RBI to buy 200 tonnes of IMF gold

RBI’s decision to shore up its gold reserves needs to be seen in the context of other central banks across the globe increasing their gold reserves. Among them are the central banks of China, Russia and a few countries in the European Union.

In the last one year, China has increased its gold holdings, by weight, by 75.69%, Russia by 18.78%, the Philippines by 18.50% and Mexico by 108.91%.

Compared with this, India’s central bank did not add anything to its gold reserves in the last one year, according to Bloomberg data. (via RBI to buy 200 tonnes of IMF gold – Home – livemint.com).

Two years ago …

2ndlook had estimated that the Chinese could possibly (and they have) increase their monetary gold reserves. On April 24th, 2009, Bloomberg reported that China had increased

its (gold) reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in an interview with the Xinhua News Agency today. China, the world’s biggest gold producer, has increased its holdings before, Hu said in the interview carried on the administration Web Site. They rose from 394 tons to 500 tons in 2001 and to 600 tons in 2003. The U.S. has the world’s biggest gold holdings at 8,134 tons, followed by Germany with 3,413 tons, World Gold Council data show. France has 2,487 tons and Italy 2,452 tons, while the IMF has 3,217 tons, according to the council.

Another report, from Market Watch, a WSJ web publication added,

The increase makes China the world’s fifth-largest holder of gold, just ahead of Switzerland, and among the six nations plus the International Monetary Fund that have reserves of more than 1,000 metric tons. Although Hu did not elaborate on where China had sourced the additional bullion, her comments were interpreted as meaning they came from domestic sources and may included refining of scrap metal. Traders also say the gold was accumulated systematically over a number of years. Last year China ranked as the world’s largest gold producer with 12.2% of world output, equivalent to 288 metric tons. The U.S. ranked second with a 9.9% share, or 234 metric tons.

What are the future plans of the Chinese? A report quotes an analyst

China should increase its gold reserve from 600 tons to about 2,500 tons in a short term and to 3,000 tons in a long term to cope with the versatile exchange rate risks, said Teng Tai, an economist of China Galaxy Securities Company.

Exactly …

This really does not mean much – except that it may keep gold prices on boil. Whether a currency is backed by 5% or a 10% gold reserve makes no material difference, especially in this era of rampant use of (not just by the US of A) “a technology, called a printing press” as an economic tool. For long term economic stability, gold needs to be in the hands of individuals – and not Governments.

Why India

Since China is a significant gold producer by itself, it may not get a shot at buying IMF gold. India has negligible domestic gold production -and was possibly therefore given preference by the IMF. Of course, preference may have been given to RBI’s purchase, given its ‘responsible’ and ‘mature’ behaviour during the current Great Recession.

What does RBI’s gold purchase mean

RBI’s gold purchase means two things.

The Indian Government which has had a rather low percentage of gold holdings as their currency reserves will now bolster these reserves. Even after this purchase, Indian official reserves, will only be the ninth largest in the world in absolute terms.

On average, countries hold about 12.6% of their reserves in gold, up from 9.9% a year ago. Some of this represents an increase in gold holdings, but another driver of the increased proportion is the rise in the value of gold. (from India propels gold to new high.)

The overhanging threat of open market sales by the IMF, speculated by many and discounted by 2ndlook, now stands neutralized. This will be a kicker to gold prices in the short term.

The ideal thing …

Sell gold to individuals. Governments should not have such large holdings of gold. Gold in the hands of Governments is the prime cause of war. Gold holding should be widely dispersed, as widely as possible, amongst individuals – like the Indian gold possession model. No national government, in the new financial architecture should be allowed to have more than 250 tons of gold – to progressively reduce to 50 tons.

Ben Bernanke’s version of history blames the victims

For Bernanke, central bankers were the heroes. In the face of irrational hordes, they offered liquidity and a host of innovative policies, ensuring that financial panic did not lead to a new Great Depression. In Bernanke’s word, “the outcome could have been decidedly worse”.

His assessment isn’t exactly wrong. But as a historical record it is incomplete and far too generous to central bankers. (via Ben Bernanke’s version of history is incomplete – Telegraph).

It ain’t the first time

Helicopter Ben has a way with history. Earlier he created the concept of ‘savings glut’ – thinly blaming China ( and others) for saving money! He explained how,

“a significant increase in the global supply of saving–a global saving glut–which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today.”

This time around he was congratulating Central Bankers and policymakers

“in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation.”

Awesome! The man is so brazen! He has no shame!!

Of course, he makes no mention how the current Great Recession first came about by printing too much money – and then keeping interests low. Edward Hadas is right in one thing at least! He says, “Those who spread kerosene should not take too much credit for putting out fires.”

Benny Boy – That is good advice. Take it.

Resolving global imbalances aka currency manipulation

The Obama administration is increasingly signalling that the US will not continue to be the world’s consumer and importer of last resort. The clearest statements came last month from Larry Summers, White House economics director, in a speech at the Peterson Institute for International Economics and in an interview with the Financial Times. The US, he said, must become an export-oriented rather than a consumption-based economy and must rely on real engineering rather than financial wizardry.

This long-run vision for US growth entails greater exports and probably a smaller current account deficit than where it is now (about 3 per cent of gross domestic product). Although Mr Summers did not and could not say so, the vision will require an end to the remaining overvaluation of the dollar.

