The Unseen Bubble

 

So we all have reached the stage when the kids are being exposed to words such as Keynesian and Hayekian. They surely were jargons some time back but no longer. Having experienced and still experiencing one of the worst recessions in a lifetime, we have all witnessed the procreation of the housing bubble. It all started with the Asian Financial Crisis of 1997, after which the Asian countries started maintaining a Current Account Surplus .Indian too joined the bandwagon. From the perspective of the then contemporary economic policies , having a CAS was supposed to be good. With the spectacular growth in outsourcing and the service sector, Asian countries witnessed huge FII and FDI inflows. This helped them maintain a huge CAS, not to mention the undervaluation of Yuan and other currencies that added to this. The US in the meantime was witnessing growing trade deficits. Over a period of time, the CAS in all the Asian countries had a corresponding CAD in the US. The Asian countries then started investing all the dollars in US Treasuries for safe returns. This drove the Fed's interest rate down to almost 0.25 percent. Low interest rate propelled cheaper loans and housing boom bloomed. This was the first bubble that was being blown. Once the supply surpassed demand the bubble burst and took with it the entire world. This led to a ripple effect in other Financial products. Seems even the trillion dollar pump in is not going to help things. The next visible bubble seems to be the US Treasuries. Having said all this, there is another small but unseen bubble, albeit not economical, being formed in our country. The MBA bubble. a decade back or just 5 years back, MBA was a coveted degree, that brought with it a lifetime of luxuries. This tempted many a young grads and they all jumped into this bandwagon. The number of MBA institutes sprawled across the country with not enough job opportunities. Today, when the job market is in its lifetime low, and recession is biting its share from every bread, there is a mad rush to get an MBA degree. Can we think of the scenario two year hence, when the economy recovers again slowly, there will be a market with unlimited supplies of management grads but the demand will not match up to it. This will lead to people working on a salary that's far too lower than their peers got 5 years back. This is the burst in MBA bubble I am talking about. Although an MBA aspirant myself, and having flunked the exams since the last 4 years, keeping my stupidity aside, I feel we all need to learn to survive. An MBA grad would have to create market for himself and then sell himself. Unlike earlier times when there used to be demand, this time around there is not going to be any such fanciful offers. Entrepreneurship will go a long way and would go on to decide the fate of this country and maybe the coming decade. Asians would have to start spending more for the world economy to recover. How is this going to happen? Where would be the market for it? Answer lies within. We need to create the market right here. And this is possible only if we create entrepreneurs and spread the spirit . Once we have the market, spending will automatically come through. We would then have, what I call brain gain in our country.