RECESSION AND AN ANTIDOTE

by MAWBPLA

A recession is looming large. Only its intensity is doubtful, its possibility is beyond doubt.

WHY RECESSION – MILD OR HARSH – IS A CERTAINTY

Impact of development on Nature restricts the possibility of industrial growth and consumption growth globally. The world is yet to identify and institute a development model that is not based on manufacturing and consumption; at the same time it has not succeeded in arresting the degradation of the environment, global warming and pollution that arises from the current Development model.

The East Asian crisis in 1998-99 was caused by over-borrowing and currency imbalance. The Wall Street crisis of 2006-08 was caused by bad financial management practices. But it was caused – looking at the macro level – by Consumption (Housing) that did not have corresponding Production (Repayment Capacity declined, caused by decline of Personal Incomes, caused by decline of jobs) as support.

IMO the Wall Street crisis was a fall-out of the East-Asian crisis also, among other more fundamental issues with Western societies. However, both East Asia 98 and Wall Street 2008 were financial blunders of financial experts and therefore could be cured through financial intervention.

But the present incipient recession and financial crisis is more attributable to those fundamental issues that were the latent underlying cause during the Wall Street crisis. They are more visible and have more impact now. Therefore the coming global recession will not be cured by financial means, nor do Western or Eastern financial institutions have the wherewithal to deal with the situation that is emerging.

IMPACT ON NATIONS

Weakening of global Economy will impact all nations. Balance of payments will be affected by reduction of exports and inbound tourism. Currencies of weaker nations will weaken. There will be massive job losses. There will be subsidence of demand and supply, at the same time there will be inflationary pressure on consumer prices. A very bad situation will emerge.

COUNTER-MEASURES

The West and Japan has reached the end of the Western-style development cycle. China is fast approaching the end. Most nations have some more distance to run.

NATIONS NEED CAPITAL: Weaker nations will require massive amounts of Capital to sustain – and possibly increase – growth and development rates. Attracting more FDI and ECBs, in the present context, will not be a solution but will only aggravate the problem that weaker nations face.

The only viable answer is low-cost and long-term own Capital.  For example, India has about $ 1000 Bn worth of it lying about unutilized, from which it can reasonably bring    $ 200 Bn into the market via Quasi-Currency Bonds.

CAPITAL IS NOT ENOUGH

Nations now have to adopt a new development philosophy which will be more knowledge-oriented. The underlying causes which sparked the East Asian crisis and the Wall Street crisis are not as significant in most nations as they are in the developed Economies of the West and the Far East, especially as in the developed Western countries. They can be more optimistic about withstanding the recession.

WHAT INDIA CAN CONTRIBUTE

India has the intellectual resources to implement Quasi-Currency Bond programmes. The author of this blog has devised a financial instrument which is now before the Supreme Court of India.

Hinduism has the intellectual depth to develop new models that can sustain development and lead the world to a new equitable order. I have written two books on it, titled “Bharatatva- Hindutva for the Future” and “Navaneetham – Bhagavad Gita Updations for the Twentyfirst Century”. (Both are available on Amazon Kindle.)

The whole world needs to take a whole new look at India.

JAI HIND!