How much is enough?

• "How much is enough?" is a good question. Anyone involved in capitalism and markets will find this question uncomfortable. It is a qualitative question and is about how money makes us feel about spending, saving and giving and values we stand for.
• Enough is the quality of having everything you need and want but nothing in excess and nothing that burdens you. 
• Income to meet the expenses of frugal living, a home, a car, insurance for health & life, provision for children education and their well being, provision for health shocks, leisure, passions and retirement - is what is enough. 
• The best thing one can do to children is to give roots & wings. And the worst thing is to give them a mountain of wealth under which they will get buried never knowing what they are and what they wanted to be in life.
• Our culture is geared towards endless consumption and upgrades. Reasonable wealth is comfort. Meaningful testament to a life is well spent.
• While personal debt is bad, public debt is necessary not only for prosperity but to avoid economic disasters. A good economy must serve the needs of many instead of the few.
• A great economist told students that the capitalist system was capable of delivering such a sustained and steady increase in output that workers would eventually have all the material goods they could possibly want. They would need to toil for only 15 hours a week and could then spend the rest of the time enjoying themselves. Capitalism was a means, a rather distasteful means, to this end.
• Capitalist economies are efficient, but workers were unsatiated by any material possessions, and devote any of their time to their pleasures. The new servant class which emerged and served the needs of neo rich were paid little more than subsistence wages.
• Modern world is characterised by insatiability, an inability to say enough is enough, and the desire for more and more money. Economics, a narrowly focused discipline in which there is no distinction between wants and needs, has driven to the end of a cul-de-sac. 
• The short-term need to get the economy moving again should not deflect policy-makers from reforms that will lay the foundations of a saner, more stable world.
• Progress should be measured not by the traditional yardsticks of growth or per capita incomes but by the seven elements of the good life: health; security; respect; personality; harmony with nature; friendship; and leisure. 
• Job security is much weaker and the pressure on the environment has increased.
• There is more to life than gross domestic product. Growth at all costs has become enshrined as the goal of economic policy. We live in a country divided into workaholics who have more money than they know what to do with and millions of unemployed and under-employed citizens struggling to make ends meet on the proceeds of work in the informal economy.
• In the middle, there are the debt slaves worried about the mortgage and often one pay packet away from penury. We ought to be able to do better than this. They favour a society with liberalism, social democracy and the good society is within reach.

A little house well filled, little wife well willed and 
little land well tilled are the greatest riches ... Shakespeare 

Money has no utility to me beyond a certain point ... Bill Gates

The fortunate man is he who, born poor, or nobody, works gradually up to 
wealth and consideration, and, having got them, dies before he finds 
they were not worth so much trouble ... Charles Reade

Earnings beyond certain point usually result in gaudy life style - excessive spending, amassing wealth, paying excess amounts for services without much substance. These activities contributes to increase in consumption and wastage, emissions and abuse of nature. Every luxury looses its vigor after 20 uses. You begin to own many things and eventually things will own you. Display of wealth or possessions is not only vulgar but also reflects low self esteem, make others feel jealous, lose real friends and win false acquaintances. They become more and more insensitive and end up knowing the price of everything and the value of nothing. 

Warren Buffet believes that setting up his heirs with a lifetime supply of food stamps just because they came out of the right womb can be harmful for them and is an antisocial act. The perfect amount to leave children is "enough money so that they would feel they could do anything, but not so much that they could do nothing." Bill and Melinda Gates are giving a $10 million only for each of their three children with a remark "It will mean they have to find their own way in life". 

Modinomics and its Incoherence

Modinomics are the economic policies of India’s Prime Minister, Narendra Modi. His followers or voters believe that Modinomics is a much-needed panacea to India’s economy. Unfortunately, there is no coherent difference between Modinomics and other “socialist” policies. Devotees of Modinomics believe, “lesser evil is better than bigger evil”, whereas liberals believe that Modinomics doesn’t make social-economic sense. There is no difference between both sides because their virtual goal is to maximize state power and social demagogy in a euphemistic way, at the cost of personal freedom, individual volition and cultural liberty.

