Professional Documents
Culture Documents
A Matrix of Concepts
Rashmin Chandulal Sanghvi
24th January, 2011
Summary of Contents
Detailed Contents
If you are busy, just read the paragraphs marked with * & red
colour. Then if interested, read the whole paper.
Short Forms:
FI = Financial Institutions including banks.
Fx = Foreign Exchange
Currency Wars.
I. Preface
I.1 Several currency wars have been fought during last hundred and
fifty years. No currency war was fought before 150 years in entire history
of money. At present (January, 2011) the currency war has already started.
If it escalates, results can be severe. Senior Economists of the world are
worried about currency wars. International Monetary Fund (IMF) and
World Bank are also worried. Let us see in details these issues in this
paper.
U.S.A. tried to push China into revaluing Yuan. China told Hillary
Clinton: “Mind your own business. Instead of advising us, ensure the
safety of your currency.” When individual pressure did not work, U.S.
tried international organisations and institutions to pressurise China.
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China has refused to buckle down under U.S. pressures and U.S.
has started action. Common man does not see anything happening but
economists and finance ministers around the world consider this as
Currency War and are worried.
Another definition:
We will see these details in the present paper. We will also consider
the substance behind U.S. allegations.
5. There are good chances that we make several errors and our
projection may prove wrong.
6. Illustration 1:
Exploitation by Europe of its colonies.
Pope Alexander VI in the 15th century told Spain & Portugal: “Go
and win the countries of the world. Who ever wins, keeps that country as
her colony”. These two countries became prosperous. Soon several others
joined them.
The Europeans took their ships and armies all over the world. They
took over the control of several nations including India by several means.
And then they justified the controls by saying: “We the white people are
supreme race. We are meant to rule over the rest of the world.” (Search on
the internet – “White Supremacy Theory. Compare it with the theory that
“Brahmins are superior to all other castes.” Consider how this bogus
theory has been perpetrated in India for many thousands of years.)
Gandhiji was one of the many Indian leaders who saw through this
exploitation. He developed world‟s unique method to fight back and
drive out the shrewd Britishers. Gandhiji used “Resistance without War”
(Satyagraha) to end the exploitation. Then the Britishers used “Divide and
Rule” method to prolong their rule over India. Some other nations got
their independence by an open revolt.
(ii) If the exploited realises and yet does not fight back, it is
“exploitation of the stupid.”
(v) One nation exploits another and there is neither resistance, nor war.
This is Equilibrium.
8. Conspiracy Theory
8.1 Theory:
“Commit crime. Most likely, you will not be caught. If caught,
deny all allegations and confuse the public by disinformation. There are
enough gullible people to believe in your denial.”
He will flatly reject all allegations. And then he will allege that his
opponents have just cooked up the conspiracy theory to malign him. And
he will start a disinformation campaign.
People will never know the truth. They will be confused. Some will
believe in P & some will believe in the opponents. The opponents‟
allegations will be largely neutralised.
And human psychology is such that they see no fault in the rich
and powerful. While they see numerous faults in the weak. Human
naiveté crosses the limits when: The powerful abuses the weak. And
public criticises the victim instead of the aggressor. This is commonly seen
when a powerful politician or bureaucrat abuses a poor.
8.3 Illustration:
U.S. Government is exploiting others in some fields for many
decades. People have made allegations against U.S. Government.
(ii) Broadcast to the world that the critic is just creating conspiracy
theories to malign the noble U.S. Government.”
9. Notes:
9.1 Several Perceptions:
History is very interesting. Same event will have infinite different
perceptions. I have noted here one perception. You may have many
different perceptions. All may be right. None complete.
9.3 Currency war is only one of the several tools available to the
exploiter. Larger field is Economic Exploitation. If you want to see how
India exploits its agriculturists, read articles by Mr. Sharad Joshi (Shetkari
Sanghatana, Pune).
I. Preface Completed
Next:
Currency war is a concept.
To understand this concept we have to consider several other concepts.
It is an interwoven multidimensional matrix.
II.1 Exchange Rate Determination: “What is the right and fair exchange rate
for a currency” is an issue on which several thesies have been written. At
the same time every person who has studied economics at college level
has studied two methods of determining exchange rate.
