Major Disasters for any country’s Economy

Do you think only stock market, Real estate and Gold affect our Economy? Well actually it’s a No. Here’s why.

The stock market of any country helps to improve its economy. Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere in the world. Next comes to the real estate business which deals with ‘real’ property such as renting, buying and selling real property. This has become a major issue in case of country’s economy. Gold buying and selling may directly affect the economy if the usage is above the threshold amount.

Considering the topic we have three major disasters any country’s economy can face. Well these are according to my opinion.

I) Narcoterrorism
The term Narcoterrorism is first used by Fernando Belaunde Terry of Peru in 1983(source: Wikipedia) when describing terrorist-type attacks against his nation’s anti-narcotics police. Narco-terrorism refers to the nexus between narcotics and terrorism. Narcotic trafficking, the phenomenon, which started as an organized cross border crime has now emerged as a threat to nation states because of its diabolic alliance with terrorist groups. In some countries to fund operations for war the country farmers used to grow opium, heroin, ganja (cannabis) etc. The money they got by selling them was used in preparations for the war operations. It has become more violent in recent years, especially in countries like Columbia and Peru the narcoterrorists had become brutal. The countries which have violent narcoterrorism are under constant Narco-war. The prohibition of these drugs is also responsible indirectly for this drug-trafficking and thus resulting in narcoterrorism. ULFA (united liberation front of Assam) from India seeks to establish a sovereign Assam via an armed struggle in the Assam conflict spends 0.65-1 million $ per month for narcoterrorism activities according to reports by ‘The North East Times’. Sponsoring terrorism is an expensive affair and money for killing, kidnapping and sabotage does not come through proper channels. It comes through illegal and unofficial channels. The market value of narcotic drugs is much higher than any consumer products in the world. It fetches large amounts of money and that too in hard cash. For instance, one kilogram of heroin from the Golden Crescent that costs approximately 1500$ in South Asia fetches nearly 0.1-0.5 million $ in the US market.

II) Havala Channel
Hawala is a dirty word. It smacks of black economy, sleazy back alleys doing surreptitious transactions in small notes, and dodgy businessmen with fictitious balance sheets. And yet, at the heart of it, hawala is not too different from normal banking. It is basically a parallel or alternative remittance system that exists or operates outside of, or parallel to traditional banking or financial channels. The countries majorly affected by this are Middle East, North Africa, the Horn of Africa and India Sub-continent. It’s an illegal money or value transfer system. In past years Hawala is legal system. It has its roots from Islamic laws, anyhow it has become illegal now due to illegal transactions to save large amount that is saved by Hawala instead of legal transactions. In Hawala system money is transferred through hawala brokers of hawaladars. It can be best described as “money transfer without money movement”. If I would like to transfer money to anyone in foreign country using hawala I’ll give money to hawala broker in my country and I’ll provide him a password or key. Then other hawala broker in my target country who has deals with my country’s broker hand over’s the money to target person, when the person provides password or key that I have mentioned. This is the simple way channel works. According to norms it’s illegal to do such transactions because conventional legal transactions charge more money compared to hawala. Thus hawala channel adversely affects country’s economy, because the private or public legal organizations charge some extra money which consists of taxes etc. So it helps to boost the economy. But due to these abundant hawala channels the economy might shrink. Another major aspect is the terrorists, separatists get their payments or transactions through hawala channel. There were cases where hawala scandals involve politicians from different countries. For example the one in India became hot cake for so many years. It was broken by journalist Vineet Narain. Countries like India, Nigerial have reached to unstoppable levels in the case of Hawala channel. So this affects the economy directly and was declared disaster for any country’s economy.

III) Financial Scams
Financial scams have abnormally affected many countries’ economies which cause decrease in currency rates, hike in provisions etc. Even developed countries like US, UK and Canada are facing these financial scams since decades. In other scenario the developing countries like India are also facing these financial scams which keep them still developing countries. Accounting scandals are most common forms of financial scams. They are political and business scandals which arise with disclosure of financial misdeeds by trusted executives of corporations or governments. They typically involve misuse of funds, overstating revenues, understating expenditures with cooperation of officials in corporations. Among so many financial scams in US one of the largest is ‘Lockheed Corporation’. The Lockheed bribery scandals were a series of illegal bribes made by Lockheed officials to friendly officials of government. Another was Lehman Brothers malfeasance, a March 2010 report by court-appointed examiner said that Lehman executives regularly used cosmetic accounting gimmicks at the end of each quarter to make its finances appear less shaky than they really were. This practice was a type of repurchase agreement that temporarily removed securities from the company’s balance sheet. In India coal mining scam accounted for 28,000 million $ scam, one of the largest ever. The coal ministry, comptroller and auditor general of India, many electricity boards and private companies are responsible for this scam. Bernard Madoff is a white collar criminal. He’s an American former stock broker, investment advisor, and financier. Concerns about Madoff’s business surfaced as early as 1999, when financial analyst Harry Marcopolos informed the SEC that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. According to Markopolos, he knew within five minutes that Madoff’s numbers did not add up, and it took four hours of failed attempts to replicate them to conclude that Madoff was a fraud. He was ignored by the Boston SEC in 2000 and 2001, as well as by Meaghan Cheung at the New York SEC in 2005 and 2007 when he presented further evidence. He has since published a book, ‘No one would listen’, about the frustrating efforts he and his team made over a ten-year period to alert the government, the industry, and the press about the Madoff fraud. These financial scams have caused millions of dollars loss to the respective countries’ economies.
I thought these three as major issues affecting economy in my perspective. If you think there are others kindly comment.