So when the western economies were on the verge of collapsing during 07/08, the politicians and the policy makers were calling anyone and everyone including their counterparts in Emerging Markets to help the world get out of the mess and most emerging markets agreed to come together and a global policy coordination was worked out to keep the world economy going. Now when I hear a senior central banker saying, Emerging markets should get their house in order and we should let them adjust to the market...that makes me laugh. What a double standard eh ? Amazing! So next time there is a crisis in the developed market may be the policy makers across emerging markets should take the same approach eh ? The thing is Emerging Markets will most likely outgrow the developed world and it is the developed world that will loose out if it continues with its double talk. And this sort of mindset gives a good indication that some of us have clearly not learnt from the CRISIS. And also this double talk makes me wonder if this is why there is so much mistrust in our world ? The thing is, if policy makers in the developed world believe they are out of the woods so now they can wash their hands off and go away to a sunny place ....then Boy! they will regret it because quite simply they are forgetting or failing to realise that the world of 2014 is so interlinked and this approach will not get us far. A global policy coordination is not just essential during crisis or times of turbulence but this is a must reflecting the reality of the world today. And to the senior central banker..I had to say this Please deny me the opportunity to embarrass you cause if you are suggesting that somehow you know the world of finance more than some of us then buddy I can guarantee you ...you wont be able to walk for more than 10 minutes on that road . The study of economics is not an exact science. And I am not for a second suggesting that Emerging Markets shouldnt adjust and get their house in order but there is a reason why emerging markets are classified as EMERGING and the fundamentals of some of the EMs will improve and it is just look at India as an example . And investors who look only at GDP numbers to get attracted towards EM do need to reassess their strategy. And while we should rightly expect EM to adjust dont forget the turbulent wind that is hitting the clouds over EM was created in the developed market and no one in the world is smart enough to guarantee a smooth exit of these unconventional monetary policy tools so expect some volatility during the dialling down process AND REMEMBER SOME INVESTORS ARE LIKE OF BUNCH OF KIDS ...so expect them to keep changing their minds every hour. The world is not going under and if the market was all efficient then there will be no entrepreneurs to create value and HUMANITY hasnt managed to create a machine with 100% efficiency so dont expect the market to be fully efficient...and volatility isnt that bad. Why focus on beating the market and not on profiting from the market moves ?
Posted on: Fri, 31 Jan 2014 11:12:05 +0000
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