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|Posted on January 25, 2015 at 5:08 PM||comments (10)|
The Trillion Euro stimulus announced this afternoon by ECB President Mario Draghi is nothing less than magnificent in my view, and will help create jobs and industry for millions, and turn into wealth. This stimulus augurs well for the European stockmarkets and for the Euro itself, which it now underpins with a very positive aspect. It seems to have been announced at the right time, and although the immediate market reaction may not have been wildly enthusiastic, it is a complex stimulus, needing people to understand and digest its implications.
In plain terms, it is 60 billion Euros per month over 18 months, starting from March to September 2016, meaning a total of 1,080,000,000,000* Euros. This was announced by Mr Draghi at the press conference in Frankfurt this afternoon.
It will serve the 19 nations that make up the Euro Area, or Eurozone, which now includes as from 1st January 2015 Lithuania. However, it will not be available at the moment to Greece, which benefits from arrangements already in place from the IMF, which gave them two bailouts and numerous haircuts. Perhaps there could be cross border mergers of some organisations which would benefit all?
There seems enough appetite for additional funds, especially by companies who have not been able to find funding from the banks so far. This is a ready segment that will be glad to be served by this Stimulus. As in England and Britain, where Mr Cameron has been visiting various companies, who have received funding now, something similar needs to be implemented in the Eurozone. Money invested in companies which need capital for upgrades of machinery, or cash flow to keep the factories operating while their customers arrange to pay them, will maintain employment and sustain livelihoods and, hopefully, even create wealth in the long term. That 'old school' way of trading had died recently in the credit crunch, and could well do with revival. It may be the clue to bring Recovery back on stream.
This Trillion Euro Stimulus was long awaited, and probably is just in time, now joining the money flow in the U.S., Japan and China, to maintain the worldwide economic Recovery, which shall flourish to Prosperity for all nations. The next stage surely must be for the BRICS nations to reduce their benchmark interest rates and for the Emerging Markets to do something similar, in due course to be followed by Africa perhaps? Or even simultaneously, and soon? Why not? The national books can become squared internationally, as each nation develops its resources, trades with the other nations, and brings development and growth at home. Would that not be the most marvellous thing to happen?
I wish you peace and prosperity, to every nation, man, woman and child.
P.S. Earlier I left out three 0's. Aw aw aw!
|Posted on December 14, 2014 at 1:54 PM||comments (11)|
After the successful run of the Quantitative Easing in the U.S., and similar measures in U.K. and Japan, it seems the time is ripe for the Euro Area to do a Stimulus.
Several years ago, when the idea was first mooted, I understand both Mme Merkel and Mme Lagarde were thrilled at the idea of a Stimulus in Europe, perhaps capitalised the Dexia Bank, and SVPs and such like ideas. In the meantime, the U.S. offered the 'Open Window' in Europe, a role which Japan and to some extent England have also fulfilled. Now it is time for Europe to do a fully fledged Stimulus, be it creation of additional funds, purchase of asset backed securities, or whatever (or a mix) that may be suitable.
It is time for the parliaments of the 18 Euro Area member countries to start debating this issue, and relay their decisions to Germany. Through more countries joining the Euro Area and adopting the Euro as their Mother Currency, the population and therefore the currency needs of the Euro Area have grown. Somehow, the Maastricht Treaty has not given a clear understanding on this very important issue, therefore I believe a Sub Clause is necessary, to enable the creation of a suitable value of capital to displace the currencies previously used by the newer members. They cannot have taken their own currencies out of circulation without replenishment by Euro from the ECB. This needs to be done with great urgency.
I suggest that if the debating can be commenced soon, then maybe the whole circus can get moving with the printing of additional capital by perhaps end of February 2015. Choose a date which you consider auspicious.
Now that U.S. is seeing the first signs of Prosperity, with more jobs being created, record number of cars being purchased, and more people buying their houses once they are finally convinced the Recovery has been for real and prospects are improving all the time; likewise, the GNP of Japan shall grow with a Recovery from the Fukushima disaster, and now a great Stimulus and growing exports; China stands ready to commence expanded production for exports, it is already doing so for the home market; Africa, South America and Asia all seem gearing up for a bright future, with increased demands....The Euro Area must do what is prudent and necessary, and bless the Stimulus measures.
Durudarshan H. Dadlani
|Posted on November 28, 2014 at 9:05 AM||comments (4)|
The Extraordinary Stimulus in Japan seems to be paying off, although the dismal figures for the economy contracting over the last two quarters may make some people believe otherwise.
From a fall of 7.6 percent in the 2nd quarter, the fall in the 3rd quarter has been trimmed down to 1.7 percent. That to me is an early indicator that the tide has turned, and the Japanese Stimulus is proving effective. It may prove to be the case that this current quarter may show growth (or a fall that is trimmed down further).
With the gigantic size of the Stimulus, which at $85 billion a month is equal to the Quantitative Easing they had in the U.S., there are of course concerns for the future, of an unsustainable monetary expansion that may be creating a bubble. That is a moot point, as although the size of the population and physical size of the country may not suggest it, but Japan is a powerhouse of wealth, her citizens having saved ample in the past few decades to enable Japanese banks and corporations invest overseas, resulting in very healthy GNP figures. Only under that significance can the Stimulus be seen to be relevant, with sound underlying strength of the Japanese economy.
The cash flow created is helping to repair the damages after the disaster at Fukushima, and hopefully putting a few more Yen into the citizens pockets, enabling them to have rising standards of living, as well as creating the capacity to invest abroad.
I was pleased to note that India under Mr Modi has secured about $35 billion over next three years, and this friendship and co-operation will serve India well. In the past, Japan has invested in South Korea, and that success story is anybody's envy. With a talent pool in high quality engineering and infrastructure development, especially earthquake proof buildings and sound bridges, as well as power plants and electronics products such as televisions, computers and transformers, Japan is likely to serve the export markets very well, in return earning growth of capital in host nations.
This strategy of cheapening the Yen and hence making their products and services cheaper is a bold strategy under Prime Minister Mr Abe, complemented by BoJ Chairman Mr Kuroda which has helped pull Japan out of the period of entrenched stagnation to a period of Recovery. Perhaps the Stimulus now needs to be trimmed down, just like the Tapering in the U.S. If they cut it down perhaps $15 billion every three months, it would form a safety net to keep the economy growing but with a little bit more stability. I believe that is perhaps the only thing they need to do to keep going.
If this current quarter's figures actually indicate a Rebound, then I believe it will confirm to one and all that Mr Abe's policies have been very successful. If he remains as Prime Minister after the snap election, so much the better. He has the unique blueprint in his mind that has helped Japan in Recovery so far. Should he remain in the same office after the election, it would be so much the better. He should have the kudos at least of being the Prime Minister, as he has masterminded the Recovery after Fukushima. That I believe.
Durudarshan H. Dadlani