Wednesday, December 21, 2011

Oops We Did It Again…


            What else, the US Congress once again remains deadlock...

            The recent ‘on again off again’ agreement on the issue of the 2 month extension of the Pay roll tax cut has once again brought into light the deep fractions between the two parties. Funny thing is the current point of fraction is not between the two parties but between the Senate and the House. On Tuesday Republican-led House refused to accept a Senate-passed version of the bill, which passed with 89 votes and the support of all but seven Republicans. The honorable speaker of the house Mr. John Boehner wants Senate to bring some changes to the bill. And don’t forget this is ‘just’ for 2 month extension. The drama will be repeated again come February!!
          
           It’s hard for me to believe that this is the most stable democracy in the world; or may be this is the future of a democratic society- ‘A controlled chaos’. Let’s not kid over selves, a civilized disagreement, by peoples representative on a national stage is lot better then open, violent altercations by the people on the streets. Not that I want to be a part of any of the current congress debates, but I guess as the nation matures and citizens become more aware, the issues will definitely have microscopic discussions. Or may be the current structure of Congress is just broken, only time will tell.

            Tell then enjoy the show and a special note to my American friends, please keep your fingers crossed before you open the January pay stub!

Wednesday, December 14, 2011

In God We Believe…?

            
            So yesterday I saw the news of how the scientists at CERN, the huge research facility near France and Swiss border are close to finding Higgs Boson aka ‘The God Particle’. Higgs boson is the elusive theoretical particle that’s believed to have played a key role in the formation of the universe. I tried to go into the details but it was just too much for my little cranium; plus, I still had to catch up on my Bollywood news.

            Later, I started thinking, would this mean that what Prof. Stephen Hawking, the famous English theoretical physicist and cosmologist, said was true. His theory on the creation of universe says that Universe was created because of the laws of science and not because of the will of God.

            I am certainly not going to argue with Mr. Hawking here but then how would he explain the functioning of the great nation of India? I mean, come on, everyone within and outside India know that it’s not running because of the government or the opposition for that matter!!

            Coming back to the point in question; if the scientists really prove that the creation of universe was because of Science, would your faith in God remain intact? Is there someone up there who looks (or sometimes doesn’t look) upon us? Would you still go to the temple and be religious?

            As far as I am concerned, I definitely believe in God, not just because I was raised in a religious family but because the way my life has turned out to be. If it was ‘only’ up to me, I won’t be were I am today, for sure. So for me God is definitely up there.

            Be religious or be an atheist, one thing that I noticed is that Science shows us the ‘How’ behind the functioning of the things and Religion gives us the ‘Why’.

Thursday, December 1, 2011

India – Commingling of Past, Present and Future!!

           No matter how much you believe in the India story’, one thing is for sure, Mumbai airport still stinks…literally!! But story outside the airport is full of confidence and promises. India has changed’ will be an understatement.

            Past decade has really changed the psyche of the Indian’s. I think now Indians have started believing in themselves. You see the confidence on the face of the recent graduate. Gone are the days when a student was scarred to graduate for he/she will have to face the nightmarish reality of standing in the long queues of prospective job interviews, if they were lucky enough to be called. Now, the job demands are almost outstripping supplies of the graduates, thanks to the booming economy.

            For the limited travel that I have done, I can say that India is the only place where the past, present and future lives side by side. You still see bulls dragging the carts, on the road full of pot holes, right next to an Audi A6. You see people getting lunch from the Thai restaurant and sipping tea from a roadside tea stall the next moment.

            Its true that India’s social fabric is still broken, but as far as the ground realities are concerned, I think India is the most tightly held society in the world. India might not have the ‘911’ emergency service, but they do have neighbor’s who care for each other 24/7. They might be lacking AAA road side assistance, but they do have friends who are always on call. Agreed, just like any other developing society there are still some shortcomings which cannot be ignored or presented nicely in a poetic way, because they are real problems which have to be solved. But hey, they know how to live life. They know when to stop in the race of life and take a deep breath to enjoy that moment. No matter how big socio-economic problems they have a win in a cricket match against Pakistan, will lift the BSE Sensex the next day.

            India…is just different. It’s not a country but a huge diverse, community. They might get Wal-Mart’s and Reliance Fresh, but they will always love to buy from the road side vegetable vendor. No matter how wealthy they get, they will always bargain. They might go to the Michelin star restaurant, but they will always have that hunger for the ‘pan’.