Put starkly, Mr Summers has stated that China can no longer behave like China because the US intends to behave much more like China. The world economy cannot have two, or even one-and-a-half, Chinese growth strategies from its two most important economies. Which will prevail? (via Fred Bergsten & Arvind Subramanian: Resolving global imbalances).

In the last 50 years, the US dollar has swung from being grossly overvalued to slightly overvalued. The inertia of the Bretton Woods system has kept this overvaluation going. How has this benefitted the US?

It has allowed the US to use its overvalued (and over-printed) currency to vast tracts of world economy. And now having captured these segments of the world economy (especially raw material sources), with an undervalued currency, it will achieve two objectives.

The US is in no position to pay off its nearly US$4 trillion, it owes the Rest of the World - equal to about 1 years GDP (my estimate, in PPP terms). This kind of dollar devaluation does three things at one stroke.

One - It reduces the real value of its debt. The Chinese, the Rest of BRICS and the Others need to be paid a lot less in the future. (as pointed out earlier in various posts linked here.) Two - It makes US exports artificially competitive. (as pointed out earlier in linked posts). Three - The US competitiveness will be anchored to assets purchased with over-valued dollars.

Readers can take courage from the fact that each such 'process' gives the US lesser returns and fewer options. The Law of Diminishing Marginal Utility. Or in plain language 'crying wolf' often never paid off.

But the smart answer is to go out and buy one kilgram of gold. If each reader of Quicktake and 2ndlook blogs were to do this, the world would become a safer and faier world in the next 10-20 years.

Swear!

Global warming's got me thinking

a call has been given by Al Gore that there should be an immediate moratorium on coal fired power plants. Look at how this will impact India. More than half of the 8,00,000 mega watts of power India plans to produce by 2030 are to come from coal fired plants. Simply because India has abundant coal resources.

What most western analysts don't realise is nearly 600 million Indians do not have regular and formal access to any source of electricity. If comparison is to be drawn, it is a bit like the entire US population and half of the European Union going without any electricity.

Can you estimate the enormity of this problem? This is what Prime Minister Manmohan Singh told George Bush at the G-8 summit in Japan last year when America tried to force India to commit carbon emission cuts. India merely said it will keep its per capita emmissions at below the world average. (via Carbon emmisions and Democracy!:Wisdom by Hindsight:MK Venu's blog-The Times Of India).

What if

The entire global warming debate is just a facade to keep up demand for oil from India and China. The opposition to coal fired power plants is to stop India and China from reducing the growth in oil consumption.

After all practically all of British GDP today is declining North Sea oil and British Petroleum. Apart from Chinese money, the other source of liquidity which keeps the US afloat is petro dollars.And the US future is so closely linked to Arctic oil.

If India and China were to reduce their reliance on oil, leading to a price collapse, the biggest losers will be the Anglo Saxon bloc.

Makes one think!

G8 refuses to cut export subsidies

Leaders of five developing countries — India, China, Brazil, Mexico and South Africa — who also met for summit level talks here had separately, called for expediting a global trade agreement that would stimulate the world economy.

But for this to happen, they wanted developed nations to end trade-distorting subsidies and export sops. The G-8 declaration, however, promised only to refrain from taking decisions to increase tariffs above today’s levels.

“We will refrain from raising new barriers to investment or to trade in goods and services, imposing new exports restrictions or implementing World Trade Organisation’s inconsistent measures to stimulate exports.”

Leaders of the world’s eight most rich countries, in the same breath, vowed to keep markets open and free and to reject protectionism of any kind. “In difficult times we must avoid past mistakes of protectionist policies, especially given the strong decline in world trade following the economic crisis,” the declaration said. (via G8 refuses to cut export subsidies).

US of A - the most efficient agricultural system in the world?

Today, an ‘efficient’ and ‘hi-tech’ agricultural farm sector in the US needs more than US$ 7.5 billion (conservative estimates, assuredly) of subsidies to survive. The US-EPA says, “By 1997, a mere 46,000 of the two million farms in this country (America), accounted for 50% of sales of agricultural products (USDA, 1997 Census of Agriculture data)” - and gobble up most of this huge subsidy that lowers Third World agricultural prices.

Giant food corporations, killed buying competition with high prices (to farmers), direct buying from farmers (at higher prices), monoclonal seeds that destroy bio-diversity. And the US consumers are not getting the lower food prices that are being promised in India.

Devastation in the Third World

These subsidies lower agricultural prices, devastate agriculture in Third World countries, creating man-made famines. These man-made famines, of course, gives the West a false sense of superiority. The Indian farmer working without subsidies, with low technology, lower productivity has a cost edge over his European an American counterparts.

The 'backward' Indian farmer

The Indian farmer working without subsidies, with low technology, lower productivity has a cost edge over his European an American counterparts. With the declining power and use of the dollar, the US is fighting a losing battle against agricultural subsidies. The US depends on less than 50,000 corporate ‘farmers’ for 50% of ts production. These corporate ‘farmers’ will abandon agriculture at the first sign of reduced subsidies.

Over the next 20-30 years, this leaves India (and Russia) to cater to global food shortfalls. The Western industrial model is in its sunset phase. The Indian agricultural model can be the big winner in the next few decades – under the right stewardship.

