Tipping Point for US$?

There is an interesting video discussion with the investment expert, Dr Martin D Weiss at "The Great Dollar Panic of 2007-2008" (Click to watch)

Some excerpts from the transcript:

"this credit crisis is many times larger.... Back in 1998, Greenspan was dealing with a small tumor in our financial system that could quickly be isolated and contained. Today, his successor, Fed Chairman Ben Bernanke, is dealing with a cancer that has already spread throughout the financial system...

...Back in 1998, Greenspan was dealing with a crisis that was isolated and easily contained. Now, in 2007, Bernanke is dealing with a crisis that is already spreading out of control to 20,000 cities and towns across America.

In 1998, the epicenter of the crisis was small Asian markets. This time, the epicenter is right here in the United States, with financial markets that are at least a hundred times larger.

In 1998, Greenspan was dealing with just one major hedge fund in trouble. He was able to sit down with the big banks. They were able to hash out a bailout. They were able to nip the crisis in the bud.

Now, Bernanke is trying to cope with at least a thousand hedge funds in this sector. If even just one-tenth of them are entangled in this mess — and there's every indication they are — that alone is 100 times more than 1998. Plus, this time, we already have 140 mortgage companies in trouble, bankrupt or mortally wounded.

Greenspan's 1998 crisis was a ripple. Bernanke's 2007 crisis is a tidal wave....

...It's already striking. Bernanke is facing a tidal wave of foreclosures in the $824 billion subprime mortgage market... the $722 billion Alt-A mortgage market... the $517 billion jumbo mortgage market... and, ultimately, in the entire $13.5 trillion mortgage market.... Not only the $13.5 trillion mortgage market, but also the $2.2 trillion U.S commercial paper market... the $2.4 trillion consumer credit market... the $10.1 trillion corporate bond market … and, biggest of all, the $144.8 trillion in derivatives held by U.S. banks alone.

So apparently, this may be, for all you know, the history in making... the concluding part of a trend that was quite apparent in the long-cycle over last many decades:

A Slum vs. The International Hotel Complex

When Yamuna Pushta - one of the largest and oldest slum in East Delhi - was demolished a couple of years back, and made way for an eight-lane highway, the Supreme Court ruled:

"Poverty could not be an excuse for living in slums."

The court was unimpressed that many of those evicted had been living on this "encroached" land for more than a generation, that they possessed ration cards issued on their addresses, and that they were paying a license fee of Rs. 7000/-p.a. to MCD (Municipal Corporation of Delhi) for possession of their 12.5 sq.m. plot. The court went on to elaborate:

"Desperation does not mean they will do something illegal by encroaching public land... In India, we have three weather conditions — heat, rain and winter. If we accept your argument, there will never be an appropriate time to demolish illegal structures standing on public land... Nobody forced you to come to Delhi. Is there a right to live in Delhi only? Stay where you can. If encroachments on public land are to be allowed, there will be anarchy."

Last year,a similar story got repeated. The only difference this time was that the land was for the "International Hotel Complex" project in South Delhi, whose project cost ran into hundreds of crore of rupee, and would host 5-star hotels, shopping malls, recreational facilties, residential and institutional area, etc... and this time the "defaulters" to this 92 hectare ‘constraint area’ (nice term!!) included Maruti Udyog Limited, Ambience Developers Private Limited, Regency Park Management Services Private Limited, Beverly Park Maintenance Services Private Limited and Jasmine Project Private Limited.

While the court acknowledged that:

"DDA's advertisement (Hindu Dec 12, 2003 ) states: "purchaser would be required to obtain necessary clearance for the project from the EPCA and/or DPCC before submitting the plans for sanction to the Building Dept of DDA". There is no confirmation that this requirement was fulfilled by the allottees."

...it went on to conclude that:

"...Had such parties inkling of an idea that such clearances were not obtained by DDA, they would not have invested such huge sums of money. The stand that wherever constructions have been made unauthorisedly demolition is the only option cannot apply to the present cases, more particularly, when they unlike, where some private individuals or private limited companies or firms being allotted to have made contraventions, are corporate bodies and institutions and the question of their having indulged in any malpractices in getting the approval or sanction does not arise..."

In case, one missed the last line in the quote: when they... are corporate bodies and institutions and the question of their having indulged in any malpractices in getting the approval or sanction does not arise!!!

