some old pics

Few interesting questions?

Why South Korea suffers so much?

To truly appreciate the South Korean economy one must first realize that it is a population of just 40 million and a very small nation which has managed to build some of the worlds biggest brands and multi billion USD firms like Daewoo .LG, Samsung, Hyundai etc . Interestingly though South Korea has several multi billion USD firms it does not even have one person who can join the elite billionaires clubs. Though most of the firms are built, grown, developed in South Korea and managed by people with Korean ethnicity. Ownership of the shares is mostly and largely held by foreigners and investors varying from hedge funds in wall streets to Japan. Most South Koreans themselves are just employees and are small scale private shareholders in these firms and the more talented ones are high ranking officials in these firms. Hence not even a single South Korean is a billionaire. This in itself is not a serious cause for consternation. What I shall describe is the problem. Whenever world economy is in trouble and thus stock markets tend to contract due to ill economic outlook. Most of these hedge funds dump their assets in South Korea which are in billions of USD to fill back their obligations in Wall Street and city of London and are forced to close their books back home. Which have received loses through other investments they made. This of course directly crashes the South Korea stock market firstly but has a much more deep impact. When these foreign hedge funds dump assets in South Korea they basically dump the Korean Won and buy U.S dollars or Japanese Yen to go back fill their contracts back at the source. What this is does is it crashes the Korean Won. The problem with this is as follows

Consider a situation where some company ‘A’ from S. Korea has borrowed money from a foreign bank say from U.S.A worth 1 million USD

Now lets say initially 1,000 Won =1 USD,

The company basically takes the money and invests in say Korean real estate. It invests say 1 million USD. Which is now worth 1 billion Korean Won. 

Now debt held by the company is 1 Million USD= 1 Billion Won.
Asset =1 Billion Won.

Whenever there is an economic scare and most of these hedge funds and foreign investors dump Korean assets and thus the Korean won .The value of Korean won comes down. As suddenly you have people selling won and not enough buyers for Won.

Assume one such event has happened and now the Korean won has crashed by 50% hence
 1,500 Won= 1 USD.
Lets go back to the company ‘A’.
Since the crash of the stock market that we just discussed .We assume real estate has fallen by say 5 %.
Now the assets held by the A= 950 Million Won
Debt held by A= 1 Million USD= 1.5 Billion Won. (As now won has crashed by 50% and 1 USD=1,500 Won)

Suddenly not only has the company’s debt increased by 50% as the won crashed but also in parallel its own assets lost some of its value. Thus forcing ‘A’ into bankruptcy. What I have simply described is the underlying problem with the South Korean economy. Too much of its holding are held by foreigners and too much of its debt is valued in foreign currencies such as the Dollar, the Japanese Yen and so on. This recurring problem was what caused it to take a bailout form the IMF in the Asian financial crisis and similar fate looms with its economy even now as the Korean won tumbles further. The systemic problem could be solved by swift government regulation and restriction but the South Korean government has held back from doing anything of that nature and has let this status quo continue, mainly in my opinion due to excess U.S government influence on its policies. The IMF’s suggestion to South Korea is as follows. Keep producing goods that Americans want and collect US dollars and other foreign currencies and whenever hedge fund managers feel like crashing your currency. Your central bank will have enough foreign reserves to buy the Won to ensure it sustains its value.”

South Korean government sadly continues these policies even today. In my opinion, against the interest of its own people and against the interest of its own nation’s economic well being.

What is a debt deflation trap or liquidity trap?

In eras of a great economic booms when asset prices keep rising and people finance asset prices based on credit.What happens is assume i am a big company i have taken lot of debt in order to finance a real estate projects one after another during boom periods . Suddenly the market crashes and all asset prices have fallen down . I now have lot of debt and an asset which is now  half the value and I have no money to pay back teh original debt. Assume this scenario if extended to almost every company in a nation. Now the most important thing to the company is get acess to money to pay back debt or undergo bankruptcy. So people try to acquire as much money as they can by selling all assets bringing asset prices even further down or they are forced to declare bankruptcy if they can't pay their debt back. This leads to few faliures in the market and this leads to unemployement. With rising unemployement people further stop spending and many goods have fallng prices and thus many manufactures further go bankrupt. Which results in further unemployement.This further unemployement causes even lesser purchase of goods causing even more falling prices and even more bankruptcies and even more unemployement. This is a deflationary trap. I have mentioned this because the current global economic crisis is a deflationary trap. This is also what happened in the Great Depression.

In this crisis majorily it was the american housing and the american consumerism that saw expansion in the credit bubble. During the last decade. The American media was able to convince every american that having negative savings rate is fine with rising house prices. i.e If say you bought a house today (most people believed house prices rise forever) at 500,000 usd .Americans believed prices would rise 15% every year on an average. So they automatically assumed house price next year would be 575,000 USD .So incase they have zero savings rate or even go into debt of 20,000 USD (-ve savings rate). They still would have saved 55,000 USD through rising home prices. This was hugely propounded by American news media .So americans accumlated too much credit card, auto loans, every kind of debt assuming it was counter balanced by rising home prices and consumed their way into oblivion. Thus now we are in a worldwide debt burdened deflationary trap once the American housing bubble has crashed.

Is exporting the only way for economies to grow? 

Due to the economic growth pattern over the last few decades of developing nations, people especially the western world has assumed a wrong sense of capitalism which is now deep imbedded into all media units. The sense they developed is this. That China develops products and we buy them and give them money. Hence they grow economically. If we don’t buy their products they don’t get money and they are basically broke. This is a horrible understanding of economics and fiat money system. This usual modern wisdom has forced me to continue this blog further where I try to push some sense and understanding into basic fiat money system and how falsified this whole understanding is.

Now lets analyze what happens when China exports. When china exports some goods to foreign nations. All that happens is Chinese exporters get USD or GBP or JPY or Euros. The Chinese government collects these currencies and prints equivalent amount of RMB and gives them to the Chinese exporter. This is highly inflationary as directly government prints money and gives it to Chinese exporters and collects foreign currencies (hence china has over 1.95 trillion USD of Forex reserves). So when they export products they basically just collect foreign reserves and create inflation. Inflation because imagine workers in a toy factory in Guangdong. They make toys throw them in a ship and give dollars to government and collect RMB and they go into domestic market. This newly created RMB has not increased any service or goods into the domestic market of china. As frankly more or less the Chinese government has just printed money and given it to bunch of people who were making some dolls in some room and throwing them in a boat. This is extremely inflationary in nature (Of course if china was importing as much as it was exporting then there would be a balance but it exports far more than it imports) . The only good thing it does for Chinese economy is it increases Forex and creates employment for many unskilled migrant workers. The last thing the Chinese government wants as of now is to increase its Forex, which are excessively large already. 

