Chinese Whisper - It's a Quantitative Arrest

http://www.zerohedge.com/news/2015-07-10/why-chinas-stock-collapse-could-lead-revolution

To become an economic super power
First; create a phenomenal growth story based on local consumption by a billion plus people.
Second; to make that story fly make the people rich on paper.
Third; to make people rich on paper, give them cheap credit and avenues to spend that borrowed money. People always fall for it.
Fourth; hope that the lie of paper gains can be sustained forever. Utopian thought.
Fifth; just in case the house of cards collapses be ready to print paper money and force it in the hand of Govt. owned institutions to invest in inflated assets. Most of these institutions happen to be State run insurance and social security custodians for retired pensioners. Model tried, tested and failed in USA and Europe under code name "Quantitative Easing (QE)".
Sixth; if that don't work - find a safe haven exile to escape an anarchic revolution.



For now; China is at the fifth rung trying out its own version of QE and at the same time denying to call it by that name. The world is in a Chinese whisper mode and QE is now being called Quantitative Arrest. Call it what you want, it's just the same. With some clever accounting and iron fist escape the fall to level 6. If it does; it will be nothing short of an economic Neutron bomb that could bring much of the world into a state of nothingness.

Across the border; in a country that learnt its lesson in 2009/10 that its shining story can be extinguished as easily as a candle on a cake is preparing to take a lesson from China. Except; it's the wrong one. To revive the economy and growth story; the government is once again keen on stoking the fire of consumption by forcing down interest rates by fudging all the indices that point in the danger direction. Last time; it just inflated land, real estate and stocks to unimaginable highs without any logical fundamentals. All that was achieved in the bargain was that the Rupee slipped 55% in 5 years against the US Dollar erasing any significant gains in assets acquired (in dollar terms). There is talk that China's loss could be India's gain. I wonder if that is true. China is now a major trading partner and any adverse impact on its economy has bearing on ours too. But for now; I am concerned that I am receiving too many phone calls from bank appointed marketers offering easy credit against assets. All I can say is beware the pied pipers of the banking world.

Consumption is good. But there is too much money already in the system looking at unreal returns and no real avenues to provide it. India's growth story has to be built on fixing its infrastructure which to my mind includes agriculture. You read me right. That is the right quantitative arrest required to build a real growth story for India.

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