Last week's interest rate cut by Federal Reserve of USA which again injected life in share market of India which got decimated after fall of sensex from 22,000 to 16,000 has proved (if at all any proof was needed) that sovereignty in contemporary world has no meaning in traditional sense of the term and USA is economically all powerful to influence economies of various countries including of India, especially in this age of globalization.
But if USA wants to retain this global economical leadership in the interest of avoiding such and other man made financial Tsunamis, then USA will have to do much more and take the cognizance of the following:-
(1)- One need not be Islamist to realize the impact of interest on economy. This is again proved by said Indian example where Fed interest cut made all the difference on crashing Indian share market. Therefore banking system needs immediate following transformation.
(i)- First and foremost, the long term depositors (more than three years) of the banks should be made the share holders of the banks (by converting their deposits into share holdings proportionate to their deposits). This will take care of the problem of money laundering due to carelessness and of non-performing assets which is the result of greed of present bankers who lend money irresponsibly without taking into account the recovery and of its legal mechanism. These NPAs disturb the economy of most of the countries (including of USA where this is one of the major cause of on going economical problems in USA with disturbing implications all over the world)
(ii)- Interest rates chargeable by banks should be made compulsorily unchangeable (any where between 0 to 4 or 5%) throughout the world (through UN by making it a mandatory condition for becoming a member of UN) if globalization has to have any meaning.
(iii)- If all the member countries of UN do not agree to come under unchangeable interest rate regime then USA ought to take initiative to form a group of willing countries who may give preference to this group in their financial and economical dealings so that such type of financial Tsunami as witnessed last week in Indian share market are not witnessed by the countries of this group.
(2)- Whatever the economists all over the world may say under the influence of various schools of economics (most of which are nothing but merely a justification for misappropriation of people's financial & economical space by State) but "Unless the holder of money has its stated value under his physical or constructive possession through money issuing authority it is not money".
Hem Raj Jain
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