Just to complete the story, the SC did ask the Ministry of Environment and Forestry to take remedial measures and penalise the violators.... And the Environment Ministry subsequently cleared the projects by imposing a penalty of Rs. 1 lakh to each of the developer!!!

...
Some months back, I was bemused - and depressed - looking at this sign board outside a property of a known-to-be benign corporate house:



I guess, it says all about the "aam aadmi" (the common man)... our version of The Unauthorized Person!!!

From "Indian Slum" to "Shining India"

There are many paths from a Slum to the "Shining India". Here are two:

This one is a short and quick... takes less than 2 minutes

India Nude

The other one is a longer route to dignity, more arduous path... yet, one which celebrates the human spirit... love, support, self-confidence...:


Indian Slum Girl Makes it

Surprisingly (again, not-really-surprisingly!), this piece of information came not from the star-struck Indian media, but from Al-Jazeera

[On another note, it is nice to post this 251st post on Alternative Perspective on the eve of its 5th anniversary;0)]

Why IT does not "trickle down"?

Earlier, the criticism/skepticism came from the left-of-center/leftist activists/academicians... then it was the politicians like Manmohan Singh and Mani Shankar Aiyer, who voiced their concern about the uneven social impacts of what goes in the guise of globalisations/free-trade, etc., ... or whatever

and now this comes from one of the central stakeholders of the current zeitgeist, the Executive Director of Morgan Stanley, Chetan Ahya:

"Globalisation and capitalism have been the two key drivers of India’s GDP growth acceleration over the past five years.... The business environment is changing, allowing entrepreneurial spirit to flourish. This trend is reflected in the divergence in corporate profit and wages relative to GDP. Over the past five years, retained corporate operating profits (gross of capital charges) to GDP have shot up to an estimated 9.1% in F2007 from 3.7% in F2002, while wages to GDP have declined to an estimated 28.7% from 31%.

These two trends (globalisation and capitalism) have helped accelerate India’s GDP growth to an average of 7.6% over the past five years from 5.7% in the 1990s... The worrying aspect of the trend in globalisation and capitalism is the rising social challenges on account of increasing inequality. We believe the rise in inequality, when absolute poverty levels are still very high, poses a major political challenge.

Although recent data are not available, the World Bank gauges that income/consumption inequality (as measured by the Gini Index) increased to 30.5% in 2004 from 27.7% in 1994 (the point from which growth started accelerating) in rural areas and to 37.6% in 2004 from 33.3% in 1994 in urban areas. We believe that this is likely to have increased further over the past three years.

The inequality gap in wealth is even starker... our analysis indicates that India has witnessed an increase in wealth of over $1 trillion (over 100% of GDP) in the past four years — and that the bulk of this gain has been concentrated within a very small segment of the population."

so why does this wealth not trickle down?

Chetan Ahya offers 3 domains of wealth creation ("three key sources of wealth accretion have been the equity market, property and gold") and how/why the nature of wealth creation remains confined to the upper-end of the society:

1. Equity Market:
"Stock market capitalisation has increased from $120 billion as of March 2003 to $1 trillion as of May 2007. Adjusted for foreign and government ownership, the implied overall gain for domestic shareholders is $570 billion. As per the Securities Exchange Board of India, only 4-7% of the population own equities. Even within this group, the ownership is likely to be highly concentrated as almost $350 billion of the increase is accounted for by promoters (controlling stakeholders)."

2. Property:
"...household wealth creation through residential property will have been at least $300-500 billion. However, only an estimated 47% of the population own a ‘pucca’ house (a house wherein walls and roofs are made of stable construction materials). Even within this segment of ‘pucca’ housing, the higher-income classes own a large proportion of the area in terms of square feet."

3. Gold:
"On our estimates, the market value of India’s stock of gold has increased by approximately $200 billion since March 2003 to $370 billion currently. The gains under this asset class, though unequal, should have been more widely distributed than those related to equity and property. According to a survey of household assets conducted by the National Sample Survey Organisation, as of June 2002, the top 34% of households (in terms of wealth) held 71% of the value of consumer durables (including gold and jewellery)."

