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West – Developed & Deep in Debt

January 26, 2012 3 comments

The entire Developed world is deeply in debt. Will this debt ever get paid?

Britain - A World Leader In Indebtedness! (Source McKinsey Reports). Alt image URL - http://goo.gl/k6soE

Britain - A World Leader In Indebtedness! (Source McKinsey Reports). Alt image URL - http://goo.gl/k6soE

debt problems of the western world go much beyond the current crisis. For one thing, as the authors point out, public debt levels are likely to rise as populations age and governments try to deliver on the promises (pensions, health care and so on).

As public debt levels rise beyond the “danger threshold”, they will tend to pull growth down. This, in turn, could make household and corporate debt servicing far more difficult and countries that are already saddled with dangerously high levels could find themselves in the middle of a crisis. Thus, even if there is a solution to the current crisis in Europe, the “debt” problems of the western world are far from over.

Tailpiece

What worries us about the spirit of good cheer that has suddenly returned to the markets is that it might lead to temporary appreciation in the euro. This, alas, could bring back the spectre of a crisis in the region and revive fears of a break-up in the currency union. One of the pre-conditions for the survival of the union is an orderly deprecation of the currency towards some sort of “fair value” that we think could lie anywhere between 1.15 and 1.20. This would make the beleaguered countries of the periphery more competitive and reduce their incentives to exit from the union. If the currency starts to appreciate again, things go back to square one and the sustainability of the union is back under a cloud of uncertainty. Financial markets tend to be prescient about these things and it is possible that while other currencies and assets rally against the dollar, the euro could at least stay put. (via Abheek Barua & Shivom Chakravarti: Deconstructing debt).

DEBT THREATS (Debt levels as a % of GDP)
Debt Household Non-financial Government Total
US 95 76 97 268
Japan 82 161 213 456
UK 106 126 89 321
Italy 53 128 129 310
Denmark 152 119 65 336
Netherlands 130 121 76 327
Greece 65 65 143 273
Portugal 106 153 107 366
Source: Bank for International settlements & Eurostat  Table source & courtesy – business-standard.com

Clear message

Estimates vary. Assumptions change.

Regardless, of difference in estimates, or the variation in assumptions, debt levels of the developed world are awesome.

The table on top is based on McKinsey Consulting’s estimates released in 2009.

Some figures were revised after McKinsey estimates were made. Like from Ireland. Or after the QE and QEII, US govt debt has ballooned from roughly US$9 trillion to 15 trillion.

The deficit has ballooned to nearly $48,000 for every man, woman and child in the U.S. This year alone, the U.S. will spend $1.3 trillion more than it takes in.

The debt has expanded at an alarming pace, from $7.5 trillion in 2004 and $5.6 trillion in 2000. At the current rate, Debtclock.org reckons that the debt will top $23 trillion in 2015, though the nonpartisan Congressional Budget Office puts the estimate at $17.6 trillion. (via U.S. Debt Tops $15 Trillion Mark Today – ABC News).

Looking at these two sets figures, two questions come to my mind.

One: How does the West+Developed world plan to repay these debts?

Only two things can happen from here. Either governments are going to default outright. Or they are going inflate away their debts, using compliant central banks to keep interest rates significantly below rising prices for many years. Either way, everyone is going to lose a lot of money. Whether it is through a default or inflation doesn’t make much difference in the medium term. (via France and the death of the sovereign debt market – Matthew Lynn’s London Eye – MarketWatch).

Two: If the whole of the Developed world is so deep in debt, it is obvious that someone else has lent them this money?

Obviously, the Developed World is a net borrower – and someone has lent that money to the Developed world – or underwriting this Debt, based on which this debt is being issued.

Since all the major economies of the world (except Russia and China) are deeply in debt, who is doing the lending? Russia and China are in a position to be creditors, only to a limited extent. But cannot account for major part.

This leaves us with the poor countries of the world.

Are the rich of this world, bleeding the poor?


Twitter / @dhume01: Aakash tablet fiasco

October 15, 2011 1 comment

Creating false agendas is a full time activity in the West. Sadanand Dhume uses his coconut brain to full effect.

Usual suspects

Sadanand Dhume comes out with his regular din.

India Government has got it wrong.

