Freaked out by free market

I doubt if you will get as many comments on your post this time.

Most will agree, I would guess and there wont be much controversy, at least not the kind of debates we’ve had on the more controversial posts.

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@Holy Maccoroni, Zia it is better if you stick to madrassah , mullahs and kashmir. What utter bollocks you are trying to sell.Capitalism or socialism or communism , the dividing line is FREEDOM. People work best when they work for themselves. Just compare a visit to state bank of india and HSBC , all will be clear. also this is a settled matter , read Francis Fujiyama, “End of history and the last man”. And free market is never meant to be ANARCHY. Its like football game , you are free but within the constraints of the rule of the game. Recent banking crisis in anglosaxon world is due to banks playing russian roulette. As in bengali is known as Phatka, that is SPECULATION. With speculation you win and it will bring lot of money , you lose you get banking crisis. On top of that there is plain and simple crooks playing havoc with the system , like BERNIE MADDOX. This is not to say that capitalist system has reached its full maturity, is has not and it will keep evolving. Just look at soviet union and america. Soviet union has twice the natural resources as america , yet one third the standard of living , and it is not just Iphone, basic food production technology and all that. A small example , the pizza hut pizza that you eat , thecheese isn’t exactly cheese but skimmed milk powder with thickening agent and cheese flavour and that is how produce cheaply for the masses. And before you get too alarmed about unemployment in Uk , the unemployment benefit is so generous if you have child , with free housing and money that there is no incentive to look for jobs.

Also one Imam Bakri who fled to avoid court proceedings against him for waging jihad, left his wife and NINE CHILDREN who has been housed in a huge house with tax payers money and regular monetary support by state . This bakri has fled to lebanon and transmits hate through Tv but would not recall his wife.

Next is islamic finance , it is garbage like rest of all that islam offers . Take oil out of the system , the arab countries will be more poor than kalahandi in orissa. Despite oil iran , libya , egypt average person’s standard of living and social security is less than an unemployed brit living on stae support.
You simply cannot get islam from interfering and destroying any rational judgement that you may have. If you really think islamic models are infinitely better why cant you simply move to pakistan . a country like a stray dog dependent perpetually on american leftover , in economic terms handouts.

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Rao Reply:
August 2nd, 2010 at 2:47 am

Being a practicing Hindu, I have worked for a Bahrain based Islamic Bank. I support the writer and am ashamed of the ignorant comments Mr. Shan has made.

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Rajeev Reply:
August 2nd, 2010 at 8:17 pm

‘Being a Practicing Hindu’ Nice joke..Why don’t you use real name.

What Shan has written is 100% correct.

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Ashish Reply:
August 3rd, 2010 at 12:50 am

@Rao,
what has your being a practicing Hindu (trying to be perfect, huh? that makes 2 of us here ) got to do with the argument about Islamic banking?
Since you are the expert, please tell us why Islamic banking is superior.

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niraj Reply:
August 2nd, 2010 at 2:48 am

Well done shan, very well said .Media is trying to hype anything they get their hands on.They scare the commenman out of wits and make them behave in an unnatural and stupid way. I am not against islamic banking but they way its preached here is utterly stupid.

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KD Reply:
August 8th, 2010 at 8:27 pm

“People work best when they work for themselves.” – who told you that ? People work best when they are not driven by self-interest but a higher goal – that of making a team successful. Personal ambitions and greed of individual players will destroy productivity more often than not.

“Soviet union has twice the natural resources as america , yet one third the standard of living ” – how is this relevant to the argument ? It would be superficial to claim that countries with better natural resources should always have a better standard of living. There are multiple reasons, not just free market, that drives better standard of living.

The recent economic crisis was because of SPECULATION, which comes from greed of individual players to make more money in a short time. The ‘rules’ of the game were always in place, its just that greedy players will always find a way to cheat the system.

Free market is not for everyone and definitely not for countries like India, where 60,000 tons of iron ore is smuggled and governments keep PSUs in bad shape to then claim that free market is the messiah !

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shan Reply:
August 12th, 2010 at 2:58 am

@KD, utter bollocks, read carefully what I have said, “free market does not mean anarchy”, also that team you speak of is the “themselves”, in a command economy there is no team but one huge amorphous mass. And that UTOPIAN HIGHER GOAL THING , we have been there before . It used to be called “toiling masses of the world unite and communist international,” we know how it fared in russia and china. Incredible it may seem MAO wanted to do away with names of individual and replace it with numbers , instead of KD say 420, . just a glance at chinese agricultural output before and after land ownership proves beyond doubt what I have said.The operative word in free market is FREE OR FREEDOM , that is the single most important catalyst to drive progress. I am a surgeon , doesn’t mean I can make a dead man alive, similarly just a system on its own can so far , there are host of other factors. In India’s case the rotting grain clearly shows what happens if you leave it in the state, CAN YOU IMAGINE ANY MARWARI OR AMBANI OR GODREJ OR TATA LET ITS ASSETS ROT AWAY, AND THERE LIES THE ANSWER.

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KD Reply:
August 12th, 2010 at 5:37 am

I can see an Ambani or a Godrej selling it to Pakistan and keeping Indians hungry if it yields a better price !

You are claiming that a government that works for the people efficiently can never be better than a corporate honcho who works for himself/herself.

For government, you provide examples of failed governments and for corporates you provide examples of successful corporates.

I disagree and claim that an efficient government will always be more people-friendly than a corporate whose sole goal, by definition, is to make profits and self-propogate.

Ashish Reply:
August 12th, 2010 at 10:17 am

@Shan,
actually the GOI in the case of rotting grains is actually behaving like a Marwari trader (clueless at that).
Why is the foodgrain rotting? Because, it costs more to reach this grain to the poor and that cost will be borne by the exchequer, which will push the inflation up, upset the budgetary target on inflation and will fuel more anger in the cities. Exporting these grains would have been an answer, especially now that the grain prices are so high, but it is political suicide.

@KD, that now brings me to your point about efficient government. Is that an ideal you are talking about? Do you have examples of an efficient government running enterprises?
The definitions of government and enterprises are changing. When the corporates try to maximise profits, they can not do so without touching (for the better) the lives of millions around them. Think about it. When Ambanis wanted to get into retail, the first thing they worried about was roads, telecom, storage- all had to be world-class. All for cutting down on supply chain losses. Yes, Ambani will make his billions, but in the process, the much maligned market forces will ensure that we reach home faster, foodgrains do not rot in our godowns, we have uptodate information about demand-supply mismatch and so on.
Do the governments have any role today? Sure, they have. The should maintain law and order, defend the country, actively formulate policy which is not for the next quarter but for the next 20 years, and market the country; of course after trying to make it marketable.

shan Reply:
August 12th, 2010 at 11:56 am

@KD and Ashish, well not bad for a general surgeon to take head on about devolopemental economics.
First KD , Ambanis cannot sell it to pakistan , just like it cannot sell moblie phone to Bin Laden. The export needs govt approval , full stop.Regarding govt organisation , you cannot get any MORE PATRIOTIC PEOPLE ON EARTH LIKE THE ANGLOSAXONS, and these are real patriot , not togadia kind or pakistani kind, whose only mark of patriotism is hate muslim/hindu vice versa.There was a minister of health under thatcher govt called Virginia Bottomley. Her mother in her eighties went to hospital emergency dept, for some ailment. SHE WAITED TWO HOURS BEFORE GETTING HER TREATMENT, NOT FOR A MOMENT SHE DECLARED HER TRUE IDENTITY . This is TRUE ENGLISH(A colony of bangladesh , according to Ashish). Now I work in NHS, it gives reasonably good service , in the sense , if you live on unemployment benefit , any medical care you need will be provided INCLUDING HEART TRANSPLANT , by the NHS. But in terms of efficiency , or VALUE FOR MONEY , it certainly is a glaring example how ministerial interference AND POLITICS , screws its possibilities.This NHS is such a hot potato , Nigel Lawson once described it as english religion. Now before you jump and point to the unemployed people , how will they fare or fare in US , LET ME TELL YOU FRANCE TAKES CARE OF BOTH AND IS RANKED BY UN AS THE BEST ALL ROUND HEALTHCARE SYSTEM IN THE WORLD.
@Ashish, your comment about marwaris , shows age old bengali prejudice of a defeated people , having nothing to aspire , bristling in jealousy, BY THE WAY SUBHAS CHANDRA(zee tv) STARTED HIS CAREER AS A RICE EXPORTER TO POLLAND .
I will come back to you later as I have some pressing matters to attend..

“private enterprise has become an expensive liability for tax payers’ “That is why the Prophet introduced the interetst free system”..

utter nonsense.. Canada is doing quite well; so also Singapore. To some extent India too. The difference between US and these systems is the role of government and regulation.

US left the free enterprise too “free”. Republican party fought all regulations as governrnmental interference in free market. The credit bubble, lack of regulations, regulations administered by state, central govt, and sometimes local city, borderless capital etc all contributed to the US and European failure. As opposed to US, Canada had only fewer banks, and all were regulated well (like India). US bank regulations were administered by multiple entities, with the result nobody was responsble for the whole thing; each entity looked into their silos.

US paid a big price, and will continue tp pay a big price. The fault was not with Capitalism, but with regulations not catching up with finnacial innovations, and the total absence of risk management,.

Unleashing individual creaetivity and creaeting an environment conducive to growth and employment benefits all. citizens OF all the systems we know of, democracy and capitalism have created the best standard of living and innnumerable innovations improving the quality of life. Finance is the glue, and the mickey mouse prophet stuff is neither a solution nor pragmatic in a global economy.

Coming close to home, we have to wonder whether Mrs Gandhi’s policy created two generations of poor people in india; and whrher Indian ingenuity could have been unleashed long before, even as early as 1950s when Rajaji’s Swatantra party envisaged unshackling Indians to pursue business and job creation with removing license raj and policiies geared to industrial growth through private investment.

The choice is somewhere between State Capitalism (like China’s) and the free for all US capita;lism. State has to enforce healkth, wage, safety, capital levels, pollution, etc standards.

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KD Reply:
August 8th, 2010 at 8:29 pm

You said it Gopi – if the state has to enforce something for free markets to work, you can be sure that the free market system is not for India !

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@Zia,
The fundamental point about any “ism” is that it evolves with the change in social conditions prevailing in the country it governs.
I am so happy that the Vedas and the Upanishad (at least to my knowledge) left no guidance in fiscal matters. Luckily there is is no Protestant, or Jewish or Catholic or Hindu school of economists. we have enough loony economists without the religion making its presence felt.
Yes, Muhammad was perhaps right in demonizing usury in the conditions prevailing in Arabia those days. Those conditions do not exist today. The world has moved on; why stick to the same justifications for Islamic finance?
The bedrock of modern financial system is NOT, as you wrongly posit, “interest charging and payment”. It is a little more fundamental than that. It is recognizing that money is an asset; on par with skills, buildings, machinery, land and physical raw materials.
Modern financial systems create a market for these assets. They attach a certain risk and appropriate return to the consumption of these assets. Like HT pays you for your skills, when the same HT needs to borrow money to start a new business, it needs to pay the lender “usage charges”. Like in any market, the scarcity or abundance of an asset will drive the price up and down. If journalistic skills are in short supply, you can rejoice. If money is hard to come by, then the interest rates will go up.
Now, it is disingeuous to suggest that Islamic Finance does not charge interest. It does, but finds a convoluted mechanism for it. After all, you can not escape the “usage charge”; if you recognise money is an asset.
Now, about the “excesses of capitalism”, “greed” and other such things.
There was a most interesting article in the Economist in the height of the securities scandal which suggested, quite convincingly, that the cost of increasing regulations is actually more than the cost to the Tax-payers. I do not have time to ferret it out today; if someone is interested, I can spend time later on to comment more extensively.
One last thing, the retirement age is also factoring in life expectancy in those countries. As birth rate falls and the work-force shrinks, those countries have no option but to enhance the retirement age. India will take time to catch up!