I think everywhere else people live there lives, in India you live each Moment.


PS: I am still jetlagged, and might have been a little too philosophical…

Monday, October 31, 2011

Democracy or something like it…


             It seems like the ‘Anna Wave’ has lost its mojo. Corruption wins in India, again.
             Let’s put some things in perspective.
           
            We have a Prime Minister who is very well educated and has an impeccable personal reputation. He is trusted on the international platforms and demands high regards from across the political spectrum. As far as his political skills are concerned, there is no doubt that he is not wired for it. He has, and is been played along. I wonder how he would be feeling; knowing that he most certainly can fix the issues, if only he had the ‘power’ that comes with his post.

            I really think that if it was some one else holding the premiership of the nation, he/she would have certainly been booted out by the opposition and public, because of the recent corruption scandals. It’s funny how things work in the so-called Democracy. Majority of the People are against corruption and hence oppose the ruling party, but the same majority also like the Prime minister of the corrupt ruling party. Given the major political parties we have, and there leaders, it’s like picking your poison, either way common man is going to suffer!!

            If this is democracy do we really need one? Should we look for an alternative political system?

            India has tremendous potential and the world knows it, but democratic politics is hindering her progress. Both, economic and social lives are affected because of political leaderships. Should we go for constitutional change?

            This might sound foolish, crazy and stupid but desperate times need desperate measures! I propose to appoint Mr. ManMohan Singh as PM for a two year period and demolish the current constitution for that period. Mr. Vajpayee (another person with an impeccable reputation) should be the President. Criminal proceeding against the political leaders and government officials should be put on fast track. Bureaucrats should be given final authority on any public project and should be personally liable. I understand there will definitely be a major international backlash, but it will be manageable as we will have the time table to get back to democratic values. Domestically it will not be easy, as our great corrupt political souls will get-together to defeat this motion.

            This might be just a ‘dream’ but when present is so troubled there is no harm in closing your eyes for a moment and live in world that ‘could have been’…

Thursday, October 20, 2011

US – China: The Big Fat Global Wedding


           With the recent debacles in Congress it’s no surprise that the US Congress has an approval rating of 14%. Even lower then the IRS, which historically has been a darling of American hatred.

            Recently a bill was proposed in the House that threatens punitive duties on Chinese imports in the absence of more rapid appreciation of China's currency, the Yuan (Reminbi). Policy makers have shaped this bill as a ‘Jobs Bill’. The argument is that imposing duties on Chinese imports will reduce US trade deficit and hence lead to job creation in US.

            There is some similarity between now and 1980’s. Back then Japanese goods were killing the US jobs and industry. So to decrease the influx of Japanese goods, US ‘pressured’ Japan to appreciate its currency, to increase US exports. The Plaza Accord of 1985 worked in favor of US but not for Japan. Everyone knows that, including China. Besides, I think US policy makers have there math wrong.

            First and foremost, simply enacting legislation is not going to make China accelerate its currency at a faster pace. Instead, the threat from US is more likely to prompt China to do the opposite, to project its sovereignty and strength.
           
             Secondly, recent history doesn’t support the inverse relationship between the value of Yuan and the bilateral trade deficit. Globalization and the advancement in the transnational supply chain means that far more ‘Intermediate’ goods are traded than in the past. This has softened the impact of currency values on the ‘Finished’ goods that are exported. Only about half of the value of Chinese exports to the United States is actually Chinese value. The other half comes from components produced in other countries that are processed or assembled in China. Yuan appreciation reduces the price of intermediate goods to Chinese producers and assemblers, who can then reduce their prices for export to preserve their market shares abroad. Between July 2005 and July 2008, the value of the Yuan increased by 21% against the dollar. But the bilateral deficit increased by 33%, from $202 billion to $268 billion.
           
           Now consider the scenario where China would impose retaliatory duties on U.S. exports. Chinese government has already stated on several occasions that the currency legislation would incite a trade war. In 2009, in response to U.S. duties on Chinese tires the Chinese government imposed duties on U.S. chicken and auto parts, which reduced sales and employment in those U.S. industries.
           
            I don’t think either of the two can live without one another. If US need cheap Chinese goods to keep its inflation in control, China also needs US consumers to sell its products to. For the last thing that Chinese communist party wants is a revolution because of economic depression. 


