Bubble Ahoy! -
Across the world stock market are
inflating crazily. Don’t think that the Sensex boom is driven by Indian
policies and economic results. Yes India is the fastest growing major economy
in the world. Yes GST and Modi’s other incremental economic reforms are
significant achievements. But stock markets are booming everywhere else too. To
grasp what is inflating the boom, look at the world economy.
The Global economy is no longer
growing at the breakneck speed of 2003-08. The printing of trillions of
currencies & issuance of no less than same value of sovereign Bonds by Western
economies has fuelled this boom. Sooner than later the corrective measures will
be taken by these economies, hence it can’t continue like this. The transition would
be interesting.
So, to judge coming trends, do
not focus on just trends or signals from the government; RBI or Indian economic
indicators. The big shocks will be global in origin, with unpredictable timing.
The bubble can continue inflating
for years before bursting. Remember, Robert Schiller got rave reviews for
writing Irrational Exuberance in 2005, yet the US bubble inflated for three
years more. The end is always nasty, but can get postponed for remarkably long
periods.
Excerpts from - Swaminathan Ankeleshwaria Aiyar article in Times of
India( July 16, 2017).
