1. How can I protect my savings from such a rapacious government ?

    I can go for gold which seems to be the flavour of the season. I can try MFs, hoping that equity will give inflation adjusted returns. I could also try RE with a loan. Trouble is, banks will come after me if I am in soup. My contributions to PPF/EPF are flowing into the government coffers, hope it wont be bankrupt when I demand my money back a few decades from now.

  2. Subra Sir,

    These are the precise reasons for the Gold demand.
    Hedge against world wide Government Stupidity.

  3. Generally our people live within the means. But not the government. That is the problem. ‘If you want to spend more, earn more. Otherwise, spend within what you earn…’ 🙂 Unfortunately this is not the case with governments….

  4. Until 1960s-70s when the world was on GOLD standards, economies across the world were expanding at a very slow pace. Suddenly the GOLD standard was removed! WHY? So capitalist countries (all western world) can manipulate currencies and inflate economies beyond their means. Anytime a fake expansion happens it calls for a bubble to develop. By 1990s-2000 this expansion led to internet bubble and we know what happened. However, this was contained only to western world so far as eastern world was still living in OLD era. But after 2000, China & India decided to open their markets (the term used was liberalization) and soon enough we experienced a massive growth from 2003 till 2007/2008. China being a communist country (although the government is corrupt and people are poor yet the government protects their own country’s interest) works in their countries best interest while India (government is corrupt, no one cares for working middle class and in short “who cares for the country”) everyone in government is working to make more money “at any cost”. By 2005, US wallstreet smartpants came up with something called CDS (credit default swaps), made TON of money but managed to plunge into financial crisis where common people across the globe including small countries were on the brink of bankruptcy.

    That was just the past 50-60 years of history. Now we will experience even bigger crisis as people who are “deliberately” making products for others to fail are not prosecuted instead are paid hefty compensations. HOW? Europe certainly cannot fix problem by throwing good money for bad behavior, all they are doing is kicking the can down the road, eventually we will see the fate of Euro. The real estate bubble in India and China is out of control, if you haven’t noticed yet, young generation has already started following western culture of living on credit. In short, when euro fall starts it will in effect start a domino effect in Asia including globe causing deep and painful recession for everyone and EQUILIBRIUM will be achieved.

    Can we do anything about it? NO
    Can you protect yourself from it? YES
    How? If you are invested in markets then stay alert and be prepared enter/exit at right time. market always gives warning signals before a major crisis. If your into CDs, savings etc then make sure you have accounts in various banks so that if a bank goes down then it will not wipe you off.

    In short, we cannot entirely protect ourselves from the crisis but we can minimize the damage….

    Something we all should pay attention to:
    1. people who paid attention to markets made good fortune during internet bubble
    2. people invested in 2003 till 2007 made awesome returns
    3. people who invested in early 2009 made good money

    The key is to find and wait for such “Opportunities”….

  5. Mr. @IsItPossible, the key is not to find and wait for such “Opportunities”… that would be next to impossible. What we need is to have the basic mental makeup to get out and move against the herd. Does everyone have the key or get it? Unlikely. It is by sheer luck or accident that you may get to time the markets.
    Only alternative is to have inside information (or ability to spot the real deal within an ocean of public data/info).

  6. LuckyOye: True, everyone does not have the KEY but it is not impossible to find especially if you want to differentiate yourself from the herd, Isn’t it!!!

    Without efforts you cannot expect above average results, no gains without pains and “free lunch” does not exist, someone has to pay somewhere.

    I am not suggesting time the markets but I wanted to point out the basic understanding of economy and markets can certainly make a HUGE difference in your financial stability and growth. Besides, troubles can be easily spotted from public data, all we need to know is where to look for….

    1. All those who knew or atleast had a method/strategy got out of Indian market late 2010 when market started downward trend thereby avoiding losses, intelligent ones invested in assets which benefit from bearish nature of market thereby making more money. At beginning of this year, markets changed the trend and people who had a strategy got in the markets.

    The idea is save yourself from financial crisis and when everyone else has a massive loss, you probably didn’t loose as much thereby creating the rift between you and the herd.

    Apply this same technique in any BULL/BEAR market and you will see how it changes your financial returns significantly. There is difference between “managing finances” vs “fluke and herd metality”.

    Markets are inherently connected with economy and we are part of this economy, doesn’t matter which country you live in. Due to nature of trade with various nations, we all are connected. Stay on right side of the markets (especially if you invest) and understand basic economic principles can take you long way without falling in financial crisis. We cannot change the way governments work but we can certainly change our thinking and behavior along with our understanding of micro/macro economics for our benefits.

    Anyways, everyone has their own ways and people adapt to new circumstances based on their own experiences…

    Subra: Sorry, took the discussion in a different tangent but thought in a macro picture all of this is well connected.

  7. i guess you meant fiscal deficit and not current account?
    fiscal deficit applies to the govt alone. current account deficits applies ot the whole country and is economically of not much meaning unless it is a cause of the fiscal deficit -which i dont see as a contributing factor in india -capital inflows via govt borrowing has been a flat 5% of GDP for last 4 years and is a mere 81 billion for govt debt.
    the current account and capital accounts automatically balance and a current account surplus doesnt signify ‘a good thing or a bad thing’.this is mere accounting tautology of the -1 +1 =0 type.

    india imports more than it exports -well,there is nothing bad about it inherently.it is not like our general accounting where we have liabilites and assets.the whole accounting jugglery with trade statistics(capital vs current account) is quite foolish actually.

    for example:all Apple iphones are credited to china’s current account surplus because it is manufactured there.so 300 dollars (example) per phone for china.however the fact is:chinese manufacturing gets only 6% of the value of the iphone.around 20% to japanese and singaporean/taiwanese electronics makers.the rest to shipping companies,marketing firms,retail and apple designers and shareholders themselves.but for accounting reasons all credit goes to china.this is silly and we should never be worrying about current account deficits.
    we should analyze this from first principles:in our personal lives,we export our services and import food,clothes everything else.if others like to give us more products for the stuff we sell them,good for us.we all like to get a good deal.ofcourse,we shouldnt be doing this on debt.i dont see such a thing in india.FII flows and ECCB continue to be strong.foreigners like investing in india and lending to indians.as long as the govt doesnt ban this,we are ok. fiscal deficit,however is a different story altogether.

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