World Bank - India and China crusaders of Global Economy

Firstly it was IMF and now its World Bank................

Yes you got it right!!

CHINDIA is now backed by the worlds two most important institutions- International Monetary Fund and the World Bank.

The eptome Bank on Thursday in a press release said

India and China have emerged as drivers of global economy post-recession..

According to their reoprt of the World Development Indicators,

China and India have emerged in recent years as drivers of global economic growth, accounting for 2.9 percentage points of the five per cent growth in global output in 2007.

According to the reports, initially the emerging economies used to contribute 36% of global output in 2000, it has now increased to 43%, the difference has been highly compensated by CHINDIA, upto 5%. The contribution has been significant from our side. Also to say was the Investment in BRIC countries. It increased by 50% from 2004(present stats).

Looking forward in near future, more than 80% of the concentration of KPO will be in CHINDIA out of which 70% will be influenced by India. Looking at the latest advances and recession, India is hoped to increase the count of 7 in Fortune 500 significantly in near future.

G7 and G20 countries

G7 Countries

The G7 was an informal gathering of heads of state and governments of the world's most advanced economies (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States).

In the early stages, members of the G7 were accompanied at meetings by their foreign and finance ministers. In 1998, the British Presidency decided to separate the ministerial meetings from the original summit in order to keep the original concept of a small, informal gathering. In the same year, Russia joined what then became the G8. Since 2005, the G8 has been holding dialogues with the major emerging economies of Brazil, China, India, Mexico and South Africa.

G8 finance ministers meet once a year before the actual summit. However, finance ministers also meet in general three more times (early in the year, and at the margin of the spring and annual meetings of the international financial institutions), but in a G7 (instead of a G8) framework. . Since the introduction of the euro, the European Central Bank (ECB) and the President of the Eurogroup also attend. (Courtesy:Wikipedia)

The G7/8 deals with such issues as: global economic outlook and macroeconomic management, international trade, energy, climate change, and relations with developing countries.

G20 Countries

The G20 (Group of 20) is a group representing 19 of the world's largest economies plus the European Union that are strategically important and influential in the world economy. The G20 was formed as a new forum for cooperation and consultation on matters pertaining to the International Financial System (IFS).

The membership of the G20 comprises the finance ministers and central bank governors of the G7, 12 other key countries, and the European Union Presidency (if not a G7 member); the European Central Bank; the Managing Director of the International Monetary Fund; the Chairman of the IMFC; the President of the World Bank; and the Chairman of the Development Committee.

The G20 is an informal forum that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability.

The members of the G20 are the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America. The European Union is also a member, represented by the rotating Council Presidency and the European Central Bank.

Morgan Stabilising by Liquefying!!

Morgan Stanley, eager to secure more stable sources of funding in volatile times especially in US and India, said on Wednesday its brokerage division sold $3 billion in certificates of deposit (bonds, futures etc.) during the past week as part of its broader plan to build up deposits.

Morgan Stanley listed itself as a R-Bank (Retail) so as to get rid of bankruptcy kind situation leading to downfall of Lehmann Brothers.

Morgan Stanley has listed itself as a Federal Bank-regulated enterprise trying to hold on the acquisitions and crude options listed at a good enough prices (crude hit 36 months low on Monday).
MS would now be entering low risk and low gain schemes by collaborating with a Swiss Bank unit to introduce new saving accounts and global currency accouts and increase international banking.

MS has to reprimand on the subprime and speculative approach which came as a consequence of extra money invested in high risk and volatile market!!

But liquefying isn't that easy, as the market price of stock dipped to 52 week low by witnessing a cut off of nearly 70% in price in the last 12 months...Such selling will not fetch profits to that extent as expected................

