War of the worlds: It's good! - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

War of the worlds: It's good!

Jul 12, 2005

If we would address Swami Vivekananda as 'an economist of highest order', we would surely be termed as insane by one and all. But halt, lend your ears to what he had to say - "You tell me how much you have suffered and I will tell you how great you are". Whether these words mean philosophy of economy may be debatable but surely there can be no two ways about the fact that they can be uttered in context to the progress made by countries which suffered mass destruction due to wars. The list of examples is unending - Japan, India, Britain, America, and Iraq. Bullets are fired, cities are shelled and troops march on, marking the beginning of a war, a word synonymous for destruction, devastation, agony and loss of hope. But in case we were to take a journey through history, we would see that countries that have achieved economic prosperity have in fact fought the biggest wars. Further if the track record and statistics of such countries were taken into account, it would prove beyond doubt that the foundation stones of their success and prosperity were laid in the times of war. Is it because "it is so" or is it because it is the war that led them to economic prosperity?

Right from the era of World Wars to the Korean war, Vietnam war, Indo-Pak wars, the Gulf war to the attacks on the World Trade Center, why is it that skirmishes of wars have brought about some major restructuring within the countries involved, thereby leading to an era of greater mobility of resources, liquidity in the market and economic prosperity.

The September 11 attacks on the World Trade Center marked the crashing of the twin symbol of capitalism on earth blowing an air of pessimism throughout the world, indicating that it was heading towards the worst ever economic recession. The people had nightmares about sky high fuel prices and rocketing insurance premiums, but somehow the twin towers proved themselves to be great martyrs, who even while coming down to rubbles paved way for many optimistic news not only for America but for the world on the whole. In fact the "First war of the 21st Century" as the American President described it, would prove to be the first defeat of a rising recession in the 21st Century.

One thing that will prove that the above quoted lines are factual rather than optimistic hallucination is simple statistics. The US government had started spending in all spheres thereby paving way for a much-needed push to the US economy. The Federal Reserve pumped in US$ 100 bn into the financial markets in days after the attack. The US Congress gave the green signal to a US$ 40 bn relief package and all this even before firing a single bullet.

Further, this led to the US central bank, the Federal Reserve, loosen its monetary policy, the end result of which was the lowering of US interest rates to their historically high levels of 1%. While such low interest rates gave birth to certain 'evils' like the present high US current account deficit and sowed seeds of the housing bubble like situation in the US, it was a boon in disguise for the equity markets in emerging nations, including India. These markets gained immensely from the high levels of foreign money flows chasing relatively attractive assets than the US T-bills and bonds, yields on which had reached their all time lows.

Bang For The Buck!

While we are not saying that the world needs wars to propel economic growth, what we are indicating here are certain long-term consequences arising out of it. Time and again there have been wars where the world economy is struggling with an economic slump or depression, but spare a thought, never has a war led to an economic depression. The sole reason lies in the activities during and after the war. The basic requirement for progress and prosperity is mobility, mobilization of financial resources, human resources. A war compels a nation to mobilize its resources, driving every individual to work for his/her nation. The nation stands as one, as it has a dream and will of a better tomorrow.

The recent bombings in London were a clear case in example. While these have surely shaken the belief of the Londoners that theirs was a city safe from terrorism, the way the global financial markets reacted and bounced back the next day is something that is indicative of the changing world. In fact, over the years, it has taken lesser and lesser time for the financial markets to bounce back from the lows recorded on the day of devastation. This is surely a lesson for the investors in equity markets. While short-term after-effects of events (good or bad) surely shake the markets, in the long-term good stories (stocks) are bound to move up and give good returns on investment. Happy investing!

Equitymaster requests your view! Post a comment on "War of the worlds: It's good!". Click here!


More Views on News

How Much Money Should an Investor Set Aside for Trading? (Fast Profits Daily)

Sep 21, 2020

In this video, I'll give you a simple equation which you can use to decide how much money you can set aside for trading.

Kotak Standard Multicap Fund: Strategizing Growth with Focused Approach (Outside View)

Sep 21, 2020

PersonalFN's analysis on the features and performance of Kotak Standard Multicap Fund.

Sensex Can Go to 25,000 Before it Goes to 60,000. Are You Prepared? (Profit Hunter)

Sep 21, 2020

Am I expecting a big crack in the Sensex and what next?

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Sundaram Bluechip Fund: Will Hold the Stable Horses (Outside View)

Sep 18, 2020

PersonalFn briefly outlines the newly launched NFO note HSBC Corporate Bond Fund.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 21, 2020 (Close)