Nuclear summit or a collection of duplicitous scoundrels?

A nuclear summit is taking place in Washington, presided over by two of the most duplicitous scoundrels in the world, namely Barack Obama of the US and Xi Jinping of China. They are discussing how to make North Korea stop its nuclear program. Japan and South Korea have reason to be worried about an unstable neighbor, armed with nuclear missiles, who can only be controlled by an aggressive, uncivilized China. Will China apply pressure on North Korea to stop its proliferation activities? Not a chance. China has to be legitimately worried about a collapse of the regime and an uncontrolled influx of refugees but its main concern is a united Korea, with a democratic government in Seoul, an ally of the US, right on its border. It is already talking about preserving regional strategic balance and not upsetting the security interests of any other country which is its doublespeak on missile defense system that the US is thinking of supplying to South Korea. What that means is that they will continue with their aggression by building artificial islands on disputed marine territory, by damming the Brahmaputra River in Tibet to steal our water and by producing nuclear armed multiple independently targetable reentry vehicles, or MIRV, but do not try to halt their ambition to conquer the world. The summit is being held in the US, the only country ever to have used nuclear weapons on innocent civilians. Is the US going to give up its nuclear weapons? No chance of that either. Obama has authorized the production of B61-12 bombs, with the force of 50,000 tons of TNT, at a cost of $11 billion. Obama quietly signed a nuclear deal with China in 2014 which would supply advanced coolant pumps to make quieter nuclear powered submarines. The argument given was that if the US did not supply the technology some other country would. Which other country is capable of manufacturing nuclear powered submarines, other than Russia? If Putin had wanted to transfer such technology to China would he not have done it already? Putin has shown his contempt for the summit by staying away. Bill Clinton waived sanctions on China in 1998 when China promised to stop helping Pakistan in producing nuclear weapons and to help in persuading Iran to stop enriching uranium. We know how that went. The US has signed a nuclear deal with Iran which does not stop its proliferation and Pakistan Prime Minister, Nawaz Sharif has conveniently used the bombing in Lahore as an excuse to avoid questions about his country's proliferation activities. Despite the files of Osama bin Laden showing how the Pakistan army is in cahoots with terrorists why is Obama rewarding it with F16s? Must have made a deal in return for taking out bin Laden to win the 2012 re-election. Is Mr Modi prepared to counter these villains?

Surely, it is the result that matters?

Is the Nehru-Gandhi dynasty responsible for poverty in India? An article seeks to explore the damage this one family has done to India. Nehru may perhaps be forgiven because he became prime minister just after World War II, before which the world was completely different. India had been under occupation for nigh on 1000 years, first by the Moguls and then by the British. The October Revolution in Russia had established the first communist state in the world, with the lofty vision of economic equality for everyone. The Great Depression of 1929 may have reduced confidence in the capitalist model of the US. Gandhi's glorification of poverty has been used as an example for us, though not for politicians and civil servants, who enjoy luxuries that even Americans might envy. But by the time Indira Gandhi became Prime Minister in 1966 it would have been apparent that the Soviet model was not working, especially since we had to borrow $5 billion from the IMF in 1982. Certainly, by the time Rajiv Gandhi became prime minister in 1984 he would have seen the Soviet Union was not prospering, the East Asian economies of Japan, Taiwan and South Korea were booming and China was embarking on aggressive capitalism, under the guise of 'Socialism with Chinese characteristics'. On 21 May 1991, the day Rajiv Gandhi was assassinated, a chartered plane carried the first tranche of gold to London, which was in lieu of $2.2 billion from the IMF to avoid bankruptcy. The economy spurted when PV Narasimha Rao and then Atal Bihari Vajpayee opened parts of the economy to foreign competition. But the Congress gained power in 2004 and again proceeded on a policy of handouts, prescribed by the National Advisory Council, presided over by Ms Sonia Gandhi, who has no knowledge of economics, and consisting of a collection of activists, who prosper from NGOs, and retired bureaucrats, glad for a sinecure. The article says," In the fever swamps of the far right, many people believe that the Nehru-Gandhis deliberately kept India backward in order to nurture a poor and ignorant vote bank. But you need not buy into crackpot theories to make a more prosaic point. Between them, Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi, who ruled India for 37 of its first 42 years of Independence, presided over one of Asia's great economic flops." Sonia Gandhi took us back a decade. It is not just policies. The Family rules by patronage, which encourages the most servile sycophancy, which leads to poisonous crony capitalism. Thus Ms Sonia Gandhi appointed an unelected Prime Minister who shamelessly observed a destruction of the economy and massive scams, despite boasting of a D Phil in Economics from Oxford. The claim to power by inheritance of this Family has created other clones who follow their example of entitlements, mostly through criminal means. They may not desire poverty, but create it anyhow.

Are they victims because we don't love them enough?

A few days ago bomb attacks on the airport and on a metro train in Brussels killed 32 and injured over 300 people. Three more have died since. The police still have no clue about the identity of the third man at the airport, wearing a hat and a white jacket, whose bomb failed to explode. In November 130 were killed and over 700 injured in simultaneous attacks on a rock concert, a stadium and a cafe in Paris. The signs were there since 2014 but authorities in Europe did not take them seriously. Even Obama called ISIS a 'JV team', which means 'junior university team', in an interview in 2014, when ISIS had just taken over Fallujah. ISIS is making bombs with triacetone triperoxide, which can be made from acetone and hydrogen peroxide, found in nail polish remover and hair bleach. The bombers at Brussels could not fit a fourth suitcase into the taxi which took them to the airport, or else the carnage could have been much worse. Is all this the fault of European colonialism, when they drew lines dividing peoples into different nations according to their own spheres of influence, the divisions generated during the Cold War between Western countries and the Soviet bloc, or the most recent meddling when, in acts of utmost stupidity, both Saddam Hussein and Muammar Gaddafi were removed? The problem that Europe has is that it is right next door to the Middle East and North Africa, where the terrorists are being trained, while the US is safe across 8,000 miles of Atlantic Ocean. Some think that we should be shedding tears for terror attacks in Baghdad and Istanbul as well as those in Europe. Should we? The President of Turkey, RT Erdogan is a thug who is bombing Kurds, fighting ISIS in Syria, which helps the ISIS, while at the same time allowing NATO aircraft to use Incirlik Air Base to bomb ISIS, which makes Turkey fair game for both ISIS and Kurds. The previous Prime Minister of Iraq, Nouri al-Maliki was solely responsible for the resurgence of Al Qaeda in Iraq because of his hatred for Sunnis. It is like asking Indians to sympathise with Pakistanis, killed in terrorist attacks, when the Pakistani Army is training and arming terrorists to kill Indians. Their hatred is such that even after living for 40 years in the US a Pakistani compares Hindus to monkeys. Liberals in India and the West portray terrorists as victims, young people who have been radicalized because we do not love them enough and are not giving them high paying jobs. The danger is that there is going to be a severe backlash as ordinary people, who are normally peaceful, decide to fight back. After all, people still blame Neville Chamberlain for appeasing Hitler. Liberals are outraged if a woman is raped, as everyone should be, but if terrorists do the same they make excuses. Why? If they continue war will engulf the world. They will be responsible.