Indian agriculture has a great future – and don’t you ignore it! On the other hand, industrial over-production, debt-financed over-consumption, American economic model, funded in the past by Bretton Woods /Petro-dollars /Sino-dollars, is about to end.

And that is the reason why the West (America and Europe) will not lower barriers or subsidies.

Giant food corporations, killed buying competition with high prices (to farmers), direct buying from farmers (at higher prices), monoclonal seeds that destroy bio-diversity. And the US consumers are not getting the lower food prices that are being promised in India.

And then the propaganda overdrive

Of course, then out came the spin-meisters. The PR machines.

"There is an urgent need for decisive action to free humankind from hunger and poverty," G8 leaders said in a statement issued on the last day of their summit in Italy, at which they were joined by African heads of state. (via G8 announces $15 bn food security package- International Business-News-The Economic Times).

First the protection ... then the subsidies ... then the distortions ... then the aid.

"The sums just aren't adding up. Is this all really new money or are they fishing some of it out of the recycling bin?" asked spokesman Otive Igbuzor.

Radically rethinking Indian agriculture

In recent weeks, there have been growing apprehensions that the monsoons of 2009 will fall short of normal. This has again raised fears of rising food prices, collapse in rural incomes and possibly farmer suicides. Many a tear will be shed for rural India. Predictably, there will calls for greater support for the agriculture sector in the form of subsidised fertilisers/pesticides, cheap electricity for pumping ground water and farm loan waivers. We have been doing this now for generations now and our impoverished farmers still commit suicide. Surely, it’s time to rethink this strategy. (via Sanjeev Sanyal: Radically rethinking agriculture).

The Good ...

Sanjeev Sanyal's article does raise some interesting points - and usual points. After a promising start he then loses his way half way through.

He demolishes the idea that "the route to prosperity in rural India lies in accelerating farm production. Agriculture ... contributes 16.5 per cent of the economy ... great exertion ... cannot ... (make it) grow much more than 3 per cent per annum on a sustained basis (when the rest of the economy routinely does 7-8 per cent)."

He correctly points out that "India ... produces enough food to feed itself but ... 20 per cent of output is wasted (a) problem ... of distribution and storage, (and with) population growth is now 1.6 per cent per year ... we need to grow production by no more than this rate. ... we should ... slow agricultural growth ... if we do not want ... greater wastage or a structural price decline ...a buffer for drought years ... is better management of bumper crops rather than ever more production. India should shift focus from increasing agricultural production to improving its efficiency (with) investment(s) ... in storage and distribution."

His best one is the warning that "farming comes with a large environmental cost ... the Green Revolution is anything but “green”. Current farming techniques are severely damaging to the environment through the depletion of ground water, conversion of forest land and over-use of pesticides, fertilisers and other chemicals ... sacrificing the long-term viability of the farm sector. It ... made sense in the ‘70s to force a level-shift in food-grain production but why should we be still sacrificing the food security of future generations?"

He reminds us that "it makes ... sense to strictly conserve ground water and use it only when the monsoons fail. Special attention should be given to water management (as opposed to extraction). Agriculture consumes 80 per cent of the country’s fresh-water in order to produce just 16.5 per cent of GDP ... poor use of a scarce resource."

The Bad ...

After such good work, he succumbs to the banal - with some usual conclusions. He thinks that,

very large investments in water systems are needed to maintain even the current growth path.

Large investments in water systems are a bad, imported idea. India's successful water management model is the nearly local 500,000 water bodies - ponds, lakes, anicuts, barrages, bunds, talabs, bawlees, wells. These water bodies stored surface water - and sustained Indian agriculture for the last 2000 years. Post-colonial India's quest for Nehruvian "temples of modern India" spurred huge and wasteful investment in large hydro-electric dams. Reviving Indian water systems and rivers will take some 10 years and Rs.25,000 crores. About the cost of two large dams.

With around 70 per cent of the population still in the villages, it is absurd to hope that such a small and slow-growing part of the economy can bring salvation to such a large population.

Mr.Sanyal, you should consider the following, before you make such a sweeping statement. With the declining power and use of the dollar, the US is fighting a losing battle against agricultural subsidies. The US depends on less than 50,000 corporate 'farmers' for 50% of ts production. These corporate 'farmers' will abandon agriculture at the first sign of reduced subsidies. Over the next 20-30 years, this leaves India (and Russia) to cater to global food shortfalls. The Western industrial model is in its sunset phase. The Indian agricultural model can be the big winner in the next few decades - under the right stewardship.

And in the meantime, he himself follows up with an observation, "studies by economists like Dipankar Gupta suggest, non-agricultural activity already accounts for around half of rural India’s economy and provides employment to 35-45 per cent of the rural workforce."

Third, encouraging agricultural growth for exports in not a viable option for India. Export of agricultural products is tantamount to export of water. International trade may make sense for some niche products like tea or for managing natural cycles in food-stocks. However, it cannot be a central strategy for a water-starved country like India. It is especially careless to be thinking about exporting water when climate change may be putting even current supplies at risk.

As pointed out earlier, both water management and agricultural exports is something that is both feasible and sensible thing to do. This is something that India must prepare itself for.

The truly ugly

Meanwhile, policies should be aimed at encouraging the process of moving the rural economy away from agriculture.

