17th June 2022
Mains Question:
Q1. Discuss how ‘deteriorating’ global economic climate threatens employment growth. Also suggest measures required for sustainable economic development. (150 words)
Approach
- Introduction- deterioration in the global economy
- Brief about situation in India
- Discuss the economic consequences
- Weak global economic growth
- Decreased consumption and investment
- Negative impact on labour market
- Required policy choices
- Effective global collaboration
- Energy transition
- Balanced policy mix
- Conclude accordingly
Editorials
Bitcoin and many other crypto-currencies have been crashing since they hit an alltime high late last year. Bitcoin has lost more than twothirds of its value since it hit a peak of around $69,000 in November last year and is currently trading at around the $22,000 mark. Ethereum, another cryptocurrency popular among investors, as lost almost 80% from its peak. As a result, the overall market capitalisation of crypto-currencies has dropped under $1 trillion for the first time since January 2021.
Why are crypto-currencies crashing?
- Fall in prices of stocks and other assets - Most analysts believe that the fall in the price of crypto-currencies is in line with the fall in prices of stocks and other assets as central banks such as the U.S. Federal Reserve tighten monetary policy to fight price rise.
- Popping of the bubble - Others believe that the crash could also mark the popping of the bubble that has driven the prices of crypto-currencies to stratospheric levels.
- Driven more by speculative fervour - Sceptics have long argued that the price of crypto-currencies seems driven more by speculative fervour fuelled by easy monetary policy than by any fundamental factors.
How do governments view crypto-currencies?
- Global View- Many countries have taken several steps to discourage the widespread use of crypto-currencies. While countries such as China and Russia have opted to impose outright bans on crypto-currencies, others such as India have tried to tax and regulate them heavily.
- Indian View- In India, while the government has not imposed an outright ban on crypto-currencies, the Reserve Bank of India has been quite vocal about the need to ban them completely.
- Challenge the monopoly -It is no surprise that central banks are wary of private crypto-currencies since they challenge the monopoly that central banks currently enjoy over the money supply of an economy.
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