To me, this is actually somewhat simplistic analysis... but what this article does bring home is that somewhere in that sphere, there are - thankfuly - people who are also becoming skeptical about this whole issue of:

"why it does not trickle down?"

The Man Who Moved the Mountain

I had once written about him...

A tribute to this man...he died last week.


Outlook Magazine wrote wrote about him:

"Every morning, for 22 long years, a frail, diminutive man, barefoot and clad in a loin cloth, would trudge two kilometres to a hillock of solid rock and chip away at it with a hammer and chisel. Bemused onlookers thought he had lost his mind, and he was an object of great fun for village urchins. But the women of the village, young and old, admired him, for his was a labour of love."

It took him 22 years - from 1962 to 1984 - to chisel through a massive 360 feet long, 25 feet high and 30 feet wide sheer rock, and to carve out the shortest possible route between his village Gelaur, and the nearest town, Wazirganj.

This was his memorial to his wife, who had died on her way to the Wazirganj hospital, because the road around the rock was 19km long, and took long time to traverse... a memorial

"...that won't ever find a place in hallowed global must-visit lists, but can well be passed down from this generation to the next as a monument of love. A poor man's Taj, literally. Not for its aesthetics, but for the way it symbolises the human spirit's capacity to endure, its indomitability..."

Dasrath Manjhi was the man who moved the mountain!

Floods in India??... Really??

It is, sadly - but not surprisingly - true!!

If you go to Google News and search "floods India", of the more than 5,000 links, only 4-5 are from Indian media. The figure is only indicative of the focus... even search on the websites of Indian MSM, the figures are telling...

Apparently, the media - and people - around the world are more aware and concerned about the Indian flood situation - which according to UN has affected close to 35-40mn people, has damaged or destroyed 1.28mn homes across 260mn hectares in more than 200 flood-affected districts, and is one of the worst flood disaster in recent history. UP, Bihar, Assam and Orissa are the worst impacted accounting for almost 24mn affected people (including 3mn children).

An article in New York Times reports:

"The monsoon rains in India are a democratic force. When the skies open, the water pours on the homes of rich and poor alike. But after the deluge, the poor always suffer most.

....But for survivors, the real endurance test is just beginning. With crops destroyed and fields bloated with water, there will be no agricultural work for millions of landless laborers here for months, leaving them to rely on the sporadic support of aid agencies and government relief organizations.

...there are gradations within this poverty, and subclasses of richer and poorer.

The flood waters began receding in mid-August, replaced by a stinking, stagnant sludge, but villages remained cut off, and many of those houses that have re-emerged are uninhabitable. Hundreds of thousands of people are sheltered beneath bed sheets along raised highways, just inches away from the traffic, which grinds past, splattering them with mud. Life cannot yet begin again for most.... those with the least to lose had lost the most...."

And the coverage from Indian media?...
...the article goes on to say:

"At a national level, the plight of these flood victims arouses little compassion. In early August, when the United Nations declared the floods the worst in living memory, the miserable condition of the 31 million people affected in India was covered internationally but was neither front-page news in New Delhi newspapers nor featured on national news channels. Instead, bulletins were dominated by the sentencing of a Bollywood star to jail.

Such apathy is not unusual. Newspapers in India often neglect the suffering of the rural poor, more preoccupied with the triumphs of the emerging India than with the familiar stories of extreme hardship experienced by hundreds of millions of Indians living on the land."

The statement "At a national level, the plight of these flood victims arouses little compassion" is apparently true... and not just for the MSM.

In Prime Minister Manmohan Singh's 15th August Independence Day speech, this was the only mention about "floods":

"I urge states to look upon water as a national asset and work to resolve inter-state disputes over water sharing with an attitude of give and take. It is only through a cooperative approach that lasting solutions can be found to recurring problems, like floods and drought. We should work together to prevent the destruction caused by the ravages of nature, like floods."

Needless to say that all the images in this post are not from India media!

The World According to "Indian Ants"...

Since this parable (it can be titled: "World According to Ants") has been doing rounds on the net (as chainmails, blog postings, etc.... and one of the avid - and disagreeing - reader of this blog, added this story to his comments on the last post :) - I thought it worth blogging about what this story (propaganda!!?) actually means - (at least to me!)...

but first the story/parable
(if you have already read it, skip it and go to the end of the post):

==========

OLD VERSION:
The ant works hard in the withering heat all long building his house and laying up supplies for the winter. The grasshopper thinks the ant is a fool and laughs & dances & plays the summer away. Come winter, the ant is warm and well fed. The grasshopper has no food or shelter so he dies out in the cold.

