THE INDIAN WAY ... OR JUST COMMON SENSE?

The American Prospect's Robert Kuttner has an interesting post that explains how India escaped the financial meltdown that affected both the U.S. and Europe. After talking with Dr. Yaga Reddy, the former Governor of the Bank of India, he explained that Dr. Reddy ignored the big guys from the International Monetary Fund, and other western bankers. Rather than accept their recommendations - to allow Wall Street-styled speculation - the Indian government did the following:

1. Banks that wanted to issue complex securities were required to hold capital reserves against them.

2. The Indian central bank regulated the financial players.

Got that? You require gamblers and speculators who trade in complex financial instruments to prove that they have the money to back their bets. Then you regulate the financial industry so they don't get out of hand and, say, lend out money at a 42: 1 ratio. Pretty simple if you ask me. Kuttner finished his discussion of Reddy by writing, "The Indian bankers who condemned him earlier in the last decade for denying them profits are now praising Reddy as a prophet."

Kuttner discusses a few other individuals that he met at the founding conference for the Institute for New Economic Thinking in his post. One thing becomes clear: We're not close to getting out of our financial woods.

- Mark

P.S. For those of you looking to read or download some of the papers from the conference, click here.