All the Chinese government in my opinion has to do is increase money supply give lot of loans for new services and goods creation and support increased money supply through its excess foreign reserves and also buy as many high end technologies that they can from abroad. Remember in  fiat system economies grow when money supply growth is supported by new services or products that people want to purchase.

This is what happened say in 90’s when the computer revolution took place. Suddenly we had a new product which people wanted to buy for several reasons so the government was able to increase money supply to accommodate this new product and ensuring the wealth of the nation and its people. 

In china you still have huge growth zones in basic movie industry entertainment industry and so on. They won't get caught in a  deflationary trap as The government has very deep pockets and can spend lot of money and in case of China most money spend would be done on real ventures which require some attention. As china still has great scope for infrastructure and basic living standards.

A very long post

I have deferred the calumny that shall follow for a long while now. It is ascertained by me that the following post shall truly be very long. I have in a very shady manner tried to condense everything into one single post with rather incomplete details which I hope shall be forgiven by the readers . You should also forgive the quality of writing that has surely deteriorated considering the length of this post and how I hastened my way through it. Nonetheless here are the sub headings

-The Great Depression

-Economic crisis of 2008

-World Today

-China and future

The great depression

“When business in the United States underwent a mild contraction…., the Federal Reserve created more paper reserves (printed lot of money) in the hope of forestalling any possible bank reserve shortage. The "Fed" succeeded……….. but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late….. the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, The American economy collapsed. “– Alan Greenspan

This was Alan Greenspan the Federal Reserve chairman (1987- 2006). Who as a young economist was criticizing the role of Federal Reserve, as it fuelled the stock market bubble and the subsequent collapse of which triggered a series of events that led to the Great Depression.

The sequence of events were, As the stock market bubble crashed and led to failure of some banks. It triggered a panic among people and they withdrew their money from commercial banks. This in turn led to the shortage of money supply in the market and several banks failed as they were left with no money and the money was now transferred to private lockers in homes. Which pushed the economy into a deflationary spiral (where you have a shortage of money supply). The solution offered by classical economics was quite simple as the economy is pushed into a deflation, the prices of goods and labor comes crashing down. The prices finally become affordable for a viable investment by competent individuals, with the availability of cheap goods and cheap labor and economy rises on this.

The then Secretary of the Treasury Andrew Mellon advised President Hoover that the best response would be to let people lose their jobs, markets crash and when labor becomes cheap more competent people will pick up from less competent people who have failed during this crisis period and we shall again emerge as suggested by free market economics and the classical understanding of economics. Hoover rejected this advice as it did not sound politically viable, and started numerous programs, all of which failed to reverse the downturn and pushed the nation’s economy into what we today call the great depression.

Hoover launched a series of programs to increase farm prices, which failed, expanded federal spending in public works such as dams, and launched the Reconstruction Finance Corporation (RFC) which aided cities, banks and railroads, and continued as a major agency under the New Deal. To provide unemployment relief he set up the Emergency Relief Agency (ERA) that operated until 1935 as the Federal Emergency Relief Agency. Quarter by quarter the economy went downhill, as prices, profits and employment fell. Or in simple words Hoover artificially tried to prop up a contracting economy and kept labor costs and farm products artificially high, and what America entered into was called the Great depression and unemployment was in double digit figures through the entire decade of 1930’s. (1936, being the worst year). Sadly history has been very unkind to free market economics and it was blamed for the Great depression. Though in reality it was not allowed to work as both Hoover and later Roosevelt both interfered in the markets which led to several unintended consequences. The world sadly after The Great Depression repudiated the ideas of free market economics and the philosophy of Adam smith.

Later in 1936 a British Economist John Maynard Keynes suggested that the governments in periods of great economic distress needs to spend more money on infrastructure and other projects and create employment opportunities and even advocated budget deficits to finance this expenditure. Government’s source of income has not been clearly established by his theory. As governments can either print more money or they have to tax more capital or they have to go into further debt from foreign creditors in order to spend more on plans he advocated. Taxing more capital to fuel government spending has been challenged by several noted researchers of modern times who have shown this only worsens the economy and other two options also have their negative effects. In fact, president Hoover increased government spending heavily and so did President Roosevelt at a much larger scale with his new deal as suggested by John Maynard Keynes, but both failed to help as unemployment averaged 17.6% during Roosevelt’s tenure and neither helped the American economy, which struggled through the entire 1930’s. The argument which was unanimously accepted was that both Hoover and Roosevelt never spent enough and they should have spent even more. This argument is sadly endorsed by most economists. Nonetheless in President Nixon’s words “We all are Keynesians”.

Years later the great Milton freedman along with his wife Anna suggested that had Federal Reserve increased the money supply during the initial deflation period as banks were collapsing the great depression could have been avoided. Later other research also suggested that had America gone of the gold standard and created more paper money (remember creating paper money was the cause of the stock market bubble) or even devalued the dollar it would have certainly avoided the great depression. These theories were supported by complex mathematical models that modern day economists became adept at using. Whether it would have worked is a matter of academic debate but nonetheless world accepted what he had to suggest like they accepted most of his brilliant theories.

The economic crisis of 2008

Alan Greenspan who as a young economist argued against the Federal Reserve for creating a stock market bubble, later in future ironically as the Federal Reserve chairman became the greatest bubble wizard mankind has ever seen and went on to create the same mistakes which he criticized fed for committing as a young economist.

“Greenspan put” was what ruled the financial world during his entire tenure. (‘PUT’ is contract that earns you money incase the underlying asset loses its value or if you buy a put when the value of underlying assets is reducing you earn lot of money).

From the late 1980s to the middle of 2000. whenever a crisis arose, the Fed came to the rescue under Alan Greenspan by significantly lowering the Fed Funds rate, often resulting in a negative real yield. In essence, the Fed pumped liquidity back into the market to avert further deterioration. The Fed did so after the 1987 stock market crash, the Gulf War, the Mexican crisis, the Asian crisis, the LTCM debacle, Y2K, the burst of the internet bubble, and the 9/11 terror attack. The Fed's pattern of providing ample liquidity resulted in the investor perception of ‘put’ protection on asset prices. Investors increasingly believed that when things go bad, the Fed would step in and inject liquidity until the problem got better and this free cheap money infested by fed was used to blow up newer bubbles all around the world. Invariably, the Fed did so each time, The perception became firmly embedded in asset pricing and fuelled excess risk taking. Several major financial journals and commentators censured the fed for fuelling one bubble after another by releasing cheap money into the market and criticized for never letting markets correct themselves in order to purge the excesses that are getting built into the system.

