Fiat Money’s Graceful Exit and the Revaluation of Property in Gurgaon

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.