• Modinomics is an immoral economic approach to individual freedom and socio-economic libertarianism.
• The established narration is socialism (government owning the resources, controlling, regulating and manipulating the means), which is totally against the hyperbole of free market capitalism.
• The Indian economy led by PM Modi and his “expert” team is consciously ignorant of economics.
• The matrix of Modinomics is again hopelessly inured and infatuated with etatism or statism.
• It is said that PM Modi is a pragmatic modernizer of “government running the economy”, but in reality his government failed to minimize the government’s role. His favorite rhetoric “minimum government, maximum governance” convinced the ultracrepidarian class, youngsters and global investors, but the result is “maximum government, minimum liberty”.
• Although his government has taken grim steps to outlaw the unnecessary laws, bureaucratic instruments and interventionists, Modinomics is still an old wine in a new bottle. His government is still run by the economics of “moral hazard” policies, “too big to fail” mechanisms, albeit his government iterates “recapitalization of public units” dialogue. 
• His followers strongly hold the opinion regarding his Fabian way of enriching the economy but their forgiving-forgetting attitude doesn’t distort the truth of economics.
• Modinomics, unlike the previous system of governance, suffers from ‘Emporiophobia’ (fear of free market),‘Aurophobia’ (fear of gold savings) and ‘Apoplithorismosphobia’ (fear of deflation). 
• Considering his government’s ‘selective silence’ on major economic issues like property rights, civil liberty, secessionism, economic expropriation, indirect taxation, capital structure, border trading, etc., it is right to ratiocinate that his government is a turban-less Keynesian. 
• Modinomics, along with the economic system of India and its paid politicians, still repeats high-sounding terms like “freedom of the investors” and “stable growth” which sedates the madding crowd. The terms “private” and “freedom” no longer mean what they are. They are cruel deceptions that fool the mind yearning for human freedom. 
• The fact is that in India we still have massive regulations and regimentations. This is necessary, we are told, because it is “in the public interest.” Terms like “public interest” and “common good” are code words that mean police state and reduced liberty. How has Modinomics liberated the Indian economy?
• With this reverse propaganda, the opposition has been neutralized. True words, true meanings of patriotism (example: bolo “Bharat Mata ki Jai”) and freedom have become the farce and illusion that cover fascism. 
• PM Modi has attracted the millennials in droves, based on the lie that “UPA’s socialism is immoral but his brand of socialism is moral” because it guarantees “liberty of opportunity”. 
• Modinomics is also embedded with obscure ideas when it comes to deciphering trickle-down economics, social spending and international economy. 
• His government voices out that the Indian economy would balance between growth and development but fails to understand that growth and development are conventional and outdated concepts, in the current changing environment. Neither growth nor development improves the real essence of economic liberty. In fact, they both crush the schema of economic freedom.
• Catallaxy, market voluntarism and property rights can be considered as sound solution(s) to counter the fascism of Modinomics and ‘Sickularism’. As long as Modinomics doesn’t divorce its romance with/from eminent domain, public monopoly and crony capitalism, it would stand indifferent in this whole paradigm. 
• The time has come to apply deductive reasoning against such economic philosophies advocated by the politicians than falling for rhetoric et al. Simply put: “Modinomics rewards sloth and penalizes hard work while Voluntarism rewards hard work and penalizes sloth.”

 

Read the original article - June 2016

Germany's hyperinflation (1922-23) - phobia

HYPERINFLATION is among the worst catastrophes that can befall an economy. It can destroy output and destabilise societies. The hoarding of real assets, such as property and precious metals, wrecks business and financial investment in countries afflicted by it. Business costs soar, as wages and prices have to be increased on an hourly basis, reducing productivity. Foreign investment evaporates as the financial risks of doing business rise. The sudden redistribution of wealth from creditors to debtors can eat at civil society and discredit political institutions.

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.

The German public, it seems, is particularly fearful of letting inflation getting out of control. This is, in part, due to the legacy of the German hyperinflation of 1922-23. The mark-dollar exchange rate rose from 4.2 to one in 1914 to a peak of around 4.2 trillion marks to the dollar by November 1923. At its height, prices were rising so fast that waiters had to climb on tables to call out new menu prices in restaurants every half hour. A loaf of bread rise from 250 marks to 200 billion by November. Banknotes became sufficiently useless that workers had to bring wheelbarrows with them to work to collect their daily pay, and bundles were given to children to play with, being cheaper than actual toys.

