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Posts Tagged ‘China’

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 10 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).

How governments drive tobacco trade

Tobacco – a colonial addiction

Six companies and sundry State monopolies drive global cigarette consumption. These six companies derive more than US$100 billion dollars in revenues, globally. For many years they were advertising industries largest customers.These six companies are headquartered at former European imperial powers (UK, France, Spain), USA and Japan.

Four tobacco companies and State monopolies control global tobacco trade. (Image source - http://www.tobaccoatlas.org). Click for interactive source map.

Four tobacco companies and State monopolies control global tobacco trade. (Image source - http://www.tobaccoatlas.org). Click for interactive source map.

In recent years, dozens of cigarette manufacturing companies have consolidated under four major private corporations: Altria/Philip Morris, British American Tobacco, Japan Tobacco International, and Imperial Tobacco. State monopolies are also major cigarette manufacturers. The largest state monopoly is China National Tobacco Corporation, with a global cigarette market share that exceeds that of any private company. Because the European Union intends to restrict further mergers and acquisitions that increase a tobacco company’s market-share dominance, industry consolidation trends may have peaked.

The tobacco industry includes some of the most powerful transnational corporate entities in the world. Tobacco conglomerates have diversified into many other industries, such as financial services, food and beverages, pharmaceuticals, real estate, hotels, restaurants, communications, and apparel, among others. The tobacco industry is expected to continue increasing in size and power.

The global tobacco market, valued at $378 billion, grew by 4.6 percent in 2007. By the year 2012, the value of the global tobacco market is projected to increase another 23 percent, reaching $464.4 billion. If Big Tobacco were a country, it would have the 23rd-largest gross domestic product in the world, surpassing the GDP of countries like Norway and Saudi Arabia. (via Tobacco Atlas Online – Tobacco Companies.).

India’s small production base is a combination of two aspects. Indian social inertia against addictive substances and the Government on the other. Indian cigarette business, small as it is, was put in Indian hands during Indira Gandhi’s socialist days. BAT lost control of ITC, which was placed in the hands of professional Indian managers.

Cigarette production in major markets (Graphics by timesofindia.com.). Click for larger image.

Cigarette production in major markets (Graphics by timesofindia.com.). Click for larger image.

Chinese State Tobacco monopoly

The complicity of governments is very similar to the modern expansion in prostitution – especially in the West.

Or Western powers pushing opium in China in the nineteenth century. After the opium experience of the Chinese, when Western trading houses, under State protection, using the garb of ‘free trade’, made China into the largest consumer of opium.

The Chinese Govt. has replaced opium with tobacco.

The second secret of the tobacco business is to be dominant in purchasing and cornering tobacco stock. For cornering tobacco stocks, Big Tobacco depends on Central Banks’ support – aka State support. For instance, ITC (and other major global tobacco purchasers) in India has a major presence in Guntur, where Indian tobacco trade is headquartered.

ITC’s over-sized chequebook buys it market dominance.

The Indian tobacco profile

India is the third largest producer of tobacco – after China and USA. India ranks 6th as a tobacco exporting nation, as most of tobacco in India is consumed by domestic consumers. Tobacco consumption in India follows traditional patterns, as a non-industrial product – spanning chewing tobacco, bidis (tobacco rolled in leaves), hookah, clay pipes and snuff. Indian traditional tobacco usage consumes between 75%-85% of total tobacco cultivation.

Indian tobacco consumption and control follows consumption patterns of psychotropic drugs. All the major drugs in the world came of India – opium is afeem, khus-khus पोस्त; cannabis is charas, ganja, marijuana, hashish. Heroin is a derivative of opium. Even, as Indians are significant (legal) producers, they are not high on consumption lists.

However, drugs never became a big problem in India. Unlike in China, or in Medieval Middle East (when drug crazed criminals called hashishis became assassins). All these drugs were introduced to the world by India – with records going back to 1000 BC. Similarly family and peer pressure plays an important role in controlling the less dangerous form of traditional tobacco usage in India. In modern times, Indian gold smuggling was funded by carriage and export of drugs.

Cigarette production consumes less than one-fourth of India’s tobacco production.

