23 Oct 2012

India's at a fiscal cliff - enjoy the view

There's an article on the zerohedge economics blog referring to the sheer absurdity of S&P's having the same BBB sovereign debt rating for nations that are burdened by debt ranging from 10 percent to 120 percent of their GDP!

The precarious BBB-rating is just ONE STEP above 'non-investment grade' or junk bond status.

These are the BBB-rated nations ranked by Debt-to-GDP ratio


Spain has already has it's entire banking sector downgraded - and is in the front of the queue for a major bailout by the European Central Bank (ECB). This event will probably be accompanied by the tightening the "austerity" tourniquet, and feudal overlordship of an EU 'Budget Commissioner' from the sinister European Stability Mechanism (ESM).

(This video on the ESM - shocking as it may be - is over an year old. The ESM has since morphed into an even more frightening, sovereignty-gobbling, legally-untouchable, financial frankenstein!)

However, my personal concern is not about Spain or the EU - it is about the BBB-rated nation that is standing alongside Spain on the edge of fiscal cliff: INDIA.

I had posted on India's predicament last December... (Please read it.)

Here's the gist of it - and a few updates...
1.] Back when Kingfisher Airlines (which had its license suspended this month) was in the news for debt 'problems'. I pointed out that the entire Indian Aviation Sector is drowning in debt. And their top bosses even approached the PMO for assistance!

One must understand that the ones in real trouble are the banks - including many government-owned banks - that lent money to these airlines! Bad loans mean vanished assets. And when assets are (mostly stock and equity) leveraged up to 14 times, seemingly minor single-digit losses or a steep drop in the stock market can wipe out a bank's capital base!

2.] Avaition is not the only 'sick' sector in India... Many other industries, including India's Power Distribution Sector, Real Estate Sector and Textile Sector are deep in debt.

3.] Several Indian States are struggling to pay just the INTEREST on the debts they owe. West Bengal loses 33 percent of the state's entire revenue; Punjab, 21.1 percent of the state revenue; and Kerala, 19.6 percent of the state revenue on JUST interest payment!

4.] India's Banking Sector is facing unprecedented levels of Non-Performing Assets (NPA) or bad loans - mostly to corporate clients like Kingfisher Airlines. In just 3 weeks towards the end of 2011, the Government of India, via the Reserve Bank of India (RBI), had pumped Rs 22,000 crores of liquidity into the banking system. Even AFTER such intervention, the banks were downgraded by the credit rating agencies this year! (On top of all this, next year, the BIS's Basel III agreement for INCREASED capital reserves kicks-in!)

5.] India's external debt is growing, it's currency weakening and it's economy is slowing. Despite the government puppets harping on about the lack of foreign investment, India had the SECOND HIGHEST foreign investment in-flow in the world in 2011! EVEN THEN, the nation's foreign currency reserve-to-debt ratio is fast approaching the levels last seen in 1991. (If you remember the shameful episode, that was when India gave away its national gold reserves in exchange for new DEBT with the IMF!!!)

India's present debt-to-GDP ratio can be simplistically explained like this: Around 65 percent of the value of everything India's produces is OWED to lenders.

Perhaps soon India will get it's own version of a 'Budget Commissioner'... We could call him, "Viceroy"!

17 Oct 2012

So we are all 'Hindu' now?

The "Hindu Rate of Growth" was coined by Indian economist, Raj Krishna. (Incidentally, Raj was from the virulent "Chicago School" of economic - just like the current Chief Economic Adviser to the Government of India, Raghuram Rajan.)

It was a disparaging reference to the low annual growth rate of India's economy - around 3.5% from the 1950s upto the time Manmohan Singh weaved his IMF-directed econo'magic' in 1991.

During his Raj Krishna Memorial Lecture in 1995, Montek Singh Ahluwalia - then, the Finance Secretary, Government of India - gleefully noted: "He (Raj Krishna) was one of the first to draw pointed attention to the inadequacy of our growth performance, when in the mid-seventies, he coined the much quoted phrase "the Hindu rate of growth" to describe India's disappointing trend growth, which at that time appeared stuck at 3.5 to 4% per year.

Today, the economies of almost all so-called "developed nations" of the world are growing, and only precariously so, at a less-than-blistering pace of 2 per cent and LESS. (But that does not discourage the Government of India in 2012 from trying hard to emulate their "successful" development model!)

Check out the latest Gross GDP Growth data from the IMF for France, Germany, Japan, the UK and the USA...

Could this all be just bitter irony - or could it be good ol' fashioned Karma? You decide.

10 Oct 2012

7 Oct 2012

Satire, 'Gangnam Style'

As of this morning, this video has been viewed 393,590,504 times (since mid-July)... That number is nearly 90 million more than the population of the third most-populous nation in the world after China and India. It has more 'Likes' - 3,621,367 - than the population of Kuwait.

Gangnam Style by Psy

But this video is more than a hollow celebration of the glitzy 'in-crowd' of Korea's ultra-posh Gangnam District. It is actually a satire by lyricist/singer, Park Jae-sang (Psy). It parodies the vacuous lifestyle in Korea's richest 15 sq.km of real estate - and their wannabe clones elsewhere.

