Needs a Ron Paul
by Bill Sardi: Todayís
Presidential Campaign Sounds Like a Horse†Race
from Kolkata (the old Calcutta) India where I have spent the past
few days on a business trip. Upon landing here in this endless dirt
city of 40 million people I was quick to check on the economic condition
of this country and was unsurprised to find it too needs a Ron Paul
to warn against the consequences of rising government debt spending
and centralized banking with all of its trappings of fractional
lending and fiat (unlimited) paper money printing which will doom
India just like it has America. While most Indians see progress,
the very seeds of civil unrest, re-povertization and war are being
From the top
to the bottom of the economic ladder, India has troubles. Indiaís
billionaires have shrunk by a third, from 60 to 40, in the past
year while it is reported that 42 per cent of children under five
were malnourished, and more than 60 per cent stunted in growth because
of a shortage of food.
With a slowing
rate of economic growth (down from 8.5% a year ago to an estimated
7.0% this year), India is now tempted to go the way of the USA and
borrow or print more money to meet its government budget.
bank prudently implemented 13 consecutive interest rate hikes to
put the brakes to Indiaís out of control growth and inflation. But
economic and political winds are changing in India.
Kumar Singh and John Chalmers, writing at Yahoo Finance India,
claim this nation of 1-billion-plus humans "risks undermining
the credibility of its economic outlook if it fails to reform its
public finances." They say "Ö as the cash-strapped government
gears for a dramatic widening of its fiscal deficit. With a slowing
economy, a sharp decline in investment and high oil prices upsetting
its budget calculations, the government is under growing pressure
to curb spending as it heads into the 2012/13 fiscal year."
India is widely
expected to miss its deficit target of 4.6 percent of GDP for the
fiscal year that ends this March.
authorities beg India to trim spending by putting a curb on oil
and fertilizer subsidies. But imagine doing that and trying to get
a great deal of its oil from Iran and side-steps US sanctions by
funneling payments through Turkey for the oil. India makes $1
billion in monthly payments to Turkish banks to acquire 370,000
barrels per day of crude oil from Iran.
But has any
government on the planet taken timely action to curb spending? Will
India simply dig itself into mounting debt and only stop when it
canít pay interest to its debtors just as the US has done? Consider
the US which has now accumulated $15 trillion of federal debt, which
is higher than its entire annual gross domestic product (GDP). Just
5 more years of this deficit spending and America will owe $20-25
trillion of debt and meeting the interest payments on that debt
will become the primary objective of government.
In his warnings
to India, Peter John Palms is as close to a clone of Ron Paul as
can be found on this Asian continent.
Palms, writing in the SME
TIMES, is trying to warn India of the economic minefields ahead.
But who is reading Mr. Palmsí news column in India? Some xx% of
the Indian population is still illiterate and trusting authorities
will make the right decisions regarding their economic future. But
elected officials are playing games here, ordering pot holes in
roads to be repaired just prior to elections.
America Is The Economic Standard For Developing Countries
Most East Indians
would look to America as its standard of economic success. But Mr.
Palms says by 2006 gross interest payments on the US national debt
were running $406 billion per year or 17% of all federal revenue.
The US has been running a false economy and maintaining an unsustainable
standard of living for some time now.
Mr. Palms says
this debt now represents the US government's largest single expense;
greater "than defense; larger than the combined cost of the
departments of Agriculture, Education, Energy, Housing, and Urban
Development, Interior, Justice, Labor, State, Transportation and
Mr. Palms elaborates, says the cost of the US national debt is currently
about $5,000 for each family of four. He says US households pay
for the national debt through inflation rather than taxes as it
political suicide to visibly increase payroll deductions. He says
$5000 is extracted from American families "not to provide government
services or even to pay off previous debt. Nothing is produced by
it, not even roads or government buildings. No welfare or medical
benefits come out of it. No salaries are paid by it. The nationís
standard of living is not raised by it. It does nothing but pay
Mr. Palms says the interest on the national debt is compounded.
This means, even if the government were to completely halt its deficit
spending and adhere to a budget neutral policy from here forward,
the total debt would continue to grow as a result of interest on
that portion which already exists. He says in 2006 interest on the
national debt was already consuming 39% of all the revenue collected
by personal income taxes.
The Inflation God
us back to India. Imagine living in a country like India where banks
are now wooing savers to deposit money in their institutions at
10% interest. But unlike the US, which quotes a low 3% rate of inflation
that is actually 7-10% if 1990 or 1980 methods are employed to calculate
the "consumer price index," India is more transparent
about the rising cost of living, citing a 10-14% rate of inflation.
This means East Indians, like Americans, are losing big-time on
their interest-bearing bank accounts.
middle class in America is being demolished via inflation and there
is no chance of an emerging middle class in India under such circumstances.
Americans gain less than 1% yield on their banked money today, losing
about 6-9% per annum in purchasing power. It never dawns on most
Americans or East Indians to check on whether their banked money
is gaining or losing value. According to a survey recently conducted
here in India, most Indians have no idea of the interest rate their
banked money is earning. Only
18% guessed right in a recent poll.
