The Birth of a Nation

The Birth of a Nation ( Part I)

The world has seen tremendous changes since 1970  to 2020. That’s a full 50 year cycle which has seen the Gold standard disconnected to  USD , Interest rates being raised by the FED , crash of 1987 , dot com bubble of 1990 , emerging market crisis 1997 , 2008 financial crisis , 2020 Covid 19 crisis and lots more. 

The entire 50 year cycle has witnessed more pain to the local population of the country when the  only focus has been to raise GDP statistics. 

Real economy is all about upliftment of the people and allowing the entire population to grow rather than just focus on increasing GDP to avail more debts.

But remember everything is good till it’s good… it is beyond human to think what can happen if you keep devising plans without realising the consequences.

Every Government ends up being puppets of the craze to increase GDP by way of taking more debts , allowing exploitation of their natural resources by foreign agencies , undermining its own assets, falling prey to cheap external loans , and other standard non variable efforts by simply and blindly copying some other large nations. 

Every country has to build cities , ports , airports , bridges , highways , etc in order to increase consumption which in turn will lead to more consumption i.e increase in consumption of electricity , automobiles , commodities viz Oil , aluminium, copper , steel , etc.

In a second thought all this will help to improve GDP statistics and the countries will have to issue bonds to take care of these expenses. 

Financial institutions, Banks are mandatorily made to buy these bonds. 

Let’s assume all the consumption pauses due to some major events like a covid 19 or some country unable to honour its debt or some major bank engaged in some frauds and unable to repay its customers. All this will lead to fall in consumption and followed by fall in GDP numbers. 

Once this happens, the rating agencies will rush to revise  the outlook of the bonds and its viability. 

So the price of the bonds starts to fall and yields starts going up , so where does all this artificial colouring of your GDP leads to … actually it leads to nothing and the country is saddled with more debts ,potential defaults , falling currency, and more pain in the real economy , when it’s left to look after a large section of ignored rural lower class and working middle class , which faces the brunt of rising inflation during the country’s quest for higher GDP and are victims of the subsequent crisis when consumption reduces and leads to loss of jobs , less savings , more debts , inability to service fixed interest borrowings , etc. 

Countries have all gone out to invite FDI , FPI to increase its foreign reserves, build better infrastructure, increase consumption, increase inflation, increase GDP , and all these only to avail more debts at better interest rates so as to compete with other countries. 

No single country can boast about focusing to improve its real wealth of the local population i.e  to improve the lives of its people by focusing on developing agriculture through technology , taking steps to reduce the deficit in monsoon , and improve its rural economy. All these will lead to a permanent rise in consumption which will last for years to come. 

Large emerging economies like China and India have more than 60 % of its people living in rural areas.

Just focus on improving this side of your economy and the real permanent benefits will be visible. Give this majority of the 60 % population means to increase its earnings and improve savings and then put genuine consumption into their hands , and this will lead to raise in sustainable growth and permanent benefits with long lasting effects. 

Once you have taken care of the majority of your people , countries will no longer need to roll out red carpet welcome to FDI and FPI. These are guests waiting to participate in your growth story. 

But unfortunately FDI and FPI persuades the Governments to improve urban infrastructure so as GDP can improve and the country can avail cheaper debt from superior foreign agencies and this influencing FDI and FPI can juice the country at the expense of its real economy. 

The consumption of the rural economy can prosper and have better long term effects as better agriculture , rural infrastructure growth will lead to an increase in earnings which itself will feed the consumption of this larger population and national debts can be contained in a larger way. 

The story will continue in Part II. 

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