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

Friday, July 15, 2011

Viki ‘The 5K’ Shah

Yea, I did it…I did it…
Yesterday I ran the 5K (3.1 mile) race and completed!!
Wide varieties of thought came across my mind in those 46:20 minutes. Following is the snapshot of my conversation with my ‘inner’ self.
At the Starting Line: “Viki you can do it…run, wait...should I walk for a mile and then start running? No, it’s a run…not walk…I should run”

After 5 minutes: “I must be close to the 1 mile mark. Crap, 4 guys past me…2 more.  Score:-6”

After 12-13 minutes: “Wait, Did that fat ‘Verizon’ dude just passed me!! This can’t be happening. What was the score, +1…-1”

After 15 minutes: “Yeeea finally passed the official 1 mile marker. Almost home…what the heck, how can this be possible; these guys on the other side are going back!! U turn must be near”

After 20 minutes: “Hmmm the road is down hill from here, I should start running…but then its down hill so I can walk faster and not run. Where is that U turn?”

After 25 minutes: “Oh my God, the lady with the twins stroller just passed me…this is bad. Is that -1 or -3? Hey you ‘athletically superior’ guy…don’t go that fast dude, show some respect”

After 27 minutes: “They must have not kept the 2 mile marker…Two mile’s cannot be this apart!!”

After 31 minutes: “Finally, 2 mile marker. 2 down, 1 more to go…Hmmm just like Tom Hanks in Forest Gump, he ran across America, I am running across Morristown…great”

After 35 minutes: “Oh boy, this is tough. Can’t even quit, my car is parked near the finishing line. I think this alley must be the shortcut to the main street, but everyone is watching…even the cops are near by!!”

After 40 minutes: “Oh no, 4 old women passed me by…viki, run…ehh, how long will they run, they can’t run all the way”

After 43 minutes: “Yes, I see the finishing line. Should I run? No, I have to do the Weekly reporting tomorrow can’t risk spraining my ankle. On the other hand I should at least run from here and ‘make an entry’ to the finish line...but then again my goal is to complete, not compete

After 45 minutes: “No matter what I have to beat that BD guy…and that Verizon gal…and that girl in green jersey…and that ‘walking show-room of the running gear’ guy…and definitely that kid…run viki run”

After crossing the finishing line: “In your face, BD guy…Yes…finally…46:20…not bad…not bad at all. Time to go home. Wait a minute I need to pick up my medal”

                                                    “Way to go”

Wednesday, July 13, 2011

One more argument for the Open Markets

            Considering me and my generation Indian’s have witnessed both the worlds…from the monopolistic surroundings of Doordarshan, Ambassador, Indian Oil, Bajaj Chetak and the national telecom company to the vibrant world of 24 hour news & entertainment channels, cars of all sizes from almost all the major international automobile companies, fuel from wide array of private industries, bikes ranging from Japanese to German manufacturer and cellular phone connections from over a dozen companies. I was always wondering how would have India performed if the famous liberalization of 1992 would have taken place earlier? How would Indians have benefited from the market economy? More importantly I wanted to throw some light on the inflationary issue related to the closed economy.
            On December 14, 1983, for Rs.48,000, Mr. Harpal Singh of Green Park, New Delhi became the first owner of Maruti 800. The keys were handed over to him by none other than, the former Prime Minister Mrs. Indira Gandhi. In 1983 the waiting list on getting a landline telephone connection was 3-5 years and was priced at a fortune. During that time a liter of milk was selling for Rs.2, the cost of onions was Rs.0.50 per kilogram and wheat was retailed for Rs.3 per kg.
            Fast forward 2011: Maruti 800 is phased out but its modern version, Alto is priced at Rs.219,000. Just one of over 10 brands available in this segment. People can get a mobile phone connection in an hour at about 1 paisa (cent) a minute rate. Milk is selling for Rs40/lit, Onion for Rs25/kg & Wheat for Rs13/kg.
            In terms of inflation (compounded): Maruti 800 saw a yearly price increase of 5.5% from 1983 thru 2011 (28 years). As far as telecom is concerned, I am sure I don’t have to give any numbers as everyone knows that phones are cheaper & better. On the other hand price of Milk grew at an astounding rate of 11.5%, Onion at 15% and wheat at 14% annually. To put things in perspective, India’s average inflation, WPI (that’s wholesale Price Index and not Consumer Price Index, mind you) was around 7.6% in 1980’s, 6.3% in 90’s and 8.8% in 2000’s. (RBI)
            Increase in competition, in most cases, will bring in control the rising inflation. Not that it is the ‘only’ solution, but it will be a positive step for the economy in the long run by making producers more productive. My point is, the worrisome trend that we see in the prices of consumer essential items is mainly because agricultural sector is not productive enough and it is being shielded by the government subsidies. True, a rural farmer needs some government assistance, but on the other hand given the opportunity that farmer will love to see his field, flush green with the use of modern technologies. I am all in the favor of a ‘partial’ opening of the retail markets in India. This hopefully, will bring modern technologies to the farmers in India’s rural areas, where indeed they are working hard but without the help of technology, they are not getting enough returns and hence committing suicide because of pressure from rogue lenders with political connections. 
            The partial opening of the retail market will take off some inflationary pressure for the Indian consumers, will help boost the spending in the economy and more importantly will help our hard working Kisan’s (farmers) to feed there families and live a respectable life.

