footnotes2marx

Technically, this is not my first blog. I've written blogs many a times before. However this is my first post on footnotes2marx. However, I must confess that it's been a year and a half before I have writen any political commentary ..so my articulation might have become a little rusty. However, I'm confident that my analysis has become more mature (just as vintage wine), so that gives me the confidence to hit the keyboard once again!!

In , India PM Singh has announced his desire to introduce full capital account convertibility. The whole world knows Manmohan Singh as an erudite person and an economist par excellence. Then why is the same person doing the same mistakes that created the Asian financial crises not too long ago--whether countries like Thailand and Malyasia almost went to the dogs? What has he learnt from their crises and also that of Argentina , Russia and many other places in the world?

Ok , demystifying the economic jargon--what exactly is capital account convertibility? Put simply, you can transform the rupees you hold into dollars or euro (or any other currency) at your free sweet will. Is there anything wrong, you might ask? Not when you are converting your hard earned Rs. 20K into dollars--but something goes wrong when the "hot money" flows in like the tsunami waters.

"Hot money" refers to the large amount of foreign capital (say billions of dollars) which flow into the country as "portfolio investment" (read money pumped into the stock market). This is an age old trick of the large western investors. Pump in huge amount of money--and artificially jack up the markets. The sensex goes up , up and away. And then suddenly (with some concerted mainpulation amongst the large investors), these investors pull out (sell everything) and move out--just in flash.

Well, our large FII friends made a lot of profits. But the stock markets always are a zero-sum game. You don't make profit unless somebody bears the loss. So when these large FIIs sell out--the ordinary retail investor--our "desi bhaiya" (with a little greed) bears losses. Millions of small investors lose money, and as a ripple effect the entire economy comes down with a thud.

Does PM Singh not know that? Oh yes , he does. Then why does he do all that. Elementary, dear Watson--he represents his class interests, that of the big bourgeoisie who funds him into that chair. He may be the leader of Indian masses, but his loyalty is tied to the classes.

So long for today.

And before I forget, do send your brickbats and bouquets (read comments).
Regards,
Charvaka Acharya


Read more:
Against my views:
http://www.thehindubusinessline.com/2004/03/30/stories/2004033000180800.htm

For my views:
http://www.thehindubusinessline.com/2004/03/27/stories/2004032700030800.htm