It's no coincidence that Adolf Hitler's inexorable rise to power began in November 1923, the high point of Germany's inflation, when he organized the abortive Beer Hall Putsch in Munich. In an interview Hitler claimed the high cost of living was Germany's biggest problem, promising "We intend to make life cheaper." To this end he demanded that shops—many of which were in Jewish hands—be brought under state control. And he stressed, "We expect all kinds of miracles of these national stores.

A study of hyperinflation has confirmed that the Nazis benefitted much more from deflation than they did from rising prices. Although hyperinflation played a role in destabilising German politics and weakening its institutions in the 1920s, it was deflation and depression during the early 1930's that “brought the toxic plant into fruit” in the form of Nazism.

The hyperinflation of 1923 created winners and losers among the middle classes (those with mortgages or debts found some relief while those with savings lost them). Middle-class votes subsequently splintered between several different parties.

Yet virtually all classes lost out when Brüning’s government reacted to a projected fiscal deficit and gold outflows in 1930 with deflationary policies. The resulting economic tailspin hurt most groups in German society. Unemployment surged among both the working and middle classes. Businessmen went bankrupt. Civil servants were either laid off or had their wages repeatedly slashed. Creditors lost their savings and debtors had their homes repossessed when the banking system collapsed in 1931. The experience of deflation made Hitler’s promises to conquer unemployment and stabilise prices by any means necessary attractive to a wide range of groups in German society, making it into a mass political movement across Germany for the first ever time in the early-1930s. The rest, as they say, is history.

Deflation is now a greater risk than inflation in Europe. The euro zone’s underlying or “core” inflation rate is now as low as just 0.8%: the lowest level in the short-life of the single currency. Britain and America, by contrast, have yet to suffer from destabilising levels of inflation because of reflationary policies like quantitative easing. Neither it is clear that the same set of policies that the German public credits for its economic and political stability will work in places like Greece or Italy, with very different structural contexts. A selective memory of the past may prove worse than no memory at all.

http://www.economist.com/blogs/freeexchange/2013/11/economic-history-1

Britain votes to exit European Union (BrExit)

The historic and unexpected voting by Britons to exit EU is probably the effect of getting tired of globalization, which only benefited rich & famous, industrialists and businesses to expand their empires at the expense of labour class.The voter turnout was 72%, the highest in any British vote in the past few decades. The outcome of the referendum shows that Britons were very angry with open borders facilitating inflow of immigrants.

Brexit Impact on UK:

1. Brexit could be the beginning of disintegration of EU.
2. Britain, world's 5th biggest market can't be ignored, and EU countries will have to negotiate bilateral trade agreements.
3. "EU exports  to UK" are much less than the "UK exports to EU" hence could attract retaliatory tariffs on UK exports to EU.
4. British pound cheaper by 30-35% after referendum, holidays and shopping in UK cheaper now.
5. UK will face investment withdrawals and economy spirals down leading to higher unemployment.
6. Lower immigration likely to hurt UK economic growth.
7. UK will experience higher taxes and less spending.
8. Imports getting expensive impacts consumption.

Brexit impact on India:

1. In short term, India gets adversely effected like other parts of the world.
2. Indian companies head quartered in EU & UK will get adversely impacted.
3. Indian Rupee gets weakened.
4. Consumer inflation likely to go up.
5. Risk aversion across all asset classes.
6. FPI (Foreign Portfolio Investors) outflows might get accelerated.
7. Uncertainty provides opportunity for stock-picking but is risky.
8. Indian students applying to UK universities and colleges might reduce further. 

It is still not clear if Brexit will really happen. And even if it happens, no one is exactly sure how things will play out. The impact on the UK economy is still not clear, ensuring that claims about the ripple effects on India and other economies are not quite concrete yet.

Globalization effects in India

Today we are witnessing 25+ years of economic liberalization leading to Globalization.
There are many advantages and disadvantages.