The Ikshavaku clan, (of Ramchandra in the Ramayana fame), became a ruling family for developing the agricultural strain of sugarcane. Bhagwan Krishna came to be known as Natho, for domesticating wild bulls. Balarama is the 7th avataar of Vishnu - whose 'weapon' was the plough - the founder of Indian agricultural practice.

The Indian agriculturist has made a remarkable recovery after the colonial collapse - and he may still surprise you.

The aspirations of rural India have already shifted — the literate children of subsistence farmers want real jobs, not pesticides. Why should we stop them? However, this requires a big shift in policy mindset. For instance, we need to shift from a regime of cheap but irregular power supply (which may work for irrigation) to one that is fully-priced but regular (necessary for the non-farm sector). This is our best bet for making India drought-resistant.

After ceaseless bombardment of advertising, with Indian languages weakening due to massive Government subsidies to English language education, is the movement to urban lifestyle a surprise? Not to me Mr.Sanyal. Though, why you are surprised, Mr.Sanyal is a puzzle to me. We need to invest in rural India. Currently rural credit is way below its contribution to GDP - and the low price realizations for agricultural output makes the case for investments stronger.

Next, we need to revisit general governance in rural India. The traditional structures may have worked for subsistence farming (even this is debatable) but they will not support large investments in industry, construction and services. The government needs to focus on how to deliver policing, enforcement of contracts, property rights and so on.

This is about shifting from a world of farm-loan waivers to one that can support large-scale mobilisation and investment of capital in these areas. The Naxalite movement that affects a fourth of India is not due to the failure of agriculture but the failure of governance. At the same time, note that the cause of property rights and governance is not served by the indiscriminate use of “eminent domain” to acquire large chunks of land for so-called SEZs.

When you refer to 'traditional structures', are you talking about 'general governance' of the colonial Raj - that post-colonial India continued with? Or are you talking about the pre-Raj structures? The Indian peasant was the first and the only peasant in the world to own his property - till 'Desert Bloc' rulers started a 800 year trend of 'landgrab'. Yes. India does need to re-visit 'general governance'! We need traditional governance - and not the 'modern' colonial baggage, that India has not discarded.

We need to give back the lands that were grabbed from the poor Indian peasant and the poor Indian tribal.

The need is for a framework of governance that allows industry and services to grow organically in response to local conditions.

Finally, there should be a greater effort to provide urban amenities for education, health, shopping and leisure at places that are accessible to the rural hinterland. Together with the shift to non-farm jobs, this provision of amenities will inevitably lead to urbanisation. This is a good thing and should be encouraged. However, urbanisation is not just about migration to the mega-cities of Delhi and Mumbai ... mofussil towns need to be revived as social and economic hubs

Indian agriculture has a great future - and don't you ignore it, Mr.Sanyal. On the other hand, industrial over-production, debt-financed over-consumption, American economic model, funded by petro-dollars /Sino-dollars, is about to end.

India cannot go down that path.

Global economy’s dialogue of the deaf- Opinion-The Economic Times

First, the frequency of meetings should be increased, especially in times of crisis, and the level of a few of these meetings enhanced. So, for example, two meetings a year at the head-of-government level and quarterly meetings at the finance-minister level would provide ample time for dialogue...

Second, the IMF’s permanent Executive Board should be abolished. Important decisions should be vetted by the IMFC and others delegated to IMF management ...

Third, the obvious secretariat is the IMF. Unfortunately, the Fund is not regarded as being impartial, especially by countries that have been seared by its past conditionality. (via Global economy’s dialogue of the deaf- Opinion-The Economic Times).

I dont know if Raghuraman Rajan is going for a verbal charade - and at the last minute, spring the BRIC currency. What RRR is suggesting is not going to happen - is clear.

BRIC demands more clout, steers clear of dollar talk - Yahoo! Philippines News

"The summit of the so-called BRIC nations of Brazil, Russia, India and China ended with a short statement by Russian President Dmitry Medvedev and a communique that demanded more power for developing nations in international financial institutions and the United Nations.

'We are committed to advance the reform of international financial institutions, so as to reflect changes in the world economy,' the BRIC countries said in a joint communique.

'The emerging and developing economies must have a greater voice and representation in international financial institutions,' it said. 'We also believe that there is a strong need for a stable, predictable and more diversified international monetary system.'

"We will not do without additional reserve currencies," he said, adding that a new supranational reserve currency was also an option as the IMF's SDRs gained a bigger role.

The initial response from the developed world to Russia's initiative came from Japan, where Finance Minister Kaoru Yosano reiterated his view that the dollar will remain the world's key reserve currency. (via BRIC demands more clout, steers clear of dollar talk - Yahoo! Philippines News).

This was predictable

The 2ndlook posts and the Quicktakes on the events in the unfolding global financial crisis have been pre-casting these developments. This meeting was good news. This meeting could not have happened earlier – with elections in India being the delaying proposition.

The meeting has happened. Some old and tired cliches have been shopped out for waiting media. Greater role for BRIC in UN and IMF … is not even old wine (turned vinegar) in a old cracked bottle.

What’s gonna happen

The Chinese and Russian decision to increase holdings of their each others currencies was good development. The greater role for ‘IMF-SDR’ is eye wash. The BRIC leaders know well enough that the West will not let go of the IMF and the UN. But the charade is possibly required – and they are going through it.

The real developments will happen more quietly. After all, the final outcome is something that they, The BRIC nations would like to reveal with fanfare and celeberation.

