It is getting a bit monotonous these days to blog. Not that I am tired of it, but because the global contagion is so wide spread and hitting from all corners that it is really hard to ignore it. It is with great pain I am writing this. I am not sure what is really happening. How am I supposed to know, when the world’s central banks have no clue. I rely on what the media spits out. I hope you do the same thing.
I thought every other bank is going bankrupt. That would be wishful thinking. Now, countries are going bankrupt. I heard about countries going bankrupt but this is the first time I am witnessing it. Iceland is on the brink of bankruptcy. Rumours are that Pakistan is following suit.
Economist reports that American banks have lent 96 cents per 1-dollar deposited. European banks have lent 1.40 Euros of 1 euro deposited. Isn’t that the wrong thing to do as a bank? What exactly are the regulators doing? This illogical lending has led to nationalization of banks in major countries. I think the whole world came a full circle to where India was.
Though India went on a growth trajectory, it exercised caution all the way. It did not privatize its banks. Every body has complained about the customer service at the nationalized banks. I guess poor customer service is the price to pay for safe guarding your depositors. Leaving the ICICI rumours aside, Indian banks seem to be well capitalized or so they say. Though this is good news there is a lot of room for concern.
I am sick and tired of our financial minister and every other bureaucrat parroting the same words. “The fundamentals of the economy are strong”. Which raises doubts about believing those 7 words. Why is the Sensex and nifty tanking so much if the fundamentals are strong? Why were the dreaded p-notes re-introduced? Why did the RBI cut CRR rate by 150 basis points to 7.5%? Why are the global financial ministers meeting in an emergency fashion?
I can sense that something is seriously wrong. But not sure what that is. The persons who know are choosing to ignore the bigger problem instead of warning the investors and citizens. I am a born optimist but the global scenario and the way world banks and finance ministers are running around is making be pessimistic.
Optimism or pessimism I need the truth. Not false assurances. I want to know if the world is at the brink of a major financial catastrophe? I want to know when wills the bleeding stop?
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 | Author: Sriram Vadlamani Sriram Vadlamni is a IT professional and an avid blogger. He blogs about India business at Indianomics.com and you can follow him on twitter @indianomics (Email: sriram.vadlamani@gmail.com) |
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Few years back, I used to read spam emails about “India would become Super Power by 2050 and there will be something called “Harra Patta” (antonym of US Green Card).
I guess friends “Time has come” not because that we have done something really big, smart or wonderful. But the World has screwed up “Big Time”. Few countries have declared Bankruptcy and some are on the verge of doing it (as this article quotes).
Thankfully and Fortunately we are not export oriented countries like China, Japan, Taiwan or any other asian countries. Indian economies has 80% internal usage and only 20% export based. Hence India is mostly dependent on its own production and consumption.
Also NRI’s all across the globe are looking for safe placements of their money, forget about the returns. If Indian banks can tap in that mammoth amount of quality FDI funds and that too is available for real long term tenure, we should be able to solve our liquidity problems.
Moreover, government needs to do more by dropping the CRR rate more, allow Pension, Insurance etc groups to invest more in the stocks (remember this should be temporarily – otherwise we might end up like US/Ireland today).
Indians on an average have savings of 35% of their income(12% provident fund, around 10% in Insurance premium by them or by their companies and assuming saving 10% in their bank accounts).
One more good thing is that our industries/companies have not been like in US or other parts of the world. They were making profits till the last quarterly results. In the worst case their profits will be hit but they will not be locked down or will file for bankruptcy.
Our Forex reserves are still US $280 Billion.
We can re-build our Nation sooner and faster than anyone else. It is not the time for Panic (or panic selling).
It truly is a scary time for everyone, all over the globe. People we have trusted have proven to be unworthy of that trust. We need to start taking a good hard look at our leaders and make sure that they are truly worthy of leadership before we put them in positions of power. That is where the media must focus; making sure that the truth is known.
really scary times. hearing of the banks going bankrupt or on the brink of bankruptcy, i was so afraid of my savings that i have put back my trust in the nationalised banks rather than the private or foreign banks. i know i was acting in panic but i couldn’t have experimented with my hard earned money.
also have cut on unnecessary expenditure. planning to have a rather cold deepawali this year. can’t spend heavily. what if the jet airways story is repeated in my scenario too. the job scenario is so tight that cannot find good jobs so soon.
I agree that the Indian government is sounding too optimistic. But the stock market crashes and rate cuts are more a function of global liquidity than fundamentals deteriorating. P-note reintroduction (not really) is to ensure that we don’t have a liquidity crisis at home – foreign investors have been fleeing the markets. I guess the seemingly optimistic statements are because they don’t want bank runs that will only create more panic in the system.
I am 100% agree with writer on “I can sense that something is seriously wrong”. There is no doubt that India is heading towards 1990′s era but still we can save and we can grow more than 10% GDP (actual, not oral !) if we will handover the Finance and Economy department to Private companies instead of Joker Ministers (changing faster and more colours than Lizard)!
I read a lot about: What Went Wrong (WWW), Why this happened, What is happening, What can/will happen, etc. but did not found anything about “What people have to do in this time”.
A literature on “What people have to do & Where they have to invest & how people can do better business in the worst time, etc.” with a broad spectrum will be helpful for all because nobody knows that when will the bleeing stop?
At last but not least, if this so called financial crisis will go worst than ever, then everybody will get a chance to go back to 1929′s era for FREE !
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