Backdrop
Technology and Infrastructure based on
technological advancement brings about growth momentum of the economy in the
country. Agriculture and housing led to water channels, water pipes and roads,
electricity led to erection of generating systems and distribution network, TV led
to satellites, cable network, mobile phones to erection of transmission towers
and now Wi-Fi. R & D will continue
to take mankind towards harmonious, happy living and sustained relationship (that
is what we all are looking for). After the advent of Industrial Age (1770 AD) and
introduction of currency industrial growth and infrastructure projects have
been financed by Banks and after the WW II formation of United Nations by the World
Bank and other Development Banks and several Funds, existing globally and
locally. India’s Investment in infrastructure during the Twelfth Five Year Plan
(2012-17) is expected to be Rs. 45,00,000 Cr.
The source of all this Bank funding is fundamentally
and basically in the nature of debt. All the currency that exists is minted by
the 204 countries in exercise of its sovereign power either under a contract (Federal
Reserve Fund for USA) or by an independent authority (RBI for India) against Bonds
issued by Government, with promise to pay. These bonds are however never paid
back, for more money is minted against more bonds when more is required and the
bank debt fund continues to increase in the globe and continues to be
circulated on fractional reserve basis. The total global debt fund of all the
countries in 2012 is about 40 trillion US $. This money than continues to
change hands for the products produced by corporations or companies (from MNCs
to Proprietorship Firms) and services rendered by individuals (from those
working in NASA to rag pickers). Monopoly, Trade, Vyapaar and Career
were indoor children games played by us all, where the pre-existing currency
was distributed by a Banker to all the players who continued to roll the dice
and buy properties collect rentals or pursue their career with passion,
ambition and diligence, till they were too tired and exhausted (after 4-5 hrs.)
to play more and the money went back to the Bank to start all over the next
time. The global economics draws a parallel and the Banks continue to dominate
the life of every nation and every individual.
To meet its challenges of growth, Government of India
has created an Infrastructure Debt Fund of about 2 billion US $ and is further
gearing up to create further funds by issuing long term 30 yrs. Government
Bonds at about 9 % fixed income to the Bond Holders, which will certainly be purchased
by the FIIs, which control Global Financial Institutions and economy, directly
or indirectly. A well-managed and well-connected conglomeration of seemingly
unconnected Bankers, Fund and Asset Managers, Financial Consultants, MNC’s,
Media called CP – GOD (Currency Pharmacy – Gold, Oil and Diamond) continue to
control the affairs of the Governments and individuals on the basis of
fluctuating markets (called market forces) and conflicts (ethnic, civil
disobedience etc.) and amass the benefits of 7 + billion human beings.
Governments and persons sees money only from the time it comes into their hand
a leaves their accounts, but that is the miniscule visible part of money cycle
and the mega part remains un-manifest to the commoner. But economists and
people who can think and see beyond can always decipher the real play of
forces.
In view of the real play of forces, interlocked in
networked, the commitments sought to be made by the Government of India, would
logically and certainly take the growth further down, as the objectives are not
achievable from the debt fund and will not increase production but will only
increase inflation. Companies will reduce employee’s salaries budget or reduce
number of employees (they can’t reduce travel, entertainment, marketing and
gifts), leading to employees unrest (Maruti in Gurgaon) and will not be able to
invest anything in R & D and continue to depend on utran (discarded
technologies), for the companies will have to meet the direct and indirect tax
demands (validated by Courts) made by the Government at every taxing event from
excise to sales and service to wealth. Government has also no choice for it has
to pay high rate of interest on the debt funding, choicelessly received by it.
The incorrectly structured economic cycle will only
lead to disastrous consequences like corruption and civil disobedience
movement, fuelled by those very people who have first got the policies in place
to receive the debt and thereafter landed the money to legally extract money
out of the system. This is simply a global manifestation or a globally expanded
form of the old Zamindari system, where money was lent for fertilizer
and seed, to the farmer by mortgaging his land. The loan would never be paid
because the crop was burnt or money spent in rituals (dowry, mritubhoj…)
and the debt and mortgage continued in perpetuity. The Zamindar would
openly molest and rape the females in the house and not only laugh it out but
glorify his misdeeds, misdoings and misadventures. The system was fully
supported and fuelled in British Raj and the Privy Council said “Once a
mortgage always a mortgage”. All that was the reason for all the land reforms
by giving khudkasht (self-tilling) rights to all the cultivating land
less persons and abolition of Zamindari system at the dawn of independence.
