Sunday, August 7, 2011

$ 14,600,000,000,000 of US National Debt - How & Why?

$ 14,600,000,000,000 & increasing! This is the amount of US National Debt.

$ 50,000 is the debt per citizen.

$ 130,000 is the debt per tax payer.

$ 3,600,000,000,000 is the total of us federal spending.

$ 1,405,000,000,000 is the total us federal deficit.

The most surprising figure – Total US Debt – 55,000,000,000,000

Image found on Google Web
Do these figures in red color amaze you? What comes to your mind when you get to know that, statistically, every person in US has a debt of Rs.22,50,000/- in Indian Money terms.

This all started when a man dreamed of boosting US Economy, falsely. He dreamed that every citizen in US should own a car & a house, no matter he can afford it or not. Every US citizen should be able to maintain a high standard of living not matter he is worth it. No matter what happens, US economy should maintain the title “World’s Most Developed Economy.”

And to make this dream come true, he ordered every bank to grant as much as mortgage loans possible, so that the citizens of US may easily live a high standard life. Imagine how easy life would be when banks start giving you any amount of loans without checking if you are worth it or not.

Same thing happened in US. Everyone started purchasing all their desired stuff on loans. Furniture, Electric appliances, Electric fittings, Gadgets, costliest wrist watches, vehicles, CLOTHES, jewels, kitchen utensils every damn thing was purchased on loan. And so the dream of High Standard of Living came true. The Economy System was such that no one realized that they had to re-pay the loans later. The economy kept on boosting the purchasing power of every citizen.

But, as luck would have it, the outcome of such Economy System affected adversely with a BIG & MASSIVE Economy Slowdown/breakdown. This was 1st reflected when the World’s richest bank “Lehman Brothers” filed for Insolvency / Bankruptcy under Chapter 5 of US Companies Act. Sharp investigations were made to find the reason of downfall of World’s richest Bank. These investigations revealed the truth soon. The Economy Experts & Researchers were called upon to find the solution to come out of this Recession. But it seems there has been no proper solution till date.

The US Economy fell deeper & deeper into the Recession when many other banks started filing for Bankruptcy. Problems increased day by day & everything reflected on The Wall Street.

HALF OF THE WORLD found that even they were into such Economy Disorder. China leads the group of countries which were under such conditions. India was also under such conditions but to a very small proportion. Soon, the recession fears spread all over the world and the respective stock markets started crashing. 2007 was the year of Global Meltdown where all the economies around the world corrected & fell sharply.

A few developing economies like India, which were partially or indirectly affected by the Global Meltdown started checking out for such domestic economy disorders. This is the main reason why India is not under Recession till date. But what worries me is the Realty Bubble in India. It is one of the symptoms of approaching recession. We are not under it still & I pray that we never fall under recession. Hope to see some better laws & regulations so that we remain away from Economic Slowdown.

How does this slowdown affect the Stock Markets? What is the reason for the Stock Markets crashing all of a sudden?

Now, 1st let me clarify some things. Please do not believe the media which flashes news like “Investors lost 2,500,000 Crores of Rupees in today’s Stock Market Crash.” INVESTORS NEVER LOOSE MONEY. These are the most incorrect figures. I don’t know how they derive to this figure. Trade Settlement in India is done after 3 days (Trading + 2days). So how can they determine the amount of losses on the same day when markets crash?

Moreover, the only feasible way to calculate the amount of losses is – [Value of shares I held yesterday before the markets crashed, minus (-) Value of shares I hold today, after the markets crash.] This system is incorrect, as 1 might be holding the share purchased at a very low value & has sold the shares at some price after markets crashed but fairly above the price at which they purchased the shares. Investors end-up making profits even in the falling markets which the media wrongly terms it as a LOSS.

Now let me explain how the Global Stock Markets crashed on Friday, the 5th August. S&P (Standard & Poor) a Credit Rating Agency, revised the rating for US markets to AA+ from AAA+. This led to a sudden collapse on The Wall Street (US Markets). The recession fears spread all over the Globe in no time. After the US markets closed, it was time for Europe to open the trade. As expected, all the European stock markets witnessed a sharp crash due to the same recession fears.

Now it was time for India to open the trade. Indian Markets are the most attractive across the globe. This is why foreign investors invest big money here as the risk reward ratio is very favorable in our markets. But at times, this adversely affects Indian Stock Markets when there is a bad news to follow. All the foreign investors start selling their holdings which create intense panic in Indian Markets. Moreover, our domestic investors also start squaring off their holdings even if there is a small bad news.

BSE registered 700 points crash in a single day on 5th August. I would term this fall as senseless. The value fall might just be about 300 points. It fell by another 400 points because the Stock Brokers started squaring off the positions of clients having insufficient funds which in turn resulted in excess supply over demand. All this happened just because S&P revised & under-rated US economy. Why did our domestic investors sell their holdings when there was nothing really wrong with the Indian Economy?

But what can we do? Traders & Investors in India are really illiterate. Financial literacy lacks among Domestic traders & investors. Every one start selling their shares even if our Finance Minister sneezes. :P :P Indian traders & investors need to undergo proper Investors Awareness Programs.

India will not face Recession because as of now our Economy is growing at the pace of 8.5 percent plus. Surely there are a few concerns like Inflation, Corruption, Government Instability & a few more, but I hope & pray that we overcome these concerns to a great extent. 

Wishing everyone a very wealthy & prosperous life :-) Don’t worry Dost log.. Yehi hai Aankado ka Dhanda.. Ek din teji.. toh ek din Manda… :-)

Bijoy Momaya !!