The dollar as a weapon.

Is trade deficit bad for the US, as Donald Trump claims? Apparently, the US must run a trade deficit with other countries to keep global trade moving, because most trade between nations is priced in dollars. This is known as the Triffin Dilemma, which predicts that there will be boom-bust cycles in the US economy because of having to run a deficit permanently. There have been 12 boom-bust cycles in the US since the 1940s. The most recent one was in 2008, known as the sub-prime crisis, because banks were lending mortgages to people with low incomes who could not service their loans when interest rate started to rise. Banks thought they had hedged their loans through Credit Default Swaps, but the market had become so big that the US government had to bail out firms like AIG.  Interest rate had been kept low because cheap goods from China kept inflation under check and the Chinese bought US treasuries to weaken the yuan, so that Chinese exports stayed cheap. China built up foreign currency reserves of $4 trillion in the process. The result was a huge asset price bubble, resulting in the Great Recession when it collapsed. All this came about because the Republicans voted for permanent normal trade relations with China in 2000, allowing China to become a member of the WTO, which meant that taxes on Chinese goods fell. US companies shifted manufacturing to China, resulting in massive job losses, which is why Donald Trump is ahead in the race for nomination to be the Republican candidate for the presidential election in November. Surely if the US withdraws the dollar from being the main reserve currency for world trade it would not have to run a trade deficit and can rid itself of the Triffin Dilemma once and for all? The dollar gives the US government the power to levy sanctions on other countries, no matter how strong they are, as it has done on Russia, by forbidding banks to trade in dollars with that country. It makes the dollar a formidable weapon to attack and weaken an opponent, without fear of reprisal. That maybe why the US got rid of the gold standard but still has the largest gold reserve in the world. Apparently, countries which want to become world powers, like China and India, are building up reserves of gold while Canada is selling its stocks. However, sanctions may force countries to retaliate in other ways as Russia has done in Syria. Russia's intervention has strengthened Iran, whose sanctions were lifted just recently, so that it threatened to walk away from the nuclear deal. China's economy is so big that the Federal Reserve agreed to help it to weaken the yuan in a secret meeting at the margins of G20. There have been empires in the past, some of which have lasted centuries. The US empire will also end. Whether with an explosion or a whimper remains to be seen.

Can you legislate for kindness?

Why are laws so ineffective in India? Because they are enacted under pressure from activists, without proper analysis and for show, rather than intent. Activists are motivated by a combination of emotion, an urge to do something, even if it is counterproductive, and to make money by forming NGOs. An article on animal cruelty seeks to make an emotional case for tougher laws by mixing up incidents and motives, which led to them. The incident of a politician breaking the leg of a horse, which required amputation to save his life, was an act of extreme cruelty with no mitigating excuse. Killing puppies of stray dogs, while seemingly cruel, may have justifiable reasons. Packs of stray dogs killing children on the streets of India are a common occurrence. This is bound to produce extreme anger in parents and communities. Some people seem to possess an extreme fear of dogs, which may seem irrational, but so is arachnophobia or agoraphobia. But most of the fear is about rabies, because it is 100% fatal. A bite by a stray will need 5 anti-rabies vaccine injections and any bite on the face will need immunoglobulin injections. The total cost could be in excess of Rs 10,000, which may equal two months' earnings for a laborer. Ignorance of the writer is shown by the statement that "Pressures of city life might be pushing people to become less tolerant...", which is completely untrue. Some 50 years back very few people in India kept dogs as pets but now you can see numerous breeds of dogs being taken for walks everywhere. Pet shops have opened on every street and there are long queues at vet surgeries. A breeder in Bengaluru has imported 2 Korean mastiffs from China at the cost of Rs 10 million each. Clearly, he intends to breed them for profit. But if they are from the same litter inbreeding will result in deformities and suffering of subsequent generations. A recent winner at the Crufts dog show caused huge controversy because of her deformed back. The article demands tougher laws in line with western countries but seems ignorant of the fact that unwanted dogs, even healthy ones, are put down. That is infinitely kinder than sterilizing them and leaving them out on the streets, where they are the mercy of the weather and all sorts of harm, from vehicles to other dogs. Wasting taxpayer money on sterilizing and inoculating them is criminal in a country where 30% of children are malnourished. If a pet dog gets a painful illness it is put down so why not strays. Activists should focus on stopping inbreeding, improving standards of veterinary education and condition of kennels, so that owners can go on vacations. We have laws banning bigamy, dowry, bonded labor, gender selection and many others. Stupid laws do not work. Instead reduce the interaction between strays and humans, that is the solution. After all, dogs are not an endangered species.

Are we people or citizens?