If the demand for a currency is high, its exchange rate will be high.
On the other hand if the supply of the currency is more than the demand
for the currency, its rate will go down. For example, at present U.S. dollar
to Indian rupee rate is ` 45 per dollar. Now if the U.S. Government
increases the supply of the dollar by “quantitative easing”, normally the
value of dollar should go down. Hence the new rate may be say, ` 40 per
dollar or even ` 35 per dollar.
When the real value of Indian rupee in India is compared with the
real value of dollar in U.S.A., one can get the fundamental exchange rate of
the currency. To find the real value of a currency in a country, a practical
method is to find a representative basket of goods & services which are
common in both countries. For example, if a basket of goods & services
costs ` 50,000 in India and $ 5,000 in U.S.A., then the exchange rate for the
two currencies should be ` 10 per dollar.
II.6 For last forty years U.S.A. has been having a trade deficit. In other
words, the value of goods & services imported by U.S.A. are far greater
than the value of goods & services exported by U.S.A. As a simple logic,
the value of dollar should be depreciating. However, all over the world
people invest in U.S.A. Hence there is a huge inward flow of foreign
exchange into U.S.A. Hence the value of dollar has remained high.
These and similar myths have made people believe that it would be
better to invest in U.S. dollar rather than their own currency. Hence there
has remained a continuous flow of money into the U.S.A. We will see in
this article, how these myths came into being and how today economists
realise their true substance (or absence of substance).
Today what is the position! Can U.S. maintain that hegemony? Are
we in for a “tectonic shift” in the global economy? What can happen if $
collapses like the Russian Rouble? Will India benefit or suffer?
In the year 2006 the parity between Indian rupee and U.S. dollar
was Rs. 45 equal to a dollar. Today also the parity is ` 45 equal to a dollar.
Hence while we believe that in terms of dollar, rupee has not been
devalued, in reality against gold rupee has depreciated by 72%.
See the gold price chart. Why it remained steady for long period &
why it has started steep climb up!
Share market friends may say: “Just tell us how the index will move
in future. Why bother about the history!” It is said: “One who does not
study history is condemned to repeat history”.
IV.1 Initially there was barter system. Then came the coins. Coins were
made of metal and carried the intrinsic value of the money. For example,
Indian rupee was made of silver (rupa). Hence a Government could create
only so many coins as the stock of silver available with the Government
permitted.
In early 20th century, U.S. & Europe were developed. Rest of the
world was mainly colony of some European country or other. In the two
world wars, Europe was economically destroyed. U.S.A. was not affected.
At the end of 2nd world war, U.S.A. & U.S.S.R. emerged as the two Super
Page No.: 12
In the year 1934 U.S. Government declared that the value of U.S.
dollar would be: One ounce of gold equal to $ 35. In other words, any
Government or Central Bank having $ paper currency was legally entitled
to go to U.S. Government / Federal Reserve and demand physical delivery
of gold. This was the solemn promice made by the Government of U.S.A.
At that time very few Governments had the capability to make such
a promice. U.S. was super power. And U.S. dollar was backed 100% by
gold. Hence it became the most popular currency around the world.
British economy was on the down trend. Once upon a time Britain
ruled scores of countries. In an open, forceful & cruel manner it exploited
all its colonies and became rich. However, after the Second World War
more & more colonies started becoming independent. The sources of
exploitation reduced. British economy started shrinking. Hence British
pound lost its importance. Simultaneously U.S. dollar gained importance.
Slowly the dollar became the world currency. This is when people started
saying that dollar was better than gold. It became the global currency.
After the 2nd world war, U.S. & U.S.S.R were locked in Cold War.
Both nations tried to have military & naval presence through out the
world. They developed several bases in island countries & had their
nuclear armed sub-marines around the world. U.S. started having balance
of payment deficits. In 1968, there was a Gold Run. People wanted to hold
gold instead of $. U.S. gold reserves started depleting.
like to spread his assets into different currencies to reduce the risks
inherent in single currency. The first foreign currency which any
individual or corporation would hold will be U.S. dollar.
This is a major benefit that the U.S. had for having $ as a global
currency.
