Profit is not a fact. It is an opinion.
It is designated in a currency.
Whose purchasing power is important.
India can free float its currency and see what happens. It looks like a very good time indeed to make the Rupee fully convertible
Most people treat profit as if it were a hard number—precise, objective and unquestionable. But profit is actually an accountant’s opinion, shaped by accounting policies, assumptions, and timing decisions. And dependent on the value of the currency.
Change the policy, and the profit changes.
Currency crashes and reserves disappear.
Business too is a continuum. Annual assessment of profit is just an estimate. Receivables may go bad. People you owe money to may die. Legal claims may come up. Your factory may explode killing the entire neighbourhood. Competition could knock you out of the market.
Two companies with identical economics can report very different profits, simply because their accounting policies differ.
This is why sophisticated investors rarely take profit numbers at face value. Or even bother about them.
Profit is a model of reality, not reality itself.
America reminds me of the beggar who once had a permanent slot outside Express Towers in Mumbai. I would often pass him to cross the road to the Belvedere Club across the road. The beggar had nothing – no assets and no liabilities. And the luminaires I met at the Club had a lot of assets but much greater liabilities. It often troubled me – who was richer – the beggar or the bankrupt millionaire I had just met.
I got an answer many years later from Donald Trump when he was in India to buy artefacts for his Taj Mahal casino. And the right answer is:
The beggar has no purchasing power.
The millionaire does.
So he is richer.
As regards the liabilities – those are the lenders problem. As regards the assets, they can always be leveraged more.
So profit or net worth don’t really matter.
What matter is who has the purchasing power. It is the person who prints the currency who has the purchasing power.
Wreck the currency.
And the purchasing power is gone.
India has to stop international trade in any currency other than the rupee.
And India will be great again.
It is actually that simple.
