I did a short piece last week, touching on Price of Oil - that it should be below $85 a barrel. Also regarding Convergence of Interest Rates ,that the differential should not be so wide as prevails in some situations. t Where it is ultra-low, like U.S. at half-percent, it should be profitable for banks if it moves up a little. Paradoxically, it will help the economy as well - money acquires value.
If the Banks are capitalised, or re-capitalised, whatever term is correct, as the IMF MD Mme Lagarde has recently suggested, then Recovery can resume in an atmosphere of construction, development and calm. That is best left to the powers that be, to organize conferences, seminars, get-togethers and then formulate legislation and plans of action.
1) At one time, in the 1990s, the Saudi currency had a fixed exchange rate against the US currency. SO AT LEAST THERE WAS SOME CONSTANCY IN THE OIL PRICE.
But now, with the Saudi riyal also fluctuating according to the market, the Oil price moves also constantly.
These variables of course must make life very difficult for most Chancellors, and Treasury departments of multinational companies.
In short, impossible to plan for the future with so much uncertainity.
I believe these are matters that have to be addressed, at national, regional and international levels.
Not only that, but Oil should be pegged at Purchasing Parity level for the various countries.
IF OIL AT ABOVE $85 A BARREL HAS CAUSED A SLOWDOWN IN THE WEST, HOW ABOUT THE EMERGING MARKETS?
THEIR PER CAPITA GDPs ARE MUCH LESS. THEY CANNOT SURELY PAY THE SAME PRICE FOR OIL.
2) An idea would be for the formation of regional trading partnerships, which will provide natural synergies, and convergence of Interest Rates, so that they are conducive to growth and development and check the tendencies of inflation building up, or even de-flation.
More on this theme in the future.
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