I s s ueNo.43
Jul y2015
F I N L Y chi meri ca:thevi ci ousci rcle
De a rRe a de r s ,
TEAM
Themont hofJ ul ys a wGr e e c e t hef i r s tde ve l ope dna t i ont ode f a ul ton s ove r e i gnde btwhi c hl a t e rr e c e i ve dc r e di ta i dof7. 16bi l l i onEur os t hr oughEur ope a nFi na nc i a lSt a bi l i z a t i onMe c ha ni s m( EFSM) i nor de r t or e ma i nf i na nc i a l l yf l oa t i ng.Af t e rr e c e i vi ngs t r ongma j or i t yof r e f e r e ndumf r omt heGr e e kswhor e j e c t e dt hea us t e r i t yme a s ur e s ,a s t r ongGr e e kc onvi c t i ons e e mst oha vec omeupofke e pi ngGr e e c ei n t heEur ope a nuni onwhi c hwa sa l s ol a t e l yba c ke dbyot he rl e a de r s i nc l udi ngGe r ma ny. I t ' st heChi na ' ss t oc kma r ke tc r a s ht oa l mos t30% t ha tha swor r i e dt he i nve s t or sa c r os st hegl obec ons i de r i ngt hema gni t udeofi t sc ont a gi on e f f e c t .Dr i ve nby80% ofr e t a i li nve s t or s ,t heChi ne s es t oc kma r ke t swe r e hi ghl yi nf l a t e dc r e a t i ngt hebubbl ewhi c hbur s ta ndwi pe doutt he$3 bi l l i onf r omt hema r ke t s . Cove rs t or yf ort hi smont hi sonCHI MERI CAwhi c hi sa boutt he Chi ne s es t r a t e gi cbus i ne s spol i c i e swi t hTheUni t e dSt a t e st ha tha s t r a ppe dChi nai ni t sowndol l a rga me .Whi l ee nga gi ngi t ' sva l ua bl e f or e i gne xc ha nger e s e r ve si nf undi ngt heUSma r ke t sbybuyi ngt heUS t r e a s ur ybondst os uppor ti t se xpor t ,Chi naha sc r e a t e dame s sofi t s pol i c y.Thea c c umul a t e dr e s e r ve sa r epr ovi ngt obeofl i t t l eus et o e i t he rr e s ol veadome s t i cf i na nc i a lc r i s i sort opr e s s ur i z eTheUni t e d St a t e s .Thust hea c c umul a t e dr e s e r ve sa r enowpr ovi ngt obeade mon f orc hi nai t s e l f . Thea r t i c l eoft hemont hs ubs e que nt l yt a l ksa boutt heMUDRAba nk a ndhowt hi si ni t i a t i veoft hegove r nme ntwi l ls ol vet hei s s ue swhi c ht he MSMEs e c t ori sf a c i ngf orr a i s i ngt he i rc a pi t a l .
Oure duc a t i ons e c t i onc ove r st hes ove r e i gnde f a ul t s ,t heva r i ouss c e na r i osunde rwhi c ht hes ove r e i gnde bt c r i s i sma yoc c ur ,t hei mpl i c a t i onsi tha sont hec ount r i e ss ove r e i gnr a t i ngsa ndt heove r a l l ma c r oe c onomi cpa r a me t e r s . Fi na l l ywe ' l lha ves omei ns i ght sf r omours e ni or ss ha r i ngt he i re xpe r i e nc ei nt hec or por a t ec ul t ur ea ndwha t c a r e e roppor t uni t i e sonepos s e s s e si nt hef i e l doff i na nc e . Iwoul dl i ket ot ha nka l lourr e a de r sf ort he i ri mme ns es uppor ta nde nc our a ge me nt .Your e ma i nourpr i me mot i va t i onf a c t ort ha tke e psours pi r i t shi gha ndgi veust hevi gort oke e pt r yi nga ndwor ki ngha r d.
-Abhi ma nyuSi nghCha uha n
Contents
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Al umniSect i on
Edi t or ’ sDesk
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Facul t ySect i on
Ar t i cl eoft heMont h
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NewsBuzz
Educat i onalSect i on
17 Tr i vi a
Ar t i c l eo ft heMo nt h Chi me r i c a:TheVi c i ousCi r c l e Ga ur ha r iP a l Me r c a nt i l i s ma ndme ij i n:
Me r c a nt i l i s mt he or ya r gue dt ha tac ount r ys houl de xpor tmor ea ndi mpor t l e s sa ndr e c e i vei ne xc ha ngegol d( t hede f i c i ti ngol d) .Chi naha df ol l owe d me r c a nt i l i s tpol i c i e sa ndha vea ma z e dl a r ger e s e r ve sof‘ me ij i n’whi c hl i t e r a l l yme a ns‘ Ame r i c a nGol d’( r e a dAme r i c a ndol l a r s ) .