Until two years ago, non-filter cigarettes comprised 30% of the total cigarette consumption. But with an increase in excise duty on non-filter cigarettes from Rs 168 to Rs 819 per thousand from March 1, 2008, the demand for low-priced filter cigarettes has risen At present, the excise duty on a pack of 10 filter cigarettes is Rs 8.19, and VAT Rs 1.05. Thus, taxes total Rs 10 per pack. Illicit cigarettes are sold for less than this amount, leading the government to believe that either registered cigarette units are evading duty or foreign-made cigarettes are flooding the market from Myanmar and the UK The business of low-cost cigarettes is big in the country, especially in Delhi, Uttar Pradesh, Madhya Pradesh, Rajasthan and Punjab. (via Article Window).

The expansion of manufacturing in cigarettes globally (see chart) is much like the housing scam in US and Europe. Banks made huge advances, created a bubble, and are now busy foreclosing these loans. The modern myth of Republic Democracy at work.

How maya works in real life.

The respect Pakistan deserves – and does not get

Global alarm about Pakistan, is triggered by a new and disruptive player, who has joined the power-grab game. Meet the mullah-madrasa-mujahhid combine.

Pax Americana has abused its power to bend Pakistan to a path of failures - and then US media makes mockery of Pakistan. (Cartoon by Joel Pett; source and courtesy - cartoonistsgroup.com). Click for larger source image.

Pax Americana has abused its power to bend Pakistan to a path of failures - and then US media makes mockery of Pakistan. (Cartoon by Joel Pett; source and courtesy - cartoonistsgroup.com). Click for larger source image.

Test of Political leadership

What do you say about a leadership that has two of the world’s super-powers, USA and China, swearing friendship and loyalty – at least once, every week.

Must be a rich, hi-tech country.

No. We are not talking of Saudi Arabia or Japan.

How about describing a leadership that gets economic and military aid – on its own terms, after flouting every previous conditionality imposed on it by the aid-givers?

Is it some super-power? Or a very poor country.

Even Haiti, Cuba, Congo, Ethiopia have to live with very strict conditionalities, imposed on them.

In your words describe a country that shelters and protects half of the world’s most wanted fugitives?

A-ha! We are talking of tax-evaders.

Sorry. Switzerland, it ain’t.

This country has also become a de facto nuclear power – and liberally auctioned nuclear technology, to anyone willing to pay for it.

Israel is not who we are talking of.

One hint. They have been doing this for 60 years.

All this – and more

Any regime that can dictate terms to USA, China, Saudi Arabia, like Pakistan has, is a skilled leadership. What more can I say? Except doff my imaginary hat in respect. (Not that I would like to live under such leaders).

USA, China, Saudi Arabia have been able to do little about Pakistan, apart from some squealing, public name-calling. In the end they paid up. Each time. For 60 years.

That is what matters.

United States is being subjected to an old-fashioned protection racket by Pakistan: pay up or things could go bad for you. Those making money out of extortion and blackmail always come back for more. (via US is paying for Pak protection racket | By SHAUN GREGORY |

Pakistan’s DNA

60 years ago, Jinnah held the entire sub-continent to ransom. After 200 conflicts in 150 years, as the British, their backs to the wall, were walking away, Jinnah became a spoiler. The hour of triumph turned into moment of tragedy. A country born out of this blackmail, has now formalized blackmail as State Policy.

Pakistan leadership knows what it is doing. There must be a reason why there is

hostility towards India and belief in the reality of the Indian threat to Pakistan (that) is woven into the fabric of every Pakistani soldier.

Pakistani state education system inculcates a hatred of the Hindu “other” and glorifies the Pakistan Army as the saviour of the nation, and second through an outdated military training regime which builds on the child’s prejudice and lays the foundation for a career of military service at the metaphorical remote frontier military post. (via Primary threat to Pak is from within, not India – Times Of India).

For most Indians, the puzzling thing about Pakistan, is their hostility towards India.

Has India hurt Pakistan

Logically, all this hostility and threat perception of India is misplaced, feel Indians. The Indian attitude towards Pakistan is best represented by an anti-Pakistan hawk, Bal Thackeray of the Shiv Sena, a right-wing party and a a known Pakistan-baiter. In a recent interview, he says

TIMES NOW: How do you view what has been happening in Pakistan over the last few months?

