Here is an article about China…..I was getting some sadistic pleasure in doing a small change in the article….and would love it if people DISAGREED with me. I see kids in our office (qualified accountants) putting their money in LIC, Nsc, ppf, kvp, ……without thinking ABOUT real return AT ALL. Sad but true.

So read on…adding India is the only thing that I have done….the rest is a cut n paste from a website..which I have referred to in the previous POST.


Bank deposits and life insurance as a savings mechanism in China(India)

Bank deposits rates are regulated. You can’t get much different from 1 percent in a bank deposit. Life insurance contracts (a huge savings mechanism) are just rebadged bank deposits – attractive because the regulated rate is slightly higher.

This is a lousy savings mechanism because inflation has been between 6 and 8 percent (but is now lower than that and is falling fast). At almost all times (except during the height of the GFC) the inflation rate has been higher – often substantially higher – than the regulated bank deposit (or life insurance contract) rate.

In other words real returns for bank accounts are consistently negative – sometimes sharply negative.

You might ask why people save with sharply negative returns. But then you are not facing starvation in your old age because of the “four grandparent policy”. Moreover because of the underlying economic growth (moving peasants into a manufacturing economy) there are increasing quantities of these savings every year. This is the critical point – the negative return to copious and increasing Chinese bank deposits drives a surprising amount of the global economy and makes sense of many things inside and outside China (India).

—-end of story——-

Every country depends on the sloth of the middle class – and the complete unwillingness to worry about INFLATION. World economies in the 1800s and early part of 1900 HAD ZERO inflation. However in the past 80 odd years INFLATION has been rampant. Most of us in India have seen inflation as well as hyperinflation – which meant gold and real estate looked ‘good’ as investment assets. Actually both of them are SAVINGS assets.

Equity is the growth asset in your portfolio – however it is so volatile that people get ‘scared’ and run away. Sounds familiar?

This morning 3 kids around 25 years or under were discussing why they should be investing ONLY in LIC, Nsc, and bank fixed deposits to get 80C ……which got me to write about this. They were talking of 80C (at least they were being forced to save/invest!) and clearly the middle class ..thought ‘I should not lose money’ was uttered 3-4 times)….so i think it was NSc…lol

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. You earned money, its got to go somewhere.

    you put in bank – cheap money to bank with no effort. Paying minimum interest rate possible.

    you put in stock – cheap money to corporations. They too will pay the minimum divident they can.

    you put in real estate – cheap money for builders. They pay you nothing in return (consider it equalent to stock without dividend). Land may appreciate, but you have to now find a buyer who will accept to buying your property at the higher rate. Not only that he also has to like your floor plan, location etc. Go figure.

  2. But u havent considered the double ur money in six months investments or 50% return per year investments …LOL oh and i forgot schemes like SpeakAsia…..hehehhehehehe. Good opportunities no? ROFLLLLLL

  3. Subraji Starting and Ending of this article is different. Diversified portfolio is always better and best. Upper class people has their most of black money and they always think whom to be the follower and how successfully it will be taken and how to hide from others and always in a high fear..Lower class will always thinks about today.Only Middle class people will thinks about all so the thinking of those guys who made to write this article is right..

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>