The Manmohan pyaray government has “injected liquidity” into the financial sector, to the tune of Rs. 85,000 crores (850 billion) – but the good news is that there is at least one dissenter from within, saying the move will be inflationary. Inflation has been hovering at around 12 per cent for quite some time now. And this implies that interest rates are already negative. When the rate of interest is lower than the rate of inflation, we say that the interest rate is negative. You do not gain by saving money; you gain by borrowing money.
The bankster (as in “gangster”) cartel, who caused the inflation, whose money is just paper, and who are hell bent on creating more and more cheap credit, are encouraging “investments” that have no foundation in real “savings.” And the interest rate is negative. And these people at the top of this scam call themselves “economists.” They, and their cronies, are hollering about “liquidity.” Let us examine the mischief that is being done with this word.
According to the basic principles of Catallactics, the “self-correcting market,” when faced with a situation of bad banks lending bad loans, engages in what is called “liquidation.” The bad banks – all “bankrupts” – and their bad assets are all sold off to the highest bidder. The bad bankers are now jobless, and the good bankers who have taken over their assets now manage them. The system recovers. All the incentives are right. This is called “liquidation.”
But what on earth is this “liquidity” word that is being bandied around today? Those who are echoing this bad word through the media are making it seem that The State should and must “inject” money (which is liquid) into these failing banks. This is basic banksterism. The new credit is created out of nothing, just as the money the RBI prints is based on nothing. And this nothing will be lent out at negative interest rates. Apparently, this is “good medicine.”
Or maybe I am the one who is crazy.
What will actually transpire is that every individual who saves will be offered the perverse incentive to borrow instead. Everyone will borrow rather than save – because this is the way the incentives are structured. This has already happened in the USA, and this is what will happen here. Indians, who are great savers, will all become big borrowers. This is a surefire means of destroying the character of a nation.
Inflationism is not just a destruction of the value of money. It is not just a hidden tax. It is not just a means of redistributing wealth. It is even worse. The greatest evil that inflationism does is the destruction of human character.
And, yes, they want to teach!
i am not too worried. the indian people arent going to borrow because the govt tells them to do so. we have a glorious tradition of ignoring babu incentives. a few callow urban folks may take to the life of easy credit. the village folk will continue to buy gold and land.we all know how banning gold and making gold a dirty word by morarji desai was ignored by most indians -smuggling was rampant.
ReplyDeletepeople still abhor debt.cheaper money is addictive to the urban youth -but the rural areas will remain steadfastly sceptical of such schemes. they have seen too many hard times to believe in the govt
Regarding what helicopter bernanke says above, I see average indebtedness steadily increasing among the urban middle class already. This is partly fuelled by inflation fuelled by cheap credit.
ReplyDeleteBut how do "gain" by borrowing? You have to repay the money along with interest right?
You mean it's better to buy now by borrowing instead of building up savings to buy the same later, by which inflation would have raced far ahead? Or alternately, others would have bought up whatever it is that you are looking for.
I saw something like this happen w.r.t house and land prices in and around Bangalore the last few years.