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shan Reply:
August 3rd, 2010 at 10:50 pm

@Ashish, I will go much further than usage charge. Most of the capital is now USED rather than LENT , IN BUYING BUSINESSES , speculating on stock market , futures trading , commodity future etc, because bottom line is RETURN. As there is a saying in bengali Elo koto, Gelo koto , roilo koto. This is most pronounced with Fund management companies. They buy company , hire best people to do the job , when company has turned around or doing well sell it on with a tidy profit. And the pension funds are entirely manged by fund managers , banks dont have anything to do with it. When I went for a mortgage for my house , I was told there was THIRTY THOUSAND different products on offer. Also this not charging interest is not a big thing. The bank who gave me the mortgage deposit has a package. This is from Virgin one , of RBS, the condition is you got to put all your salary into the mortgage account , which is also your current account, and they will charge you interest on the money owed by you to the bank minus your current account . Now if you pay of your mortgage which i have done , any sum into your current account YOU GET INTEREST.

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Zia’s comments is out of sync. Islamic banking is a sham since it redresses the interest mechanism into a form which the mullahs dont understand and declare it shariah compliant. Islamic way of managing finance has yielded the classic Dubai model. Moreover Islam and Middle East countries have thrived on Oil Economy (including Indonesia). Remove Oil out of the equation and the Muslim countries will move back to Adam’s age.

Sure Capitalism and Socialism has its own flaws but it has provided a sohisticated monetary and banking system and has thereby resulted in the upliftement of the European and American Society.

The Banking crisis is the result of overstretching the basic banking principles. The system will resolve the internal conflicts and is slowly bouncing back to normalcy.

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Millions have been killed in the name of communism and socialism; the last one being the Pol Pot murders in Cambodia. Mao’s “let thousand flowers bloom” swimming and the famine sthat ravaged China was another killer; Stalin’s camps, and the list goes on.

The events unfolded in Russia, China, East europe in the last twenty five years show communism is an unsustainable form of system. Communism works against the human desire of achieving, owning, enjoying, and wanting to be better (than others).

The issue for the future is how the crisis of 2007-2009 will affect growth and living standards, will it put US on a permanent decline (the talk about “the lost decade” has already started), how can China grow if US demand is diminished, is there any currency in the short term that can replace dollar etc.

India, with a growing domestic market, and inclusive government policies, has a high probability to come out a winner when books are closed five years from now. We have to eliminate several government departments (inspections and permissions activities that are csspool of corruption); move away from the British model of bureaucracy,a nd move to a US type bureaucracy. The problem with India is not its politicians, but the bureaucrats; the IAS raj.

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Because muslims believe riba is haram and used to keep their cash under their pillows,so in order to get this money into the banking system islamic banking was invented.not for love for islam.interest should exist, if one was to borow money for a cretain time for his use then he should pay a price for this.islamic banking renames all banking products and instruments with islamic names but in essence they are all the same.at the end you pay principal and interest the expected and leave thinking it is not harram because they call it ”murabbaha”.dont scratch your head all islamic products are similar to the conventional products,only names are different in ” arabic” as everything in islam

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For God’s sake, read some history! Don’t shoot left and right without doing your research- it is easy to have opinions! Capitalism created the enormous prosperity of the West over the last two centuries. Crisis have always been there and they will always be there but they are periodic occurences. The socialist block collapsed because the only thing they could provide their citizens were police states and mass murder, not jobs and income growth. China and East Asia has been folllowing the path set out by the West and now India has joined in. Apply to some museum- they might admit you as a relic! Don’t take it personally- just some good friendly advice!

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Ashish Reply:
August 2nd, 2010 at 3:12 pm

@Mitra and Binoy Hegde,
What is interesting about the China phenomenon is that they have managed to grow and pursue a capitalist economic policy without even paying lip-service to the civil liberties which we take for granted are necessary to innovate and as we know, innovation is the bedrock of the capitalist system.
It is amazing. It is a very corrupt system, the rule of law as we know it does not exist, independent thinking is not encouraged. Yet, China grows. And, every year, pulls a large number of its citizens out of poverty.
This blog is probably not an appropriate forum to examine this in more detail. As a China watcher for long time, with many “people to people exchanges” I have found China extremely fascinating; especially since it goes against my grain. I believe democracy, rule of law and capitalism go hand in hand; but, then a small voice pipes up and says- look at China.

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Binoy Hegde Reply:
August 2nd, 2010 at 5:16 pm

@Ashish

What China has demonstrated is that freedom is not a necessary condition for short term (20 – 50 years is short term from a historical perspective) economic progress. They have achieved in 25 years what the west did in 200 years.

Obviously they would not have achieved this if US was not there as a country with a voracious appetite for more, more; cheaper, cheaper.

China’s state capitalism model is definitely worth copying for a ‘cleansing and direction setting”. It does not have the mess of democracy – remember the case filed against the Delhi Metro prohibiting their expansion to Gurgaon because a banyan tree had to be cut – the environmentalists, indian railways, army etc etc filed case and it took for ever to make a decision. Chinese do not have to worry about courts, delays, property rights.

I believe China’s growth will be short-lived (unless their central planners do some magic; and they have done it in the past!) due to 1) One child policy that has skewed the male/female ratio, they are now much below the threshold that is required for continued reproduction – so the aging society in 30 years will have to have labour imported (most probably from India!) 2) The absence of legal structure/protection and 3) the absence of a transparent banking system. While (2) and (3) can be solved, demographic shifts are not easily reversed and very difficult to fix.
Additionally, there is a “black swan” in the horizon – what if the Chinese system goes upside down (as happened when communists took over) if people agitate for political freedom and democracy – will there be million Tinneman, and what will be the impact ; also what will be the impact if US/Europe takes a nose dive.

India, with its innovation and freedom, a growth focused on domestic market than exports, and no coerce controls on individual aspirations, has a better chance of sustainable progress; and there are no black swans imaginable that will stop its momentum unless jehadis take over Pakistan and get control of nukes there and do stupid things against India using the nukes.

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Ashish Reply:
August 3rd, 2010 at 1:19 am

@Binoy Hegde,
Thank you for a reasoned answer. I specifically liked your first paragraph where you make the distinction between short and long term.
US market existed for whoever chose to take it; China did, the ASEAN countries did to some extent, India did not. We have to look for reasons which are endogenous and not explained by external forces; I argue they are the same for all countries.
In the matter of courts/ rule of law: do you seriously believe that other than IPR laws, it is any different in India than China. We are as lawless; probably more. In China you fix one party (sorry, capital ‘P”); here, you don’t even know where it starts and where, if at all, it ends.

The demographics is an important point, though and probably the only thing that will stand in China’s way. But, read the current issue of the Economist- the Chinese prosperity is now spreading inland, away from the coasts.
The point about demographics has only one caveat- it is not enough to have the warm bodies, like India has. They must be educated, well-fed and traineable. The fact that US MNC’s are pouring in dollars in remote provinces (like our Jhumritalaiya ) proves their confidence in being able to source the right people to run the plants.
About your “black swan” thing… yes, that has been the fear always, isn’t it? But, it seems like the Chinese leadership is managing it well so far- like a controlled release valve.
Yep, with all that, I am still bullish on India and for many of the reasons you cite.

shan Reply:
August 13th, 2010 at 1:22 pm

@Binoy Hedge, freedom is a major ingredient in the recipe for success. The amazing chinese transformation is a testimony to THAT LIMITED FREEDOM. You just need to compare with CULTURAL REVOLUTION AND GANG OF FOUR. That the farmers could sell their surplus produce and own land transformed chinese agriculture, the oplace famous for starving its THIRTY MILLION PEOPLE. The cheap manufacturing is also a testimony of UNBRIDDLED FREEDOM WITHOUT RECOURSE TO ANT LABOUR LAWS AND ENVIORNMENTAL LAWS.

shan Reply:
August 2nd, 2010 at 6:22 pm

@Ashish, Few comments on “chinese miracle” , and leave it you to ponder. The miracle itself shows what majical transformation takes place when you allow ECONOMIC FREEDOM. This is most marked in CHINESE AGRICULTURE, the place renowned for wiping out THIRTY MILLION OF ITS CITIZENS IN 1950-1960 , DUE TO FAMINE , had made amazing transformation , and this is entirely due to PRIVATE OWNERSHIP of land rather than stalinist commune farming.
Next is chinese growth or more specifically ONE TRILLION DOLLAR reserve.
This has been acheived entirely due to mass cheap labour , (there was news of using prison labour), without any constraint of any kind LABOUR LAWS , ENVIORMENTAL LAWS . also the foreign investment in china is overwhelmingly , TAIWAN , US, AND REST OF G8 TAPPING SLAVE LABOUR.
I have read the Iphone by apple which sells at 500 dollars , is assembled in china, china makes only 20 cents out of each Iphone. This probably explains why you had so many incidence of chinese illegal immigrant suffocating and dying back of a lorry yring to sneak into england. also there was this case of cockle pickers in morecambe bay (all illegal immigrant) swept away by the tide at four o clock in the morning.
Also natural resouce wise china is a rich country which many people are not aware of , it has 80% of deposit of RARE EARTH METALS , which is indespensible in electronic components.
But the bottom line is unless you have complete freedom you can go only so far , as they say if america decides to pull the proverbial rug , china will be in tatters. In fact if african dictatorship just gave that guaranteed supply with cheap labour , no reason why sudan should not supplant china.
An example of closed society during mao se tung time. Mao decided that sparrows were a menace eating all the grain, so he ordered EXTERMINATION of sparrows. Next year they had famine due to LOCUST eating all grain , a nice example for school kids about ecology. This was so bad they had to breed and release sparrows. This also PROVES WHAT HAPPENS IF YOU BLINDLY SUBMIT, ANY ECHOES HERE.

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Ashish Reply:
August 3rd, 2010 at 1:33 am

@Shan
USA can’t pull the plug on China; it needs China more than China needs USA.
Last year alone, an average US family benefited to the extent of 1000 USD on account of cheaper Chinese imports.
There is actually a strong school of thought that says that all this talk about getting China to adjust its currency is political posturing. US consumers will end up paying for a stronger Yuan.

Mitra Reply:
August 3rd, 2010 at 3:02 pm

Good observation, Ashish! In some respects, China’s tremendous success is a puzzle. In the long run, freedom will still win, I would like to believe. Maybe, China will become a democracy. One thing- India has such a terrible record in social sector development- indicators related to health and hunger, disease, literacy etc even though India is a democracy- while China does much better. Clearly, our democracy has failed to empower the poorest citizens- we have a long way to go.

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Ashish Reply:
August 3rd, 2010 at 3:26 pm

@Mitra,
yes, that’s the other side of the puzzle (actually the Indian half of the puzzle)

shan Reply:
August 3rd, 2010 at 4:00 pm

@Mitra, That is quite easy to explain really. China spends bulk of its education budget on primary education and secondary education. India spends on higher education. That is why India produces hundreed times more postgraduate and Phds.

shan Reply:
August 3rd, 2010 at 8:06 pm

@Ashish, this is from todays HT
US President Barack Obama has said America is on the road to recovery thanks to his economic plan that included ensuring new jobs and industries don’t go to China and India

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Ashish Reply:
August 3rd, 2010 at 11:17 pm

@Shan
Obama is saying what is expected of him by his constituency. What is the point you are trying to make?

An excellent piece Zia. You are right that the economic meltdown has more to do with greed than anything else. But the greedy would never accept. More interestingly, I read some people comment here who do not know a word about the concept of Islamic banking. They simply criticise it because they see the word “Islamic” attached with it. Little do they know that Islamic banking is not a system that can be run by madrasa clerics. It is highly complicated system of finances that sick people like Shan and Gopi Thomas can never understand.

