Back to the future

This post, originally written on 14/10/2008, would be significant in these days of political squabbling over Foreign Direct Investment in retail:

I’ve called The Times of India the worst newspaper in this country more than once in this blog, lampooning it as The Crimes of India (even though Calcutta’s The Telegraph is giving it serious competition for that position). But after yesterday’s editorial, which I shall proceed to summarise, the existence of this paper seems to me to be a crime.

You all know about the stock market crash. Well, India’s version of the crash was mainly fuelled, as I’ve already spoken of, by foreign holding companies pulling their money out of the market. (As a matter of fact, despite all the talk of the “small investor” hurting, far less than 1% of Indians own shares.) The Crimes of India has the perfect solution for correcting this problem of the market crashing when foreign companies pull out. What’s that solution?

Allow foreign companies to buy even more shares than they already can!

Right. Let’s see this again.

1.    The stock market is under the influence of foreign companies which by law are allowed to own major chunks of shares.
2.    The stock market abroad weakens. The foreigners decide, because of the interconnection of the international markets, to buy something real, like gold or government bonds, and minimise their losses.
3.    In order to find the money to buy these, they unload the shares they own in Indian companies.
4.    Like anything else, the more shares are released in the market at once, the lower the price goes (think food, for instance, at your local grocer’s; the more available at any given time, the cheaper it’s going to be.)
5.    So the foreigners take out all their money and the market tanks.
6.    Since they take their money out in dollars, they pay rupees to buy those dollars, releasing massive amounts of rupees compared to dollars, and the rupee crashes.
7.    And since so many things we need are still imported, including oil and now even food, the price of everything goes up, even though there’s a recession on. Stagflation, in other words.

Fine. So I’m no economist, but in these circumstances my logical solution would be to stop the foreigners re-investing, for the government to buy the shares up while their value is low, and make laws regulating how much money foreign investors can remove from the country at one go. I may be wrong – but I don’t think so.

The Crimes of India’s solution, again? Let the foreigners buy more shares, so the next time they can drop us even deeper in the hole. Some people never learn.    

Or just a thought…is someone paying them to write this?

I wouldn’t discount that possibility at all.