A dollar devaluation by another name

British Prime Minister Gordon Brown said on Tuesday there was substantial support among the Group of 20 nations for creating a new framework to tackle global economic imbalances … Analysts said the United States’ drive to agree a roadmap for a more balanced global economy could meet resistance from China which is unlikely to agree reforms that would threaten its growth … A document outlining the US position ahead of the September 24-25 summit said big exporters, which include China, Germany and Japan, should consume more, while debtors like the United States ought to boost savings … The euro hit a one-year high against a sliding dollar ahead of a federal reserve meeting and the G20 talks on rebalancing, a process which is likely to require a weaker dollar.

Like Quicktake has pointed out in earlier posts, the US has alternated between an overvalued currency to gain ownership over large sections of world economy – and now with a devalued dollar, it seeks to gain an upper hand in merchandise exports. The three main points that one needs to understand are: -

One – It reduces the real value of US debt. The Chinese, the Rest of BRICS and the Others need to be paid a lot less in the future. (as pointed out earlier in various posts linked here.) Two – It makes US exports artificially competitive. (as pointed out earlier in linked posts). Three – The US competitiveness will be anchored to assets purchased with over-valued dollars.

	US	Germany	Japan	China	ASEAN	India
Labour	High cost	High cost	High cost	Low cost	Med. cost	Low
Welfare Burden	High	Very high	High	Low	Low	Low
Entrepreneurship	Medium	Medium	Low	Low	Low	High
Domestic market	Large	Medium	Medium	Medium	Small	Large
Raw materials	High ownership	Low-medium	Low-medium	Medium	Medium	Medium

What the US is proposing is that the Chinese Yuan must become ‘stronger’ – and the dollar must become weaker. This will mean a real reduction in US debt – and a subsidy for US exports. Of course, a devaluation has never helped any regime in the long run – but in the short run it reduces imports and increases exports. But is a ‘fix’ that the patient begins to row dependant on!

Is that the US is wanting to do to itself?

Related Quicktakes

Toward a robust globalisation

Fitch cuts Russian debt rating, sparks memories of ‘98 crash- Internation…

Leadership in the Developing World

The bubble you know

A Chinese bubble has been deflated. Too bad it’s the wrong one. The main Shanghai stock market index has fallen 23% from its peak at the beginning of August, reversing half of the run-up that started early in 2009. That’s a welcome correction, but it doesn’t mean a return to normality, or address the bigger bubble round the corner.

Shares were driven up by a belief in China’s recovery – and by a rush of liquidity. The fall occurred because both were gently dampened. Politicians have warned that economic recovery isn’t a done deal. Monetary authorities drained some liquidity from the market, curbed certain kinds of lending and asked banks to show restraint. (via The bubble you know).

Look ma, "Green shoots"

The long and short

The US economy is going to take some time to recover – a long time. Green shoots versus Brown Weeds is the kind of empty debate which covers the complete lack of visibility on the probable outcome that economists have.

The Japanese have finally decided to sack the LDP – after more than 50 years. The Japanese do not expect any major recovery or growth to happen for the next few years.

Europe is in the boondocks – and is unlikely to come out out of this soon. Their most feasible European option is a greater role for public sector – which the Europeans seem to have embraced in a bear hug.

The BRICs of global economy

Which leaves the BRIC countries. Russia is too dependent on high raw material prices – which need greater demand from the world economy to make a difference. Russia feeds on high growth rates – but cannot be the reason for growth of the global economy.

Ditto for Brazil. Which leaves the world with India and China. Let us first take the Chinese case first.

How ln can this model work

Biting the bullet

Most economists believe that to kill the Beast of Great Recession, the world is left with one, single  magic bullet – China. This being the only bullet in the chamber, makes everyone very nervous, keeps everyone busy, reading Chinese tea leaves with great care.

There is overall consensus that the Chinese growth figures need to be ‘tempered’ – and significantly. The fears seems to be in two areas: -

1. Overstated growth rates.

“The Chinese government is one of the few governments in the world that knows its GDP numbers three years in advance,” Marc Faber told CNBC. Combine this with the other preoccupation where “China is desperately trying to figure out how to withdraw its funds from the dollar without driving it down — not an easy feat.”

