Monday, November 24, 2008

Bretton Woods and the Birth of "Irrational Exuberance"


“Money, get away.
Get a good job with good pay
and you’re okay.
Money, it’s a gas.
Grab that cash with both hands
and make a stash.
New car, caviar, four star daydream,
Think I’ll buy me a football team.”

Pink Floyd had it on the spot when they wrote one of the songs with probably the most complex time signatures for any modern rock harmony. It’s funny that the essence of this song has captured the crux of the current state of the US economy.

It signifies the “irrational exuberance” of the largest capitalist power in the world economy. From building trillion dollar military weapons to spending billions of dollars on block-busters, they seem to be invincible.

But scratch the surface and you’ll realize the reality: $1 trillion subprime debt. $9 trillion national debt. $2.4 trillion held by private investors. $600 billion held by Japan. $500 billion held by China.

James Fallow sums it up:
“every person in the United States has over the past 10 years or so borrowed about $4,000 from someone in the People’s Republic of China”

They were overconfident, reckless and arrogant.

The US catches a cold and the world sneezes.

Looking closer to home, we can probably make a safe bet on India. But what is currently happening here is also uncertain. We have our Prime Minister and Finance Minister who are both notable economists and yet unable to face the current crisis.

This brings us to the fundamental problems of the world economy.
Keynes in 1941, at Bretton Woods, suggested the forming of an organization that would act as a monitoring and regulating agency for the world economy:
The International Clearing Union.

The idea behind this institution was that the member countries would be able to contribute towards the institution which would then allocate the funds between wealthy and poor nations. At the end of the financial year, all countries would aim to balance their accounts, i.e. countries with deficit would have to make payments and countries with surplus would have to draw out their funds, leaving the countries on an equal footing. Both the excess and shortfall of funds would be charged interest. So the net result was social welfare.

This was vehemently opposed by the US which went on to propose and succeeded in establishing the two most famous organizations in our times: the IMF and the World Bank.

Thus in hindsight Keynes was arguably right. The US now finds itself hiving off the scraps of other nations and heading towards deep recession. With credit friendly citizens and rash decision making, even Friedrich von Hayek would not approve of.

Keynes was a blatant socialist and thus the US now is falling back towards the foundations of the Keynesian philosophy and reinforcing the theory by the fed bailing out the chapter 11 companies.

Don’t get me wrong; I love the idea of free markets and the proposition that the markets take care of themselves. But the changing global scenario suggests otherwise.

At the risk of sounding cliched, let me end with Pink Floyd again:

“Money, it’s a crime.
Share it fairly but don’t take a slice of my pie.
Money, so they say
Is the root of all evil today.
But if you ask for a raise
it’s no surprise that they’re
Giving none away.”

Tuesday, November 11, 2008

Chaos Theory

The magical figure.
The mythical quantum.
What happened to the mighty?
Into the abyss.
Where have the Knights gone?
Sanity forsaken?
Why suppress the crippled?
Why bleed the feeble?
Why still ponder?
The redeemers?
Where’s the hope?
Where are the dreamers?
Where are the achievers?
How are the tears shed?
How the despondent are engaged?
Where is the collectivism?
Where is discipline?
Where is the reason required?
Faith leaves the faithful.
Hope leaves the hopeful.
Logic abandons the reasoning.
Desperation urges the meek.
Shameless aggression impending.
Weak underpinnings .
Utopia?
Triumphant fabric of insatiability.
Doubt.
Sliver of neglect.
Indifference.
Pain.
Linked destinys.
Naked Capitalism?
Effluent Socialism?
Sagacity dumbfounded?
Brazen desolation?
Linking of fates.
Unfailing truth.
Ashes to ashes dust to dust.
Clean slate.
Redefined passion.
Fundamental Chaos.
Indispensable Order.
Evident Caution.
Inevitable Complacence.


“Greed.”

Sunday, November 2, 2008

Scars Unseen

“Children of god” is such a clich├ęd term that it has lost its significance. It no longer stands for even a sliver of what it used to. It may be one of the few terms in English that can be translated into any other language and still hold its value.

Before you think that I have lost my sanity, let me tell you where this is coming from.

Sat through two lectures of Society and Business Management and conducted one session as a group assignment. The research involved made me realize that what we believe is no longer what we practice. We found some startling facts about the real India and what really goes on inside people’s head.

We conducted numerous interviews. Everyone from “chhotu” to “Mr. Joe Regular”.

The First.
We met a small girl who was a snake charmer. The question –
Why she did what she did?
The reply?
“Because I believe this is what god wants me to do”

This is possible the most outlandish reasoning I have heard in my life. Granted that she was an innocent, but nonetheless this is what people are telling their kids these days.

The Second.
This was a “chai-wala”. Looked no more than 12, but had an electrifying smile and may just make you believe that he’s an actual adult.
Same question.
“Dad told me to.”
Next - What does dad do?
“He’s a farmer in UP.”

This is the perennial vicious cycle. Dad worked as a child. Makes son work as a child. Grandson ends up working as a child. It is just too difficult to find the breaking link.

The Third.
This girl was managing the shop while her mother was at home. She doesn’t have a father. She goes to school in the morning, comes back to work at the shop and studies in the evening. She had wisdom beyond her years – something you wish you could sometime see in some college grads.

So that’s what has been bothering me all week. How can any parent allow their kid to work?
But more importantly, how can we just standby and do nothing?

I have no foundation to even attempt to understand the logic behind this. But I know that it is wrong. Every person of sound mind should be against this. It should be so preposterous that it stimulates us to action.

But that’s where the problem lies. ACTION.

We asked a person buying fire crackers on diwali what he thought about the child labour involved in manufacturing those crackers. He simply replied that it was the government s job to stop the law-breakers, not his. He further explained away his situation by saying that he was restricting himself to a minimum of crackers for this diwali.

Can we actually get any more insensitive?

One of my classmates has taken an initiative to teach poor kids here at the college. We were sceptical and found all the right reasons for him to be wrong. We came up with all excuses such as - “attention grabber”, “marks-oriented”, “will-never-go-through-with-it guy”.

But this is what I realised. I have no right to criticize him. Why?

Because I have not spent five minutes even thinking about those kids and their situation.

Does that mean that I’m an awful person? No. It simply means I don’t give a damn.

We have become so involved in our own lives we find it difficult to empathize with anyone. We distance ourselves from any crisis that doesn’t concern us.

So is that what we are? Self-centred, narcissistic, indifferent, arrogant?

I honestly hope not. Someone please prove me wrong.