27 February, 2021

An American Padmavyuh

Full convertibility was Manmohan's mantra. Thank god they failed.

Illustration by Sorit
An American Padmavyuh
On March 18, 2006, Prime Minister Manmohan Singh told a global audience in Mumbai that the Reserve Bank of India would prepare a roadmap on full capital account convertibility to fully integrate the Indian financial system with the global. But now, on September 30, '08, Dr Singh has done a U-turn. He now says "the foremost challenge is to insulate India from the ill-effects of the international financial crisis".

Why this shift from "integration" in 2006 to "insulation" in 2008? Simple. The Wall Street-innovated global financial architecture is like the padmavyuh in the Mahabharata which, like Abhimanyu, a nation can only enter, but never come out of. The global financial padmavyuh of today is the US-patented model. It is several thousand times more toxic now than at the time of the Asian crisis in 1998.

Just take one aspect, the monumental growth in virtual money, or derivatives. The outstanding over-the-counter derivatives (OTC) in banks was $100 trillion in 2002 and $596 trillion in 2007—a rise of 496 per cent in five years....

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