2. Understated bad loans by banks.

an astonishing $300 billion vanishing act … the amount of bad debt the top three banks offloaded in the early 2000s. Back then, the People’s Bank created four asset management companies to scrub away the dirt from two decades of policy-driven lending. There was a big catch. The AMCs bought the loans for up to 100 per cent of face value, while recoveries were in the 20-30 per cent range. That means the top three lenders’ Rmb1.2 trillion of AMC bonds, which start to mature this year, are likely to be almost worthless. In theory, the Ministry of Finance is ultimately on the hook, but it is unlikely to make good for the banks. The amount due to all three is roughly one-sixth of China’s fiscal revenues for 2008. (from If in doubt, rub it out BY John Foley /  August 29, 2009, 0:03 IST).

Housing makes up roughly a quarter of investment spending, which is in turn 40% of gross domestic product. The differences between China’s big cities make a bubble harder to spot. But record bids for land are cause for concern, as is falling affordability in big cities. Meanwhile, stagnant residential rents suggest speculation, not demand for somewhere to live, is pushing up house prices. A burst real estate bubble could be fiendishly tricky to clear up. While stock markets clear in a day, property gluts can take months – if they clear at all. ( from The bubble you know by John Foley, Septemeber 1st, 2009, 01:33 IST).

Everything is made in China

Both these severely strain the economic outlook and the banking sector. This may lead to, what the WSJ.COM says, a situation, where “China in the medium term will face just the overcapacity and bad debt that many observers feared already existed.”

But some of these observations and scare stories are exaggerations – and need to be read with the caveat that the dominant Western media portrays all competitors in a similar manner.

What about the Indian economy

That pretty much leaves India as the sole candidate. India cannot absorb the kind of imports that are required to make a difference to the global economy. Or boost exports to the rest of the world – to create consumer led growth. World Bank estimates are that India will grow faster than China by 2010. So, no go!

A plan for Indian businesses

What this means is that India needs to do: -

1. Not bank on any kind of global recovery soon.

2. And island itself – by ensuring that any kind of global mayhem, counter-party risks do not hit Indian banks, corporates, exporters, et al. This may need some strong alliances on export guarantees and credit enhancement by importers for exports from India.

The Indian Government, may not take any major initiative in this regard, but it is the Indian businessmen, who should and must understand this situation – and take the necessary precautions, actions, insurance, guarantees, due diligence, comfort letters – the entire gamut.

Sunita Narain proposes more Government

Dilbert knows all ...

we bought samples of leading brands available in the market and analysed content for the toxin. What we found was staggeringly high levels of lead in virtually all samples we checked. India does not have a mandatory standard for regulating lead in paints. We only have a voluntary code laid down by the Bureau of Indian Standards (BIS), which specifies that lead content should be 1,000 parts per million (ppm). Our tests found that the biggest and best companies had lead levels 180 times the voluntary standard.

But we were not surprised, as I said. After all, the government has not set standards to phase out lead in this daily-use product. Something most governments had done some 20 years ago. In the US, lead had been termed the number one environmental threat to the health of children. But it was a non-issue for the industry in India. We were angry at this indifference and decided to write to all major paint companies asking them about their plans to phase out lead. We expected little response. But this time we were really surprised.

Two of the major companies — Asian Paints and Nerolac — wrote back saying that they were planning to get rid of lead. They promised that this would happen soon, within a few months. So, instead of immediately releasing our report, we thought we should wait: To recheck and to validate if the companies kept the promise they had made to us. Some months later we went to the market and picked samples of the same companies.

Our analysis found a change. Of the big five, three companies had no lead in their product. Asian Paints and Nerolac had indeed cleaned up. Berger and Shalimar still had lead in the samples we tested. Both are big companies and neither have any excuses. The fact is that companies have the technology to phase out lead. (via Sunita Narain: New coat of paint).

Failed agency, failed agenda, failed model

Much as I like Sunita Narain’s work, her reading of this situation is wrong.

Unlike her fault-finding, this was good news. For three reasons.

