Greece greased up !!!!

THE GREEK DEBACLE

The worst is not yet over. Just as the topsy-turvy market began to stabilize after the severe stroke of the Dubai fiasco nearly toppled it, the Greek debacle has once again pushed it into consternation.

Had it not been for the support of Abu Dhabi, Dubai would have possibly collapsed, now the search is on for the savior of the Greek economy. 

Corruption is widely regarded as one of the triggers of the Greek debt crisis threatening the euro common currency. Corruption is part of everyday life in Greece, and private households paid more than 780 million euros in bribes in 2009.

But the reality is more complex. A crisis began with the previous ­government in Athens cooking the books developed into three interlocking themes – the reluctance of the Greeks to swallow the nasty budgetary medicine prescribed for them, the medium-term outlook for the single currency and Europe's long-term role in a rapidly changing global economy.

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

Had it been a country with a currency of its own, it could possibly have alleviated its present predicament by devaluation of its currency and hence would have created fluidity in the market and reined in inflation and national debt. But it can’t help it, being bound by the single currency Euro, over which it has no possible control.

The Country could do nothing but beg the other stronger (comparatively) countries like Germany and France to holds its hands while it is staggering on the precarious bridge to cross over from the land of recession to the new world of fiscal stability.

The IMF is also supposed to bail out the country with a humungous aid to help this debt ridden country.

The big market players are concerned with the present scenario of the commitment level of the Greek government.

The risk of another default or – the doomsday scenario – of Greece deciding to leave the single currency has spooked investors, who are demanding a high price for holding risky Greek debt. The gap between the interest rates on rock-solid Greek bonds has widened sharply.

The political equation of the country is also quite unbalanced with public raging over the price hike and tax cuts. Bedlam is reining over the country.

The Greek prime minister has been criticized for spending cuts in the public sector services and for raising the tax rates which is blurring the already faded vision of a better future.

The Socialist government increased sales, tobacco and alcohol taxes and cut public sector holiday allowances to save 4.8 billion Euros (6.5 billion dollars), equal to about two percent of gross domestic product (GDP).

Pensions in the public and private sector are also frozen.

All this has deeply underlined the error committed by the European countries by making Euro their single currency in haste without considering the possible ramifications. A new sense of direction is what this predicament demands of the European authorities.

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The Descent of the G-2

The Myth about G-2

Even as Niall Ferguson deciphered the creation of a world economy on the basis of the term Chimerica wherein symbiotically one nation would supplant the needs and demand through its supply and henceforth they would co-exist it was a staggering reality that was bound to take form.

The myth deepened as Obama announced his plans for the creation of a G-2 block last November in coordination with Beijing. One thing has obviously become very clear to everyone that being a superpower America might have enjoyed lots of world hegemony but with the descent of money in the past financial crisis there have been a resurgence of the east and it has caught the vision of every on lookers past the Atlantic from New York to Tokyo that the is always an end.

Everyone is talking and everyone knows- the world economy has entwined itself in such a way that every pawn depends entirely on the movements of these two G-2 countries.

However with the recent list of scandals there have been lots of internal tension that have been generated between the G-2 block and its peaceful co existence kind off looks unlikely. This past winter there have been several events which have struck heavy discord between the two nations.

This winter has been a cold one for China-US relations. So many serious disagreements between the two countries have not surfaced simultaneously for decades: the US is exerting unprecedented pressure on China to revalue the Yuan, a cyber war erupted between Google and the Chinese administration, Washington intends to sell weapons worth $6.4 bn to Taiwan, China dumped US bonds worth $34.2 billion, both sides threaten to introduce punitive import tariffs, and US President B. Obama received 14thDalai Lama Tenzin Gyatso in the White House.

In the past China and the US avoided taking harsh measures against each other serially, but evidently things have changed beyond recognition over the past several months.

Iranian barricade

Obama proposed this particular idea of joining hands with the China to sustain the growth that these two blocks could have had if they joined hands however Iran is one of the issues US is not in the right terms with China. China stands in the way of vetoing against whatever NATO and US proposes in the Security Council to wage aggression against Iran.

This support comes up because Iran is China's major commercial and strategic partner. Over 15% of China's oil import (a total of some 450,000 bpd) is supplied by Iran, with only two countries - Angola and the Saudi Arabia - supplying greater amounts. China took two important new steps to boost its cooperation with Iran in the energy sphere in the late 2009.

