A new reign in the world?

I have been on the road for a couple of months. I asked a professor who taught financial analysis at Darden School of Business, University of Virginia a question that bugged me for the past 4 months. “Should we start diversifying from USD? And if yes, what would be the safest bet?” I was not very surprised by the answer I got. “I Don’t Know!” A true American answer I thought. The professor being an American would never want people diversifying from USD. I can understand the implications on her job.

I have debated much with a few professors over the declining value of US Dollar. There is not one who does not agree with it. Everyone agrees but the conflict of thought comes when it comes to “time”. Should we depend on President Obama to be the savior of our economic crises? This question is difficult to answer.

The great Debt Crises of our times:

I recollect a few cool stories I read about ancient Greek. The Great battle between Achilles and Hector somehow always stayed in my mind. The great Greek Gods favored the fall of Troy.

I somehow see similar events today. I would not want to debate over theology and concept of God but the fact that there is a certain great fall of Greece in the near future. Greece has amassed a mammoth $550 billion debt on it shoulders, which is close to a whooping 160% of its GDP.

The EU sits still. It observes all the austerity moves by Greece promising them help if needed. I do not blame them to show such indifference to a fellow EU member. Greece lead itself to this situation and should come out of it on its own. It should learn the lesson the hard way. However there is one small flaw to this theory. What if Greece sinks and with it sinks the EU pride and the EU economy? We already hear rumors of the PIIGS and their debt.

USA is not far behind. Its total debt of $12 trillion has been a matter of high concern not only in USA but all across the world.

Here are a chart and a graph showing the PIIGS' and the United States' indebtedness -- more specifically, their public debt and 2009 deficit relative to GDP.

Just glancing at the chart, and remembering that the PIIGS are among the weakest economies in Europe, it seems that the United States isn't in great shape either. It's just on par with Spain, whose economy is struggling.

Note: The debt mentioned here is the national debt.

Are we going to witness the shift in the economic power of our times?

Now, we need to understand the shift will not be overnight were the markets come crashing down in USA and the Chinese celebrate? Imagine little Chinese jumping and dancing seeing the USD fall and Chinese Renminbi Yuan as the next global currency.

The recent US – China battles clearly shows a rise in Chinese power. China stands right in front of USA defying its trade policies and the US can’t do anything about it. Can they?

Round 1: The Copenhagen Summit where China fought hard with India by its side to have no cap emissions and the result was China won round 1.

Round 2: Imposing restrictions on Google over the search content. Google threatens to walk out of China if they prick further. China says “Who cares! You wanna stay here, abide by the Chinese rules otherwise F*** off!” China wins round 2.

Round 3: China starts diversifying their investments from USD to Gold. They know USD is not going to profit them in the long run. China has steadily (and surreptitiously) increased its gold bullion reserves from 600 tonnes in 2003 to 1,054 tonnes today. China makes the rules for round 3 and wins.

I say Chinese are one heck of smart people. Thankfully India brought 200metric tones of Gold Bullion from the IMF for $6.7 Billion. Learn from your neighbor.

Round 4: USA sells arms to Tibet, dead against the policies of China. USA says we still have the arsenal. President Obama also invites Mr. Dalai Lama to White house. I wonder how this helps USA but who cares! Ok! Finally USA manages to clear a round.

Round 5: China keeps its currency rate stable against foul cries by USA. 130 democrats and republicans join to vote against Chinese keeping their currency devalued. Finally republicans and democrats come together so what if it’s against China? (Pun intended) China has made it clear that it will not appreciate its currency due to foreign pressure.

(For my friends who do not understand these implications: By undervaluing their currency China is able to get price benefits in the international markets. Their goods are priced low because their currency is low and hence they are able to sell more. This hampers business in USA. The companies in USA cannot afford to price their products as low as China and China eats away the market.)

The most crucial factor in this battle is there is no referee. USA has repeatedly cried foul and demanded a red card be given to China. China still plays.

Do we see the global power being divided?

No doubt the Chinese have stepped up their engine but how long will they last this battle is crucial question. Their huge economy certainly is their major driving force, but they have a lot of money in USD. They would not want USD to fall off. They have a lot of money coming from US markets, they would not want to cut these trade relations and suffer. US will suffer as well, but it can always come back with its rich economy. China on the other hand has taken a good start but needs to be careful not to upset the elder brother of the world less it comes under scrutiny.

The battle is still ON!

P.S. Charts and data courtesy Internet! J

Does someone want USD?

“America if measured by the lofty ideals of its birth is a failed experiment”. I laughed my ass off as I read this economic blog on the oracle. I sit here waiting for my flight to be announced.

I wonder what caused USA to be in such dire consequences. Why did such a huge economy land itself in such a predicament that even sunlight feels planets away? I was excited as almost everybody seeing Mr. Obama as the next president of USA Dec 2008. I had great trust in this athletic looking guy, (black guy), who spoke about wisdom, peace and economy. Seldom are people with such oratory skills gifted to mankind. Adolf Hitler was one among them.

Obama not only failed to deliver his peace promises but also failed miserably in straightening the corporate policies for earth’s doom. “War at Afghanistan” after his Nobel peace prize... Wow. ! . Way to go buddy.. That’s like kicking in the gutt of the judges and saying, “SURPRISEEE… “

USA is facing huge debt crises. Who is going to repay 12 trillion USD? (For those who wonder how much 12 trillion USD would amount? Imagine all the money in the Indian economy. Imports, exports, domestic trade etc.. This would sum up to 1.4trillion USD. Which means USA debt is almost 9 times the entire money in the entire Indian economy).