1. Three out of the five biggest companies voluntarily agreed and reduced lead content – at a significant cost to their own bottom-lines. Without a sword over their head or legal threats hanging over them. Just a gentle pointer did the trick. That is good news. This is possibly why Indians trust their companies more than the Rest of the World.

2. The Government has voluntary codes – which are NOT enforced. Unlike the US. We should do more of this – and not less, Ms.Sunita Narain. Bigger Government, with greater enforcement agenda is a bad idea – and no good can ever come out of it.

EPA does nothing about environment and justice does nothing to do with justice

For you to call for greater Government activism is simply more bad news. The American model is faulty, expensive and prone to abuse. Why copy a failed model?

3. Ms.Narain – Maybe, your organization can franchise a ‘प’ (Prakriti) logo – for all companies that voluntarily adhere to the highest global standards. And that will again be good news.

Let us take away the regulatory load (which will soon become overload) from the Government and move towards self-regulation.

I think it is time you took a 2ndlook.

Climate change – How India is falling for propaganda

I have been surprised by the number of reasonable Indians who have come to accept the proposition, advanced by equally reasonable but perhaps nationalistically-motivated Americans, that the acceptance of internationally-mandated restrictions on carbon emissions by India is in its own national interest. Some have even come to argue that India should actively seek a climate change treaty at the Copenhagen conference in December 2009.

If the big and largely rich emitters of today were to take mitigation in the immediate future seriously, they could achieve emission cuts commensurate with the recommendations of the Intergovernmental Panel on Climate Change (IPCC) without denying the poor in India (and Africa) the prospects of a humane existence. With abject poverty eliminated and electricity and water provided to all, India could join the mitigation effort by 2040. (via India and climate change talks).

Acquisitive Indian companies making US nervous?

What if

The entire global warming debate is just a facade to keep up demand for oil from India and China. The opposition to coal fired power plants is to stop India and China from reducing the growth in oil consumption.

After all practically all of British GDP today is declining North Sea oil and British Petroleum. Apart from Chinese money, the other source of liquidity, which keeps the US afloat is petro-dollars. And, remember, US future is so closely linked to Arctic oil. If India and China were to reduce their reliance on oil, leading to a price collapse, the biggest losers will be the Anglo Saxon bloc.

Makes one think!

India’s pharma exports

Three things…

First, many of the regulatory bodies are actually a US-Euro Club – to fool the world, with token actions and steps to demonstrate inclusion and fairness to the developing world.

And second, these token actions divert the attention of the developing world. For instance, World Bank list of banned entities were significantly, from two sectors - Software and Pharma. These are the two sectors where the US still has a lead – and the Indians are its biggest challengers. Generic pharma firms from India have become world beaters - and the Indian software companies have built up US$50 billion a year business, in less than 10 years. These 50 billion dollars have come out of (arguably) US pockets.

At least, the actions against Wipro and Nestor Pharma were pathetic excuses to ban a business – and no third party arbiter will uphold these actions.

Third, on January 9, Standard & Poor’s announced that Greece, Spain and Ireland were on review for a possible downgrade, indicating that a Euro-zone country could default. The cost of the US bailout is likely to exceed US$3 trillion. Current US budget deficit is likely to break all records and estimates.

Not so long ago …

In 1999, an employee of an auto-components manufacturer, Autolite, was arrested in France for trademarks and copyright infringement – based on a complaint by the car manufacturer PSA Puegeot Citroen. The French police, on similar complaints, arrested two other nationals, a Belgian and a Taiwanese woman also.

The Belgian was of course granted bail – and the Indian and the Taiwanese were denied bail - ‘The lawyers representing the Indian businessman offerred to deposit his passport and the sum of 100,000 French Francs claimed by Peugeot in the custody of the court as bailbond, pending the trial of the case on November 12′.

French court procedures took nearly 1 month and the Indian executive was finally granted bail after being in prison for 1 month. After two years of appeals and expensive litigation, the complaint was found to be without any merit – and dismissed.

