Monday, July 27, 2015

Indian Economy is not same as American Economy - Insight by Sh. Gurumurthy.

Around 10 crore Americans have 120 crore Credit cards. They owe around 3 Trillion US$ . This has destroyed US economy.

Excessive exposure to stock market and a deliberate policy of reduced interest rates has exposed Americans to the vagaries of stock market. In 1983 the Interest rates were 23 % and around 6 % US families had exposure to stocks. By 1990, Federal Reserve had steadily brought down the interest rates to 8 % and as there well lesser returns from savings, the exposure of an American in stock market steadily increased. By 2001, IR were cut down to 1 % and by this time more than 55 % of families were investing in stocks.

By 2003 60 % of pension / retirement fund got invested in stock market. A total of 16 trillion $ was invested in stock market.

When stock market tanked, these funds, that were meant for "bad/ sad" days also tanked.

Now come to 3 countries:

1. In India less than 2 % of population has invested in stock market. India has a tradition to save.

2. In Japan The interest rates are extremely low (for a 5 year deposit rates are around 0.8 %), even then Japanese do not invest in stock market. They prefer savings. Infact for less than one year interest rates are - 1 % i.e. people actually pay banks to keep their money. Only 6 % Japanese invest in stock market.

3. In Germany only 7 % households are exposed to stock markets.

Now due to this note that a crisis in stock market is a National Crisis in US, But it is not like that in India, Japan or Germany. In US Perversion of Economics has been brought about by perversion of sociology (family values declining/  family as a unit vanishing).

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