Saturday, February 11, 2012

Do they know what they are doing?

Governments throughout the world have strict secrecy laws. All decision making is kept secret. This politicians an air of mystery and superiority and tells us, the people, that they know more than us. Trust us, they say, and we will do the best for you. But do they really know what they are doing? Indian government is to allow airlines to import fuel for planes directly from foreign countries where it is cheaper. This has been done as a desperate measure to try and avert bankruptcy of private airlines who are, apart from Indigo, running at huge losses. The reason why fuel is so expensive in India is because it is taxed heavily, up to 36% in some states, whereas it is taxed at only 4% in some countries. Instead of reducing taxes the government wants airlines to buy directly from abroad. This maybe because airline fuel tax is levied by states and the central government cannot touch it. So, by allowing airlines to buy directly from abroad, is the center trying to undermine the states? The fuel has to be transported and stored in some state in India. So what if that state decides to levy tax on the fuel? The German government must be cleverer. Germany is demanding very harsh austerity measures from the Greek government in return for the next tranche of bailout money, 130 billion euros. Already unemployment in Greece is at 20.9% and industrial output fell 11.9% in December but the EU, led by Germany, is demanding a cut in minimum wage from 751 euros to 600 euros and the loss of 15000 public sector jobs. Surely, this will worsen the recession in Greece making default inevitable. If Greece goes, Portugal, Ireland and even Italy may follow leading to a break up of the euro. Normally the currency of any country reflects the strength of its economy. Having a common currency across 17 countries meant that Germany was able to sell its products in all these countries at the same price as in Germany even though there was enormous difference in economic strength. Also a common low interest rate helped people in weaker countries to spend on borrowed money running up unsustainable debts. If the euro breaks up Germany stands to lose as much as these countries if not more. Common sense suggests that richer countries should be helping to stimulate growth in these countries while reducing deficit. But that is not happening. In India criminals with black money and goons have any chance of winning in elections. Surely it is not the same in western countries. We hope they know what they are doing. Do they?

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