Money changing hands

Over the past decade Greek authorities borrowed heavily to fund government spending and deficits leaving the country with debt exceeding its GDP and needs to borrow 13 % of its GDP to repay its debt.


The Greek government wants to implement following policies to repay the debt by 2012.

• Freeze public sector pay
• Increase tax & price of goods.
• Raise retirement age from 60 to 63 hence will lead to delayed pension payouts.

In short the suffering is for civilians. So the civilians are accountable to these crises. Before theses crises there was lot in news about Goldman Sachs mortgage manipulation.


The Dept & GDP ratio which is crippling the country was the same situation back in the year 2000. Why was it not reported that the Goldman Sachs acts conjunction with the government hits billions & billions of debts. Bankers like Goldman Sachs 7 Wall street colliding with Greek government to falsify the data. Then to rectify the problem Greek government is sending their intelligence agency  to investigate whats going on and the hard reform Goldman Sachs to head up the particular investigation sot he government is being captive by the corrupt bankers and Wall St and blaming themselves for the debt and asking citizens to be accountable for the debt by raising taxes.


Goldman Sachs paid less than 1% of taxes last year and also stands responsible for Greek crises by manipulating mortgage funds it also paid large bonuses to ts employee's in Christmas. This shows that government is corrupt.
Manipulation by i- banks have often lead to crises for which civilians are made responsible on large scale. The financial system needs to be transparent to avoid such crises. 

Be Sure about Rupee appreciation

The recent declaration of Warren Buffet about his visit to India in March 2011 regarding his investment plans in the India would be the prime reason for appreciation of rupee in future. Since Buffet is holding his assets in Dollars and would certainly not like his investments being depreciated due to depreciation of Dollars, off course no investor would like that.

So what strategy has Buffet adopted?, the answer is to invest in the growing economies (China, India..... ). About Buffet holdings in China, it holds 9.95 stake in Chinese auto maker company BYD and many such large stakes. India is the next destiny of investment after Sep-2011 and will also force other such investors to pump their money in Indian economy. 

The calculation of investors is simple a 50 % (per annum) growth in Indian economy will stand profit whereas a 15% (per annum) decline in depreciation of Dollars or other currency stands a loss. What they would be left is with 35% Nett profit (per annum) on this trade. The point where they will pull the money back from India is when they will find that % growth of economy is equal to % of deprecation of currency because such trade will lead to neither loss nor profit.   Investors always prefer to invest in rising economies since the assets are cheap at an initial stage. This will appreciate Rupee because to buy Indian assets they will sell dollar in exchange of a Rupees. 

Even after growth of two Asian giants India & China, USA stands ahead because the profit will certainly be deployed in buying the Dollar assets again because they would be cheap after appreciation of Rupee so always buy dollars when cheaply available. 

A golden rule says "Always buy assets when cheap and sell when when they are  at high prices." 

Enjoy making money......

Kuldeep H. P
Making love for Economics & Financial Analysis
pitrodakuldeep@gmail.com    

Collapse of Banking System

Banks are the medium of exchanging money. Depositors deposit money in the bank and charge interest rates for their deposits where as banks lend money in the form of loan and charge interest. So the system will only function if interest rate on money deposited is less than interest rate over the loan amount. The banks make money in this gap and so are called money creators.

Profits of Bank = Total revenue - Total cost

So it is clear that if total cost goes up i.e. the number of depositors increases than the number of money lenders the system goes wrong. What makes no of depositors increase in the bank which making the system wrong the answer is rise in inflation.

Rise in inflation is fewer money chasing less goods i.e the prices of goods rise due to shortage of demand which decreases the buying power and since the savings of  people increases the money is then deposited in the bank to get the interest. Banks on the other hand has less number of borrowers so the amount of money lending decreases and hence the interest collected is less which increases the total cost of the bank thus decreasing the Profits which might be loss even on the long run leading to collapse of banking system(Eg : Lehman Brothers), leading to recession.

Now in recession banks themselves lend money to large institutions at high interest rates through investment banking system making huge profits and hence recovering previous losses. Them till the time of recovery there is enough money flowing in the economy which increases demand as well as supply where aggregate demand is same as aggregate supply (in Recovery stage). The banks now has enough borrowers and the cycle continues until next collapse.

Concluded the recession stands an opportunity in span of every 7-9 yrs.

Kuldeep H. P
Making love for Economics & Financial Analysis
pitrodakuldeep@gmail.com

Depreciation of US Dollars

The depreciation of currency is due to various economic factors and cant be manipulated by other foreign nations as claimed government of USA.

Since many years with the start of Bush era (2001) USA is running large trade deficits and the Iraq war was the main reason for large government expenses in US military leading to budget deficits and further trade deficits. Trade deficits because foreign countries (China & Japan etc) contributed to large inflows in USA in exchange of US treasuries.

The Debt to GDP ratio increased further since 2003 and was about 0.4 i.e about 40%. Obama government introduced mediclaim & mediaid bills in 2010 and it is predicted that this bill will have large contribution of government expenses and so will rise the government expenses and US dept is predicted at about 53 trillorn dollars in 2014 leading to large trade deficit and depreciation of US dollars.

 Predicted Debt to GDP ratio
2050 - 100% (the worst situation happened during World war II)
2070 - 200%

Rise in debt will cause large trade deficits and depreciaiton of US dollars. The question is how would other countries get affected with rise in trade deficits of USA, the answer is as simple as the next currency bubble is surrounding China.

China is buying Gold and hedgeing with deppreciation in US Dollars and so the price of gold will rise till then. But there is always a saturation point for rise in gold prices where other investors will sell Gold due to fall in supply. 

So never buy Gold after it crosses $1600 an ounce because it would be forced to fall from this level.

Kuldeep H. P

Making love for Economics & Financial Analysis

pitrodakuldeep@gmail.com