For instance, in the video, Psy says that he loves a "classy lady who can afford a relaxing cup of coffee" - and that he's a man who "downs the cup of boiling coffee in one go"! Korean blogger, Jea Kim explains it like this: "In Korea, there's a joke poking fun at women who eat 2,000-won (about $2) ramen for lunch and then spend 6,000 won on Starbucks coffee. They're called Doenjangnyeo, or "soybean paste women" for their propensity to crimp on essentials so they can over-spend on conspicuous luxuries".

That's the social perspective...

The economic perspective is not gung-ho either. Much of the pretentious lifestyle is fuelled by debt... And lots of it. There are nearly FIVE credit cards for every South Korean adult - and the typical credit card debt alone per household in 2010, was an astounding 155 percent of its members' disposable income!

So what if the economy is circling the drain - at least, we'll be going out 'Gangnam Style' with a Starbucks latte in hand!

Gangnam Style... with English subtitles

2 Oct 2012

Why does society need Social Classes?

Human society has always NEEDED social classes to validate its members' self-consciousness. Which means, there can be no Ruling Class without a compliant class for it to rule over. Similarly, the recently-evolved Middle Class cannot exist without the Lower Class below it and the Ruling Class above. There is no 'rich' without the 'poor' - and the label 'Third World' has no meaning till someone defines the 'First World'.

It's called relativism. And it's about how we humans need 'frames of reference' to comprehend most concepts.

If the frames don't exist, they have to be created! For example, after 10-12 years of schooling, it becomes easier for us to comprehend (or is it, accept) our own place in society. (Within this new 'frame of reference', isn't it easier to see why parents scramble to get children into the "right" schools?)

Georg Wilhelm Friedrich Hegel (1770-1831) is considered to be among the most important European philosophers, and this video explains one of his most influential concepts: the Hegelian Master-Slave Dialectic.

I disagree with the 'revolution' conclusion of the cycle... I think that the Ruling Class is trying hard this time to play the Lower Class against the Middle Class. (Perhaps because a well-defined Middle Class did not exist during Hegel's time.)

Whether the current 'notional' money system of the world implodes suddenly, or deflates slowly - the Middle Class will suffer the biggest drop in living standards. The Ruling Class will continue to live well off the accumulated (savings) assests of the Middle Class - as they has so far lived off the exploitation (cheap labour) of Lower Class.

1 Oct 2012

Cashless Society, and the coming Social Class inversion

The evidence is conclusive. There is an alternate electronic-money system coming. It will be based on the 'mobile' platform and tied to an individual via a unique ID.

The US Treasury is currently running phase one of a two-phased 'competition' inviting ideas for creating a completely new mobile-based electronic-money app. The first phase of the competition will generate ideas - while the second phase will turn the best of them into working models.

Now, what could be wrong with that? After all, mobile-based transaction has already been been rolled-out successfully by telecom companies like Vodafone in Africa (google, mPesa); and the Indian government too has shown that it has major ambitions to promote mobile transactions at the grassroots level.

Well, the suspicious aspect of the US Treasury 'competition' is that it is being bank-rolled by various private corporations under the guise of a trojan horse non-profit entity called the Center for Financial Services Innovation (CFSI), which specialises "in serving unbanked and underbanked consumers."

Now, that is the very same language as the UID (Aadhar) project with its network of Banking Correspondents and NIU (National Information Utilities) being unveiled in India.

It is becoming clear that we are witnessing - in parts - the creation of a technocratic system that is meant to be omniscient and omnipotent. It will have access to enormous amounts of personal data, even on the simplest daily transactions. And it will have the potential (eventually) to dictate what transactions are permissible - and for whom.

The "unbanked and underbanked", presumably, are individuals and families without enough cash to warrant a bank account. So why is there such a sudden and tremendous support for the "inclusivity" agenda by everyone from United Nations, down to central governments and large private corporations?

I believe it is about 'control' - and the coming 'new normal'.

The Ruling Class realises that the days of the Middle Class (their traditional base for power legitimacy) are numbered. As the economy deflates, the debt-fuelled veneer of prosperity around the Middle Class evaporates, former loyalists and supporters may turn on their rulers! (We are already seeing this happen across Southern Europe and the Middle East right now.)

Government-subsidised (central bank fiat money-based) 'development' for the Middle Class and 'exploitation' for the Lower Class is going to be reversed.

At the heart of the transfer of support from the Middle Class to the Lower Class is Direct Welfare Payment... And THAT's why a bank account for the "unbanked and underbanked" Lower Class is suddenly so important now!

The direct welfare payments in 'electronic cash' (central bank e-fiat) will be managed by private corporate monopolies (of the Ruling Class), of course for a fee.

The 'welfare payments' and the 'management fees' will be paid by the Middle Class and their taxable progeny - till they are stripped of ALL of their assets - at which point, they will be integrated into the Lower Class!

Just before discontent boils over... the Ruling Class will, once again, transfer their legitimacy to a favoured group within the Lower Class - who will form the kernel for the next Middle Class. Rinse. Repeat.

This is also called Human History.