We live in exciting time ... or is this a dangerous time?

Hillary Clinton on Humanitarian Aid to Pakistan - The White House, Press Office

it is fair to say that our policy toward Pakistan over the last 30 years has been incoherent. I don't know any other word to use. We came in in the '80s and helped to build up the Mujahideen to take on the Soviet Union in Afghanistan. The Pakistanis were our partners in that. Their security service and their military were encouraged and funded by the United States to create the Mujahideen in order to go after the Soviet invasion and occupation.

The Soviet Union fell in 1989, and we basically said, thank you very much; ... Their democracy was not secure and was constantly at risk of and often being overtaken by the military, which stepped in when it appeared that democracy could not work.

And so I think that when we ask that question it is fair to apportion responsibility to the Pakistanis, but it's also fair to ask ourselves what have we done and how have we done it over all of these years, and what role do we play in the situation that the Pakistanis currently confront.

... our new approach toward Pakistan is qualitatively different than anything that has been tried before. ... we support the democratically elected government, but we have to have a relationship where we are very clear and transparent with one another; where we have the kind of honest exchanges that have come out of our trilateral meetings, where we're sitting across the table and we're saying, what do you intend to do about what we view as an extremist threat to your country, which by the way, also threatens us.

... it is our responsibility to support the democratically elected government, to be a source of advice and counsel where requested, but also to step in with aid that can try to make this government as successful as possible in delivering results for the people of Pakistan. (via The White House - Press Office - Briefing by Secretary of State Hillary Clinton on Humanitarian Aid to Pakistan).

So much excitement ...

Is admission of 'truth' something that merits a celebration? Does obfuscation and cover-ups for the last 50 years, get 'white-washed' by an admission of 'guilt' - and a some paltry million dollars in 'aid' - outlined many times in many 2ndlooks and Quicktakes?

The Indian media is agog with this 'story'! And a section of the US media is worried about what all Hillary will 'admit'?

Not what the US does - but what will Pakistan do ...

That is important.

Will the Pakistan nation take charge. Will the Pakistani establishment ‘admit' the truth. Will they remove the cobwebs of self delusion? There is some ambivalence in Pakistan about their attitude towards India.

Modern Pakistan

The Pakistan nation is actually 5 parts – The army, the ISI, the politicians, the 22 families and then there are the rest. Some may want to add the fundamentalist clergy as the sixth element. And now there are fringe terrorist groups – like LeT also on this list. Mahbub ul Haq’s “22 families” speech in Karachi in 1968 highlighted the power and wealth of a few families in Pakistan.

No one in Pakistan talks to anyone. Each has contempt for the other four. And all five have separate agenda.

With Or Without The West

For 60 years, India has grown steadily - slowly, and in spite of the West.

India’s defense production, its nuclear program or its space program and its India’s software success are homegrown. As are its successes in industry, stockmarkets, education, films and television programming, its democracy and the rise of its middle class. In the nuclear industry, India’s thorium approach to nuclear energy design will possibly open new realms in nuclear arena. At various times, when India has been stuck, it has been the West that has pushed India further into a corner. Even in matters of foodgrain, when India was a user of PL-480 grain. Or for instance, the Kaveri jet engine or the cryogenic engines.

While our Manubhai is chasing the chimera of Western approval and panting and drooling to ’sit at the high table in the global comity of nations,’ the back yard, Manubhai is burning.

And Pakistan should possibly learn this one thing from India.

India’s Pakistan Fixation

Of course, the Indian part of the equation needs looking at, also.

September 11th, 2008. US President George Bush permitted US troops to take offensive actions against its ally, Pakistan – in the US War against terror! Indian news channels were elated – and it must have taken Arnab Goswami (of Times Now) a lot of self-restraint not to do a gig. It took 4 generations of Indian (and now part of Pakistan) leaders to throw out the West from the sub-continent. 60 years later, India is celebrating the return of the West, to the sub-continent. The most potent symbol of this is India’s Pakistan Fixation.

The Pakistan Fixation is a a cover-up of India’s laziness or lack of resolve. I don’t really believe that Pakistan has the focus or the persistence to do half the things that India imagines Pakistan is doing. In the last 20 years, India has lowered its guard – and has become further fixated on the Pakistan bogey. The Pakistan Fixation hides Indian ineptness at confronting the root of Pakistani problem – USA, amongst others.

Western Adventurism - The Imperative

Without slavery, the West does not enjoy the manpower edge that it had till 1900. The loss of colonies from 1900-1950 has taken away the resource base and captive markets for Western dominance. Now with the collapse of Bretton Woods, the opacity in financial systems is diminished. The welfare state has put a significant burden on an aging Western population.

With fading prowess on one side, and a resurgent Asia on the other, the US and EU are now at the cross roads. Is the West prepared to quietly fade away in the sunset?

Unlikely.

What Have We Achieved

60 years on, there is nothing to show for these border disputes. Dutifully, the Indians, Pakistanis and the Chinese glare at each other – over colonial border issues. These border issues are less than peripheral to our nations. We have allowed the past to hold our future as a hostage.

The past is extracting a ransom that we cannot afford to pay. Let us recognize our past for what it is – empty ballast that is dragging us down. Having achieved nothing on this front for the last 60 years, why do we wish to continue down that path? We need to see that going downhill is always easier than climbing the Himalayas.