Chi nae xpor t e dmor et ha ni ti mpor t e dt oUS( Fi gur e1) ,c r e a t i ngl a r gef or e i gn r e s e r ve st ha tby2015t ot a l e dove r$3. 73t r i l l i on( Fi gur e2) .
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Ar t i c l eo ft heMo nt h
t hi sl e a dst ol owChi ne s ehous e hol dc ons umpt i on.I ns uf f i c i e ntpe ns i ona nds oc i a ls e c ur i t ys ys t e mf ur t he ra ddst ot hel owe rc ons umpt i on. Fur t he r ,t heha r s hr e a l i t i e st ha tboughtma nyAs i a nc ount r i e sont he i rkne e si n199798 As i a nFi na nc i a lc r i s i st ooha vec ompe l l e dChi nat obui l dl a r gef or e i gne xc ha nge r e s e r ve s . Dome s t i cs a vi ngsc oupl e dwi t hhugef or e i gne xc ha nger e s e r ve s ,he l pe dChi nat oboos t c ons umpt i ona c r os st hewor l de s pe c i a l l yi nUS.
But ,howt he s e‘ me ij i n’t ur ne di nt o‘ i r onpyr i t e ’or‘ f ool ’ sgol d’i swha twewi l le xpl or e i nt hi sa r t i c l e . Fool ’ sgol d: ThePe opl e ’ sBa nkofChi na( PBOC)buysdol l a r se a r ne dbyChi ne s ee xpor t e r st oke e p r e nmi ni biwe a kbyma nda t i ngahi ghr e s e r ver a t i ot ha ti sr e qui r e dt obema i nt a i ne dby Chi ne s eBa nks .
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Ar t i c l eo ft heMo nt h
Theowne r s hi poff or e i gna s s e t sa sape r c e nt a geofmont hl ya ve r a geM1mone y s uppl yi si nbe t we e n8290% dur i ngye a r s2009t o2014( Fi gur e3) .Thi si ndi c a t et ha t t heM1mone ys uppl ywa spr i ma r i l yus e dt obuyf or e i gna s s e t s . Ea c hye a r ,a st her e s e r ve sc ont i nue dt ogr ow,Chi nai nc r e a s i ngl yboughtUSt r e a s ur y bondsa ndot he rdol l a r de nomi na t e da s s e t s .Chi ne s edol l a ri nf us i onhe l pe dUni t e d St a t e st of i na nc ei t st r a dea ndbudge tde f i c i t s . Ea c hye a r ,a st her e s e r ve sc ont i nue dt ogr ow,Chi nai nc r e a s i ngl yboughtUSt r e a s ur y bondsa ndot he rdol l a r de nomi na t e da s s e t s .Chi ne s edol l a ri nf us i onhe l pe dUni t e d St a t e st of i na nc ei t st r a dea ndbudge tde f i c i t s . Spe ndi tLi keBe c kham: Chi ne s edol l a ri nf us i onhe l pe dke e pAme r i c a ni nt e r e s tr a t e sl ow,e nc our a gi ng i nc r e a s i ngl e ve l sofbor r owi ng,e s pe c i a l l ya mongc ons ume r s .Che a pc r e di te na bl e d USc ons ume rt opur c ha s emor eChi ne s egoods . Wha t“ e s s e nt i a l s ”dot heboome r si nve s t e da l lt hebor r owe dmone ye ve r yye a r ? USCe ns usbur e a upr ovi de sabr e a kuponwha tt heAme r i c a nsa r es pe ndi ngt hebor r owe dmone yon: •$200bi l l i ononf ur ni t ur e ,a ppl i a nc e s( $1, 900pe rhous e hol da nnua l l y) •$400bi l l i ononve hi c l epur c ha s e s( $3, 800pe rhous e hol da nnua l l y) •$425bi l l i ona tr e s t a ur a nt s( $4, 000pe rhous e hol da nnua l l y)
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Ar t i c l eo ft heMo nt h •$9bi l l i ona tSt a r buc ks( $85pe rhous e hol da nnua l l y) •$250bi l l i ononc l ot hi ng( $2, 400pe rhous e hol da nnua l l y) •$100bi l l i onone l e c t r oni c s( $950pe rhous e hol da nnua l l y) •$60bi l l i ononl ot t e r yt i c ke t s( $600pe rhous e hol da nnua l l y) •$100bi l l i ona tga mbl i ngc a s i nos( $950pe rhous e hol da nnua l l y) •$60bi l l i onona l c ohol( $600pe rhous e hol da nnua l l y) •$40bi l l i onons moki ng( $400pe rhous e hol da nnua l l y) •$32bi l l i onons pe c t a