Last week as I started to write about a - bubble of various sorts, forming across the entire gamut of the Indian economy the – sub-prime mortgage mess started to unravel in the US.
Media outlets and various financial organizations expressed shock and disbelief at the ramifications of the situation here in the US. It is interesting that none of them decided to interview the mastermind of the current fiscal mess his holiness - Mr. Alan Greenspan, under whose watchful eye the entire current sub-prime fiasco has it's genesis!
Yes, Mr.Greenspan is a very erudite and knowledgeable person; he is also the architect of this current mess. Mr.Greenspan had the knowledge and the tools at his disposal to prevent this situation in the sub-prime mortgage market as well as the deeper credit crunch that is making ripples across the globe. In fact if memory serves me and possibly other folks correctly this is not the first time Mr.Greenspan can be faulted for his acts of fiscal omissions - The Great Internet Bubble of the 20th Century also happened on his watch!
Now in India we have Prime Minister - Dr. Man Mohan Singh, who also is a very erudite fellow as well as an economist like Mr.Greenspan. Again if my memory serves me correctly the last time India as a country was almost at the doorstep of financial insolvency, this same Dr. Singh was at the head of the finance portfolio. Wonder if this is just a coincidence or fate as they say in India?
Lets look at some other interesting parallels.
Things that happened on Alan Greenspan's watch.
Black Monday 1987.
Internet pump and dump.
Beginning and end of Real-estate boom.
Super hot and sizzling economy, followed by busts and boom.
Overall decline in manufacturing economy!
Things that happened when Man Mohan Singh was lead Economic Advisor to PM, was FM, or PM himself.
India close to financial insolvency 1990.
Indian stock market pump and dump 1991/92.
Indian real-estate market becomes super hot.
Super hot and sizzling economy, followed by busts and boom.
Over all decline in manufacturing economy.
What happens next in India?
Every time I talk of the above scenario I am told to stop being a naysayer, and look at the rapid strides the service sector economy has made and the growth of employment etc. that will eventually create a trickle down effect that will uplift the Indian masses. Everyone tells me about the transition of global economies, from being agrarian to industrial manufacturing to eventually service driven.
TO WHICH I SAY CRAP! STOP THIS NONSENSE, FUELED BY PSEUDO-INTELLECTUAL DRIVEL!
SHOW ME ONE, ONLY ONE ECOMOMY THAT HAS SUSTAINED ITSELF ON A SERVICE ECONOMY WITH A GROWING POPULATION!
World War I & II saved the British Empire from being a footnote in history 50years ago. Japan has seen it's best days behind it. The Asian Tigers on the Pacific Rim are barely managing to keep their heads above water from the onslaught of the Chinese Tsunami. Countries on the African and South American continent barely register on any economic indicator or can hope to do so in the near future. Argentina and Brazil have never lived up to their potential despite the billions of dollars pumped into them in the past. Except for South Africa which has some economic activity the rest of the African continent it seems will be battling a human medical catastrophe.
Granted some of my predictions are a little extreme, but with a looming global recession, it would not take much for those predictions to come true!
Lets not forget about the nature of the Internet and electronic specialty service economy which moves at the speed of light is also susceptible to an equally rapid transformation into a commodity service that tends to flatten and remove various hierarchical barriers to entry for most service businesses. This not only reduces margins it automates and eliminates various functions that may have been essential earlier, and in turn may have been a source of wide scale employment.
The speed of the service economy is very rapid and by nature disruptive; it has a cannibalizing effect on general business and society as a whole. This is due to the constant search for greater economies of scale and optimization of efficiencies. We have witnessed this on a wide scale level during the dotcom meltdown. The same happens and has happened in an agrarian and industrialized economy, but at a much slower pace. When this reduction in economic activity does happen there is already enough ancillary business activity that has been created that it smoothes out the usual and periodic cyclical business and economic ups and downs.
My next post will touch on the immediate and near term ramifications of this service economy.
No comments:
Post a Comment