UK economyshowing no sign of real production growth

As per the news, the UK economy is showing no sign of real output growth which seems to be the most disturbing fact looking at the financial markets recovery. The financial markets are on their bullish framework and showing signs of consolidated growth over time. Is this growth justified when compared to a negative real growth in production?

This recession hit very badly to the framework of the working of financial markets. These markets are not presenting the correct picture of the economy rather showing false images by forming bubbles which burst quite often. This phase which is termed as the recovery phase might be another bubble engulfing many people in the trap.

There is a definite need of an hour to convert the technical valuation of the financial markets product into fundamental valuation. Until this happens, we can't see any sign of recovery phase of any economy.

The Indian Markets showing great fundamental strength in this recovery face of Financial crisis

Looking at the recovery of our Sensex and Nifty recovery reaching nearly 80% of what was lost in the crisis can be seen as the most fundamental driven growth. This trend might sustain itself to a new height and this growth should be looked after in the coming few years to come.

China's mindblowing reaction towards US treasury debt

It was believed that after the financial crisis, China will reduce its reserves in US treasury for financing their debt from this source. They started reducing their reserves in November 2008 when the US treasury yield was less than 3% but they started to buy a huge amount again when the yield started going up to 3%. So from July 2009, the China's demand for US treasury has started picking up again.

Why China's economy is trusting more on US when everything has proved to fatal in this crisis? This is an important question to look out for in future.

Investment banking divisions of banks gaining strength again?

As per the reports, The investment banking operations for HSBC and Barclays capital have done very well in the opening half of 2009 as compared to their positions in 2008 where they suffered huge losses. Its being said that the other bank's investment banking division is also picking as evident from their increase in profits.

But if this sustainable growth in investment banking divisions then, why are banks not able to pay back their government bail out packages? Is this growth justified?

FSA's bid to change trading from complex non-standardised products to standardised products

Recent update for the financial markets for shifting trading from complex derivative products to standardized products which can be easily regulated by the government authorities. It can increase the electronic trading platform but will hit hard on the OTC counter parts for exotic products.

Are these bailout packages for banks credible?

The big bailouts for the banks these days pose a lot of questions in the minds of common man.The only question comes to my mind where is my tax paid money is going .The government is creating an unnecessary amount for bailouts which actually involves our hard earned paid money to government in form of taxes.After the announcement of bailout packages the bank announces exra monetary benefits to the employees of bank in monetary form under supervision of he government .Is this ac justifiable?Government should encourage efficient use of resources rather than wasting them in form of compensation to employees.But this is posing a great problem for lay man who doesn't has power to appeal to the government.This is the problem of moral hazard where actions of government can't be checked by the people and government is taking advanage of this information asymmetry in their own favour by filling their own pockets wih huge amounts.Information asymmetry means the acion of one party cant be followed by other party due to lack of information.These asymmetric problems need to checked immidiately in order to lighten the crisis.The biggest financial crisis of an era.

Where did the current crises started from?

It all started from the derivatives market.The concept of derivative security is basically to provide hedging againt future uncertain pricing of a stock or commodity. So in order to avoid the business risk arising out of non business acivity,the dealers can get into contract of a derivatives so that their position is hedged.But does derivative offer oppurtunity for the dealers to optimize their returns?Does it serve the primarily motive that it is made for?What can be the other determing forces that can make derivates a no use tool for hedging agencies?
As mentioned above ,the theoritical model for which the derivatives securities are made,but pracically the truth lies beyond measure.According to survey,only 52%of the total trading in derivatives is done for hedging,rests 48%accounts for speculation and arbitrage activies undertaken on a huge scale.So practically markets can account for three purposes of which two of the activities depict one of the forms of market ineffectiveness that account for 48% of the activities.I'll focus on the relationship between the arbitrage stratergy resulting in a bubble creation and hence creating scope for speculation activity.Hence 48 % of our market conditions are derived as bubble creating acts of the traders.
It all started from crude oil trading in the derivatives market.The crude was traded intensively by the chartist(or technical traders) and all the arbitrage arising out of the bubble creators were enjoyed by the "arbitraguers".Hence the basic motive behind which the market was not fulfilled at the first place and hence the big industries which rely on crude oil as their basic source of raw material were not satisfied with the market makers.The bubble followed a psychological bullish trend and hence none of the prices didn't seem tobe enough of providing stability.Crude oil offers as the basic commodity for production and consumption and hence it defines the inflation of an economy to some basic extent.the crude oil touched a new high one day of $122 per barrel.This type of a pricing allured many of the citizens of US and UK to hedge their postion against inflation by getting long in the future derivative of crude oil lots.Hence this proved to be a successful stratergy for the US citizens in the beginning till the time crude oil made a new high of 147 $ per barrel.Till that the ballon was damn fully filled .Another blow of air into the ballon can result in outburst of the balloon.Hence the psychological bullish trend bursted into fall of a crude oil prices.But still the bearish stage was not established.Now the hedge funds,pension funds,citizens,etc enetered into more long positions of crude oil lots creating a natural made debacle in the long run.When crude oil started falling ,the most liquid thing in the world(or exchanges)became a vulnerable source of credit crunch for most of the heavily dependant nations like US and UK on crude oil .Their money blew away like sand from the hard pressed hand.(continuation in next)