t ors por t s( $300pe rhous e hol da nnua l l y) •$150bi l l i onone nt e r t a i nme nt( $1, 400pe rhous e hol da nnua l l y) •$100bi l l i onone duc a t i on( $950pe rhous e hol da nnua l l y) •$300bi l l i ont oc ha r i t y( $2, 900pe rhous e hol da nnua l l y) Ma r cFa be rofTheGl oom,Bl ooma ndDooms umma r i z e dt hepr obl e mof“ pr oduc t i onbubbl e ”i nAs i a nc ount r i e sa ndhowAme r i c a nsa r el i t t l et oga i nbyt hi ss pe ndi ng s pr e e ,a pt l yi nhi sJ une2008ne ws l e t t e rwi t hbe l owl i ne s : " Thef e de r a lgove r nme nti ss e ndi nge a c hofusa$600r e ba t e .I fwes pe ndt ha tmone y a tWa l Ma r t ,t hemone ygoe st oChi na .I fwes pe ndi tonga s ol i nei tgoe st ot he Ar a bs .I fwebuyac omput e ri twi l lgot oI ndi a .I fwepur c ha s ef r ui ta ndve ge t a bl e si t wi l lgot oMe xi c o,Hondur a sa ndGua t e ma l a .I fwepur c ha s eagoodc a ri twi l lgot o Ge r ma ny.I fwepur c ha s eus e l e s sc r a pi twi l lgot oTa i wa na ndnoneofi twi l lhe l p t heAme r i c a ne c onomy.Theonl ywa yt oke e pt ha tmone yhe r ea thomei st os pe ndi t onpr os t i t ut e sa ndbe e r ,s i nc et he s ea r et heonl ypr oduc t ss t i l lpr oduc e di nUS.I ' ve be e ndoi ngmypa r t . " Fur t he r ,a st hema r ke tva l ueoft her e a le s t a t er os e ,UShomeowne r sbor r owe don t he i rhome e qui t yt hi sl e dt ot hei nc r e a s e di mpor t sofChi ne s egoodsa ndc r e a t e d mor eout f l owsofdol l a r sa ndf ur t he ri nc r e a s e dt r a dede f i c i t . Thus ,USe c onomi cor de rha vebe c omei nc r e a s i ngl yde pe nde ntondol l a r sf l owi ng f r omc ount r i e sl i keChi na ,J a pa ne t c .Thi sha sl e dt oavi c i ousc i r c l ewhi c ht hr e a t e ns t hef ounda t i onofUSe c onomybe c a us eoft hei nt e r de pe nde nc ebe t we e nChi naa nd USA-Chi naons pe ndi ngofUSc ons ume r st oke e pi t sf a c t or i e sr unni nga ndUSon dol l a rf l owst of i na nc ei t st r a dea ndbudge tde f i c i t .
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Ar t i c l eo ft heMo nt h Ther e c e ntdowngr a deofUSgove r nme nt ’ sde btr a t i ngbyS&Pf ur t he ra dde df ue lt o t hef i r ebyr e duc i ngt heva l ueofUSTr e a s ur ybonda ndt hec ur r e nc yhe l dbyChi na . Thi sl e dpe opl et odubt hei ns c r i pt i onondol l a rbi l l -‘ I nGodweTr us t ’a s‘ Ihopemy r e de e me rl i ve t h’ ,hi ghl i ght i ngt hepr os pe c t st ha tl oa nsmi ghtne ve rber e pa i d.
TheVi c i ousc i r c l e : Cur s eofe xpor tl e dgr owt h: Chi na ’ shugedol l a rr e s e r ve sr e qui r e sade s t i na t i onwhi c hha swe l lde ve l ope df i na nc i a l ma r ke t s .Toa t t r a c tt he m,ac ount r yha dt obewi l l i ngt os pe ndmuc hmor et ha ni t sown pr oduc e r sc oul ds uppl y,a ndas t r ongf i na nc i a ls ys t e mc a pa bl eofa t t r a c t i ngt hei nf l ows a ndr e a s s ur i ngt hee xpor t e r st ha tt he i rs a vi ngswoul dbes a f e ,s a f e rt ha nt hede ve l opi ng c ount r i e sha dbe e n.Theobvi ousc a ndi da t ewa sUni t e dSt a t e s . For t yye a r sa go,J ohnConna l l yt he nt heUSt r e a s ur ys e c r e t a r y,a c c ur a t e l yi de nt i f i e d Chi na ’ spr obl e m:‘ I tma ybeourc ur r e nc y,buti t ’ syourpr obl e m. ’Chi naha ppe nst o l e a r nt hi st heha r de s twa ypos s i bl e . I fChi nat r i e st opul lf undsf r omUni t e dSt a t e sgove r nme ntde bta ndbr i ngt hef undt o Chi nat he ni twi l lha ves e ve r ee f f e c t sone xpor t s .
