What is money?

Money is such a multi-faceted and all-pervasive element of our system, that our capability to obsess about one aspect of it prevents us developing a proper appreciation of what it actually is.

Our monetary system is based on fraud. Can you and I write checks “drawn on ourselves”? Of course not. We have to back them up with value. The Fed does not. So, the mighty US dollar is not backed by gold or silver or anything at all; it’s simply an accounting trick ... Paul Rosenberg

How does a monetary economy differ from one in which trade occurs by barter? This ruled out gold being money, since gold is a commodity that anyone can produce for themselves with a bit of mining (and a lot of luck). So even though gold is really special and incredibly rare, it is in the end, a commodity: an economy using gold for trade is really a barter economy, not a monetary one.

A true monetary economy is inconsistent with the presence of a commodity money. A commodity money is by definition a kind of money that any producer can produce for himself. But an economy using as money a commodity coming out of a regular process of production, cannot be distinguished from a barter economy. A true monetary economy must therefore be using a token money, which is nowadays a paper currency ...  Augusto Graziani

In a credit economy at the end of the period some agents still owe money to other ones, a final payment is needed, which means that no money has been used. So to be money, the token given in exchange for a good must be accepted as a final payment, but this carried the danger that whoever produced the token might be able to “get something for nothing”.

Graziani's three basic conditions that had to be met for something to be called “money”:

1. money has to be a token currency (otherwise it would give rise to barter and not to monetary exchanges);
2. money has to be accepted as a means of final settlement of the transaction (otherwise it would be credit and not money);
3. money must not grant privileges of seignorage to any agent making a payment.

The only way to satisfy those three conditions is to have payments made by means of promises of a third agent, the typical third agent being nowadays a bank.

So money is fundamentally the promise of a bank to its customer, and a monetary payment is the transfer of that promise from one customer to another. 

Monetary payment must therefore be a triangular transaction, involving at least three agents, the payer, the payee, and the bank.

Firms are present in the market as sellers or buyers of commodities and make recourse to banks in order to perform their payments; banks on the other hand produce means of payment, and act as clearing houses among firms. In any model of a monetary economy, banks and firms cannot be aggregated into one single sector.

In reality it is simply the nature of a monetary economy: money is simply a third party’s promise to pay which we accept as full payment in exchange for goods. The two main third parties whose promises we accept are the government and the banks.

Moody's rejects ratings upgrade lobby by Modi

• India's current rating by Moody's stands at Baa3, the lowest investment grade, a notch above junk status.
• US-based agency, Moody's, declined to budge citing concerns over the country's debt levels and fragile banks.
• Winning a better credit rating on India's sovereign debt would have been a much-needed endorsement of Prime Minister Narendra Modi's economic stewardship, helping to attract foreign investment and accelerate growth.
• Moody's said India's debt situation was not as rosy as the government maintained and its banks were a cause for concern.
• India has been the world's fastest growing major economy over the past two years, but that rapid expansion has done little to broaden the government's revenue base.
• At nearly 21% of gross domestic product (GDP), India's revenues are lower than the 27.1% median for Baa-rated countries. India is rated at Baa3 by Moody's, the agency's lowest notch for debt considered investment grade. A higher rating would signify to bond investors that India was more creditworthy and help to lower its borrowing costs.
• India's debt-to-GDP ratio has dropped to 66.7% from 79.5% in 2004-05, interest payments absorb more than a fifth of government revenues.
• The ministry attempting to impress that the government's resolve to contain the fiscal deficit at 3.5 per cent of GDP in the current financial year didn't impress the agency.
• Diron had told local media that a ratings upgrade for India was some years away, depending on the progress on reforms.
• Diron said that, not only was India's debt burden high relative to other countries with the same credit rating, but its debt affordability was also low. She added that a resolution to the banking sector's bad loan problems was "unlikely" in the near-term.
• Moody's on November 16 affirmed its Baa3 issuer rating for India, while maintaining a positive outlook, saying the government's efforts had not yet achieved conditions that would support an upgrade.

My View:

Trying to influence for better ratings, whether deserving or not, is not uncommon but definitely is beneficial to the nation. Attempting to influence rating agencies without taking any pragmatic corrective steps and getting deeply involved in petty politics is unbecoming of leader of the nation. Ask a farmer and he will tell you, fields tilling, irrigating, seeding, cultivating, applying fertilizers and harvesting in a sequential manner over a certain time only will result in good harvest. Nothing can be achieved overnight. In a country with 125 crore people, diverse cultures and saddled with illiteracy, poverty, belief systems and spread over 600,000 villages development is a slow process. In the process inflicting injuries on the lowest strata is immoral and must be avoided. Above all principles of democracy and constitutional obligations should never be given go by.