The Detritus

As various colonial powers were forced out of various colonies, left behind was the garbage of colonialism. This post-colonial debris has become the ballast, that is dragging down many newly de-colonized countries.

Vietnam suffered from a prolonged war (1956-1976) – and finally peace had a chance after 20 years of war. Korea remains divided. The Cyprus problem between Turkey, Greece and the Cypriots has been simmering for nearly 100 years. The role of the Anglo Saxon Bloc, in Indonesia, the overthrow of Sukarno, installation of Suharto and finally the secession of East Timor is another excellent example. The Israeli-Palestinian conflict (1935 onwards) will soon enter its 75th year. The entire Arab-Israeli-Palestinian conflict is a creation of the Anglo-French-American axis. The many other issues in the West Asia and Africa are living testimony of the Western gift to the modern world.

Closer home is the Kashmir problem. After 60 years of negotiations, India-Pakistan relations have remained hostage to the Kashmir issue. Similarly, between China and India, the border issues remain 60 years after the eviction of Britain from India.

India and Pakistan must remember that the Pakistani armies and the Indian armies at the time of the 1948 Indo-Pak War, were under the command of British Generals. India’s Governor General , in 1948 was Mountbatten, who was removed after this mischief was done.

Pakistan special effects

Things become more difficult when leaders like Asif Ali Zardari dismiss written agreements with his coalition partners, PML (N) headed by Nawaz Sharf, claiming agreements were not”holy like the holy Koran.” Or when General Musharraf starts a Kargil War with a rogue army that is no longer under the command of the civilian authority.

2ndlooks and Quicktakes on Pakistan

Pakistan – a nation in fidayeen mode?

What should India’s counter terrorism plan look like …

Mumbai Massacre – The real blame and real culprits

India’s Pakistan Fixation

Terrorists And Counterfeit Indian Currency

For More Than 60 Years …

Indo Pak Relations – What Will It Take

India Lowers Guard

New Empire Builders – Neo-Cons Sneaking In

The Carving Of The Middle East

British Empire & The Anglo Saxon Bloc

Behind The Web Of Terror

The China Syndrome – The Times of India

post-reform the US will retain its de facto veto power with a 17 per cent share and the US, EU and Japan will together still control 53 per cent of IMF shares. Individually, the shares of US, Japan, UK and France will still be larger than China's share of under 4 per cent. Impatient with these little handouts, China has launched a multi-pronged campaign to claim a seat at the head of the table.

Shortly before the G20 summit, Zhou Xiaochuan, governor of the Chinese central bank, suggested that the dollar should be replaced by SDRs as the new reserve currency. The huge dollar reserves held by central banks and other global investors would be severely eroded if the dollar were to suddenly depreciate. Yet, these investors cannot easily diversify away from the dollar since this itself would trigger dollar depreciation. The Chinese are particularly concerned: an estimated $1 trillion out of their total reserves of around $2 trillion are held in dollar assets. The SDR exchange rate is a weighted average of exchange rates of the major convertible currencies. Accordingly, under Zhou's proposal, China and other countries could convert their reserves from dollars to SDRs at current exchange rates without any erosion in their value. via TOP ARTICLE | The China Syndrome - Editorial - Opinion - The Times of India).

Rather a good summary of the flux in global currency system - for someone who wants to understand the situation today. The last paragraph will be of interest to everyone - especially Indians.

The relative roles of different Asian currencies in this fund are yet to be determined, but clearly the Chinese yuan has arrived and the meltdown of the dollar as a reserve currency has begun. The US-led western alliance has two options before it. It can give China a leading role in the G7-dominated financial architecture or face an alternative architecture led by China. Heads i win, tails you lose. Meanwhile, India is yet to find a role for itself in this new great game.

Buffett could buy North Korea as gift for Obama - William Pesek

It’s tempting to fantasise about Buffett just buying the place. He has given away tens of billions of dollars. Imagine the good that could come from buying out the Kims and giving North Korea to Obama. It will never happen, of course, but one can dream of a Buffettland above the 38th parallel.

Hermit kingdom

Yet that really does put things in perspective. The second-wealthiest man in the world could buy Kim’s Hermit Kingdom and still have enough for Mongolia and Namibia, too. And here you have this nation that could easily be purchased by a single US investor essentially holding entire parts of Asia hostage. (via William Pesek: Buffett could buy North Korea as gift for Obama).

A little over a century ago,

It was such thinking that led to the 'sale' of Cuba, Philippines and Puerto Rico by Spain to the USA. After the purchase, came a century of pain in Cuba, many hundreds of thousands of lives lost in Philippines and the forcible accession of Puerto Rico into the US. Before that the Berlin Conference, sparked of the scramble for Africa.

Rome & India

Around 50 BC, fresh after crucifying some 8000-10,00 slaves on the Via Appia, Crassus decided to come India. The richest man in Rome, Crassus dreamt of conquering India, what Alexander could not do. Suren, the Indo-Parthian General from Gandhara, sent him back - with molten gold down his throat.

So, Billy boy, pride goes before the fall. As for you hubris ... beware!

Earlier Empires

Spain's national industry today is prostitution. Britain is floating on the sewage of the Bretton Woods bilge! After the multi-trillion dollar bailout, which has just begun, and with more than US$4 trillion with China, Japan, Russia and India, neither is the outcome certain nor is the outlook bright.