After the dot com bubble burst in 2000 and as America was entering a recession due to the misallocation of capital that took place during the dot com boom and the system was cleaning itself up. The Federal Reserve once again started adopting the Greenspan Put and started shoving large amounts of money through negligible fed fund rates to fuel the economy. Hoping it would forestall any problem like before but rarely did they know they have created a perfect storm. Thanks to a huge derivative market that the America never saw before. The Greenspan Put created a newer bubble that was the mother of all bubbles and the Greenspan put shall finally prove to be a failed concept.

The U.S congress for years had been high on the agenda that every American citizen should own his/her own house and was trying its level best to ensure that all Americans have their own house. Freddie Mac (Federal Home Loan Mortgage Corporation) and Fannie Mae (Federal National Mortgage Association) which were government sponsored enterprises were used for achieving this purpose. An American citizen was getting loans which were guaranteed by Freddie and Fannie. So basically an American citizen was getting loans not on his credit or his ability to pay back, but based on the credit of the American government through Freddie and Fannie. So many loans were made to incompetent individuals with no credit history with no job with 3 to 4 bankruptcies in their past. Freddie and Fannie in turn financed their functioning by selling bonds to the rest of the world. It’s highly ironic that a nation like china held over 250 billion USD of Freddie and Fannie bonds which fuelled home building in America while China suffers with a huge shortage of viable homes with good living conditions. So In reality Freddie and Fannie were a distortion to free market economics and without their existence a bubble of this nature would never have been created. This in collusion with the cheap money that was created by Federal Reserve created the perfect mother of all housing bubbles.

The housing bubble in itself would not have created much of a problem and it would have merely been a contraction and correction in the market that was necessary. It is the credit default market that pushed economy into a chaos which was a part of the newly developed derivatives market (Derivatives market is around 700 trillion USD, which is 5 times the wealth of the world). A credit defaults related contracts in simple terms are a contract between two participants where one participant in the market vows to pay millions of U.S dollar incase the asset on which they are betting failed (i.e. in rather vague and extremely simple terms. If a person X with a good job and nice credit history was buying a house. People based on his credit scores were indulging in a betting process on wall street and city of London which stated that if X defaulted on his mortgage A shall give 1 million USD to B .Incase he does not default which has higher probability as he has good credit history and a good job B would give A something like 50, 0000 USD over a two year period). As the housing bubble started deflating, and people started defaulting on their mortgages bets of this nature started going bad and most financial institutions which were selling such contracts for cheap money were now going bankrupt as none had enough money to meet the obligations of these credit default contracts. In reality they needed trillions of dollars to meet these credit default obligations and thus resulted in bankruptcies and several bailouts figuring in trillions of dollars The financial industries were forced to sell every asset class world over in order to meet these credit default obligations bringing the valuation of every asset class crashing down with them. They still were not able to meet the requirements of these credit default obligations even with the 2 .5 trillion USD bailout by Federal Reserve and the 700 billion USD bail out by treasury. Considering the space requirements I shall summarize and end here and call it the financial crisis on 2008. (Remember, the investment banks on Wall Street and city of London Like Lehman bros or Merrill Lynch never loaned individual house owners money to buy homes. They were actually betting millions of dollar on a small home if that person will pay his loan, since this was easy to predict in normal environments based on person past history. They made lot of money over the last 8 years but when the housing market crashed in 2007 all this bets went berserk) .These larcenies committed by the financial world were hidden under brilliant and amazing mathematical wizardry.

Benjamin Bernanke (Federal Reserve Chairman), who has written, argued heavily in favor of the Greenspan put and believed that any problem in the financial or economic structure could simply be solved by applying the Greenspan Put. By December 2008, seventeen months after the credit crisis broke out in July 2007, events have conclusively proved that Bernanke’s faith in the magic of the Greenspan Put had been misplaced and is flawed. Decades of misapplication of Friedmans monetarism had driven the doctrine into theoretical bankruptcy. There is also clear evidence that the liquidity cure devised by Greenspan has eventually run out of ammunition as the serial bubbles get bigger each time to cover the previous one. The Greenspan Put only adds more water to a raging flood as each time the Federal Reserve tries to reflate the economy when a bubble bursts without clearing the excesses that were created during the bubble phase. It ends up creating a newer bigger bubble. The faith in self-regulating monetarism of Bernanke that Greenspan openly confessed before Congress apparently did not get through to Bernanke who continues to apply the Greenspan Put. If successful he would certainly destroy the American dollar in exchange.

World Today

The world till now has grown with ever increasing imbalances and thus the current financial crisis which is a direct consequence of this is trying to purge these imbalances. The imbalances are as follows:-America as a nation, with time grew into a heavy consumption based economy with 75% of its GDP based purely based on its overly obese disgusting population to eat what the world produces and distribute dollars to them .America holds 5% of the worlds population and consumes more than 25% of the worlds products. This was possible as the world was ready to send their products to America in exchange for dollars .Most notably, East Asia and Southern East Asia. This in itself would not have caused any problem .The problem arose because currency with time loses its value or you can buy lesser amount of goods tomorrow than you can today with the same amount of money (or even more simply 100 dollar note would be of less value two years from now hence we deposit the money for interest). So all these Asian countries are stuck with an asset (USD) that is constantly depreciating. So they had to invest it somewhere in order to ensure its purchasing power. Normally a person like you or me would deposit the money in a bank at certain interest rate. Since, we are talking about several hundreds of billions of dollar. It is not possible to deposit them in any bank. As no bank is big enough to pay a single customer say 60 billion USD on a 1 trillion USD deposit that China is ready to deposit. So the Asians were forced to invest in American treasury bonds or the American debt which was the only investment option in the entire world which could consume such large amounts of money and sustain its value and also give constant yield. What this in turn did was the money that the Chinese gave to Americans through treasury bonds and bonds issued by Freddie and Fannie trickled down to the people through credit cards and other schemes and this fuelled further consumption by the American people of foreign products and the same dollars were sent back to China in exchange for products, which were again deposited in American bonds by Chinese which again came down to people creating a loop which resulted in a self perpetuating bubble of consumption and production. Though other than consumption, these treasury bonds also helped kill over 9 million innocent people by American military and CIA in 3^rd world nations like Nicaragua.