 

Tuesday, October 18, 2011

Is India complicated?

           
                     Recently I spoke with a friend of mine, Hiruta Hiromichi from Tokyo, Japan. I had met him when I was volunteering in a kibbutz in Israel in 1996. Then, I had asked him how will he like to visit India? I vividly remember his answer, “India is so crowded, I am afraid I will get lost” he said. He did visit me in India while going back to Tokyo. Since that time, India has changed…a lot, for better. I repeated my question to him, “will you visit India with your family?” His answer was “Yes”. A very enthusiastic ‘yes’, I must say. But then after a pause he added, “But things are still complicated in India”.
That made me think, is India complicated?
  
First of all what is India?
            We have over 1.2 billion people or 17.5% of the world’s population, living in the seventh largest country or 2.4% of the world’s land area. We have more arable land area than any country except the United States, and more water area than any country except Russia, Canada and the United States.

Now, let’s focus on India’s languages-
            How many languages are spoken in India? Chances are that no one has the accurate answer- the country’s authority’s account for 234 languages spoken by 10,000 speakers, and a total of 1,600 languages and dialects. In other words, every 50 miles you drive, you will encounter a different culture with a different dialect or a language.

            On the Economic front, India’s macro economy is doing fabulous but you start focusing on the micro structure and you encounter all the things that are wrong with India’s present. Except for some western pockets, roads and rails are the story of misery. Electricity is still an issue. 24 hour water supply is still considered a luxury.

            On the Social front, Law and order is for the selected few. There are some improvements in the social fabric of the nation but then again they are in few and selected places. Elections are still manipulated and are won by short-sightedness. Literacy rate of 71%, I think, is the only bright spot in social India. Most of the judicial cases are still settled outside the courtrooms. Justice is still delayed and denied.

Does all this makes India complicated or this is what India is? The jury is still out.

My professor of economics once told me “One is optimistic on India till the time they arrive in India

Tuesday, September 20, 2011

Politics of Peace

           
             So last week Palestinian President Mahmoud Abbas announced in Ramallah that he will be demanding full UN statehood for his people at the United Nations this week. He plans to apply to the UN Security Council first before going to the General Assembly, where he might get two third majority for creating a new Palestinian state. As far as Security Council is concerned, the application will be dead on arrival since US is opposing.
           
             So, why is President Abbas short-cutting (or trying to) the process, even his prime minister, Salam Fayyad, is against the idea of going to UN for statehood? Some people think that Abbas wants to lose. The US veto, he hopes, will tell the world that Israel, backed by the U.S., is the barrier to peace. But this is no way to bring peace to the people. I am totally for the ‘Two State theory’, but real problems needs to be solved before any ‘unilateral’ actions are taken.

            To Abbas’s point, Israel’s President Benjamin Netanyahu has been leaning with his right wing leaders and hence no fruits are bore from the long standing, boring peace negotiations. But again, Abbas has been Netanyahu’s partner in crime. For one, the charters of both wings of the Palestinians: Fatah and Hamas – call for the elimination of Israel. And secondly, Abbas and not Netanyahu, is the one who has refused to enter negotiations without conditions. More importantly, Abbas is seeking something at the UN that was already offered to the Palestinians in 2003 (Camp David summit organized by President Clinton) and rejected by them.

            I have been to the place in question and it is beautiful. Both Israelis and Palestinians have suffered a lot and I think politicians needs to keep politics aside and become leaders for once. They need to be sincere in there acts and should put peoples interest first for they too have right to live there life in peace and harmony. Israeli and Palestinian children’s have suffered enough. From all the wishes I have, I really want to see peace in the Middle East before my life ends. 

Friday, September 16, 2011

The empire: United States of America

                                         
            So, is this the beginning of the end of the empire of the 20th century, the United States of America? Pessimists have been forecasting the decline of America since 18th century. But this time, it seems like they might be right. Are they?
           
            If you look back in history, once an empire loses its economic sheen, its political clout also shrinks. Either it be the Romans, the Ottomans, or the Great Britain. Their economic debacle was the reason behind their fall from grace. Is America going to be the latest entry in this list?
I highly doubt it.
           
            For one, the recent economic troubles, although severe, are not big enough to bring down the economic behemoth. Secondly, there is no heir apparent for the global leadership position. I know there are some names in the ring, first and foremost being China. Seriously!!
           