Next:
How USSR was destroyed by using “Economics”.
V. U.S.S.R. Implosion
V.2 Now consider a short history from 2nd world war to 1990. After
Second World War U.S.A & U.S.S.R emerged as the two super powers in
the world. Europe was seriously damaged. Britain which claimed earlier
to be super power No. 1 had economically collapsed and was on a further
downward slide.
V.3 Star Wars: Reagan became President of U.S.A. In the year 1983 he
started the “Star Wars”. Let us understand what is “Star Wars”.
Both the nations had developed guided missiles with nuclear war
heads. These were the missiles which could fly a few thousand kilometres
without a pilot & strike the target. They use Global Positioning System
(GPS), radars, satellite communication systems and computers. They could
be exploded by remote controls. These missiles were costly weapons.
The third stage of missiles was as under: Say U.S.A. would send a
missile to attack Moscow. Moscow would send a counter missile to
destroy the American missile in sky. The U.S. missile would send small
missiles to destroy the Russian counter missiles. Imagine the amount of
technology required for all these unmanned vehicles of death. It was all a
hugely costly exercise.
V.4 Afghanistan:
The Afghan people are the most indomitable people in the world.
Nobody can rule over them. Some 200 years back England was ruling over
India – which included current Pakistan & Bangladesh. Afghanistan was a
neighbouring country. England wanted to conquer Afghanistan. When it
sent its army to Afghanistan, the whole of the army was killed by the
Afghans. England suffered such huge losses that since then it has never
tried to conquer Afghanistan.
Please see map in the next paragraph. This is an old map of U.S.S.R.
as it existed before 1991. We can see that U.S.S.R. was really a large
country locked in from most sides.
Page No.: 17
Gorbachev also knew that his Government was not rich enough to
fight Star Wars. He voluntarily announced restrictions on creation of
further missiles. He requested that U.S. should follow but never insisted
on it.
Poor Yeltsin suffering from financial shortage asked for a large loan
from G4 Nations. U.S.A., U.K., France & Germany (G4) together offered a
loan of $ 30 billions (at that time it was a huge loan). However, the loan
was conditional on U.S.S.R. removing several economic regulations.
Yeltsin trusted the G4. He scrapped by simple Presidential decrees several
laws. At one stroke U.S.S.R. ceased to be a communist country and
became more capitalist than U.S.A.
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V.8 Now remember the fact that U.S.S.R. was communist since 1917.
Under the communist regime commodity prices had no freedom to move
with economic forces. For example, if price of bread was one Rouble in the
year 1917, it was one Rouble even in the year 1990. This is an illustration to
say that entire economy was regulated.
V.9 Now consider this entire history again. U.S.A. used pure economic
forces to destroy super power No.2. In the process U.S.A. did not suffer a
single soldier. USA spent huge amount of money on helping Taliban and
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Pakistan. However, this was financed by issuing $ notes which the world
took away happily. See paragraph IV.3 above. Today U.S.S.R. does not
exist. U.S.S.R. has been destroyed. You can call this as economic murder or
currency murder.
Notes:
Next:
How a cartel created South East Asian Crisis.
Bankers made a killing in Fx derivatives.
G4 achieved their political objectives.
IMF & UN helped.
Page No.: 22
VI.1 Countries mainly affected by the South East Asian (SEA) Crisis:
Within Japan interest rate on Yen loans is almost zero. It has been
so for more than two decades.
Even Indians could earn a huge net profit by adopting Yen Carry
Trade. But under FERA, RBI would not permit an ECB for speculation.
These five South East Asian (SEA) nations were growing rapidly.
They were praised as South East Asian Tigers. Their Finance Ministers
were being awarded “Best Finance Minister of the year” awards.
nineteen times his funds. The Malaysian borrower M had, say, `1,00,000.
He could borrow even ` 19,00,000 and play on ` 20,00,000.
I read this speech on IMF website during those years. After some
time I wanted to copy and save the speech and hence went to IMF website.
This speech was removed.
VI.6 Notes:
The 1997 crisis was known as South East Asian or SEA Crisis.
Initially this crisis affected South Korea, Thailand, Indonesia, Philippines
and Malaysia. All these five countries were economically ruined.
