With reference to the editorial, "Financial savings rise" (September 17), modern-day economics is way too skewed compared to what it was three decades ago. We are worried about the US Federal Reserve increasing rates and irritated as to why the Reserve Bank of India (RBI) is delaying reduction of rates.
Monetary measures seek to increase the supply of credit, not increase the supply of money to the economy. Central banks are not equipped to increase the level of reserves in the banking system if they so wish it. They can only raise ledger money to cajole the banking system into normalcy. For nearly two years now, the RBI has been unsuccessful in this endeavour.
Social issues such as rising income inequality and household debt are linked to the rise of finance into an unprecedented dominant force. This is skewed by the finance industry getting preferential treatment from the government - be it in the form of bailouts or the right to borrow massive amounts of relatively free money from central banks.
Worse, banks sit on piles of idle cash, but do not loan it out into the economy because they are worried about their balance sheets. This is where household savings become vital as these instantly fund our economy, which is more dependent on it than ever before.
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Monetary measures seek to increase the supply of credit, not increase the supply of money to the economy. Central banks are not equipped to increase the level of reserves in the banking system if they so wish it. They can only raise ledger money to cajole the banking system into normalcy. For nearly two years now, the RBI has been unsuccessful in this endeavour.
Social issues such as rising income inequality and household debt are linked to the rise of finance into an unprecedented dominant force. This is skewed by the finance industry getting preferential treatment from the government - be it in the form of bailouts or the right to borrow massive amounts of relatively free money from central banks.
Worse, banks sit on piles of idle cash, but do not loan it out into the economy because they are worried about their balance sheets. This is where household savings become vital as these instantly fund our economy, which is more dependent on it than ever before.
R Narayanan Ghaziabad
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number