Wednesday, November 28, 2012

Inflated Conspiracy

Every time my cousin comes visiting to India from the US of A, he always ends of complaining how the cost of living has dramatically gone up since the last time he came to India. Each time he comes, his hopes of relocating to India keeps getting dimmer, as he looks at the spiraling costs and the incomparable standards of living. This is a rather interesting point, US with such high standard of living manages to maintain a significantly low cost of living or inflation. Inspite of subsidy that it gives to farmers and the cheaper than cheap fuel (called gasoline) it offers, the cost of living continues to be low and the standard of living significantly high. Paradoxical!
I present a theory, not mine, but a view point that I endorse to and that has existed for quite some time and dismissed by many as 'one of the many conspiracy theories' that does not merit any attention or time. However, a closer scrutiny might indicate that, this theory cannot be dismissed outright. Even if the effects are not deliberate but nonetheless the outcomes are unmistakable. To understand the theory, three facts need to be understood by us:
  • Most countries like to keep their Forex Reserves in the form of Dollars
  • All currencies in the world are equated against the Dollar for it's value in the market
  • Dollar circulation is entirely managed by an Independent central Bank - Federal Reserve (Fed)  in the US of A.
Fed decides the Monetary Policy independent of the world economic scenario. Whenever USA prints more Dollars and makes money easily available with almost 0% interest rates, the money invariably finds it's way into the international market via MNCs or FIIs and into other countries as Forex. Two situations arise due to this:
Situation 1
  • More the Dollars in a country = the local currency 'appreciates'
  • The more the local currency appreciates the more expensive it's exports become [imports become cheaper]
  • More expensive the exports the less competitive the Country gets in International trade scene
Situation 2
  • Lesser the Dollars in a country than local currency = the local currency 'depreciates'
  • The more the local currency depreciates the more expensive the imports become [exports become competitive]
  • More expensive the imports the more expensive the Cost of living becomes in the domestic scene
  • More money in circulation also causes domestic inflation

This is the Catch 22 situation of the top order, getting the balance right is not an easy policy decision for any government. Nonetheless an export oriented Developing or Developed Economy can in no way afford to be non-competitive in the International Market, hence invariably the second of the above two options gets chosen. Observe how the price at which US buys products from these countries remains relatively stable helping them keep imports cheap and also by ensuring most of the printed dollars move out of the country they manage to keep a very low inflation. However the Cost of living in the country that is exporting the goods becomes high, due to dearer imports and high amount of local currency in circulation. So in this manner, whether deliberately or unintentionally US exports its inflation by ensuring - There is steady supply of dollars and continuity of international trade in dollars. 

China, the emerging super power and an export oriented developing economy, probably understood this much earlier than others and ensured that their RMB or Chinese Yuan remains rock steady in value verses the Dollar. They tried to keep the value of their currency decoupled from Dollar, so they could continually remain competitive in International Trade and at the same time control prices locally and fuel domestic growth. Ofcourse all of this came at the expense of being called a "Currency Manipulator", however their objective was met. Other countries with lesser clout than China - do suffer the consequences of Dollar supply. China also has been the most vocal in asking for the International Trade to be done in a neutral currency [Ex: using the SDR of IMF] so the world trade is decoupled from Dollar whose circulation is dictated by Fed entirely based on the domestic requirement in the USA.

So the message I got to give my cousin is, because Cost of Living in India is going up, because US is able to maintain steady or low cost of living and this situation is not expected to change as long as US continues it's two major exports:
  • Dollars
and hence
  • Inflation


Wednesday, November 21, 2012

Nations of a State and States of a Nation

Life has to get precedence over all other beliefs and laws of society. Death of Savita Halappanavar, in Ireland is unacceptable and intolerable under any circumstances.It raises strong questions about 'Statehood' and influence of religion and again brings forth the debate of Nation vs State. Savita did not die due to medical negligence but because of a less understood and open-to-interpretation law that bans abortion due to the religious reasons. How can a matured state allow that to happen?

We often use Nation and State as synonymous terms even though both are different. A society of men is said to constitute a Nation when they feel conscious of their common racial or cultural or sentimental solidarity among themselves. Contrastingly a State is a Political entity and bound by geography and law of land. A Nation doesn't have to be restricted to a single State and a state doesn't have to be restricted to a single nation. Often States are assimilation of multiple nations and nations are spread across multiple states. States with single Nation are called Mono-National and States with multiple nations and are called Poly-National.