            There is no doubt that China has achieved a lot on their economic front. According to one study, since the last 30 years China has brought more then 300million Chinese out of poverty. That is a big achievement for a nation that is still developing. With all the money that China has (because of the favorable trade balances) and with its strong military, China is still lagging behind in political reforms. Now, I know people will say who cares about voting when citizens are rich!, But in the not so distant future a time will come when Chinese will ask for the same ‘rights’ that their counterparts have. It is that moment, I think China will either breakdown or become a true heir apparent to lead the political world. Till then, China will have to be content with their major economic leadership role.
           
            As far as Europe is concerned, the recent debt fears in the EU region is enough reason to discard their candidacy for the leadership role.
           
           There are some observers who think that the unipolar world lead by US is history and the future belongs to a multi-polar world, where countries like EU, China, India and Russia will play a very significant role. I Agree, but I think that they will still need the US to show them the way.

            Also, the single most important thing that America has is its freedom of thought and expression for its citizens. I think, that alone will keep America as the top nation of the world.  
           Constantinople fell to the Ottomans after two centuries of retreat and decline. It took two world wars, a global depression and the onset of the Cold War to lay the British Empire low. So it's a safe bet that the era of American dominance will not be brought to a close by credit default swaps or mark-to-market accounting!!






Thursday, September 8, 2011

29/10, 13/02, 7/12, 26/11 and now 07/09

             My condolences to Delhi victims and there families.

            So, the cycle starts again…Blast…Victims…Public agony…Statements denouncing blasts by both ruling and opposing parties…Suspect sketches…Governments promise to increase security…Potential suspect in custody…Bollywood condemns attack…Media headlines…Time lapse…Blast!! And it starts all over again.

            It’s a pity; just a fortnight ago we were celebrating the ‘victory’ (if we may) over political corruption. Terrorism is the only thing that is more dangerous then corruption. None of us blessed souls could even imagine the loss that the victim’s families suffered, no matter how pretty words we use to describe our anger and sympathy. On the national front I sincerely hope that India doesn’t create a new National security agency, for the one from 26/11/08 is still not ready yet.

            So what do we take from this; another blunder from the security forces? Is this the sign of an emerging power? We can’t safeguard our capital’s judicial courts, let alone securing common citizens. Or is this one of the ‘rare’ lapses that the intelligence agencies had ‘coz we don’t know from how many threats they save India from!! again I am not defending them, but just giving them the benefit of doubt and taking into consideration there genuine efforts .

            All the above dates are colored with blood of innocent victims of terrorism. Given the current situation the only question arising in my mind is what will be the next date? I don’t have much to say except to wish that terrorist incidence doesn’t become a ‘way of life’ for Indians.   


Inflation: “Please don’t hate me”


            So, there is going to be one more speech made by President Obama tonight, right before the NFL season opener!! This time around he has chosen to speak on ‘Jobs’ and why not, after all elections are only 14 months off and Republican candidates, a whole lot of them, are gaining ground on him.

            US was still reeling from the 2007-08 crises and the recent news of Europe’s debt has bring to a halt the US snail paced recovery. By now, we all know that US consumer spending accounts for about 70% of the GDP. And during sensitive times like this when unemployment is over 9% (16% shadow unemployment) confidence is low and hence consumers are  more hesitant to spend and hold back on major purchases like homes, vehicles and travel, to name a few. This will impact the GDP growth and private sectors ability to expand their businesses and job creation.
                       
            This is where I think government should step in. As per my precious post (The Story So Far) , I feel that the gap that is created by consumer should be filled up by government spending. I know there is a big hoopla of US deficit and debt, but look what happened after S&P downgraded long term US debt, it actually went up in value. In fact, it is more valuable then the debt of AAA graded countries like France and Germany.

            The current core inflation (ex-food & energy) in US is 1.6%; it’s no where near the danger zone (around 4%). Government needs to spend money and flood the system with dollars. It would impact the economy in the following ways:
  • Higher-than-normal inflation would lower the nation's debt in real dollars.
  • Government won’t have to cut spending and increase taxes.
  • US dollar will reduce in value hence make US goods more competitive.
  • The unemployment rate would fall because of increase in manufacturing activities.
  • Increase in employment will boost the prices of homes.

