REMOVING THE HAZE ON INDIAN ECONOMY

Removing the Haze

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India’s widening current account deficit (CAD) over 4.8% & dangerous fall of rupee (from 44/- to over 61/-) are concerns for all & being analyzed & written about daily in newspapers, magazines & discussed on TV by economists, experts, columnists & journalists, but I am sorry to say all of them are saying the same things (points), which most people (public) know, the causes for the two as experts are saying : reduction in exports, increase in imports, huge oil import bill, import of gold, reduction in inflow of foreign capital, US economic recovery, etc.

The RBI has warned in its “Financial Stability Report” recently, that macro-economic risks Indian economy facing, is on the increase & a high CAD is a worrying sign for an economy that is slowing down.

Many people are advising that to overcome CAD & Rupee problems, the RBI should issue foreign currency bonds & give them to oil Cos to use them in place of dollars to buy oil, but they forget that falling rupee may render them to “junk status” by rating agencies (already India’s rating faced “junk status threat” 4 months back).

But real reasons for Indian economic fall are:-

India has frittered away all its money in absolutely unproductive & corrupt Panchayti Raj schemes & MANREGA schemes (both Panchayti Raj & MANREGA have how badly failed & how big loots happened, numerous reports have already revealed & TV programs exhibited), rather than investing in Infra, Railways, Roads, Airports, Agriculture & Industry, these things are tangible & can be seen, also hugely labour intensive, therefore give huge employment to all, mainly to rural people (over 80% of employment generated for them, also permanent employment) & great thing is that these things build the country. And also pulls in foreign investments. (That is what, not coming today & India sliding)

We have utterly failed in this.

I will not blame two UPA Govts for this, even if Indian economy in such a dire state, as this writing is not political or to criticize, but to analyze & clear the dusts economists & experts are failing to see though.

FIN; CRISIS & A New Concept: “NATION’S SPENDING CAPACITY INDEX”

FINANCIAL CRISIS, A New Concept: “NATION’S SPENDING CAPACITY INDEX”

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I have analyzed financial crises of one country after another: USA, Eurozone Nations. China (also having high trouble of overheating economy, inflationary pressure, as there has been excess forex buildup resulting into & contributing to crises for other nations’ economies), also India is under impending financial trouble due to excessive money printing by Indian Central Bank for funding populist Govt Schemes, I have come to develop a New Concept, unthought-of so far, the concept as I have named “Nation’s Spending Capacity Index” (NSCI).

It has been imperative to create “Nations Spending Capacity Index” (NSCI) for each country i.e. for all countries, be it poor or rich, which will be an index or a pointer to, how much is a nation’s capacity to spend i.e. the capacity of a given Govt  to spend in a given economic scenario!

That is, how much a Govt is capable to incur budget deficits or resort to debts, so that any financial crisis can be averted, as it (the panel) will caution & alert the concerned Govt through this index i.e. “NSCI”, its capacity for incurring deficits & debts, so that a Govt does not fall in an irretrievable pit & future financial crises can be averted.

In this way economists will also have an active & a real say on a Govt’s capacity to bear deficits & debts.

A panel of eminent economists shall be constituted by each country (mind, not the rating agencies, which fail to do this & which only rate, that too after a disaster occurs), that panel will monitor or issue standards & specific figures to the Govt & public, that a concerned Govt how much in a position to incur a certain amount of deficits or debts in a given scenario.

It will make every thing very transparent & scientific and also involve economists actively to advise on the dangerous situation the world is facing today, beforehand, Govt’s will be free to choose their advisory economists for the panel.

I think this new path breaking concept of “NATION’S SPENDING CAPACITY INDEX” (NSCI) will dramatically change risk factors of a country that it may face.