I fChi nawe r et odi ve r s i f y,s a yi fChi nawe r et obuyUK’ sde bt ,i twoul dbr i ngdown UK’ sbondyi e l ds .The nUK’ si nve s t or swoul dmovet oUni t e dSt a t e sa st hebondyi e l ds t he r ewoul dha vei nc r e a s e dduet oChi na ’ smovi ngf r omUSgove r nme ntde btma r ke t s . Thusul t i ma t e l yChi ne s ef undswi l ll a ndi nUni t e dSt a t e sonl y.ForChi nadi ve r s i f yi ngt o UKora nyot he rde ve l opi ngc ount r ywoul donl yme a na ni nc r e a s ei nr i s k. Fur t he r ,i fChi nat r i e st odi ve r s i f ybypur c ha s i ngr e s our c e sl i kei r onor emi ne s ,oi lf i e l ds e t c . ,a si tha sdonei nAf r i c a ,Aus t r a l i aa ndi nLa t i nAme r i c a ,t he r et ooi tha st of a c e r i s ks .Ast hede ma ndf orc ommodi t i e si sma i nl ydr i ve nbyt heChi ne s ee c onomy,s l owdowni nChi ne s ee c onomywi l ldr i vec ommodi t i e spr i c e sdowna ndwi l lt husde c r e a s e t heva l ueofChi ne s ei nve s t me nti nr e s our c e s .
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Ar t i c l eo ft heMo nt h
The r ei sas a yi ngt ha t‘ I fIoweyouapound,Iha veapr obl e m;buti fIoweyouami l l i on,t hepr obl e mi syour s . ’Chi naha snowunde r s t oodwha tvi c i ousc i r c l ei tha snowgot i nt o.
Chi ne s ec ur s e ’ se f f e c t sonUni t e dSt at e s :
I fChi nawe r et owi t hdr a wf r omUSgove r nme ntde bt ,i twi l lr a i s et hebondyi e l dsa nd ul t i ma t e l yr a i s et hebor r owi ngc os tf orUSc ons ume r s .I fFe de r a lRe s e r vei nc r e a s e s mone ys uppl yt obr i ngi nt e r e s tr a t edown,t hi sma yl e a dt oi nf l a t i on. Though,Chi na ’ swi t hdr a wa lf r omUSgove r nme ntde btma r ke tma yl e a dr e duc t i oni n i mpor tf r omChi na ,howe ve rl owc os tc ount r i e s( LCC)l i keI ndi a ,Vi e t na m,Ca mbodi a a ndot he r sma yt a keChi na ’ spos i t i oni nt hi sc a s ea ndi ti sl e s sl i ke l yt ha tl a bori nt e ns i ve j obswi l ls hi f tt oUSs hor e s .
Summar yandConc l us i on:
Chi nas e e mst obet r a ppe di ni t sowndol l a rga me .Thea c c umul a t e dr e s e r ve s a r epr ovi ngt obeofl i t t l eus et oe i t he rr e s ol veadome s t i cf i na nc i a lc r i s i sort o pr e s s ur i z eUni t e dSt a t e s . Thusi t si nve s t me ntofr e s e r ve sa nds a vi ngsi ndol l a r s ,ha spr ove dt obea de mon.I fChi nac ont i nue st of e e dde mon,de mononl ygr owss t r onge r( Chi na ge t st r a ppe df ur t he ri nt hedol l a rga me )a ndi fChi nas t opsf e e di nghi m,t he de monma ye a tt hema s t e r( t heva l ueofi t se xi s t i ngr e s e r vewi l lf a l l ) . Expor tl e dgr owt hs t r a t e gyofChi naha sonl yma debot hChi naa ndUni t e s St a t e smor evul ne r a bl e ,a sUni t e dSt a t e sne e dt oc r e a t ede ma ndf ort hegoods pr oduc e dbyChi na . Fur t he ra sUSpol i t i c i a nst ookt hepa t hofl e a s tr e s i s t a nc et ot a c kl egr owi ng i ne qua l i t yi nUni t e dSt a t e sa ndf a vor e dde btf i na nc e dc ons umpt i on,i tha donl y l e dt ohe a r tbr e a ka ss e e ni nt her e c e ntf i na nc i a lc r i s i swhi c ha f f e c t e dbot h Uni t e sSt a t e sa ndChi na .
