In my IIT life, it was the first occasion when I or probably everyone got chance to attend a lecture delivered in Hindi. The lecture was lucid, clear, scintillating, and informative embedded with visionary ideas. Till now it was unimaginable that a lecture could be delivered in Hindi with complete authority over the subject in such a premium institute of India. But this happened today. Above all, all have perceived ideas conveyed by the lecturer even they have not any formal education in Hindi since his KG days. It is really irony we are staying in such a country, where people can’t expect a lecture it its national language. Communication is the tool which makes friend foes. Now if we are not taught in our own culture how we can expect that product of such institute should think about the nation, welfare for all.
In IIT, every year the team of faculty monitoring the performance of students noticed students who did not do well in their tests are those who either didn't do hard work or are poor in English. We all are in habit of wasting our energy in learning languages, which is not needed as that much of time could have been invested in more productive work. There is need of only a few who should concentrate on other language for translating the subject matter written in other languages. A person will always imagine better and clear in his own mother tongue.
Anyway these are some dilemma which has to be handled in more indigenous manner. A lot can be thought, discussed over this matter. But for the time being let us move on the lesson conveyed by the lecturer to the students of management school. The topic of lecture was the current financial break down.
The lecturer divided his thought in three parts. First he focused on dollar economy. How dollar turned into the means of exchange in global arena. It is means of exchange in international market. All nations of the world are forced to convert their money in terms of dollar. So what was the story of Dollar?
Due to special geographical location, the United States was not involved in the war directly until the attack on Pearl Harbor by Japan which happened almost at the end of the Second World War. During those periods all the countries are buying arms from this America. A sense of insecurity came in the mind of people. They thought the USA would not be affected by the ripples of war. So they start depositing their gold in the bank of America in return of bond. It was told that due to flow of gold, a huge quantity of gold was accumulated there. It was estimated that if all the gold is spread over the surface of the earth, then it will be a cover of three-four inches.
After the war was over, European companies started taking their gold. There was another change in the gold market in sixties. The price of gold in market was doubled than the price at which American bank was selling. People started buying gold and they sold all that in market and earned money to buy even more money and the cycle started. President Nixon checked this movement by making dollar equivalent to dollar. Now other countries will buy dollar rather gold. Almost all the countries were forced to accept that movement. The reason behind is that the economy was very strong as they are saving a lot. Their industrial development was on rise. Vietnam War has crippled the American Economy and that compelled America to rob other countries by showing her muscle power. She collected billions of dollars from Kuwait, Saudi Arabia and even from Japan who was not related to the war at all.
All such movement and conman activities raised the confidence of people of America. Slowly they started drifting towards consumerism. After the Newyork stock exchange attack, the president bush was confused and called people for shop for nation. Even they don’t require they were inspired for buying showing their concern for betterment of their country. Bernanke who was the president of federal system of America told that people who have no confidence, will power are saving. This fired the sense of consuming more and more and in this way America started taking loan from all over world which amount touched to $ 112 billion.
Federal system is the most independent system of America which takes decision for the country and desires measures to be followed by the government. This is not a bank but a group of bank in which Bank of Newyork is the prime bank and plays the major and decisive role. The irony is that president of this system is elected by President but he has to power to remove that. For removing them, court has only power on various restricted ground. So the irony is that in America, economy which is backbone for any nation is controlled by a few people who are not controlled by anyone.
At last consumerism increased at such a level that people are burdened by heavy loans. Now they started defaulting. That made all the assets associated with them idle. Companies didn’t show this fact in their annual income account which was finally revealed. This causes sudden collapse of investment world. The balloon was blown and finally it squeezed to take its own shape. Bear Stearn was the first which was finally bought by JP Morgan. America took over Freddy Mac & Fannie Mae. On 6 September, 2008 America nationalized the world largest insurance company, American International Group, Ins. (AIG). On 15 September, Lehman Brothers declared bankrupt itself which was the major blow to the investment world. The panic was further added by the sell of another giant Merrill Lynch. The group was lucky enough as American Bank came forward to acquire the company.
It is better to give some more light on layman terms what exactly happens which caused the final blow of US economy. Due to consumerism, the demand of everything increased which cause rise in price. Due to speculation, banks started issuing loans at lower terms without holding any collateral. Due to increased demand leading to increase in price made banks confident enough that even the borrower would default they would make benefit buy selling the asset acquired by the borrowers. Now what followed next? See if a company gives a loan at terms of some fixed interest i, then that becomes a constant source of income. All the companies want a constant source of income. Now say company X approaches to the bank and offered them compensation calculated based on higher interest rate (i+e) what actually they are making. Any other company will now approach to this company and will make such deal. In this money is transferring from one hand to another hand. Investment banks are doing this intermediary job. The loan given on almost without no term are called subprime loan. Now the burden of loan increases on borrowers. They start making default which will cause loss to the company holding the money. Now the number of defaulter increases causing the losses to increase further. This ultimately causes the prices of assets go down as more and more people will sell their asset in market. Lehman Brothers was marred by such scene because they had invested tremendous fund in assets.
Finally the lecture of the Dilip Kelkar was to be over. He gave an insight to the students to think independently in spite of just copying the west. He told please study the lesson already given by the great scholars of India for the welfare of not only India but also the world and see them in the light of modern scenario and formulate mechanism which will be indigenous with independent thought and would fruitful for all.
He told that Yugoslavia thought differently and prospered. He given the name of an economist… who helped brought out Yugoslavia’s dead economy in a week not accepting the terms of Dollar market.
Finally he ended the lecture giving the importance of Family. Consumerism broke the family structure of America and individualism grew leading to dissaving in the economy. Japanese in spite of having negative term for saving in banks, but still they continued as they have strong belief in family system. India still holds family system. He told that you will find many people who didn’t married for looking after their family members. Though they have no money, they don’t send their parents at old dwellings. They will feed their family members who are incapable of earning money.
Finally dear think about the nation, values and service to the poor. Only man can sacrifice everything for his knowledge, ideals etc. So be the human of highest ideals then only holistic prosperity will come on this earth.
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