This post will explain you that, why this period will not be of subdued economic activities. This will be worse, besides good economic activity.
I liked the golden words from Sid, "The monetary supply, to maintain balance, must grow at a rate which approximates the growth in productive output, otherwise the money system will eventually starve itself of liquidity". This is perfectly right.
But my question is, What happens if the money supply increases without productive output.
People have gone crazy these days, they are hoarding on to cash as the best investment. If people keep the cash with them, the system will starve from liquidity. So government will have to inject more cash in the system. But, people will hoard all that cash again. Government print more and injects more.
Its sort of government is trying to unclog the credit system, by throwing cash. But people with all their belief that this is the end of 50 year long Kondratiev_wave, keep on hoarding cash. This creates a oversupply of cash in the system. Though, it will not look like it, because people are hoarding cash. But what happens when all this cash comes out to buy something.
My golden words are : "If majority understands the system and take action against it, the system changes itself".
Banks, whose primary duty in the system is to lend, are refraining from lending. People are so sure that this is great depression, they are keeping their cash at home. Everybody is cutting on those new purchases, because they think, they will be able to buy cheaper later on. Governments to stop the world from severe problem, are printing money, cutting rates, providing liquidity.
My view is also the same, that it will be very long slump in global economy, it terms of productivity. But, governments printing money at an insane rate to keep the system intact, are doing wrong. In dollar terms, it will be period of growth. People around will have a more terrible life, but Dow Jones Industrial Average will make new highs. Wages will be less, but not in money terms, but only in terms of things they can buy with it.
Kondratiev Wave, wiki page says this, "The business cycle is supposedly more visible in international production data than in individual national economies. It affects all the sectors of an economy, and concerns output rather than prices (although Kondratieff had made observations about the prices only)."
This is precisely my argument, the real economic output will be far less, but prices will be far more. When the cash which is being hoarded upon, comes out to buy something, things will appreciate in price. If prices of essential commodities doubles from here, the money system will ask for more money to buy essential things. This will lead to governments printing more, essential commodities rising more, money system starves again from liquidity and so governments print even more. Positive feedback loop of price rise begins.
I hope i made some of your questions clear, and planted new questions.
Saturday, January 31, 2009
Sunday, January 25, 2009
Culture and God
Long before, India accepted that growth and economic upliftment means westernization. Westernization of our thoughts, westernization of language, westernization of lifestyle.
China and Japan, sort of proved that growth and economic prosperity can be achieved without following the western culture.
Every single human obsession to spend, creates jobs for other people. If you have too many gods, and different ways to worship them, too many festivals, too many rituals, too many customs, all these create jobs. A festival increases the velocity with which money changes hands. A marriage season increases economic activities across all sectors.
If you think about it, Diwali became a big festivals, why not Janmastmi. It was not because Ram was more important than Krishna. The primary reason was because it was coupled with the Kharif crop harvest, at that time of Diwali our ancient agrarian economy had more to earn and more to spend. The velocity of money ( the rate at which money changes hands) increased during those times. That lead to people spending more for Diwali and lesser for Janmasthmi, and Diwali became a bigger festival. Same is the reason for Holi becoming a big festival because of the Rabi crop harvest.
The outsourcing boom and investment inflows, together increased economic activities independent of our festivals. Money was coming not just through our economy, but from outside. So, the importance of these festivals and the monsoon on economic activity was diminished. Now, in this economic downturn the importance is back. If you run a factory in India, you could see a clear change in orders, even from a small festival like Sankranti on your sales.
For Christmas, Santa Claus was created because Jesus was not able to increase much economic activities. People needed a red-dressed gift-delivering symbol of god, for Christmas shopping.
World will learn some day, that it is not possible to run economy with just one god, you need a whole family of gods. Also, you need to celebrate all your Gods birthdays, marriage anniversaries and other godly achievements. All this is nicely binded into our culture, we have 1066 festivals, 330 million gods. We celebrate, Mahashivratri, Ganesh Chaturthi, Janmashtmi, Ram Navmi, Diwali, Tulsi Vivah, Holi, Gurunanak Jayanti, Id, Christmas, Raksha Bandhan, Onam, Pongal, Lohri, Navratri, Mahavir Jayanti, Bhuddha Purnima, and a hell lot many more.
Just think about these festivals, and imagine the economic activity each one of them create.
These festivals are very important to run our economy. So, next time you get stuck in traffic because of Ganesh Chaturthi, don't get pissed off on those people, look at the economic activity which is being created. This economic activity is helping you to earn money, in some or the other way.
Westernization is killing some of our culture, but we must preserve it. Culture preservation is not just some bullshit, which governments try to do. It makes deep economic sense to preserve it.
China and Japan, sort of proved that growth and economic prosperity can be achieved without following the western culture.