Although our Constitution starts with the words," We the people ", it then goes on to promise that " all citizens " will be guaranteed " Justice, Liberty, Equality and Fraternity ". " We the people " is how the US Constitution starts, and Justice has been added to " Liberte, Egalite and Fraternite " of the French Revolution. India has different areas with different languages, customs and cultures which makes it a collection of peoples. Therefore, the word " citizens " was used in the very first sentence to unite all the people, writes a professor. " 'People' and nations everywhere need a good enemy to bond, not good friends. 'Citizenship', on the other hand, proceeds in the reverse direction; it does not seek out enemies, but friends," he writes. Another professor has a different understanding of the Constitution. " The first part is constitutionalism, liberal democracy and a commitment to redistribution," he writes. Actually the original document wanted India to be a " Sovereign Democratic Republic " but Indira Gandhi changed it to " Sovereign Socialist Secular Democratic Republic " which allowed her to nationalise banks and raise the top rate of income tax to 98.75%. The economy tanked and India had to borrow from the IMF to survive. She also changed the words " unity of nations " to " unity and integrity of nations ", which allowed her to justify the state of Emergency by accusing her opponents of trying to divide the country. The Constitution we have today is not what the 'Founding Fathers' wrote, granting equality to everyone, but a document tailored to give extra-constitutional rights to certain communities, to divide the people by giving extra privileges to certain sections and to loot public funds in the name of helping the poor. Because all these rights do not come with any demand for duties as citizens. The killing of a dentist in Delhi by slum dwellers neatly sums up how unrestrained rights are dividing people and resulting in murder. Slums are illegal settlements as politicians protect them in the name of helping the poor. They are a means of blatant grabbing land worth billions of rupees. Millions of Bangladeshis have been allowed to infiltrate the country freely in the name of helping minorities. The Constitution is merely a document, which has no value unless properly implemented. It is being used by politicians to increase their own wealth and powers by dividing the people, to win elections. One professor sees a unity of 'citizens' while another seeks to divide the people. No wonder India remains a weak, poor, divided nation.

A bulging wallet gives a feeling of wealth.

Those who make policy and those who advise them probably never go out on to the streets in India. An economist writes that the Rs 1000 note should be withdrawn because no one needs to use such a high value note for daily activities. Instead, these notes are used by criminals for shifting large sums of money, for not paying income tax by hiding real incomes and to buy votes by crooked politicians. In fact, an Indian housewife should never need a note higher than Rs 250 in value. How has he arrived at such a magical figure? By maths. The $100 note is 0.25% of US per capita income, so on that basis, and adjusting for Purchasing Power Parity, he has arrived Rs 250. This has been described as 'mathiness' by another economist. Instead he should have asked his maid or driver how often they use a Rs 1000 note. Buying fruits and vegetables for a family of four for one week will cost a better part of Rs 500 and buying rice, atta, dals, cooking oil and washing powder will cost Rs 1000. There are only 21.1 million credit cards in India in a population of 1250 million, who spent a total of Rs 1.9 trillion in the last financial year, while there are 553 million debit cards, who spent Rs 1.2 trillion, which is much less per card. These spends are probably driven by online shopping and could drop precipitously if state governments impose taxes on e-commerce, driving up prices. You have to pay annual fees to banks for cards whereas cash is free. The inflation rate in the US was 1% last year, while retail inflation in India was 5.1% in February. This means that the rupee is losing its buying power every month and should fall in value against the dollar. The rupee is being propped up by remittances by Indians living abroad and by foreign investors who have bought $257 billion worth of equities and $51 billion worth of debt, for a total of $308 billion. If even a fraction of this is sold the rupee will drop, which will push up the price of imports, especially fuel, and add to prices. If that happens even Rs 1000 may not be enough for weekly shopping. India's economy is dependent on cash transactions as the Finance Minister has acknowledged. The informal economy provides employment to 400 million people, which is 90% of the workforce, and generates $780 billion, which is 40% of official GDP. Only 3% of people pay income tax and then have to file tax returns to claim refunds. Rs 650 billion has already been refunded this year. Imagine an army of tax officers, earning huge salaries and perks, engaged in refunding taxes. What a waste of public money. If you add another 400 million to this the whole system will collapse. Fortunately, it costs much less to print a Rs 1000 note than to print notes of smaller value and the RBI earns seigneurage from printing notes. We feel rich with bulging wallets, not plastic.

Will depopulation be good or bad for the world?

Ruchir Sharma, Head of Emerging Markets Equity at Morgan Stanley, writes that the next population bomb will be one of depopulation, and not one of ever rising number of people resulting in famine, as predicted by Thomas Malthus. The working-age population was growing at 2% in the post-war years up to 2005 but has fallen to 1% this year. This will cut long term global GDP growth rate from 3.5% to 2.5% and that of emerging economies from 4% to 3%. He admits that rapid population growth can lead to economic growth only if politicians create the right conditions. What about India? Our population is growing at less than 1.5% per year, which seems low, but the fertility rate per woman is 2.5, which is higher than the replacement level of 2.1 per woman. Everyday 68,922 people are turning 25 years of age, that is 2.1 million per month. By 2025, 690 million Indians will be below the age of 25 years, which will be more than the combined populations of the USA, Germany, France, Britain, Canada and Australia. But so many young people will demand jobs, without which there is no self respect. The Arab Spring was a spontaneous outburst of young people who saw no future to look forward to. In Egypt protesters were demanding jobs and the opportunity to get married. Young men in Tunisia, where the revolution started, are joining ISIS in great numbers because the future looks bleak without any hope of finding jobs. Tunisia has a population of just 11 million, less than that of Delhi. Nobel Prize winner economist, Joseph Stiglitz writes of the difficulties in finding jobs in the US and Europe and the impossibility of owning a home for most young people, burdened with education loans from banks. Politicians stress on the importance of education, but spending money on an expensive education makes sense if there are enough high paying jobs. Not everyone has the ability to become a rocket scientist or a chartered accountant. Technology is seen as the savior. Optimists predict that energy from renewable sources will become almost free. With free energy we can get any amount of water by desalination of sea water. Vertical farms, run by robots, will produce an abundance of food without the need for pesticides, which will make it cheap. But what will people do if most of physical work is taken over by robots? The UN predicts that 1.8 billion people could face a scarcity of water by 2025 as forests are cut down to provide land for farming. Poor countries with high birth rate are most at risk and they may not be able to afford capital intensive technologies. India already has 500 million people drinking arsenic in water. Japan is tackling its falling population by increasing the number of women at work and re-employing retired people. The Middle East, with high birth rate, is perhaps an example of Malthusian catastrophe. Perhaps, the only answer is technology and tax incentives for old people to work.

Why is the Governor talking about traffic lights?