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S Singh Reply:
August 2nd, 2010 at 4:42 pm

So, all these 54 OIC countries like Pakistn, Yemen, Saudi, Chad etc are at the zenith of their progress because they have Islamic Banking??????

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Ashish Reply:
August 4th, 2010 at 12:01 pm

@S Singh,
good question. I guess Islamic Banking may not be the only answer; it is only a part of the answer

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The emphasis on the capitalists system on growth and more growth has played havoc with the planet.

I do not want to be a doomsayer but it has been estimated that mankind has at best, less than 20 years before many a “tipping points” are reached. It has been estimated that out of billions, just millions will survive.

Sounds far fetched? Read up on James Lovelock’s – The Revenge of Gaia.

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Ashish Reply:
August 2nd, 2010 at 3:37 pm

@Syed,
okay; gone and bought the book; should take a week to arrive

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Ashish Reply:
August 2nd, 2010 at 4:13 pm

@Syed,
while I wait for the book to arrive. are you aware that for the last 100 years or so, the oil industry has always predicted that it will run out of known reserves in the next 40 years?
It does not matter what the date of the prediction is: 1920s or 1960s or 1980s or 2000.
Anyway, all else fails: we will still have nuclear fuel; or even bicycles (camels??).. wind energy is good too, with so many windbags among our political class.
We are covered.
“There is probably no doomsday. Now, go and enjoy your life”

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syed Reply:
August 2nd, 2010 at 5:23 pm

@Ashish,

I also hope that Lovelock’s predictions are false. During my schooldays, one of the writings which had a big impact on me was was of Lovelock’s – A new look at life on earth. This book is its sequel.

The issue is not so much a shortage of energy as a shortage of food. But I would not like to spoil the fun.

You are right, oil reserves have not run out, maybe because extraction technologies have kept on improving. Hopefully technology would help us here also!

shan Reply:
August 3rd, 2010 at 12:48 am

@syed, apparently einstein said the dissapearence of human kind will occur , ifed. all the bees died.In Britain there has been lot of alarm bell regarding this as due to some mysterious illness all the bees were dying, without bees there is no cross pollination and plant kingdom comes to a standstill.
As regards resources , population increase is already causing massive problem , a lot of problem in india can be attributed to massive population increase , that is why you have wars , then disease and famine , which will probably bring into an equillibrium.
Regarding energy resources, massive strides in technology is already producing impact with hybrid cars, the next gm car the petrolengine doesn’t produce traction it produces electricity which runs four motors clamped to four wheels , it gives 100km per litre, also fuel from algae , and definitely solar energy will be big thing coupled with hyperefficient bulbs, and machines will keep mankind going for couple of hundreed of years.

Gopi Thomas Reply:
August 3rd, 2010 at 2:21 pm

@Syed @Ashish

I read an interesting article on food security. It seems China has leased large tracts of land on a long term basis (100 years or so) in “agriculturable” African countries to produce food. Apparently it is done in a less “colonialistic” way. They also talked about an Andhra Pradesh business man who is doing similar thing in Africa (produce there, sell to India) In this article.

Lopsided policies, sometimes done to improve common man’s plight, also impact food security. The land reforms in Kerala under the first communist government in early 60s essentialy destroyed rice agriculture in the state. The rice land holdings were too small to engage it in a comercial way, and most of the fields now are residences. So, all have dwellings, but no food!

The lure of farmers for high yield seedless crops also threatens food security; making people dependent on large foreign agro businesses.

A comprehensive policy on the models of Japanese system is needed – they do not allow rice imports there. They can afford the high priced local rice there (and forego the cheap American rice). We may not be able to go to that level; however, it is time to relook at our land use, water preservation, imports, seed mutation, and all other related factors together to form a comprehensive food security program. Eminent scientists like Dr Swaminathan should be involved in the formulation.

Gopi Thomas Reply:
August 3rd, 2010 at 7:19 pm

@Ashish @Syed

Controversial initiatives by China (and others) on food security -

“Outsourcing’s third wave..buying farmland abroad” Economist – May 21, 2009
Atlantic Monthly, May 2010, Howard French , “The next empire”

Ashish Reply:
August 3rd, 2010 at 11:19 pm

@Gopi,
yes, I know about this initiative by China.
Forget the ethics for the time being; you can’t fault the initiative and vision.

Gopi Thomas Reply:
August 4th, 2010 at 12:43 am

@Ashish

Absolutely. China is doing the right thing for its people. And I personally do not have an issue as long as (in this case) they do not starve the host people..

For once, instead of killing millions like Mao , Pol Pot, and Stalin did; they are doing the “right” things.

The legal issue (are we better off vis a vis them) comes basically because of two things 1) They do not have right to private property 2) There is no judicial system like we have here and in other western countries. These become issues when things start going “south” .

However, china hs to develop an internal market – which they are putting a s a priority. At this time there is a larger Indian middle class than chinese middle class; and many companies can prosper with the existing midle class in India, and not with china.

The key differentiator for China is its execution capability. That they achieved a transformation in 25 years (200 years for the west and zillion years for us) is remarkable. The national control and not having elected representatives help them to aim and fire (sometimeslfiring iterally ). Tibet and Uyger etc are pimples for them; but for us similar things are bleeding ulcers.

If I could wave a magic wand and make something hppen, it will be like a Chinese rise as has happened, and then a peaceful democratic transfer

shan Reply:
August 4th, 2010 at 3:45 am

@Ashish, the gulf states have been renting land from cambodia for the last ten years , all the produce will go to gulf. So china has merely followed the exploitation trail., which used to be known as neo colonisation.

Ashish Reply:
August 4th, 2010 at 10:02 am

@Syed,
as an aside the book arrived yesterday; the wonders of internet ordering and phenomenal back-end logistics.
The problem is, it also arrived with a couple of others- including Marketing 3.0 by Kotler et al.. I am afraid Kotler will consume me for the next fortnight or so.

shan Reply:
August 3rd, 2010 at 4:22 pm

To the blogreaders et al, As I have pointed out else where wheat yield is 8.2 metric tonne per hectare in UK and 2.8 tonne per hectare in INDIA. That says it all. Sorry to be pompous , guys in India will have no idea what G7 (I have excluded Russia) agriculture is. Same with rice output in japan , I remember vaguely from the book of an very eminent bengali economist(I can’t recall the name) the rice output figures are like 2tonne per hectare to 6 tonne per hectare in japan. I once went to work in an island off mainland uk called isle of wight. \the hospital could not provide me accomodation , but they were so desperate for my services they put me up with a farmer who rented part of his cottage. What I saw opened my eyes. IT IS KNOWN AS INDUSTRIAL FARMING, there are FARM MANAGERS , massive machines , conveyor belt etc.
The fundamental thing is the perception about farming and farmers in India , specially in bengal , they are peasants , in UK it is very upper class to have land.The rowing of seeds is mindbogglingly dense, and proper land size allows for use of tractors, combined harvester , even computer directed aircraft spraying of pesticides. Fertiser use in india is a monkey business , not a mathemetical precision as in uk. Also people have no idea about soil care , maintainance and improvement , om top of that THERE IS MASSIVE INPUT FROM LAB RESEARCH WHICH IS PRACTICAL , NOT LIKE IN INDIA WHERE THE ONLY PURPOSE OF RESEARCH IS TO PUBLISH PAER IN FOREIGN SYMPOSIUMS.

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Ashish Reply:
August 4th, 2010 at 10:27 am

@Gopi,
“they do not have the right to pvt property”.. well, with China, everything is a qualified yes or no.

The other thing, continuing my response to Binoy Hegde, regarding demographics-
China finds itself in a demographic shortfall but, you know what? If you and I know, the Chinese know this too! And, you can be sure they are taking action. In selected communities and regions, it is already possible to have more than one child.
This is truly Orwellian. But, it seems to work for them.

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Has the Free Enterprise Worked for Globalization?…

© Speaker Pelosi The recent global recession and economic crisis affected numbers of people worldwide. As a result of the fear of continued shocks, several critics are pointing to the effects of globalization and private enterprises as the cause of th…

I find Mr. Haq’s arguments interesting but naïve.

“Private enterprises have become an expensive liability for taxpayers. The recession did not so much stem from fiscal indiscipline as from greed.”
I think it’s a very blanket statement. Private enterprises are the once who create taxpayers. Second, the money taxpayers had put in, on average has yielded 23% return since Oct’08. I’ll grant him that recession stemmed from greed more so than fiscal indiscipline, that being said the entire economy is motivated by it.

“That’s why Islam, in principle, forbids an interest-based monetary system. In Prophet Mohammed’s Arabia, it was common to enslave a person who defaulted on interest and principal payments on loans taken. ‘Can’t pay your loan back, be a slave’, that’s how it went.
Interest-charging and paying have evolved into a sophisticated, standard practice of modern monetary systems, without which the economy would simply not move. That is no reason for the private sector to lose sight of responsibility — for clients, society, its country and the world at large.”

Interest in general are a good thing, they protect against inflation. Imagine an economy with inflation on 10% and no interest? Risk adverse person will continue loosing hard earned money throughout his life. Islamic banking is picking up exponentially these days primarily because of low interest rates. I believe the laws of Islam were written to prevent exploitation of the poor with regards to not taking interests; Islamic banking comes nowhere near following those laws. You back your loans by assets instead of loans, its just a workaround…as far as Islam is concerned.

Remove interests and you will have not one factory, not one progressing nation. B.T.W interest swaps are one of the biggest derivative that corporation use to reduce their debt burden.

“De-regulations have led to such violent boom-bust cycles that free-market does not anymore have the capacity to create the kind of employment required.”

I simply ask you to see the progress of India 15 years before 1995 and 15 years after. Certain sectors do get hurt by deregulation (more competitive such as airlines etc) but for the most part it fosters competition and better price value matching. Economics 101 – Subsidies and Caps are inefficient.

“As Europe waddles in Greece’s fiscal disaster and US bails out of the slowdown, pressure is building on countries like India to hasten efforts to plug their fiscal deficits. We should borrow less so that global recovery speeds up. So, I just suffered a fuel price hike, as if over 16% of food inflation wasn’t enough.”

That’s the curse of growth and incompetency of leaders, nothing to do with free-markets. With 10% growth comes inflation but that wouldn’t account for 16% hike. Rotting wheat in government storage will. Dont blame free-markets for it.

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Binoy Hegde Reply:
August 4th, 2010 at 12:15 pm

Aj

“Free market” has to be restarined with meaningful laws and regulations; the absence of which destroys peoples jobs and wealth, while leaving the perpretors intact. US would not have had a finnacial crisis (Canada next door did not have) were if simple regulations and guidelines were there. Theer was no licensing of mortgage brokers, no checking of appraisals or income, 105% of the value was given as mortgage, banks did not have to keep any part of the mortgage, they could sell 100% of the mortgages to Bear Stearns and Lehman and others, they in turn sold the whole thing as securities to pension funds and investors worldwide..The impact would have been minimal .If originating banks were required to keep 20% of each mortgage before selling off the rest. The impact would have been minimal if a single regulatory agency with powers checke dthe whole bank instead of patchwork siloed regulators (FDIC only afre failure, OTS, Comptroller of Currency, FHLBB etc ).

Free market with strong regulations — will go a long way. I would even propose, in order to control speculative price rise (and fall) as happene dto the 2007 summer gasoline prices, the speculators should be required to take possession of the commodity they are speculating (gasoline, copper or whatever); forcing people who do not have any need to hedge (because they are not in the copper market) out of the hedging market. Many issues arise because a good thing gets prostituted; goes beyond its intended purpose.

