Dear SH Aspirant,
We have been providing questions for the IBPS Clerk
Mains Exam 2017 and for the IBPS SO Prelims Exam from the important topics of
all the sections, which would enhance your preparations for those exams. Solve
the questions below which are asked in the IBPS Clerk Prelims Exam, so that
this will improve your preparations for the exams.
Solve these questions, so that you do not need to
fear for the English section in the forthcoming exams. This question set is a
mix of Reading Comprehension and Filler Type questions, which are asked in the
recent examinations, attend these questions and conquer the section of English
language.
R.C 1-10): Read the following passage
carefully and answer the questions given below it. One word is given in bold to
help you locate that while answering a question.
The 10th anniversary of the Great
Recession, a.k.a. the Great Financial Crisis of 2007-08, has inspired a spate
of comments across the globe. Almost without exception, they warn that the
lessons of that financial crisis have not been absorbed, and another giant
financial bubble is currently inflating its way to another huge bust. Yet, this
near-unanimous chorus of warnings has not stopped stock markets across the
world from reaching new heights. Greed is drowning out fear. Many busts are
caused by central banks tightening money. Today, we have the opposite: the
greatest flood of money ever created (over $10 trillion, according to some
estimates). The central banks of the US, China, Europe, Japan and Britain are
at the forefront. What happens when these central banks try to return to
normal, and the giant flood becomes giant ebb? Optimists claim that central
banks can manage the transition smoothly. The US Fed plans to move in baby
steps, announcing its intentions well in advance to avoid panic. This assumes
that markets are rational, when they are mainly creatures of panic and
euphoria, boom and bust. Much has been written about the printing of trillions
of dollars by the US Fed after 2008. But the others are not far behind. A
recent Financial Times column noted that the Bank of England, created in 1694,
had a bank rate of around 4% through most of its history. This fell to 2% in
the Great Depression, then rose and peaked at 17% in the
inflationary 1970s, before returning to the historical 4%. After 2008, an
unprecedented monetary stimulus has reduced the Bank rate to 0.25% today. The
Bank has also bought £445 billion (about Rs 36,900 billion) worth of
securities by printing money. This enormous stimulus has neither led to a boom
in GDP nor in consumer prices. Instead, like stimuli in other countries, it has
created a giant bubble in assets like bonds, equities and real estate. Many
financial analysts fear that the next bust may come not from Western central bank
action but from China. This country encouraged a lending boom to rescue the
economy after 2008. But that now seems out of control. China’s debt has
exploded from $6 trillion to $28 trillion, and its ratio to GDP is up from 140%
to 260%. James Anderlini of the Financial Times (‘China’s economy is
addicted to debt’, goo.gl/McRV96) says this has created “an economy addicted to
borrowing and afflicted with serious asset bubbles. The ultimate test will come
when Beijing eventually attempts to wean the country off this debt dependence.”
Historically, bonds and equities have moved in opposite directions. Today, both
are at all-time highs. Not because this makes economic sense, but because the
tidal wave of central bank money has to be put somewhere. So, financiers are
plunging into bonds and equities simultaneously, as in the bad old days of
2003-08. They are also plunging into junk bonds, and even junk countries.
Argentina has repeatedly defaulted on its foreign debts in the last 100 years.
Yet, in the current financial madness, it has successfully sold 100-year bonds,
a privilege once restricted to the most creditworthy nations. Mohammed
El-Arian, chief economic adviser of Allianz, complains of a “liquidity
delusion” that cheap money will continue to flood in forever. So, there is too
much risk in soaring markets.
Such a huge bubble typically
occurs when three things happen simultaneously. One, the arrival of an exciting
new ‘disruptive’ technology that is difficult to value in the short term, but
has huge potential. The second is easy market liquidity to help investors roar
into markets. The third is cheap credit. All three elements are in evidence
today. The new technologies include electric cars, hyperloops, artificial
intelligence and companies with ‘network effects’ (like Uber, Facebook and
Amazon). Liquidity is massive and cheap. (Some bonds carry negative interest
rates.) Ruchir Sharma of Morgan Stanley says “the scale of today’s tech
boom is not readily visible because much of the investment action has moved
into the hands of big private players. In 1999, nearly 550 startups went
public, and after many ended in disaster, the government tightened regulation
of public companies. In part to avoid that red tape, this year, only 11 tech
companies have gone public.” “Many are raising money instead from venture
capitalists or private equity funds. Venture capitalists have poured more than
$60 billion into just the technology sector every year for the last three years
— the highest flows since the peak in 2000 — and private equity investors say
there has never been a better time to raise money.” Many hyped companies (now
called ‘unicorns’) have never made a profit. Yet, investors have
thrown huge sums at them, raising their valuations above $1 billion each. The
world now has over 260 unicorns, including many in India. A bust is certain everywhere
(including India). But nobody knows when. The 2003-08 boom proved that markets
could soar for years after being declared irrationally exuberant. Cynics are
still buying, hoping to double their money before the bubble bursts. It’s a
risky strategy.
Q.1) The underlying tone of the passage is
understood to be one of:
a) Emphasis
b) Gloom
c) Uncertainty
d) Optimism
e) Prudence
Q.2) The acceleration in stock markets, for long
years, not conforming to rational belief often happens under which of the following
circumstances?
a) Prior to an economic gloom.
b) After an economic gloom.
c) After rate cuts imposed by a central Bank.
d) When prices of commodities stabilize.
e) When bonds and equities move in the opposite
direction.
