Will rate cuts stimulate demand?

Another round of rate cuts by RBI and again economist are discussing whether this will stimulate demand by the public. But will it??? Or government needs to do something more??? Let’s go the basic of this situation. 

Everybody is aware that this financial crisis began due to the bubble burst of property market, which had been growing at an exponential rate. This burst led to the bankruptcy of many banks and let to the bloodbath in the share market across the globe and resulted in credit crunch across the globe. What this has done is that it has directly affected the demand (consumption expenditure) of the public. With so little of money into the system, banks are not in a position to lend money. In order to inject more money into the system the government either goes for expansionary fiscal or expansionary monetary policy. Whereas expansionary fiscal policy involves tax cut, more transfer payments or more investment from the government side, the expansionary monetary policy involves reduction in CRR, SLR, repo rate and reverse repo rates. With these monetary policies more money is injected into the system by providing more money into the banking system. But does this mean the same money is transferred to general public in forms of loans? The answer is NO. Since the crisis happened due to bad investment and bad loans on the banks part, it takes more than rates cut to induce banks to transfer the benefit to the public. This time the banks are very sceptical in giving loans. They already have suffered the brunt of giving too much too soon in hope of better returns. So they are reluctant in transferring the money to the general public. And until or unless the amount of money injected into the system goes into the hand of public we can’t expect increase in demand. So government and RBI have to take some other steps apart from these monetary policies for inducing demand. 

Only GOD can save Pakistan now

While returning to hostel, after my Economics exam, I got the news of Terrorist attack in Pakistan. It’s not new to hear about such attacks especially in the sub-continent but this was something unheard of in the recent past. The terrorists attacked the visiting Sri-Lanka team, which was playing a series in Pakistan after other teams had backed out citing security reasons. The attack is bound to have serious repercussions as to how Pakistan will be perceived hereafter. It’s been more than a decade that India has been proposing that Pakistan be declared a terrorist state. With fundamentalists getting support from the ISI and government officials, democracy is as good as dead in Pakistan. The deadly combination of Pakistan, being a nuclear possessing state, and hardcore terrorist outfits having a major say, is a sure recipe of disaster for the world peace. The future of Pakistan looks very bleak and only GOD can save it from becoming a failed state with terrorist organizations having a major stake.

US Presidential Election Campaign: Mindless Flank gets one shot point blank

(Following article is courtesy Manish Kumar, Batch of 2010, FMS)

The US-presidential ad campaign between the rivals Barack Obama and John McCain has been one of the classic examples of aggressive flank attack strategy mostly pursued by McCain and to some extent by Obama side too. The main idea of these ads was to attack the competitor in the unexpected areas to catch them by surprise. It involved a lot of creative manipulation (mostly negative) of facts and principles to churn out limitations and the misfits of the competitor for the presidential seat. The ads developed and widely distributed during the campaign revolved around demeaning the rival candidate by projecting an undignified image unworthy for president ship. The deprecation in the campaign especially from McCain's side stooped to unprecedented low proportions and the ads started a virtual mudslinging from unforeseen angles.

"Dangerous... Not truthful... Hypocrite... Disrespectful..Not ready to lead."  were the warnings that McCain and the Republican National Committee aired about Obama."Out of touch... No maverick... Same failed policies... Sleazy ads... John McCain doesn't get it." Obama's campaign aired these warnings about McCain.

In a glaring example of flanking attack, in a particular McCain campaign ad, present in the report submitted, Obama was projected as a limelight hogging celebrity in the leagues of Paris Hilton and Britney spears questioning his integrity. So basically, his popularity which was an asset was misrepresented as a negative attribute not aligned with presidential virtues.

But in strategic marketing as in real life, a mindless excess of everything, almost invariably, tends to boomerang to one's debacle. The same holds true for flanking strategy, as was bluntly experienced by John McCain. After a certain limit , the flanking attack tends to nullify its effect by raising suspicion in the minds of the target audience about its genuineness, especially when the strategy is all focused on conjuring the weaknesses of the competitor instead of highlighting one's own selling proposition. The word was that 100% of McCain's ads were negative compared to 34% in case of Obama. The election results speak for themselves.