Opinion: Food for thought | World Markets & Economy

It's time we overhauled our own perspective, and opened our eyes to what is going on around us apart from the monotonous bull run. We will be reviewing the economic condition at the moment, by considering what we've really been through in the past two years.

Economic scientists that come on news channels are of the opinion that the Great Recession has ended, and the next inflationary cycle has begun. While this statement may be good news for the stock market bull, it might just not be- for the consumer community and for the stock market bull too! While stock markets are always ahead of the other economic indicators - volatile as they are, in depicting the state of the economy, considering them to be the only indicators would be wrong.

Considering what has transpired out of the two year drama on the stock markets, as a direct consequence of what happened due to, (what i like to alliterate as) the stock markets, as a direct consequence of what happened due to the invention of the incomprehensible and now impossible financial instruments; the real prices of commodities and real estate in many emerging markets hasn't gone down while the purchasing power went down significantly during the downturn. Credit (no pun intended) has to be given to the governments for this fiasco. They made credit super cheap to the irresponsible borrowers, increased the MSPs of food grains - when they could have done a lot else, and made plans to bail out the hubristic realtors. Then there was the double whammy of the bad monsoons, and whoa, the economy is still looking good.

The economy had never really turned sour in our case. The Indian economic stimulus was in the form of lower taxes and cheaper credit. Lower taxes meant better margins for the producer and cheaper stuff for the consumer. Cheaper credit never really got taken- as it was not really cheap, and it was not really required. Buying debt, and then paying off bills and then repaying that debt is a risky affair. Whole economies are built on debt nowadays, and when the real production from the available sources of raw materials doesn't make up for the debt, problems happen. And that is what exactly the capitalist world is risking at the moment. Coverups and hypocrisy cement capitalistic economic growth, and this time, a lot has been covered up; and as we used to say, the cycle has just grown bigger.

The stock markets have recovered to the levels they should really be, the premium being the wealth created as a result of the exploitation of natural resources, and the discount being the debt incurred in doing so. The drying up of available capital in the international markets was offset by TARP funds and such schemes in an experiment which can go either way. At the same time, if the focus shifts on the real drivers of global growth- ie, the emerging markets and the US economy is allowed to stagnate, and then pick up as a result of the growth in the former, then i would be clapping. China needs a stronger yuan to reflect its real strength, and has to rightly do so instead of flexing the right muscle the wrong way. The punters expect the western region and China to restart overconsumption and overproduction respectively; where the former is not really possible very quickly and the latter has never ceased! At such times, the focus shifts, as it has, to economies with domestic consumption and production stories such as India. Countries should start protecting their own economies from those who want all the good things for themselves- such as China who want to keep exporting, and still want their currencies to be undervalued. You can definitely not have everything for yourself, and also at a time when you've invested so much into the US Treasury.

There is a lot of money lying around for now, which will soon be sucked up by the governments as they realize it's not needed. We can, as investors, only hope it will disappear before it goes to the stock markets. As that would again invoke greed, when it should be invoking fear. Or may be, it has already happened. "Anytime, now." is the chant, as we stand at an inflexion point on the economic chart; (and the problem is, every situation seems to be an inflexion point, and everytime, it seems, "it's different", while it's always the same!).