Saturday, June 25, 2016

It is not about Current or Fiscal deficit but Trust deficit which is causing Ripples across Globe!!

Last fortnight has been really intriguing for the global economies. From dismantling of a Union to a credible central banker's exit. From a failure diplomacy of being an integral part of NSG (Nuclear Suppliers Group) to a presidential candidates consolidation. It's all happening and that is creating ripples across continents.

I foresee so many events as a tip of an iceberg of so much which is yet to be witnessed. Will others in European Union also contemplate freedom via referendum? PIGS next in the race of achieving that "Independent State" tag? Yet to be seen. Brexit (1-GB of memory lost by EU). How will EU shape up its policy after exodus of one of its major economy? Jury is out to understand the effects and affects of exodus. Financially ripples were felt across major and minor economies. Greenback gained its supremacy a tad more.

Central Banker's exit from Reserve Bank of India was a livid example of trust deficit which widened between the ruling government and the Banker. Though he achieved all the sought after targets from CAD to reigning inflation but the ecosystem around him was not fertile enough and he returned to academia. Fundamentally strong emerging India should not have let Dr Rajan go but again as it is said "It's not about personalities but institutions". We hope and wish a better banker to be crowned at the helm.

We have seen that any CAD and Fiscal deficit situation across globe can be catered with either a financial stimulus or financial tightening but the trust deficit which is being fueled by the recent acts of governments or referendums would create far more financial ripples which would be tough to aid or band-aided.

Division of thoughts is a way of expression but widening of trust because of division of thoughts would only be lethal and harm the functioning of economies in long term. Taking the people along and understanding their thoughts to frame policies is the way to go. 

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