Essentially they were attacked by G7 Governments through the cartel of
financial institutions which speculate in foreign exchange. Having
succeeded in making huge gains by selling short the currencies of these
five countries, the cartel then attacked Mexico, Argentina & Russia. These
attacks were again successful and the currencies of these countries
depreciated drastically. Then there were attacks on China & India.
However, because of substantial foreign exchange regulations in these two
countries, the speculators did not succeed. They did not dare attack U.S.
currency.
Page No.: 27
One can say that many countries around the world were attacked.
Still the name of the crisis remained South East Asian Crisis.
Some Proverbs:
African Proverb:
When Elephants fight, grass gets crushed and trees get hurt.
Greek Proverb:
When a demon becomes so huge that no one can defeat him; God
plants seeds of destruction within the demon himself.
Indian Beliefs.
Law of Karma – What ever you cause to others will come back to
you.
Next: Third world as the lender of money & supplier of goods to USA.
Page No.: 28
http://www.mckinsey.com/mgi/reports/pdfs/productivity/usprod.pdf
VII.3 This was not enough. They still wanted lower costs. Hence U.S.
experts together with IMF & World Bank experts advised commodity
supplier countries to depreciate their currencies. Benefit for the third
Page No.: 29
world were supposed to be: within the country all suppliers of goods &
services including labour still get their prices. And yet outside the country,
they could achieve competitive strength.
Little did Indian Government & RBI realise that (i) Continuous
depreciation of rupee was increasing cost of production in India. Imported
products & especially crude oil increased cost of production. (ii) With high
cost of imported machinery, Indian factories were becoming less
competitive. (iii) It was a strong incentive for Indian rich to transfer their
wealth to Swiss & other foreign accounts. (iv) It was a strong disincentive
for any one to invest in India.
What were all the Indian experts doing! Were they only repeating
what the U.S. experts told them!
When a person holds any currency note, in effect, he has given loan
to the Government issuing that Currency. If you hold ` 100 with you, you
have given a loan of ` 100 to the Indian Government. The paper note has
no intrinsic value. It is just a piece of paper. It is true that when you give
that note to the shop keeper, he will give goods worth ` 100 to you. Today,
we all need money to transact our business. And in India, rupee is the
legal tender. Fact remains that when the Government issues paper
Page No.: 30
currency it is getting value for nothing. Any one who takes money, is
giving a loan to Government.
In the year 1991 Indian Fx reserve was less than $ 5 billions. Since
then, the Fx reserves have increased to approximately $ 300 billions. Out of
this amount, let us say, the dollar component is worth $ 200 billions.
(Actual mix of reserve is a secret maintained by RBI.) Thus in last 20 years,
India has lent approximately $ 195 billions to the US Government.
China, Japan & India have decided that they will not allow their
currencies to appreciate against US dollar. Any appreciation of their
currency & their exports will be hurt.
This is the Currency War. In this war US fires at every body & the
victims still support US. The day we stop trusting dollar, our exploitation
will stop. China, Germany, Brazil & several countries are trying to find a
way out. So far, there is little success. So far.
VII.7 We are familiar with the India story. Similar was the case with
China. It was encouraged & praised as a miracle economy when it
supplied toys & shoes at low cost to U.S.A. China developed special
economic zones simply to export goods. Chinese outside the SEZs
remained poor. They were starved & are being starved (comparatively) so
that Chinese SEZs could export goods at low cost to U.S.A. China
developed huge export surpluses. Where do you invest the surplus! In
U.S. currency & treasury bonds only!
VII.8 With this policy, U.S.A. was very happy that Chinese & Japanese
currencies had low values. When the Japanese auto & electronics
industries grew so well that their competition started hurting U.S.
production & ego, they forced Japan to revalue Japanese yen – year 1986.
China is far behind Japan in terms of technology input in exports. Hence
U.S.A. never asked China to revalue its currency. Until the 21st Century..
when U.S. economy had started facing difficulties & unemployment
started soaring. It is unwritten law that all countries around the world
should so arrange their currencies & economies that U.S.A. should benefit.
China became the first country to oppose U.S. instructions. Hence the
beginning of current Currency War.