MODERN VERSION:
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks the ant's a fool and laughs & dances & plays the summer away. Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others are cold and starving.

NDTV, BBC, CNN show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food.
The World is stunned by the sharp contrast. How can this be that this poor grasshopper is allowed to suffer so? Arundhati Roy stages a demonstration in front of the ant's house. Medha Patkar goes on a fast along with other grasshoppers demanding that grasshoppers be relocated to warmer climates during winter. Amnesty International and Koffi Annan criticize the Indian Government for not upholding the fundamental rights of the grasshopper.

The Internet is flooded with online petitions seeking support to the grasshopper (many promising Heaven and Everlasting Peace for prompt support as against the wrath of God for non-compliance). Opposition MP's stage a walkout. Left parties call for "Bharat Bandh" in West Bengal and Kerala demanding a Judicial Enquiry. CPM in Kerala immediately passes a law preventing Ants from working hard in the heat so as to bring about equality of poverty among ants and grasshoppers. Lalu Prasad allocates one free coach to Grasshoppers on all Indian Railway Trains, aptly named as the 'Grasshopper Rath'.

Finally, the Judicial Committee drafts the "Prevention of Terrorism Against Grasshoppers Act [POTAGA]", with effect from the beginning of the winter. Arjun Singh makes Special Reservation for Grass Hopper in educational Institutions & in Govt offices.

The ant is fined for failing to comply with POTAGA and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government and handed over to the grasshopper in a ceremony covered by NDTV.

Arundhati Roy calls it "a triumph of justice". Lalu calls it 'Socialistic Justice'. CPM calls it the 'revolutionary resurgence of the downtrodden' Koffi Annan invites the grasshopper to address the UN General Assembly.

Many years later... The ant has since migrated to the US and set up a multi billion dollar company in Silicon Valley. 100s of grasshoppers still die of starvation despite reservation somewhere in India...

As a result losing lot of hard working ants and feeding the grasshoppers, India is still a developing country.....

==========

This modern urban-India parable says 2 things:

Ants are quite oblivious - and uneducated - about the contribution of the Grasshoppers to the economic ecology. For instance, apparently they have no idea that the Grasshoppers who "laugh & dance and play the summer away" actually contribute to - as mentioned in an earlier posting:

- 60% of Net Domestic Product
- 68% of income
- 60% of savings
- 31% of agricultural exports
- 41% of manufactured exports

(and, therefore, contribute just as much to the "number-driven Self-Esteem" of the "globally emergent"/"shining" Indian Ants :)

... and it does not mention how the Ants "lay up supplies for the winters"!!...

In nature/ real world, this is how it happens !!!

Presidents "Robert Bush" vs "George W Mugabe"

BBC (Aug 4, 2007) reports:
Mugabe Approves Surveillance Law

"Zimbabwe's President Robert Mugabe has approved a new law allowing the security services to intercept postal, internet and telephone communications. The law also establishes a state-run communications monitoring centre.

Officials say the new law is meant to provide security and prevent crime but critics say it is aimed at stifling opposition to Mr Mugabe.... Both houses of parliament approved the new law in June."

Two days later, New York Times (Aug 6, 2007) echoed: Bush Signs Law to Widen Reach for Wiretapping

"President Bush signed into law on Sunday legislation that broadly expanded the government’s authority to eavesdrop on the international telephone calls and e-mail messages of American citizens without warrants.

...the new law for the first time provided a legal framework for much of the surveillance without warrants that was being conducted in secret by the National Security Agency and outside the Foreign Intelligence Surveillance Act, the 1978 law that is supposed to regulate the way the government can listen to the private communications of American citizens."

To many laymen like me, it will remain a mystery why these two gentlemen don't see eye-to-eye with each other! (*_^)

From "Mass Media" to "Mass Reality"

The title of this post is plagiarised from an article by P Sainath, who, earlier this week, became another Indian to win Ramon Magsaysay Award. The award to this developmental jounalist was given for "passionate commitment as a journalist to restore the rural poor to India's consciousness, moving the nation to action."

