E.R. RAMACHANDRAN writes: I happened to run in to Nanubhai on Dalal Street. He was eating Khaman Dhokla in a farsan shop.
“Khem cho, Nanubhai?”
“Saru che.”
He was looking glum but gestured me to join him.
As I bit into the tasty dhokla with tangy chutney on the Friday afternoon, which was fast turning into a ‘Manic Friday’ as per Dalal Street lingo, he was staring at the bull near the entrance, which overnight had become a Russian bear hugging everybody that passed the Street.
Nanubhai is a well-respected Dalal Street dada with an answer to every shareholder’s query.
“What went wrong with Lehman Brothers?” I asked.
“Lots of things. If the founder brothers, Henry, Emanuel and Mayer were alive this wouldn’t have happened. Lehman Brothers were more than a 150-year-old company. But yet, it had no Lehman in the company. Such a situation can never happen in India.”
“Are you trying to tell me an Indian would have handled this differently?”
“Bilkul. If it was an Indian firm, Lehman Brothers would have fought as soon as their father died and divided in to three companies. They would have diversified into clothing, polystyrene, petrochemicals, vegetables, movie making, telecom, drilling oil, mobile phones, retailing, books, spectacles, gyms, wellness. In short, anything and everything under the sun. They would have made money for themselves and their shareholders.”
“But when there is massive failure there would be no option but to file for bankruptcy?”
“Fail-wail chance hi nahin! Even if they encounter tough times, they would have friends like Mulayam Singh and Amar Singh to bail them out. They could finish off competition by befriending the finance minister and getting duties levied on the imports of competition. They would fund and befriend ruling parties. Unfortunately for Lehman Brothers in 2008, without a Lehman on the board or some Indian business brothers at the top, they couldn’t open the survival kit to stay afloat.”
As we were sipping double khadak chai, I asked: “Did anybody anticipate this global meltdown?”
“Anticipate? Mazak chodo! I will tell you something. America has some 45 Nobel laureates in economics from 1970. From 2000 alone there are 15 Nobel laureates in econometrics sitting on company boards, treasury benches and in places like Harvard, Stanford etc. Kisiko kuch patha nahin tha! How come none of these had any inkling to the disaster awaiting the banking circles all over the world? Even the finance ministers of G-7 talked of strong “fundamentals” of world economy around this time last year! Two months back the only topic they were discussing was the rise in oil prices.”
“What will happen if it goes all on like this?”
“Some American economist will study this, write a new a theory and get Nobel Prize next year, dekhna. Seriously, they forgot things like control, double check, systems-in-place etc and brought in vague words like Subprimes to give loans left, right and centre.”
“What will happen to the Indian market?”
“It’s already having the Lehman Brothers’ effect. Our finance minister seems to like the figure 60,000. While presenting the budget earlier in the year he pledged Rs 60,000 crore to write off loans given to farmers. Now he is pumping Rs 60,000 crore to help out the banks! I don’t know what he will do next. He is again from Harvard!”
“What is the lesson to be learnt from the Lehman Brothers’ episode?” I asked as we were leaving.
Nanubhai took a spoonful of saunf and said: “You know, we have an old elementary rule for keeping hisab-kithab. Divide a page into ‘Left’ and ‘Right’ with a line in the middle to denote Debit and Credit. In case of LB, as somebody said, nothing was right in the ‘Left’ and nothing was left in the ‘Right’,” concluded Nanubhai.
Great piece ERR :)
very enjoyable reading that sire. thank you.
good one.
Jokes apart, I seek to raise some points:
Will the world finally see through the tamasha that goes on in stock markets (derivative trading, short selling and such) as glorified betting?
If Executive salaries have come up for debate even in the Mecca of Capitalism, will our IIMs be immune?
Where are those highly paid credit rating agencies who are supposed to know all?
Make no mistake, allowing FDI in retail and continued preferential treatment to FIIs, will put India in a similar mess one day. China is sitting on a trillion $ forex reserves thanks to Walmart. Compare that to USA today.
Felt nice reading this though one can’t say this while reading about the market.
ERR..No ERRor… Nice piece…
@Truth From Facts,
the problems arose due to unregulated ‘betting’.
This is the time for India to leap frog ahead by attracting more investments and it will be very wrong move if we take a conservative approach by adding protectionist barriers to investments including retail (which BTW is the best solution to improving agriculture sector). We have to act before America realizes its follies…
And China sitting on 1T forex reserves means having america by its chandugalu :)
ERR,
Absolutely hilarious and one of your best columns. Seriously, you should write these columns in a book or even better write a series of novels. You make RK Narayan look like a plodder and a dim wit:)
ISLAMIC banking would have saved the World economy from this kind of turmoil.