      The negative impact of a devalued dollar is going to be the commodity prices. But given the upside of the inflation on domestic economy, US have to think local. Also, Increasing inflation might not be an easy step for the government and the Fed to take, for US has adhered to the ‘Strong-Dollar’ policy for quite a while.  But I think the time is ripe to let the dollar loose.

Sunday, August 28, 2011

The Tale of Two Hurricanes: Irene and Anna


Storms are brewing over the largest and the longest running democracies of the world.
America’s east cost is facing the wrath of Hurricane Irene. As of this moment, the eye of the storm is 30 miles south of New York City. Some towns near our place have witnessed some flooding’s and are without electricity since last night. Irene will pass over New York/ New Jersey area by this afternoon. Damages to properties have been significant in the coastal areas. This time around states have braced themselves well for category 2 (now, 1) hurricane Irene. I guess lessons have been learned and implemented from the deadly 2005 hurricane Katrina.
Now, coming to the second storm that is facing the world’s largest democracy, India. Hurricane Anna has made the landfall on New Delhi this morning. The Anna’s version of the Jan Lokpal bill (citizens' ombudsman bill) has been approved by the Parliament. The people power has spoken. It indeed has been the victory of the democracy. You know there is something wrong with the system when most of the nation is rooting for a cause and our elected officials are taking the other side. Jan Lokpal bill will be a good add-in to India’s democratic values. The whole nation is rejoicing, it’s as if Diwali has come in August.
But this is again a glass half full. As someone said, ‘With Power comes Responsibilities’. I am not being a party pooper here, but trying to see the whole picture. Since now we have what we wanted, the system should work. Agreed? What Anna Hazare did was nothing short of an achievement. It will definitely go down in the history books, but where does Jan Lokpal bill stands when it comes to the oversight of its functioning? After all that is what is expected of a well running democracy: checks and balances.
As of now, it seems that both the storms have done what they were supposed to do; Irene on her part did create havoc and destruction of properties. Her eastern hemisphere counterpart, Hurrican Anna has brought joy on people’s faces…for now!!

Wednesday, August 24, 2011

The Marshall Plan II

           This morning I was following my daily ritual and was listening to Ken Prewitt & Tom Keene on Bloomberg Surveillance. By now we are all familiar with the economic turmoil that Europe is facing, especially the Euro zone nations. Hence, I wasn’t surprised to hear 2 year Greek bonds yielding…are you ready…a whopping 40.5%. That’s right; now compare this to the backbone of Euro: The German Bunds (Bonds), they are yielding 0.67%.

            More then $500B have been loaned to Greece, Portugal and Ireland, yet there economies are still in a state of shock. In fact the above lending has lead to speculative attacks on strong but shaky and vulnerable economies of Spain and Italy. The only ‘feel good’ story out of the Euro mainland is Germany. But then for how long would it keep on providing economic and more importantly, moral support to ‘Euro’.
            I think what Euro area needs is a second version of the Marshall plan. After World War II, when Europe was trying to rebuild itself, United States of America, under the then Secretary of State George Marshall provided the monetary support. But this time around the role of US has to be taken over by the IMF and ECB. I know, IMF has already committed $320B to the Euro zone economies as part of the EU-IMF bailout package of $950B in May 2010. But more needs to be done, considering EU’s economy is as big as US. Also, considering the recent market hostilities towards Spain & Italy, EU needs to do much more. I understand it’s controversial to ask but US should also contribute towards the package considering EU is one of there biggest trading partner. A stronger Europe is in US interest. It makes both, economic and political sense.
            Many generations of efforts have gone into creating ‘Euro’ and it will be a pity if we loose it within a decade. Times were tough in 2008-09 for US, but we came out (well, sort of) of the crises with a black eye and lessons learned. This time around its EU’s turn to take the blow and hopefully learn a lesson or two.

Thursday, August 18, 2011

And so the Nation awakens…Again

             Till yesterday the one thing that I really want to get an answer for was ‘what happens after death?’ but now my most important curiosity is ‘which Congress leader decided to put Anna Hazare behind bars?’ It’s been more then 48 hours since Anna’s arrest and the way things are unfolding, this is turning out to be a mini version of ‘Operation Bluestar’ for the ruling Congress party, a sense of déjà vu.