The most important aspect of this whole discussion is America has no real power because none of the OECD can support its dollar (Japan could, but it is now heavily in debt and has a very bleak future) America had to go into debt of over 2 Trillion USD just to finance its war against Iraq and Afghanistan. No country in the OECD has any money to support USD and thus it is heavily dependent of China to prop up its currency making it structurally weak. If it even wants to wage a war against Lebanon. It has to go into debt with China to ensure dollar remains valued. As it has no wealth, no foreign reserves, no gold reserves no metal reserves (both foreign and gold in less than 80 billion USD in total) .In case in future China does not accept USD. Then America is just wasteland with overly obese people, faced with hyperinflation like Zimbabwe as it has printed trillions and trillions of USD notes and not enough production to back it up .Thus pushing it in a geo political back foot. My future outlook for America is extremely gloomly. It is nation that requires over 1 trillion USD of debt every 9 months on average to sustain itself as a country. Added to that it has a trade deficit of over 800 billion USD . The current problem is clearly caused by excessive debt, excessive consumption, excessive printing of money, and their solution has been to go further into deeper debt, trying to force feed further consumption, and printing more money and this is something that truly eludes me and is nothing less than being ludicrous. America clearly has got addicted to this consumption based economy and is not ready to rebalance its problems.

My dire prediction that ‘U.K will go bankrupt’ is now coming true. It was a country that was just selling fictitious bonds created in city of London to the entire Europe. It has no real industry, it has no productive capacity, it has no natural resources (other than oil). It does not even produce food for its own people. Their economy was fictitiously over rated. With exports of financial products and it is estimated that U.K will be a net importer of oil by 2017 .Then it won’t have anything under the sun that it can export to the world. The British have been living a rich life for no apparent reason. They get their pay scales in GBP (Great British Pound) and most of them have jobs in retail stores, in spas, saloons and so on. It is game over for U.K which till now had a financial industry selling fake bonds in return for real products from China, Japan, Germany and world over. In the process they have incurred huge debts. (The GBP has crashed by over 40% in the last 10 months and the crisis is just beginning and I have been warning about U.K and GBP from one year now). If I am right UK will go bankrupt by 2010. Firstly it has a huge shortage of money to meet its debt obligations and it can meet them by issuing more debt. At least in case of America they have been pushed into a deflationary spiral in commodity prices as the dollar rose. Incase of U.K, the GBP has crashed and some of the commodities are at their 30 year highs when measured in GBP in an environment with high deflationary forces .The central bank will be forced to increase further liquidity into the markets in order to meet this liquidity crunch and along with more debt being issued. This will in turn push the yields of the debt based securities inevitably high and with GBP falling and the commodity market rising. It’s disastrous for U.K. Then the government will be forced to raise interest rates in order to curb inflationary forces generated by loss in currency value and raising commodity prices and not necessarily due to excess liquidity available. That would imply rise in yields on debts which are now on much larger base of debt and considering the already existing liquidity crunch this would inevitably force U.K to default on its debt sometime in 2010 or go bankrupt. I think the best solution for U.K would be to go bankrupt now itself and default on all its debt. Because, the commodity market is now low and the inflationary forces generated by loss in currency value would be minimal and they have lesser debt to inflate themselves out ensuring a lesser loss in the value of their currency. If they declare bankruptcy in future (which is inevitable) when commodity markets rise .They will inevitably face inflationary pressures on a already high commodity priced markets which could push them into a position from which they cannot revive themselves and they would also face a higher devaluation of GBP as they would be defaulting on a much larger debt base creating higher inflation as they have to inflate themselves out of much larger debt and this could lead to a much disastrous state. All these problems would be worse incase world enters a period of stagflation in the future which is highly likely incase China ends up keeping its currency pegged. If Gordon brown has any commonsense U.K should declare bankruptcy today itself and default on all its loans right now.

Most European nations in the OECD other than Norway, Canada have terrible economic problems .Most of these countries have an extremely bleak future. Most of them are in heavy debts (except for France). They have very less production .They have industries that rely upon selling water at 25 USD per bottle and leather bags at 2500 USD per bag on the pretence of luxury goods. This is a clear sign of excess and overvaluation. They have terrible social security obligations towards the people. Worse of all it has terrible problems in relation with an ageing society. Hungary Iceland Czech republic have already gone bankrupt . Spain, New Zealand, Italy have been downgraded by all credit rating agencies. If they get downgraded further with higher debts being issued. Yields shall rise with higher debt obligations they are facing a very bleak future. I think most of Europe is in serious structural problems.

China and future

The Chinese government has been one of the most efficient governing bodies in the world over the last 30 years. With the current Hu-Wen governance, being par excellence. I am completely convinced that the children of the yellow river shall rise again and descendants of the Han dynasty in the name of china shall be the world’s financial and political super powers and I can’t foresee any geo political, war, or financial chaos that would stop this from happening (Maybe problems resulting from water shortage could cause some problems) Nonetheless their government though excellent has its share of disasters I shall only talk about their mistakes as they are few.

Chinese government’s biggest concern has been its desire to ensure that food is affordable. In the process they have artificially lowered the prices of agricultural goods. So agriculture became an area of business where a person buys tractors, fertilizers everything on the basis of demand and supply but ends up selling the final products on low prices and not based on supply demand dynamics. Making it a completely unprofitable business, pushing several millions of farmers into poverty and worse of all giving a negative perception that agriculture by nature is unprofitable

Which is not true. The Chinese government needs to remove these restrictions and let agriculture become more profitable that would in turn fuel rural markets as farmers would earn more money to spend on mobile phones, McDonalds and other products and services that cities are producing, which would in turn enhance wealth in the urban area. Leading to some balance in the society that free market provides .This is not just something I predicated out of thin air, but something that has been observed to be true world over. Also more importantly it is unviable for a society to have hundreds of millions working in industries as this would cause serious environmental hazards. The Chinese governments need to let agriculture become profitable. It has a substantial population that can afford rice and other goods at the prices they need to be and let the free market attain the balance that it needs to. Nations like Malaysia and Vietnam are currently largest exporters of commodities like coffee and rice .China could easily overtake them as the largest exporter in these basic cash crops. China should also usher an age where people would replace agriculture based products with industry based products like cotton instead of polyester like jute instead of polythene for bags . So on so forth leading to a greener and more importantly a rich rural society.

Chinese suffered a heavy inflationary pressure at the end of 2007, because they kept their currency pegged to the dollar. Excess dollar was printed by the American government and every commodity like oil which was valued in dollar rose heavily. The Chinese ended up paying the price through inflation as they related their currency with the dollar .Considering the amount of money that has been printed by Federal Reserve over the last 10 months with zero percent interest rates. If the Chinese continue pegging their currency with the USD. It would be disastrous. As every commodity like oil priced which is priced in dollar will rise substantially. D and the Chinese in 2 to 3 years from now will pay a huge inflationary price and it would be much larger than what they experienced during end of 2007. They need to let their currency rise and fluctuate according to market dynamics, that alone can ensure this won’t happen. Inflation is caused only by shortage of commodities or excess printing of money. The Chinese have been doing neither they have enough commodities to sustain and also they do not print excess money, but they have been pegging their currency with a country that is printing excess money which is America and they will in turn suffer if they don’t stop pegging with USD. I have my concerns about Hong Kong as well and having a separate Hong Kong dollar does not ring well with me.

