Monday, September 26, 2016

India Export Import Bank Madness

While USA is lending its buying power to India so companies such as GE can have customers they would not otherwise have, India borrows money to lend to companies overseas so they can buy from India products that would otherwise have no demand.
Export-Import Bank of India (Exim Bank) is planning to once again tap the overseas market to raise up to US $1.5 billion via bonds in this financial year in line with demand.
"On an average year, we need to raise US $2-2.5 billion. Definitely, we will be going to market once this year, but size and time have to be decided depending on market conditions," Exim Bank CMD Yaduvendra Mathur said.
Since there is no rational limit to ex nihilo credit, people do the most irrational things.  Like buy and sell things they otherwise would never consider.  The malinvestment and misallocation is incalculable.  And it gets worse.
"Our balance sheet is predominantly dollars, almost 60% is in dollar terms. This is an area which is going to see the fastest growth," he said.
"Our assets are long dated. We will always have refinancing demand because liability is shorter than assets as well as fresh disbursement."
You know what they call it when you borrow long term and lend short term?  Mismatched maturities.  It was the heart of the 1997 and 2008 busts.

You cannot have prosperity without strict separation of business and State.  ExImBank madness proves this.

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