...for reminding his audience that, in their ignorance, they may actually be becoming "Nero's Guests"

Here are some quotes from his various writings, which give a glimpse into the mind that made this transition from "mass media" to "mass reality"

• "By official estimates, over one lakh farmers have taken their lives in the last 10 years. Not a single person has been punished for it. There have been lots of relief packages, but more packaging than relief. What sort of human beings and reporters would we be to stay silent, throw in the towel?"
  
  
• "As for the media, there is a great and urgent need for introspection. The failure of journalism was far more predictable than the poll results. For years now, the media have stopped talking to ordinary people. How on earth can they tell their readers and viewers what is going on? There are 400-plus journalists to cover Lakme India Fashion Week. Almost none to cover the agricultural crisis in any informed way. The labour and agriculture beats in newspapers are almost extinct. The media have decided that 70 per cent of the population does not make news. The electorate has decided otherwise."
  
  
• "Embedded journalism is a state of the mind. You don’t have to be travelling with an army to be an embedded journalist. Between 1965 and 1975, there were 5,000 American journalists in Saigon, and they still didn’t get the story right. Not one of these unembedded guys managed to tell the true story of the Gulf of Tonkin Incident for about a decade. So ‘embeddedness’ is a state of mind, you can sit right next to your PC in your office in Oklahoma or wherever and be an embedded journalist.... that it is possible to have the world’s largest media and the world’s least informed public.
  
  
• "In war, the hypocrisy of media sometimes stands naked, so we are all ready to condemn and criticize. However, the same media does that and much worse during peace as well. It does so when it covers the WTO, when it covers the disputes over economics, when it covers markets and market fundamentalism and neoliberal ideologies, when it covers so-called “success stories."
  
  
• "...however much I might support... alternative media experiments, I am not willing to give up my space in the mainstream media. I think that has got to be liberated from the embedded hierarchies of neocolonialism. And to liberate the media from the embedded structures of the global conglomerates, we need public action. We need to assert that public space has to be respected in the private fora, we need to assert that public interest must prevail over private profit, I think we have to recover the public space that the conglomerates have taken over in the media. If you cannot stop the march of monopoly, you will find it very difficult to liberate yourself from embedded propaganda."
  
  
• "...I can't be speaking in the voice of the masses, the people have their own voice. What I can do is talk to peasants and workers and let you know what those conversations are like, and ask if you want to listen. I'm looking at the human condition in this society and telling it the way I see it."
  

P Sainath's Writing on India Together
And if you can get hold of his book "Everybody Loves a Good Drought", don't miss it!

The More You Have, The More You Get...

Even though I don't invest in stocks (not being part of the elite clan of 3-5% Indian population who do), I was/am still awed by the news items about the dividends declared by various companies... And the implied "wealth" they must have created for the "middle-class" investors...

Given this personal context (ignorence?!), I found this report about the dividends paid by Indian companies in the Outlook Business (July 20th '07) quite interesting:

• Between 01-02 and 06-07, the %age of profits that Indian companies paid as dividends dropped down from 12.85% to 10.71%
  
  
• "In the list of 309 companies (of the BSE 500) only 27 paid out more than 30% of profits as dividends. Of these, 11 were the MNCs that have traditionally reptriated high dividends."
  
  
• However, a look at the top dividend payers (in terms of %age of profits distributed) reveals an interesting finding - 15 of the top 20 dividend-payer companies had promoter holding of over 40%...

Here is the data for 2006-07:



One must also note that in India, income from dividends is non-taxable....
And who were the "Hand-Sum Takers" of promoters' dividend during last 5-years?:

Asim Premji (Wipro)
Rs 2,154.38 crores

Shiv Nadar (HCL Group)
Rs 1,569.03 crores

BK Munjal (Hero Group)
Rs 503.25 crores

Rahul Bajaj (Bajaj Group)
Rs 431.79 crores

Anil Aggarwal (Sterlite)
Rs 568.11 crores

Dilip Sanghvi (Sun Pharma)
Rs 253.25 crores

...which reminds me of an old Hindi saying "पैसा पैसे को खीचता है" (money attracts more money) - or in modern paralance, we live in a (self-created) system where "The More You Have, The More You Get"...

Perhaps, that is why, the "trickle-down effect" does not happen...