You may be very surprised when (and not if) other reserve currencies come into play. A tripolar-currency system will unwind Warren Buffet's wealth faster than Kim Il Jong's dictatorship!

Before your tall talk about buying other countries ... just check out your pockets, Billy boy.

Why Do Our Economic Models Keep Failing? - The Atlantic Business Channel

why economic models always fail us in crisis. That's a big question, so fortunately the professor has a really great historical analogy to start us off. A group of Swiss soldiers get lost in the Alps and the weather take a bad turn. One soldier realizes he has a map and they follow it until they find a town to take shelter. But when they explain what happened to their commander he realizes that's it's not a map of the Alps: it's of the Pyrenees. (via Why Do Our Economic Models Keep Failing? - The Atlantic Business Channel).

Amazing piece of propaganda!

The entire economic model was about printing money. Helicopter Ben was the first, in his celebrated speech, where he sneeringly (Did I imagine the sneer) openly spell out the US 'printing press' policy - and the aim to helicopter drops US dollar bills. Helicopter Ben was also the first to further pushed the boundaries by refusing to share M3 figures with the world - with a terse anouncement by the Federal Reserve Board. Of course, I must say, Ben was kind enough to to blame Asia for a ‘savings glut’ - which resulted in this global financial crisis.

Alan Greenspan chimed in with tupenny bit with 'the Fed did not cause the housing bubble' statement. Well, Chairman Sir! You didn't do it! Neither did I.

So who did?

All in all, Ben Bernanke, represents a new level of Western brazenness.

Eureka! It works ...

The US and the World economy is suffering from a surfeit of printed money which was channeled into 'supply side' economics. The model worked exactly as it should have!

The Chinese 'worker' and Indian 'coolie' worked his backside off. The American 'consumer' bloated up debt - and bought all the goodies. The debt mountain became just way too-oooo wobbly. It crashed. The Chinese (and Japanese, Indians and the Russians) have been left holding these pieces of paper, called American dollars.

As for you ...

Derek, if possible, be honest. Otherwise, keep quiet. Say nothing. At least, don't add to the cacophony of lies, untruth and cover-up.

Just don't get very clever about this, Derek.

Paper gold: Nice idea, but…

Having a central currency – let’s call it the Zhou-Triffin Doubloon (ZTD) – managed by a supra-national organisation would make it more difficult for any one country to get into too much debt to another. If the supply of ZTD in issue were controlled properly – say by expanding it in line with global GDP – it would serve as a steady store of value, with little risk of devaluation.

Moreover, a credible ZTD would have many of the advantages of the now-defunct gold standard. It would be strictly limited in supply and readily acceptable everywhere. Indeed, it would be even better than the yellow metal, which is after all too cumbersome for a modern economy and too scarce to serve as a measure for international trade. (via Paper gold: Nice idea, but...).

What would this mean ...

That a citizen's nightmare like the IMF and World Bank, answerable to non-one, or at least less answerable than any 'elected' Government, would rule the world currency system.

This would also mean practically immediate nationalization of gold in most countries - and restrictions on private ownership of gold.

This will also finally end with mind numbing WTO type negotiations. The West will find newer and more devious ways tyo gain advanatage; like the recent IPR related seizures of pharma products shows.

Concentration Of Power

Today the most popular methods are the Fortune 500 listing and the Forbes listing. These listings finally demonstrate that half the world’s economic output is controlled by 50 people from 500 companies - about 25,000 individuals. Add another 25,000 politicians and bureaucrats. We have about 50,000 people managing the lives of 5 billion people.

Everyone is saying …

There is rising chorus that President Obama should do what Roosevelt did. Krugman, this year’s Nobel prize winners, also said in an interview that Roosevelt’s actions need to be emulated. And what is it that Roosevelt did ...?

Roosevelt nationalized gold.

Apart from a lot of things that Roosevelt did, which can be debatable, this was the one thing that he did, that made the US into a super power - for a short while (of 70 years).

And the nationalization of gold also impoverished the Americans. Nationalization of gold enabled the US Governments to enter costly wars like WW2, Vietnam War, and now the Iraq and Afghan Wars. This allowed to US to walk into the WW2 with 25,000 tons of gold - and impose Bretton Woods on the world.

Gold production (from Ghana, South Africa, Australia, Canada, Papua New Guinea, America, etc.,) was controlled by the Anglo Saxon Bloc - and the world’s largest private reserves of gold, of India was controlled by the British. It is this choke on gold reserves that enabled the sustenance of US as a superpower.

And now they are trying it again.

Many Think ... That There Are Many More Qualified …

Paul Krugman has been (allegedly) anti-Obama - and advising Obama to pay heed to Roosevelt’s policies. Was Krugman’s Nobel Prize award to help him to increase his ‘opinion making’ powers? Was the Nobel prize fixed to meet American /Western short term requirements? Was the Nobel prize given to the Paul Krugman to make his position strong - as a part of the Obama Dream Team - or as ballast against an ‘adventurous’ Obama who may not toe the line?

Will Krugman join Warren Buffet in rescuing the Western economic system? Will they nationalize gold again - and instead promote silver? Is a new version of the bi-metallic standard coming?

Post dated cheque on a falling bank ...