The Chinese government needs to quickly realize that whenever it has interfered with markets it has led to capital destruction it has led to several unintended consequences with many dangerous effects and the best moves that the government has made till now is to simply move back. It has artificially kept costs of 4 wheelers extremely high. At times they were 6 times their cost when compared to other places around the world .Which has only ended up consuming life savings of a family in one single expenditure. Which otherwise could have fuelled 10 different billion dollar industries through consumption by these families They could have gone for more massages, more restaurants, more movies, so on and so forth. Creating more profits for all the above sectors and thus a larger and stronger economy. Even better this capital could have been used to fund entrepreneurship. But instead it led to destruction of this capital and several industries that could have been created through this. Nonetheless the government is increasing its belief in free market capitalism with each passing day.

India its future

There are endless articles all across New York Times, Yale Global, The International herald tribune, and all across every western news print media praising Indian story and how it shall inevitably be the world’s next super power. This propaganda which the western media has so well perfected in, Is no more true than a dot com share during the year 1999 and the value of a home in California in 2006 or a sub prime based AAA rated mortgage being peddled across wall street in 2006. Indian economy is terminally ill. India already ranks behind Sudan and Somalia in the world hunger index and is just above Zimbabwe. Politician’s strategy that the poor shall starve to their own deaths, thus slowly cleaning India of its poverty is sadly not working. India currently holds more than 33% of all the poor people on earth. Extreme social disparity, growing social unrest with a very young population and very less habitable land. India is heading towards a gloomy future. After 20 years, India could usher into an age of complete political chaos. India within the next 8 years, already a nation where hunger is big concern, shall be a net importer of basic grains and commodities necessary for its survival. With a weak political structure based on populist politics India has a severely grim outlook. Unlike what the propaganda suggests. India also is very low on any natural resources for its survival and if my worst fears come true .The nation will get chopped like a pizza out of hot Owen in the next 30 years. It should never have been a single country. it was too divided culturally to ever be a federal union. Though I believe the propaganda shall continue for the next 6 odd years with some meaningless fudged up growth figures reported all across American and British new channels. I also feel in future nations might place their military inside India to have legitimate control over its nuclear arsenal. India is already a humanitarian disaster, where police indulges in violent massacres which the world media neglects to report and it is a humanitarian disaster on humungous magnitude waiting to happen in the next 30 years. The way human society has never seen before.