Bal Thackeray: Why should I bother? Let them go to hell. I don’t want to know.

For  this is just about what Pakistan means to-day to Indians. Except when there are terrorist incidents. Must Pakistan be wary and suspicious of India. After all, India

has twice imposed military defeat on Pakistan – in 1965 and 1971 – and in neither case sought to assimilate, occupy or otherwise destroy Pakistan. The creation of Bangladesh in the latter war was Bengali-led and an inevitable working through of the inherent contradictions of East and West Pakistan; India did not press its advantage in 1971 over the rump West Pakistan despite Pakistan having lost roughly half its navy, one third of its army, and a quarter of its air-force.

India did not seek to exploit its nuclear monopoly over Pakistan, after the nuclear test in 1974, to the detriment of the Pakistan state. Nor has India been involved in significant military action against Pakistan since 1971 except in response to Pakistani or Pakistani-backed adventurism, such as in Kargil in 1999. India has a “no first use” nuclear policy and in terms of casus belli “Cold Start” is reactive not pre-emptive. (via Primary threat to Pak is from within, not India – Times Of India).

How are Ajmal Kasab and Jared Laughner different? Guns in the hands of killers.

How are Ajmal Kasab and Jared Laughner different? Guns in the hands of killers.

Power grab

Pakistan is actually 5 parts.

First is the army and the ISI combination. Then there are the popular politicians who take part in elections.

Add the mullah-madrasa-mujahhid combine with a fundamentalist clergy, various terrorist groups – like JeM, LeT, Al Qaida, various Taliban factions et al.

The economy and wealth are in hands of the 22 families. Mahbub-ul-Haq’s “22 families” speech in Karachi in 1968 highlighted the power and wealth of a few families in Pakistan.

And bringing up the rear there are the rest. No one in Pakistan talks to anyone. Each has contempt for the other four.

And all five have separate agenda.

Going for broke

To anyone but the most biased or blinkered, it is clear that there are political and economic goals that drive Pakistani rulers. Just like other rulers of the world. Instead of the one-party ‘dictatorship’ of China or a ‘two-party’ democracy in the West, there are many more Pakistani players – each jockeying for power, differently. In a very messy manner, according to ‘modern’ political standards.

Pakistani leadership has been able to use Saudi Arabia, China and USA to meets its own ends. (Cartoon by Ajit Ninan; on 24th May, 2011; source and courtesy - timesofindia.com). Click for source image.

Pakistani leadership has been able to use Saudi Arabia, China and USA to meets its own ends. (Cartoon by Ajit Ninan; on 24th May, 2011; source and courtesy - timesofindia.com). Click for source image.

Without making value judgements, multiple Pakistani factions are competing with each other to grab power.

The anti-India hysteria, alleged Islamization of Pakistan, the radical elements being a lunatic fringe or the mainstream, is just that much baloney.

Pakistani perception of the Indian threat to Pakistan is inculcated by the Pakistan Army for one central reason – to legitimize the Pakistan Army and ISI’s primacy in the Pakistan polity and thereby to justify the Army’s claim to a huge slice of Pakistan’s national resources. The perception of an Indian threat thus serves a purpose quite disconnected from the reality of that threat.

India’s large standing army is a material reality that has to be at the heart of Pakistan’s security concerns – is legitimate but misses two essential qualifications. The first is that India is no longer Pakistan’s primary security challenge; that is now the terrorism and extremism of militant Islam. The second is that in military terms, capability does not automatically equate with intent: India’s large standing army does not pose a threat to Pakistan per se any more than a large American or French army poses a threat per se to the UK. (via Primary threat to Pak is from within, not India – Times Of India).

India lives in a toug neighborhood. What to do? (cartoon by Kirtish Bhatt; courtesy - bamulahija.blogspot.com). Click for larger image.

India lives in a tough neighborhood. What to do? (cartoon by Kirtish Bhatt; courtesy - bamulahija.blogspot.com). Click for larger image.