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Aj Reply:
August 6th, 2010 at 2:06 am

@Binoy

Dear Binoy

Just to go a little deeper into the exact issue you bring up. There are few facts that need to be pointed out here
1) Freddie and Fannie are both goverment owned organization. They issued more mortgages in the period of 2001-2004 that prior 10 years combined.
2) The restrictions to mortgages were infact reduced by the regulators themselves. Google Andrew Cuomo and see what you find. He was the youngest HUD secratary with no prior experience – appointed during Clinton administration. The decision to provide mortgages to those who didn’t deserve was political. It is like setting up a disaster and then blaming the people who arbitrage in it.

…but in general I agree with you that we need regulations not because banks are at fault but because regulators fostered unregulated risk to become big enough that it became a systematic risk and they are to blame for it.

Second, I agree to a degree with you on comodities. The wheat bushel back then was trading at twice the spot but again forcing deliveries is not the answer, that would simply kill the market and you wont even see 1% liquidity. How many people want a barrel of gulf oil in their backyard? Where will be the hedge if no-one would want to take the other side of the trade? Do you think anyone in the world can take the deliveries of Exxon hedges?

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Binoy Hegde Reply:
August 6th, 2010 at 6:46 am

Aj

Not so. It is true that Fanniemae and Freddiemac bought more mortgages. However, the crisis was due to bad mortgages, with no ownership by originators and no checking of mortgae brokers -this is in a country where nail cutters need licensing; but loan officers and mortgage brokers who close $1million dollar loans do not need any. Figure out.

The mortgage meltdown was caused by subprime mortgages (which fanniemae and freddiemac do not buy, or if at all they buy, they buy the top tier of credit score for subprime) originated by the mortgage broker affiliates/networks of Lehman and Bear Stearns and other wall street houses. False loans were originated, delivered to Wall Street firms such as Lehman and Bear r Stearns, they packaged it, sold to investors worldwide. Some of these investors had bought CDS from AIG to hedge against the delinquency risk.. You get the point. – AIG goes down, Lehman goes down, Bear Stearns go down. The whole world gets affected. Employment goes down. Normal mortgages get affected because of unemployment and property price decline, and consequently Fanniemae and Freddiemac have lots of bad loans in its portfolio. They did not originate and hold bad mortgages to start with. It is a Republican propaganda. (I worked in housing finance for a Wall Street firm)

BAaks are at fault, big time. Several legal cases are going on where banks acted as custodian and trustee of the same “$100MM” pools multiple times — or in other words, a $100MM pool was sold, say four times, or in other words $100MM in loans supported $400MM in MBS.
Simple regulations are needed – such as qualifying and licensing mortgage brokers, expalnation of mortgage terms (such as Option ARMS etc), requiring a minimum 20% or so downpayment, strict verification of income and assets, requiring originating banks keep 10% of a moetgage and sell only 90% etc etc. Also, clear authority has to be assigned. US has too many siloed regulators who can look into this, but not that; who can look into federal chartred banks but not state chartered, can look into money center but not retail etc etc. These all creates problems. Canada escaped the financial crisis preciselt because they had strong regulations and strong, clearly defined enforcers. Same thing with India..

On the hedge – I am a firm proponent that anybody playing commodity hedge should take position. Otherwise, I ( and may ebe you) , who do not have any economivc and utility interest in petroleum will hedge for pure speculative purposes. No economic purpose is served by speculative games by uninteretsed parties. So let companies who use these raw materials as well as suppliers who supply these raw materials hedge, not others. Functions and instruments of a capital market should be for capital formation, capital deployment, smoothness in commodity pricing etc and not a bazar for people playing funny money game.

Aj Reply:
August 6th, 2010 at 7:49 am

@ Binoy

I just ask you two fundamental questions -

1) If you think it’s the unlicensed brokers then why did this crisis not happen in the last decade? How the issuances did went 10 folds in 3 years? Banks couldn’t do it unless backed by the government. Laws were changed so that the brokers you speak of can get kickbacks. I argue that Clinton administration (and Bush) wanted to provide housing to low-income families and hence drastically reduced the requirements. Freddie and Fannie were pushed to back these loans as that was the only way for the “sub-prime” market to take the risk. Granted the due-diligence was missing but it was promoted by the government for political agenda(by both parties). Banks simply found an arbitrage opportunity in the spread till it became so big that it wasn’t an arbitrage any more. I further urge you to look at the compensation structure of the C-levels at Freddie and Fannie for those years. I can tell you the numbers but I think you should do the homework

Here is an extract for you though –
“Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded “kickbacks” to brokers that have fueled the sale of overpriced and unsupportable loans. ”

2) For commodities, fundamental question again. If Exxon wants to sell forwards of 20 million barrels of crude oil who will buy them if not traders? Shell and BP have their own barrels to hedge? Traders have a big role in dispersing the risk. Taking the analogy of AIG, the biggest problem was not that a whole lot bad loans were written but that they were concentrated enough that they became systematic risk. Imagine if there were 10,000 AIGs with 1/10,000th the exposure each. Would it really have that bad an impact? Similarly trading commodities derivatives – it disperses risk. Exxon going under will have a larger impact on the economy than a 10 million people losing $100.

I understand working of counter-party risk and over- leveraging more than you can imagine. Let’s just say I breathe on Wall Street and am fairly there.

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Binoy Hegde Reply:
August 6th, 2010 at 3:51 pm

Aj

You are absolutely right that “housing” was a bedrock for both governments. increase in homeownership was touted by both as achievements; and Bush was proud of the highest homeownwrship rate in the history of US.

The crisis was precipitated by the growth in subprime mortgages/MBS. From nothing in 2002, it (subprime MBS) rocketed to almost $3 trillion MBS by early 2007. The money which wall street made in securitizing and marketing was huge. Lehman/Bear Stearmns/Goldman (they all even bought retail mortgage firms to originate tehse bad stuff- Lehman-Aurora, Bear Stearns EMC, Goldman several including Litton) made tons of money. Rating agencies were a party to this. Instead of proviidng independent ratings, they gave mostly aaa because if they did not give aaa countrywide and others will take the MBS to a Fitch instead of S&P to get the rating. Mozillo of Countrywide and Stan Oneal of merril lynch were fined because of this collusion.

Fanniemae and Freddiemac were not originally buying (and never bought real subprime) subprime loans — subprime loans (not only low credit score loans, ut also no down payment, 125 LTV (just imagine that!), teaser/option etc) was a creation and perpetuation of wall street firms. Fannie and Freddie, as public companies (which is another discussion in itself) were compared to Lehman and Bear Stearns and others profits by analysts, as to why they were not making profits levels like their “real private” counterparts.. So, Fannie and Freddie change dtheir buying guidelines and started to include highend subprime (A-, b+) in their loan purchase. Fannie and Freddie portfolio is bad now, not because of teh subprime loans they have in the portfolio, but because of the ‘normal” loans that have gone bad due to unemployment, property price decline etc.

FYI, FHA did not have any role in the wall treet sub prime fiasco. FHA insures certain loans (FHA loans) that are generally packaged into GNMA securities, that have done well in the downtrurn. The subprime loans (packaged by Lehman, BEar Stearns etc) were not FHA insured loans.. FHA loans production generally is in the 5-10% of all loans, however after the crisis, it has risen to 35%, because of the banks not lending and FHA filling in due to the funds allocated as a part of stabilization. The Bear Stearns/Lehman/Goldman/AIg loans were not FHA loans, and did not require any FHA approval. (however, i should say, that the increased FHA lending will result in more FHA loan defaults 3 years down!)

U are right that Fannie/Freddie has a lot of bad loaans in its portfolio, and a reckoning will have to be done. Fannie and Freddies original intent was not to keep any loans in its portfolio. Their role was just guaraenteeing MBS payments for which they collected a fee from originating banks. However, when they became ‘privatized” (and became high flying stocks for a long time), in their quest for more profits, they started keeping loans in its portfolio because of the high spreads due to their lower borrowing costs due to the implicit government guarantee. And their CEOS made tons of money.

I hope India learns from the secondary market fiascos here and institute appropriate controls before they introduce a widespread mortgage secondary market like here in US.

shan Reply:
August 5th, 2010 at 12:27 pm

A few word about greek financial meltdown. There was a piece about this in one of the tabloids in uk. It said greeks like to play 4-4-2, a parody of the football system. What it meant was greeks keep 40%tax to themselves, by paying 40%bribe to the tax man leaving only 20% for the goverment. There are govt schools with thirty school children in a remote island EMPLOYING THIRTEEN PE(physical education) teachers. This is what socialism does to a country, and politicians create posts just to reward their cadres.Any echoes here.

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Aj Reply:
August 6th, 2010 at 2:12 am

@Shan

Not sure if its socialism or just govt. In all economies that I’ve observed(including capitalist) the govt sector lags behind the private sector.No comments on corruption.

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@Ashish, Gopi, Shan

Does India at this stage really need to lease out agricultural land overseas?

We have to first work on improving the yield per acre.
Millions of hectares of lands are under litigation and thereby not being tilled.
Average land holdings are small, the dividing “bunds” between plots of lands is useless and collectively takes up a lot of area.
Then there is distribution to take care of (check the recent newspaper reports on the mess the Food Corpn. of India)

The Ambanis knew of the problems in the distribution system & therefore they tried to set up a parallel system (which also envisaged setting up small airports in hundreds of places to transport vegetables etc.) which was scuppered due to many reasons. Their motto tellingly was – Change India.

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Ashish Reply:
August 4th, 2010 at 9:13 pm

@Syed,
of course you are right.
What works for China does not/ may not work for us; our problems are different. And, thanks for a succinct statement of our challenges.

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Zia wants to inject “the merits of Islam” in every discussion – so, now he has the merits of Islamic banking that would have prevented the financial melt down!

Interest rates and their results (inflation, deflation) were not the cause of the meltdown, although a widespread deflation is predicted by many economists as the result of this meltdown.

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Zia works step by step-
1. Muslims are innocent victims.
2. On terror, muslims are just reataliating.
3. Terror has no religion.
4. Threatens India with dire consequences if muslim demands not met.
5. In Islam, there are no castes..but we want reservation..we ruled over you for 700 years but we are opressed community..we got pakistan so what..we chose to saty in India to bleed it more.
6. There are HINDU terrorists. There is saffron terror. Poor muslims are only doing peaceful Jihad.
7. islamic system is the best.
8. I am secular.

Just looking at his thought process, one can say that this guy is full of venom and a soft Jehadi.
These kind of people are far more dangerous than Osama…These are the ideological terrorist..We should not forget that first modern day terrorist Jinnah was suave and well educated.

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Sam Reply:
August 6th, 2010 at 11:12 am

Zia’s articles are so poorly written…they are not worth publishing …

maybe he is hiding his incompetency under the muslim media reservation ..

everyone should stop wasting time in reading these…
until one day he will turn into a 21st century version of Jinnah..
the more voice he gets, the more junk he is going to write.

if not for muslim tag, he should be banned for writing such rubbish and juvenile writings.

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Can Zia view any problem without blowing the trumphet of Islam ? This is called Propaganda not journalism

Islam is a religion its not a economic management system.Banning usury was a smart move by Muhammed but banning Slavery would have been even smarter – something which muhammed never did.What zia is actually advocating for is Sharia-Finance.

http://www.theaustralian.com.au/business/dubai-worlds-debt-default-will-put-islamic-finance-to-test/story-e6frg8zx-1225804745267

Fact is this that Dubai did default(theoritically) but it has been rescued by Abu-Dhabi which has trillions of dollars worth of oil.Its a pointed failure of Sharia finance.This was a bailout …end of story.

http://www.theaustralian.com.au/business/industry-sectors/sharia-compliant-banking-products-a-huge-flop-in-britain/story-e6frg96f-1225882133009

Sharia banking products a huge flop in UK.Zia you should have told your readers this as well but anyways.

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shan Reply:
August 7th, 2010 at 2:01 am

@Vijay, absolutely right I have read in financial times that islamic bank in uk has been a failure.

