They says breadth control mind. Could self styled new age Gurus to control money which controls civilization in ‘Planet Earth’?. Can money be transformed? Is the Global financial crisis giving a new meaning to money? Are we moving from a Human Economy of ‘scarcity’ to Nature’s economy of ‘abundance’?
Analysis from Business Writer and consultant Joydip Chakladar
Is Global financial crisis, is in requirement of stress buster? What could be the best form of breathing exercise for putting Wall Street mind in control? Though Governments across the world have not identified it as only Wall Street chronic disease, but as a state intervention problem, based on Keynesian model. They, see it as a brilliant opportunity to blame businessman for all this mess, and create a regulatory haven, across the world. Their solution is limited on putting more stimulis to revive drooping economies. US President Barack Obama signed the $787 billion legislation into law, declaring that it would start the long process of recovery.
However, Wall Street itself is not buying that assurance. The Dow plunged nearly 4 per cent on the same day of signing. Stimulus is growing. Experts are debating to determine what kind of recession it is – Keynesian or Hayekian. But all around, we see no recovery.
This brings us close to a very important question, that, can we solve this problem from the layer of thinking, which has been instrumental on creating it? There is a need, now to question, about the fundamentals of the Human economic thinking, and the structure on which we are basing those thoughts?
Is it all just about Demand and Supply? Is it that the world is in the receiving end of scarcity of resources, and we constantly had to make choices about global needs? Present economic thought is based on a scarcity mentality. and that makes important for presence of periodic cycles of recessions. The issue of money is a very important one, for people all around the world. Some people want a lot more of it, and some people want to get rid of it, but probably most people think, of it as a very important concern affecting there daily thought process, significantly.
Money, itself is nothing more than a medium of exchange (that really means a symbol) for goods and services. As such, it has been around ever since people decided that bartering crops and blankets for tools and trinkets, was too inconvenient, especially when the guy with the tools or trinkets didn't want crops or blankets, and wanted goats or crockery instead.
So, every human group that has traded extensively, with another human group has developed a monetary system, alongside a barter system that is used whenever it works. The stuff we use for money, may be material, like shells and metal or paper, but what really matters is the worth we give to the stuff. And the worth is not material at all. It's just an idea in the minds of people. The crops, paper and coins have very little intrinsic worth, and the worth of something solid like gold goes up and down. The inner worth in the minds of people of certain products and services determines the value of products and services. This important dimension of collective psychology , was often ignored, when doing the valuation, through modern scientific financial instruments. However, things are different, in the real economy. In real economy, as a medium of exchange for goods and services, money has to be backed by something valuable. That is, something people perceive as valuable. But, it's often forgotten, that money must also be backed by people's trust, in the source of the money, regardless of the valued backing. We know that banks can fail, when people lose trust in them, even if they are full of money. Governments can fail when people lose trust in them, even if they have a lot of material backing. The experience of the recent financial crisis ‘not getting solved’ is a good example for this, as people have lost trust in the system, and nothing is restoring there confidence. So the actual value of money as a medium of exchange for material things depends on very immaterial or spiritual things like confidence, trust, and faith. That’s why in human environment there are different types of currencies. Money is the just the physical currency. But there are subtle currencies which get exchanged which are the base of the physical currency exchange. And how much money people, are willing to give to a person for goods, services or out of the goodness of their hearts depends, on those very subtle currencies of trust, confidence and faith.
No physical currency can stand, if those subtle currencies are in problem. The present problem is rooted in the problems of subtle currencies. If it would be a physical currency problem the Governments could solve it using Keneysian model, with printing more money and giving stimulus. But they couldn’t, as the subtle currency is in problem.
However Nationalizing Toxic assets, is a solution which is invariably preferred by the banks themselves. Of course, determining the price at which these assets are purchased is a very tricky issue, particularly when a liquid market for such assets has dried up completely, as is the case now.
If the government buys the assets at too high a price, it will be seen as a straightforward subsidy for previous bad behavior, and accentuate the "moral hazard" problem, something that is politically unpalatable The second conventional solution which Government is banking on is Nationalizing the banks . To buttress the banks is by governments providing capital directly to banks themselves, either by buying stocks, or by acquiring a newly issued preferred stock. For example, this is what Warren Buffet did for Goldman Sachs in September 2008 in the US: He injected $5 billion in the form of preferred stock that would give him not only 7% of the capital, but also a guaranteed 10% dividend forever.
In Europe, governments have typically taken the bank-nationalization road, although with less demanding terms than what Warren Buffet obtained. Nationalizing the banks was the option taken for instance in Sweden in 1992, and in 2008, first for Northern Rock in the UK, and then for a wide range of banks in all countries by mid-October 2008.
The first objection to nationalizing banks or their toxic assets is the well known "moral hazard" problem. If banks know that they will be saved when in trouble; they may be tempted to take higher risks than otherwise would be prudent. When these risks pay off, the profits are held privately, and translated into generous dividends for the banks' shareholders, and extraordinary bonuses to management.
But when they fail, the losses end up being absorbed by the taxpayers. The current salvage programs confirm that this problem hasn't gone away and is unavoidably further strengthened by new bailouts. Secondly, even if both strategies -- bailing out the banks and re-regulation of the financial sector -- are implemented reasonably well, neither resolves the second line of problems: The banking system will get caught in a vicious circle of credit contraction that invariably accompanies the massive de-leveraging that will be needed. Depending on how the re-regulation is implemented, it may actually inhibit banks from providing the finances needed for a reasonably fast recovery of the real economy. In practice, this means we are only at the beginning of a long, drawn-out economic unraveling. The social and political implications for such a scenario are hard to fathom.
The last time we faced a problem of this size and scope was in the 1930's, and that event resulted in social and economic problems that ended up manifesting violently in a wave of fascism and ultimately World War. This crisis is even bigger and worse then that, as every family is going to affected by it , if we follow and base ourselves on the same old principles of economy. There is a requirement of complete transformation in the entire economic system.
The present system which is based on Modern Economic thought helps money to give a fake sense of immortality. Everything in Nature destroys, Money doesn’t. A crop kept for a year will, get destroyed and not give an yield in next year, whereas money kept in Bank will grow. This is the natural reason, why it is important in the present system, to store and stop the circulation of money where some will ‘have’ and some will ‘have not’ and everybody ‘will not have’ in socialism . Thus, Human Mainstream economy where ‘scarcity’ is law, creates conflict with Nature’s Economy where ‘abundance’ is the law.
The future of earth depends on New Age medicine for transforming Business and economic consciousness. India has much to offer on healing the Global Economy. Indian school of economic thought based on Atharva Veda, makes an Essential connection between the spirit of Money and material compartment of money. An Yogic Economy based on consciousness of subtle currencies , True need, Inner Worth and joy of Giving , is the economy of the future , and can be the economic solution today also for the global financial crisis.