All this talk of God, Allah, etc., is just that much hot and fetid air. The truth – all these are tools for power-players to use and come to power. What has made a difference and caused alarm across the world, is that a new disruptive player has joined the game.

What is worrying the world is that the LeT, Taliban are different kind of players  – and they play rough. Will the outcome be any different?

It will not be the usual ‘suspects’ but four different groups of Pakistanis on who will control Pakistan – and Pakistan’s atom-bombs, wealth, people, natural resources – the works. And a whole, new element.

It is called oil.

Gold grand prix – The Chinese challenge

Total Gold demand - Top world markets (Image courtesy 0 ft.com). Click for a larger copy.

Total Gold demand - Top world markets (Image courtesy - ft.com). Click for a larger copy.

Golden ambitions

Western media has breathlessly announced that India’s leadership of many centuries as the largest buyer of gold has been broken by the Chinese. What does this mean for India and China? Not to forget the rest of the world. In the last few months,

India and China combined to contribute 63 percent of the total gold jewelry demand in the world in the first quarter.

Investment demand has grown (in China) by an average 14 percent a year since deregulation of the market in 2001, “a trend that has continued with the strong growth momentum witnessed in the first quarter,” it said. China’s investment demand jumped 123 percent to 90.9 tons in the first three months, compared with an 8 percent rise to 85.6 tons for India.

The country’s total (investment + jewelry)  gold demand in the first quarter jumped 47 percent from a year ago to 233.8 tons, the council said. That still lags behind Indian consumption of 291.8 tons, according to the council. (emphasised text in brackets supplied.)

Gold-to-silver ratios in the past few decades. Image courtesy - wsj.com. Click for larger image.

Gold-to-silver ratios in the past few decades. Image courtesy - wsj.com. Click for larger image.

Law abiding citizens

International regulatory damping of gold demand – especially in USA, India and China eased from 1975 onwards – from December 31st, 1974, with Executive Order 11825 by Gerald Ford.

Unlike India, which was well serviced and supplied with gold by the Indian underworld, China and the USA were deprived of gold supplies during this regulatory blackout of nearly 50 years. Current growth in demand for gold in China is building on a

low base which means that the investment demand and demand for an inflation hedge from 1.3 billion increasingly wealthy Chinese people is more than sustainable.

The not realized important fact that the people of China were banned from owning gold bullion from 1950 to 2003, means that the per capita consumption of over 1.3 billion people is rising from a tiny base. Gold ownership by the Chinese public remains minuscule. Especially when compared to other Asian countries such as Vietnam and India.

Should the Chinese economy crash as some predict, demand could fall. However, sharp declines in Chinese equity and property markets and a depreciation of the yuan would likely lead to significant safe haven demand for gold. Chinese demand alone likely puts a floor under the gold market at $1,450/oz.

It is worth noting that the People’s Bank of China’s gold reserves are very small when compared to those of the U.S. and indebted European nations. China appears to be quietly accumulating gold bullion reserves. As was the case previously, they will not announce their gold purchases in order to ensure they accumulate sizeable reserves at more competitive prices.

China – Biggest gold producer and consumer

China is already the world’s largest producer of gold from 2007, for four years now. China has captured the top position from

South Africa, which was producing as much as 1,000 tons of gold in 1970, (but) has seen its mining production decline for five straight years.

Accelerating a drop in output last year, the country’s mining authorities started a crackdown on unsafe mines after 3,200 workers were trapped at Harmony Gold Mining Ltd.’s Eldestrand mine in October.

Following an order by President Thabo Mbeki, the mining commission in the last three months started to requiring gold mines that suffer a fatal accident to suspend operations while a safety audit takes place. (emphasised text in brackets supplied.)

In 2010 Chinese gold production was

340.88 tonnes of gold in 2010, retaining the position of the world’s largest producer of the precious metal, the China Gold Association said. The number of domestic gold producers shrank to around 700 at the end of 2010, from 1,200 in 2002, through mergers and acquisitions

Further recently, the Chinese Government, through public sector companies, bought South African gold mines from the Australian owner.

