The world should learn from us: black money is the solution.

Although very different in nature dollar economies are much more successful than others, writes a Nobel Laureate in economics. By that he must mean Anglo-Saxon ones because there are many dollar economies in the world and, some like Zimbabwe, have had to get rid of their currency after it became junk. These countries have independent currencies, which move up and down according to the state of the economy, unlike in Europe where 19 countries have adopted the Euro, without fiscal or political union, resulting in severe stress. The Aussie dollar has dropped to 70 US cents from parity while the Canadian dollar is 75 US cents. This makes exports cheaper but surely makes people poorer by reducing their buying power as imports and travel become expensive. Even with a 30% fall in the value of the currency Australia is having to shut mines, with consequent loss of jobs. Surely, the same logic should apply to other countries with independent currencies, even if they are not called dollars. Brazil's currency, the real, has fallen to its lowest level in 10 years and its credit rating has been cut to junk status. A cheap currency raises the cost of goods so inflation is at 9.57%, forcing the central bank to push interest rate up to 14.25%. This is typical stagflation. Brazil's economy depends on exports of commodities so the slowdown in China has hit it very hard. But what about Japan. It is a manufacturing and high tech economy so the collapse in commodity prices should have sent its economy soaring. But its economy actually contracted in the second quarter by 0.3%. This is apparently because Japan, like the US, was buying up bonds to increase the money supply into the banking sector in the hope that banks will be forced to lend because a very low interest rate meant that the money would not earn anything. However, the inflation rate was also very low which meant that there was no loss in keeping cash lying idle, which is what banks did. China did precisely that when its government poured money into infrastructure and real estate after the crisis of 2008. China's debt has risen to 282% of GDP, most of it being household and corporate. China wants to shift its economy to a consumption led growth, like in the west, but that will cause boom-bust cycles as high consumption leads to high inflation, which is controlled with high interest rate, which leads to a fall in investment and slowing of the economy. The US has suffered 12 such cycles since 1940. Will its rigid political system withstand a bust? Meanwhile Heibei Financing is close to collapse because of $5 billion of bad debts. Some countries have gone into negative interest rates to force people to spend and banks to invest. Global confusion! In India we are not concerned. There is only one remedy for every ill: reduce interest rate and increase black money in real estate. We are so clever.