Don't believe a word of it.
There are two kinds of SCHIZOPHRENIA that everyone suffers from - they do not see themselves as ONE, as a WHOLE: first, as producers as well as consumers, because of which they favour pro-producer swadeshi policies; and second, as savers as well as borrowers, which makes them err in believing cheap loans are good while their own savings in bank deposits earn "negative interest rates" because of inflation, now raging at over 10 percent on average, with "peak inflation" in excess of 20 percent.
Thus, while private, household savings are being eroded in value the central banking cartel is encouraging borrowing by the very same households their inflationism has impoverished - as with "microfinance" for the poorest. And "student loans" for kids (to pursue useless MBAs.) I call it "planned indebtedness."
This, while TRADITIONAL PRUDENCE instructed all kids, "Neither a lender nor a borrower be." Save - and invest: that is how CIVILISATION happens, with private capital accumulation.
So, let us distinguish the HOT ASHES from the TREES:
The hot ashes are all the big "corporates" on the BSE Sensex - all BIG BORROWERS (from the central banking cartel), all of whom are so hugely "diversified" that it is not at all difficult to SEE they themselves "know not what they do": for example, the protected cigarette duopolist now into "skin care" products advertised "dermatologically tested by ITC." You believe that?
ITC must be borrowing heavily for these diversifications, for their Chairman (who just received a big award at Rio+20 for "environmental" and "rural development" bullshit) is now on our central bank's board!
Also, don't miss the FACT that consumers of tobacco would have been much better off without swadeshi cigarettes and with free international trade instead - and I will discuss the "consumer vs. producer" schizophrenia below.
Thus, looking at the index number of these 100 "listed companies" as a sign of "economic health" is NONSENSICAL - for if you go to any "Main Street" you will surely find that almost all the establishments there have nothing to do with "share capital." And it is these "small is beautiful" businesses that will never grow - because inflationism is eroding private savings. Below is my description of Main Street, Poona, from my old column denouncing State "education":
Main Street, Pune, is a busy market. Walking around, you find hundreds of small bakeries that turn out a dazzling array of breads, buns, biscuits, rolls and so on. There are scores of small jewellers, tailors and expert darners. Many tiny establishments make picture frames. There are Irani, Parsi, Chinese, tandoori and continental restaurants. Budhanis is famous for its potato chips. There is a popular home-made softy ice-cream joint. There is a vada-pau stall that always has crowds of customers. There are bhelpuri and chaat-wallahs. A group of acrobats perform for passers-by. The street is lined with hundreds of shops selling diverse products ranging from footwear to sarees, from electronic goods to kitchenware.
Any "share capital" you see in this REAL CITY CENTRE MARKET?
These are THE TREES.
Why do we miss the trees? Because "education," 24x7 Business News on all TV channels, and all the "pink papers" as well are talking about a MACRO WORLD that really does not exist. This is the grand delusion of the "national economy" and all the numbers of various "aggregates" and "averages," including the index number of share prices. I discussed this only yesterday - and in many previous posts as well - so let us proceed further.
As I wrote yesterday, the Keynesian delusion of a "national macroeconomy" does not know where the true source of market demand lies. It is they who perpetuate the huge error - indeed, a GREAT EVIL - that increasing the paper money supply (which is really inflationism) boosts economic activity; that cheap credit does the same; and that the bigger the size of the State Budget, the better it is for all of us.
This is actually like saying more bureaucRATS, or more battalions for the Army and the "para-military" are better for society - hence "employment generation" is a great idea! Taxpayers, in this case, don't see themselves as taxpayers! Dunno exactly what such a mental disease ought to be called - not listed in the DSM-4.
So, in their Economics classrooms, worldwide, under the subject-head of "Social Accounting," they teach eager minds thirsting for knowledge and truth that the "gross domestic product" or GDP (whose "growth rate" is their daily statistical prediction) consists of Consumption + Investment + Government. Where the hell did SAVINGS go? And what does "political economy" mean - except that the SMALLER the size of government and taxation, the better is is for all the people.
"Peace, easy taxes, and a tolerable administration of justice" - these are all ordinary people need to flourish, according to the wisdom of the classical liberals of yore.