Hegemony of world trade

It was the song dynasty at the end of the first millennium that started what we today call the paper currency as a medium of trade. A paper that is backed by productivity or resources of varied nature the person issuing the currency can provide in return to that. The premise of trade through currency was simple and seemed to be almost without flaw. As explained in simple terms, If there are two bodies namely A and B, lets assume A buys goods of certain value from B and gives B his currency in return for those goods. The currency that A has issued only has value if he has products that he can give back to B when B returns him his currency. In case he does not have any products or natural resources that B wants. Then the currency loses its value as it is of no worth to B and is just mere paper. This basic idea which seems ever correcting ensures the possibility that those indulging in such a trade shall automatically pay the price Incase they succumb to the greed of printing more currency than they can back with their productivity or natural resources. Thus ensuring paper currency, to be an acceptable and more importantly a plausible format of trade for the last 1000 years.
None the less, history is proof that forever many nations tried to inflate their currency as they printed more money in times of civil unrest, war or in general desperate times. They all paid the ultimate price of printing excess money which is dreaded and studied by economist’s world over through centuries and this state is called ‘Hyperinflation’. Most nations from United States to China from Argentina to India all at one point suffered this state .The United States during the civil war, China during the end of Kuomintang era and Eastern Europe during the two world wars, India during the Tuglaq era and Zimbabwe currently. Thus ensuring man shall not succumb to greed of printing money without products or economy to back it up with. This seemingly perfect theory has one flaw that has brought modern economy to a standstill, into a phase that has repudiated all economic beliefs, wisdom and understanding that we have accrued over these 5000 years from the time a man started exchanging his grains for chicken. The aberration that has questioned the fundamentals of economics as ancients knew it is called the concept of reserve currency. A reserve currency is a currency that all trading nations will use to buy or sell goods in return for that currency.
The aberration is as follows. In a situation of more than two players in the world of trade say 20 players A1, A2,…A20. If A1 issues the reserve currency, or the currency which is used to trade among all the 20 players. A1 could give his currency to the remaining 19 players buy services and products of varied nature go into trade deficit and thus debt and not back it up with productivity. Since the remaining 19 players could use this currency to trade among themselves giving him an unfair advantage. To expound my argument imagine if A1 could give his currency to A2 buy services and products of varied nature from A2. Now A2 takes that currency and probably buys something with that currency from the other 18 players (In the classical case of two players. if A1 did not have anything to give in return to A2. The currency A1 has issued crashes ensuring he does not buy more than his means or print more than his means but it is not so in the current case as A2 might take it (currency of A1, which is the reserve currency) and buy products from A3 or A4 or so on up to A20 as the currency) .This gives the nation that issues the reserve currency tremendous purchasing power in the likes that has never been seen in human history and if this status quo remains forever. The country issuing the reserve currency could go into infinite trade deficits and buy all services and products from world over without producing in relation to its consumption giving the world the reserve currency and then the remaining countries use this currency to buy goods from one another and thus maintain or sustain the value of the currency. This seemingly unbelievable flaw in modern world trade has created an empire as powerful as ‘The holy roman empire’ and what many today call as ‘The holy dollar empire’.
Historically man knew of this inbuilt flaw and thus used gold as the only medium of international trade. As none was ready to give this supreme power to the printing press of one particular nation. In history one who owned gold made the rules as he could buy both bread and circus.
The modern economics took a drastic turn at the end of World War II as many nations in desperation printed more money in order to fund their wars, which led to hyperinflation in almost all of Europe with prices in certain nations doubling every 14 hours. The world decided to bring some economic standards and it resulted in the famous Breton Woods convention. Where, America with its vast gold reserves and gains accrued through the past two centuries declared dollar to be the modern gold by stating that every 32 US $ shall be equivalent to 1 ounce of gold. Or every dollar shall be replaceable by 1/32th of an ounce of gold .Making dollar as good as gold. American dollar now became the world’s reserve currency and it could just print dollar which was as the modern gold and buy every service and good the world had to offer. This lasted till the 1970’s when the world realized the excess dollar the American government was printing and started sending all the dollar back to America to replace every 32 U.S $ with an ounce of gold This led to a great fall in American gold reserves as America had printed too much dollar. In 1971 President Nixon removed any relation that gold had with dollar . What all feared finally happened. As the excess dollar printed took its toll. Inflation in America crossed the 20 % mark .Jobless rate was above 10%. Dollar truly was losing its status as the reserve currency which fueled its great growth into an economic military and political superpower.
The American government stuck a deal with the OPEC body. That deal created not just the dollar supremacy but also ‘The dollar empire’. OPEC is the group of oil suppliers to the entire world. Most of these nations suffered with severe internal political conflicts, social unrest and border disputes with neighboring nations. America offered military support to all these nations and in return asked all the members of the OPEC bodies to sell oil only to nations that can give them U.S dollars. Which in turn means, Even if a nation has gold it has to sell its gold to buy US $ in order to be able to purchase oil. Thus making dollar backed by oil. This reinstated and reaffirmed the position of the US dollar as the supreme and also the reserve currency of the world. Those who questioned it were punished. In 2000 Saddam Hussein declared that he wished to sell his oil in return for EURO. Now he is resting in peace. Hugo Chavez of Venezuela also tried to question the mighty dollar he pondered EURO in exchange for his oil and CIA led a covert operation against him. Now Iran is trying to sell its Oil in return for EURO and the American government has already started its propaganda that Iran possesses or is trying to posses nuclear weapons .Though its neighbors which includes Pakistan and Israel both posses nuclear weapons and are a threat to it. Thus making this move very rational. Still with force or through diplomatic boycott everything that has to be done to save the Holy dollar empire, shall be done.
With great power comes great responsibility .The world over was ready to produce for American consumption in return for American dollar which even today most Asian nations have stacked up in their vaults as if it were gold and as many believed it really was. They traded the American dollar for oil, they exchanged it among themselves and they kept producing for American consumption. The American society on the other hand developed in a very interesting manner .They now had the largest number of shops per person. They had the maximum number of restaurants .The maximum number of saloons, the maximum number of gyms, spa’s so on so forth. Their economy developed into a service sector economy which primarily is meant to maintain an economy and support the productivity of an economy but America lost its productivity, creating an imbalance which 100 years back would have been laughed at by economists. America now is left with an industry that is primarily service sector that it can never use to overcome its trade deficits. The only products, that America still produces and that world needs is in software and hardware technologies, but that alone can’t purge the ever increasing trade deficits. One famous Austrian economist parodies the modern world as follows.
“Imagine an island with 6 people, 1 being the American the other 5 being the Asians. The 5 Asians were given the task of hunting for fish, cutting the wood, cooking the food, so on and so forth. While the 1 American was given the task of eating all that is produced by the 5 Asians. The American also washes himself, maintains his body and enjoys his life by sunbathing (but produces nothing that could be of service to the other 5 people on the island) .The modern economist now says .The American is the driving force of this economic structure. The American is the most integral part of this economy. The logic being, If there was no American on the island the 5 Asians would be jobless, They would have nothing to do. So the 5 Asians need to thank, that the American has a huge appetite”
To take the analogy a step further”The American in return issues certain notes (dollars) and gives them to the 5 Asians. These notes act as passes for the Asians to drink water(oil) and these Asians also trade these notes among themselves for what is left of what they have produced“
This seemingly weird structure of society is a surprising reality. America has kept accumulating trillions of dollars worth of trade deficit and has depleted its manufacturing sector into total ruins and lost its ability to produce enough to meet a trade balance. It moved its work force from manufacturing into shop salesmen who would now sell foreign products, from producing goods into never ending masseuse parlors. This unusual status quo led to several unusual results that could have probably baffled economists 100 years back. Consumption became 72% of America’s GDP. The very concept of GDP when it was first conceived was assumed to be the productivity of a nation. The driving force of economy became spending though it never produced anything but it was spending (as it could go into trade deficits and debts till dollar remains the reserve currency as explained at the start). America increased its GDP through credit systems where people were forced or rather tempted to spend not only what they earned, but also what they will earn if the work for the next 40 years. This fueled a growth in a rather strange manner. None the less people were spending even what they never earned and the GDP numbers were excellent for years.
American society now has credit counseling services that are similar to groups like Alcohol anonymous. Where a person needs counseling to overcome his addiction, in this case the addiction of swiping the credit card. The Federal Reserve wanted to fuel its new structure of economics by creating easy money for Americans to spend and lowered its interest rates to 1%. Americans who had no jobs who had 3 to 4 bankruptcies, were able to get loans to buy as many houses as they went on to spend the money they never had on products they never could afford. People who had jobs that paid them 30,000 $ per annum were buying houses that cost 500,000 $ without any downpayment. All this hyper consumption and easy availability of loans and credit created lot of fictitious wealth on Wall Street with excessive haphazard consumption and many modern economists stated that American economy has never been in a better shape in the last 230 years of its existence as an independent union. Some of them argued that every next person now owns a house which is close to a million $ making him/her a millionaire. Finally the bubble collapsed starting with the sub prime mortgages (one’s with very less FICO scores) which later extended to the entire housing market. Most of this easy money which the American banks and private investors had got spilled over onto all the stock markets in the entire world. Every stock market blew out of proportions the SSE composite went from 1019 in 2005 to 6100 in oct 2007, BSE Sensex reached went from 7000 to 21000 in almost the same period. So did the Russian, South African and every stock market in the emerging world. As American government was printing more and more money but the dollar was not falling the way it should as it was the reserve currency and it was pegged with other currencies. Which tried to maintain its value? Though this is total distortion of economics the way it should be.
This weird modern economy started taking a strange turn with depleting ability of the American nation to produce and its unusual growth in the finance sector. Especially in the realms of investment banking. Investment banking primarily is nothing but investing your money on something that you feel shall rise in the future and thus give you better returns. This innocuous looking industry which some still call as mere gambling grew in a rather strange fashion.
“Assume there is a cricket player who just joined the national team. The economics related to this is nothing. Now bunch guys put a bet that he shall rise up the ranks (the way investment banking was in the past).Now we have additional elements which are as follows. Another person becomes an insurer and insures a persons bet incase he makes a loss. A 3rd person comes in and bets that the person who loses the money in the bet, won’t be able to pay the money. Another person comes out with data that analysis of the truthfulness of all these people and rates them with so called credit rating and calculates the probability of them being correct. Another person comes in and says if this particular person who is betting on this player shall make profits after 1 year. This persons current contract will be traded for another year, with varying profits the person is making. Another person comes in converts most of these bets into bonds and sells them to another person .Now this other person keeps trading on these bonds. Some other person comes in to bet the downfall of this player and the whole process of several layers of trading on the same thing continues. There were even people who were betting that finally the person who makes the profit may not be able to receive his profit’. This in reality never produced a product or a service to any individual but in strange fashion made people several millions of dollars.
These seemingly odd sequence of deals is modern investment banking .Americans not only thought they could create the worlds gold in their printing press, but they now got so greedy that thought they could they could create wealth out of thin air. Where the same particular object was sliced and diced and the same bet was traded in 3rd or 4th levels. In order to over emphasize its profits and interconnect all markets to increase the profitability on paper. This whole system developed only because there was no industry in America that could actually produce anything that would make a billion dollars per annum. This fictitious wealth satisfied many and investment banking became world’s most desired industry. Americans thought they not only invented the light bulb, telephone, nuclear bomb and airplane but they have now finally discovered Alchemy : P with the slicing and dicing. This whole thing had one simple flaw. It could collapse in one instant. Which happened once the housing bubble went bust. Hundred years back the Americans were making the light bulb, inventing faster calculating machines, discovering weapons, improving infrastructure, making aeroplanes. They had a manufacturing sector strong enough to sustain the economy now they created dubious trading as the biggest sector of their economy.
This whole strange structure of modern economics is nothing but true .An aberration that was caused out of greed that was caused out of the power that a man gained by declaring what he had to be today’s gold .Forever all societies that enjoyed both the bread and circus and looked too great and too rich to fall have only collapsed .As a nation is not its gold or its wealth but its people and with growing wealth as in this case comes growing incompetence. The Americans invented manufactured their way into economic political diplomatic glory the likes which has never been witnessed into the history and they now were spending themselves in bankruptcy. America now has its soldier’s station in over 140 countries. Trying to protect the Holy dollar empire. Using force to compel people to accept money without real value This can only work in the short run as it is doing today and world accepts dollar. It ultimately leads to economic dislocation that it has now, both domestically and internationally, and always ends with a price to be paid.
The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. Americans will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better not just for America but for the world over.