Akash should be gold-plated, have diamond edges and emerald buttons. All this at US$40. Poor students in India must not get any help from the Government. Let the market take care. Usual rants. Imbalanced and lacking depth.

Sure, the Indian Government gets a lot a lot of things wrong – like every other over-active State in the world does. But his silly criticism shines.

Especially, when he proposes the alternatives. China, Indonesia as nations that India can learn from. China, Indonesia – Semi-dictatorships, where the public-sector-oligarchy is going from strong-to-worse. Hardly, any examples to hold up.

But then can anything get through Dhume’s coconut shell, that he calls brains.

Creating false agenda's has become a full time job in the West. (Cartoon courtesy: polyp.org.uk). Click for larger source image.

Creating false agenda's has become a full time job in the West. (Cartoon courtesy: polyp.org.uk). Click for larger source image.

1971 Bangla Desh War – Why was China quiet?

June 17, 2011 13 comments

Why was China militarily neutral in Indo-Pak Wars-1965, 1971? Tibet Card used by Indian Foreign Policy?

Signing of Surrender Document on 16 December 1971 Surrender received by Lieutenant General Jagjit Singh Arora (General Officer Commanding (GOC), Eastern Command) from Pakistani General A.A.K. Niazi. (Photo courtesy - indopakmilitaryhistory.blogspot.com). Click for larger image.

Signing of Surrender Document on 16 December 1971 Surrender received by Lieutenant General Jagjit Singh Arora (General Officer Commanding (GOC), Eastern Command) from Pakistani General A.A.K. Niazi. (Photo courtesy - indopakmilitaryhistory.blogspot.com). Click for larger image.

War on two fronts

One of the major reasons why India could take on Pakistan on two fronts – in Bangla Desh and on the Western Front, was because, there was no Chinese action to support Pakistan. China has been positioned as an all-weather friend of Pakistan? So, in the hour of need, China did not lift its little finger to help Pakistan against India?

The Bangla Desh Theatre of war (Graphic courtesy - timesofindia.com). Click for larger image.

The Bangla Desh Theatre of war (Graphic courtesy - timesofindia.com). Click for larger image.

China’s inaction

The 1971 Bangladesh War changed world perception of India – leading to Nixon’s famous outbursts. As the tapes show, the US President pushed, prodded and cajoled the Chinese to act against India – to no avail.

China’s puzzling inaction, similar to its inaction in 1965 also, declassified White House Tapes show, in the 1971 Bangladesh War, is rarely analysed in the current India-China narratives.

Indo-Soviet alliance

The answer for 1971 seems to be the dreaded Soviets.

The Chinese dreaded the Soviets. China’s aggressive posturing against Soviet Russia on the border island of Zhenbao-Damanskii had alienated the Russians. Soviet Russia backed off after China was made to pay a price. It was some US show of support to China, that made the Soviets stop from complete bull-dozing of China. This aspect of international politics is rarely analyzed or factored into analysis. But this does not explain 1965-Chinese neutral posturing.

This extract below from The Guardian gives a perspective on the USSR-China-USA relationship.

The Tribune announcing Niazi's appeal for surrender. Niazi's surrender with 1,00,000 soldiers, was the largest surrender received by any general in 20th century. (Picture courtesy - bangladesh-tour.blogspot.com). Click for larger image.

The Tribune announcing Niazi's appeal for surrender. Niazi's surrender with 1,00,000 soldiers, was the largest surrender received by any general in 20th century. (Picture courtesy - bangladesh-tour.blogspot.com). Click for larger image.

de facto alliance was personally decided by Nixon in August 1969 just as the Soviet Union was preparing to launch a pre-emptive nuclear attack on China. Nixon had decided the Soviets were the more dangerous party and that it was against American interests for China to be “smashed” in a Chinese-Soviet war. “It was a revolutionary moment in US foreign policy,” Kissinger explains. “An American president declared we had a strategic interest in the survival of a major communist country.”

In October 1969, Mao Zedong was so convinced war was nigh, he ordered all Chinese leaders to disperse around the country, except for the indispensable Zhou Enlai. Kissinger says that it was only Moscow’s uncertainty about America’s response that led the Soviets to postpone the project. Soon after, Kissinger, as Nixon’s national security adviser, engaged in the secret negotiations that led to the American president’s meeting with Mao in 1972, an event that astonished America’s enemies and its friends. (via On China by Henry Kissinger – review | Books | The Guardian).