(Note: I write my theories & concepts in short as I am a banker & have little time to write in a book like or research file like form, but I do feel these theories & concepts must be circulated for the good of the world & people, anyone is free to elaborate or write on them)

Subhro Das

Conceptualized 25/8/11, Written 26/8/11

THEORY: DEPRESSION WAITS AFTER INFLATION

THEORY: DEPRESSION  WAITS  AFTER  INFLATION

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In high inflation, there is excess money supply by the governments, governments go on money printing spree or resort to huge debts, either from domestic market by various means & instruments or from abroad, this leads to price rise galloping over 10% per annum and there is a high devaluation of money, that is “inflation” is almost 10% or more, but queerly (please mind it very carefully) there is no jobloss, rather money is in the pockets of all, some making huge, some making daily wages only, so apparently a very happy situation, I termed it “Thin Ice Platform Syndrome”.

But what actually happens in this situation is, one’s money & savings are depleted by two effects, one “price rise” gobbles up one’s pocket money & the other, inflation eats into one’s savings, the rich get richer & the poor get poorer.

There is a phenomenon of high production by companies & businesses, in this situation to cash in price rise & raw money in the pockets of the people, so there is a BOOM at every corner: jobs, shares, profits.

A charged atmosphere.

It goes so long as one sector (any one) of the economy tilts a bit, that is, products or services of a sector have no takers or a little lesser takers, may be due to price hike, over production, depletion of money of people of a certain section or a replacement of the product has come. As soon as the sector tilts, job crash happens, price falls(due to above mentioned reasons) so also the profit falls of that sector, production slows, businesses of that sector go out of business taking along with jobs of that sector too. This creates a whole effect on the economy “then & there” & to one after another sector, this creates more joblosses, more fall in wages, so also fall in demands of  goods & services.

And The Depression begins.

“Thin Ice Platform Caves in”.

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In India tendency is highly this way, food prices are going berserk & if Govt goes to a little austerity, as now in huge spending spree, market will crash, a recession will begin,

That is the classic example of the phenomenon “a recession waits after a boom”, resulting into following things: jobloss, low production, low offtake of loans, money held with the ultra rich & people depleted.

Subhro Das

(Conceptualized 25/08/10 Written/Blogged 05/08/11)

In this regard I wrote following analysis two months back (in June’11), also posted it in the net :-

DANGER:RUNNING ECONOMY BY “MONEY PRINTING”

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India Govt is running its economy by printing money, it’s a very dangerous trend, as HT Reported that RBI to print (already started the job) 18 THOUSANDS TONs of notes, also cautioned it is a very very large amount by any standard, be that US Dollar, EU Euro or Chinese Yuan.

Infusion of such huge amounts in the economy will be very disastrous, the inflation, the price rise, especially the FOOD PRICE RISE will break every body’s back & send the economy in swirl, the Govt is forcing the RBI to be on this money printing spree just to squander away the money in HIGHLY POPULIST but UNPRODUCTIVE programmes, if this POLICY brings this country to its knees, then this “Sonia Congress UPA Govt” will be fully responsible. Only stopgap measures of raising INTEREST RATES by RBI too frequently are no SOLUTION at all.

EU Nations are facing similar uncontrollable disasters, Greece, Portugal, Ireland, Spain, one nation after another in black hole, EU is pressing hard on them to reign dangerous budget deficits & implement VERY TOUGH Austerity Measures, even there are no takers of their Govt Debt Funds i.e. bonds of these countries (as Govt debt is so high), EU, IMF are arranging for their bail outs, sitting frequently. In USA a last minute Compromise with Opposition for a Debt form US Central bank saved USA, as “earlier debt ceiling” failed to pay the US maturing debts in next two days.

In India RBI (RBI Governor Dr. Subba Rao himself) also is also now saying “Legal Autonomy is Imperative for RBI, backed by a legally monitoring committee”.

Is India will get such back up as EU nations or go Mexico & Zimbabwe way, if India remains this reckless, who will provide us back up, as Govt now can now print any amount of money, even in normal circumstances as now, as there is no “Debt Ceiling” like in US ?

Now, about China, IB Apr’10, China’s Overheating: consumer prices rising, giving the massive money supply, danger is, that inflation may go out of hand.