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E duc a t i o na lS e c t i o n Sove r e i gnDe f aul t Abhi ma ny uS i ng hCha uha n
Wi t ht heGr e e c ebe c omi ngt hef i r s tde ve l ope dna t i ont ode f a ul t ,t hei nt e r na t i ona l i nve s t or sa r emuc hwor r i e da boutt her i s kpr e va i l i ngi nt hegl oba le c onomi e sr e ga r di ng r i s i ngde btl e ve l si nt hef i na nc i a lc r i s i sl e a di ngt os ove r e i gnde f a ul t s . Sowha te xa c t l yi sas ove r e i gnde f a ul ta ndonwha tpa r a me t e r si si tbe i ngqua nt i f i e d? As ove r e i gnde f a ul ti st hef a i l ur eorr e f us a loft hegove r nme ntofas ove r e i gns t a t et o pa yba c ki t sde bti nf ul l .As ove r e i gnde f a ul ti sdi f f e r e ntf r omt hec r e di tr i s kde f a ul ti n t hes e ns et ha tt hec r e di t or sc a n' tr e pos s e s st hes ove r e i gns t a t e ' sa s s e t st hewa yt he yc a n i nc a s eofac ompa ny.Ove rt heye a r sc ount r i e swi t hwe a kf unda me nt a la nde c onomi c f r a me wor kt e ndt or e s t r uc t ur et he i rde btr a t he rt ha ngoi ngde f a ul t .Re s t r uc t ur i ngof de btma yi nc l udepa r t i a lpa yme ntoft hede bta mountwhi c ha r ec a l l e d' ha i r c ut s ' or e xt e ns i onoft het i mel i mi tt opa y.Count r i e sof t e nt e ndt oe s c a pet her e a lbur de nof de btbyi nf l a t i ngt hema r ke t sorbyde va l ui ngt he i rc ur r e nc ybypr i nt i ngmor ec ur r e nc y orbyc onve r t i ngi tt ot hef or e i gnc ur r e nc yorke e pi ngi te qui va l e ntt ot her a t e sofpr e c i ousme t a l s ,t hi si showi tbe c ome sha r de rf ort hei nve s t or st oqua nt i f yt hei nt e r e s tor c a pi t a lde f a ul t .
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E duc a t i o na lS e c t i o n I fpot e nt i a ll e nde r sorbondpur c ha s e r sbe gi nt os us pe c tt ha tagove r nme ntma yf a i lt o
pa yba c ki t sde bt ,t he yma yde ma ndahi ghi nt e r e s tr a t ei nc ompe ns a t i onf ort her i s k ofde f a ul t .Adr a ma t i cr i s ei nt hei nt e r e s tr a t ef a c e dbyagove r nme ntduet of e a rt ha ti t wi l lf a i lt ohonori t sde bti ss ome t i me sc a l l e das ove r e i gnde btc r i s i s .Gove r nme nt s ma ybee s pe c i a l l yvul ne r a bl et oas ove r e i gnde btc r i s i swhe nt he yr e l yonf i na nc i ng t hr oughs hor t t e r mbonds ,s i nc et hi sc r e a t e sas i t ua t i onofma t ur i t ymi s ma t c hbe t we e n t he i rs hor t t e r mbondf i na nc i nga ndt hel ongt e r ma s s e tva l ueoft he i rt a xba s e .The y ma ya l s obevul ne r a bl et oas ove r e i gnde btc r i s i sduet oc ur r e nc ymi s ma t c h:i ff e w bondsi nt he i rownc ur r e nc ya r ea c c e pt e da br oa d,a nds ot hec ount r yi s s ue sma i nl y f or e i gnde nomi na t e dbonds ,de c r e a s ei nt heva l ueoft he i rownc ur r e nc yc a nma kei t pr ohi bi t i ve l ye xpe ns i vet opa yba c kt he i rf or e i gnde nomi na t e dbonds . Si nc eas ove r e i gngove r nme nt ,byde f i ni t i on,c ont r ol si t sowna f f a i r s ,i tc a nnotbe obl i ge dt opa yba c ki t sde bt .Butt hegove r nme ntc ome sunde ri nt e r na t i ona la nddome s t i cpr e s s ur et or e pa yi t ’ sobl i ga t i ons .Thei mpl i c a t i onsofde btc r i s i ss e ve r e l y a f f e c t st hee c onomi cs c e na r i ooft hes t a t e ,a ndt hegove r nme nti spr e s s ur i z e dt of ol l ow s omea us t e r i t yme a s ur e swhi c hc ur bst hegove r nme nts pe ndi ngwhi c ha f f e c t st he GDPgr owt h.Poorout putl e ve l sr a i s e st hec ur r e ntc ountde f i c i twhi c ha f f e c t st he c r e di tr a t i nga ge nc i e s ’a bi l i t i e st oke e pa ne yeonva r i ousi ns t r ume nt s .Downgr a di ng oft her a t i nga sa ni nve s t me ntde s t i na t i onma ke st hena t i one xt r e me l ydi f f i c ul tt or a i s e c a pi t a li nor de rt or e vi vet hee c onomi cs ys t e m,f ol l owe dbyt hedome s t i cpr e s s ur e . Dome s t i cs a ve r sa ndi nve s t or s ,a nt i c i pa t i ngaf a l li nt heva l ueoft hel oc a lc ur r e nc y, wi l ls c r a mbl et owi t hdr a wt he i rmone yf r omba nka c c ount sa ndmovei toutoft he c ount r y.Toa voi dba nkr unsa ndpr e c i pi t ousc ur r e nc yde pr e c i a t i on,t hegove r nme nt ma ys hutdownba nksa ndi mpos ec a pi t a lc ont r ol s .Aspuni s hme ntf orde f a ul t ,c a pi t a l ma r ke t swi l le i t he ri mpos epuni t i vebor r owi ngr a t e sorr e f us et ol e nda ta l l . Cur r e nt l y,t he r ei snoi nt e r na t i ona ll a worc our t sf ors e t t l i ngt hes ove r e i gnde f a ul t s , whi c he xpl a i nst her e a s onofde f a ul tc a s e st obes ova r i e di nl e ngt ha nds e ve r i t y.The ne e doft hehouri st oc omeupwi t haf r a me wor kwhi c ha l l owst oqua nt i f yt her i s k be f or e ha ndbyke e pi ngt heha r dvi e wonhowt hes our c eoff undsi sbe i ngut i l i z e dj us a st hewa yi ti sdonebyi nt e r na t i ona lf i na nc i a lbodi e sl i keI MFf orde ve l opi ngna t i ons s a mepr oc e dur eha st obef ol l owe df ort hede ve l ope da ndi ndus t r i a lna t i ons ,whi c ha r e mor el i ke l yt ode f a ul ti nor de rt os a vet hei nt e r e s toft hei nve s t or s .