Every single human obsession to spend, creates jobs for other people. If you have too many gods, and different ways to worship them, too many festivals, too many rituals, too many customs, all these create jobs. A festival increases the velocity with which money changes hands. A marriage season increases economic activities across all sectors.
If you think about it, Diwali became a big festivals, why not Janmastmi. It was not because Ram was more important than Krishna. The primary reason was because it was coupled with the Kharif crop harvest, at that time of Diwali our ancient agrarian economy had more to earn and more to spend. The velocity of money ( the rate at which money changes hands) increased during those times. That lead to people spending more for Diwali and lesser for Janmasthmi, and Diwali became a bigger festival. Same is the reason for Holi becoming a big festival because of the Rabi crop harvest.
The outsourcing boom and investment inflows, together increased economic activities independent of our festivals. Money was coming not just through our economy, but from outside. So, the importance of these festivals and the monsoon on economic activity was diminished. Now, in this economic downturn the importance is back. If you run a factory in India, you could see a clear change in orders, even from a small festival like Sankranti on your sales.
For Christmas, Santa Claus was created because Jesus was not able to increase much economic activities. People needed a red-dressed gift-delivering symbol of god, for Christmas shopping.
World will learn some day, that it is not possible to run economy with just one god, you need a whole family of gods. Also, you need to celebrate all your Gods birthdays, marriage anniversaries and other godly achievements. All this is nicely binded into our culture, we have 1066 festivals, 330 million gods. We celebrate, Mahashivratri, Ganesh Chaturthi, Janmashtmi, Ram Navmi, Diwali, Tulsi Vivah, Holi, Gurunanak Jayanti, Id, Christmas, Raksha Bandhan, Onam, Pongal, Lohri, Navratri, Mahavir Jayanti, Bhuddha Purnima, and a hell lot many more.
Just think about these festivals, and imagine the economic activity each one of them create.
These festivals are very important to run our economy. So, next time you get stuck in traffic because of Ganesh Chaturthi, don't get pissed off on those people, look at the economic activity which is being created. This economic activity is helping you to earn money, in some or the other way.
Westernization is killing some of our culture, but we must preserve it. Culture preservation is not just some bullshit, which governments try to do. It makes deep economic sense to preserve it.
Thursday, January 15, 2009
Brutal System
One of my friend told me, that stock market is too brutal. This post shows you that every system, when it comes to teach you for the things you did in a wrong way, it teaches brutally. Systems are purely rational, they are emotionless. When system comes to teach you, of something bad, it will teach you in a wild, uncontrolled and savage manner.
Around 1985, a technology came to India that was more wonderful for people. They were very happy to see this technology work. It was admired more than TV or Radio. It was called Sex-Identification before birth. People used it terribly, to get the female child aborted and fill their obsessions about the male child. People produced 4-5 male child, after getting 3-4 female child aborted. They were pretty happy, that they will command fat dowry when their male childs grow. This lead to a shortage of female child.
God never reacted to the bad. No thunder showers or lighting happened when the female child were killed. The system was looking, it was silent.
Twenty two years later.
In year 2008, there is a terrible shortage of females, especially in small village areas. People are offering reverse-dowry to the female's family for getting their male kids married. Some people with 4-5 male child, cannot afford to pay the females family and cannot even manage to get all their male child married. This is not that brutal.
The brutality is with the villages in Rajasthan. They produced too many male child, and because of terrible sex ratio's nobody want to get their female child married in those villages.
This will lead to no new families, who will be male-child-obsessed. Some, want to try to sell their land and move to other villages, where people like to get their female-child married, to get their sons married. But, nobody wants to buy land in those villages, even at super-cheap rates. Many of the male child ran away, from their families, to get married. Most of them stole and took all family jewelery along with them. The system, will teach them brutally by wiping out the complete villages out of the landscape, they will make their sons die unmarried. This is evolution. The brutality is totally worth it.
The system, destroyed the wrong. System will always teach you for the wrong deeds, in the same lifetime. If the system is silent, don't think you are right.
Around 1985, a technology came to India that was more wonderful for people. They were very happy to see this technology work. It was admired more than TV or Radio. It was called Sex-Identification before birth. People used it terribly, to get the female child aborted and fill their obsessions about the male child. People produced 4-5 male child, after getting 3-4 female child aborted. They were pretty happy, that they will command fat dowry when their male childs grow. This lead to a shortage of female child.
God never reacted to the bad. No thunder showers or lighting happened when the female child were killed. The system was looking, it was silent.
Twenty two years later.
In year 2008, there is a terrible shortage of females, especially in small village areas. People are offering reverse-dowry to the female's family for getting their male kids married. Some people with 4-5 male child, cannot afford to pay the females family and cannot even manage to get all their male child married. This is not that brutal.
The brutality is with the villages in Rajasthan. They produced too many male child, and because of terrible sex ratio's nobody want to get their female child married in those villages.