Democracy – How Think tanks shape policy making

June 15, 2011 3 comments
Finally, less than 100,000 people have the power to shape the world in a manner they deem fit. Concentration of power. (Cartoon BY - ANDY SINGER, Courtesy - POLITICALCARTOONS.COM  -  2/4/2010 12:00:00 AM). Click for larger image.

Finally, less than 100,000 people have the power to shape the world in a manner they deem fit. Concentration of power. (Cartoon BY - ANDY SINGER, Courtesy - POLITICALCARTOONS.COM - 2/4/2010 12:00:00 AM). Click for larger image.

Old boys club

Council on Foreign Relations sounds like a pretty harmless group, which has a few academics that potter around – and release an occasional irrelevant paper.

Not quite. If not harmful, they are atleast pretty powerful.

In 1952, Eisenhower and Richard Nixon became the first CFR members to be elected President and Vice President of the USA.

Adlai Stevenson, the Democratic candidate beaten by Eisenhower and Nixon, was also a CFR member.

‘The Council was starting to dominate American politics at the highest levels,’ write Burnett and Games.

‘The pattern would be repeated four years later, with Stevenson again losing out to Eisenhower and Nixon.

‘Although Nixon was to narrowly lose the next election in 1960 against John F Kennedy, the charismatic Bostonian was another member of the CFR.

‘Nixon would return in 1968 to defeat fellow CFR member Hubert Humphrey, and win again in 1972 against George McGovern.

‘Although not a CFR member in 1972, McGovern saw the light and joined afterwards.’ (via Southern Times – Why Africa needs secret societies).

Red herrings – the challenge ahead

English language media at least, is dominated by a few news agencies like Reuters, Bloomberg, API, and AFP. These agencies in turn are fed by various think tanks and reserch organizations, which then dominate global debate.  In the last few years, top 10 websites control 75% of the web traffic. Hollywood dominates the big screen.

For instance the highly flawed model of Transparency International promotes a narrative of corrupt Africa and Asia. To dominate the debate, censorship is not the only solution. It is not even a preferred solution.

More noise is equally effective. 

Finally a few media conglomerates drive the global mindset. Usually censorship is not needed. More noise is equally effective. (Cartoonist - Ares, Courtesy - Cagle Cartoons, www.caglecartoons.com). Click for larger image.

Finally a few media conglomerates drive the global mindset. Usually censorship is not needed. More noise is equally effective. (Cartoonist - Ares, Courtesy - Cagle Cartoons, http://www.caglecartoons.com). Click for larger image.

Capture and exploit

After this kind of media capture, the West drives the narrative. And exploits this narrative. To get over the ‘problem’ of economic stagnation, the West has created artificial ‘crisis’ situations.

These are major diplomatic offensives using media, academia, events and situations, to

  • Maintain superior negotiating positions
  • Define the agenda – which usually means non-substantive issues.

But for an India to match the trade and tariff barriers, propaganda and diplomatic offensives, calls for more resources.

The image of corrupt politician, Congressman, has become easy to promote, driven by Transparency International's flawed data. The role of these Think Tanks gets concealed. (Cartoon - BY PAT BAGLEY, Published by SALT LAKE TRIBUNE  -  1/27/2010 12:00:00 AM; courtesy - caglecartoons.com). Click for larger image.

The image of corrupt politician, Congressman, has become easy to promote, driven by Transparency International's flawed data. The role of these Think Tanks gets concealed. (Cartoon - BY PAT BAGLEY, Published by SALT LAKE TRIBUNE - 1/27/2010 12:00:00 AM; courtesy - caglecartoons.com). Click for larger image.

Benign designs?

The manner of funding Indian NGOs by external sources, especially the West, is not benign anymore. More than 33 lakh NGOs operate in India, with foreign funding that is estimated at US$4 billion. This figure is double the official Government figure that is based on declared receipts, which reports say, are under-declared.

In times to come

Is the West aiming to capture these Indian ‘think-tanks’? The promotion of Western Climate Change agenda by Amartya Sen, under the auspices of the Aspen Institute India is indication of times to come.