VII.10 When you keep issuing IOUs & no one ever asks for repayment, in
essence you are not paying any one any thing.
Further notes:
1. Exporters of India are giving out Indian resources at low or Nil cost
to U.S.A. while half the Indian population is poor. And the export lobby
claims that they are the saviours of Indian economy & they deserve
incentive in the form of continuous depreciation of Rupee. And even RBI
buys the argument!
2. During last 500 years, the Chinese did not allow any European
nation to rule them. They are not allowing the white to exploit them even
now.
This is a long story told in 5 pages. On internet you may find books or
essays written on each paragraph.
Next:
There are more benefits. Let us keep them for some future
discussion.
Next:
How US maintains its hegemony over world trade!
Page No.: 34
There are several ways that U.S. employs to ensure that the $
remains global currency. U.S. will not give up the tremendous advantages
that it has got used to. We will see some of these ways in brief.
Gold may or may not move out physically. “In these days of
digitalisation, who wants the real thing! Virtual is better than the real.”
The custodian will issue receipts to the FIIs that it is holding gold on
behalf of the FIIs. Receipts will be in smaller quantities. Some people do
insist on physical delivery. Women would rather wear jewellery than hold
digital receipt of gold. “One Asset in hand is better than two digital
assets.”
Where required, gold will be delivered.
1.3 FIs will sell gold in the „spot‟ market. They will get cash which will
be used in the banking business to earn income. Net of lease rent, FIs will
earn profits.
1.4 FIs will buy gold in „futures‟. As far as FIs are concerned, they
have sold gold and bought gold. Hence technically, the gold taken on
lease is still with them. It is possible that for all the transactions – lease –
sale on spot – buy in futures – only custodian‟s receipts have changed
hands.
1.5 It is also possible that some gold is actually delivered in the market.
In fact it is planned to continue deliveries in the market so that gold prices
Page No.: 35
This way, they make no losses on “sale and buy” operations. The
cartel was happy & confident in Gold Carry Trade. Bankers who made
profits out of air, were taking huge bonuses and congratulating them
selves for being so intelligent. U.S. Government was happy that $ to gold
price was stable. This process could continue with some disturbances till
the year 2006.
1.6 Banks could legally say that they have fulfilled all banking reserve
ratios and the balance sheet is great. They are earning profits and every
thing is rosy.
1.7 U.S. Government can legally claim that it is still owning 8000 MTs
of gold. A part of this gold may have physically moved out, got
converted into jewellery or may be lying in some one‟s lockers as his/ her
investment. Even if some gold is lying in Fort Knox as custodian, it has
been sold out virtually by the banks.
1.9 After the dot com bust and Enron plus Arthur Andersen collapses
in 2001, world had started losing confidence in U.S. By 2006 the trend
became intense. More and more people were buying gold instead of
hoarding $. By 2008 gold buying rush became gold buying avalanche.
Today, prices have risen from $ 400 per ounce to $ 1400 per ounce.
1.10 All the banks which had conducted Gold Carry Trade had to stop
selling gold and start buying gold. But if all the banks need to buy say,
2000 tonnes of gold, it is simply not available in the market. (This explains
steep rise in gold prices between 2006 & 2010.) All these banks could have
incurred huge losses.
Conclusion: The Gold Carry Trade cartel has failed. So have the banks.
Bail Out doles kept some banks running & some went insolvent. And no
one has blamed the Gold Carry Trade. US Government keeps bailing out
others. Who will bail out US Government!
Page No.: 36
2.1 The South East Asian crisis was created because of several reasons.
One was: they dared to move to Yen instead of $ as global currency.
Iraq was attacked only because Saddam dared to sell oil in Euros.
Saddam was humiliated & killed.
2.3 Iran became dominant in Asia. When a compliant Shah was the
ruler, U.S. armed Iran. However Ayatollah Khomeini took over the control
of Iran & disturbed U.S. plans. Iran was attacked by Iraq in the year 1980.
It is rumoured that Iraq (Saddam Hussein) was instigated by U.S. to attack
Iran. U.S., U.S.S.R. & Spain supplied weapons to both sides - Iraq & Iran.
They made money. Iraq & Iran were seriously damaged.