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Al umniS e c t i o n I r i naGo e l
“ Ani nve s t me nti nknowl e dgepa yst hebe s ti nt e r e s t . ” -Be nj a mi nFr a nkl i n
I tgi ve sme i mme ns epl e a s ur et owr i t ef orFI Nl ya ga i n.Iwoul dl i ket os ha r e wi t hourr e a de r ss omeofmye xpe r i e nc e sa ndma kef e ws ugge s t i onsf ort he c or por a t el i f ei nt hef i e l doff i na nc e . Iha vebe e npl a c e da tI CRALi mi t e da sa Se ni orAs s oc i a t eAna l ys t .Mywor ki nc l ude sa na l ys i ngt hef i na nc i a l sa ndunde r s t a ndi ngt heove r a l lbus i ne s sofac ompa nyi nor de rt oa s s e s st he i rc r e di t r i s ka ndr a t et he ma c c or di ngl y.Themos ti mpor t a ntt hi ngwhi c hIl e a r nti nt he f i r s twe e kofmypr of e s s i ona lwor l dwa st ounde r s t a ndt hea ppl i c a t i onofour c l a s s r ooml e a r ni ngi nr e a ll i f es c e na r i os .Ir e a l i s e dt ha ts omeoft he or e t i c a l c onc e pt soff i na nc el i ker a t i oa ndpe e rgr oupa na l ys i sc a nbebe t t e runde r s t ood,onl ywhe nyoua c t ua l l ya ppl yt he m.Iha vewor ke df oronl yt womont hs a tI CRALt d. ,butt hel e a r ni ngha sbe e ni mme ns ea ndt hes c opes t i l lr e ma i ns wi de .Thef i na nc i a ldoma i ni sve r ywi de ,s odon’ tbedi s a ppoi nt e di fyou don’ tge tt odowha tyouf e e li swor t hwhi l ei nt hebe gi nni ngbe c a us ea sl ong a syoua r el e a r ni ng,youa r egr owi ngi nt hei nt hepr of e s s i ona ll a dde r .Iwoul d a l s ol i ket os ugge s tt omyr e a de r st ha thi ghs a l a r ypa c ka ge ss houl dnotbea pr i or i t yt ot hos ewhoa r el ooki ngf oragoodpr of i l ei nt hef i na nc i a ldoma i n be c a us eyouma yha vet oma keac ompr omi s ebe t we e nt het wo.Ic hos ea goodpr of i l ea ndt hes a t i s f a c t i onoft hewor ke xc e e dsa l lot he rf a c t or sf orme .
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Al umniS e c t i o n Comi ngt opr e pa r a t i onsf orpl a c e me nt s ,i twoul dber e dunda ntt opoi ntout t ha tal otofr e a di nga ndas oundunde r s t a ndi ngofba s i cf i na nc i a lc onc e pt s i sr e qui r e d.Al s o,Ec onomi c sa ndFi na nc eha veal otofs yne r gi e sbe t we e n t het woa nda nunde r s t a ndi ngofones ubj e c twoul dr e qui r ea nunde r s t a ndi ngoft heot he ra swe l l .The r e f or e ,i ti si mpor t a ntt oke e pyour s e l fupda t e d ont hene wsa ndbea wa r eoft hei mpa c tofma c r oe c onomi cc ha nge sa nd pol i c i e sonbus i ne s se nvi r onme nt .Compa ni e shi r i ngf orf i na nc epr of i l e s us ua l l yt a kewr i t t e nt e s t s ,whi c ha r enott ought oc r a c ki fyourf i na nc ea nd e c onomi c sba s i c sa r es t r ong. Fi na l l y,Iwoul dl i ket os a yt ha te ve nt hought het r a ns i t i onf r omc ol l e gel i f e t oc or por a t el i f ei sal i t t l et oughbe c a us eofmor er e s pons i bi l i t ya ndl e s s e r f r e e domt owor kl i keyouwa nt ,youc a nma ket hebe s toft hei ni t i a lf e w ye a r sofyourne wc a r e e rt ol e a r n,ma kene wc ont a c t s ,ne wf r i e nds ,a dd ne wme mor i e sa ndne we xpe r i e nc e s . Iwi s ha l lourr e a de r sa ndf i na nc ea s pi r a nt sa l lt heve r ybe s tf ort he i rf ut ur e c a r e e ra ndIhopet ha ta l lofyoue nj oyyourwor ka smuc ha sIdowhe n youe nt e rt hec or por a t el i f e .
