Saturday, March 10, 2012

The Global Money Printing Spreads to India: What It Means

The Reserve Bank of India  cut the cash reserve ratio of scheduled banks by 75 basis points to 4.75% from 5.50% previously.  The RBI said the move will inject about 480 billion of primary liquidity into the banking system.

The price inflation that is coming is going to be near global. The world has never experienced anything like this.

I now consider the Federal Reserve, the European Central Bank and the Reserve Bank of India as major money printers. The People's Bank of China is also printing dramatically, but below earlier levels, which means they will be facing stagflation.

If the global money printing gets out of hand, and it may, we will have days when gold will spike by $250 to $500 per ounce.


  1. They are trying to devalue their currency to keep up with ours. They don't like when their people's standard of living rises.

    1. You don´t understand. The only way to rise the standard of living is by efficiency. As they don´t have it, they have to devaluate, if not it would happen what it is happening right now in south america. Overvaluation of local fancy currencies exports going down. Local demand artificially rising. Huge increase in personal debth. The End is known. It´s a bubble economy.
      By the way: A credit line in Uruguay costs you between 36-64% in local currency p.a. If you want a U$S credit you have to pay 9-12%. Credit Cards up to 24% p.a.

    2. Wrong

      If your currency rises in value your countries standard of living rises. Exports in nominal terms may fall, but those companies will either lower their prices or go out of business because they are no longer efficient enough to keep up. This is a good thing. All the while the price for importing raw materials is dropping, allowing internal production to become cheaper, thus more people can afford what they want.

  2. The RBI is printing huge amounts of money since the beginning of financial crisis in 2007 (here is my blog entry on the evidences - Inflation, here in India, is in double digits since last 2 years. They tried to raise interest rate - in total 13 rounds - a little bit (2% or so) and the bubble economy started to falter. RBI, just like other central banks, has painted itself in the corner; the only way out is inflation. India, the so-called emerging market [sic] economy, is also a giant bubble which will go bust as soon as they raise interest rate. They won't and so the only way out is very high level of inflation e.g., yesterday I went out for my haircut after 3 months, and the price of a haircut has gone up by 100 rupees (US$ 2)!!!

  3. Inflation is nothing new to India. India is one of, if not, the biggest consumer of gold.

  4. A big part of the Indian economy is "offshoring" jobs that would pay $80/hr in the US, to places in India where they do similar work for $20/hr. If the dollar rises faster than the rupee, this differential narrows, and it has been narrowing at about 10% a year for the last few years. Indian companies like Tata are doubtlessly pressuring the Indian government to inflate.