Success and Failure

Success is the accomplishment of an aim or purpose.
Failure is lacking success.
While succeeding is important, the road map to success is even more important.
Success as a result of illegal & immoral means is worse than failure.

Ingredients of success

1. Vision & goal definition.
2. Tenacity and perseverance.
3. Research, planning & resource mobilization.
4. Developing sound business model.
5. Due diligence and risk mitigation.
6. Timing and luck.
7. Execution.

Managing success

1. Managing success is harder than handling failure.
2. Neither success nor failure are permanent. 
3. Hard work is the only path to true success.
4. Elation of success or depression of failure are unnecessary.  
5. Identify and acknowledge contributors for success and reward them.
6. Never let ego destroy business. 
7. Take time to celebrate success and pay attention to the lessons it offers.
8. Eliminate wastage and optimize costs.
9. Innovation to stay succeed.

Lessons from failure

1. Failure is never the end of road. It is just a turn.
2. Reshape values and redefine priorities
3. Become more compassionate.
4. Improve perspective on finance.
5. Revisit approach and realize true friends.
6. Realize that success isn’t everything.
7. Re-envision goals.
8. Become more passionate about mission.
9. Develop a deeper sense of community.
10. Learn to never give up.

Resolve to be honest at all events; and if in your own judgment you cannot 

be an honest lawyer, resolve to be honest without being a lawyer. 

Choose some other occupation ... Abraham Lincoln

The progress towards the goal will be in exact 
proportion to the purity of the means. As the means so the end. 

It is not the end that we can work with but only means ... Gandhi 

My View:
Both success and failures are a myth. They are simply results of choices, actions and luck. Results are never in our hands nor predictable. Otherwise, we will not see so many great people fail in the history. What is in our hands is preparation, mitigation of risks and execution. Rest is luck. Ironically, money reflects success. Money is important for comfortable living. But there are many things which money can't buy. Peace & happiness has nothing to do with money. They are mindset. Many poor people live happy and meaningful lives. In this world, no good man has ever made a fortune. The more morals and ethics are compromised they more one can make money. In most cases enrichment is consequence of destruction of ecological assets. People succeed with inside advance information of government policy changes which is a punishable crime in any democracy and reflects its association with crime, corruption and bribery. With all ills of the society there are ample opportunities for good and honest people to do business and earn decent income.

Venezuela: Riots forces suspension of demonetization until Jan 2, 2017

Dec 19 2016 : The Times of India

Venezuelan President Nicolas Maduro suspended demonetization of the country's largest denomination bill, which has sparked unrest, until January 2. The surprise pulling out of the 100-bolivar note from circulation this week -before new larger bills were available -led to vast lines at banks, looting at scores of shops, anti-government protests and about four deaths.

Maduro blamed a “sabotage“ campaign by enemies abroad for the delayed arrival of three planes carrying the new 500-, 2,000 and 20,000-bolivar notes. “One plane, contracted was told in flight to change direction and go to another country ,“ he said.“There's another which was not given flyover permission.“

The 100-bolivar bills, officially out of use since Thurs day and worth just 4 US cents at the black market currency rate, can now be used until January 2. Many Venezuelans had found themselves without the means to pay for food, gasoline or Christmas preparations in a country already reeling from an economic crisis.

About 40% of Venezue lans do not have bank accounts. Adding to the chaos, Venezuela has the world's highest rate of inflation, which is set to hit 475% this year, meaning large bags of cash must be humped around to pay for basic items.

“We have a government utterly stupid and destructive in economic management, whose only goal is to keep power at whatever price,“ said opposition leader Julio Borges. Maduro had justified the demonetisation move as a way of strangling mafia on the frontier with Colombia. He has also closed border crossings with Colombia and Brazil until January 2.

My View:
Venezula was suffering from low oil prices and hyperinflation despite percapita GDP of $10,000+ and its currency has become worthless which warranted demonetization. However demonetization with out new bills to replace was monumental mistake that lead to chaos and people starving for food and supplies. Blaming external forces for failures is meaningless. By inept planning & implementation, demonetization has compounded the problems instead of solving any ills.

Maduro emulated Modi with demonetization surprise and with out replacement supplies and it boomeranged on his face. 

Indian exercised unusual patience in queues despite 100+ queue deaths so far despite cash supply situation not improving in 50 days. Past is no guarantee for future, Modi should remember and accelerate mitigation measures.