China's state-owned Sinopec signed a contract with Tehran to develop the first phase of the Yadavaran oil field, one of Iran's largest, and to invest $6.5 billion in the upgrade of Iran's refining capacities. Beijing reckoned it made no sense to scrap the plans in the name of taking the role of a minor partner in the duet with the US. Thus US have still not being able to tame Iran.

Iran appears in the list of countries of unrecognised countries with the likes Of Nigeria, Yemen etc. This list is released by the United States government wherein they have forgotten to put in names of many other undemocratic governments like Columbia or Honduras which have similar rule but are pawns to the Obama regime.

Iran’s reluctance to trade with US and its trading procedure which it has called to be shifted to be on a non dollar currency intensifies the situational imbalance and strains the relationship in the G-2 block.

Revaluation of the Yuan

Even in the time of the slump the American production house is not being able to sell what it produces because the cheap imports from the Chinese economy that the American consumer has so much got addicted to.

The phrase means as literally as simple it seems- America eats what china produces. This is wrong at least for the American industries. There is no real time market left in the US and with the slump whatever they had has been devastated. They had just now got slightly under the two digit job loss percentage but with no reform.

Jobs are going to be created only if there is demand but the demand is eaten away by the Chinese goods produced and the internal situation remains the same. This situation is intensified because China is a communist nation is not increasing the wages of its people. This triggers its economy to be able to produce export so very cheap that buyers have nowhere else to go.

China agreed to a compromise over the issue in 2005 when it set a flexible rate for Yuan synchronized with a pool of currencies, and the Yuan actually added 21% by July, 2008.

The process came to a halt on the eve of the global economic crisis. Currently the exchange rate is about 6.82 Yuan per US dollar compared to 8.2 Yuan in the early 2005. Industrialized Western countries absorbing the majority of China's exports are unhappy with the arrangement: US President B. Obama and several other Western leaders believe that the artificially underrated Yuan shields the Chinese market from Western imports while giving Chinese exporters an unfair advantage.

This simply means china is using its powers just to keep the economy running at the expense of others.

Taming the $

Beijing found an alternative approach to curbing financial risks – according to the US Department of the Treasury, in December, 2009 China sold $32.2 billion worth of US bonds and thus reduced its stockpile of US bonds to $755 bn. As a result, currently - for the first time since August, 2008 - Japan, not China, is the world's largest holder of US bonds (with a total of $769 billion).

The official version is that China dumped the US bonds in an effort to diversify its currency holdings. To avoid excessively injecting liquidity, China will not likely opt for quick cuts of investments in US bonds. They continue to play an important role in the Chinese currency reserves – the US securities account for some 70% of China's total which has topped $2.3 trillion. Still, China’s is getting rid of a fraction of its dollar assets had repercussions worldwide and may be indicative of the country's long-term strategy.

The simple end results can be expected as follows:

The dependence of china on the American economy would be contained as make it less vulnerable if another series of default occur.

The valuation of the American bonds would seriously suffer if china keeps on dumping them in the market.

With the plans of creation of an SDR to replace the currency for oil trading and gold price calculation the might of the dollar may be tamed. Henceforth with the passage of time it is obvious that trading in dollar is no longer a affectionate choice.

Taiwan and Tibet

Both of these territories are considered to be interwoven with china as China continuously demands them to be its own. This has raised a number of un-necessary remarks from people all around the globe and called for criticism. The Chinese government on these issues is a Nazi of their own kind.

Manhandling as what was done in the recent past was not met with great appreciation from the Chinese side. The recent sale of arms of about 6.4 billion USD to Taiwan by America and the recent warm meeting of 14thDalai Lama Tenzin Gyatso in the White House have been accepted as acts of treachery by the Chinese government. China controls these localities and entertains no un-communist movement in these areas.

Google China Showdown

Last but not the least is the Goole China showdown. Chinese inclination toward controlling media, pubic speech and any other modes of conversation makes it one of the strangest country ever. Even though it projects itself to be a communist country in the capitalistic terms and a country that helps new found capitalistic systems to grow up it is nowhere close to achieve it.

Banning public speech and controlling voices would only reverse growth and nothing else. Google charged China with flooding the world with spyware. According to Google, cyber attacks against its corporate infrastructures had been launched from China. Namely, attempts were made to break the mailboxes registered on Google by Chinese dissenters. Google responded by lifting search request censorship via its engine, thus momentarily conquering a greater share of the Chinese market.

