India’s Gold

It was not until the US economic recession of 2008-2009, that monetary policy, capital flows and stock markets sparked my interest. I had always assumed that the brilliant minds on Wall Street and other financial capitals around the world were doing the “right thing”. Unfortunately, prized MBAs from top business schools and competitive salaries did very little to check their greed. Armed with instruments such as high frequency trading, derivatives and naked short sells they gambled away trillions of dollars of the public’s hard earned investments. Even the ratings and audit agencies, who are the guardians of financial propriety, gave their highest seal of approval to these massively leveraged products.

इदमेव हि पाण्डित्यं चातुर्यमिदमेव हि । इदमेव सुबुद्धित्वमायादल्पतरो व्ययः ॥
This alone is erudition, this alone is dexterity, this alone is good intellect – expense less than revenue.

– समयोचितपद्यमालिका (Samayochitapadyamalika)

From the fall of communism to the recent tremors in free market capitalism, the dot-com and real-estate bubbles to the sovereign debt crisis in Europe, it is more obvious now than ever that there is a serious lack of long-term economic wisdom in the “developed” world.

The past several decades have not seen shared prosperity as is sometimes portrayed, but merely cycles of boom and bust. The common man has been lured into this complex game of speculative gambling where the financial power house always wins. On a larger scale, “rich” nations borrow from “poorer” nations in the form of long term treasury bonds and have siphoned away massive quantities of natural resources from the third world. The US Treasury Department prints dollars – the world’s reserve currency – and imports goods in exchange for paper to satisfy the American consumer’s never ending appetite. On the other hand, Asia, South America and Africa have had to mine and export their way out of endless poverty.

India’s economy is presumed to be growing at over 8% even when more than 300 million citizens survive on less than Rs 20 a day, thousands of acres of forests and agricultural land are diverted for mining and industrialization, indigenous people are driven out of their ecosystems, rivers are polluted by runaway chemicals and vast species of flora and fauna are wiped out from the face of the planet. The long term impact of material development on energy consumption, environment and social health is conveniently ignored by short sighted economic indicators. The Gross Domestic Product for instance, is a fundamentally flawed measure of economic progress. A lush green tree is no good in GDP terms until it is chopped down and transported for business. An Indian housewife who cooks the family meal, instills social values in her children and helps with their homework is not considered a contributor to GDP since “no money has exchanged hands”. The proponents of GDP would much rather have every family hire nannies without any consideration to the kind of citizens their children grow up to be.

This is not a sustainable economic model and cannot lead to global prosperity and peace. What’s worse – an entire army of misinformed business graduates who are in line to enter the ranks of global institutions, will more likely cause further damage.

At a time when stock markets are in a tumble, food and commodity inflation have hit the roof and faith in printed currencies has eroded, gold and silver prices have climbed new peaks. For some perspective, the US Federal Reserve has the world’s largest stock of government gold – about 8100 tonnes; the Reserve Bank of India – 946 tonnes; the people of India – a staggering 20,000 tonnes !

Indian women hold the world’s largest private stock of the yellow metal as ornaments. And this did not happen overnight. For over 5000 years, gold has been passed down over generations – primarily as a wedding gift. Traditionally the Indian woman is the custodian of her family’s wealth; she holds the keys to the lockers and is a prudent disburser of the household income. As a symbol this great responsibility, the divine department of wealth and prosperity has been assigned to godess Laxmi. One of the blessings of being the world’s oldest living civilization is an ingrained knowledge of sustainable economics, and marriage is an integral part of it. Some economists argue that India has escaped recent economic crashes because its culture encourages strong family values which is associated with a balance between spending and savings.

A few years ago, despite my skepticism, my mother saved up some money and bought gold. Today her old fashioned metal investment has jumped to $1900 per ounce. After years of futile research in stocks, bonds and ETFs, my mother has given me a fresh new perspective on investing. Cheers to the newest millionaire on the block – the Indian housewife – SHE is India’s gold.