I love it when a plan comes together!
Just a month ago, I recommended going short on the Indian rupee
, expecting a 10 percent drop in its value. As of today, we have had nearly 11 percent decline in the value of the rupee in a very short time. Those of us who bought put options are sitting on triple-digit returns.
Last week, I wrote about gold being back in vogue
. I indicated that gold had ridden up by 17 percent from its lows to $1,370 per ounce. Today gold sits at $1,420, up a further 4.5 percent in just one week.
While I enjoy the profits, my mind does wander to what the root causes of the fall of the rupee and the sharp rise in gold prices are.
This weekend, I was reading parts of the famous "The Republic" by Plato. I was intrigued by how relevant his writings from 2,400 years ago are even today. I was also reminded of the works of his prodigal student, Aristotle, who in his works titled "The Politics" explain what may be happening in America today.
Plato wrote that personal interests do not mix with that of the state as far as a leader is concerned. He was convinced back then (and I whole heartedly agree) that a statesman has to be a very educated person and one who can clearly distinguish between personal gains and the good of the nation. In India, there is an acute shortage of well-educated and ethically honest leaders. The main purpose of the leader in India is to oppose the other party as well as to divert state wealth to their own needs.
As a result, India has always struggled with growth rates below its true potential. But when the degree of personal greed and infighting reaches a crescendo, we see a tattered state in dire straits.
In my opinion, a clean slate and fresh elections are the only hope for India now. The illogical policies of the current brain trust in India (a finance minister pleading the populace to not buy gold — the only savior from the rupee for Indians, high taxes on TVs being imported into India, etc.) show the bankruptcy of ideas that exist at the highest levels in tackling the problems. Such misguided policies are ineffective and bound to fail.
Moving to gold, the sharp rise in the past couple of days is based on the fear of a war with Syria. There we have a tyrant who is literally killing his own people just to stay in power. I am reminded of the passages from Aristotle's work where he describes the traits of a tyrant.
A tyrant starts out appearing humble and simple. He seeks to show himself as a steward and a king. Once in power, he will stop at nothing to stay in power, starting with spying on his people and ending with killing his own people, if necessary. The tyrant is adept at creating divisive policies and speeches to divide his people. Constant battles on various topics between the two sides often ensue.
A tyrant also seeks to disarm his people, making them powerless in attempting any kind of acts to overthrow the tyrant. A tyrant also tells his people to hunt down those who oppose his authority.
I see all of those traits in the current regime in Syria and it shows no signs of any solution. As a result, the world stands on the brink of another war, yet again. That has led to this recent spike in gold prices.
While I see the causes of what plagues India and Syria, what bothers me is that I see eerily similar signs here at home too. What plagues India and Syria today can easily be the United States in a few years if we don't take care.
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