When the North Pole greens over

More recently …

A shipment of medicines destined for Brazil, from India, was detained at Rotterdam. The Dutch Customs used a complaint from a local Dutch company, to detain this shipment, based on local patent laws. After a few months of ‘negotiations’, the shipment was sent back to India. An expert writes, what

‘EU is doing is using Council Regulation (EC) No. 1383/2003 to impound drugs that are suspected of violating patents registered in member-countries even if these are simply in transit. The regulations permit customs to hold these goods for a minimum of 10 working days while informing the patent holder of the seizure. The patent holder then applies to a civil court to initiate legal proceedings in order to prove that infringement has taken place.’

Whats the Quicktake

These seem like offensive actions from the EU and the US – to undermine their competitors and to bolster Euro-US businesses. It makes me doubt the Satyam saga. To carry the conspiracy theory thread forward, was there a Merrill Lynch-Ramlinga Raju ‘deal’?

'demmed' Indian cows

Modern day protectionism, huh?

This also furthers the importance of having non-Western bodies, which are sponsored by the Third World, which will regulate and govern international laws. To depend on the West, is to further dig the hole that the Third World finds itself in.

And in case you forget, remember that for some time Indian cows were blamed for global warming!

On Independence Day, ‘harassed husbands’ to demand ‘freedom’

Times of India was not far behind

“All the four groups are working for equal rights for men and women in India. We feel that in many instances, the Indian law is biased when it comes to husbands, as it often favours the wives. Be it in the case of custody of children for divorced couples or false allegations of domestic violence and dowry harassment, the law generally takes the side of women, without listening to the side of men,” said Kumar.

“However, we would like to clarify one thing. We’re no women haters. This is about equal rights of both men and women,” said Kumar Jahgirdar, founder of CRISP.

In order to prove that harassment of husbands was prevalent, Kumar cited the latest report of SIFF on suicide rate of men across India.

“Around 1.2 lakh (120,000) harassed husbands in India have committed suicide in last four years,” SIFF’s president claimed. (via On Independence Day, ‘harassed husbands’ to demand ‘freedom’).

One of the 'not so bad'

A ‘progressive’ and ‘free’ India has decided that men are evil – especially husbands. It has enacted discriminatory laws, which lay the burden of proof on husbands and their families, including women, on the basis of a wife’s complaint.

Considering the disproportionate amount of NGO activism on this law, it raises questions about the motives and funding of these NGOs. In case you have not already guessed, the biggest source of funding for these NGOs is the West.

Mid-day's fatuous coverage

The Odious Section 498

Possibly the best ‘example’ of post-colonial legal thinking is the Section 498. A retributive, revengeful law (patterned on Western legal models) is now undermining the very structure of Indian society – marriage. Section 498 has has taken away marriages from the social domain into the legal sphere.

From being contributory, accommodating, religious and life long, Indian marriage system is becoming extractive, adversarial, contractual, legal and short term. Some in the West do see the value in the Indian system – but India seems to think that West is a way out!

Another Mid-Day attempt

On September 5th, 2008, the Times Of India reported that the Indian Government may review the section 498 law. The report talked about how

“For long, voices raised against the anti-dowry act were dismissed as those belonging to men desperately trying to retain their dominance over women. But now, an increasing number of women complaining against misuse of the act has forced the women and child development (WCD) ministry to initiate a review of the controversial legislation.

The government’s turnaround comes after an increasing number of complaints came from women themselves — mothers-in-law and sisters-in-law who ironically have fallen victim to the misuse of the two laws.

The statistics are telling. Raksha, an NGO working on marital harmony and child welfare, has analysed figures by the National Crime Records Bureau to deduce that 1.2 lakh women have been falsely implicated under 498A.

‘‘Every 21 minutes, an innocent woman is being arrested. While the number of arrests under 498A are increasing every year, what is not being considered is that the conviction rate in these cases is barely 2%,’’ Anupama Singh, Raksha spokesperson said.

Another 'cartoon' from Mid-Day

Media and academia

The media looks at these ‘battered’ husbands in a amused manner – as the recent media coverage of the Shimla conclave demonstrated. The only newspaper which toned this matter objectively was the Deccan Herald of Bangalore. Most newspapers had amateur cartoonists trying to raise a laugh – some of which are linked to this post.

Of course the English language media raises no questions about the agenda of these NGOs, the sources and their activities.

Makes one think!