            We are all aware of the social issues faced by different nations of the world. Be it Egypt, Libya, Bolivia, Algeria, China and the most recent being our former rulers. We witnessed how the lives were lost and properties damaged during the violent protests in the above countries. And then when you turn towards India, you see people across the socio-economic status, marching and agitating with candle light vigil, in peace not by vandalism or violence.

            Coming back to the point in question, how often have you seen an IIT student and a rural farmer protesting for the same cause (ex-cricket!!)? Anna and his intent of bringing transparency to the political system of India has done the unthinkable…united, India. Gone are the days when Young India would take a dictation from the Old Political India. India’s class of 2011 is different, or it seems, as of now. The ruling party has made a serious lapse of judgment, not just by arresting Anna, but by not being serious about the Jan Lokpal - Citizens' ombudsman bill.

            I, just like most Indians, am totally behind Anna and his team who are fighting to bring accountability to the political leadership. But at the same time, we must keep in mind the ‘limits’ of the bill. The first, and foremost being the ‘selection’ of the committee members to oversee the ‘elected representatives of the people’. True, the current crop of Lokpal leaders are the best in there class but what assurance do we have that the next bunch will have the same work ethic? What if the next committee member is a product of corruption? What then? Wait for another Anna Hazare or create one more super committee?

            Think about it…in the mean time, as expected the opposition party’s have grabbed the Golden opportunity of supporting Anna, with both hands, after all ‘An Enemy’s, enemy is indeed a Friend”!!

Monday, August 15, 2011

India, state of mind

Happy 64th, India

            I was thinking about writing something for the Independence Day since last week but couldn’t think of anything. A lot has been written about India’s Economic Journey, Political Ride and Social Trip across a wide range of platform and I don’t think I can add anything to it, except…

            Today’s India, as I see it from a distant land, has a split personality. India, the economic power house, which had a tremendous past decade and will have a prosperous future, the other India which is the Political (Social) India, is going through its worst phase in its 64 year old democracy.
           
            On one hand you have a common man, Anna Hazare, a Gandhian, who wants to change the way Political India functions. His 4 month long ‘Movement against Corruption’ (Andolan against Corruption)has shaken the corrupt political fabric of India. Most Indians were tired and fed up of the political scenes. The only thing needed to ignite there fire of opposition was a small spark which was ignited by Anna. But the only thing that is working against the good causes of Anna Hazare and millions who have joined his movement is ‘Time’. The worst part is, even the political leaders know this for a fact that Indians have a short term memory. Politicians will try to weather the storm of opposition by lengthening the process of negotiations with Anna and his team till the time that the common Indian will divert there attention to there day to day worries of living and surviving another day.

            I know some might say that India never gets full credit for what she has achieved and her ‘progress’ is always seen as ‘glass half empty’. My apologies, but I do think that the glass is half empty. Political landscape has to change in India for the betterment of both, economic and social India. The way things are going I would say more so for social India.

Happy Independence Day!!


Tuesday, August 9, 2011

The Unthinkable

             So, the unthinkable happened during this past weekend. US long term debt was ‘downgraded’ by Standard & Poor’s, one of the three leading credit rating agencies. The reason behind the downgrade was not financial but the political instability in the US congress to make fiscal decisions.

            John Chambers, the head of sovereign debt rating at S&P became the most hated man in the world. S&P had sent a note to the US Treasury at around 1:30 on Friday afternoon that it is going to downgrade long term US debt from AAA to AA+. US Treasury replied back indicating a $2 trillion error in there calculation at around 5:30pm. At 7pm S&P acknowledged the error and at 8:15pm Wall Street time, S&P took the historic step of downgrading the most secure of the securities in the world. All the TV channels stopped there regular programs and called in there ‘experts’ to evaluate the situation. John Chambers was on the top of every channels list. To add insult to the injury, the AA+ rating is on a Negative watch, which means that if US Congress doesn’t act, the debt can be downgraded to AA- in 2 years time.

            S&P and Treasury are still at odds over the $2T error. Markets world over took a blood bath on Monday. Ironically, the debt that S&P downgraded, US 10-30 year bonds, were high in demand and investors were selling stocks to buy into bonds. This shows that world doesn’t have any alternative to the US securities. US dollar is the world reserve currency, period. Not that I support the current fiscal policy of US, but out of all the nations, two emerging countries had the audacity to tell US to rein in there spending; Really, Mr.Hu Jintao. Let me refresh your memory, the Chinese central bank in early 90’s put its printing press in over drive to pay out its debt. Russia actually defaulted on its debt and later did the same thing in 1998.   

