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’…

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. 

 

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”

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. 

The empire: United States of America

                                         
            So, is this the beginning of the end of the empire of the 20^th century, the United States of America? Pessimists have been forecasting the decline of America since 18^th 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!!

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.