Gold News

Young & Poor, with a Future

Or, the secret to India's next boom hasn't changed from the last...
WE GOT a glimpse of Bombay's new huge, ultra-modern airport when we arrived, writes Bill Bonner in his Diary of a Rogue Economist.
It is an engineering and architectural marvel.
An airport is necessarily a rational, planned affair. Travelers, luggage, airplanes – all must function with as much efficiency as possible. Schedules must be kept. Procedures must be followed. Order must be maintained.
But all around the airport was chaos. Support towers for a modern highway rose up out of the dirt...where chunks of broken, discarded concrete had been abandoned. Tools...building supplies...shacks and sheds...trash...and, of course, throngs of people mingled in complete disorder.
Why don't they straighten the place up? Why not put things away? Why not impose some order? Will India always be a poor, messy confusion?
"You will never understand India until you've read the Bhagavad Gita and the Vedas," cautioned an old friend.
We didn't have time to read the ancient texts. So, we kept our eyes and ears open.
Last night, we made our way through the festivities for Kala Ghoda in central Bombay to the Sassoon mansion. The streets were crowded. Pedestrians. Motorcyles. Automobiles. There was little open space. Women in their bright sarees...odors of spices on the sidewalk...vendors selling jewelry and drums. Horns honking. It was Bombay, after all.
David Sassoon was a rich Indian Jew who moved his family to England in 1833. His grandson fought in WWI and chronicled the foolishness of it in poetry. In the inner courtyard of his house – now a museum – local poets recited their verse to a sparse crowd. A young woman with a very English accent had the stage:
"What am I to make of all the sounds?
"All the noise.
"Is it real life...the real thing...all there is...and nothing more?
"Or, is it all illusion and distraction...
"Diverting my attention from the deep mysteries of my own soul?"
We didn't stay for the answer. Is it all an illusion? Maybe. But it's all we've got. Better make the best of it. And that is done not by exploring the mysteries of our souls, but the mysteries of the noise.
Our colleague began explaining the poor performance of Indian equities to us.
Everyone is India is corrupt. Well, not everyone. But there have been so many scandals that it's no wonder people don't want to put their money in Indian stocks. But the more he explained, the more puzzled we became:
India has always been a very corrupt place. It's the only way to get anything done. You need to bribe someone. But Congress passed a law requiring public disclosure of the contracts between the government and private business. For the first time, you could look at what really goes on. Naturally, you find corruption. The dealmakers didn't want to be prosecuted, so they simply stopped making deals. As a result, the big capital investment projects came to a halt and the economy suffered.
It sounded as though it wasn't corruption that hurt the Indian economy, but the lack of it.
Our colleague added:
"This stage will pass. People will get used to this new transparency law. They'll figure out how to be corrupt without getting caught. The economy will pick up."
And how will Indian stocks do? Will they get back on their feet?
Finally, he said:
"If you go back to 2000, you see that everybody's favorite market – the US – has risen about 50%. That's the S&P 500. Compare that to the Bombay stock exchange. The BSE 30 rose 600% since 2000. And the fundamental conditions have not changed. India is young and poor. America is old and rich. Which one will grow most in the next 10 or 20 years? Probably India."
Yes, once it figures out how to get its corruption mojo working again...India is set to boom. Or not.

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

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