THE TREES are really the true source of Market Demand. Powered by private savings and investment, all these "small is beautiful" entrepreneurs - including especially those of the "informal sector" of street hawkers and vendors - raise REAL MARKET DEMAND with their incomes as well as profits. So, every evening, a small tea-shop owner will spend on what other offer in the market - like cigarettes, booze, and so on.
During the debates surrounding the QE2 "stimulus" in 2008, I penned a column titled "What pumps up the economy" explaining what classical liberals called "Say's Law of Markets." Do read it as QE3 hits - and I also recommend a series of posts explaining many other implications of this Law of Markets, which begin here.
When we look at THE TREES we immediately realise that to MAXIMISE REAL MARKET DEMAND we need:
1. Hard Commodity "Private Money"
2. Economic Freedom For All - so ganja farmers, bar dancers and so on can actually raise real demand with their income, instead of this "employment generation" NONSENSE funded via inflationism.
3. Unilateral Free Trade With the Outside World - and my 2008 column on Say's Law of Markets also showed that protectionists among Indian businessmen do not know too much about anything; that their uncompetitive swadeshi products are reflective of their dud intellects:
Not only does Say’s law indicate that consumer demand is paramount, it has important implications for free international trade. We now see that when a Sony plasma TV or a Honda City sell, all our markets hum with catallactic energy. The seller of real estate gains. The bhel-puriwallah gains. Everyone gains when the energy in the market rises to fever pitch. The critical understanding that Say’s law can deliver for Indian industry is that they all stand to gain when foreign goods that do not directly compete with their products sell in our markets. So, more Kingfisher beer is likely to be sold if French cheeses sell in India. In those bleak days of protectionism and autarky, nothing sold. A Bajaj scooter came with a 10-year wait list. Amul Cheese was advertised as “The Taste of India”. There was no catallactic energy in our domestic markets. And Indian industry lost.
Well, we began with SCHIZOPHRENIA - discussing the schism within minds, as between saver and borrower, who are actually both the same person, a ONE, a WHOLE.
So let me conclude with the other SCHIZOPHRENIA - that between the Individual as producer and consumer, when both are really ONE.
Policies can be only ONE WAY: either pro-saver or pro-borrower (which I have just discussed); and pro-producer or pro-consumer. I am confident my readers will agree that we have grievously erred on both fronts.
Thus, the decision of the Department of Industrial Policy and Promotion to debar foreign investment in Internet retailing is PERVERSE - for it will not only hurt consumers, especially those in small towns, it will also hurt the expansion of Internet services, because private service providers will be hurt.
Not that private providers of Internet services are not hurt even today, by UNFAIR COMPETITION from the State-owned loss-making BSNL.
How can any private entrepreneur out-compete an inefficient firm if its losses are underwritten by the same inflationists?
This LOGIC then applies even more to the chronic loss-maker Air India - who have introduced their TWO new Boeing Dreamliners on DOMESTIC routes.
I read a statistic the other day that said Air India has cornered about 20 percent of domestic passenger traffic. I also read that the most efficient, profit-making Air IndiGo has managed almost 20 percent of passengers as well. Further, by saving and re-investing their hard-earned profits, Air IndiGo has ordered ONE HUNDRED AND FIFTY new, energy-efficient AIRBUS aircraft!
So, do read what the MORON heading the Competition Commission of India has to moan and groan about "cartelisation in airlines."
Shut down the BANKING CARTEL - first.
Not by any deliberate acts of violence - but simply by opting for gold, or whatever. I just read another masthead quote from one of our MORONIC central bankers to the effect that reducing gold imports is a good idea.
Well, I have a better idea than that.
Why not import lots and lots of gold duty-free RIGHT NOW and then wait for the rest of the world to go bust with their QE3 paper inflationism.
Then, when all OUR GOLD has much appreciated, we RE-EXPORT OUR GOLD to these nations, and enjoy VERY CHEAP IMPORTS!
Pro-Consumer, what?
I leave you with the ideas I shared a while ago - why each and every form of State Intervention in The Market makes poor people even poorer.
Ludwig "King" Mises said it first, of course.