It is time the Muslims re-affirm their faith in ISLAMIC banking. I would say even non-muslims invest in ISLAMIC banking so that this can boost the world economy.
The minute the INTEREST practice comes into play then greed creeps into the system and greed creates chaos.
Now the Inflation is sky rocketing and fault is with the system of regulations.
American has produced so many economists but all are farce.
Believe in over a thousand your methodology of ISLAMIC banking and the world will be safer.
Get lost Azamgarh. Once the oil banks dry up the so-called ‘good’ Islamic economies too will join the Afghan-Iraq-Pakistan bandwagon. Then Poppy cultivation will be the only way to do Islamic banking. in Saudi you can’t print the word ‘interest’ in newspapers. But when Saudi funded Thaiwan way back in 1980s they charged Islamic interest!
@Azamgarh,
yeah right!!. Poorest people on earth are muslims and they are getting poorer. Once the oil boom gets over, muslims will be a dependent community. When increase in population is not proportional productivity, one can expect the real problems, banking or no banking
Karihaida,
‘
This is the time for India to leap frog ahead by attracting more investments ‘
but how.
Would you invest in India, if you were living in west
Azamgarh seems to be a malicious troll, and I feel it is best to ignore him. He very well knows that all his statements in his past several posts are either downright stupid, or provocating. Ignore him – replying to each of his idiotic statements is a big waste of time – he’s probably having a good laugh right now!
Well how i wish the whartons and kellogs and teh harvards of the world also taught morals and ethics along with ‘finance’. The greedy students let loose by these institutions after indosctrination in finance, created a galaxy of dubious and complex instruments from bad loans by giving them sexy names like CDOs and sold it to the gullible of the world including pension funds..Now the world has to pay a heft price for their greed
Richest Tax payer in India is Shah Rukh Khan and Azim Premji. Dont term muslim’s poor. You are suffering from a limited vision.
While 36 billionaires in India have a collective economic wealth equivalent to one-third of the country’s GDP, the country’s 600 million farmers collectively account for only 17 per cent share. With every passing year, the share of agriculture in GDP continues to slide down still further. No wonder, the average monthly income of a farm household (which includes five members of a family and two cattle) does not exceed Rs 2,400.
Bilihaida,
Dear white counterpart.. I’m already doing it :)
Ways to attract investements.. open up/reform agriculture sector, cut down on wasteful spending and investors will come automatically given the consumer base we have. The first batch of ‘forced’ investors i.e RNRIs will start trickling in soon and its only a question of wether they can get others along with them.
Plus given the scepticism about what the messiah (Obama) might do, if our gov’t thinks out of the box it can be achieved.
I agree with Azamgarh. Islamic banking has got a good funda of not allowing the INTEREST on money.
I am a hindu but really I find this beneficial.
I think there is some kind of misunderstanding on Islamic banking. Its a very simple concept that we all studied about this in form of idioms in school that ‘ chappe idashtu kaal chach beku’ (jitna chadar, utna pair pasaro).
No taking or giving money on interest. Just try this… There will be no credit/EMI prblems etc.. Yes, you will go up in life a bit slow but will have a lot of peace of mind.
@Azamgarh,
I think you should provide some tips to make this concept understand to all.
Good artilce yaar.
@Azamgarh
:) ISLAMIC Banking. All that blah blah blah. But richest taxpayer. Azmi premji was selling soaps only, he made his name and fame on the formar CEO of Wipro Technology “Vivek Paul” And Shahrukh khan, Yes first gay of india having highest wealth. Why you forgot Ambanis, tatas and narayan murthis. Improve your knowledge and thinking beyond the bread which media gives you to eat.
No problem. Live your thinking and get a kick in your butt or think out of the box and understand the real scenario..
Awesome observation about Nobel laureates from harvard and how INDIAN would have saved. :)
Certainly a very good & thought provoking article.
Unintelligible-House
I welcome Islamic banking; but the problem is it works only for ‘Peaceniks’! What about non-Peaceniks like us?
DB,
For you marwari lending at 25% rate of interest maybe?
Dear ERR,
I always wonder how you can give such beautiful but thoughtful pieces!
In full agreement with Doddibuddi reg publishing books and about RKN.Keep up!
Simply loved the piece :)