Chinese Govt admitted, inflation posed a threat to social stability (Please mind the sentence). Govt has taken measures like raise reserve, check on money supply, control on lending, increase down payment for loans(margin money), lending to endpoint(no direct money to borrowers, but input suppliers & builders).  

Subhro Das

(Some additions & alterations done on 05/08/11, while reposting)

FINANCIAL CRASH,A NATURAL DISASTER: MY THEORY

FINANCIAL CRASH,A NATURAL DISASTER:  MY THEORY

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Too high inflation & financial crashes are natural disasters.

Financial crash is such that none can escape it, only one can avoid it by getting out of its way or ducking it or bearing some losses(as minimum as possible), saving a little or saving oneself only.

So the more little you carry or the smaller you have, the handier things you have, the better you are. This is the Theory of Crash Survival. It is effective for also in financial crash & too high inflation survival.

In natural disasters like storm, flood, quake- Money (card too is your money, but there is always doubt about its paying capacity after a crash) is the best as light to carry.

 But (Mind the bend starts here), in financial crash & inflation it is first thing that is hit, that is most affected, so it must be dumped first, surely as much as you can & change it into suitable materials, depending upon situation & one’s suitability.

As even if inflation slows down in three to four years or the financial crash is over in five to six years, one’s present value of money will never come back.

So MONEY is the last thing to hold (saving are money too don’t forget, investments are not, but very risk prone, so depends on judgment & analysis), in financial crisis & high inflation.

One can put forward an argument in US financial crisis, should one hold houses with prices were falling drastically two or three year ago, by not selling them off, turning them into money? Yes, one must hold, if one did not exit out before the crisis, as if one were God, knew the crisis coming, as turning them into money, in the crash will be calling for further trouble, like jumping into an unfathomable gorge in fear.

Subhro Das

Conceptualized 10/09/10, Written 25/07/11

(Mind it I have written various theories & concepts & I write in only a few words, don’t take books to elaborate, it is for your information)

RUNNING ECONOMY BY MONEY PRINTING

RUNNING ECONOMY BY MONEY PRINTING

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India Govt is running its economy by printing money, it’s a very dangerous trend, as HT Reports that RBI to print (already started the job) 18 THOUSANDS TONs of notes, also cautioned it is a very very large amount by any standard, be that US Dollar, EU Euro or China Yuan.

Infusion of such huge amounts in the economy will be very disastrous, the inflation, the price rise, especially the FOOD PRICE RISE will break every body’s back & send the economy in swirl, the Govt is forcing the RBI to be on this money printing spree just to squander away the money in HIGHLY POPULIST but UNPRODUCTIVE programmes, if this POLICY brings this country to its knees, then this SONIA Congress Govt will be fully responsible. Only stopgap measures of raising INTEREST RATES by RBI too frequently are no SOLUTION at all.

EU Nations are facing similar uncontrollable disasters, Greece, Portugal, Ireland, Spain, one nation after another in black hole, EU is pressing hard on them to reign dangerous budget deficits & implement VERY TOUGH Austerity Measures, even no takers of their Govt Debt Funds i.e. bonds of these countries (as Govt debts too, is so high), EU, IMF are arranging for their bail outs, sitting frequently.

Is India will get such back up as EU nations or go Mexico & Zimbabwe way, if India remains this reckless who will provide us back up ?

Now, about China, IB Apr’10, China’s Overheating: consumer prices rising, giving the massive money supply, danger is, that inflation may go out of hand.

Chinese Govt admitted, inflation posed a threat to social stability (Please mind the sentence). Govt has taken measures like raise reserve, check on money supply, control on lending, increase down payment for loans(margin money), lending to endpoint(no direct money to borrowers, but input suppliers & builders).    

 : Subhro Das

ALL ARE SICK !

ALL ARE  SICK !