Now Uncle Sam can’t possibly print more dollars. It will only land itself deeper in the mud. Let me make it, a little more clearly as to what happens if Uncle Sam prints more Dollars to return their debt. By printing more dollars US would reduce the value of dollar. (The more the commodity the less the demand and thus less the value. basic economics with a lot of world trade.).. Damn! The Chinese are going to be bloody pissed with 790 billion USD invested in USA.

So who takes the huge burden? The common man! This debt would also be transferred to other commoners across the globe. China is not going to invest in Dollars nor will the Indians. This potentially leaves Brazil and South Africa who are shunning themselves from the dollar. I do not want to scare the ignorant people with such blogs, but my only intention is to spread awareness. Prepare yourself for future. Avoid investing in USD. The best solution is to perhaps diversify your business to other countries to lessen the impact. No one can avert the coming disaster unless very strong social changes are brought about by the white house, which I really doubt seeing Obama dance to the tune of the corporate world.

As I ponder over the US debt I realize that all these years USA has lived life king size over others expenses. Their greed for money and power blinded them from this huge disaster. I believe my flight has been announced. I would want to make this clear that I am not so much of an anti American but it’s just that the recent policies have really been sick down to the core.

Will come up with better reports the next time.. Chow..

Going Green?

“Environmentalism” is a religion practiced by many ignorant mortals across the globe. The best part of this religion is, all u need to gain followers is to hold a high profile cosmetic summit like those at Copenhagen. Virtually every social networking website proposes going green. Words like “Global Warming”, “Melting of Glaciers”, and “High Co₂ emissions” draw more attention than “poverty”, “growth”, and “literacy”. Almost half the statuses on Facebook including mine went green during the summit. Beautifully fashioning the “Aristotelian logical fallacy of the argumentum ad ignorantiam – the fallacy of ignorance”

Unfortunately much of the climate debate today is fuelled by not what is known by earth’s climatic system but by what some people believe to be true. I remember a story I heard during my years of adolescence at nursery of a hen propagating the falling sky and the end of the world.

Dr. John Christy, director of the Earth System Science center and professor of atmospheric science at The University of Alabama quotes “My research and that of others, suggests that we do not know as much about the climate as the public has been led to believe. There are claims, for instance, that all types of weather-related problems (droughts and floods, violent storms and so forth) are becoming more frequent and violent. Fortunately, scientists keep records of such things and a calm, systematic study of the climate history shows that while there are natural cycles there is no long-term increase in these events. The scientific numbers, for instance, show a slight decline in the number of tornadoes in the US since 1950.”

“The Earth currently is experiencing a warming trend, but there is scientific evidence that human activities have little to do with it. Instead, the warming seems to be part of a 1,500-year cycle (plus or minus 500 years) of moderate temperature swings.” Says Dr. Singer was Professor Emeritus of environmental science at the University of Virginia, specializing in planetary science and global warming who is now the Director of the Science and Environmental and Policy Project.

We are, in fact, in one of the COOLEST periods in Earth's history. Earth was warmer throughout the past 500million years than it is now. It was warmer at the end of the ice age, during Bronze Age, warmer in Middle Ages, and Roman warm period. A mere 100,000 years ago (a brief period of time, geologically speaking), all of Canada and much of the U.S. was covered by a continental glacier. During recurring periods tens and hundreds of millions of years ago, the Earth was warmer and sea level was higher. Many of the topmost layers of bedrock in North America were deposited in ancient oceans, when sea level was much higher than it is now.

The question is "Do we go green?". The answer is “Sit back, relax and continue with the development”. India has started industrializing since 20 years. We have possibly done nothing to affect Mother Nature. On the other hand USA started industrialization a couple of centuries ago and so did UK. India should not fall for the sudden social impedes given as the only solution for survival by these bigger polluters.

According to Surya P Sethi, principal advisor (Energy) Planning Commission, 700 million Indian still do not have access to modern and commercial sources of energy and 220,000 villages are yet to be electrified. 35% of our population earns less than US $ 1/day and 80% of the population earns less than US $ 2/day. (A UNDP estimate)

Let us compare the energy consumption per capita per annum of India with developed and developing countries.

Country	Energy consumption per capita per annum (kgoe/a)
Canada	8300.7
USA	7794.8
OECD	4700
Russia	4423.2
South Korea	4346.5
South Africa	2596.9
China	1138.3
Brazil	1067.6
India	512.4

South Africa is close to European levels. It will not take China and Brazil long to join them by the current growth. Where does that leave India? India’s likely emissions by 2020 would still be 30% of current European levels.

By going green to save the world from an illusionary catastrophe India would need to cut its emission levels. Before we sign for this global movie of saving the world produced and directed in the west we need to question ourselves that by doing so are we justifying our democracy? Are we justifying 70% of the rural population who elects our government? Does nature belong only to the stratospheric society of the world? Is pure drinking water a birth right only of the rich developed nations?

India has to grow leaps and bounds to give all its population a decent opportunity to earn bread and butter, an opportunity to have equal access to pure drinking water, an opportunity to study the best technologies of the world.

To go behind a pompous hen shouting of the falling sky is being an idiot in elephantine quantities. India has all the rights to seclude itself from any binding treaties. I do not ask to increase pollution levels that are embedded in every major city of India but also there is no need to cut down projects which leads to growth.

What is the cost to Adopt futuristic technologies before it gets redundant? Green technologies like Turbine-bearing balloons, Algae fuel, Wave farms, nuclear fusion, geothermal systems, and solar satellites are futuristic tools for growth. But to adopt these efficiently we need to develop ourselves to a level close to that of the first world countries. Do we have enough funding to lift its population from poverty, illiteracy, give them proper water and simultaneously adopt these green technologies? The answer is “no”. I would always prefer spending for growth over hogwash climate prophecies.

So let us stop our obsession over global warming, climate change prophecies and instead concentrate over other important issues which require attention and quick.