Let us look at some things which were heralded as a fantastic solution for a problem. Then we will see how these have NOW become problems and not a solution as it should have been.

Insurance, Home loan, car loan, educational loan, derivatives, leverage, credit cards, …………..

Look at business Insurance. It is a brilliant risk spreading mechanism. If one man makes a genuine loss, it makes sense to spread the loss amongst all the businessmen. However once people started cheating by making false claims, and companies were no longer ‘Mutual’ (i.e. the owners and the policy holders were divorced) there were too many issues. Then the insurance companies became too big, life insurance became complicated with Variable Insurance, Viaticals became a big business……

Home Loan: In the 1960s Mumbai had a thriving co-operative movement. Minimum of 7 people got together, bought a plot of land and constructed a house. Then they got a loan from a Co-operative bank, and houses were constructed. Over 20 years the loan was repaid.

In the 1980s HOME LOANS were introduced as a great tool for the home buyer.  Now all the home loans are usurped by the builders to grab all the land and keep home prices far beyond the reach of the middle class. The builders, land owners, lenders DARE not let land prices fall – it will hit their balance sheets. 

Educational loan: the new ‘boon’ in the financial services market. Parents will pledge their houses and borrow for the future of the kid. This will again create a cartel – Middleman-Institute -Gullible parents and demanding children. Watch this space. 5 years from now it will be a Rs. 25,000 crore industry FUNDING POLITICIANS running colleges.

Car Loans: structured in such a manner that a new car will get you a loan at 11% flat and a second hand car at 14% flat. For the EMI generation, the NEW car will look cheaper. OMG talk of financial innumeracy. 

Derivatives: a brilliant hedge tool. If you have cotton dresses to be delivered on a fixed price contract, you buy a call option. If prices went up, yes you paid more for your raw material, but made money on the option. 

However, we converted this into naked options – put and call, and allowed everybody to play, and get burnt. Who gained from this mad trading, taking 100x position, etc.? your broker of course. Who else? yes, the SARKAR -stamp duty, stt, then the stock exchanges, the …….all except you. Hey we still need YOU – just to pay the bills. 

…we could just go on, right? 


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  1. Hi Subra,
    FOr this section:
    “Car Loans: structured in such a manner that a new car will get you a loan at 11% flat and a second hand car at 14% flat. For the EMI generation, the NEW car will look cheaper. OMG talk of financial innumeracy.”

    Is it a reference to better priced 2nd hand cars?

    Please clarify..

  2. India has a very strong monetary ‘transmission’ mechanism due to the tremendous clout of various vested interest groups. Few that I can name are Worker Unions, Builder-Politician nexus (into which the Banker is now sucked in), Farmer lobby, Caste lobby, Industrialist-Politician nexus (the original one since Indira’s times).
    What this means is that even a tiny monetary ‘stimulation’ by RBI has huge impact on the economy and money surge through the system. In recent times, RBI has had to do pseudo stimulation of the Indian economy by buying Dollars for its forex reserves and printing Rupees against it.
    Hope you can see that this is equivalent to putting the economy on steriods (drugs). The 8-9% plus growth of last decade was driven precisely by this drug. Can we continue to take this drug for another 10 years? If not, what will be the withdrawal symptoms?

  3. Thats how my father got built his 1200sqft apartment at Ghatkopar, Mumbai.
    My inlaws have alovely apartment 800sqft apartment in lovely colony in Chembur.

    I wonder if it is possible to do so in Mumbai now?

  4. Mr.Dheeraj..Your experience with future and options are bad but usually done with right entry and exit with technical you can huge profits with that.Try intraday from our website if you like..Usually all Investments has their own pros and cons so choosing right thing and performing well for all in life time is some what luck…

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