Gandhiji advised Sir Stafford Cripps to the next plane back and his offer as as "post dated cheque on a falling bank." - which he later denied as having said it at all, though in agreement with the thought. And that is equally true of the US in particular and the West in general.

And one single global currency, is such a bad idea.

Hank Paulson Fraud III - Washington Mutual sues the FDIC for over US$13 billion - The China Post

In a complaint filed with the U.S. District Court for the District of Columbia, the thrift's former parent accused the FDIC of having on January 23 made a “cryptic disallowance” of its claims, prompting the lawsuit.

It also accused the FDIC of agreeing to an unreasonably low price in arranging the a US$1.9 billion sale of the banking business to JPMorgan on September 25, when regulators seized Washington Mutual and appointed the FDIC as receiver.

JPMorgan did not buy the parent holding company, which filed for Chapter 11 bankruptcy protection the following day.

In its complaint, Washington Mutual seeks to recover as much as US$6.5 billion of capital contributions it said it made to its banking unit from December 2007 through the seizure. (via Washington Mutual sues the FDIC for over US$13 billion - The China Post).

Fraud .. when people are in pain ...

This is very similar to Joseph Kennedy’s shorting the market before The Great Depression. It has always been a wonder to me how could Joseph Kennedy, a bootlegger and a friend of the mafiosi could become SEC Chairman? And after that did happen, would a Great Depression not follow?

First, the world was hit by Big Oil and as though that was not enough, came the Big Banks!

Hank Paulson Should be investigated

It was always 2ndlook’s suspicion that Hank Paulson’s behaviour in the Lehman collapse is similar to Bootlegger Kennedy’s behaviour. And this now coming out all in the open!! JPMorgan was blamed for Lehman collapse. This was reported widely including in The Times of India.

US bank JPMorgan Chase stands accused of precipitating the collapse of American investment bank Lehman Brothers by freezing Lehman assets days before it filed for bankruptcy protection, the Sunday Times reported.

After 60 Days

While deciding on Bear Stearns, Lehman Brothers, WaMu, was Paulson looking at his future - 60 days later, when he would need a new job!

Was the collapse of Lehman a deal for a job with Goldman - or was it JP Chase?

U.N says world should ditch dollar - International Business Times

Multiple currency options

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.

"It is a good moment to move to a shared reserve currency," he said. (via U.N says world should ditch dollar - International Business Times).

What Has Been India Upto?

While the US has been resisting calls for action, busy doing post-mortem, Asia and Europe have been moving. Interestingly, Manmohan Singh has done some huge work in a crucial 60 days - the nuclear deal with the USA and NSG, the IBSA Summit, the ASEAN free trade agreement and his three Asian nation visits. India’s Trade and Commerce Minister, Kamal Nath, has been talking about a multi-lateral set up. The UN was made to issue a statement on this. Am I reading too much into this? At times, India has seemed clueless.

Avinash Persaud, ex-JP Morgan, at the UN panel of specialists was a master stroke. Mainline media has ignored this development.The 2ndlook proposal, on November 8th, 2008, for the Third Global Reserve Currency, named BRIX, based on first appearances, has a superstrate layer over the UN panel's proposal.

Though, I do wonder what the ex-IMF expert is doing? Will India take a leadership role?

Bush-doctoring?

What is the G20 upto

All G20 members were 'invited' to join another Western Club - the FSF. The Financial Stability Forum, another club, with the same G7 members. Just why does India join these rubber stamp bodies - and lend sanctity to the exploitative agenda of the sponsors. Does the world need another body, with the same Central Bank members, addressing the same monetary issues problems, with the same agenda?

At the sunset city of London, venue of the next G20 conference, Working Group 1, set up to suggest ways to enhance sound regulation and strengthen transparency, with a brief to

"monitor implementation of actions already identified ... make further recommendations to strengthen international standards in the areas of accounting and disclosure, prudential oversight and risk management ... develop policy recommendations to dampen cyclical forces in the financial system and to address issues around the scope and consistency of regulatory regimes.

Co-chaired by Rakesh Mohan, Deputy Governor of the Reserve Bank of India, and Tiff Macklem, Associate Deputy Minister, Canadian Ministry of Finance have readied their initial report - on predictable lines - as per the expected time lines.

Wishful thinking breaks against a brick wall of reality

Sooner rather than later, brothers!

Consistent with 2ndlook's opinion, the Chinese and Russians have been found wanting. Niether have they the respect of the G7, which they so cravenly desire and dont get - and dont value the support and standing that they have in the Third World. Russia has a fond belief that they can float a new currency bloc - with the help of China.

The Russian industrial and corporate systems are on the verge of bankrupty. Russian industry with huge debts payable to Western banks in the next 12 months, have been unable to obtain refinancing of these debts. Russian foreign exchange reserves are down from nearly US$400 billion to US$275 billion.

The Chinese have been reduced to praying for a G20 success - so that their super-prime customer the US starts buying again. Never mind if the US does not pay their purchases. Russia has been threatening to launch a new Third Currency in collaboration with China. In the meantimes, ASEAN has created a emergency fund - like an Asian IMF.

Best of luck, Brother Putin & Tao.

Does this crisis affect the poor at all?

The most dangerous of them all ...

One supra-national currency. That seems like one bad dream. One global currency seems like the ultimate conspiracy theorist. Some 5000-10,000 people will control our lives. Of course, such ideas are injected into the discourse from countries like Russia.