How an average person in India has outsmarted
top Central Bankers in U.S.A. and Europe?

November 19, 2005

During 1999-2000, I used to have lively discussion with my students about future gold price. Gold was then trading in mid- to upper-200 dollar range per ounce. Then European and American central bankers were selling off gold in tonnes, primarily to support their currency values. To whom they were selling? Indians have been the highest per capita consumers of gold in the world and so obviously they were buying gold from the central bankers of developed countries in that price range. I was then telling my students that only time would tell who was smarter: the central banker of a developed nation or an average Indian. It has turned out that the average Indian has outsmarted central bankers of developed nations because gold is now trading at $480 per ounce.

Those who are not familiar about the Great Depression in USA, gold price then shot up to $600-700range. On an inflation adjusted basis, gold should now be trading at $3000 range, depending on the exact price inflation between then and now. Wall Street folks are now telling gold is cheap!! They are right. What were they telling their own Central Bankers when the latter were dumping gold in the $250-300 range?

By the standard of prosperity measure that I have proposed for all nations to adopt, India may turn out to be the richest country based on per capita wealth of the absolute majority. This is a pure hunch because countries are not building data on net household assets. In case you have missed, you can see my letter to U.S. Senators dated November 5, 2005.

My current hunch is that wealth in USA has gravitated to a top fringe and the vast majority is skating on thin ice with mountains of debt and little equity. My conjecture is that the average Indian is not yet used to debt-driven prosperity. When nations adopt the proposed measures of prosperity (I believe they will), we will know the latent truth.

I wish the Indian government decision makers were as smart as the average Indian with respect to (i) system of governance, (ii) mineral policy, and (ii) enforcing rules of law.

Sankarshan Acharya