It is not difficult to understand that the supports by judiciary to land
reforms led to the first amendment of the Constitution of India for the
leaders, with their vast readings (free time spent in jail) were able to
understand and appreciate the interplay of global economic forces. Incidentally
industrial age ended and e-age started in 1955, making all information
available to individuals and after 1990 though there is a deep quest of making
the world unipolar to enable them (CP-GOD) to mint a global currency, the same
is becoming multi polar and slipping out of their management and control.
For providing long-term debt to infrastructure
projects, it would be necessary to shift from Bank Funding to Insurance Funding
that has the capacity to provide long-term funding mechanism and the source of
money is not a fund created on debt. In the existing economic structure insurance
funds will be able to provide an extremely efficient method of providing loans,
on very reasonable terms as to interest and repayment to Public Sector
Undertakings and Private Entrepreneurs by fully collateralizing the project
only and without seeking any personal guarantees as is prevalent with Banking
Sector. From the financer point of view there are always inherent risks
involved with the project development investment and that is, that the
investment made may not be returned back with interest and penal interest. However,
as the horizon of the vision expands and more faith and trust is imbued on the
entrepreneur and those executing the project, it will be possible to see that
every project is able to achieve its object and purpose, if the money is spent
on the project. The real object of every project is job creation and sustainment
of personal wellbeing, which is always achieved if the project fund is not
siphoned off in land banking, share markets or other projects not under the
management of the entrepreneur and somebody provokes him and shows the
possibilities of making some quick money, which is never made.
The confidence
that this system of funding permeates because of the inherent strength of the
financial structure of Credit Funding raised against actually existing Insurance
funds from those who care for the world and have feelings for the mankind, as
contradistinguished from the money raised against Government Bonds from those
who do not care. The stake holders in creation of these funds are:
1.Life
Insurance Company – in USA
2.Senior
Citizens – in USA
3.Broker,
Asset Manager, Financial Consultant and Investment Banker
4.Overseas
Financial Group (‘OVG’)
5.NBFC
in India
6.Insurance
Company
7.High
Net-worth Individuals (HNI), Qualified Institutional buyers (QIBs) and Fixed
Income Buyers (FIBs) – All over the globe especially Europe and USA
8.Law
Firms in USA and India
9.PSUs
and Private Entrepreneurs – in India
10.Engineering and Techno Consultants and Project
Managers - in India
11.Financial
Consultants and Asset Valuers – in India
12.Projects
– in India
Backdrop
-
Insurance
appeared simultaneously with the appearance of the human society. Since 1680,
all over the world first marine insurance, then fire insurance and thereafter several
other forms of insurance have continued to grow. Life Insurance Companies
continue to provide and citizens continue to take Life Insurance Policies (LIP)
to provide security to their families after their death. Citizens continue to pay
premiums against these LIPs on monthly, quarterly, half yearly or yearly basis.
In view of the judgement of Supreme Court of USA, in USA these LIPs are
transferable and/or assignable to third party. Over the centuries, the
insurance surplus fund has continued to accumulate all over the world. This
wealth is in fact the fund generated by beings which existed on planet earth,
had worked and had deposited premiums with the Insurance companies and the
insurance companies even after paying the legitimate dues to the people have
been left with legitimate profits, which they have continued to invest against
securities including government securities on low interest rates.
These profits constitute
about 40 % of actual cash deposits in the Bank as contra-distinguished from
digital money and freshly minted currency and is to the tune of about US $ 23
trillion in US and Europe with an premium of 4.3 trillion US $ coming in every year,
for it is inherent in the human functionality, that nobody consumes more than
he produces. The only exceptions are those who do not produce anything but live
as looters and moochers (CP-GOD) on the wealth produced by other private entrepreneurs.