Mechanics of माया maya?

War on drugs – Call it off say leaders

June 15, 2011 2 comments
The War on Drugs has now been on for 50 years. No success. (Cartoon by Barry Deutsch; Courtesy - leftycartoons.com). Click for larger image.

The War on Drugs has now been on for 50 years. No success. (Cartoon by Barry Deutsch; Courtesy - leftycartoons.com). Click for larger image.

A high-level international panel slammed the war on drugs as a failure. Compiled by the Global Commission on Drug Policy, the report concludes that criminalization and repressive measures have failed with devastating consequences for individuals and societies around the world. It called on governments to undertake experiments to decriminalize the use of drugs, especially marijuana, to undermine the power of organized crime.

The 19-member commission includes former presidents of Mexico, Brazil and Colombia, Greece’s prime minister, former U.N. Secretary-General Kofi Annan, former U.S. officials George P. Schultz and Paul Volcker, the writers Carlos Fuentes and Mario Vargas Llosa, and British billionaire Richard Branson.

At a news conference launching the report, former Brazilian President Fernando Henrique Cardoso, who chairs the commission, said ending the war on drugs does not imply complete liberalization.

Instead of punishing drug users, the commission argues that governments should “end the criminalization, marginalization and stigmatization of people who use drugs but who do no harm to others.”

Cardoso said the commission called for regulation rather than legalization “because we don’t think that’s the moment’s come for legalization.” Even regulation and decriminalization are not a solution, he said, unless they are accompanied by information, publicity campaigns, and improved health care and treatment. (via High-level commission calls drug war a failure, recommends legal regulation of marijuana – The Washington Post).

Options, anyone?

With 2 crore (20 million) drug users in the USA, prisons overflowing with more than 20 lakh (2 million) prisoners, the American policy establishment is stuck for answers. The 2 crore (20 million) figure is more than 16% of the working-age, labour population of the USA – which stands at 16 crores (160 million). Similarly, when drugs became cheap and abundant in China, thanks to the British, China became the largest consumer of opium in the world.

But …

Interesting case

Why has drugs never become a big problem in India? Even, as Indians are significant producers, Indians themselves are not high on consumption lists – or have significantly profited from it.

2 million prisoners - and another 5 million on trial, parole etc. Does this war make sense? (cartoon courtesy - hightowerlowdown.org). Click for larger image.

2 million prisoners - and another 5 million on trial, parole etc. Does this war make sense? (cartoon courtesy - hightowerlowdown.org). Click for larger image.

The police actions against drug cartels have given little benefit. The heavy-handed legal approach of criminalizing possession of drugs too has yielded no results either.

in the past 40 years, the U.S. government has spent over $2.5 trillion dollars fighting the War on Drugs. Despite the ad campaigns, increased incarceration rates and a crackdown on smuggling, the number of illicit drug users in America has risen over the years and now sits at 19.9 million Americans.

Director of National Intelligence Dennis Blair declare(d) last week that the Mexican government had lost control of its own territory. President Felipe Calderón responded by pointing out that his nation shared a border with “the biggest consumer of drugs in the world and the largest supplier of weapons in the world.” (via The War on Drugs).

Touché!

Guns & Crime

June 7, 2011 1 comment
Crime Stats - Top 18 countries (Source - http://www.nationmaster.com). Click for source interactive graph.

Crime Stats - Top 18 countries (Source - http://www.nationmaster.com). Click for source interactive graph.

Anglo-Saxon systems

Interestingly, UK and USA, two countries with Anglo-Saxon system of jurisprudence, have the highest crime incidence.

But the surprise element is India.

India – with the largest number of poor people. More than in sub-Saharan Africa. With also the largest arsenal of firearms outside the US. Most of these guns are unlicensed – and logically, a number of these guns are with the poor. Another newspaper reported that the cost of these illegal firearms is less than US$100 or Rs.4500.

India had the world’s second-largest civilian gun arsenal, with an estimated 46 million firearms outside law enforcement and the military, though this represented just four guns per 100 people there. China, ranked third with 40 million privately held guns, had 3 firearms per 100 people.

Germany, France, Pakistan, Mexico, Brazil and Russia were next in the ranking of country’s overall civilian gun arsenals. (via U.S. most armed country with 90 guns per 100 people | Reuters).