2.5 Euro was attacked. And even now, at every opportunity, American
experts would denounce Euro. But Euro has survived US attacks. With
Euro, a large market for US $ has vanished.
IX.3 China:
I feel US may have developed a strategy to break and destroy
Chinese economy. U.S. cannot tolerate any one challenging its Super
Power Status. It may take them 20 years or 30 years or 2 years to achieve
their goal. And the strategy may have started before ten years. After
China is finished – some people may realise the strategy. Most will never
realise.
In the year 1979 Ayatollah Khomeini became the ruler of Iran. USA
seized all Iranian assets in USA and refused to honour its debt to Iran.
4.3 Series of strategies to maintain high value of dollar like Gold Carry
Trade. Asking other countries to devalue or revalue their currencies.
Japanese Yen fluctuations. Indian Rupee devaluations & depreciations.
4.7 Siphoning off whole world‟s savings & consuming the same: Euro
dollar, Petro dollar, Japanese & Chinese dollar.
4.8 Scuttling the IMF SDR & replacing it by U.S. $ as the international
currency.
Next:
It has become practically impossible for any one to trade
internationally in any other currency.
Page No.: 39
X.1 Illustration:
Why?
Almost All the shipping costs are quoted in $. Crude oil is traded
in $. Expatriates‟ salaries are quoted in $. Several port services are quoted
in $. Together, more than 70% of its costs are quoted in $. Even ship
purchase cost would be in terms of $ - even if it is built by South Korea.
ECB (loan) on ship would be in $.
SCI quoted freight in rupees – say ` 45,000. SCI‟s Profit & loss
account - currency wise Break-up is as under:
$ `
Revenue 100% 1000 45,000
Cost in $ 70% 700 31,500
Cost in INR 20% 200 9,000
Profit in INR 10% 100 4,500
Its costs are 90% or say, `. 40,500. On the date the freight is quoted,
the $ - Rupee rate was say, ` 45 equal to a $.
@ ` 50 = $ 1. @ ` 40 = $ 1
The issue is, if SCI had quoted freight also in $ then its picture
would be as under:
$ @ 50 `
Revenue 1000 50,000
Cost in $ 700 35,000
Cost in INR 9,000
Profit in INR 6,000
At all places gold will be quoted in $ though USA does not supply
gold. Even South African mines will quote gold in $ and not in Rand.
When $ gold price went up from $ 400 per ounce to $ 1400 per
ounce, it was actually a massive devaluation of $. If South African mines
were quoting gold in Rand, Indian gold prices would have remained
` 9,000 per 10 gm. & not shot up to 20,000 per 10 gm. (One American
Ounce = 31.1 Grammes.)
Next:
While US is trying desperately to maintain its hegemony,
is it likely to succeed for long!
Page No.: 42
XI.1 Its crude oil price strategy is slipping out of its hands.
XI.2 Gold price strategy has already slipped out of the Cartel‟s hands.
(i) “U.S. is invincible.” World Trade Centre Attack and U.S. failure to
catch Bin Laden.
(ii) “Americans are honest.” Enron, Arthur Andersen & scores of other
scandals in U.S.
(iii) “U.S. Economy is strong.” Dot com bust,
XI.4 SEA countries, Iraq, Iran, Venezuela and China – all have tried to do
international trade in currencies other than $. There will be more
attempts.
XI.6 Saudi Arabia, China and some other Governments have started buying
gold and selling $.
Despite all these facts, one may observe that the common man still
thinks: “U. S. is a great economy”. Sage Tulsidas had said: “Samarth Ko
Nahi Dos Gosain”. (Ordinary people do not find faults with the wealthy &
the powerful.) Our sages were great experts in human & society
psychology. (Individual thinking & collective thinking.)
Next:
If & when US economy collapses, $ loses its hegemony, what will
happen!
Page No.: 43
When USSR collapsed, not many were bothered. World trade was
not affected. However, when US (the largest buyer in the world) collapses,
what can happen! Let us see a few probabilities.
Lehman Brothers and AIG believed: “We are too big to fail.” They
failed. World believes that a war between two nuclear powers is
unthinkable because of its harsh consequences. We hope, the unthinkable
does not materialise.