            One thing to notice is that after flooding the system with US dollars, Fed and Treasury are still not able to increase the US domestic consumption, so now the focus has to turn on increasing the investments and one way to attract companies is to lower your corporate tax rate, which is highest in the developed world (after Japan). But it seems that this Whitehouse is busy with there own agenda of making US the first Socio-Capitalist economy. The energy that President Obama invested in passing the healthcare bill should have been diverted into fixing the economy. Republicans are also to be blamed, especially the Tea party advocates, who are narrowly focused on there tax policies and don’t take into consideration the whole macro economic picture. The damage has been done.
           
According to S&P, 5 countries have gotten back there AAA rating but it took them 9 to 18 years!!

Friday, August 5, 2011

Oh! The Beauty of Democracy…

And so on Monday, August 1st, World was once again saved by American Superheros(!!).
Two days before the ‘hypothetical’ dead-line of the US default, the drama on the Capital Hill ended. The President and the Democratic & Republican leadership did what was expected of them. They showed that they are no different than their counterparts in Asian & African developing democracies. They didn’t behave as ‘Peoples representatives’ instead they acted as a typical ‘incumbent’ facing an election in 15 months.
US has the top notch credit rating since their inception…News Flash…S&P cuts US credit rating from AAA to AA+ with negative outlook. (Friday, August 05, 2011 10:30 pm) and I thought that my 401(K) won’t see the dark days of 2008, come Monday and I will be proven wrong…again!!
Just when we thought that S&P will play the ball. But then again what credibility does the credit rating agencies have? After all they had re-confirmed AIG & Lehman’s AAA rating just before a week of Lehman going under. So, hopefully market will take that into consideration when it opens on Monday.
I have heard many of my friends say that if US was a company or a household, it would have not raised the borrowing limit, after all everyone should live in their own means. True. Agreed, but US is not a company run by a CEO nor it’s a household whose decisions are made by the bread earner, instead US is a ‘democracy’, a ‘capitalist democracy’. The decisions are not based on ‘right’ or ‘wrong’, but on ‘popularity’.
A society reflects the character of the citizens of that nation and when those citizens are living beyond their means (from 2000 to 2007 US saving rate was 1-3%, it went negative briefly in 2005) how can we expect the nation to live within its means.    
 

Wednesday, July 27, 2011

The Dreaded “F” word


            A four year old boy, Adam weighing 15 pounds, is the new arrival to this place. His mother carried him for 5 days searching for water through, what the locals & international media calls, ‘the death road’ (terror of militias). She died on the way. This place is the UN refugee camp in the horn of Africa…Somalia. Somalia is suffering from yet another famine and this time it is more grave then the ones before. As if Mother Nature has not troubled them enough, the local militant affiliates of Al Qaeda, Al-Shabab, has banned international humanitarian agencies to enter the area.

            World remembers Somalia from the 1993 Battle of Mogadishu when 19 American soldiers died in an ambush, which ended the US involvement in this dark corner of the African sub continent. Somalia doesn’t have any functioning government since 1991. The lawlessness has helped bred militia groups like Al-Shabab in every nook and corner of the country, who in the name of the religion spread terror, even in these sensitive times. UN has refugee camps on almost permanent bases in this country. Famines have become an annual affair in this part of the world. The recent famine has affected more then 2.2 million Somalis. After pleading with local militias for days, today a UN plane carrying 10 tons of food was allowed to enter the famine hit region, hopefully one of many more trips.

            People living in other continents, doesn’t show any surprises to what occurs in Africa for it seems so distant from the hi-tech world that we live in. Africa has become the most happening place for anything that seems in-human to the rest of the world. There are some pockets of success like South Africa, Botswana and Namibia, but majority of the 53 countries suffer the same fate as Somalia.

Hopefully world will come together, again, to support Adam and many more like him.

Friday, July 22, 2011

Summer Deals

            Three down, one more to go!!