Demonetisation brings manufacturing to a halt

Auto Spare Parts Sector Takes Beating

Dec 19 2016 : The Times of India (Hyderabad)

About 30,000 units manufacturing auto mobile spare parts and about the same number of agro based industrial units have shut shop post-demonetisation with orders drying up. About 1.5 lakh MSME units (all segments) lined up along Jeedimetla, Balanagar, Shahpur, Maheswaram, Adibatla, Quthbullapur, Dulapally , Kukatpally and Cherlapally are on verge of shutting down operations after facing huge losses over the past one month. Also small players in retail textile, food processing and plastic industry are also bearing the brunt of demonetisation.

Despite the announcement that banks can give upto Rs.50,000 to commercial establishments, banks are not giving that amount. “The worst hit among the lot are the micro units with turnover of `10 lakh to `50 lakh. Also MSMEs across segments are hit badly. In most of these units, the workers are hired on a daily basis.“ added Gowra Srinivas, senior vice president, Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry .

Since the `micro' industry completely runs on cash, be it placing of orders, transportation, payment to workers or purchase of raw materials, units have seen between 50 to 70% loss of production over the month.“I am unable to pay to my labourers as none of them have bank accounts. They are refusing to come to work, forcing me to suspend operations,“ said Shaik Hussain, accessory manufacturing unit owner from Balanagar.

“With production at the manufacturing units dipping, the supply has gone down. Moreover, even the transportation network which operates only on cash is hit. In the whole process, I am unable to supply to my clients. I have not only lost a number of orders but even reputation in the process.“

My View:

The overall impact could be well over 1,000,000 people. Modi & Co wants brings these people into formal economy and tax them. What a ridiculous idea! 

While they don't pay income tax only they pay all indirect taxes levied on consumption. Even if Modi & Co decides to tax them, it will be meager which produces much work and little gain.

Modi as leader of the nation should realize the realities of the nation before heeding to the funny advises of economic pundits living in ivory towers about avenues to maximize tax revenues.

Patriotism

Patriotism is defined as love for or devotion to one's country. Frequently compared or contrasted with nationalism which is also loyalty and devotion to a nation; especially a sense of national consciousness exalting one nation above all others and placing primary emphasis on promotion of its culture and interests as opposed to those of other nations or supranational groups. The difference between patriotism and nationalism is that the patriot is proud of his country for what it does, and the nationalist is proud of his country no matter what it does; the first attitude creates a feeling of responsibility, but the second a feeling of blind arrogance that leads to war.

Some famous quotations are:

• When a nation is filled with strife, then do patriots flourish ... Lao Tzu
• Patriotism is the last refuge of a scoundrel ... Samuel Johnson
• It is but refusing to gratify an unreasonable or an insolent demand, and up starts a patriot ... Robert Walpole
• No man can be a patriot on an empty stomach ... William Cowper
• There are seasons in every country when noise and impudence pass current for worth; and in popular commotions especially, the clamors of interested and factious men are often mistaken for patriotism ... Alexander Hamilton
• Guard against the impostures of pretended patriotism ... George Washington
• Patriotism is supporting your country all the time, and your government when it deserves it ... Mark Twain
• Patriot is the person who can holler the loudest without knowing what he is hollering about ... Mark Twain
• Patriotism is the virtue of the vicious ... Oscar Wilde
• Patriotism consists not in waving the flag, but in striving that our country shall be righteous as well as strong ... James Bryce
• True patriotism hates injustice in its own land more than anywhere else ... Clarence Darrow
• Patriotism is not a short and frenzied outburst of emotion but the tranquil and steady dedication of a lifetime ... Adlai Stevenson
• Patriotism is looking out for yourself by looking out for your country ... Calvin Coolidge
• A patriot must always be ready to defend his country against his government ... Edward Abbey
• No matter that patriotism is too often the refuge of scoundrels. Dissent, rebellion, and all-around hell-raising remain the true duty of patriots ... Barbara Ehrenreich
• Heroism on command, senseless violence, and all the loathsome nonsense that goes by the name of patriotism - how passionately I hate them! ... Albert Einstein
• Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and the success of liberty ... John F. Kennedy
• Patriotism is when love of your own people comes first; nationalism, when hate for people other than your own comes first ... Charles de Gaulle
• If we love our country, we should also love our countrymen ... Ronald Reagan
• I saw courage both in the Vietnam War and in the struggle to stop it. I learned that patriotism includes protest, not just military service ... John F. Kerry
• Unless our conception of patriotism is progressive, it cannot hope to embody the real affection and the real interest of the nation ... Jane Addams
• I don't want to see the military falling. I want to see the military rising to dignified heights of professionalism and true patriotism ... Aung San Suu Kyi
• Dissent is the highest form of patriotism ... Howard Zinn
• Real patriotism is a willingness to challenge the government when it's wrong ... Ron Paul

Patriotism is the last refuge of the scoundrel; 

Pseudo patriotism is the last refuge of the incompetent.