This will lead to no new families, who will be male-child-obsessed. Some, want to try to sell their land and move to other villages, where people like to get their female-child married, to get their sons married. But, nobody wants to buy land in those villages, even at super-cheap rates. Many of the male child ran away, from their families, to get married. Most of them stole and took all family jewelery along with them. The system, will teach them brutally by wiping out the complete villages out of the landscape, they will make their sons die unmarried. This is evolution. The brutality is totally worth it.
The system, destroyed the wrong. System will always teach you for the wrong deeds, in the same lifetime. If the system is silent, don't think you are right.
Wednesday, January 14, 2009
Creative destruction
Destruction is also sometimes a creative thing to do. Creative Destruction is like a reboot, to start a hanged system again. Creative Destruction is like a war to start creation again.
If value, cannot be created by the economy, destroy the current value, so that the economic engine runs again. Keynes, in his theories clearly pointed out, that wars act as a great economic stimulus. Now, if you read Classical or Neoclassical economics you will feel like laughing at it. But Classical and Neoclassical theories were proven as terrible failure only after we saw Great Depression. Now, everybody believes in Keynes. Deficit spending is done by every government as a counter-cyclical measure to beat the economic boom-bust cycle. Don't you think Keynes will also fail some day.
So, if a theory fails so easily, after perfectly working for some years . Then, the theories which are written in our oldest Veda's must be right. For they would have seen all the conditions and must have been modified for all scenarios, they would have evolved above failures.
Its written in RigVeda. Fear Debt, for it will land you to biggest problems later on.
U.S. has engaged in many wars, precisely when its economy was in problem. World War II was the basis of taking the world out of the Great Depression. The solution to systematic problems will be found by the system itself.
World War I caused German Hyperinflation. The German Hyperinflation led to rise of Hitler. Hitler in search of food, attacked France. The World War II started, the economic engine started running again. The world was out of the Great Depression. This cycle took in all ten years. The thing to note is that the system, finds out a solution for its problems automatically.
If you have severely, faced bad-luck for most of your life. Then your prosperous time will be starting soon. However, if you have been a lucky all your life, good-luck will say you goodbye. This is theory of Luck. Luck never stays with one person for a life-time. The feedback loop has to do something with it. If you have been too lucky, you start behaving like an asshole, and luck goes away. This can be called feedback loop of assholism.
These systematic forces will always be working. The feedback loop will be always at work. However, big the problems human being landed into, the solution will automatically be found by the system itself. The system may take time, but at the end things will become better.
Be patient with the system, for justice will be done by the system itself, for wrong ideas of the human being. Probably, these systematic forces at work, would have made the human being to believe that there is something out there which sets everything right, which the human beings called God.
If you do positive things, positive feedback loop will be formed. If you do negative things, negative feedback loop will be formed. What is positive and negative, can be taken from the principles of Dharma.
If value, cannot be created by the economy, destroy the current value, so that the economic engine runs again. Keynes, in his theories clearly pointed out, that wars act as a great economic stimulus. Now, if you read Classical or Neoclassical economics you will feel like laughing at it. But Classical and Neoclassical theories were proven as terrible failure only after we saw Great Depression. Now, everybody believes in Keynes. Deficit spending is done by every government as a counter-cyclical measure to beat the economic boom-bust cycle. Don't you think Keynes will also fail some day.
So, if a theory fails so easily, after perfectly working for some years . Then, the theories which are written in our oldest Veda's must be right. For they would have seen all the conditions and must have been modified for all scenarios, they would have evolved above failures.
Its written in RigVeda. Fear Debt, for it will land you to biggest problems later on.
U.S. has engaged in many wars, precisely when its economy was in problem. World War II was the basis of taking the world out of the Great Depression. The solution to systematic problems will be found by the system itself.
World War I caused German Hyperinflation. The German Hyperinflation led to rise of Hitler. Hitler in search of food, attacked France. The World War II started, the economic engine started running again. The world was out of the Great Depression. This cycle took in all ten years. The thing to note is that the system, finds out a solution for its problems automatically.
If you have severely, faced bad-luck for most of your life. Then your prosperous time will be starting soon. However, if you have been a lucky all your life, good-luck will say you goodbye. This is theory of Luck. Luck never stays with one person for a life-time. The feedback loop has to do something with it. If you have been too lucky, you start behaving like an asshole, and luck goes away. This can be called feedback loop of assholism.
These systematic forces will always be working. The feedback loop will be always at work. However, big the problems human being landed into, the solution will automatically be found by the system itself. The system may take time, but at the end things will become better.
Be patient with the system, for justice will be done by the system itself, for wrong ideas of the human being. Probably, these systematic forces at work, would have made the human being to believe that there is something out there which sets everything right, which the human beings called God.
If you do positive things, positive feedback loop will be formed. If you do negative things, negative feedback loop will be formed. What is positive and negative, can be taken from the principles of Dharma.
Subscribe to:
Posts (Atom)