Citic Group, China’s biggest state- owned investment company, and partners agreed to buy Gold One International Ltd. (GDO) for about A$444 million ($469 million), gaining gold assets in South Africa.  China Development Bank Corp. and Long March Capital Group are the other members of the bidding group, which is seeking as much as a 75 percent stake and plans to keep the company trading in Australia and South Africa, with a potential listing in Hong Kong. Citic is bidding through its Baiyin Non-Ferrous Group Co. unit and China Development Bank through its China-Africa Development Fund.

Gold One operates the Modder East mine in South Africa and also has projects in Mozambique and Namibia.

A frothing-at-the-mouth FT.com found many reasons to critique the deal.

China and silver

The other big story is silver. Why this sudden spurt in prices? How sustainable is price increase in silver?

Silver is down nearly 30% this month in volatile trading. Such a move in the Dow Jones Industrial Average would equate to an eye-popping drop of more than 3,700 points. Tony Crescenzi of Pacific Investment Management Co. called silver’s parabolic rise and subsequent skid a “tulip mania-style move.”

Silver backers counter that even with its recent drop, the lesser precious metal has retained a nearly 80% gain over the past year.

While gold supply is well understood, silver bulls and bears argue about just how much silver is out there. Some analysts make the case that silver in batteries and photographic film is “recycled” back into the market, reducing scarcity. Silver bulls, of course, think that’s a bunch of poppycock.

More important, the gold-silver price ratio has gotten out of whack. During most of the past 10 years, the ratio hovered around 60, meaning gold was 60 times more expensive than silver. Silver’s incredible surge over the past year has pushed the ratio down to 43, a level not seen since silver’s last crazed phase in the early 1980s. At its peak, back on April 29, the ratio narrowed to 31, a level not seen in three decades.

Silver bulls will argue that the gold-silver price ratio should reflect the 15.5 level authorized by France in 1803, or the 15 level outlined in the U.S. Coinage Act of 1792. It’s more likely that the ratio will revert to modern-era norms rather than race back to the Napoleonic era. And that means that gold, more than silver, looks like the solid store of value today.

Behind this huge spike in silver prices

The Chinese.

As 2ndlook has pointed out earlier, Chinese love silver – and Indians love gold. Most of Chinese consumption of gold is by a few well-heeled elites with guanxi.

But only look at the Chinese trading frenzy in silver.

Chinese speculators have emerged as a big driver of silver’s spectacular rally and subsequent crash with trading in the metal in Shanghai soaring nearly 30-fold since the start of the year.

The commodity, nicknamed “the devil’s metal” for its wild price swings, surged 175 per cent from August to a peak of almost $50 a troy ounce two weeks ago. Since then, it has plummeted 35 per cent, hitting a low of $32.33 on Thursday.

At the same time, silver turnover on the Shanghai Gold Exchange, China’s main precious metals trading hub spiked, rising 2,837 per cent from the start of this year to a peak of 70m ounces on April 26, according to exchange data.

The number of contracts outstanding, an indicator of investor exposure, doubled over the same period.

Silver trading in Shanghai remains below the levels in London and New York, the two main global hubs, but its rapid growth means its has become increasingly significant in driving prices.  “I’m pretty certain it’s the Chinese retail [investment] that is driving this move,” one senior precious metals banker said. “There’s an enormous amount of speculation going on out there, they’ve got the bit between their teeth.”

The Chinese gorilla

Looking at the reports of the market and commodities, it is plain that the Chinese Government is an interested player in gold acquisition – something that 2ndlook projected nearly 4 years ago. And the Chinese consumer is behind the rise in silver prices.

Since China is anyway the world’s largest producer of gold, disruption in gold supplies has not highly marked. If other Governments follow the Chinese example, gold prices could explode. If Chinese buying gets very aggressive, again, prices could spike.

The only cloud on the horizon could be some kind of consensus to bring some undeclared quantities of gold into the market – like the Central Banks Gold Agreement (CBGA). Is that likely? The only such seller could be EU members? With the Euro-zone and the Euro-currency itself in such trouble,  would ECB members dare to sell gold?

Especially, if the Chinese Government is ready to buy?

Top national central bank gold holdings. (Image courtesy - FT.com.). Click for larger copy.

Top national central bank gold holdings. (Image courtesy - FT.com.). Click for larger copy.

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