Global warming’s got me thinking …

Carbon credits ... anyone?

a call has been given by Al Gore that there should be an immediate moratorium on coal fired power plants. Look at how this will impact India. More than half of the 8,00,000 mega watts of power India plans to produce by 2030 are to come from coal fired plants. Simply because India has abundant coal resources.

What most western analysts don’t realise is nearly 600 million Indians do not have regular and formal access to any source of electricity. If comparison is to be drawn, it is a bit like the entire US population and half of the European Union going without any electricity.

Can you estimate the enormity of this problem? This is what Prime Minister Manmohan Singh told George Bush at the G-8 summit in Japan last year when America tried to force India to commit carbon emission cuts. India merely said it will keep its per capita emmissions at below the world average. (via Carbon emmisions and Democracy!:Wisdom by Hindsight:MK Venu’s blog-The Times Of India).

How oil is sapping the world

What if

The entire global warming debate is just a facade to keep up demand for oil from India and China. The opposition to coal fired power plants is to stop India and China from reducing the growth in oil consumption.

After all practically all of British GDP today is declining North Sea oil and British Petroleum. Apart from Chinese money, the other source of liquidity which keeps the US afloat is petro dollars.And the US future is so closely linked to Arctic oil.

If India and China were to reduce their reliance on oil, leading to a price collapse, the biggest losers will be the Anglo Saxon bloc.

Makes one think!

Vatican uses short codes to blame Hinduism for Hitler’s Holocaust

The Vatican forgets these halcyon days?

the Vatican’s 1998 apology, “We Remember.” That long-awaited document expressed regret at Christian mistreatment of Jews over the centuries but pinned the fault on some of the church’s sinful “members” while holding blameless “the church as such.”

The Vatican’s champions say it had no choice: “the church as such” is ecclesiastical shorthand for the church as bride of Christ, which partakes of divinity and must thus be without blemish. “We Remember” further contended that the Holocaust was the product not of Christianity but of a “neo-pagan” regime that had renounced the faith, but Carroll portrays Hitler as the heir to such church-sanctioned haters as St. John Chrysostom and Torquemada. (via The Church as Sinner – TIME).

Deflect ... blame ... cover up ...

Hitler … Aryan .. Pagan …

Some few years ago, the Vatican came out with a much awaited ‘apology’ for its involvement in the Holocaust. Since Hitler, though technically a Catholic, was a staunch believer in his Aryan lineage.

This the Vatican uses as an escape hatch to pin the blame on ‘neo-pagan’ beliefs. Combine Hitler’s Aryan supremacy theory, India as the citadel of ‘pagans’ and non-believers, makes Vatican’s language a short hand for Hinduism and India.

Just how did the Church think, it could palm off Hitler’s genocide onto Hinduism – and India which is the citadel of ‘paganism’. Are they forgetting the Abbott of Citeaux?

Another red-wash

“Novit enim Dominus qui sunt eius” (Kill them all, God will know his own) instructed the Abbot of Citeaux to followers at the start of the Albigensian Crusade.

Did the Church look at its own history? The Ustashe killings, the Albigensian Crusades, at the Hussite Wars, at its blood soaked history, at the numerous humans who were burnt at the stake, torn apart – all in the name of the Father, the Son and the Holy Ghost.

Blame the victims

And after 1500 years, blame pagans for it. Pagans, if the popery forgets, were the victims of the Church’s expansionary zeal – and Hitler’s. Maybe the ghosts of the Native Americans will whisper the truth in Vatican’s ears – who were also annihilated by brave Christian soldiers?

The Government should something about this!

The poor Indian didn't ask for this ...

“The government needs to look at this,” Crowden said. “Budgets are being cut. If they don’t do something, it’s going to be a serious public-health risk.” (via Coming to a bin near you: rat pack takes Britain by storm).

Where did this come in from

Growing up in various parts of India, one often heard, for every problem, two common remarks. One, “The Government should do something about this.” The second, “It is not like this in foreign countries.”

Whether it was overflowing drain or a pothole on the road. In the last few years, I wondered where this bit of escapist phraseology came in from! And now I know. Looking back, and seeing things now, I can see that things have changed.

