timing is correct. The markets all over the world are not as rational as they used to be.
Experts warn that the bailouts given out by US govt have just delayed the inevitable and that another bubble is already underway.It is just a matter of time that the global economy will again slow down. This means that we are very tightly coupled to happenings in US. Any sane person would want to reduce such a dependency if not totally eliminate it.But it cannot be done in a short time.
The main reason for all this US debt, details of which can be found here(http://www.brillig.com/debt_clock/), is the way successive US govts have not followed austerity measures so badly needed. The US govt has borrowed the most money from all over the world for Financial bailouts, afghanistan/Iraq wars, etc and not for education and health care. This is a bad wastage of badly needed money for much more worthy causes.
All these are very scary trends for the world as a whole as we are very much dependent on US.I really no longer believe on the Stock markets.Lets see how worse things get and badly hope US again gets a President like John F Kennedy who was a true people's leader rather than a puppet in the hands of the MNCs.
Now what does this really mean.Does it mean that the amount should get indefinitely higher.In fact experts now worry about the enormous amount of USD currency held by Asian countries.We all know that currencies are very vulnerable to movements.Just like the stock market.Consider the scenario what happens if US goes bust.What will happens to such huge reserves.They will just be worthless paper. To avoid such a scenario countries all over the world have been giving debt to US by buying US govt. securities and bonds which in turn are guaranteed by the US govt.This means that we all have come to take the US government as the master of us all. What if US says i do not have any money left.Who will bail out the world then? Recently rating agencies warned that they might lower the rating of US govt from AAA to AA.
This is a very worrying scenario which the governments all over the world realize but fear to admit as this would lead to wide panic in the market.And by market i mean Stock/Capital markets.The recent stock market crash in India shows the dependence Indian market has on FIIs.The Indian investor appears to be just a small fry in this huge ocean.We can just ride the wave if our timing is correct. The markets all over the world are not as rational as they used to be.
Experts warn that the bailouts given out by US govt have just delayed the inevitable and that another bubble is already underway.It is just a matter of time that the global economy will again slow down. This means that we are very tightly coupled to happenings in US. Any sane person would want to reduce such a dependency if not totally eliminate it.But it cannot be done in a short time.
The main reason for all this US debt, details of which can be found here(http://www.brillig.com/debt_clock/), is the way successive US govts have not followed austerity measures so badly needed. The US govt has borrowed the most money from all over the world for Financial bailouts, afghanistan/Iraq wars, etc and not for education and health care. This is a bad wastage of badly needed money for much more worthy causes.
All these are very scary trends for the world as a whole as we are very much dependent on US.I really no longer believe on the Stock markets.Lets see how worse things get and badly hope US again gets a President like John F Kennedy who was a true people's leader rather than a puppet in the hands of the MNCs.
