The ICFAI University, Hyderabad, organised a lecture on “The Treasury Inflation Protected Securities” by Suresh Sundaresan, Chase Manhattan Bank Professor of Economics and Finance, Columbia University, New York.
Speaking on the importance of Treasury Inflation Protected Securities (TIPS), Dr. Sundaresan opined that government securities can serve as public goods. Highlighting the role of inflation-linked government backed securities or TIPS in protecting long term economic interests of a country, he said they not only provide a price-discovery function for the risk-free cost of borrowing at different maturities, but more importantly, they have a policing role in imposing monetary and fiscal discipline. In another session, speaking on Global Financial Crisis Policy Interventions, Dr. Sundaresan identified three structural factors for the crisis. The first was global imbalances in savings that led to the large scale import of capital by the United States from countries like China and Germany. The second, he identified as demographics that are working to the disadvantage of most developed countries, wherein a minority of young population are working to meet the entitlements (healthcare, pensions, etc.) of the majority aged population putting tremendous strain on these economies.
The third and important cause for the crisis was the failure of regulators and governments. The banks were at fault by allowing for zero doc loans (loans given without any documentation), securitization of sub-prime mortgage assets and by offering big bonuses to bank executives in good conditions but letting them go scot free in adverse conditions. J. Mahender Reddy, Vice Chancellor, IFHE wished that Indian government took required measures to ensure that the country doesn’t face similar crisis in future.
R. Ravikanth Reddy
They provide a price-discovery function for the risk-free cost of borrowing at different maturities and have a policing role in imposing monetary and fiscal discipline