Chinese officials, army, and academic circles deny involvement in the cyber attack, automatically switching the suspicion to Baidu, the main domestic company posing competition to Google. Analysis International says Baidu's market share was roughly twice that of Google in the second half of 2009 – 61.6% vs. 29.1%. While the disparity persists, the gap between the two companies is steadily growing narrower year by year.

At the moment Google's withdrawal from the Chinese market and its compromise with the Chinese administration – that is, the reinstatement of censorship - seem equally possible. Considering that China is home to some 20% of the world's Internet surfers, it is clear that the US Company would hate to lose grip on such a market.

But more could be expected when the situations are naive

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Privatisation of Indian Railways

Privatisation of Indian Railways

Even as the talks on the privatisation of the Indian Railways intensify with the recent budget saying a complete no to any of that kind solution however Mamta Banerjee adding a minor clause regarding it in the railways budget: This topic has gained an important imposing topic.

Figuring out to silence speculations on the privatisation of Indian Railways Mamta Banerjee simple added that no such proposition is going to be applied this fiscal year however the railway ministry would look into other possible business models for railway development to sustain the growth that the railway ministry has meted out and simultaneously prepare itself for a future growth.

However from my point of view I would like to add some things that I think should be thought over before taking some or the other substantial decision.

Standard of Indian Railways.

Indian railways within the past two UPA elected government has been in a lot of glamour and show off with new and different plans being implemented by the two railway ministers. Another staggering addition has been the growth in the Indian Railway system and the sudden surging profit that this public sector company has achieved. However is the railway still worth the money spent on it?

Well one thing to be noted that Indian Railway for the people of the country is kind of a lifeline. Even if we consider the staggering population of India we can easily see that railways is something that connect one end of the country to the other and is the most cheapest viable and useful medium that people trust and adhere to. Railway is one way or the other attached to most of Indian homes. Therefore there is no two thoughts on how much importance is the railway development to the people of India. Railway is the lifeline of the country.

Every class culture and financial slab of the Indian household enjoys this service. The competitive options like that of airways and roadways are comparatively less favourable in Indian household. Railways end up being the biggest winner.

However if we compare the standard that the Indian Railways provide us I would not particularly want to comment on that. Being in the public domain expectation about the services are not so high henceforth I would grade it as ok.

However compared to the standard of services that railways in foreign countries provide the situation is thought provoking. The diffused quality of railway lines , the time lag, efficiency, cleanliness are some of the points on which the Indian railways could be downgraded and called inefficient however they are able to meet the demand by effective supply somehow more or less which is good

Demand vs Supply

Some say demand equal to supply is the basic equation of any give and take institution and why should Railways be different. Even though the railway industry is not run for effective profit however it always tries to meet the demand that an Indian traveller could create. In short more or less the supply is there. However in the recent times the above equation negates itself when

· There is more demand that means there is an incentive to the Railways to provide more trains

· There is more supply that means there is an opportunity for the people to use more of the railways.

The above two conditions however appear in an economy which in a very fast growing economy wherein a little discord or loss over some time could be easily meted by the sudden rise in profit if that particular policy works. Indian in general however is not so sound enough that the losses could be carried over by the institution.

Siddu was commenting that China is building 4000 km last year of tracks and we built a meagre 200 km and disregarded the budget. What I say is Indian Economy sustainable enough to handle even 500 km of more tracks when the demand side is quiet stable and stagnant. Even with the development of agricultural setups the requirement from that part is still stagnant.

Thus what I conclude for the time being Indian railway is somehow doing justice for the demand. No farmers kill themselves because they did not get the train support. No person killed for lack of transportation. But however I am not implying we would not need privatisation. We would need that and ultimately one of the two points that were forcibly generated demand or supply some time in future as country grows at a very fast pace.

When to privatise?

Efficiency and facilities of the service is always associated with being a private enterprise. However the important thing to keep in mind is that private players seldom take offence and not do anything to make money.

To meet the growth of the railways at some point of time a ruthless private sector would be needed to drive sustainable and revenue generating system but not now. The government with its pace right now is able to cope up with whatever is to be done.

So the question remains when to privatise. My chance would be when the system tells itself that no further it could be handled completely by the government. The system itself is the best indicator of it.