The Indian State in retreat

To many, brought up on the Western schools of political understanding, the Indian Voter will vote for cash, sops, caste and allurements. This displays a profound disrespect for the Indian Voter – and greater ignorance.

The Indian State has been gradually and steadily retreating – and the Indian Voter has been at the forefront of this retreat. For all practical purposes health care in India has been privatized over the last 70 years. The vestigial State support for health care can also go, if the State cuts away its exclusive dependence on Western medical systems – and the complete collapse of Indian medical systems. The Western Voter will not let go of the subsidized health care system – while the Indian Voter has been gradually shifting the the private sector.

Similarly, the dependence on subsidized grain has been steadily decreasing. Inflation may give a false impression of increasing food subsidy bills. However, fact is that from about 75% of the population in the 1960-1970 decades, the dependence on subsidized food grains has reduced to 30%-40%.

Similarly, in other sectors too, the reduction of the role of the State is becoming apparent and welcomed – by the Indian Voter. The resistance is from the bureaucracy and the vested interests of Big Business.

Do things change

Over the years, Indians use this phrase less and less. This phrase is now close to becoming either extinct or may even become a parody. It may soon make its way into Indian films as a joke.

The interesting thing is …

The other thing was that the people who could do something, the educated, the elite, the Westernized used this phrase, hankered for this solution more than the poor or the desi and the dehati types. In all my years, I have never heard a desi say that “the Government should do something about this.”

Curious eh!

Coming to the Brits! Till they get up, and stop asking the Government to do something, the decline will not stop!

Racism in Detective Fiction

From the book "Postcolonial postmortems By Christine Matzke, Susanne Muehleisen page 88

How very true!

Ms.Christine and Susanne, you have hit the nail right in the centre of head! Your aim is truer than you imagine. Whatta shot! Though I don’t know if you have hit the nail deep enough – deep into the heart of darkness in the Western heart, which gave rise to these genres of Western ‘literature’.

An Indian columnist laments how Indians lack literary talent and ability!

The Indian churail (or pisach or djinni) faces similar problems as the Scandinavian myling or the Er Gui of China: they don’t translate well outside of their culture.

India may have had local incidents, where an oppressive zamindar may have created a market for horror stories and monsters – but without genocide, slavery and massacres to fall back on, popular imagination simply does not have the fodder to create ghouls and monsters.

And that is reason for Indian churails being rare – not lack of literary ability in Indians.

Pallavi Aiyar: Where Marx comes alive

For greater good of the most many ...

perhaps nothing exemplifies European socialism more than the maze of regulations governing the retail trade in Belgium. It took a panel of five young government officials from the Directorate for Regulation and Organisation of the Market, armed with pages of notes, to explain the main highlights of these to me.

This is what I learnt: In Belgium, shops can only legally go on ‘sale’ twice a year, in January and July. It is only during these periods that shops may sell goods at below cost or ‘extremely reduced’ profit. For six weeks before the sales period, shops may not advertise price reductions.

Although offering discounts (as long as these do not amount to a loss) is legal at other times of the year, for a month before the biannual sales, textiles, shoes and leather products may not be discounted at all. Moreover, the sales are reserved for the ‘seasonal renewal’ of stock, so products deemed non-seasonal may not be included in the sale. Sofas, for example, are considered seasonal but antiques are not.

To implement all of this, two hundred-odd inspectors from the Directorate wander around the country inspecting and many complaints regarding non-compliance are also phoned in.

The rationale behind this mountain of red tape is the protection of small and medium enterprises (SMEs) which it is believed would go bankrupt if big retail were to be allowed to dump in an unrestrained manner. (via Pallavi Aiyar: Where Marx comes alive).

Europe has come a full circle!

The State has slowly and surely, completely taken over. The hard fought liberties, the Magna Cartas, the Liberté, Egalité, Fraternité, have been in vain. The people have have just stepped up to the dias and handed over all the power back to the State. The much touted Renaissance and Reformation have all come to nought.

For the Rest of the World, what is truly a cause of anxiety is that the East seems to be embracing Western political ideology and constructs with reckless enthusiasm – in their quest for ‘progress’ and ‘modernity’. And the public sector behemoths may yet cause some damage.

Remember the East India Company – a public sector company.