If Alan
Greenspan is right, then property
in Gurgaon may be bought and sold using a different medium within the span
of a few decades. According to an interview with the once most powerful central
banker in the world, historically fiat currency has always ended with
hyperinflation. Fait currency or paper money that is backed up by nothing is
the current medium of exchange throughout much if not all of the world. The
historical reason why fiat money always, in the
end, leads to hyperinflation lies within the sphere of economics and
finance and the erstwhile central banker is someone who is quite familiar with
the intricacies of such historical trends.
According to Mr. Greenspan, interest
rates throughout the world have been artificially suppressed for a time
duration which is according to him against innate human time preferences. Mr.
Greenspan is quoted to have said that even data on interest rates going back
millennia to ancient Greece has shown that interest rates are inexorably tied
to built-in human tendencies and time
preferences. He argues that the willful suppression of such rates throughout
the world may lead to an unfavorable outcome. Furthermore, a subtler and
potentially fantastic statement he made suggests that human nature is unlikely
to change to become synchronized with the low interest rate environment. Hence
according to Mr. Greenspan, abnormally low interest rates run against the grain
of human tendencies yet a transformation in human nature may allow the
widespread acceptance of such low interest rates. Mr. Greenspan made the
statement regarding a built in time preference for interest rates years before
much of the world had begun its novel experiment with negative interest rates,
is it possible that negative interest rates portend a change in human nature
itself? If so such a change would drastically disrupt real estate in Gurgaon
and maybe change the fortunes of many of the top builders in Gurgaon as well.
Frank
Wilczek, a Nobel laureate speaking more
than a decade ago at a roundtable
discussion where all attendees were
Nobel laureates had stated that it seemed
unnatural that most young people in developed nations completed their education
by the time they were close to 30 and then worked till they were 65. To him, it made more sense if young people lived
longer, much longer, perhaps close to 300 years! Now Frank Wilczek is a
physicist, and physicists work in a discipline with a great deal of conjecture
which is unrelated to the tangibility of luxury
villas in Gurgaon, however the two converge when one realizes that low-interest rates followed by a change in
human nature due to far longer life spans may lead to grossly different
valuations for luxury villas in Gurgaon. The emergence of low-interest rates may well indicate a
forthcoming change in human nature and much longer lifespans; this is not
magical conjecture any more than an economist’s explanation regarding why fiat money always ends in hyperinflation, it
just does and nobody can do anything about it.
Low-interest rates portend
a far longer human lifespan as they lead to returns on capital that are lower
over time than are returns if interest rates are higher. They also mean more affordable
homes in Gurgaon as many more people
would be able to purchase a property in Gurgaon if interest rates were one
percent or much lower. If low-interest
rates globally are here to stay and fiat money is on its way out, then in the
future purchasing a house in housing projects in Gurgaon may be far cheaper
than it is today.
