US quantitative easing: How different things work
The US Federal Reserve has embarked on another round of quantitative
easing (QE3) to stimulate the local economy. The move has profound
implications for India as well.
Easing the Pain
The US Federal Reserve has embarked on another round of quantitative easing (QE3) to stimulate the local economy. The move has profound implications for India as well.
What is QE3? When the interest rate is almost zero and cannot be lowered any further, central banks sometimes inject money into the economy directly to boost growth. Quantitative easing (QE) is an unconventional monetary tool seldom deployed. However, this is the third round of QE by the Fed in the past four years, hence the term QE3.
How will it work? The first round of QE began in September 2008 and concluded in the first quarter of 2010, with a total of $1.25 trillion in purchases of mortgage-backed securities. In the second round, between November 2010 and June 2011, the Fed bought $600 billion of longer-term treasury securities. During QE3, the Fed will buy $40 billion of mortgage backed securities every month for an indefinite period. QE3 will infuse cash into banks allowing them to lend more. It is also expected to keep interest rates low.
What does it mean for India? Excess liquidity and low interest rates mean higher capital flows into the developing world. India could be among the key beneficiaries of foreign investment looking for higher returns in the emerging markets. The liquidity infusion through QE3 is expected to increase inflows from foreign institutional investors. But, large capital flows could pose a major challenge for exchange rate management and also stoke inflationary pressures in the economy. Analysts are divided in their assessment of the impact on India. But the Indian stock market saw a pronounced bull run after QE1.
No Happy Ending
British PM David Cameron may find himself in a spot of bother. He believes that inner well being should get priority over economic growth but a study now reveals that pursuing happiness as a goal can have the opposite effect! A constant stress on positive emotions, it seems, can actually make people less happy. Cameron introduced a new "happiness index" in UK in 2010 as an alternative to GDP despite strident criticism.
Picture This
A portrait by tragic artist John William Godward is expected to fetch handsome returns for its owners after being declared a masterpiece by experts. The 1909 painting, called "Summer Idleness: Day Dreams", was bought at 70 in 1937 (about 3, 900 at today's prices). It could now go under the hammer for between 150,000 and 200,000 - nearly 3,000 times its original value.
In the Dock
The shipping ministry's plans to double the capacity at Jawaharlal Nehru Port Trust, India's largest port, seem to have run into rough weather. ABG Ports, part of the winning consortium, now wants to pull out of the project while the law ministry has strongly opposed the move. This is delaying the construction of the fourth container terminal at JNPT. The board of JNPT is now expected to take a final call on the project.
Compiled by Rishi Joshi
The US Federal Reserve has embarked on another round of quantitative easing (QE3) to stimulate the local economy. The move has profound implications for India as well.
What is QE3? When the interest rate is almost zero and cannot be lowered any further, central banks sometimes inject money into the economy directly to boost growth. Quantitative easing (QE) is an unconventional monetary tool seldom deployed. However, this is the third round of QE by the Fed in the past four years, hence the term QE3.
How will it work? The first round of QE began in September 2008 and concluded in the first quarter of 2010, with a total of $1.25 trillion in purchases of mortgage-backed securities. In the second round, between November 2010 and June 2011, the Fed bought $600 billion of longer-term treasury securities. During QE3, the Fed will buy $40 billion of mortgage backed securities every month for an indefinite period. QE3 will infuse cash into banks allowing them to lend more. It is also expected to keep interest rates low.
What does it mean for India? Excess liquidity and low interest rates mean higher capital flows into the developing world. India could be among the key beneficiaries of foreign investment looking for higher returns in the emerging markets. The liquidity infusion through QE3 is expected to increase inflows from foreign institutional investors. But, large capital flows could pose a major challenge for exchange rate management and also stoke inflationary pressures in the economy. Analysts are divided in their assessment of the impact on India. But the Indian stock market saw a pronounced bull run after QE1.
No Happy Ending
British PM David Cameron may find himself in a spot of bother. He believes that inner well being should get priority over economic growth but a study now reveals that pursuing happiness as a goal can have the opposite effect! A constant stress on positive emotions, it seems, can actually make people less happy. Cameron introduced a new "happiness index" in UK in 2010 as an alternative to GDP despite strident criticism.
Picture This
A portrait by tragic artist John William Godward is expected to fetch handsome returns for its owners after being declared a masterpiece by experts. The 1909 painting, called "Summer Idleness: Day Dreams", was bought at 70 in 1937 (about 3, 900 at today's prices). It could now go under the hammer for between 150,000 and 200,000 - nearly 3,000 times its original value.
In the Dock
The shipping ministry's plans to double the capacity at Jawaharlal Nehru Port Trust, India's largest port, seem to have run into rough weather. ABG Ports, part of the winning consortium, now wants to pull out of the project while the law ministry has strongly opposed the move. This is delaying the construction of the fourth container terminal at JNPT. The board of JNPT is now expected to take a final call on the project.
Compiled by Rishi Joshi