The Last Days Of Lehman Brothers

Richard S. Fuld Jr. was under siege in mid-July. His renowned investment bank, Lehman Brothers, was barraged with questions about whether the expanding credit crisis would engulf the bank and wipe out investors.
Signs of worry abounded. The company’s shares had plummeted, its debt had been downgraded, and investors were increasingly worried about a Lehman default. It was a downward spiral that mirrored the demise of Bear Stearns(A very strong Investment Bank) four months earlier.
In the months leading up to Lehman’s downfall, the proposal was just one of many floated by Mr. Fuld as he embarked on a frenetic and increasingly desperate attempt to keep his 158-year-old investment bank alive.
To save Lehman, Mr. Fuld called blue-chip companies and discussed mergers with a competitor, the worst situation in which a company would like to be.
Mr. Fuld is likely to face some tough questions about the final months and days of Lehman, the company collapsed last month and was sold off in pieces to buyers including Barclays and Nomura.

Though Lehman was the smallest investment bank when it failed — and regulators decided it was not too big to fail — its demise set off tremors throughout the financial system that reverberate to this day. The uncertainty surrounding its billions of dollars of transactions with banks and hedge funds contributed to the freezing of credit markets that has forced governments around the globe to take steps to try to calm panicked markets, including guaranteeing bank deposits.
Lehman executives complain bitterly that any chance of keeping the firm alive began to dissipate rapidly just after Labor Day when JPMorgan Chase, which handled Lehman’s trades, came calling for more money. Lehman had put down securities it believed were worth $6 billion during the summer to assuage the bank’s concerns that its trades were risky. But JPMorgan thought those securities had deteriorated in value, and asked for $5 billion in cash or liquid assets.

So we can say that JPM had assets but conspired against Lehman's dislocating a very big International Firm.

Questions have been ploughing around Fed bank as it brought reforms to save Banks like Morgans and Goldmans(although the same remidies were required to stabilize Lehamns).

So as to keep up in market Lehman officials approached many banks including Ping An International and HSBC.
Lehman also proposed to sell some of its assets to Mr. Warren Buffet who actually bought some assets of Goldman Sachs, but rejected the deal as policy said by Buffet was unacceptable..

At last it can only be summed to say that if due steps would have been taken the Lehman's would have been in the market with the market more stable then it is now....................

DESPERATE INTERCEPTION!!!

Desperate to avoid a depression like the one witnessed in 1929, the US Fed in coordination with other central banks today announced a cut in key rates to stimulate consumption and economic activity. This has been a suffix to the recent hapennings and recession type liabilities, not so true but imposed due to heavy speculation in global markets.

Who knows the markets have been slaughtered on the condition basis or due to heavy speculation and rumors of global stagnation.

Steps taken also include some Joint unprecidented(to be precise) actions and consultation such as to increase liquidity in market to reduce financial crisis.

This will have an impact on Inflation. But according to me, decline in energy and other commodity prices has reduced the upside risk of Inflation to a much greater extent.

Stats say that

The Fed has reduced the federal funds rate by 50 basis-points to 1.5 percent.

Chinese Central bank has cut interest rates for the second time in less than one month reducing it to 6.93 percent, to increase money availability in the market.

OTHER MAJOR FALLS ARE:-

The European Central Bank's main rate is now 3.75 per cent, Canada's benchmark rate fell to 2.5 per cent, Bank of England's rate dropped to 4.5 per cent and Sweden's rate declined to 4.25 per cent.

Now comes RBI's Interception....

Speculators have been discussing the slashing in interest rates as a negative impact as this is following the same trend the Fed did about 2 month ago to maintain or retain stability in Financial Markets.

The Cash Reserve Ratio (CRR) will fall to 8.5% from 11 October and the move would release about Rs20,000 crore into the financial system.

Observing the current liquidity situation in the context of global and domestic developments, it has been decided to reduce the CRR by 50 basis points to 8.5% of net demand and time liabilities (NDTL).

Thus increasing the total market liquidity to Rs90,000 crore.

Recently the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit

Speaking in Finance Minister's Language the depression will have no effect on the nation's economic stability, but stats have as usual performed differently.