Writings on the Wall

It was London's big chance to pull the world out of the hole it has dig itself in. It was historic given the fact that the top 20 world leaders sat around a table, trying to find a solution, which wouldn't have been any where near possible 2 years back. Although they were split in opinions, but united in resolve. Though for better measures, they did achieve something atleast.

The IMF restructuring is a good sign, especially for countries like China and India. They have got the attention they deserved. Moreover the world have now realised that the pre second world war structures of financial institutions like IMF and World Bank needs a massive overhaul. The countries like China, India and Brazil, which were no where in the picture than, have overtaken many of the top 5 then. Its a good sign, perhaps the beginning of end of West's domination on world politics and policy formation.

There were calls for transparency in banking system of certain countries. The 18th century clandestine traditions of Swiss Banks have no place in the 21st century. Infact most of the countries would benefit beyond doubts if the Swiss Banks are exposed. Another co-related issue was of Tax Havens. The Tax Havens of world were named and shamed by OECD, in a clear message to the world- the black money will become defunct if not accounted for in future. This might perhaps prove to be the most significant achievement of London Summit, if implemented thoroughly.

Looking at country basis might perhaps be difficult, if not impossible, so i'll stick to the continents, for wider audience.

Africa got what it called for. US$ 6 Billion will be raised by the dilution of gold reserves of IMF. Perhaps the desperation and inability to put in more money by the wealthier nations resulted in am embarrassing consensus of doing away with the proud gold reserves of IMF. That said, the resourceful continent needs as many helping hands to get itself out of the terrible hole, dug by the mighty, but the poor are left inside to rot for life. It is the responsibility of all those countries who exploited Africa for years to get this continent out of trouble, but sadly, they got nothing, but a raw deal. US$ 6 Billion raised by gold reserve dilution might help perhaps a bustling city of Addis Ababa at the max, forget even the whole of Ethiopia, though its just a reference.

America's (In both horizontal hemispheres) doesn't deserve a mention here, solely because the culprit lies in close proximity with them and they stand beside him, even after the whole mess is created by it. Mexico's promise to borrow more from the World Bank won't do any good to many other countries, crying for help.

Asia, perhaps the mightiest as it might look. With China, Japan, India, South Korea, Saudi Arabia, Indonesia, looks like taking the charge for future calls of the International FI's. With huge foreign reserves and budget surpluses/controlled budget deficits, the next century will belong to only and only Asia. China have already over taken Germany and is in top 3 nations of world in GDP(PPP). The might of Asian countries and fall of European and American countries was correctly described by BBC saying - While the west will start contracting, China and India will still grow, perhaps at a slower pace. That itself is a huge statement.

Europe, pity, the over-reliance on US of A and low local demand, have done them in. Perhaps the biggest loser in recession game and might be the last one to get out of this hole. Sarkozy remained defiant in face of a very strong opposition (USA and UK), supported by the ever stubborn Merkel. Perhaps the NATO-affiliated countries are to be blamed partially for the slowdown in Europe. The huge sums to both wars, just on the wink of an eye by master, have resulted a huge hole in there pockets.

Australia, well, are they a continent? Even a passing mention won't do any good.

Conclusion? Well, simple, there are so many US dependent economies in the world, infact many of them US nourished and nurtured, that it will all depend on there master. If the US of A stops playing its dirty games, perhaps the world would be a better place to live. The 'first world' doesn't seem to be far from the 'second and third' after all.

The whole world seems to be fighting with an invisible enemy these days. One, which refuses to die down and retaliates as an essential example of Newton's Third Law of Motion. The governments world over are trying to figure out strategies to combat this enemy, yet to no rather negative effect. This enemy ain't murdering innocents. Yet there is pain, suffering, fear and uncertainty. Thats what the RECESSION has resulted and make no mistake, its getting worst.

Most of us point our finger to the US sub-prime mortgages, much in demand because of the Real Estate bubble. Here's what i think about the co-relation between Real Estate and Global Economic downturn.

Lets assume 3 inhabitants - A, B and C on a remote island. A and B have 1 coin each and C owns a piece of land.

• Human wants are more than needs. A buys the land from C for 1 coin, all fine, just an exchange.
  Situation: A- Land, B-1 Coin and C-1 Coin; Price of land- 1 Coin



• Tempted by the uniqueness of land (2 Coins but land only 1), B buys the land from A for 2 coins, borrowing another coin from C, introduction of credit.
  Situation: A-2 Coins, B- Land and a debt of 1 coin from C, C- 1 coin lended to B; Price of Land: 2 Coins



• Lured by the trading of land by fellow co-inhabitants, C decides to re-buy the land from B for asked price of 3 Coins. Already lended 1 Coin to B, C borrows 2 coins from A to pay-pff the rest. Still fine, no shortage of phsical money.
  Situations: A- Lended 2 Coins to C, B- 2 Coins, C- Land and debt of 2 Coins from A; Price of land: 3 Coins



• A decides to realise its loan by exchanging land with C. C asks for 4 coins as the price of land. A borrows 2 Coins from B and acquires the land from C. Still better, rotation of money.
  Situation: A- Land and debt of 2 coins from B, B- 2 coins lended to A, C- 2 Coins; Price of land- 4 coins.



• Fearful of his loan going bad B re-buys the land from A for a price of 5 Coins- 2 borrowed from C + 2 against loan and 1 DUE. Physical money shortage.
  Situation: A-2 Coins and 1 due from B, B- Land, 2 Coins borrowed from C and 1 coin due to A, C- 2 Coins lended to B; Price of land- 5 Coins

The Price of land when exceeded more than 1 Coin, resulted in introduction of credit, more than 2- increased credit, more than 5- shortage of physical money. All of it gets worse from here, till a point of realisation that no more money exists which will than led to panic selling, resulting in the reduction of price of land. The land will ultimately fall down to its base price, 1 coin, but the credit will still exist. Implications will be bitter fighting for the realisation of borrowings, ultimately leading to war like situations. The disaster could have been avoided if each of them had realised how much money the others had, which would have laid to rest the uncalculated lendings and borrowings.

Its the banks who are at fault, because they got to assert how much money can the borrower pay back. Whatever may be, we are heading for the 3rd World War.