Advantages:

1. Technology transfer
2. Access to developed countries markets
3. Improved productivity
4. Improved living standards
5. Poverty alleviation
6. Foreign Investments creating jobs for poor
7. Education increase for jobs with higher skill sets
8. Increased life expectancy
9. Easy access to global information & lifestyles

Disadvantages:

1. Environmental degradation or destruction
2. Higher pollution with poor regulation of environmental safety
3. Instability in commercial & financial markets
4. Increased inequality between rich & poor
5. Increased external dependency
6. Export of raw materials, food & oil
7. Spread of new diseases
8. Talent migration resulting in decreased skilled labor
9. Destruction of culture, customs, traditions, identity & own language
10. Destruction of combined family benefits to elders
11. Increase in single living, single child & divorce rates
12. Increase in prostitution, liquor consumption etc
13. Increase in bad habits among youth
14. Increase in rape, violence and drug abuse

India with almost 40% people below poverty line, and illiteracy at 40%, globalization benefits are very very limited for these sections of people. The fact that beggars use cell phones is the height of development aberration. Government neglecting Education & Health sectors under lobbying from vested corporate interests, these sectors have become inaccessible for lower middle class & poorer sections. Another ill effect is increase in corruption that has acquired  cultural acceptance leading to social degeneration. With less controls by government, black money generation, over charging for services, non-compliance of laws & regulation by rich & famous has its devastating effects. Chinese dumping their substandard manufactured goods have destroyed our local small & medium size industries. 

In conclusion, globalization benefits are fully enjoyed by rich, famous, educated & skilled people (about 40% of population) while disadvantages are more or less borne by all equally. Where as its ill effects are hurting poor & illiterate and people in agriculture, rural avocations (60% of population) very badly. Even after 25 years of liberalization our governments haven't done any thing for ensuring passage of these benefits to these under privileged people except making some paper laws.

Gandhi's advise to Nehru on assumption of office of first Prime Minister of independent India is paraphrased as "Whenever you set up to sign a paper as Prime Minister, think about common man on street & peasant in field and if beneficial to them sign it otherwise think about it". which was long forgotten and today successive governments follow the opposite. Gandhi also advocated for "Sarvodaya" which truly means "Simultaneous upliftment of all sections of society" was never given a thought by all our rulers in independent India. Today if any body talks about Gandhian principles he will be looked at as a pervert.

Today,  our Government is by the rich, for the rich and of the rich. This is very much against the principles of democracy to provide equal opportunities to all without any discrimination and is in violation of Constitution of India.

Inflation Control - RBI's primary Responsibility.

Inflation control with in the limit of 3% per annum is the primary responsibility of Reserve Bank of India (RBI) while discharging its responsibility of managing the nation's monetary system.

• Higher inflation hurts common man & wage earner's living standards very badly.
• Inflation  effectively transfers wealth from savers to borrowers.
• Savers lose their hard earned money while borrowers & spenders gain with effective reduction of their liabilities.

Corruption results in unbridled spending by ill-gotten wealth earners evading taxes, boosting prices of essential commodities and breaking rules & procedures with impunity. Uncontrolled corruption results in crony capitalism, nation turning into a banana republic* and consequently a state of anarchy. As long as Corruption remains a low risk and high profit activity it will grow like a demon.

Today in India, every public spending includes elements of corruption of at least 40% and another 20% towards inefficiency & mismanagement and retards nation's growth and development. During last 30+ years, corruption has grown in leaps and bounds and acquired public acceptance. 

While RBI's focus is on inflation control mainly by limiting the cash availability in market, Ministry of Finance (MoF) focuses in making cheap capital easily available for industries & businesses who in turn fill their coffers with taxes and generate jobs and thus works with conflicting goals. Every decision of RBI & MoF has opposing effects, posterity is the best judge and nothing could be done then except issuing soothing press statements. This is reflected by Finance Ministers utterances "I have no magic wand", in the past by P.Chidambaram.

In USA, the Government provides enormous social & financial security for its senior citizens and thus their banking system paying near zero interest on savings & deposits and very low interest on commercial lending can't be emulated in India because here Govt of India provides near zero social & financial security to senior citizens and they are largely dependent on interest income earned on their life time savings. Doing so will result in degrading our culture**.

Ironically, our government talks about limiting the inflation with in 4% because crossing that limit will result in downgrading our economy by international rating agencies will result in capital out flow rather than their national duty. They focus on reducing or withdrawing subsidies being enjoyed by poorer sections rather than controlling expenditure, eliminating corruption & wastage and restricting incentives to capitalists.

*   Banana republic refers to a unstable country whose economy largely depends on exporting a limited resource product.

** Culture of a person / society / government is the way they treat their weaker sections, women, children , old people, handicapped & minorities.