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”!!

India, state of mind

Happy 64^th, 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!!



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!!

Oh! The Beauty of Democracy…

And so on Monday, August 1^st, 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.    

 

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.

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!!

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