Some States have traditionally been of a Poly-National character where as some of the others acquired this character over a period of time and yet there are some that want to staunchly protect their coveted Mono-National character. Rapidly changing demographics have started putting pressure on the Mono-National States and have put them in a dilemma. These States on one hand open their doors to foreign nationals and fill shortage of human resource with specific skills and at the same time try to ensure it in no way threatens their local electorate. Invariably, the foreign nationals arrive with their own cultural baggage. These baggages start weighing heavily upon the local culture and threaten continuity of culture in the existing form. To the chagrin of many purists this often ends up creating an accommodative and hybrid version of the local culture. Though, with vast human migration, changing demographics, shrinking world there are not many true blue 'Mono-National' States left.

 The more Poly-National a State gets, it would do good by functioning off a Constitution that is not strongly influenced by religious tenets. I am sure if a similar death, like that of Savita, would have happened to an Irish national, while equally condemnable, the news would have been restricted to the local media. However as we had a person of different nationality at the centre of such an event, the inadequacy of the Mono-Nation State's ability to move away from religious tenets or reluctance to accept the changing demographics comes to the fore. One would have thought that Church dominating the politics of land was a thing of Medieval ages, but looks like we were wrong.

Most of the rich Mono-National states had an issue of lack of sufficient college graduates with specific skills, this meant that to fill the gap they needed to import those skills from abroad where there was abundance of resources. Importing resources and hoping that they leave their culture back home is a rather Utopian dream. Hence flexibility and readiness to accept the changes is needed so that no more lives are lost. I think States are better off being Religiously neutral. This should also help one to understand and appreciate the complexity of running a poly-nation state like India.


Monday, November 19, 2012

The Presidential Suite

The dust has settled on the US presidential elections, finally to the relief or agony or many other contradictory feelings of people, a President is in place at the White House. As the frayed nerves are put at ease I wanted to share a few observations I had during the course of the campaign leading upto the elections and declaration of result.

Firstly Globalization should have meant that a part of the world is present in every other part of the world, like fractals. The exchange of information, cross cultural corporate environment and access to information via Internet or television should have made it easier for this to happen. What seems to have happened though, is that the World has got closer to USA rather than the other way around. So events such as US Presidential elections are no longer watched and monitored only by US citizens but by many ordinary citizens, like me, world over.

Secondly, while it is indeed amusing to see so much dinner time or cocktail party debates on US Presidential candidates in countries that are thousands of miles away from US, there is no doubt that the person who gets the job has an immediate effect on foreign policy involving these far off countries. The policies of ‘father Bush’ administration or ‘son Bush’ administration or Obama administration has not only had repercussions on their own populace but in far off places like Iraq, Iran, Israel, Afghanistan, Pakistan, India and China to name a few. Hence political leaders world over keep a close watch on the proceedings.

Thirdly due to the strong ideology based politics US political parties are so easy to identify with; . You have a set of belief about abortion, euthanasia, gay marriage or China or outsourcing, you automatically become part of one or the other political outfit.

Fourth, elections are, apart from everything else, also about money. The advertisements, the travel for campaigning, entourage, accommodation, dinners; all cost money. Wherever there is a question of money there is a high chance of misdoings and illegal methods for raising funds, US elections show, how it could be kept clean by bringing in transparency into the funding process. Everybody knows where all the money came from and tries and keeps it as clean as possible.

Fifth, televised debates between the presidential candidates. This, I think, is the hallmark of the US Presidential elections. Two matured gentleman going hard at each other but with dignity, grace and entirely on the basis of facts, figures, policies and strategy. No raised voices, no rising temper, no backbiting. Everything in public view to live audiences, so everything is on record and available for repeated viewing and any goof ups or mistakes impossible to escape from.

Sixth,  the developing economies world over have nothing to learn directly from type of politics of US. The situations are different, demographics are different hence these countries are better left to themselves to work on their own type of politics. Any attempt to blindly adopt some of the methods could lead to disastrous consequences.

 Seventh, Last but definitely not the least, the biggest learning for all is about grace in defeat and humility in victory. Romney and Obama both demonstrated this perfectly, one conceding defeat without losing dignity and the other claiming victory without being condescending.