Monday, July 11, 2011

The never ending saga of Debt, Deficit & Default

            …and the drama continues. Now the date to watch for is August 2nd. That’s when $14.3 trillion debt limit of US government is going to be breached.
            Debt ceiling is a cap set by Congress on the amount of debt the federal government can legally borrow. The cap applies to debt owed to the public (i.e., anyone who buys U.S. bonds) plus debt owed to federal government trust funds such as those for Social Security and Medicare. The first limit was set in 1917 for $11.5 billion.
            Considering how serious the debt ceiling issue is and getting worse each passing day, President Obama sent out invitations to the leaders of both parties for last week’s meet. Invitation said: “a unique opportunity to do something big about the budget deficit.”
            Nice words…Unique! Big! But the thing is Congress has raised the debt limit 10 times in the last 10 years – from $5.95 trillion in 2000 at the end of the Clinton presidency to the present level of $14.29 trillion, so I don’t think there is anything unique or big about it. Time is in the favor of the US political leaders because considering all the uncertainties with the debt ceiling, US debt is still selling at below 3% for 10 years. I still believe that the common sense will prevail on Capitol Hill and the dooms day scenario of 'US default' is not going to materialize.
            Two senior research fellows of George Mason University’s Mercatus center, Veronique de Rugy and Jason Fitchner, came up with the steps that Treasury could take to meet its financial obligations and prevent a technical default until the end of the fiscal year on Sept. 30, and possibly longer:
  • Based on Congressional Budget Office estimates, tax revenue of $2.2 trillion in fiscal 2011 Technical default can be easily averted by paying off the $214 billion of interest on the debt. Tax revenue is also enough to cover Social Security, Medicare and Medicaid outlays as well.
  • Treasury secretary can repeat his ‘extraordinary actions’ of suspending investment in government pension funds and the Social Security Trust Fund, something that he is doing since the public debt hit the statutory limit in May.
  • Treasury can also use cash on hand or sell assets, such as gold, foreign currency or assets acquired under the Troubled Asset Relief Program. Agreed, such sales won’t yield enough to cover all the bills, but the payments can be prioritized.
            So, to all the respected Congressmen-women & the President, the opportunity might not be ‘unique’ or ‘big’ but it doesn’t mean that its not important for it directly deals with the lives of an average American.


Reference:  
 

http://www.bloomberg.com/news/2011-07-07/debt-limit-shuffle-buys-time-for-something-big-caroline-baum.html#0_undefined,0_

A 'Politicians' Crusade against Corruption

So, this past Saturday I had an opportunity to meet the president of Janta Party and a visiting Harvard economics professor, Mr. Subramaiam Swamy (thanks to my friend, Nishil). Lately he is been in the news not for the economics or more surprisingly, for political reasons, but for his crusade against the corruption. He is the one who initiated the inquiry into the now famous 2G scam.

He spoke in great dept about how he came across the fudged allocation process for issuing the licenses for the 2G spectrum. Considering the gathering was not large, he didn’t hold any bars in making sarcastic remarks against the ‘lady from Italy’, the ‘powerless Prime Minister’ and the ‘pathetic prince’. His views on the Krunanidhi clan were also not great and rightly so. For all the scams and misappropriations the clan has undertaken since being in power are just ridiculous. But it was his supportive remarks for ‘the fat lady from Chennai’, Ms. Jailalitha, that I started thinking that it is not the public servant, but the politician, Mr. Swami who has started this crusade against corruption.

            Don’t get me wrong, what he is doing is indeed great for the nation as a whole, but then just like all the other things in India, his crusade is also politically motivated. Just so I don’t ‘misunderstand’ his mission, I asked him why did he choose 2G scam and not any other, as there is no dearth of corruption scandals in India. His reply was this scandal had a National security angle to it, which was quite understandable. But just like all the other politicians he ended up making a speculation. “Make me the head of the CBI and I will undertake all the corruption cases”.

            It was indeed a pleasure to meet him. Needless to say he has a vast amount of knowledge and is a great communicator. There is no doubt in my mind that he is a great leader and an intellectual person, but his political ambitions trump his prior two qualities. 

Breaking News: Before ending his speech, Mr Swami, predicted that come August, ‘one very highly placed minister’ in the current UPA government will be the guest of honor at Delhi’s most happening place, the Tihar jail.

Wednesday, July 6, 2011

Voting: A Luxurious Right or A Civic Duty?

Happy 235th Independence Day, America!!
Just like most of my countrymen, I spent 4th of July vacationing with friends and families. Didn’t do anything that remotely was related to the birthday celebration of this great nation (didn’t even saw the fireworks). What do I say about this great nation; it gives you ‘Freedom’- freedom to ‘think’, freedom to ‘act’, freedom to ‘live’. It doesn’t confine you to act in a certain manner, given it is within the law!
Some good news for Indians, recently concluded census study shows that India’s literacy rate has reached a whopping 75%. It’s indeed an achievement for a nation, who had an educated population of only 12% during the time of independence in 1947.
Over the weekend, a very close confidant of mine gave me an eye-opening statistic. He said that in a multi-party, vibrant democracy like India, a party only needs to focus on 15-20% of the population(on religious or socio-economic grounds) to win the leadership of the whole country. He said that since ‘only’ 50-55% of the voting population exercises their right and given the rise of the regional parties, any party getting 30-35% of the voting population will get the necessary seats in the parliament to run the country.
Shouldn’t a vibrant, transparent, functional democracy have full involvement of its citizens? Why does almost half of the population don’t think that it is necessary to exercise there right. It is one of the biggest threat to the democratic system of a nation. This epidemic is spreading world over and is not limited to India. Last three general elections in US have seen an average turnout of 60%. Europeans, historically have been very involved in there election process but lately there turnout has also been dwindling down.  
So then the question arises, why do people living in a democratic nation don’t exercise there most important right?
I guess may be that is where the difference lies, most of us treat voting as a ‘right’ and not a ‘duty’.