India – Killing the Goose that Laid the Golden Egg

India Reserve Banks 1

Almost two years ago Warren Buffett called India the “dream market” and now the economic growth collapsed to a snail’s pace and the nation’s debt ratings are at risk of being cut to junk. Consequently, India has been obsessed with their current account deficit failing to grasp the idea that capital investment inflows result in outflows of profits, interest, and dividends. We seriously need a major reform of the international accounting system for it is contributing to the destruction of the global economy by government intervention. India has not only raised taxes on gold trying to stop its importation, but they are now sitting on any attempt to wire out capital from the nation. Even deals selling Indian assets by foreign investors trying to liquidate has now been blocked by red tape. Money can take months to get out waiting for the central bank to approve the transfer.

A year ago, Singapore abolished a general sales tax on imports of investment grade gold and other precious metals. They have been trying to establish storage facilities for gold acting as a neutral agent – the new Switzerland of Asia. The entire region is shifting and we may see a peak in this type of activity by 2015.75.

The emerging markets are doing the very opposite of what they should be doing. Instead of demonstrating that they are free markets, they are attempting to restrict capital outflows and that means that in the near future, international capital will not invest in those countries if they cannot get cash when they need it.