Uhh when will it end

It was 1914 when the Simla convention took place. The powerful British raj and Tibetan government singed a treaty drawing a demarcation line between Tibet and the British raj which was called the Macmohan line. This line was forgotten by the British raj till 1935 and then they reinstated this into their maps. It has forever changed India’s relationship with all its current neighbors and has pushed us into a boundary turmoil that even till today has not been solved and poses a big threat to our nation than ever before. I here discuss the history, the story, behind this line and how it has affected us in every way possible and continues to be a problem that ceases to be solved. This is truly an interesting post primarily because it affects you and me.

The Macmohan line by nature was a line that connects all the highest camping points overlooking into the Tibetan territory and gives them to the British raj and also a small Tibetan area which was the south twang district. This line is a proof of the power British raj held, as they forced a deal which most governments would not have accepted since it gave all the highest camping points into the British territory. The problems started once Indian government declared its Independence and declared Macmohan line as its default boundary which continues to be so till today. Interestingly, Tibet was in suzerainty of China and thus Tibet as an entity did not have a sovereignty to sign treaties in relations to the boundaries at least as claimed by the Chinese and to support their claims in 1904 a decade before Simla convention Brittan and Russia did recognize Chinese suzerainty over Tibet.

The communistic party finally gained power in 1949 and Nehru realized the importance of friendly ties with China and also the need for mutual co operation came up with his famous quote “Hindi Chini bhai bhai” and also propounded the famous Panchsheel in order to enhance the relationships between these two ancient cultures. India declared ‘The Macmohan line’ as its default boundary with China. This was something the Chinese were not willing to accept. The reason being they denied Tibet having any sovereign rights to draw a treaty with the British Raj and thus denied the Macmohan line as the default boundary (as supported by the treaty signed in 1904 which recognizes Tibetan suzerainty under Chinese by British). In reality, according to many analysts and me alike, they could not accept the nature of ‘The Macmohan line’ as by definition it connected all high camping points into India boundary something no sovereign or powerful nation willingly would yield to and felt it was strategically suicidal if accepted. None the less that is the boundary that India till today follows. Though, with all this background we did try out best to settle our relations with China.

In 1954 India signed a treaty and accepted Tibet as an Integral part of China. Previous to this Chinese maps as published in China included areas below the Macmohan Line extending into Assam something not in consonance with Indian belief. Nehru brought this issue with Chinese premier Zhou Enlai. He casually mentioned that these were old maps and had not been redrawn. Something which continued for another three years. The Chinese did add footnotes under the maps that diplomatically mentioned that these maps were reprinted and that they were not new. Nehru found this act of theirs rather annoying and kept changing his stance over this act. It was quite clear that Chinese were not willing to accept the Macmohan line and were not in a position to fight a war as the aftermath of the civil war that saw the victory of the communist party left the Chinese economy in total disarray. I present Indian maps as seen during our Independence after 1947.

Kashmir as it was shown on the official map, as on Independence Day, 1947.

The map attached to Mountbatten's Report on the Last Royalty.

These maps were changed in 1954 as retaliation towards Chinese maps and the new maps included Aksai Chin (The land of white stones) which is seen even today in the maps published by India. This cartographical aggression by India did not get any response from China. As economically it was still in distress after the civil war that just ended. Aksai chin is one of the world’s most barren lands with almost no inhabitation. After this inclusion the Indian government faced a major embarrassment as it was later found from a Chinese newspaper about the construction of a highway from Tibet to Xinjiang province. It was clear that the highway was passing through Aksai chin. Which led to a great uproar among Indian politicians in the LokhSabha. To make things worse, China started driving out what it called anti national forces in Tibet from China. This was seen as imperialistic tendencies shown by Chinese and received great censure from the Indian polity during 1957 to 1959 and Indians showed great sympathy towards the Tibetan exiled government and went great lengths to support them and establish them in Dharmashala. (Something which eludes every historian is if Indians were so sympathetic towards the Buddhist government. Why did India from the start of 1951 reiterate that Tibet was an integral part of China and also go to the lengths of singing a treaty in 1954 that accepted Tibet as a part of China).None the less there were widespread protests as with the highway being built across Aksai Chin and also in the nature which Buddhist government was pushed out. This led to a great sourness between the two nations as outright protests ensured that Hindu chini bhai bhai was not actually true. Indians once again took the matter to U.N where both the nations claimed the other was infringing upon its land through cartographic aggression. Zhou Enlai suggested a truce where India recognizes Aksai chin as a part of China and China recognizes the twang district and thus the whole of Arunachal Pradesh as a part of India. Something which to me sounds sensible as firstly Aksai chin is inhabitable and China had already built a highway through it and Arunachal Pradesh is a much larger in terms of area and was quite widely populated and included Indian settlement while Aksai Chin did not. Indian government decided to turn down this offer and stuck to its boundaries as claimed from the start. Many Indian diplomats suggested Nehru against this as they warned that Kashmir shall always be an issue for the Indian government and its relations with Pakistan shall be sore and creating a new enemy in the form of China will only harm all our diplomatic and strategic ties. Nehru in view of widespread protests and also in fear of hurting nationalism stuck to his original boundaries and thus this issue was not resolved.