Iceberg ahoy

India with the lowest police-to-population ratio and the highest police-to-illegal-guns ratio. Either crime levels must be high, or imprisonment levels have to be stratospheric.

Strangely, none of these ‘logical’ things are happening. Crime is at low-to-average levels, imprisonment is at a global low, police force is seriously undermanned – and firearms are common.

What gives?

Karl Marx on the opium trade

June 7, 2011 1 comment
Faced with a labour crisis after slave revolts, Europe (specially England) needed alternatives for a new 'slavery' model. A fugitive theorist - Karl Marx. Capitalists and capitalist nations of Europe loved – especially the USA.. Click for bigger image.

Faced with a labour crisis after slave revolts, Europe (specially England) needed alternatives for a new 'slavery' model. A fugitive theorist - Karl Marx gave a model for 'slavery'. Capitalists and capitalist nations of Europe loved – especially the USA.. Click for bigger image.

Marx on the Opium trade

Some 150 years later, Karl Marx’s commentary on the opium trade remains relevant.

Much loved by the capitalists of his time, Karl Marx analyzed opium trade well.

Nurtured by the East India Company, vainly combated by the Central Government at Pekin, the opium trade gradually assumed larger proportions, until it absorbed about $2,500,000 in 1816. The throwing open in that year of the Indian commerce gave a new and powerful stimulus to the operations of the English contrabandists.

In 1820, the number of chests smuggled into China increased to 5,147; in 1821 to 7,000, and in 1824 to 12,639. Meanwhile, the Chinese Government, at the same time addressed threatening remonstrances to the foreign merchants, punished the Hong Kong merchants, (with) more stringent measures. The final result, like that in 1794, was to drive the opium depots from a precarious to a more convenient basis of operations.

The trade shifted hands, and passed to a lower class of men, prepared to carry it on at all hazards and by whatever means. Thanks to the greater facilities thus afforded, the opium trade increased during the ten years from 1824 to 1834 from 12,639 to 21,785 chests.

The year 1834 marks an epoch in opium trade. The East India Company lost its privilege of trading (and) had to discontinue and abstain from all commercial business whatever. It being thus transformed from a mercantile into a merely government establishment, the trade to China became completely thrown open to English private enterprise which pushed on with such vigour that, in 1837, 39,000 chests of opium, valued at $25,000,000, were successfully smuggled into China, despite the desperate resistance of the Celestial Government.

We cannot leave without singling one flagrant self-contradiction of the Christianity-canting and civilization-mongering British Government. In its imperial capacity it affects to be a thorough stranger to the contraband opium trade, and even to enter into treaties proscribing it.

Yet, in its Indian capacity, it forces the opium cultivation upon Bengal, to the great damage of the productive resources of that country; compels one part of the Indian ryots to engage in the poppy culture; entices another part into the same by dint of money advances; keeps the wholesale manufacture of the deleterious drug a close monopoly in its hands; watches by a whole army of official spies its growth, its delivery at appointed places, its inspissation and preparation for the taste of the Chinese consumers, its formation into packages especially adapted to the conveniency of smuggling, and finally its conveyance to Calcutta, where it is put up at auction at the Government sales, and made over by the State officers to the speculators, thence to pass into the hands of the contrabandists who land it in China.

The chest costing the British Government about 250 rupees is sold at the Calcutta auction mart at a price ranging from 1,210 to 1,600 rupees. But, not yet satisfied with this matter-of-fact complicity, the same Government, to this hour, enters into express profit and loss accounts with the merchants and shippers, who embark in the hazardous operation of poisoning an empire.

The Indian finances of the British Government have, in fact, been made to depend not only on the opium trade with China, but on the contraband character of that trade. Were the Chinese Government to legalize the opium trade simultaneously with tolerating the cultivation of the poppy in China, the Anglo-Indian exchequer would experience a serious catastrophe. While openly preaching free trade in poison. it secretly defends the monopoly of its manufacture. Whenever we look closely into the nature of British free trade, monopoly is pretty generally found to lie at the bottom of its “freedom.” (via Karl Marx in New York Daily Tribune Articles On China, 1853-1860 Free Trade and Monopoly; linking text in parentheses supplied; parts excised for brevity and relevance).

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