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F a c ul t yS e c t i o n Mudr aBank
Dr . P a nk a jTr i v e di P r o f . a ndAr e aCha i rP e r s o n F i na nc e , S I MS R
Fi na nc eMi ni s t e rofI ndi awhi l epr e s e nt i ngt heUni onBudge t2016a nnounc e dt os t a r t upMUDRAba nk.MUDRAs t a ndsf or“ Mi c r oUni t sDe ve l opme nt s&Re f i na nc e Age nc y” .I ti sa ni ns t i t ut i ons pe c i a l l ys e tupbyGove r nme ntofI ndi af orr e f i na nc i ng a ndde ve l opme ntofMi c r o,Sma l la ndMe di umEnt e r pr i s e s( MSMEs )i nI ndi a .MSME s e c t ori nI ndi ai spl a yi ngve r yi mpor t a ntr ol ef orde ve l opme nt .Ne a r l y45% ofour ma nuf a c t ur i ngout puta nd40% ofoure xpor t si sc ont r i but e dbyMSMEs e c t or . Gr owt hoft hi ss e c t ori sc r i t i c a lf orourGDP.Thebi gge s tpr obl e mt hi ss e c t ori sf a c i ng t oda yi sa c c e s st of i na nc i a ls uppor tbyor ga ni s e df i na nc i a ls e c t orl i keba nksa nd NBFCs .Wi t havi e wt oe nc our a get heba nksa ndot he rf i na nc i a li ns t i t ut i onst opr ovi de f i na nc i a ls uppor tt oMSMEs e c t or ,MUDRAba nki sc r e a t e d.MUDRAwi l lr e f i na nc e t ot hel e nde r sl i keComme r c i a lBa nks ,Re gi ona lRur a lBa nks ,Coope r a t i veSoc i e t i e s , a ndSma l lBa nkse t c .whoa r ei nt oMSMEl e ndi ng.
MUDRAi sr e a dywi t ht hes c he me st hr oughwhi c hi ti st a r ge t i ngmi c r oa nds ma l lbus i ne s se nt i t i e st ha ta r ei nt oma nuf a c t ur i ng,t r a di nga nds e r vi c ea c t i vi t i e s .Thes c he meof l e ndi ngbyMUDRAi ss i gni f yi ngt hes t a geofde ve l opme nta ndf undi ngne e dsoft he bor r owe r sa nda l s oi t sgr owt ht ot hene xtl e ve lofope r a t i ons .
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F a c ul t yS e c t i o n MUDRAha sna me dt hel e ndi ngs c he mea sf ol l ows . ( a ) Shi s hu;Loa nupt oRs . 50, 000 ( b) Ki s hor e :Loa nf r omRs .50, 000t o500, 000 ( c ) Ta r un:Loa nf r omRs . 500, 000t o10, 00, 000 MUDRAi sagoodbe gi nni ngf orr e f i na nc i ngt hel e nde r sl e ndi ngt o MSME.Apa r tf r omr e f i na nc i ng,MUDRAwi l la l s oc omeoutwi t hpol i c y gui de l i ne sf orMSMEf i na nc i ngbus i ne s s .MUDRAi spr opos e dt ode s i gn pol i c yr e l a t i ngt or a t i ngsofMi c r oFi na nc eI ns t i t ut i ons ,c l i e ntpr ot e c t i on, r e c ove r yme t hods ,a ndt e c hnol ogyi s s ue sf a c e dbyMSMEl e nde r s . MUDRAt obee f f e c t i ve ,ne e dt ol ooka tbe t t e rr i s kma na ge me ntpr a c t i c e s l i kea nyot he rba nks ,c ons i de r i ngt heuni quef e a t ur e sofl e ndi ngt oMSME s e c t or .Al s oMUDRAne e dst oc omeoutwi t hi nnova t i vef i na nc i a lpr oduc t sa tr a t i ona lpr i c e . I nt hef a mi l yofr e f i na nc i nga ge nc yi nI ndi a ,wea l r e a dyha vet hr e eme mbe r s ,NABARD,SI DBIa ndNHB.We l c omet ot hef or t hme mbe r MUDRA.
