The speed with which financial assets can be bought and sold and the ease at which national borders can be traversed, represents burdens upon the normal conduct of monetary policy.
Author
Rahul Menon, Associate Professor, O.P. Jindal Global University, Sonipat, Haryana, India
Summary
Global financial markets may be exhibiting recovery following the dramatic falls in value, but the global economy is still in uncharted waters. Employment generation in the U.S. has been weaker than expected, threatening the fragile post-pandemic recovery. The Bank of Japan’s decision to raise interest rates after years of keeping them low has also rattled financial markets, setting off a reversal of equity flows and a collapse in Asian markets.
Financial markets have shown signs of recovery following these intense bouts of selling pressure, with many claiming that threats of recession are overblown, even though vulnerabilities remain. But these incidents highlight the potentially destabilising nature of finance. The speed with which financial assets can be bought and sold and the ease at which national borders can be traversed, represents burdens upon the normal conduct of monetary policy. As Keynes once said, “When the capital development of a country becomes a by-product of a casino, the job is likely to be ill-done.”
Published in: The Hindu
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