Privatisation would envisage following situational points:

· High Fare

· High efficiency

· High regularity

Thus it would endanger: low cost markets, petty small people etc

Thus privatisation is internally filled with lots and lots of problem as can be imagined herein with.

Solution

No clear cut business model is present to balance the Indian growth properly. Privatisation would satisfy but will also kill. The complexity of the entire financial system complicates lots and lots of matters therefore it is better that a controlled privatisation in a step by step manner is evolved.

More to come..........

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NIPPING IN THE ‘BUD’GET

As the Finance Minister (F.M.) Pranab Mukherjee walked into the Parliament with his usual dignified style for his Budget speech 2010, India Inc. was on the edge because the gamut of measures and reforms they expected to be taken by the government for the current fiscal year were to decide what would happen.

It was going to tell whether the roll back of the Booster measures announced to combat last year’s slowdown would be reversed or possibly the same path would be fortified once again. .

Speech was delivered but was greeted neither with Razzmatazz nor with stoicism, but the package on a whole presaged a fiscal consolidation. A vision was promised in the last year’s Budget session but it seems rather just a revision was possible owing to the ‘Tsunami’ of the financial crisis hit the world economy and nearly wiped out the economic gains of past decade.

Without delving into the labyrinth of statistical figures and to put all the aspects of the budget in a simple order let us look at the major provisions of the Budget by the F.M.

We The People

The Increase in the slab for Income Tax is surely a ‘Holi’ bonanza for the common man with a great amount of saving promised in the Budget by the F.M. This certainly has put more money in the hands of the people and paves a way for stronger economy with the money in the hands of the consumer. We can envisage a better financial consolidation soon.

Industry

While the Minimum Alternative Tax (M.A.T) has been raised the surcharge on the corporate tax has been cut by 2.5% which will alleviate the industry stake holders. The government plans to collect revenues from disinvestment of public sector companies and also by the 3G SPECTRUM auctions hence government will borrow little money from the market in line with its target to contain fiscal deficit. These lower government borrowing will ensure funds are available to the private sector at reasonable prices.

The Auto sector will be hard hit with the price hike of petrol and diesel, but the decrease in the tax slabs for the middle and high income families will put the Automakers in a position to pass their tax burden on the consumer without much effect on both the supplier and the consumer side.

Farmers

With the new policy allowing direct hand over of subsidies to the farmers in form of cash in lieu of oil bonds, the F.M. has struck the right note enabling the Monsoon struck poor farmer to get out of his predicament.

Although more than 50% of the farmer subsidies will land into the pockets of the Agriculture-Industrialists but still it will cascade the overall effect of the development of the Indian agriculture since these subsidies will pave the path for the construction of cold stores and would hence prevent the damage to the crop and hence will boost the sales.

Also the 6 months extension on the repayment of loan proposed by the F.M. is a ray of hope for the farmers suffocating in the dungeon of the crisis due to poor Monsoon.

Banks

In accordance with the Loan waiver policy adopted last year the F.M. has gifted the Harvester of the Indian economy, the farmer, a 6 months extension on the repayment of loan which has benefited the Banks considerably.

Had the relief not come banks would have been force to categories the overdue farmer loans in their books as ‘NPA’ (Non-performing loans) in the fourth quarter which would have showed in their results in March ’10.

Also after the rise in the loan deposit ratio banks will now re-deploy assets from their low yielding bonds to loans.

Major Criticism

The fuel price hike has certainly the potential to be the Nemesis of the U.P.A. government for the next general election but it was an imperative move which was required to keep the State owned companies from going under because they need humungous subsidies to balance their chart-sheets which the our debt ridden economy can’t provide.

The deregulation of the oil prices will profits of the government owned companies like –IOCL, ONGC, GAIL would increase. After initial inflation it will eventually contain overall inflation in the long run and improve efficiency from competition among retailers .and search for alternative fuels, boost energy conservation and rein in fiscal deficit.

Pragmatic Moves

A Central Electronic Registry will be established soon. The Central Electronic Registry would be a database of all mortgages and the banks that have a charge, so whenever a borrower seeks to avail loan against a property, lender will be able to verify whether anyone has already got a charge of the property.

The announcement of the Financial Stability and Development council is a good move to control the financial Infrastructure of the Nation.