Maitra, writing in The
Deccan Herald, says "With bad news all around on the economic
front, Indian people today are confused and worried about where
to invest their money and how to get a reasonably good return without
the fear of losing it."
Join the modern
world India. The wealthiest people on the planet donít know where
to stash their money either. India is not a loner in this regard,
though it holds an un-auspicious form of wealth that I will discuss
If you are
a mutual fund fan, you will not be encouraged to invest in diversified
funds in India where all 171 mutual funds here gave negative returns
Mr. Palms s
goes on to say: "central banks and fractional banking system
are what cause depressions and inflation and ultimately collapse
as the one in the US has done three times in the past." Is
anybody listing to Mr. Palms in India?
In the US,
Ron Paul has a large following of younger voters who are learning
Austrian economics and of the follies of the Keynsian system of
creating more debt to dig itself out of economic doldrums. But here
in India, now armed with their cell phones and motorized cycles,
young people only see rising opportunity.
As Mr. Palms
warns: "India is different from the U.S. in many cultural and
historical ways, but it is exactly in the same circumstance as the
U.S. with respect to money as long as it participates in the same
Central banking system and fractional banking which needs to be
abolished if an economic meltdown is to be averted."
Age wise, India
is a very young country. The streets of Calcutta are filled with
the faces of young men and women who have no idea that the course
now being taken by India could doom their futures. Printing money
will buy votes in India, as it has in America, but this is just
pushing the debt onto the next generation.
as Gary North asserts, this debt will be repudiated. Future generations
will not pay it. There will be a default and a forced devaluation
of currency, maybe 30-40-cents on every rupee vanishing in a looming
bank holiday. Such an occurrence in India will trigger an uprising
as many millions live on only a few rupees a day.
Shaaw, writing for BloombergNews, says the 2011 goal in India was
to curb inflation whereas the 2012 goal may be to restore economic
growth. With that will come the pressure for Indiaís central bank
to lower the cost of money by reducing the base interest rate banks
pay to obtain money to lend. Why this sounds exactly like what the
US Federal Reserve central bank did early in the past decade.
If there were
only some god in the sky who would reach his hand down from heaven
and stop the central bankers from creating cheap money and a boom-bust
bubble economy in India. Actually Keynsian economists tend to nebulously
treat boom-bust business cycles as if they are acts of god, rather
than their own creation.
And like US
Indian banks are making a lot of bad loans, particularly to
business enterprises rather than for home loans as the US did. One
article says "Bad loans for Indian banks are popping up like
toads after first rains."
The East Indian
trump card is gold, lots of gold, owned and treasured by families
in the form of jewelry. Indian gold is purer (24 carat) but softer.
This yellow shiny metal yielded a 12% return in 2011, its 10th
annual gain. "On the long run, gold is a sure winner and should
you decide to invest in gold, buy coins rather than jewelry whose
price includes making charges (approximately 15 per cent) that canít
be recovered while selling" says Dilip Maitra.
But gold jewelry
is not subject to government confiscation. It appears Indian banks
are encouraging the masses to buy gold bars and coins. The State
Bank of India is widely advertising on billboards throughout Calcutta
that all 1100 branches of their bank offer 99.999% pure gold. But
donít bet on Indians opting to buy gold coins over jewelry anytime
hold gold worth over $950
billion, mostly in the form of jewelry. Compare this figure
against Indiaís M3 money supply (currency and savings accounts)
which amounts to $1.4 trillion. While East Indians arenít likely
to part with their gold jewelry they can sure use it as collateral.
Imagine a scenario
where the worldís paper money is revealed for what it is Ė an IOU
backed by nothing but the full faith and credit of flimsy governments
and central banks. Imagine a currency crisis that is worldwide.
Who would come out on top in such a scenario? Letís say gold rose
to unprecedented highs, maybe $5000 an ounce. That would come to
nearly $5 trillion in gold for India. Indiaís family wealth could
rise to where its jewelry gold could be used as collateral for building
new homes, starting small business ventures, etc.
of India's $265
billion in total household savings is held in gold, 18 tons
of it by weight. Indians are essentially serving as their own banks,
carrying reserve wealth in their home jewelry closet rather than
holding it in inflation diminished savings accounts in banks.
Reserve Bank is catching onto the idea and has purchased 200
tons of gold from the International Monetary Fund.
imports tons of gold, with a balance of trade that leans towards
more imports and exports, current account deficits may pose problems
like what occurred in 1991. Some 20 years ago India was forced
to airlift 47 tons of gold to Europe as collateral for a loan to
avert a sovereign default.
him mail] is a frequent writer on health and political
topics. His health writings can be found at www.naturalhealthlibrarian.com.
latest book is Downsizing
© 2012 Bill Sardi Word of Knowledge Agency, San Dimas, California.
This article has been written exclusively for www.LewRockwell.com
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