Thursday, October 1, 2015

The Paradox of Stealth

Economics of Saving is a very important component of Macro Economics and Global Economics. Saving and Savings by itself provide various safe-guards to the Economy. Point 1 It prevents people hoarding money in their private domain and denying some form of circulation...Point 2 by default organized Banking institutions increase the worth of money...Point 3 money can be deployed into sectors of the economy where it is badly needed and finally Banks provide a safe haven and prevents crimes of theft.

Banking Institutions in India are an important life-line of the Economy and provides a frame work for social security and given the higher levels of population and density of population as seen in India Banking will have a say which will increase manifold in the future considering the fact that a large sector of the population is still un-Banked. Conversely said as the number of people inducted into the banking system increases more the stability of Banks a feature characteristic of India to the possible exclusion of many other countries of the World and also note that banking in India is a hundred year old phenomenon.

Alongside Banking is the activity of stock-broking which could be called as Corporate Banking if one would say so..a higher risk venture of directly investing in Companies through shares through Stock exchanges and the like and expecting rewards...this is banking through investments in Corporates a form of exchange found in many countries of the world today and supports and co-exists with the conventional banking system and set to morph and evolve in many ways.

For a moment let us focus on the conventional Banking system which is familiar and prevalent and is for practical purposes collector of money from the public; large sums at times to be lent in the public domain and is a lawful responsibility of individuals to do so and support the financial system.

What is the Paradox of Stealth ? A wealthy man who has invested in the Banking system whose money increases proportionately and unencumbered with time feels famished and poor and counts only his liquidity as his source of wealth and not the Deposits he has and note that this paradox is more prevalent with term deposits as against conventional Savings. He deceives himself into believing he is much less richer than what he is because much of the wealth is invisible and sometimes concealed in the Banking System.

This phenomenon can be seen more so in the Working sections of the population who are still over dependant on their employment though they are seemingly well-off and fail to take advantage of their position some times for various reasons.

How can someone avoid the Paradox of Stealth ?

One ..properly accounting for his long term and short term liquidity needs

Two..Assessing periodically his return from the Banking System

Three..Measure reasonably the Economic significance of Employment at any given instance

finally take decisions taking the full position and not the stealthy position.

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