"Boom & Bust Financial Cycles"

"Financial Cycles - Boom & Bust "
by P.T. Choudary, Chairman IDEAz

Quotations for consideration:

  • “The 1 st panacea of a mismanaged Nation is inflation of the currency; the 2 nd is war. Both bring a temporary prosperity; a permanent ruin.” - Ernest Hemingway.
  • “An economist is an expert who will know tomorrow why the things he predicted yesterday did not happen today.” - Laurence J. Peter.
  • Expert predictions have a lousy record. An expert will always have an explanation for anything in hind sight, and will rarely accept that his earlier prediction was wrong. There is not much risk for experts who make predictions, says Dan Gardener , as their rules for play are “Heads: I win, Tails: You forget we had a bet.”
  • “The difficulty lies not in the new ideas but in escaping from the old ones” - John Maynard Keynes .
  • “Money is like manure; it’s not worth a thing unless it’s spread around encouraging young things to grow” - Thornton Wilders

Key Concepts:

  • The many Boom & Bust cycles in the history of our Financial System arise out of fundamental flaws inherent in our concept of money and how it operates in the Financial System.
  • An effective, steady and robust Financial System must be in consonance with the universally applicable Nature’s Laws. Flaws arise when the concepts underlying the systems are in contravention of such Laws.
  • Busts come when short term over borrowing is resorted to, to make long term investments in non productive properties / assets which do not really have any inherent potential for growth to justify the values claimed.
  • Identification of such flaws and redesigning of the Financial System will result in a more resilient and effective system that encourages steady growth.

The International Financial System has experienced many ‘Boom & Bust’ cycles ever since the establishment of Capital Markets. Each time a great many financial analysts have written many analyses about the ‘root cause’ of the most recent ‘Bust’. However there has been no success in preventing such ‘Busts’ from recurring. Also, as the ‘root cause’ is differently identified each time, it raises the question that perhaps each such ‘root cause’ is not actually the real ‘root cause’ but only an effect symptomatic of a more fundamental cause.

The real and only cause of such ‘Busts’ cyclically following every ‘Boom’ in the financial system perhaps arises out of some fundamental flaws in the very concept of ‘Money’ and how it operates in the Financial System.

To prevent such ‘Busts’ following ‘Booms’ in future, and to ensure that the growth of wealth in the System is continuous and steady and not a short lived ‘Boom or Bubble’, we need to identify the flaws in the current Financial System and redesign the System eliminating such flaws.

The invention of the idea of ‘Money’, as a mutual recognition of the value of the effort or cost embedded in each product or service by both the parties to a transaction, (the seller and the

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