In the 20th century after 1960‟s (it took 20 years to recover from
world wars) and in the 21st century we have seen tremendous growth in
trade, science, technology and new instruments like computers, internet,
wireless communications and so on. All these have made us richer in
terms of wealth and military power.
The spiritual evolution has not kept pace. There has been some
growth but no way as much as the growth in wealth and power.
Most of the times it has fought wars to keep growing its trade and
continue exploitation of natural resources of other nations.
But now China may not permit further exploitation (To the extent it
understands exploitation.)
All those people who own $ assets will lose their assets.
India may hold $ 150 billions as Fx reserves. This will evaporate.
India will suffer a loss of upto $ 150 billions.
has great wizards in economics & a fantastic “Think Tank”. It will save $
from a disaster.
Well, recent past has shown that US has made several blunders. The
think tank could not avoid the dot com bust or the American crisis of
2008-2010.
Only time will tell whether US $ crashes or survives.
U.S. will have to stop its excessive & wasteful consumption. The
resources saved will be available for the rest of the world.
Indians who have stored their black money abroad & especially in
$, will have to remit the funds into India. We will have more capital
available for our own capital programmes.
Caution: (i) Nothing will work on its own. India will have to work
hard & strategically to gain its rightful benefits. If it does not work, some
one else will take away the benefits.
XII.9 Mafia: Now U.S. strengths have turned into a problem. An albatross
around its neck.
Every day it needs to borrow $ 2 billion. If U.S. does not get more
foreign money every day, its financial wheels will stop. U.S. Government
will not be able to pay salaries to its staff and to its military.
If China and Japan stop subscribing to U.S. Treasury bonds for one
month, U.S. wheels will stop. Alternatively, U.S. has to continue printing
notes and issuing within U.S.A. This will cause inflation. Americans are
not used to severe inflation for many years.
When U.S. Government will call back its Marines from the world
and release them on innocent U.S. residents – there will be more mafia
gangs. Guantanamo Bay and several other incidents around the world
have proved that these gangs will be more cruel than Russian gangs. And
U.S. may have many mafia gangs already working in U.S. Will U.S. be safe
haven for anyone! Even proper American natives may start thinking of
migrating elsewhere.
XII.10 Inflation:
Current inflation in India and government‟s helplessness in
controlling inflation is a direct result of Currency Wars. It is discussed in
Annexure 2.
Two young CAs pass exams, obtain certificate of practice and start
practice. Both are equally competent. However, one CA has no capital.
He starts practice from home. Another CA gets a gift of Rs. 5 crores. He
buys good office and installs necessary infrastructure. He will get a good
head start. The CA without capital can eventually cover up the distance.
But initially the rich CA gets a benefit.
Plain gift of massive fund has its own tremendous value for USA
and tremendous loss for rest of the IMF members.
Remember, IMF has worked as an institution “Of the US, For the
US, By the US”. It will not allow any great solution if that solution does
not serve US interests. World will have to replace IMF by a truly
independent global institution. And then issue an independent global
currency. Sounds very difficult. Nothing worthwhile has ever been easy.
Assume that India starts trading with all its international markets in
their own currencies. Indian imports are annually worth $ 300 Billions.
Page No.: 50
China has already made an offer to India: For bilateral trade China
is ready to avoid $ and deal in Rupee or Yuan. If India accepts this
proposal, to that extent need for $ will be reduced.
Next:
When the price is $ 1,400 per ounce, it is $ 45,015,000 per Mt. (32,154*
1,400). ($ 45 millions per tonne.)
Hence $ one billion will get 22.21 tonnes of gold.
8,000 Mts. of gold = $ 360 billions.
USA has held Saudi Arabia; and through it oil exporting nations as
its virtual colonies. For several decades U.S. could control the price of
crude oil. We, the Indians may not see the truth. But those who are
exploited, do see it. They have a seething anger at USA. Hence Bin
Laden‟s attack on U.S. World Trade Centre in September, 2001.
Pre-British within India there were 700 Kingdoms and all wanted to
expand. More powerful would usurp the land of its neighbour.
Neighbour either surrendered or fought back. There was always a war
somewhere or the other.