Governor of the Reserve Bank, Raghuram Rajan is an angry man. Because he is worried. He feels," Our world is facing an increasingly dangerous situation," because after the Great Recession of 2008 governments are following " beggar thy neighbour " policies to divert growth from other countries, instead of undertaking structural reforms, which will " increase competition, foster innovation, drive institutional change ". Central banks, especially of rich countries, have a problem with very low inflation. " They feel that they cannot claim to be out of tools. If all else fails, there is always the 'helicopter drop', whereby the central bank prints money and sprays it on streets to create inflation (more prosaically, it sends a check to every citizen, perhaps more to the poor, who are likelier to spend it). But they can also employ a range of other unconventional tools more aggressively, from asset purchases (so-called quantitative easing) to negative interest rates," he writes. But these policies are ineffective because they either encourage people to save more, keeping the money in banks, or to borrow excessively to accumulate assets, leading to another bubble. What worries him are the 'spillover effects' because such policies depreciate their currencies which is bad for emerging economies. So what is Mr Rajan's solution? There should be another Bretton Woods type agreement wherein,"....policies with few adverse spillovers should be rated 'green'; those that should be used temporarily should be rated 'orange'; and policies that should be avoided at all times would be 'red'." With the greatest respect to Mr Rajan, surely he is being naive. The Congress threw over Rs 3 trillion on the MGNREGA scheme which pays the rural poor for 100 days a year - for doing nothing. A 23.55% jump in the salaries of civil servants dished out by the Seventh Pay Commission will add another Rs 1 trillion to government expenditure. What is wrong in paying civil servants? The government does not even know how many employees it has so a lot of the money is going to 'ghost employees'. Rs 20 billion to be spent on providing free gas connections to 15 million rural households. Another Rs 1 trillion announced today for free rural housing and on increased salaries for civil servants. Rs 1.15 trillion was spent on the Food Security Act in last year's budget. Where is the money to come from? Apart from politicians and civil servants not enough people earn enough to pay income tax so the government goes on increasing service tax and on adding cess, which is a tax on service tax. It is because our government has been dropping 'helicopter money' for years that the retail inflation is at 5.18%, when wholesale prices have fallen 16 months in a row. Which means that monetary policy, which is Mr Rajan's responsibility, has become moot. He cannot do anything to politicians in India, that is why Mr Rajan is angry with others.

If India could have a Donald Trump.

In 1978 China and India had similar living standards. Deng Xiaoping started economic reforms in 1978 whereas India started in 1991 when the Reserve Bank was forced to pledge 67 tonnes of gold to get a loan of $2.2 billion from the IMF. China's real GDP in 2001 was $1.56 trillion which was the same as India's GDP of $1.55 trillion in 2014. Today China's GDP is $10 trillion, which makes it the second richest country in the world, while India's GDP is $2 trillion. What was it that happened in 2000 that made the Chinese economy zoom so high? First, China became a member of the World Trade Organization. India, which is a member of the WTO since its formation in 1995 and was a member of its predecessor, GATT since 1948, allowed China to become a member with nothing in return, while China has repaid that by blocking our entry into the Nuclear Suppliers Group and will never allow India to become member of the UN Security Council. Nehru actually declined an offer of permanent membership of the UN Security Council in 1953 and suggested China as an alternative, leading to a humiliating defeat by China in 1962. The second event that helped China was when the Republicans passed a resolution to extend permanent normal trade relations with China in 2000. That resulted in a flood of outsourcing of manufacturing to China, resulting in a loss of 2 million jobs in the US, out of a total of 5 million jobs lost in manufacturing. Wages fell by 15% when adjusted for inflation. US imports from China cost $481.9 billion in 2015, while it exported $116.2 billion worth, giving a trade deficit of $365.7 billion. But what no one seems to talk about is that cheap imports from China kept inflation rates low in the US, which lulled the Federal Reserve into keeping interest rate low, resulting in the sub-prime crisis. The interest rate was 6.6% in 100, fell to 1.75% in 2001 and was just 1.00% in 2003 when the crisis was born, as US consumers borrowed like crazy, thinking that the party would last forever. What now? Both countries are chained by their political systems. China is a dictatorship of the Communist Party which has to maintain a high rate of growth to keep people employed and prevent protests. The weakening global economy means China's exports are falling. The government is trying to shift from manufacturing and investment towards consumption but there are doubts about how successful it will be without widespread job losses. Donald Trump promises to bring jobs back from China and robots will allow the US to manufacture cheaply at home. As for India, our growing population means that the workforce will reach 200 million by 2030, while our economy remains shackled by socialism. If only we could have a Donald Trump in India.

The rogues are falling out.

In an interview with a US magazine President Obama criticised British Prime Minister, David Cameron for making a mess of Libya. He called it a " shit show ". " We actually executed this plan as well as I could have expected. We got a UN mandate, built a coalition, it cost us $1bn - which, when it comes to military operations, is very cheap. We averted large scale civilian casualties, we prevented what almost surely would have been a prolonged and bloody civil conflict. And despite all that, Libya is a mess," he said. We know he is an accomplished liar, but this is blatant. No one is sure how many died in the attacks but estimates vary from 30,000 to 100,000. Libya has been in a constant state of civil war for the 5 years since Gaddafi's death. The UN mandate was for a no-fly zone for the protection of civilians in Libya and for the Arab League to ensure peace and security in the region. Bombing Gaddafi's forces and killing his grandchildren was never allowed in the UN resolution. That makes Obama, Cameron and Sarkozy war criminals and they should be serving life in prison. As it loses ground in Syria, ISIS is shifting its base to Libya, as Gaddafi had predicted would happen. Mohammed Elbibi, the man who took Gaddafi's golden gun is in hiding because he is afraid for his life. If Gaddafi was such a villain, as the West makes him out to be, why do people still support him? In his almost 8 years as president Obama has never taken responsibility for the disasters his administration has caused. Just like he has not taken responsibility for the murder of Ambassador Chris Stevens in Banghazi in September 2012 he shifted the blame for the war in Syria on Cameron. Just as Obama won 2 elections because of a combination of over 90% black votes and political correctness among whites so Cameron won an absolute majority last year by scaring people about the Scottish National Party and blaming the Lib-Dems for increasing tuition fees for college students. With absolute majority Cameron cannot shift blame any more so when the Work and Pensions Secretary, Iain Duncan Smith resigned for cuts in disability benefits the proverbial shit hit the fan. Cameron could lose his job as prime minister if his party goes against him. The coming referendum on Britain's membership of the European Union has divided the Tories and he might face the same end as Margaret Thatcher did over Europe. Just like the Congress did in India the economic recovery has depended largely on rising property prices, as the rich have benefited from low interest rates. The poor have lost through higher taxes, to balance the budget, and having to pay high rents. The villains are falling out with each other. Sadly they will not get the punishment they deserve.