Later war amongst the two nations erupted in 1962. The reason was the Macmohan line drawn in the Arunachal Pradesh area did not include the highest camping point and that point was towards the north of the Macmohan line in the Chinese territory and it was not in coherence with the definition of the line given in 1914(A mistake committed by British while drawing the line) . The Chinese troops saw Indian troops patrolling north of the Macmohan line and this evolved into a war as Chinese troops attacked and took up great parts of Arunachal Pradesh they later receded some parts of what they had taken up during the war. The war also spread towards Aksai Chin area. In both places Indian army was humbled and Nehru received heavy criticism for not being well prepared. In 1980’s yet again Deng Xiaoping reiterated the similar deal as propounded by Zhou Enlai but Indian government did not accede to it. We later indulged in problems related to Burma. Now we are trying to attain some peace and diplomacy with Sri Lanka which helped Pakistan refuel its navy in Sri Lanka during the 1971 war with India. We now can see emerging problems with Bangladesh. In my personal opinion India failed in terms of its foreign policy when it came towards its relations with its neighbors. On the other hand China resolved its boundary problems with Russia in some sort of a barter .It is now in truce with Myanmar and is building a strategic sea port in Myanmar and is also in truce with Bangladesh and is also building another strategic sea port in Bangladesh. After the 1962 war Pakistan in its own words gifted a land mass of Azad Kashmir (or Pakistan occupied Kashmir) the size of Sikkim to China in order to develop friendly ties with China.

This was a brief history of the Indo Sino relationships. All these issues should be sorted as soon as possible as I find the exercise of drawing huge boundaries for the sake of drawing without holding any territory as futile. At best it only ensures that you are still at loggerheads with the other person without gaining much. We must realize these are just lines drawn by the English who divided us several centuries back and now we are fighting based on the legacy and lines left by them. Recently views expressed by all western countries in relation to future monetary policies were not in coherence with those expressed by China and India. We both are nations with similar problems and need each other for economic, academic and technological growth. The only worry is, can we ever have a leader who says “okay fine, there is no point in just drawing boundaries so big without actually owning it. The bigger problem is the economic growth and sustaining it”. (Lets be honest we are not going to fight a war for Aksai chin). The only problem is selling this to the Indian population and making sure we are not selling away their holy soil.

Being slightly cynical

I have observed the never ending conversations about American recession with basically no or little understanding over any of the events that surround it. I would like to be a simple Cynic here and ask We are living in a country where 459 million people are under the poverty line almost 42% of the entire population(which is one third of world's poor) . Something which no great depression will push America or any European nation into.We live in a country with 830 million people (76% of our population) earning less than 20 Rs/day .Which is a statistic much worse than even observed in sub Saharan Africa. A situation which I don’t foresee even if all accepted definitions of recession are attained in the U.S and in the worst case if this recession enters a depression.Our current state of poverty and hunger is worse than any economic depression in America would see. I think we need to discuss more about the Great Indian poverty or the Great Indian Hunger and less about the Great American recession.(which is a part of accepted economic models).

TATA NANO NaNa?

I have from the past shown great interest in trends all around the world. I hardly admire anyone other than myself but I do tend to concur with Jim Rogers on most things. Especially of him being extremely bullish on agricultural stocks or food processing firms .From the advent of industrialization , Man has valued arable lands and fertile plains the most. More so now, with ever reducing arable land and growth in demand for food processing industries. We are a fortunate nation in this regard as we claim to have some of the world’s most fertile lands. West Bengal happens to be one such fertile land with its vicinity to the Sundarban Delta. This land has a great scope of food processing industry in the league of P&G, Nestle and many others. Even Developing countries like China seem to be struggling with the lack of arable land and the hardships it faces trying to grow the multi billion dollar industries that surrounds it is known to all students of economic development. Amul happens to be one of the most influential and most important food processing industry in this country with diversified food products, but it is quite ironic if you observe that it is situated in Gujarat with great vicinity to Kacch which is at least barren land and described by some as a desert. The Indian government at the start of independence came up with several food processing units in Bihar and West Bengal which closed down due to bad management and several other reasons. I very well remember Sudha and other drinks that were in supply when I was really young. With growing consumer market especially food processing industries .This is a time when healthy entrepreneurs with initiative from Government can establish industries of this nature in diversified food products bringing prosperity onto farmers as shown by ITC by some of its ventures. These naturally fertile lands are a great boon to this nation and government ought to work towards making these geological and climatic gifts into multi billion dollar industry pushing farmers out of poverty into prosperity and many entrepreneurs into further success.

TATA’s Nano project even with my great due respect to the TATA’s fails to do so. It is a manufacturing project with demands 1000 acres of fertile land .Something criminal in this nation with so much of barren empty land available which is still connected by rail roads and roads alike. Even in the ancient Roman Empire manufacturing industry was set up in areas which shall never hinder the agricultural development. Industries that ameliorate agriculture were main establishments in arable land. I happen to be very strong proponent of the free market economy and industrialization but I also believe it ought to be done in an intelligent manner sacrificing healthy fertile lands which the whole world is going great lengths to achieve (through several research projects) for a manufacturing sector is nothing less than mere desperation and outright inane behavior by the government and greed shown by the industry developers (ask me why?) .I would have strongly supported Buddhadeb, if the industry was of a different nature.

Anyway,on a totally different note. I find it really hard to move in this city traffic and I don’t see any solutions in the foresight. Even countries like China which have worked so much on infrastructure have given up and are trying to reduce personal vehicle use and encouraging publictransport services. I can only imagine what would happen if school girls who are now on using scotties take up TATA Nano Though I don’t posit this as argument to counter TATA NANO as I don’t believe lack of infrastructure should be the reason to not build innovative products..At the end I think I am happy with whom Nano moved in Gujrat and I am sure that will do only good to our nation as a whole but I really wait to see what Budhadeb shall do .If industrilisation is what he wants West Bengal has the scope to become everything from the largest producer or rice to jute of the entire world if proper efforts and reforms are taken up.