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AJ and BINOY HEDGE, congratulations for a really stimulating exchange between two of you. This is the reason I come to these blogs, where you get more enlightened than the desi journos like MJ AKBAR , etall(I know one blogger worships him) . Now for some transatlantic perspective. What you written is quite incredible though one suspected about it. In fact in gautam chikermane’s blog I had written something similar about corruption in US. As usual this guy who has far far lessacess to information than what we NRI’s have trying to lecture us, only to expose themselves of their superficiality.In fact I remember reading Gunnar Myrdal’s Asian Drama , and inevitably the topic of corruption comes in. He says in that book clearly america is not UK , there is fair bit of corruption that is “tolerated” in US.If you remember the film “And all for justice”, starring Al Pacino, where the judge caught with a hooker performing sado masochism , is going to face trial . When his lawyer ask him about the lie detector , the judge says “it has been taken care of” , meaning it has been doctored. Now it was fascinating to read that in the epicentre of capitalism , there are two state owned company like fanny may providing mortgage. This is the thing , people don’t realise america is not all private enterprise.Is the railways Amtrak state owned. Now in UK mortgage used to be provided by building society.It was so designed that building society deposit will accrue more interest than banks , and this was per law. And the building society lent out to prospective home buyers. This was staid , till uncle sam appeared on the scene. Now the bottom line became return , whatever route that comes , speculating , options , futures trading even investing in Bernie Maddox ponzi scheme. So the building society all became banks. Another aspect not touched in your exchange, is BUY TO LET mortgage which was quite popular in uk. You buy a property with 95% mortgage , you rent it with the hope to make a tidy profit in short time by riding on the house price boom. Now when it goes bust , because there is not enough “true” buyer , the all you have to do is surrender theproperty and now it becomes toxic debt. I shouldn’t take a rocket scientist to stop this ****. The same happened in japan in 1990, massive loans were taken , securitising the property (and the property values had become astronomical;) , now when the crash came bank doesn’t get its money , but gets the property which is far less than the original loan. This financial jungle has caused quite a few problem , because of the lure of astronomical pay , smart brain in science are becoming future analyst , with a massive loss to science. There have been some dick head as well , like that bloke leeson of barings bank(queen’s bank) . He is a son of a plasterer , did O level(junior secondary), was simply betting on the movement of nikkei index, in the process bankrupting the bank. So really I think these finacial mob needs to be cut to size. This is the reason the best country in the world are nordik like denmark , sweden and certainly germany. As you are aware £0% americans have no health insurance and depend on charity , exactly like in india , i have seen bbc documentary Gp’s giving physician samples to the poor.

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@Zia,

Just re-read your blog & I have to state that as far as socialism is concerned, I do support it, to an extent. However I differ with your views regarding an interest based financial system.

FAct is, some form of compensation is neccessary for lending my money, else why would anyone lend money. At the very least, the lender faces a default risk does he not?

So Sharia compliant products are designed differently- A person does not borrow money from a bank to buy something. Instead the bank buys the goods for him and resells them to the customer and makes a profit on the transaction (but not from charging of interest). At some point the Bank becomes the owner in one stage of the transaction, thereby making it sharia compliant.

However the important point is, the bank charges on the customer remain the same (theoretically) so is there any real difference between sharia products and conventional products? I think not.

Just a matter of how you catch your ear!

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shan Reply:
August 7th, 2010 at 7:00 pm

@syed , as a customer you are worse off, you borrow hundreed thousand pounds to “buy” a house. You keep paying repayment every month, now you loose job , you cannot pay back , so you sell the house , if it sells at ninety thousand , you have to make good for the shortfall minus the repayment. In this case you would have been much better off renting a house. Think about it.

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syed Reply:
August 7th, 2010 at 7:15 pm

@shan,
Actually it would work the opposite way if the cost of the house had appreciated!

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shan Reply:
August 7th, 2010 at 7:20 pm

@syed that is absolutely true, but the same should hold for the villified banks, put as they say what goes up must come down.

Gopi Thomas Reply:
August 7th, 2010 at 11:26 pm

@syed

You said you supported Socilaistc form of govt to some extent…to wjhat extent??

An idealistic notion, but a practical way of governing??

What baout th innate desire of man for better, bigger, more,……… (the solutiosn for those are spiritual, not an imposed political system0)

Anyway, let me know

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@Gopi,

My definition of socialism is the social democratic model which includes democracy, free market, socially progressive causes as also welfare plans. This model avoids the runaway effects of unbridled capitalism.

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shan Reply:
August 8th, 2010 at 1:23 pm

@Syed you are staring at SWEDEN,DENMARK, and germany.

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Gopi Thomas Reply:
August 8th, 2010 at 6:03 pm

@Syed

Ok, yes, they make sense. I am for an European model; however, I think the ideal may be somewhere between US and Europe.

btw, a seminal book was published (I think by a young Indian economist) in early 2007 as to how the European Union will be the numero ono in the 21st ecntury, not China, not India, not US.

Do you think the Greece, Portugal, Spain…will essentially be the deathknell or do you think a new Phoenix will (and can) rise out of this catastrophe

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syed Reply:
August 9th, 2010 at 9:01 pm

@Gopi,
Well, currently Greece, Portugal, Spain…even UK seem to be in a pretty sad state & they will need at least a decade to pull themselves out of the mess they are in. Actually the gap between Europe & the rest of the developing world has decreased.

I personally feel China will lead the pack because of so many reasons…..

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shan Reply:
August 10th, 2010 at 1:25 am

@Syed, prediction is an imperfect science, however as things stand and if it continues to follow the current trend then US is number one followed by japan germany and france , just perhaps UK, then comes russia and then china and india.A country’s power is in its technology , otherwise saudi would be way up. Now each and every computer in the world runs either Intel or AMD processor , the software is microsoft, the Maglev 350miles/hr train is german invention , all the state of the art military hardware is us , some uk , some french and russian. I think we are overawed with china, just remember how china backed off the straits of taiwan when american american aircraft carriers shoewd their presence. In fact china hasn’t been able to build a aircraft carrier. In fact I can’t think of any original chinese invention ,India has one or two like HEPB vaccine, some software.

Ashish Reply:
August 10th, 2010 at 10:49 am

@Syed, This is probably the most severe challenge posed to the concept of EU/ EC. Germans are tiring of paying for their profligate “flatmates”.
In the end, it is about what makes you happy. The challenge to EU is because the Spanish or French or Portugese or Italians all look at happiness or success in their personal life differently. Even North and South of Italy are culturally very different. In times of stress, these fundamental differences come to the surface; people question the economic prescriptions to lead their way out of the mess. Sarko’s answer to the recession was “Sarko One”, a 300M$ spend on yet another jet. No wonder he can’t get along with Merkel, who does her own laundry.
As an aside, I just saw UK being described as a colony of Bangladesh in one of my favourite blogs; ah well, how the mighty have fallen. http://bit.ly/b4BsLM

Binoy Hegde Reply:
August 10th, 2010 at 9:19 pm

@Syed @Ashish et al on Food Security

As you know Russia has stopped all wheat exports due to the drought and fire there.

A report here (in USA) said that the wheat price will double as a result of shortgaes, drought, fire etc. However, the price for a loaf of bread is supposed to rise only by 2 cents!

It is so strange — price for a loaf went up by 10 cents or so when gasoline went upto $4plus dollars per gallon here.

One wonders what is “raw material” any more!

Ashish Reply:
August 10th, 2010 at 11:26 pm

@Binoy,
Ha! Ha! This keeps the economists busy. No shortage of bread, for them at least

shan Reply:
August 11th, 2010 at 12:48 am

@Binoy Hedge, this may have something to do with future trading of grain , also though the international price will go up , america probably has silos full of grain for another five year , also this has to do with VOLUME , that is why the effect is not pronounced, regarding impact of fuel or gas as it is known in Us this may be due to the fact the bread may be starting its journey in wyoming to reach its final destination in newyork. This sort of thing happens when there is TAKE OFF of the economy, in other words entire population is participating and constitutes the market , whereas in India’s case that amounts to say 15% of the population.

shan Reply:
August 11th, 2010 at 1:08 am

@AshishAs an aside, I just saw UK being described as a colony of Bangladesh in one of my favourite blogs; ah well, how the mighty have fallen. http://bit.ly/b4BsLM.
This is also known as kupomonduk. Now I answered to one dimwit S Singh which is apt here “It is not surprising a plonker like you will fail to notice the real reason for cameron’s visit, HE HAD JUST FINALISED A SEVEN HUNDREED MILLION POUND,( YES POUND NOT RUPEE ) DEAL TO SUPPLY FIFTY SIX HAWK TRAINER AIRCRAFT.Apparently britain’s trade with sweden is more than that with India. Now as much there is reason for being massively proud about RECENT indian acheivements, before you get too carried away let me put things in perspective. Per acre yield of wheat in Uk is 8.2 tonnes per hectare, same for india is 2.8. India’s agriculture is in stone age. Twenty five thousand students come to uk from india each year to study. The average UK anual income is 24700 POUNDS, average indian income is 43749 RUPEES.(Exchange rate 1£=72.9 Rupee)
Uk has produced 56 noble laureautes highest per poulation in the world. The CT scanner and MRI scanner is british invention , so is jump jet , which is a jet that can take off like a helicopter.India has produced four home grown nobel prize winners of which three, there nobel winning work took place in calcutta. As we used to say when coming across guy like you “singh, ming choley na” . Only ashish and bobby will understand what I mean.
The guy who had written it has as much functioning brain cell as a multi infarct dementia patient, Is it how the mighty have fallen or more plausibly GRAPES ARE SOUR.

Binoy Hegde Reply:
August 11th, 2010 at 3:48 am

@Shan

What I meant was that thewheat price in US is going to double.

Ashish Reply:
August 11th, 2010 at 10:15 am

@Shan,
well, the guy who writes the blog is a PhD in Comp Science from one of the leading univs of the world and does pretty decent work in advanced comp sc research in US. BTW, he is also a Bengali with an undergrad in CS from Jadavpur Univ.

shan Reply:
August 11th, 2010 at 9:24 pm

@Ashish , a little correction about the colony of bangladesh , it has produced 117 nobel laureattes.

Shan,

See, technologywise China is nowhere behind, but maybe they do not get publicity. Their Harmony Express is achieving speeds of 394 mph, their Tibet railway line has been made through 100s of innovations, their 3 gorges dam is a milestone…Presently & rightly so, they are focusing on upgrading infrastructure, the rest will automatically follow..I think AMD is based in Taiwan, its the same people who fled from mainland China to Taiwan.

Does a hitech military really make a country stronger? Russia found out it did not – it collapsed against the US. Now the US seems to be where Russia was.

Actually I have slightly different take on why China will lead. ..

Their civilization was among the most advanced, the four greatest ancient inventions were made by the chinese ie. compass, gunpowder, printing & papermaking. You cant keep that type of people down for long!
I interact with them regularly & they are harder working, more intelligent & with stronger family ties than Caucasians.

@Ashish,

You are right. Defn. of happiness is different everywhere.
And EU unity in future is not going to be easy.

[Reply]

shan Reply:
August 10th, 2010 at 6:26 pm

@Syed, some correction AMD is american micro devices , 110%kosher yank company , just type amd in wikipedia. Next the harmony train , is is the same MAGLEV TRAIN THAT GERMANS INSTALLED FROM SHANGHAI AIRPORT, apparently it was deemed so expensive , germans couldn’t afford it , but very recently they are planning to have one from hamburg to berlin.The bottom line is as you know in economics it is land and people ratio, with 1.2 billion people whatever they do it will be another hundreed years to reach the standard of G7, that is if we are talking about entire population rather than just shanghai. As you are aware it is not just military might, (that was russia) , every great invention and nobel prize it is US followed by Europe, year in year out. Just take medicines , just name one medicine worth its name invented in china , and I haven’t yet started talking about MEDICAL TECHNOLOGY(This is the second biggest industrial sector in US), and you wouldn’t bet your life with a CHENGDU fighter jet pitted against F16, not to mention commercial aircraft which china has no expertise. And I am not even talking about MONSANTO and GM food , or gene transplant of a fast growing eel fish into salmon making it grow to full size in half the time. There was a news about a farmer in UK with 290 CLONED BULL from an american prized bull.
I full agree with you that china used to be known as middle kingdom , CENTRE OF UNIVERSE and no reason why they would not be able to reclaim the lost ground , but , and there is a big but , AND THAT IS FREEDOM , my instinct says they will only go that far , and also their psychopathic obsession with taiwan , tibet , and a morbid desire for revenge against japan for nanking , may yet put a damper to their progress.