The more the rights the more the bonds.

Niti Aayog, the organization set up in place of the Planning Commission, has come up with 2 suggestions to tackle poverty in the country. The first is to identify the extreme poor, by setting a bare subsistence level of earning so that subsidies can be targeted to them, and the second is to impart skills to those people so that they can lift themselves out of poverty. But will it work? With respect to the eminent economist Arvind Panagariya, who is the head of Niti Aayog, the answer must be no. The reason why people get caught in a poverty trap is because they have too many children, as another report shows. In this report the woman, having worked extremely hard to bring up 6 children single-handed, voluntarily offers herself as a bonded laborer because her son wants to get married. More children and more bonded labor. The study shows that when a factory owner acquires a bonded labor for $200 he makes a net profit of $2,585, which is 191%, over an average of 6.3 years. There are an estimated 11.7 million bonded laborers in India. The punishment for any attempt at escape can be severe. At one level human beings are like commodities where value is decided by supply and demand. The more scarce the skills or knowledge the more the earning potential. Thus, chartered accountants are highly educated and highly paid but actuaries earn twice as much. The mystery is why do poor people have so many children when 35% of rural families have double income and 42% of these are in the DINK category, which means 'double income no kids'. It cannot be a lack of aspirations because 60% of households possess televisions, even with a lack of dependable electricity supply in rural areas. It must be because of economics. Those who see children as added expense will have few and those who see children as a source of income will have more. India has followed socialism since independence but has the largest number of poor people in the world. So, how to reduce the number of poor people? Some would recommend even more handouts and complain that " obligations to secure rights- based laws are being ignored by the Union government." But that is precisely what the Congress did and was routed in the elections in 2014 because it increased poverty by causing double digit inflation and tanking growth rate. Maybe it was a Malthusian warning of the population reaching unsustainable levels. Is there any proof fewer people increase wealth? The much criticised one-child policy of China has made it the second richest country in the world, after the US. Real wages in England increased by 250% between 1300 and 1450 because a large part of the population was wiped out by plague. Reducing the poor reduces poverty. More bonded labor means more NGOs. Must be very profitable, but not for the poor.

Can we stay far from the coming war?

Another explosion in Turkey killed at least 4 people in Istanbul yesterday. Last month car bombs killed more than 37 in the capital, Ankara. In retaliation Turkish warplanes bombed Kurdish positions in northern Iraq. As usual, Turkish President, Erdogan and his pack of henchmen have heaped abuse on terrorists. " Democracy, freedom and rule of law " have " absolutely no value " to us, said Erdogan. Truth at last. He is solely responsible for the violence in his country. To increase his powers as President he broke off a ceasefire with the Kurds last year and won a landslide victory in November. On the one hand Erdogan is allowing US planes to bomb ISIS from bases in Turkey and, on the other, he is bombing the Kurds who are the only group fighting ISIS on the ground in Syria. Kurds blame Erdogan for smuggling oil from areas controlled by ISIS, a charge which has been echoed by Russia. The US urged Erdogan to stop shelling the Kurds, which is a laugh, because, as a member of NATO, Turkey is using planes supplied by the US to do its dirty work. When Russia started to bomb ISIS oil trucks Erdogan wanted to draw in NATO in an all out war with Russia but was bluntly told that his thuggery would not be supported. Meanwhile, European Union leaders have been begging Turkey to stop the flow of migrants crossing into Greece and have signed a deal promising to take in refugees from camps in Turkey and to pay billions of Euros as ransom. Turkey wants visa-free travel for its citizens into the Schengen zone, which will allow 8 million Turks to flood into Europe instead of a couple of million Syrians. Wonderful irony. The EU surrendered to Erdogan's threats of opening the floodgates of migrants, saying that he does not have " idiot " written on his forehead. Angela Merkel's party suffered defeats in recent regional elections, with the rise of the anti-immigration Alternative fur Deutschland Party. All across Europe parties against immigration are making gains as Europeans become increasingly uneasy at the dilution of their culture, terrorist attacks and influx of economic migrants disguised as refugees. Just yesterday Paris attacker, Abdeslam, who has been on the run for 4 months, was arrested in Brussels, after being shot in the leg. The only way to stop the flood of migrants would be to bomb ports in Turkey and Libya from where they are sailing. Some already think that an all out war is a definite possibility. Why is our government surprised that the US is supplying F16 planes to Pakistan? Obama has been supplying advanced weapons to Pakistan regularly. Surely, he made a deal with the ISI of Pakistan to supply sophisticated weapons if it gave up Osama bin Laden to help him win his re-election in 2012. Never has the world seen such a collection of unscrupulous thugs and gutless wimps in power. War is inevitable. We have to maintain distance.

We need to know whose money it is.

News channels in India have been full of the debt problems of liquor baron, Vijay Mallya who is now in residence in his house in Hertfordshire in England, which he bought for 11.5 million pounds, over Rs 1 billion, last year. He is said to owe Rs 90 billion, but he has pledged shares to the banks, so the net loss maybe around Rs 50-60 billion. Not small change, but nothing compared to what other companies owe. Relaince ADAG owes an eye watering Rs 1.25 trillion, Essar Group owes Rs 1.01 trillion, Jaypee Group owes Rs 762 billion, GMR Group owes Rs 480 billion, Videocon Group owes Rs 454 billion, Lanco Group owes Rs 471 billion and GVK Group owes Rs 334 billion, giving a combined total of about Rs 5 trillion. There are 9 companies whose debts are higher than those of Mallya and their earnings are less than their interest payments. 5,600 companies have been declared willful defaulters, with debts of over Rs 600 billion, but the loans of the big firms are so huge that banks are terrified to call them bad because they will lose a lot more than the promoters of the companies. In India, business fellows do not risk their own money. Public sector banks are owned by the government which allows politicians to treat public funds as their own money. " Bankers recall that in early 2009 there was practically weekly hounding of bankers by the ministries asking them to clear more loans. The government was facing its re-election and there was a general feeling that while the West had problems, India, along with the BRICS countries was set for 10% growth. Caution was scarce." This was the Congress, led by the world famous economist. But not just in India. No banker went to jail in the US for nearly collapsing the global economy in 2008 because no one can be prosecuted for making a bad business decision, even though a lot of these fellows were playing with savers' money and doing their best to hide the losses. However, Bernie Madoff is serving a 150 year prison term for a ponzi scheme and Rajat Gupta has just been released after serving 2 years in prison for insider trading, although he did not make any personal gain from his supposed crime. In India no one goes to jail because politicians treat public funds as their own, there is close friendship between business fellows, politicians and civil servants and cases drag on forever so that crooks die of old age before being convicted. While Ms Mamata Banerjee has increased West Bengal's debt by Rs 850 billion to Rs 2.78 trillion by dishing handouts to win elections. Salaries of government employees and interest payments total Rs 660 billion, Rs 210 billion more than what the state earns. Meanwhile, MPs of the Trinamul Congress have been shown to be accepting bribes in a sting operation. They pocket our money, we are left with none.

