The Note... And The Vote

A small item in the news yesterday deserves closer attention.

It goes:

Extreme bearishness in the bond markets forced the Reserve Bank of India (RBI) to call off an auction of Rs 12,000-crore worth government bonds. Bond dealers said that all bidders must have sought a yield higher than what was acceptable to RBI.

The report concludes:

This borrowing is a part of RBIs borrowing calendar although it has decided to issue bonds of a shorter tenure. This has furthered hopes that RBI will subscribe to the bonds, which were to be issued on Friday. Although such a move would be favoured by the bond market and send prices soaring, it would end up monetising the deficit, push up money supply and increase the pressure on inflation. It would also worsen the government’s credit profile and risk a downgrade.

All this indicates that Chacha Manmohan S Gandhi has squandered the opportunity he had 5 years ago, when tax revenues were soaring and the boom was on. Instead of bringing order to the government’s finances, all he has done is pour more and more money into “leaky bucket” schemes like the NREGA – the rural employment guarantee scheme.

The writing on the wall is therefore very easy to read: the rupee will fall, inflation will rise, and the economy will go into a tailspin with a downgrade (which will put off foreign investment).

Meanwhile, finance ministers of the G-20 are meeting to discuss the mess, but all the noises are about strengthening the IMF. Look carefully at the photo accompanying the news story: India is being represented by Montek, an IMF man.

I spoke at length last night with a friend in the markets, and he suggested that 6 months down the road, the US dollar will also nosedive. Like all sensible people, he suggested gold as the best option for safeguarding private wealth from the depredations of the world’s central banksters. Of course, this blog has been advising its readers to buy gold for a long time now. The first such advisory was on Diwali last year, when gold was anywhere between 11,000 – 12,000 rupees per 10 gms. It is well over 15,000 now. It will go up even higher.

In that Diwali advisory I had quoted Jim Rogers: "Get out of paper assets and into real assets, including gold."

Indeed, I will go further than that, saying borrow up to your limits – and invest everything in gold. Just as you borrow to invest in a business expecting returns higher than the rate of interest you pay on your borrowings. With interest rates running at a low now, gold will yield returns far higher than the interest you will pay. I any case, the monetary and banking system as it exists today rewards borrowers while penalizing savers. So borrow.

Think about it.

While these are serious matters to do with money and markets, and therefore worthy of the politician’s attention, it does seem ridiculous that, as elections approach, the latest gambit of the BJP in Karnataka is to oppose the installation of a statue of Charlie Chaplin. Their battle-cry: The safeguarding of Indian culture, nothing less. I fervently hope that our dumb masses see through these dumb games and refuse to vote for the dumb BJP.

Then whom should they vote for? The rest are also klutzes. I support the idea that is gaining popularity – the None of the Above or NOTA vote.

Remember my Urdu poem?:

Manmohan pyarey
Tu ne kya kar dala re
Tere note hai jaali
Tere vote bhi jaali
Aur tu ne jaali note aur jaali vote
In dono ki chakkar chala li.

The entire System is a Fraud.