[Reply]

Ashish Reply:
August 10th, 2010 at 11:11 pm

For whatever it is worth,
AMD is Advanced Micro Devices; it is a global MNC, headquartered in US.
Yes, AMD is present in Asia- it has countless sales offices and operations centres (customer services). In Asia, it has 3 R&D centres (India- Bangalore), Hsinchu Science Park in Taiwan and in Shanghai. I could be wrong, but the one in Hsinchu is probably the biggest; Shanghai would catch up or overtake soon.
All US MNCs, especially in Electronics, have large R&D Centres in China (well, don’t catch me on “all”, there would be some who would be an exception, but, it would truly be an exception).
What we do not realise that Defence industry is an important driver for domestic electromnic industry development and China’s spending on military is huge. Lot of the system integration work is carried out by (horror!) private sector guys.
Yes, China is still not a design powerhouse. Even Taiwan does better (I am only talking electronics, here) as does Korea and obviously Japan. But, 3-4 years back, suddenly all factories from Taiwan moved to China while retaining their Taiwanese ownership. There are hardly any manufacturing jobs left in Taiwan anymore. Who can predict how many design jobs will be left in Taiwan 5 years hence?
Do not underestimate the Chinese; either in mainland or anywhere else in the world. They are smart, incredibly driven and focused.
As for pathbreaking research, its time will come too. Compare China’s record for the last 20 years with Japan’s or Korea’s after the war, the Chinese will look very good. If we talk wealth, most Asian billionaires are Chinese too; even disregarding the Tycoons of HK.

[Reply]

syed Reply:
August 11th, 2010 at 12:10 am

Hear, hear,

The Chinese are extremely good workwise, far better than caucasians. Taiwanease and Chinese are the same people, and if Taiwan can be where it is now, just imagine the potential in China.

China was unfortunate in that it was ruled by Mao with his crazy “great leap forward” (actually a great leap backward). Only in 1990 (same as India) did it start economic reforms, results are for all to see.

Maybe they are not focused on basic fundamental research presently, the type that gets Nobel prizes. But I am sure, that time will come soon.

shan Reply:
August 11th, 2010 at 1:26 am

AMD, has R&D in orlando florida, schaumberg in illinois , boxborough in massachussets , nashua in New hampshire, Dresden in Germany , ONE IN SHANGHAI One in Taipei, Hsinchu is manufacturing under licence by third party, THREE IN INDIA , Two in Bangalore One in Hyderabad.Lets keep things in perspective.

Binoy Hegde Reply:
August 11th, 2010 at 3:57 am

@ Syed

Nobel prize has a gestation period of 15 plus years. Ie, the awards given this year , most probably will be for discoveries or theories done 10-15 years ago. So, watch out for Chinese nobel laureates streaming in ten years from now.

The PhD programs in US universities, for most part, are run with Indian and Chinese PhD students. Many university professors are concerned that the supply of chinese PhD students will decline once Chinese universities start to excel, and they have already started excelling. There is this university – something starting with a T- considered to have come a long way up, almost to the par of MIT and Stanford. Apparently, many chinese professors and reserach stars have gone back to China from US, because the govt gives them a free ride in setting up the lab, hiring reserach fellows etc..

A respected EE professor ina leading university here told me that the number of chinese coming for PhD has already started to decline. He is expecting the same thing for Indian syidents (I told him that it will take along time). And he said he will leave his reserach professorship when both chinese and Indians stop coming for PhD, .

Rajeev Reply:
August 11th, 2010 at 8:02 am

Chinese are masters of reverse engineering. If they can reverse engineer MIG, Sukhois and very soon F-16 (courtesy Pakistan), they can easily reverse engineer Intel chips.

Ashish Reply:
August 11th, 2010 at 11:55 am

@Binoy,
you perhaps mean the Tianjin Univ; the oldest in China and extremely reputed. It had produced(if memory serves me right) more than 200 patents (my data is a little dated ) and is counted among the leading centres of learning in the world. The Tsinghua university is very highly rated too; focused on technical education.

Binoy Hegde Reply:
August 11th, 2010 at 3:55 pm

@Ashish

Thanks. He was talking about Tsinghua university regarding electrical engineering education. He said Tsinghua’s PhD is like any top US university’s.

Freaked out by Islam

Freaked out by Zia :

Freaked out being labelled as a Kaafir…

http://indiansinpakistan.blogspot.com/2010/08/i-am-kaafir.html

I am a kaafir…
We have a Pakistani Hindu family living in our neighbourhood. The first time I heard about them was when they refused to let out their servant quarter to someone I had known. “Woh log bhi aapke India sai hain,” I was told.

It was unusual for us not to know an Indian family living on the same street as us. Even then I checked with the small Indian community in Islamabad, but nobody seemed to have a clue.

Few weeks later, I learnt that the “Indian” family owned a handicraft shop in an upscale Isloo market. Everything fell into place. Our neighbours were Hindus from Sindh who owned one of the biggest handicraft shops in the federal capital and that the locals referred to them as “Indians”.

Once I was giving my address to a shopkeeper, who knew I was Indian. He heard me out and said, “Ek aur Indian ka ghar bhi toh hai wahan…” I told the shopkeeper that he got the address right but the family he was referring to was not “Indian”. “Par woh Hindu hain na…,” he tailed.

I was reminded of the shopkeeper’s remark when a young Hindu man’s coffin was marked “kaafir” (infidel) in black and then highlighted with red.

Prem Chand was among the 152 people killed when an airliner crashed into the majestic Margalla Hills last week. Prem Chand, 25, was a bright spark and was a member of the Youth Parliament. He was flying along with five other parliamentarians to Islamabad to attend a session.

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syed Reply:
August 11th, 2010 at 4:57 pm

@Sam,
Has this hate mongering ever get you anywhere?

If you are talking to rational people, then they do not really need to be told all this. If you are talking to those who are beyond reason then also you are wasting your time.

I have spent so much of my time with one nut called wiseadviser on Gautam Chickermane’s blog since God knows how long & he is like the the dog’s tail – always bent

[Reply]

Sam Reply:
August 12th, 2010 at 3:04 am

>Has this hate mongering ever get you anywhere?

This article itself is written by a Indian Muslim living in Pakistan.

So please do not sweep real issues, by calling others as hate mongering.
Lot of muslims are drunk on islamism and hate secularism and do not want to share and give courtesy even for dead people.

It is a common courtesy, in many cultures to respect dead people and not to say bad things about dead people.
Somehow for islamic thugs, they miss this basic human respect (if the dead man does not belong to islam)..

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Sam Reply:
August 12th, 2010 at 3:15 am

Please reserve your calls for “hate mongering” to some islamists thug.

http://www.thejakartapost.com/news/2010/08/11/expose-ji-crown-prince-abdul-rohim-sees-violent-jihad-inevitable.html

======================
So what is jihad to you then?

There is no doubt that jihad has become an inseparable part of Islam. Why? Because the Koran explains it in more than 100 verses.

Even the Prophet Muhammad took part in 28 of more than 70 wars that took place during his 23 years of active missionary period.

Here, we teach our students about the Koran and Hadith, including the topic on jihad.

However, more and more people, even some Muslims, now consider teaching students about jihad similar to training them as terrorists.

We have also realized the West has put up much efforts to persuade Islamic schools worldwide to scrap the jihad subject (from their curriculum) and skip discussions on all Koran verses containing it.

Our duty is to share the complete version of our religious teachings to our students.

Ashish Reply:
August 12th, 2010 at 9:57 am

@Sam
re’ the article you linked to from the Jakarta Post
Indonesia has as much chance of becoming Sharia compliant as you have of turning into a Muslim; not impossible, but improbable ;-D
Rohim’s group is dangerous (his father is arrested, BTW. But, Indonesia under Yudhoyono is definitely working to marginalise these groups. Indonesia is, in many ways like India- except that the Muslims are a majority. If anything, their culture is even more of a synthesis of Hindu and Muslim ways than Indian culture.
The country that I worry about is Malaysia; there is state sponsored Islamisation and marginalization of minorities there.

Sam Reply:
August 12th, 2010 at 1:03 pm

Islam teaches that Muslims are in possession of the final and the best message from their God.

This supremacist attitude, combined with the fact that a warrior has founded this…will lead to sharia..

it starts slowly and as the race among muslims intensifies “who is the most purest muslim”
“who is following the Mohd’s message fullest”"..

in that race, only the purest and most violent and vicious muslims can win…

Gopi Thomas Reply:
August 11th, 2010 at 6:04 pm

@Syed @Sam

Agree with Syed.

Sam, please focus on the subject; no need to bring in what is happening to Hindus/Ahmadiyas/Christians/Sikhs etc in Pakistan in a discussion on economic meltdown, food security etc.. ..

Argue for/against Zia’s positions; but not Zia himself

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Sam Reply:
August 12th, 2010 at 3:08 am

Gopi
you are missing the point..
I agree with your statement “Argue for/against Zia’s positions; but not Zia himself”

But Zia sets the topic and agenda.
He gets to chose what to say, and people can argue/agree within the constraints of the article.
This is fine, if there is another columnist who writes for Hindu issues.
Let’s call that columnist topic “They call me Hindu”..

Unfortunately Hindus are not given this choice and the secular society is so vicious this legitimate concern is not addressed.

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Taxes imposed on Hindu pilgrims for Vaishno Devi temple..

But give Haj subsidy for Muslims…

What a farce of secularism..

if this is the secularism, Hindus have to suffer under,..
imagine how hindus suffered paying jizya under moghul islamic thugs..

http://www.taxguru.in/government-policy/validity-of-the-entry-feestax-imposed-on-the-vehicles-carrying-pilgrims-by-state-of-j-k.html

[Reply]

@SAm,

Please reserve your calls for “hate mongering” to some islamists thug.”"

What makes you think that I don’t call them hate mongers?

[Reply]

Sam Reply:
August 12th, 2010 at 12:56 pm

>Please reserve your calls for “hate mongering” to some islamists thug.””

Because, I only criticize Islam
Criticism is not hate.

(not individual person)

Since islam is an idealogy, I can criticize it.

Again, that article is written by Indian muslim in Pakistan.
Every single word is by writer.

How come you miss the main point.
How come a HIndu’s coffin is written as Kaafir with big red letters.
Why cant they write Hindu ?

Their religious hatred has no bounds..

How come you do not focus on that issue ?

[Reply]

Sam Reply:
August 12th, 2010 at 1:32 pm

http://log.umalik.com/post/885745738/10-32-pm-reclaiming-the-kafirs-and-infidels

Moh_A_K [Moderator] 1 week ago in reply to Usman
Usman:
Throughout the rule of Muslim majorities the world over, non-Muslims were/are treated as dhimmis/third-class people. During the Ottoman rule, non-Muslims could not walk on the same side of the road as Muslims and they also had to pay Jizya (the tax imposed on all non-Muslims). There was no “golden period” of Islamic subjugation for the non-Muslims when they were ruled by Muslim rulers. This was the same in the Mughal empire as well. Why doesn’t the Muslim community in Pakistan write
“Made by Kafirs” on their TV sets, the cars they drive, the mobile phones, the computers they use, the airplanes of the Pakistani (PIA) airlines, on their UK residency permits, on their English-language books, on the printing presses used to print Qurans, on their DVDs, videos, headphones, iPods, Xray and MRI equipment, etc. Hazrat Mohammed’s behaviour was not the best if you read Ibn Ishaq’s account and the Hadith. Definitely not a role model for anyone, women and children included. Half the Muslim world (the Muslimahs) are missing from any decision-making or equal participation, including mosque attendance. Ahmaddiyas and Shia are accused of shirk even though Allah (SWT) says in Surah 23:14, that he one of the best creators (plural, meaning there is more than one creator).