All the currency printed in the world does not get destroyed except when burnt
in wars, attack by terrorists or natural disasters.
The
Process -
Senior Citizens
in US, who are holder of LIPs and are in need of immediate funds, look forward
to surrender the LIPs to the Insurance companies. In view of the assignable
nature of these policies, the senior citizens can assign the same on a premium
higher than the surrender value. An Overseas Financing Company (‘OFC’) can get
in their fold, policies of senior citizens and pay the surrender value of the
LIPs along with a premium amount to the senior citizen, who is more than
satisfied as having received more value, than the surrender value they would
have got from the Insurance Company.
The OFC than continues
to pay the premium, from year to year to the Insurance Company, for the rest of
the life of the person, whose policy they have assigned to themselves. The OFC
will be entitled to receive the insured value of the LIP at the time of death
of the policy holder. Having purchased the policies of senior citizens for a
premium, OFC can assign the task to an Investment Banker to keep the policies
in their trust and continue to pay the premium to insurance companies and to
collect the insured value as and when it becomes due and payable by the
insurance companies. A simple calculation of the surrender value paid to the
policy holder with premium and the payment of annual premium to the Insurance
companies vis a vis the insured value to which OFC would be entitled, reveal
that OFC is conveniently left with a substantial surplus amount as their profit.
This surplus amount along can constitute a reasonable fixed return of, say 5 %
for 10 years, and is a complete security of any long term investor and is totally
secured by any Investment Banker. A totally secured annual return backed by
existing securities is a perfect, lucrative and flawless investment for High
Net-worth Individuals (HNI), Qualified Institutional buyers (QIBs) and Fixed
Income Buyers (FIBs) all over USA and Europe, when LIBOR (London Inter-Bank Offered
Rate) is about 1.35 % for 12 months and continues to vary at 11.45 am (London
Time) every day at the behest of BBA (Britain Bankers Association – and
extension arm of CP-GOD). The maximum amount that the HNI, QIBs and FIBs are
receiving against long term investment is LIBOR + 1 % i.e. 2.35 % and they are
not aware, where the money was being invested.
Having secured
the funds raised by OFC, OFC’s would execute MoUs with Public Sector and
Private Sectors undertaking infrastructure projects in India by creating an SPV
or equity participation or granting loan. With the formal commitment made for
projects in India, OFC will load their Mid Term Notes (‘MTN’) or Bonds from its
SLS portfolio and instruct its Investment Banker to provide the HNI, QIBs and
FIBs with information required to enable them to access the MTN or Bonds offered
via the Bloomberg Terminal in order to perform due diligence of the projects to
be executed in India. With the due diligence accomplished and the HNI, QIBs and
FIBs becoming exactly aware of where the funds are flowing, the sale can be completed
with the MTN or Bonds sold @ par to HNI, QIBs and FIBs all over USA and Europe
assuring return of principal and a 50% fixed return (5 % per annum for 10 years,
payable at the end of 10 years). The Investor purchases these MTN, for such
investment eliminates the inherent risk of any loss of principal and interest
which is associated with project investment and also gives him a sense of
contribution to actual genuine development of the world and not contributing or
underwriting the blood money used to exploit the commoners around the globe
The investor receives:
· MTN
ownership, backed with ‘A’ rated or better SLS with a non-lapse premium
contingency.
· Principal
reimbursement at maturity
· 50
% fixed return, payable at maturity
· SPV
security
· Equity
stake
· Additional
windfall
Reorientation
of the family structures, coming up of new entrepreneurs and modernization of
technology shall continue to need fresh funding ad infinitum. The quest and the will of every human being to create
world anew and a will to create a better human society or natural disasters
will continue to take the infrastructure and the world around to the next level
year after year, whether it is basic like bijli
(electricity), pani (water), sarak (road) or real estate and housing,
telecommunication, sports, old homes, education or heavy medium and small industry,
to next level and continued reconstruction. India neither lacks
entrepreneurship nor lacks commitment, but needs the necessary restructuring
and momentum to break the existing inertia, which can be provided by Insurance
Credit Funds and help India to take a quantum leap.
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