Today, with one country – India – all the wars within India have
reduced to some border skirmishes between states (similar to Maharashtra
and Karnataka border disputes). Whole country considers parties to the
dispute as stupid politicians.
XIV.4 Advait..
An evolved person does not want to rule over anyone and does not
permit any one to rule him.
Theory:
In India, all the three religions – Hindu, Jain and Buddha have fully
developed literature on the “Law of Karma”. It says, “Everyone will
experience the consequences of what she/ he does”. “What you cause to
others, shall be caused to you by nature”. “However the timing and form
of your experience cannot be predicted.”
The butcher kills the goat. One who eats the mutton has not killed
the goat. Still he is also a partner in the act of “himsa” and he has to face
the consequences. Butcher has killed the goat for his customer. The cause
of killing is the customer. Customer has to face the consequences.
Even the Christians say “you shall reap as you sow”. This means,
the law of Karma is understood almost universally – in several different
ways.
Now add the “Law of Karma” to entire discussion on economics.
time when you face the consequences. Hence to a person unaware of this
set of theories, this ”Samsar” (world) appears to be unjust and unfair.
Application of Theory:
U.S. caused the SEA crisis by first creating asset bubbles and then
pricking the bubbles. Between 1990 and 2010 U.S. has experienced asset
bubbles and in September, 2008, nature pricked the US asset bubbles.
XIV.6 Maya:
All this is simply a drama of Greed and Fear. All individuals and
all entities are in the grip of Maya. Some “smart” people have perfected
the play of Greed. The societies that permit unbridled greed are bound to
collapse.
Conclusion:
U.S. has exploited rest of the world for last sixty years. It has used
cunning strategies & even wars to obtain & maintain $ hegemony. Free
availability of large funds flows has made U.S. egotist & intolerant of
democracy in global matters. It has pushed itself into the quagmire of wars
in Iraq & Afghanistan.
Now US has lost grip on all the cartels it created. The probability is
more in favour of a terrible crash in US $ & US economy. Low chances for
US behaving wisely & conservatively. I personally see very little chances
of US retaining its super power status for long.
Many Thanks
Rashmin Sanghvi
Page No.: 56
Ahimsa
If a person keeps fighting with all & sundry over petty matters; you cannot
even discuss Ahimsa with him. However, consider a Jain who would not even
eat green vegetables in monsoon. He is a wealthy person being proud of his
wealth & eager to display his wealth. He is unfit for finer discussion on Ahimsa.
You will be able to discuss the finer aspects of the concept with a non-vegetarian
person who is sensitive to the feelings of others. Eating habits do not determine
the level of thinking & sensitiveness of a person.
(i) When both Jain & Baudhh religions talk of Ahimsa, why do we need
two different religions!
And yet every Ahimsak person also has a different way of thinking &
living.
(ii) A tax consultant may not believe that Ahimsa & tax evasion have any
relationship. But a tax commissioner may agree more readily. But on this issue,
we will have strong views from many CAs.
Page No.: 57
It is the law of nature that every one will think & act differently – even on
one and the same concept. This is called Unekantvad.
Brazil, Germany are also vocal critics of USA. Almost the whole
world is affected. However, developing countries are affected more than
the developed / rich countries.
In case you would like to see global expert economists‟ views, see the
following web links:
(iii) Octaviourzua:
http://octaviourzua.com/investing-strategies/how-does-the-us-export-inflation/
For India the oil price in terms of $ goes up by 40%. If India could
buy crude oil by paying in rupee or Euro or gold – without involving $;
then the crude oil price for India would have remained steady. But that is
not possible. Hence India is forced to raise petrol prices.
5. In the year 2010, monsoon was extended by more than one month.
This has spoiled the monsoon crop as well as winter crop. Hence food and
vegetable supply has gone down. Prices have to go up. This is another
factor beyond the control of Indian Government.
In real life, there are several forces and counter forces acting on the
economy. Inflation is the result of these forces.
7. If you can see on the web all the links given on page 59 , consider
the following: When the information on India‟s biggest current economic
problem (inflation) is so easily available on the web for free, how is it that
almost the whole of the media is ignorant about it? Why no one in India
is discussing the real cause of inflation?
Thanks.
Rashmin Sanghvi