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To round up simply, the government works in a loop. It takes money from the people in through Direct and Indirect taxes and simultaneously delivers it back to the same people by plethora of social services. Budget presented by our F.M. has sensibly managed the conflicting objectives of growth, inflation and fiscal prudence. The partial rollback of the fiscal stimulus in form of increased excise duty is in line with the market expectations and is considered prudent by the market analysts.

Budget has some inflationary effects too but it won’t be more than 0.4% according to our responsible F.M. and he assures that it would be contained effectively.

Certainly the F.M. could not have nipped the Recession in the “BUD” but most positively he has tried to Nip it in his “BUDGET”.

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leela

She tottered barefoot across the courtyard with uncertain steps, glancing up impatiently every now and then at the lone star shining through the morning mist. Dewdrops clouded her glasses, barring even the vestiges of what used to be her vision. With a flash of annoyance, she grabbed them off her face and tossed them onto the stone floor. A little clunk was all she heard as the absolute stillness of the sepulcher was devoured by the rooster’s cry. Her heart lifted. As if in answer, her feet responded. They spelled out a beat. Momentary. Then the rooster’s second cry. On cue. She glanced up to her left. Right at the corner of the high walled courtyard of her ancient house, she could see the first rays of the sun peeking through. Dawn had broken. Routine. Timed. She heaved a sigh. An echo. It came from the bricks of her home, the mortar that held them together, the history that had been lived there - in answer to a sigh they had been witness to since so many days that they had lost count.

She moved towards her mother’s portrait, her fountain of strength she drank from every morning. A blur. She cursed her glasses.

She heard it then, the milkman’s whistle. It was a signal from him, the milkman – she liked to call him Shyam in her mind. All was well with the world. The wrinkles on that drooping face lit up in a smile. So did her courtyard, she thought with awe. Perhaps it was her heightened sense of clarity that day, or one of those coincidental realizations of the divine present in our mundane mortal lives.

As she pottered around with her little chores, her lips moved soundlessly. In perfect rhythm. But she had no words. She didn’t worry. The words would come. And they did. It was the song urchins sang as they played hopscotch under the great banyan that grew right outside her home. It was tradition, the kids had changed, the song hadn’t.

The sparrows came then, her everyday visitors. She brought out a handful of grains to feed them. She heard the yells of Ramesh and Lakshmi, her neighbors for as far as she could remember, as they quarreled to a practiced tiff. She smiled in reminiscence. She counted to five. The thud. Count to seven. Another thud. She had been detached from the physicality of it long ago. And she really liked their kids Luv and Kush. They called her Eeya. She would knit them new sweaters, she thought, smiling in anticipation. She got up and looked around. The sparrows wouldn’t leave her alone today, she thought, surprised. They had outstayed their normal schedule. Well, I wouldn’t bother, she thought crossly, they just think I am an old woman with nothing better to do.

Indignant, and energized by the rush of it, she walked quickly across the yard to the storeroom, her treasure trove of family heirlooms, keepsakes from times gone by and the wisps of memory she had forgotten existed. It had not been opened for ten years, she thought in amazement. Ever since Gayatri had left home. Her helper Gayatri. But she wouldn’t think of that, she decided. Bygones were bygones. She unlocked the storeroom and walked in. Right in front of her stood the green box her Nani had given her, dusty, yet retaining that inner sheen that she’d always associated with her Nani’s face. She brought it out.

With a smile on her face, she sat down cross-legged in the center of the courtyard and opened her box. The little trinket glistened in the sunlight. She had been given it when she was born. Her thoughts wandered. To another era, or so it seemed. Of experiences. And to the mere shadow of life she was living now.

Just then she heard the ruckus from above. Routine was back. She could have danced at the thought. Jayanti, who was carrying her baby, and her mother Saraswati. Arguing. She decided she would give the trinket to Jayanti at the birth of her child. She was enjoying herself now. She spoke out the words as they were being played upstairs next door. You don’t take care of me at all, I’m going to have a baby. Beta, calm down. No I won’t, it’s just not fair. Beta listen, I’m trying to tell you something. I’m not listening to anything, I have been…

The words caught in her throat. Suddenly. Unexpectedly. She felt choked. She glanced up, squinting her eyes at the noon sun. She looked back down. Her sparrows were still there. In that moment of epiphany, she understood. The sounds were fading out. With great affection, she looked around one last time…

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