The heartwarming response from my friends to my post on the English translation of Bapu article on Financial Terrorism has prompted me to take the discussion forward on this subject. I am reproducing at the end of this post, few of the responses received.
As you all know, this article was written by Bapu way back in the year 2003. The world has seen many changes since then; there have been many upheavals around the world. Not even the developed countries have been spared this time around. The sub-prime crisis, which is a product of virtual money, as explained by Bapu, loomed over USA for a couple of years (2006 and 2007) before it finally struck in the year 2008, leaving a trail of financial destruction behind it, from which USA is yet to recover. In my opinion, It was indeed a product of the virtual money. What we have seen of the global economy in the past few years and what we are seeing today is but a confirmation of what Bapu had foreseen and projected back in 2003.
As I write this, the PIGS (acronym for Portugal, Italy & Ireland, Greece and Spain) nations, part of the European Union, are facing a financial crises of never before and dangerous proportions. In the year 2008, Iceland was on the brink of financial bankruptcy after three of its major banks failed to meet their debt obligations, following a run on deposits accepted by it in the Netherlands and UK. Its banking collapse is considered as the largest in economic history, given the size of its economy.
Take the case of Spain. Its increasingly desperate struggle to put its finances right has seen its borrowing costs soar to such levels that it would not be possible for it to manage the situation indefinitely, reflecting a growing belief that it will need a sovereign bailout, which the euro zone can barely afford at this point in time.
Spain’s and Italy’s fate, it appears, is linked to the fate of Greece. It is being increasingly felt that if Greece, which is on the verge of financial bankruptcy, were to default or exit the euro zone, the after effects of such a development could push Spain and even Italy over the edge. It is said that if Greece is to be put back on its feet, the European Central Bank and other lenders from within the European Union will have to write off monies owed to it by the government of Greece to the extent of Euro 200 billion! It is no surprise then that, today, Greece’s credit rating is far worse than that of many of the African nations.
The ripple effect of the European crisis is not likely to spare India either. The Prime Minister, Dr. Manmohan Singh has admitted that India will be adversely affected by any crisis that may precipitate. In a study carried out by Maplecroft, which is risk analysis firm, although it has ranked India as 85th in terms of financial exposure, out of a total of 169 countries outside the euro zone that have business dealings with euro zone countries, it has still been categorized as high risk exposure. One of the main reasons is that nearly 18% of India’s exports for the year ended March 31, 2011 were to the Euro zone countries.
What emerges out of all these developments is the dubious role played by debt (virtual money as explained by Bapu) and how countries have fallen or have been made to fall in the debt trap.