Challenges faced by the financial industry in the current decade

CONTENTS

• The return of socialist ideas to the global financial arena

• Keynesian economics versus fiscal conservatism

• The slow and steady rise of the reminbi(RMB)

• Roles which I intend to play in the financial sector in the medium term

CONTENTS• The return of socialist ideas to the global

financial arena• Keynesian economics versus fiscal

conservatism• The slow and steady rise of the

reminbi(RMB)• Roles which I intend to play in the financial

sector in the medium term

CONTENTS• The return of socialist ideas to the global

financial arena• Keynesian economics versus fiscal

conservatism• The slow and steady rise of the

reminbi(RMB)• Roles which I intend to play in the financial

sector in the medium term

CONTENTS• The return of socialist ideas to the global

financial arena• Keynesian economics versus fiscal

conservatism• The slow and steady rise of the

reminbi(RMB)• Roles which I intend to play in the financial

sector in the medium term

Socialism in the realm of globalization

• The global recession has given a boost for leftist and socialist tendencies in the global economy. Governments from Europe to Asia are holding back on reforms and increasing protectionist barriers. There has also been a rise of anti-establishment political organizations.

This scenario will have far reaching

effects in the world economy

Reduced consumer spending

New Limitations

on economic migration

opportunities

Fiscal conservatis

m by governmen

ts

Loss of credibility for existing

financial organisatio

ns

The rise of the federal

reserve/ reserve banks

The rise of Reserve Banks.

In the current world economy , national reserve banks and their governors/chairpersons have gained prominence . It will be fair to say that most of the difficult economic manoeuvring post-2008 was carried out by these banks and their respective chairpersons rather than most governments.

Appointments of reserve bank chairpersons in most countries nowadays attract unusual national attention.The subtle shift in economic decision making power from governments to national reserve banks presents its own unique challenges and demands a fresh rethink on policy making.

Keynesian economics versus

fiscal conservatism

Keynesian economics

or Keynesianism is the view that in

the short run,,

economic output is strongly

influenced by net

demand (total spending in the economy)

Fiscal conservatism

- Fiscal conservatism

is the economic

philosophy of prudence in government

spending and debt.

• Basically Keynesian economics states that we can spend our way out of a recession.

• Some of the prominent backers of Keynesian economics include noble prize winning economists like Paul Krugman.

• Some of the nations which pursued Keynesian economics post-2008 with credible success include the United States and China.

• The fiscal stimulus by the United States helped limit the impacts of the recession on her economy and returned the nation to a growth track in a short time frame.

• China pursued an aggressive format of Keynesian policies by spending billions buying goods for which there was no demand and storing them in warehouses. This policy helped keep intact her manufacturing factory lines post-2008 and ensured that they were ready when global demand returned

Basically we save during an economic downturn and reduce national debt . This is a traditional time tested approach to

economic policy making

Fiscal Conservatism

• Nations which successfully implemented Fiscal conservatism to help the economy include India .

• India with its culturally steeped tradition of saving instead of spending combined with a traditionally conservative reserve bank helped mitigate any liquidity crisis from the economic downturn

• Many European nations are now adopting fiscally conservative policies as a part of financing deals and bail outs.

The rise of both Keynesian and conservative economic policies may hold relevance in the short term . But multiple nations pursuing opposing economic policies will create diverse and polar economic policies across nations.

This may hinder the long term objective of integration of the world economy once the downturn years are over.

The slow and steady rise of the

reminbi(RMB)

The reminbi or RMB is the national currency of the peoples republic of China(PRC).

The internationalization of the RMB began in the late 2000’s when the PRC allowed certain mainland Chinese firms to settle payments internationally using the RMB.

Backed by one of the largest economies the use of RMB in Asia is on the rise.

Implications of the rise of RMB

• The reminbi has a great potential to be a major trade currency of the future.

• There has been a rise in the number of RMB based financial investment products.

• The growth of Hong Kong as a hub for offshore reminbi investment products.

The RMB offers as much challenges as opportunities. The reminbi is regulated by the peoples bank of China. The regulation policies are not transparent and is usually mixed with a lot of political overtones . This scenario provides a challenging situation for investors and nations as the use of RMB rises globally.

Roles which I intend to play in the

financial sector in the medium term

• An important aspect of any career is to grow in a phased manner one step at a time.

Short Term- Gain as much knowledge as possible of the financial industry by using various means of relevant education . I have already embarked on this path by currently preparing for CFA Level 1.

Medium Term – Apply the knowledge gained in the industry to gain practical experience and build base for a future entrepreneurial venture.

Long Term – Build own venture aimed at investments and investment products.