Goldilocks was fairy tale.

According to S&P around 2 dozen India companies are expected to default on Foreign Currency Convertible Bonds this year. TOI, 23 June. These are bonds which give lenders the option of converting their money into shares on maturity and were issued when share prices were high and the rupee was strong. Now share prices are down so the bondholders are demanding their money back and the rupee is down some 25% so the cost of repayment has risen very high. About 80% of the bonds pay less than 2% interest and 60% are zero coupon bonds, which means they do not pay any interest at all, which means that if the companies borrow to repay the money their interest costs will rise significantly. The total amount to be repaid is $5 billion which will put further strain on the rupee. Foreign Direct Investment has dropped to $7.8 billion from January to April compared to $8.5 billion in 2011 and Foreign Institutional Investors have also been pulling funds out if India in recent weeks. The amazing thing is that these companies had made no provisions for redemption of the bonds believing that India will continue to grow forever. Why do Indian politicians, economists and businessmen think that we can keep growing infinitely? Commodities such as oil, coal and iron are finite and if all the countries in the world were to start growing prices would reach such high levels that no one would be able to afford them. The growth of just one country, China caused prices to rise all over the world leading to inflation. Brent crude was selling at $125 a barrel but is down to around $90 because of the prospect of global recession. The IMF is predicting a doubling of oil prices in a decade's time. When oil prices are high alternative sources such as shale or deep sea drilling become economical but if prices drop significantly companies will stop these activities causing a shortage which will again push prices higher. Only about 25% of the earth's surface is land, the rest being water, and of this only about 15% is arable. As economies grow people eat more and better food pushing prices higher. The poor end up starving. This is why economies go through cycles of boom and bust. Western leaders understand that growth in their countries is only possible at the expense of other countries. That is why they are refusing to make any concessions in the Doha round of trade talks at the WTO or in talks on environment. They are gambling that if conditions become so bad in poorer countries that large numbers of people are dying of starvation they will surrender in desperation. The only solution for India and other developing countries is to reduce population by 50 to 80%. That is why China enforced a one child policy which resulted in double digit growth. If there are no poor there will be no poverty. Sounds crude because it is true. Only fools believe in a Goldilocks economy.