Archive for October 15th, 2010

USD can only depreciate against planet Mars

October 15, 2010

I attended a talk by Larry Summers in Mumbai. The topic was “India and the Global Economy”. I could not have missed this event.  

But was disappointed. Barring a few insights nothing much was talked about. The topic also changed to Indo-US foreign relations. I am very interested in this area but there were not many takeaways. And coming back I realised, Summers had given a similar talk in July-10 – The U.S.-India Economic Relationship in the 21st Century. So read this speech and you have not missed anything.

The key takeaway of the meeting was the title of the post. Uday Kotak of Kotak Mahindra Bank recalled a meeting with Summers in 2008. US economy was dipping and things looked tough. So when asked whether USD would depreciate, this is what Summers said: USD can only depreciate against planet Mars… 🙂

The idea being with so many economies in trouble, USD will never really depreciate. Even when US alone  is in trouble, the recession spreads through other economies.   So on earth it cannot depreciate against any economy. Might be against otehr planet… hence Planet Mars…

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Would QE2 help?

October 15, 2010

As Bernanke gives an important speech in Boston Fed today, there are expectations that he will be clearer on Fed’s upcoming monetary framework. People have already factored in quantitative Easing – 2.0 (QE2) and questions asked are not whether but how much would it be?

Daniel L. Thornton of St Louis Fed reviews the various thoughts on QE2 in this short note. He says it will not be much useful this time.

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