Is Obama responsible for the Trump bandwagon?

Last Tuesday Donald Trump won in Florida, forcing Florida Senator, Marco Rubio to suspend his campaign,  Illinois, home state of Barack Obama, and North Carolina. He lost in Ohio and is ahead by less than 2000 votes in Missouri. He now has 673 delegates compared to 411 for Ted Cruz and 143 for John Kasich. If he wins Missouri he will pick up another 25 delegates while Cruz will get 5. Republican Party leaders would do anything to get rid of Trump because of risks to down-ballot contests for Republicans standing for the Senate and the House. Some think that he will destroy the conservative agenda built up since Ronald Reagan. There is a trend to the US presidency. The incumbent usually wins a second term but after 2 terms the vote swings to the other party. So, 2 terms of Obama followed by 2 terms of Donald Trump and then 2 terms of a Democrat would mean 24 years without a conservative in the White House. Problem for the Republicans is that pretty much every Republican Senator hates Ted Cruz who is running second. Liberals blame the Republican Party for Donald Trump's success. It is as if he was lurking in the shadows like some undead, waiting to pounce on the unsuspecting Americans with his racism, xenophobia, gender bias and impossible economic policies. After the miserable failure of Jeb Bush, the other establishment candidate, Marco Rubio dropped out after his humiliation in his home state of Florida saying," From a political standpoint, the easiest thing to have done in this campaign is to jump on all those anxieties. But that is not what's best for America. The politics of resentment against other people are not just going to leave us as a fractured party. They're going to leave us a fractured nation." The usual bromide dished out by the politicians. We know best, voters are mugs. Meanwhile, Hillary Clinton has squeaked through in Missouri. Her biggest mistake was working as the Secretary of State for Obama. She has been blamed for a cover up of the attack on a consulate in Benghazi, in Syria, in September 2012, in which Ambassador Chris Stevens and 3 other Americans were killed. But it was not Clinton's fault. Susan Rice, a personal friend of Obama, went round the news channels claiming that it was not a premeditated terrorist attack but a spontaneous outburst in response to an anti-Muslim video on the internet. Why was she lying? Because Obama was up for reelection in November. Having won 2 terms through a combination of racism (overwhelming black votes) and political correctness Obama has presided over the greatest loss of down-ballot Democrat seats than any president in 70 years. His boast about economic recovery is shaky at best and he is despised by working class whites, who should be the bedrock of Democrats. If Trump becomes president Obama will have no legacy. Better to have no legacy than one like his.

Why a tendency to use a sledgehammer instead of logic?

The government has banned 344 fixed dose combinations of drugs available in India. Most of them are combinations of antibiotics, painkillers or cough medicines. Some of the combinations do not make sense while others are positively dangerous. Trouble is that the list itself is incomplete and seems illogical. For example, combinations of Cefixime, a third generation cephalosporin used in typhoid, with linezolid and levofloxacin have been banned, but not its combination with cloxacillin. Linezolid and cloxacillin are both indicated only for gram positive bacteria, as for an abscess, whereas levofloxacin would make more sense. The list does not include fixed dose combinations of anti-tuberculosis drugs which have been supported by the World Health Organization because they ensure that the patient takes all 4 drugs. This stops patients from taking partial treatment and emergence of resistant strains of the bacteria. The problem is that all these combinations are for patients who weigh less than 50kg and inadequate for heavier people. Also a patient with tuberculosis gains weight once the disease comes under control, so the dose needs to be increased. The biggest problem is that there is no law on who can call himself a doctor. While rules are very strict about trained doctors, who have to undergo Continuing Medical Education, to keep up to date, there are no rules for the millions of quacks who practice with complete impunity. Homeopaths, vaids, physiotherapists, dietitians, foot massagers and even snake oil salesmen are allowed to call themselves doctors and prescribe allopathic drugs. Companies make combinations for these illiterates who find it convenient to prescribe a concoction of stuff in the hope that something will work. Poor patients go to these charlatans because their fees are less than trained physicians. However, India is not the only country with drug combinations. Every country has over the counter, or OTC, preparations for simple illnesses, such as flu or loose motions, which are combinations of commonly used drugs. Cough, especially dry, can cause great inconvenience, especially because it tends to get worse at night when the patient lies down, keeping her awake. Most syrups for dry coughs will contain codeine, pholcodine or dextromethorphan, mostly in combination with an antihistamine. These make people drowsy so should be taken only before going to bed. Unfortunately, some people have become addicted to such combinations. But taking a sledgehammer approach takes away treatment options from trained doctors. Morphine is invaluable for treatment of heart attacks and terminal cancer but is not available on prescription. That has not stopped an addiction epidemic in Punjab. But, as is normal in India, drug companies have obtained injunction orders from courts so patients can relax for the next 25 years. You cannot do good unless it is logical.

Why do they ask us to invest in froth?