[Reply]

syed Reply:
August 12th, 2010 at 1:59 pm

@Sam,

I am not an apologist for Pakistan, I do not believe in job reservations, however give the devil his due.

Check this link
http://www.app.com.pk/en_/index.php?option=com_content&task=view&id=112650&Itemid=2

….The Government of Pakistan has made institutional arrangements and taken a lot of other measures for the uplift and welfare of the minorities, like reservation of five per cent quota in Government Jobs / Services, reservations of four seats for minorities in Senate, …

Kind of a bit goes against our impressions of treatment of minorities in Pakistan, no?

Life is never absolutely black and white like you paint it to be, dear Sam

Sam Reply:
August 12th, 2010 at 2:32 pm

i hope it is true..
5% is a just an announcement..not yet implemented.

I will believe it, when they remove blasphemy rules.
under current laws, only a muslim can be a president.
A hindu’s testimony is not same as Muslim in a court..

A hindu has to take a course on islamic subjects…

You still did not say a single word on “Kaafir” incident…or my posting on that ..

Ashish Reply:
August 12th, 2010 at 2:49 pm

@Sam,
I will second Syed on “life not being black and white”.
And, I went to the link you posted. Please read the comments under the post; most/ all the comments are condemning the incident and all are from ordinary Pakistanis.
An idiot does not a village make…

Sam Reply:
August 12th, 2010 at 3:06 pm

We are still going round and round in circles…

where is the hate in the link I provided ? or in that particular posting of mine ?
Can Syed please point out, my “hate”

Sam Reply:
August 12th, 2010 at 3:09 pm

Zia can say “Freaked out by Free market”

But if i say “freaked out by Islam”
or if i say “Freaked out being labelled as a Kaafir ”

i am full of hate.

wow !!!

if i call Zia is full of hate for free market, they will still call me hate..

syed Reply:
August 12th, 2010 at 3:13 pm

@sam,
I am not referring to any specific post of yours. The hate comes out from your writing and that is the impression I have got from your posts since the last one year.

Sam Reply:
August 12th, 2010 at 3:20 pm

just like islam says only it is a true religion and all others are false..

i have a right to call islam and most of its idealogy (like sharia, blasphemy, jizya, dehumanizing infidels,…slavery,…) is false.

i never have any hate for any muslim or individual..

only their actions or beliefs..

Unlike the jihadists, who want to kill …
i do not have that kind of hate ..

either point to specific hate statements or re-read my postings again..

@Ashishonomics aka reagonomics of newdelhi, your analysis
Why is the foodgrain rotting? Because, it costs more to reach this grain to the poor and that cost will be borne by the exchequer, which will push the inflation up, upset the budgetary target on inflation and will fuel more anger in the cities. Exporting these grains would have been an answer, especially now that the grain prices are so high, but it is political suicide.
This has the same intellectual merit as the comment of Marie Antoinette , if they can’t get bread ask them to eat cake.Despite living in Delhi your gaze seems to be permanently tranfixed at the 1960 marauders, perhaps you haven’t forgotten “Chiner chairman amader chairman”. Now despite separated by couple of continents spanning five thousand miles , I am better informed about OUR country of birth. Just to inform you ETTAWA WHERE THE FOOD WAS ROTTING due to lack of space in FCI godowns , is in UP , AND IN THIS UP FIFTY MILLION PEOPLE ARE STARVING.
Foods rot because they are not stored properly, STORAGE OF FOOD IS A SCIENCE ON ITS ON MERIT . A common word for it SILOS. Just because pictures cannot be uploaded , otherwise I would have posted one. In EU THERE ARE UNDERGROUND SILOS IN DISUSED MINES.That is why they have wine lake and butter mountain . Perhaps you would concede the opinion of VIVEK DEBROY OF ANALYTICUS INDICUS counts more than your marketing 9.0
According to Vivek , the real reason is Govt like to have that security that we are siitting on a surplus food , and can keep the middle class happy (because they only matter , they are the ones who get elected , blabber in NDTV, become RSS or worst COMMUNIST). The chotolok doesn’t matter , so long Sir ashutosh ’s class and caste is not affected. The bottom line is it will not cause inflation , just to pay for transport cost IF ACCORDING TO CALCULATION BY PROF KAUSHIK BASU OF COLUMBIA , WITHDRAWL OF PETROL SUBSIDY IN THE CURRENT BUDGET DOES NOT CAUSE INFLATION.

[Reply]

Ashish Reply:
August 14th, 2010 at 12:42 pm

@Shan,
get some serious education first; don’t mug up and regurgigate, which is what your medical education seems to have prepared yourself for. And, start with basic English grammar. Economics is not your territory.
Your posts are so full of banalities, non sequiturs and absolute unconnectedness to the topic or posts, that it is really a waste of time responding to them point by point.As an example, your quoting Kaushik Basu’s analysis is neither here not there- economists have long argued that subsidies are distorting in nature. As to why you suddenly quote the best known secret (found in any basic economics textbook) is beyond me.
Since you get your fix on economics from popular writing, I recommend Samar Halarnkar in HT, who made the same argument that I made, couple of days back. http://bit.ly/bImWQp
That is, within the grain industry, the parameters are production (cultivation), procurement, storage, distribution. Each has a cost and the ultimate consumer pays for it (at any rate someone -in the case of stored foodgrains- picks up the tab). Now, if the hungry people are far away from the storage, then the grains need to be transported to them and that will cost money. That money is will add to the expenses, push the budgetary deficit up (get that you dimwit) and will be inflationary in nature since (Economics 101 for dear Shan) the government has to print money to bridge the gap.
The grain rotting in the godowns is “expensed off”, already paid for in the budgetary allocations made in the previous budget, the cost of transporting them to the poor is not. Nor is the cost of building storage infrastructure. That is why I said, the GOI is behaving like a pucca Marwari trader. Only when the cost (poiltical or social) of not transporting will exceed the economic cost of transport, will the government wake up and transport. How did my comment show my envy of the Marwaris? It is Wren and Martin that you need, rather than Samuelson.
Here is what I had said,
Why is the foodgrain rotting? Because, it costs more to reach this grain to the poor and that cost will be borne by the exchequer, which will push the inflation up, upset the budgetary target on inflation and will fuel more anger in the cities. Exporting these grains would have been an answer, especially now that the grain prices are so high, but it is political suicide
This is exactly what Vivek Debroy is saying; government does not want to antagonize the middle class chatterati.
In sum, the word that describes you is TROLL. Get a life, read some school level books first; becasue without even basic education, in subjects ranging from physics to economics, you are reading books that require pre-suppose that basic education. You are confused. Perhaps you are lonely and need to jump in and engage people in arguments just to have someone to talk to. I see no reason to waste my time indulging your need any more.

[Reply]

Ashish Reply:
August 14th, 2010 at 12:46 pm

Correction:
(at any rate someone -in the case of stored foodgrains- picks up the tab) should read
(at any rate someone -in the case of stored foodgrains- it is the government of India that picks up the tab)

[Reply]

shan Reply:
August 14th, 2010 at 2:48 pm

@Ashish, you wanker, kaushik basu was invoked to show if removal of subsidy , which any idiot will know will increase the purchaser price of petrol , and thus its cascading effect into all that is transported , but hard calculation shows its effect is minimal , thus will not cause runaway inflation. By the same token any moron should get it that transporting grain from Ettawa to the villages of UP will not cost arm and a leg. No point in talking to a salesman , whose whole purpose is to sell by hook or crook , humanity , compassion doesn’t come into the equation. Your crown seem to reflect the process going inside the cranium , getting sparsely populated by neurons.

[Reply]

Ashish Reply:
August 14th, 2010 at 8:30 pm

“by the same token”??
go on, you are hilarious! Rip-roaringly funny.
One more question, O’ economics prof: why not increase the subsidy to 100% in the hope that we reduce inflation rather than contain it?
@Zia,
do please continue blogging so that we have the pleasure of hearing Shan’s wisdom on
- Economics (with knowledge gleaned from popular press)
- Physics (likewise)
- Sociology (from Kancha Ilaiah rather than M N Srinivas)
- and many more…
actually, is there anything that Shan is not able to comment on?

All these come with the added bonus of mangled grammar, stitching together capitalised adjectives and schoolboyish abuses. What more can you ask for?

This is from the tabloid THE SUN, AUG 12, page 13, owned by RUPERT MURDOCH , to the blogreaders who were unduly concerned at britain’s plight , one describing it as “how the mighty have fallen”.
“Mum of two Jaimie and her boyfriend Chris live off benefits they are entitled to claim.
The couple who live in a two bedroom council flat with son Baileytwo and baby daughter Elisa, receive £4200housing benefit, £8866 joobseekers allowance,£3900child benefit and tax credit £1200 grant to kitout flat £300 B&Q vouchers to decorate the rooms. Jamie 20 said we live very nicely on benefits and we wouldn’t want to change our lifestyle.
They have a 32″plasma TV , a computer, an Xbox and a panasonic sound system.
The colony of bangladesh is doing all right , probably slightly better than the rotting grain country.

[Reply]

@ashish, you are deypo, paka, and erey tarkik, I dont know what the f you are trying to say. I have merely argued that transportation costs of grain from Ettawah station to the villages of UP is not astronomical as to put inflationary pressure , and govt all over the world have run deficit budget , which is not going to happen in any case. And you plonker where have I suggested keeping the subsidy is good economics, on the contrary( get your eyes checked by a optometrist) , I had pointed to kaushik basu and his work showing that removing subsidy will not put that much infationary pressure. Only a dick head plonker like you can argue in favour of letting grains rot as a policy decision to contain inflation and meet budgetary targets. As to my contribution , you and zia may both like to reflect on these comments.
James T Cassidy says:
July 23, 2010 at 6:14 am
Dear Shan

You are mesmerizingly brilliant, a veritable treasure of knowledge, on issues past and present and your linguistic quiver has arrows to meet all debatory challenges, with verifiable sources, and deliver your responses with absolute precision, be it sarcastic, humorous, incisive or downright abrasive. It is not possible for me to meet you in person, but I wish I could
Ravi in New York City Reply:

July 26th, 2010 at 8:03 am

Shan, wherever you are, you are a smart person. Keep up the good work
Mohan Ramchandani Reply:

July 26th, 2010 at 8:37 pm

Shan,

You have said it brilliantly. We need commpassion and empathy for fellow beings

Got it you Enchorey paka

[Reply]

Ashish Reply:
August 15th, 2010 at 3:36 pm

….”I dont know what the f you are trying to say”
Precisely.
Some education starting with basic English grammar will help.
Don’t let that lack of education stop you from commenting here, though. That would be a loss to the world of comedy.

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shan Reply:
August 15th, 2010 at 8:29 pm

@Blogreaders etall, just reflect on this jerk , a clown named ashish, my typographical error is his basis for his judgement on my grasp of english grammar. This about a person who was awarded national sholarship on the basis of higher secondary exam by govt of india. This about someone who lives in Uk having passed the english exam conducted by the linguistic assesment board. This is a person who is a fellow of royal college of surgeons.The more this AIRHEAD , sewage mind speaks more he reveals of himself , a disgrace.

[Reply]

Ashish Reply:
August 16th, 2010 at 12:50 pm

your Latin is even funnier than your English; go on, use some more.
Blogreaders et al, indeed!

