Renewed global uncertainties

02 AUG,2020 | MEDC


 

 The global economy faces a renewed bout of uncertainty. The American economy, in particular, is struggling as Covid-19 spreads rapidly across various parts of the country. The US-China trade war has now expanded into the political sphere, with the closure of each other’s consulates. This is reflected in the surging price of gold. Global gold prices have risen by 25% over the year, as most of its competitor asset classes have floundered, reflecting its dominant status as a trusted haven in times of financial uncertainty. The vast monetary expansion now being undertaken by the central banks of the developed world means that aggregate bond yields are depressed. India should see this as an opportunity to welcome the flood of yield-seeking capital and channelize it into socioeconomically productive areas. It should not dissipate itself purely in making the stock market rise. Policymakers must make available appropriate financial instruments to divert this flood of capital to its most appropriate destination.

*Photo Credit: Google

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