            The deals that I am going to talk about are in billions & trillions of dollars (& Euros).
            On a much much smaller scale (this is an anomaly) but on a very much important issue, I had to make a compromise with my four year old daughter. After almost half an hour of haggling and going back & forth with negotiations we came to an amicable solution. The deal was, she will finish her dinner in 15 minutes and I will give her Half of Hershey’s milk chocolate. Needless to say after 15 minutes, the whole Hershey’s bar was invisible and the full untouched dinner plate was visible in 1080i HD with Digital Crystal Clear clarity!!
            Yesterday night 32 team owners of the National Football League (NFL) approved the 10 year deal (Collective Bargaining Agreement) with the players association and thus started the process of ending the 4 month old lock out of America’s most popular league. The issue here was of how to share the $8 billion in annual revenue.
            Next on our list of successfully completed deals is between Paris and Berlin, or should I say between Nicolas Sarkozy and Angela Merkel over the funding of the Greece debt. Both were at odds over how much should the private sector be involved with the ‘reorganization’ of the Greek debt. By yesterday afternoon in an emergency summit in Brussels, European leaders approved the second bailout of Greece with an extra $159B of European governments & IMF money. Plus, private investors will pull in $75B to fund this deal. World markets were happy with this deal for all the major stock indices ended the day in green territory.
            Now, coming to the one that is ‘almost’ done.
            This one is much bigger and more important then the previous two (…with all due respect to the NFL & European Union), the debt ceiling negotiations in US congress between Democrats and Republicans. The negotiations are still going on and presumably they will reach for a compromise by this Friday. The current plan is for $3T (T as in Trillion) debt reduction program in the next 10 year.

            Hopefully congress will take a cue from the previous two deals and come to a conclusion. After all Democracy is all about Compromising & making Deals!!

Monday, July 18, 2011

A Nation Held Hostage

           The US government has had a triple A credit rating since 1917, but thanks to the recent uncertainties in US Congress, the world’s most secure security is at risk. US definitely don’t have any liquidity issues, as of now, but a non payment of a single bill even on a technical grounds, is enough for a downgrade. The debt ceiling drama is nothing but 536 so-called ‘responsible citizens’ of the country, holding the nation hostage. Is it open democracy or economic militancy? Not to mention that this is happening in the worlds oldest and most developed of democracies. I was so naïve to think that this kind of blackmailing only happens in the developing democracies!

            How else would you describe the recent spat between Republicans and Democrats over the debt ceiling? The ruling party wants to increase the ceiling ASAP, so that there is no Economic Armageddon, so to speak. They also want to increase taxes and keep the status-quo of unleashed government spending. On the other hand, the opposition wants to first get the President to sign on the much needed (in there words) cost cutting measures and not touch the taxes. They think that the issue on hand is of debt and not taxes.

            As of May 16th, US government has already crossed the current debt ceiling of $14.3 trillion. The debt that is going on now is to officially get the approval of the Congress to go over the limit. On Aug. 3rd, Treasury will take in $12 billion. But it will have $32 billion in expenses with the 25 million Social Security checks totaling $23 billion due out that day making up about 72 percent of the total*. (BPC)

              According to Bipartisan Policy Center (BPC) for the full month of August, the federal government will have the projected revenue of $172 billion, but will have projected expenses of $306 billion. Following tables by BPC explains the Federal governments August financials in detail:

Programs that might be funded in August:
         
 
Program
Cost
Interest on Treasury Securities$29.0 B
Social Security Benefits$49.2 B
Medicare/Medicaid$50.0 B
Defense Vendor Payments$31.7 B
Unemployment Insurance Benefits$12.8 B

Programs that might go unfunded in August:

Program
Cost
Military Active Duty Pay$2.9 B
Veterans Affairs Programs$2.9 B
Federal Salaries + Benefits$14.2 B
Dept of Education$20.2 B
Food/Nutrition Services$9.3 B
Dept of Labor$1.3 B
Dept of Justice$1.4 B
Dept of Energy$3.5 B
Health & Human Services Grants$8.1 B
Federal Highway Administration$4.3 B
Environment Protection Agency$0.9 B
IRS Refunds$3.9 B
Small Business Administration$0.3 B
Federal Transit Administration$1.3 B
HUD Programs$6.7 B
Other Spendings$52.8 B
Source: Bipartisan Policy Center
On Congress we Rely...

*http://www.washingtonpost.com/blogs/post-partisan/post/danger-of-default-bachmann-and-palin-dont-get-it/2011/03/04/gIQA3GZLEI_blog.html