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Tag Archive: Ben Bernanke


What is Helicopter Money?

What is Helicopter Money ? Why the Central bankers are using the term so frequently now?blog

The instant reference that can be drawn towards the Hollywood/Bollywood, kind of Robbin hood stories where the hero/villain throws money from the helicopter in the villages. Jokes apart

Getting back to economics “Helicopter money” is the term economists and market-watchers use for an aggressive form of monetary stimulus — the government’s power to print money — to try to spur growth and get inflation higher. There had been buzz that the Bank of Japan could move in that direction, but it elected to take only a smaller action. The bank did say it would do a “comprehensive review” of policy in the months to come that could presage more coordination between the bank and the Japanese government. Continue reading

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As Federal Reserve Chairman Ben Bernanke’s tenure draws to a close, these are the top 10 take away from the last night :blog

1.    Janet Yellen voter to taper

2.     Taper nothing more than symbolic – $10B split between Treasuries and MBS

3.     Fed changes forward guidance – Low rates now appropriate “well past the time that the unemployment rate drops below 6.5%”

4.     Bernanke believes FOMC will taper QE probably at each meeting, $10B each time with end of QE before 2014 year end Continue reading

As I posted yesterday on the Inverted Yield curve, as the future yield is a function of the expected spot rate and the term premium, either of imageswhich could go up or down separately or together. The talented RBI researchers should come out with their interpretation of the current yield trends of gilts in the forthcoming Annual Report of the Bank. So let’s try to build analogy on Term structure moving forward.
The “term structure” of interest rates refers to the relationship between bonds of different terms. When interest rates of bonds are plotted against their terms, this is called the “yield curve”. Economists and investors believe that the shape of the yield curve reflects the market’s future expectation for interest rates and the conditions for monetary policyContinue reading

Over the past few weeks, the economy of India has been in focus because of various factors such as decline in INR, slowdown in industrial image001production, etc. We keep reading a lot of articles that suggest that the policies of current government are responsible for this state of affairs.

A.Seshan in Businessline points to this known but seldom reported trend ongoing in India – inverted yield curve in G-sec markets:

A typical yield curve should be upward sloping indicating that the higher returns/rates/yields should be provided for taking higher risks which are generally over the long term. Similarly, lower returns/rates/yields should be for lower risks which are generally short term. In short, longer the time frame, higher should be the rate/yield that you should earn. Continue reading

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