Pundits are puzzled and indignant as to why Indians do not invest in the share market. Less than 1.5% of Indians invest in shares, compared to 10% in China and 18% in the US. Only 2% of our household savings are invested in stocks compared to 45% in the US. Learned articles are written on how markets always give good returns if you hang in there. However, even in the US there are those with contrary views. Our market fell by 8.5% in August last year, when China devalued the yuan by 3.2%, and by 7.7% in January when the yuan was devalued by 1.4%. The S&P 500 in the US also fell both times but has recovered whereas the Sensex is weak because foreign investors have sold $2.4 billion worth our stocks. Foreigners own 70% of our market at $257 billion so we are at their mercy. There is another danger lurking in the background. Emerging markets have borrowed heavily in foreign currencies because of very low interest rates in the US, Europe and Japan and $1.6 trillion will need to be paid back over the next 5 years. If there is any default it will immediately affect all emerging market stocks. Indian companies have external commercial borrowing of $181.9 billion, Rs 4.5 trillion, of which 37% are at risk. Which puts us at the mercy of the US Federal Reserve. If the interest rate in the US goes up and/or the dollar becomes stronger it will immediately increase the debt burden of our companies. Indians think that our market is manipulated by some big players but it seems that the US market is also manipulated because earnings per share have fallen but the market is almost at record level. The Fed raised rate by a timid 25 basis points in December which was criticised by some as being too soon. Like drug addicts markets have become so addicted to near zero borrowing costs that they celebrated when US employment figures came in lower than expected. Since money does not earn any interest from banks investment into risky assets was the only way to generate returns. This has naturally built up bubbles in markets everywhere. The Eurozone, Japan, Switzerland, Sweden and Denmark have adopted negative interest rate where depositors are charged to keep their money in banks. This is to force people to spend money, in an effort to increase demand, and to devalue the respective currencies. In an assault on basic freedom governments are trying to engineer cashless economies which will prevent people holding their savings in cash and allow banks to make windfall profits from charging customers. Globalisation has made problems so interconnected that constant adjustments are required, which is beyond the scope of central banks. So great is the desperation that serious economists are actually discussing 'helicopter money' where people are just given money to spend. But what if they don't? Take them shopping at the point of a gun? Better to stay away from the stock market, what?

Why do we have the same discussion every month?

It is that time of the month again. Figures for the economy have just been published which will lead to a cacophony of calls for the Reserve Bank to reduce interest rate. The Consumer Price Index was 5.18% in February compared to 5.69% in January. It does not mean that prices are falling, it merely means that prices are rising at a slower pace compared to the month before. The average rate of CPI last year was 5.88% while it is 5.91% so far this year, so prices are rising faster, compared to last year. Those demanding lower interest rate point to 2 other indices. The Wholesale Price Index which has been negative for 16 months which means that wholesale prices of commodities, especially fuel, and manufactured products are falling. This is supported by the Index of Industrial Production which fell by 1.5% in January because of fall in manufacturing and capital goods. However, there are questions about this because the capital goods part is lower than in 2009, just after the Lehman Brothers incident, and the consumer goods component is the same as in 2012. Since IIP is measured against a base year, which is taken as 100, it would seem that growth is stagnant. The difference between wholesale prices and retail inflation maybe explained by the fact that WPI does not include services, such as education and recreation and amusement, whose prices have soared because of increased taxes. Average movie ticket in the US costs $8.70, which would work out to around Rs 600, whereas the price for a ticket at any multiplex in India would range from Rs 300-400. The median household income for people of Indian origin in the US is $101,591, which would be more than Rs 7 million a year. The average annual income of affluent people in India is a mere Rs 1.5 million. Compare college fees in the US to what the Indian Institute of Management charges in India. While one can postpone the purchase of a car or buy a cheaper brand of toothpaste, services, such as education, rent and healthcare are essential. Consumer spending is not going to rise by reducing interest rate as the total number of credit cards in India were a meager 21.1 million last year and the increase in spending maybe due to online purchase of retail products at the cost of bricks and mortar stores. So why the outcry for lower rates? The reason is that banks have huge amounts of bad loans, a lot of which has been hidden. Most of these are in infrastructure, metals and power sectors so low interest rate may allow the loans to be restructured at lower rates, providing some relief to companies. The hope is that lower rate will stimulate the real estate sector but that will help only those who can afford to buy properties at these levels, which means the rich. Increasing real estate prices only increase poverty as Britain is discovering. Lack of ideas all round. Worrying.

We have more to learn from Brazil than just football.

Thousands of people are protesting in Brazil against the government of President Dilma Rousseff who says that she is not going to resign because she has been democratically elected and blamed the opposition for creating a crisis. Sounds familiar? That is exactly what our politicians say when they are accused of hanky-panky. People are angry because the economy shrank by 3.8% last year and the currency has dropped by 55%. Brazil's economy relies largely on exports of minerals, controlled by the government, and agricultural products and the slump in commodity prices has resulted in huge deficits. People are enraged at allegations of $2 billion scam at the oil company, Petrobras. Something like our 2G and Coalgate scams. While the economy was booming the previous president, Lula da Silva started a direct benefit transfer scheme, called Bolsa Familia, in which the government paid a subsidy of 70 Reals for every child to the mother, provided the child attended school and health checks regularly. It was hailed for lifting 11 million families out of poverty and Lula is revered by the poor. We have the MGNREGA, Food Security Act and the Right to Education Act to subsidise the poor. Now the government has decided to provide free cooking gas to 50 million poor women. Prosecutors even picked up Lula and his wife for questioning. Such an act will be impossible in India where politicians can travel to the US for secret medical check ups in private planes, with lots of boxes, without any customs search. As the recent games with Vijay Mallya has shown. Mallya was Member of the Rajya Sabha and as an MP got himself a diplomatic passport. Clearly Rs 90 billion can buy an awful lot of support. To get their money back banks applied to the Supreme Court to impound his passport on 8 March but Mallya had left India on 2 March, no doubt assisted by his well-wishers. Now the Attorney General wants Mallya to come back to India to surrender his passport. Naturally, Mallya has declined the invitation. You cannot take Rs 90 billion from banks by being stupid. He said that he does not feel safe in India and, although he feels sick to be in hiding, one day he will return to clear his name. Retail inflation rate in Brazil was 10.36% in February despite the interest rate being held at 14.25% for 5 months straight. The Governor of the Reserve Bank, Rajan has cited Brazil as an example of what can happen if you try to grow the economy too fast. However, politicians have elections to win and in a poor country like India handouts are the easiest way to win. Politicians get power and pelf and the hapless taxpayer foots the bill. In other countries people are protesting against corruption, here they are protesting to bring corruption back. The irony is that most people here have heard of Brazil, but only for its football.

Will it be good for us to have no rights at all?