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NEW S BUZZ Gr e e c enol o ng e ri nde f a ul to ni t sl o a ns -I MF I MFde c l a r e dGr e e c et obel onge ri nde f a ul toni t sl oa nsa f t e ri tr e mi t t e d a bout2bi l l i one ur os( $A2. 93bi l l i on)t oma keupf ormi s s e dde btpa yme nt s .At he nsha sa l s oi ni t i a t e dr e pa yme ntofove r duel oa nst ot heEur ope a nCe nt r a lBa nka ndi sa l s opa yi ngba c ka500mi l l i one ur ol oa nt oi t s ownc e nt r a lba nk.Gr e e c eowe s3. 5bi l l i one ur ost ot heECBa ndna t i ona l c e nt r a lba nksi nt hee ur oa r e af orgove r nme ntbondst ha tha vema t ur e d, i nc l udi ng0. 7bi l l i one ur osi ni nt e r e s t .Thec r e di twor t h7. 16bi l l i one ur os t ha ti tr e c e i ve dl a s twe e kf r omt heEur ope a nFi na nc i a lSt a bi l i z a t i onMe c ha ni s m( EFSM)ha sbe e ns e r vi nga sabr i dgel oa nt oke e pGr e e c ef i na nc i a l l y a f l oa tunt i lane wa i dpa c ka gei sa gr e e dbye ur oz oneme mbe rc ount r i e s .
Ma ur i c eObs t f e l dbe c o me st hene wBl a nc ha r d Whi t eHous ee c onomi ca dvi s e rMa ur i c eObs t f e l di st obe c omet heI nt e r na t i ona lMone t a r yFund’ sne wc hi e fe c onomi s t ,s uc c e e di ngOl i vi e r Bl a nc ha r dwhoi sr e t i r i ng.
Bha r t iAi r t e le nt e r si nt oe x c l us i v et a l ksf o rs a l eo f4 Af r i c a nuni t st oOr a ng e Fr e nc ht e l e c omgr oupOr a ngeSAi si nt a l kst obuyf ourofBha r t iAi r t e l Lt d’ sAf r i c a nbus i ne s s e sa st heFr e nc hphonec ompa nyl ooksa twa yst o pus he xpa ns i oni noneofi t sf a s t e s t gr owi ngma r ke t s .Or a ngei sdi s c us s i ng t hepos s i bl ea c qui s i t i onofBha r t i ’ sAi r t e luni t si nBur ki naFa s o,Cha d,Re publ i cofCongoa ndSi e r r aLe one .
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NEW S BUZZ Se bi , RBIwo r ki ngf o rs mo o t he I POr o l l o ut : Ma r ke tr e gul a t orSe bii swor ki ngwi t ht heRe s e r veBa nkofI ndi a( RBI )f or as moot hr ol l outoft hepr opos e de I POpr oc e s s .Thi swi l lr e duc epa pe r wor ki npubl i cof f e r i ngst one a r l yz e r o,ha l vet het i me l i nef orl i s t i ngofa c ompa nyt oj us ts i xda ysa nda l s or e duc ec os t sofl i s t i ngs ubs t a nt i a l l y.Se ve r a lba nksa r ec ur r e nt l ywor ki ngt or ol loutt heASBA( Appl i c a t i onsSuppor t e dbyBl oc ke dAmount )s ys t e mt hr ougha l lt hebr a nc he s ,whi c hi sc r uc i a lf orl a unc hi ngt hee I POpr oc e s s .Se biha ss e tJ a nua r y1,2016a st he da t ef orl a unc hoft hi spa pe r l e s spubl i cof f e r i ngs ys t e m.
Ba nkss e e kRBIno dt os pr e a dQ1bo ndl o s s e so v e r f o urqua r t e r s : Yi e l dsongove r nme nts e c ur i t i e s( gs e c s ) ,whi c hwe r eonade c l i ni ngpa t h s i nc ee a r l yOc t obe rl a s tye a r ,r e ve r s e dt he i rt r a j e c t or ya f t e rRBIa nnounc e d aha wki s hs t a nc ei ni t s bi mont hl ypol i c yr e vi e wi nJ une .Theyi e l dont he 10ye a rbe nc hma r kgove r nme ntbond,f ore xa mpl e ,ha smove dup18ba s i s poi nt s( bps )s i nc et hepol i c ywa sa nnounc e d.Wor r i e dove rmount i ng l os s e si nt he i rbondpor t f ol i oi nt heApr i l J unequa r t e r ,ba nksha ver e que s t e dt heRe s e r veBa nkofI ndi a( RBI )t oa l l owt he mt oa mor t i s ema r kt oma r ke tl os s e s( wr i t i ngdowna s s e t sa tc ur r e ntva l ue s )ove rt hene xtf our qua r t e r s .
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F i n s t r e e t , F i n a n c eC o mmi t t e eo f S I MS R f i n s t r e e t . s i ms r @g ma i l . c o m