As Washington was abuzz with congressmen debating the debt ceiling, the markets had already given its verdict – after so much of political wrangling, the US was more likely to lose its coveted AAA rating than it had ever been in history. S&P’s statement confirms this, when it says that “…the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges …”

So what will be the impact of a US downgrade?

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Popularity: 59% [?]

The Small and Medium Enterprises (SMEs) play a catalytic role in development process of most of the economies as they constitute a major part of the industrial activity in these economies. In India SMEs account for about 39.0% of the manufacturing output and around 33.0% of the total export of the country. Especially in a country like India, SMEs act as the backbone of the economy.

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Popularity: 16% [?]

I have this theory – book value of equity should never grow by the profit each year, in fact there should be no net profit at all. Look at it this way, the price of any product/service can be broken down into its constituent costs/value additions. The balance amount is called business profit. However, there mostly is no direct tangible contribution by the owners of the enterprise for taking this share. The jobs executed by an owner/part-owner (Chairman, CEO, etc.) should be treated as services rendered by an employee of the firm independent of his/her ownership in the firm. All the contribution as an owner is at the overall company level, whereby he/she should be rewarded for the risk carried as stake-holders in the enterprise. However, this is something that cannot be quantitatively priced-in.

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Popularity: 17% [?]

Traditionally, Central banks control and help the economy by controlling interest rates. But today, the Federal Reserve is going to use an unorthodox method of pumping money into an economy, in order to jump start job growth.

Under the disguise of “Quantitative Easing”, the Fed will buy long-term government bonds and pump an equal amount of cash into the economy. You can read more about QE here.

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Popularity: 23% [?]

The concept of decoupling states that the economies of the emerging markets are not essentially driven by the economies of the developed markets. While being true to an extent, it is debatable.

Before the 2008 crisis, this theory had gained immense popularity on account of the high growth in the emerging markets. At the end of FY 2007, the MSCI Index of emerging markets had surged 36.9% Ytd when compared to the 6.2% surge in the Dow Industrial Average. The similar scenario in FY 2010 has regained the popularity of this theory.

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Popularity: 25% [?]