Sunday, November 11, 2012

Uppity Identity

Identities, in a life time we juggle with multiple identities. We are actually a sum total of what our identities make us. All of us have a priority list of identities that we adorn depending upon the situation and circumstances. It is the same order in which these identities have the capacity to make us feel good or hurt us depending upon how other’s respond to them.

Nationality, race, ethnicity, religion, football club we love, cricket team we love, baseball team we swear our allegiance with, education we have had, institutions we have attended, profession, political ideology that we agree with, economic ideology we subscribe etc. are all various identities that make us. We are not born with all, definitely they don’t matter to us when we die yet, during a lifetime these identities are us and we are our identities. Identities are fragile malleable, ductile and continuously divisible. Hence identities are the source of both internal (within us) and external (in society) conflicts.

The multiple identities that we adorn, appear harmless; however a study of human history indicates that all major conflicts have always been conflict of identities. Identities need constant nurturing, constant appreciation, and constant acknowledgment. At any point if an identity is ignored, disrespected, devalued or threatened, then one tends to become extremely protective and sensitive about it and does whatever is needed to prove the relevance, value, superiority of it. Yes, under duress, some identities do tend to become dormant but, there is no indication of any identity ever becoming extinct.

Second world war witnessed how Hitler, who gave priority to the Aryan identity of his, went berserk to prove purity and superiority of this identity over the so called defiled identity of Jews and the results of such an effort is now etched in history for us to read and reflect upon.

Cold War was a conflict of ideological identities, capitalist trying to prove their superiority and relevance over communist. Again undoubtedly clash of identities, repercussions were quite drastic and it polarized people.

9/11 incident indicates how an identity that feels threatened, disrespected and condescended upon, reacts, despite loss of civilian lives involved and severe repercussion on how the world would perceive both the identities involved in this conflict.

And we can go on and on, from large scale wars to the riots that break out in football stadiums, all bear testimony to how identities have the power to dictate action. This also means that as an individual if we keep removing and travel backwards in order of importance from one identity to the other we probably might know who we really are and how many of our identities really deserve the importance we give them.  On the other hand as a society we understand that if peace is a real and essential objective then one has to appreciate and accept all the multiple identities that exist without paranoia, propaganda or parochiality. Nobel laureate economist Amartya Sen in his essay ‘Identity and Violence’ says ‘Perhaps the worst impairment comes from the neglect—and denial—of the roles of reasoning and choice, which follow from the recognition of our plural identities. The illusion of unique identity is much more divisive than the universe of plural and diverse classifications that characterize the world in which we actually live. The descriptive weakness of choiceless singularity has the effect of momentously impoverishing the power and reach of our social and political reasoning. The illusion of destiny exacts a remarkably heavy price’

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Tuesday, November 6, 2012

Shoe - Silence Please

I think all of us remember the incident where Bush had a pair of shoes hurled at him in Baghdad. Ever since that incident there have been flurry of incidents across the world where shoes were thrown at politicians. Wonder if anybody spared a thought about why it caught up like a craze and spread like forest fire as a mode of protest.

I know there might be different theories to explain this; however I think the reason is more apolitical. The shoes that were thrown, I think, were those which made the most embarrassing of noises while walking on the office floor. In other words these must have been farting shoes that are an embarrassment to the wearer. I have been victim of such shoes which look smart and are extremely comfortable but have a strange knack of making odd noises when walking in office.  Each time I found myself in such awkward situation I wished I could walk barefoot, wished I could vanish, wished I didn’t have to walk much, hoped magically the noise would stop. However I never thought that I could use it to throw at people that I didn’t like and not only get rid of my problem but also gain some popularity in the bargain.

Looking at the string of shoe throwing incidents across the world I realize that I am not only one who faces the problem of noisy shoes. However, while mine sneer at me sitting on my shoe shelf, other’s had the distinction of flying over popular politician’s head! One must also observe that in all such shoe throwing incidents the shoe never hit the person it was hurled at, it swooshes past but never ever has it hit. Why would it? If you could make your mark and fulfill your objective without hitting the target, why bother to waste extra time. Shoe companies or showrooms are not making any extra effort in ensuring that people could wear and trial shoes on a surface that closely resembles their office floor in texture so, I wouldn’t be surprised if we see a continuance of people at the tether end of their patience with their farting shoes and let go their frustration on the shoe and the politician in one go and for the same reason.


Random: November 2012