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Nothing will happen in this Anti Corruption Drive, all (80-90%) are ill, that is, “morally corrupt”, be it poorest of the poor or the rich, all for money anyhow, no ethics but pride in earning money, be that illegally earned, even family members, father to mother to wife/husband to children boast, say with pride that “upri Kamai” i.e.  Bribe earning of him/her is this much.

Society is jealous of one’s bribe income, not hates but is jealous. That is, society too wants there should be one in the family who will bring home a lot of bribe money, salary (honest) income is not given value, prestige is in bribe income. So all are sick & morally corrupt.

Why we are in this state of mind ?

Capitalism (I know communism & socialism have badly failed & capitalism saved China, East European nations from disasters), I think took away all the ideals in old times world had.

Now education is teaching skills for earning money only, all from youth to elderly are morally corrupt, family members are proud of illegal money, feel no shame in asking “how much upri(extra) you earn?”.

Then the cost of living, penchant for luxury life style, inflation, food price rise, population growth, rise in fundamentalism, increase faith in astrology, vastu (see TV, it’s  now a mind boggling industry & we say we are modern!), people know (the poorest & the richest), money only is the survival.

So we are not living in a mentally corrupt system, but a naturally corrupt system (mind, I used NATURALLY CORRUPT SYSTEM), that is a system by the nature, a naturally evolved system, be it India, European nations, USA, China(see IMF chief in jail, world bank chief in controversy for spending millions in luxury to attend conventions to save environment).

Then ?

Nature actually understands far ahead of us, the techniques, technologies we are discovering today, the nature has discovered & used them far ago, be it aviation or physics, biology or anything, so seeing this unmanageable population growth, wide spread plundering of natural resources & limited natural resources, NATURE  has taken this CORRUPTION ROUTE  for survival, to save the wealth of the world & to save the world from extinction, to ensure further development of the world or this world will just be scattered away, spilled away, will fritter.

(I add that, this analysis may be right, but is highly controversial, I will like anybody to counter this theory & prove it wrong, I will welcome, if this concept is defeated. Also wherever I used “all”, I actually meant “most” i.e. 80%, 90%).

Subhro Das

Conceptulised 11/05/11, Written 27/06/11

FOOD PRICE: THE MOST SURPRISING

FOOD PRICE: THE MOST SURPRISING


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When food prices are not to come down, as food prices are very crucial & very SURPRISING THING among all things as shooting food prices can bring down prices (can cause crash) of all other items,  can make "the money" totally useless, as well as can give rise to uncontrollable inflation.



Food has to bought & daily, one cant defer it, can postpone any other item, but not food, so if food prices shoot up steeply other items will suffer & lose price, that is even if on the face, prices of other items may not seem to fall, but actually are falling as high inflation due to food prices is deceasing the value of money very fast.



Here is the point, as your money is losing value so the prices of other items are decreasing, even if they appear standstill.



Also as agriculture cost will rise due to rise of food prices as a causal effect so agrarian labour cost will sharply rise, so will cause reduction in employment & agriculture will turn into less labour intensive & dependent on mechanization also contract farming will replace traditional farming more & more.



One or two persons will manage a large tract of farm land along with this large agriculture farm fields are being taken on lease by one country in other far away countries, this is being done to make sure meeting the large future need of food, but will enhance food cost tremendously, IT IS HIGHLY IMPORTANT FOR TODAY’S ECONOMISTS TO ANALYZE THIS ASPECT.



As money goes to buy food, other items suffer & as other items suffer, so the other sectors (industries) suffer as it results into low take off industrial products, so blue colour employees as will be highly hit, so the white colour ones too will also be gradually hit, as high food price will slacken other sectors.

Printing money to counter the high food price & to create employment will add to higher food price & create unemployment, as a money printing economy will generate only a negative impact, unlike in usual recession & inflation, it requires very deep analysis, as it has a wide ramification & world is sitting on this, also food tracts are being converted into bio fuel plant farm lands & special economic zones.

So point is FOOD PRICE is a very surprising thing, as it has a queer effect.



Subhro Das



Conceptualized July10 to August10

Written 01/06/11