My View:
Modi invoking patriotism following fiasco due to his senseless demonetization to cover up his unauthorized decision is nothing but tyranny. His cabinet ministers, BJP MPs, several opposition leaders and even media were suppressed in raising dissent for the fear of being branded as anti-nationals by Modi with unchallenged grip on the country.Propaganda that cashless transaction as a solution with out any infrastructure or public awareness is a diversionary tactic from the man made economic disaster.

Ironically, middle class educated and salaried classes who were in complete disconnect with poor, peasants and rural masses were solidly behind Modi with blind belief that desired results will be achieved despite crores of people confined to queues for over 40 days for their meager cash needs and queue deaths nearing 100 and informal sector grounded.

From the above quotes it clear that dissenting, challenging and fighting tyrannical government which destroyed the nation with its ill conceived, secretly unveiled and unscientific demonetization is patriotic, but not silently co-operating. Modi not taking experts into confidence for bailing out the national chaos with corrective measures and blindly going in the same wrong direction with increasing speed is nothing but insanity. 

All political parties and people should unite and dislodge Modi from seat of power and save the nation from his authoritarian regime, otherwise we will find ourselves ten years backwards with democracy and institutions facing extinction.

Singing national anthem has nothing to do with either patriotism or nationalism.

Cashless economy will be a disaster

Cash is empowerment, freedom, privacy & security.

Cashless society is at least 25 years away for fulfilment of following requirements:

• Basic education
• Banking education
• Technology education
• Smartphone requirement
• Electricity for charging
• Internet or 3G connection
• Net Banking wareness
• App to be downloaded
• Knowledge about secure operation
• Privacy and security cyberlaws
• Grievance redressal knowledge
• Awareness of perils
• Cost Benefit analysis
• Above all mindset

Fully cashless society would mean the end of privacy . There would be a digital trail of every action you take through your purchases and transfers. In the absence of robust privacy laws and data protection in India, it is a big worry every week as we hear stories of hacking.

A fully cashless society could mean the end of dissent. The government can use any data it gathers against you. Even if you commit no crime, there is much you may be embarrassed by. What's more, they could make any opponent a pauper with one keystroke, freezing your bank account while they investigate alleged misdeeds. Just the fact that they have this power could have a chilling effect on dissent. Would you want government men have that much power on you for presumptive reasons?

It is a myth that an advanced society must necessarily be cashless. In Germany more than 80% of transactions are in cash, as citizens safeguard their privacy and freedom. In the US, 45% of transactions are in cash. Even in advanced, wealthy & small countries like Norway & Singapore cashless transaction are just 60% only. In India, 600 million people have no bank account, and less than 20% of all Indians have a smartphone. Internet penetration is iffy. Trying to make India cashless is akin to putting a bullock cart in an F1 race.

Technologies, like any App, imperil our privacy. But those actions are voluntary, and we can choose to avoid them. That is the crux. Coercion towards cashlessness with deprivation of currency implicit in the demonetization is ridiculous. A cashless society would only be good if we evolve towards it, not if we are forced into it.

Digital payments involve transaction costs, are unreliable because of infrastructure issues. After demonetization who would trust an Indian banks and RBI? The beneficiaries of forced cashlessness are not consumers, but vested interests like banks and payment companies. This might be the largest redistribution of wealth from poor to rich in the history of humanity.

When the demonetization was announced, Modi & BJP said it was meant to attack black money and counterfeit currency. Once it became clear that those reasons were nonsense, they tried to change the narrative into a cashless economy. Within a fortnight of that, they are already backtracking and saying they meant `less cash' instead of `cashless'. The truth is that the demonetization was a humanitarian disaster that is crippling our economy, and no matter how many times Modi and gang try to rationalize it, it cannot be done. These men will stop trying when they cannot justify any more, they will distract.

The best government is that governs least.

My View:

Anything by force undermines individual freedom & rights guaranteed by constitution. When people see reason, benefits, security, affordability etc they themselves will adopt to cashless transactions voluntarily. Until then it is only a commodity with a price and government has no right to promote any body's business on its citizens forcibly. 

How government will enforce tax compliance is altogether different issue. This is no right way.