You’ve lost your argument Ashish, constantly playing the “poor grammar” card makes you looks like a total loser. Since you’re going to be so anal about English Grammar, I’ll point out a childish spelling mistake you have made. When you start a sentence, the first word is in capitals – “Your” not “your”.
What I find more hilarious is your refusal to admit defeat, constantly coming back like a cockroach with one leg.

D

x

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The article is spot on. I don’t particularly know much about Islamic banking, but Capitalism, as a system of economic and social organisation, has failed dismally to secure and meet the pressing economic and social challenges faced by ordinary people. Yes, those who have the skills that the market finds desirable are well rewarded, but those who don’t face severe economic hardship. This can and was offset after the New Deal, which implemented Keynesian economic policies and ensured a social security net was formed, so that those whom the market deemed expendable were not left on the scrapheap to rot. There was generous unemployment benefits, pensions, welfare provisions which are the mark of a civilized society. However, since the Thatcher regime (which Shan seems to like) in the UK and the Reagan regime in the US, these safety nets were removed, and that led to severe economic inequalities. And this is the number one fault of free market laissez faire capitalism. It leads to severe economic inequalities, and coupled with globalisation and free trade policies (which many countries like India have been bullied into following by the USA), this makes many workers economically insecure, as they know their company may not be able to compete internationally, and they will lose their jobs because of it. Is this the sort of society we want? It is fine for the corporate elites, who are in a comfortable position, but for lower and middle income workers, it is a very stressful time. Moreover, with globalisation, there is a race to the bottom, as countries attempt to attract foreign investment by lowering corporation tax; however, because domestic companies are more insecure in their position and people are more likely to lose their jobs, unemployment in some sectors will inevitably increase. However, with lower rates of tax, how can a government attempt to protect these insecure workers with unemployment benefits? This is why this situation is known as the “race to the bottom”.

And I stress again, that this is the main reason why free market capitalism fails. It inevitably leads to inequality, and a recent book has been released in the UK that shows the damage economic inequality causes.

http://www.amazon.co.uk/Spirit-Level-Societies-Almost-Always/dp/1846140390

And Shan and others, your idea that the economic reforms of the 90s in India, and the idea that simply “freeing” up the market, removing subsidies and encouraging foreign investment will lead to growth and extremely simplistic. Pranab Bardhan, a top US economist, has exposed the flaws in the conventional that stated that globalisation and economic reforms lead to the growth in India and China. Here’s a blog post by Soutik Biswas describing the ideas.

http://www.bbc.co.uk/blogs/thereporters/soutikbiswas/2010/07/globalisation_and_indiachina_myths.html

Ultimately, communism doesn’t work because it appears to lead to political totalitarianism and human rights erosion. What India and the rest of the world needs is a new democratic socialism, with nationalisation of industry (which contrary to popular belief won’t lead to inefficiency), and eventually the formation of workers’ cooperatives, free from the market and the state. That is what true socialists, not authoritarian Stalinists want eventually. The state will eventually disappear, and we will be left with an economically just, ecologically sustainable society able to provide for all, free from discrimination and prejudice.

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Ashish Reply:
August 17th, 2010 at 1:11 am

@Lenin,
good in theory. But, wherever the state has withered away, it has been complete anarchy with no redeeming feature.
If you were an entrepreneur, you will know, the first sale is very important. Show us one good example of a democratic socialist utopia.

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And those of you who disapprove of big government, reflect on the rise in economic inequality in the UK during the Thatcherite monetarist experiment from 1979-1992. After the post war, the Keynesian consensus was followed by both major parties in the UK. The Gini coefficient, which is a precise way of quantifying economic inequality, was 0.30. A higher value indicates greater inequality, with 1 suggesting total inequality, which 1 person earning the whole national income. During the 1980s, the coefficient increased steadily due to Thatcher’s extreme market fundamentalist policies, rising to 0.38. This exemplifies the moral and economic injustice of free market policies. The reason India has been shielded from the global financial recession is because of the tight regulation of our financial industries, and our understandable suspicion of foreign financial companies who implore India’s government to lower controls on foreign investment in finance. Remember the Asian currency crisis, caused because of a lack of capital controls leading to speculative attacks on the currency.

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If people want some information about the evolution and history of economic thought, read J.K Galbraith’s The Age of Uncertainty and Robert Heilbroner’s Worldy Philosophers.

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Ashish Reply:
August 16th, 2010 at 10:43 pm

@Lenin,
I have the Age of Uncertainty; will check out the Worldly Philosophers. Thanks for the suggestion.

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@Lenin, i dont know what planet you are speaking from. To argue about the merits of indian state enterprises is like bin laden talking about the virtues of non violence.I will give you a fact not an example about indian banks..During the indira gandhi era, there was a policy decision to divert all the resources to the poor farmers, and banks(they were all govt banks at that time) were told to give loan to farmers in preference to industries. now marwaris are not the one to take things lying down , rather they made a virtue out of this socialist project. The tobacco farmers in andhra pradesh were all coerced to give a thumb print(they are all illiterate)on a peace pf paper applying for loans to the bank. Another thumb print was coerced on to a paper transferring this loan to the calcutta marwari businessman as a loan to him from the farmer.. This was done with the collusion between the bank manager, politician at delhi and ofcourse the marwari.This was done on a grand scale involving thirty thousand farmers. so the money we are talking about is in millions or crores depending on Lenin’s true identity.One of my relative who worked for this marwari asFinance Director, is a first hand witness to this charade. WELCOME TO COMMAND ECONOMY. also India is in such a primary stage of devolopement all these western economic practices like Quantitative easing , monetarism really is not of paramount importance. just take wheat output , in uk it is 8.2 metric tonnes per acre, in india it is 2.8. need I say more. I am not a fan of margaret thatcher , my love for that most unenglish, grocer’s daughter from lincoln is same as twin tower insurers love for bin laden. As regards britain’s plight , in order to spare the trouble of scrolling upward here is a cut and paste.
shan says:
August 14, 2010 at 1:43 am
This is from the tabloid THE SUN, AUG 12, page 13, owned by RUPERT MURDOCH , to the blogreaders who were unduly concerned at britain’s plight , one describing it as “how the mighty have fallen”.
“Mum of two Jaimie and her boyfriend Chris live off benefits they are entitled to claim.
The couple who live in a two bedroom council flat with son Baileytwo and baby daughter Elisa, receive £4200housing benefit, £8866 joobseekers allowance,£3900child benefit and tax credit £1200 grant to kitout flat £300 B&Q vouchers to decorate the rooms. Jamie 20 said we live very nicely on benefits and we wouldn’t want to change our lifestyle.
They have a 32″plasma TV , a computer, an Xbox and a panasonic sound system.
The colony of bangladesh is doing all right , probably slightly better than the rotting grain country

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shan Reply:
August 17th, 2010 at 1:25 am

@Lenin, oh I forgot to mention the real climax to that story(fact). Now the poor farmers cannot payback the loan , and the whole purpose of this charade is that the no one should bother the marwaris. So what happens. Govt arranges a loan waiver scheme on a grand scheme calloed LOAN MELA. It looks so socialistic anti market , compassion and good for publicity and by extension good return in terms of votes. Its time to change your name from Lenin to reality bites.

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@Shan, the example you describe can be described as cronyism and/or corruption. Free marketeers tend to assign particular failings with respect to a certain country’s economic policy with an inherent failing of the system itself. This is a fallacy, in my opinion. In fact, the problems of the Soviet Union and it’s eventual downfall is more to do with poor leaders rather than any intrinsic fault in the socialist economic system of organisation. In any case, I don’t think that the USSR actually satisfied all the characteristics of socialism, and many scholars describe it more as state capitalism. It was a perverse system in a lot of ways, and it’s failing was not altogether unsurprising.

And remember this, the economist Paul Samuelson, in his best selling textbook “Principles of Economics” specifically said that, contrary to popular opinion, the example of the Soviet Union shows that a socialist economic system can’t just survive but even flourish. Now, obviously the eventual failing of the USSR made him look foolish, but it shows how successful the USSR was with respect to delivering growth, and they actually made the attempt to distribute the proceeds from growth in an equitable manner.

Proper democratic socialism can work, especially with the new developments in computer science and computer engineering. With the extremely powerful processors that are now available, combined with the supercomputers that are able to make an incredible amount of computations per second, it is possible for a state to conduct economic planning on a country wide scale. One of the problems with the USSR was the delay in updating the information with respect to demand for products and in terms of production figures. This delay led to inaccurate information being inputted, explains the regular shortages or surpluses that were common in the USSR.

The computer hardware and software available at the time was primitive, and wasn’t appropriate or powerful enough to make a success out of economic planning. Sometimes, the planners may update that there has been an increase in demand for a product, but by the time the planners informed the industrial managers, consumer tastes changed, and therefore there was a surplus. Now, changes in consumer decisions can be inputted into the economic planning database on the supercomputer in very quick time, and so production marries up with demand more efficiently.

Vassily Leontief, an economist who won the Nobel Prize for the development of Input-Output analysis, may unwittingly be the man who makes the dream of democratic socialism come true. With his input-output analysis, you can see how different industries are related to each other, and how the change in demand for a certain product or capital equipment affects all the other information. By using advanced computer software installed on a supercomputer, his technique can be used to plan the economy in a way that ensures all demands are met, and efficiency can be maintained. Remember Leontief conducted his studies using primitive computer hardware at Harvard at the time, so if it was possible to conduct the analysis then, think of the possibilities these days.

However, I stress that, although the economic decisions can be dealt with, more important is that the new democratic socialism ensures civil liberties are maintained, as is freedom of speech, freedom of religion and that the government realises his duty to the environment and to human rights. These were big failings in the USSR, and the new democratic socialism must avoid the failure of the USSR to not uphold these ideals. The fact that the system will be democratic means that capitalist voices will be heard, but after a socialist system that can ensure economic justice, equity, efficiency, social cohesion, community spirit, ecological sustainability, who would want a return to the social darwinist system of capitalist economics?

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shan Reply:
August 17th, 2010 at 6:01 pm

@Lenin, the transformation of russia from a feudal country full of serfs, to a industrial giant in a span of ?fifty years?1910-1960, is one of the most spectacular feat , which in my opinion far surpasses what the chinese have acheived. There are lot of lessons from this. Centralised planning is neccasary and can work if applied properly and focussed not all and sundry. Also it shows why liberal society will triumph. Remember the jews were kept confined to Pales and denied any semblance of citizenship. but when the jewish emancipation took place , it worked wonders for Russia, Eisenstein, Trotsky, the physicist kapitza all jewish. Perhaps the great composers and artists and novelists. Was Faberge jewish. But the fact remains it did go down and communism folded. There will be historians writing about it for centuries to come. But I remember Gorbachov, addressing party members in russsia , how can we support a system where a electrician will not attend a call to fix the electrical fault unless he is paid extra . This goes back to what I said earlier in this blog , People work best when they work for themselves, also without competition , there is no incentive to improve., thus become stagnant and sclerotic. but there are situations where you cannot have competition , say armed forces , or railways , so they will need to be managed in a different way.

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DUDE LIVES…………

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u missed pyaar ka punchnama and don 2 which were awesome as well!!!!

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very interesting view, I was drawn here by the sentence – unhappiness is the positive sign of aspiring and the progressive. My trick is keeping the core of my soul “happy”. That is difficult. For me it needs humility, education, knowledge, faith and all that i can cling to keep myself confident and build that relationship between me and the outer world. I start my day with the big picture and take each event as it unfolds, not too overwhelmed by success neither too belittled by any failure but keeping my cool. It may sound like a successful formula but I have got my own flaws and that makes my life a struggle to achieve that godliness. May the force be with you Mr. Wanchuk. Thanks for sharing your fine analysis of “Happiness”

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