On 2 December 14 people were shot to death and 22 seriously injured in a shooting in San Bernadino, in the US, by a couple of Pakistani origin. The police found an iPhone 5C belonging to one of the shooters, Syed Rizwan Farook, which has advanced security features. The FBI asked Apple to create a software which will bypass the security feature so that they can try millions of passwords to break into its contents. Apple CEO, Tim Cook resisted the FBI demand, saying that it will endanger the security of millions of people who use Apple devices, not just phones. A magistrate ordered Apple to comply with the FBI demand but Apple has appealed the decision and says it intends to fight to the Supreme Court.Whenever any government takes away our rights it is presented as a service which will be good for the people. Like our government, which tagged the Aadhar Bill to the budget as a money bill to avoid any discussion in the Rajya Sabha. This sinister act forces every citizen to provide prints of all 10 fingers, iris scans and photographs in chilling reminder of George Orwell's 1984, where Big Brother controls all information. The government says that it will enable it to pay subsidies directly into bank accounts of the poor, eliminating theft, but it is completely silent on why it is spending billions of rupees collecting particulars of the middle class who do not receive any subsidies. Similarly the government wants to eliminate cash transactions, ostensibly to eliminate black money. How pious is that? There is no discussion on how the government will be able to track movements of whoever they want simply by finding out where they have used their debit or credit cards. Denmark has already gone largely cashless, which has allowed its government to slash interest rate to negative which means that people are charged if they save money in banks. This is a financial assault on people because they cannot avoid the charge by keeping their savings in the form of cash. The real intention of the government is to increase tax collections by tracking every transaction but if every plumber, electrician or mason is forced to pay tax on income over Rs 250,000 a year there will be an increase in poverty. Sadly, while there is debate about government diktat in other countries there is none in India because politicians know that they can win elections by distributing handouts. Meanwhile, the FBI has admitted that it wants Apple to unlock other phones as well and is using the All Writs Act of 1789 to get its way. If the FBI wins there will be 2 consequences. One, Apple is already working on an encryption software which even its own engineers will not be able to break and two, other governments will also demand the 'backdoor' key. In the end the US may have to share control of the internet with other countries, like China. Is that what it wants?

The slippery road to wealth.

To spend or not to spend, that is the question being debated by pundits in India. It refers to the budget which has committed to stick to a fiscal deficit target of 3.5%. Fiscal hawks want the government to stick to its deficit target, no matter what. While the Chief Economic Adviser, Arvind Subramanian wanted the target to be relaxed and expenditure increased, in an effort to boost growth, the Governor of the Reserve Bank, Raghuram Rajan warned," As Brazil's experience suggests, the enormous costs of becoming an unstable country far outweigh any small growth benefits that can be obtained through aggressive policies. We should be careful about jeopardizing our single most important strength during this period of global turmoil, macroeconomic stability." Commodity prices, especially that of crude, are down which gives the government plenty of extra money to spend, by reducing its import bill. As the price of crude has dropped so the government has been increasing the excise duty on fuel, raking in over Rs 1 trillion in revenue. If there is a global recession we may need to increase spending to stimulate growth, so we must consolidate at present. Others take the opposite view. For them "....it was necessary to to breach the Lakshman Rekha for the fiscal deficit at 3.5% of GDP. The second was additional resource mobilization through taxation, which could have increased degrees of freedom for the government." The budget has done precisely that. There was a cess on service tax and another on cars. Car sales have fallen 2 months in a row and higher taxes may cause a further fall in sales, which will reduce tax collections. A tax has been imposed on dividend income above Rs 1 million and a surcharge of 15% on incomes above Rs 10 million a year, are taxes on the rich. According to these people ".....the size of our market, in terms of population if not income, is the biggest asset." Is it? Only about 3% of people pay income tax. That is because most wealth is in real estate, a lot of which is inherited. Thus there are millionaires on paper who do not earn enough to pay taxes. Secondly, the vast majority of poor spend more than half their income on food and essential items so most of service tax is realised from the middle class. Cost of healthcare and education have spiraled and while these add to the GDP they are not productive. China provided a stimulus of $586 billion in 2008 which was widely praised for reducing the length of the global recession. Now China is struggling with a debt of $28 trillion which is a drag on the global economy. Pundits urge India to institute structural reforms but the discussion is always centered around how to increase subsidies to the poor and not on how to create wealth. We can be poor or we can be rich, we cannot be both.

Predictions of the number 'seven'?

Is the world facing 7 years of famine following 7 years of plenty as happened in Egypt couple of thousand years ago. A professor thinks not. But, in a telling coincidence, he lists 7 dangers to the world economy. 1. There are worries about China. Although it is still growing at 7% there are doubts about its figures, which prompted the present Prime Minister, Li Kiqiang to develop his own index based on electricity consumption, rail cargo volume and new loans. Using this index economic growth comes in at 5%, but the government is moving the economy from investment towards services, so new indicators are needed. But is it working? The stock market and the currency are still falling, retail sales are static and people are travelling less. New Zealand just reduced interest rate because its dairy exports to China are falling. If the economy is still growing why are people eating less? 2. Emerging markets have large debts which could become a drag if the Federal Reserve increases interest rate further and the dollar becomes stronger. Using the Keqiang index India's growth rate falls to around 6%. 3. The Federal Reserve has to walk a tight rope. The unemployment rate has fallen to 4.9% but wages are not growing and a strong dollar is hurting exports, drawing scorn from both Democrat Bernie Sanders and Republican Donald Trump. 4. The middle east is on a knife edge. Having conned the US into lifting sanctions Iran has tested ballistic missiles with 'Israel must be wiped out' written on them in Hebrew. When criticised for the tests they threatened to walk away from the nuclear deal knowing that Europe will be reluctant to impose new sanctions and the west needs Iran and its proxy, the Hezbollah, to defeat ISIS. 5. The fall in oil prices is adding to the fear of deflation and causing losses for the shale oil industry in the US. 6. Banks are still in difficulty with bad loans. Indian banks are drowning in a sea of bad loans, some due to falling growth rate, some due to genuine mistakes but most due to corruption, as shown in the Kingfisher case. 7. Finally, the European Union where the central bank cut the interest rate to 0% from 0.05%, which seems meaningless, cut deposit rate to minus 0.4%, so banks will have to pay the central bank to park money with it, in an effort to force banks to lend, and increased its bond buying program from 60 billion to 80 billion Euros a month. A negative interest rate is supposed to weaken the currency but in the case of Japan it a had the opposite effect. Experts advise structural reforms, but what? Write off bad loans, lend more money to countries like Greece to stimulate growth and stop the flow of migrants. But politicians are committed to austerity and are building walls, which hampers trade. Time to be an atheist?