Part III - The Solution

What's the use of discussing the problem if one doesn't provide the solution. So this it then, let us read my version of the solution to this issue.

As the boom began from 2003 and lasted till 2007, the fall will also last till 2013 or 2014. Most of the solutions require a long term approach to resolving our current conundrum. I feel we should stop the austerity measures as they aren't producing the desired results. On the contrary austerity has led to reduced consumption, lower tax collections, high unemployment and a feeling of helplessness among the masses. We need to complement the Monetary Stimulus i.e. the Quantitative Easing by USA and England and Long Term Refinance Operations (LTRO) i.e. lending by the European Commercial Bank at 0% for 3 years with Fiscal Stimulus as the money supply has not met with money demand which has led to inflation as the system if flush with liquidity and there are no other options but to speculate.

EU nations should revert to pay-cuts, pension and labour reforms to make their more productive and reduce taxes to fuel consumption. People will need to accept the fact that the days of superb social security web are over. In the USA banks should be made to realise that the funds that have been provided to them are for lending to the people and not for prop trading. The US government should come up with large scale infrastructure spending measures and alternate fiscal stimulus measures to create employment. We need to emancipate people from their current state of mind. 

EU will need to work together for a solution for the debt-ridden countries, they should be provided with more liquidity and a long term aid package should be finalised without penal austerity and fiscal goals. This will help to remove the insecurity and provide a definite road map for the revival of their Economy and re-entry into the Debt Markets. The current indecisiveness and disparate solutions by different countries needs to go, the stronger countries like Germany, Finland, the Netherlands and Norway need to sacrifice for the long term survival of the Euro. 

For India these measures will lead to higher prices and even higher inflation. If we exclude fuel price inflation from the indices we will see that the other components like agricultural and manufacturing prices can be tackled my taking prudential steps like de-bottlenecking the infrastructure and providing impetus to agricultural reforms. I feel the major beneficiaries of subsidies have been the rich farmers and the middle class, we need to provide them on a need basis and to the deserving. And we need to start making tough decisions pretty soon or the situation will be such that decisions will be made for us. I feel that the latter situation will prevail. It's human tendency to procrastinate and we are seeing this all over the globe.

Let us see what the future beholds.    

The Current State of the Global Economy - Part II

The bail-out funds came with many covenants, fiscal consolidation being the major one. Fiscal consolidation aims to reduce the fiscal deficit i.e. reduce government spending on social security measures like pensions, healthcare education and unemployment benefits. Hence these countries had to cut down on jobs in government departments, increase the retirement age from 55 years to somewhere near 60 years, wage cuts and tax increases to augment government finances. The caveat for receiving further funds was on reducing the fiscal deficit. Subsequently these measures led to large scale protests and resentment among the general public. 

e) USA - Post 2008 USA bailed out its ailing financial sector which included housing finance companies, banks, insurance companies and investment banks. Under Federal Reserve's (Fed) ( USA's Reserve Bank) blessings also several financial institutions were merged with their stronger counterparts. To spur up the economy the Fed came up with a monetary stimulus package called Quantitative Easing (QE) of about $600 billion and reduced the borrowing rate to Zero, this money was used to buy US Government Bonds which was used to bail out the financial companies and help the US Government to meet social security benefits , in layman terms the Fed printed $'s and gave them to the Government to splurge. This infusion of money didn't have the desired effect of increasing the growth rate or creating job opportunities. So in 2010-11 the Fed announced QE II of another $600 billion, this additional funds were used by banks to hoard or increase their cash reserves and speculate in commodity and forex markets, which led to increase in commodity prices without any tangible increase neither the growth rate nor the employment figures. This wasn't the last step which the Fed took, another measure called operation Twist i.e. replacing short term bonds with long term bonds in the Fed's Balance Sheet, this measure was introduced to reduce long term borrowing rates and propel infrastructure spending. But in 2012 the unemployment rate continues to remain above 8% and the number of people receiving unemployment benefits have remained the same. 

f) China - China's biggest trading partner is the US, hence it was thought that post the QE measures the consumer spending in the US would increase on the contrary it has remained at 2007-08 levels and is slowing moving lower and with very little employment growth the signs look bad. So to prop-up domestic consumption to sustain its manufacturing base, China also undertook a monetary stimulus which led to a property bubble and the inflation rate inched above 5%. Mid 2011 China's Reserve Bank increased the borrowing rate and put curbs on real estate lending, this tightening coupled with the slowdown in exports has also slowed down the Chinese growth rate to mid 8% level.

g) India - Recent economic surveys and reports haven't been kind to India. We all know the story by now, policy paralysis, high inflation, huge subsidies, fiscal deficit, current account deficit, crippling infrastructure etc. Last year inflation was the major issue in India which was caused to rise in agricultural commodities, dairy and poultry products and supply chain constraints in manufacturing products. Few of our problems can be because of international issues but the majority have been our doing.

My last part of this series will be about how we can tackle this mess.

The Current State of the Global Economy

June 13, 2012

This is my 1st post realting to Economic scenarios and hopefully many will follow. Currently we are encountering varied issues all over the globe, let me list them down...

1) Japan - Aging population and deflation

2) USA - High unemployment, low growth, low rates of interest

3) China - Propety bubble, falling exports, slowing growth

4) European Union (EU) - High unemployment, high debt to GDP ratios, low growth

5) Australia - High unemployment, low growth

6) India - Low growth, weakening currency, high inflation

The common feature among all is Low Growth and High Unemployment. Precursor to our current state was the Financial Meltdown of 2007-08 and we are still in its aftermath. Let's begin with the EU, which is the main reason for the current crisis. EU countries are currently facing high debt to GDP ratios ( in the range of 70% to 150%), i.e. their debt levels are not sustainable with their current GDP and neither will their economies grow at such a rate that they can repay the interest or the principal. Let us see what led to such a situation for a few of the countries...

a) Greece - Greece's entry into the EU was done in haste and without adequate due diligence by the initial member countries, to shore up member nations that have adopted the Euro, so it could convert into Euro at a highly favourable exchange rate. Greek citizens suddenly became rich as they possessed a stronger currency. The Greek government started borrowing at very low rates due to their EU association. These reasons coupled with an unproductive economy, high social security benefits and low retirement age made them profligate. To sustain such high levels of social security benefits, the government got into a debt spiral in which they had to borrow more money to pay the interest on the initial debt. This situation was sustainable till the world markets were flush with liquidity, but the 2007-08 crisis which led to a trust-deficit made borrowings by such profligate economies expensive as liquidity dried up and lenders became sceptical. Now the government could not mend its ways hence they started borrowing at higher interest rates compared to other EU nations. Earlier they were borrowing at 2% - 3% now the rates rose to 7% for a ten year note, a country which doesn't have the means to even pay the interest on such loans and has a GDP growth rate of 1%-2% can't sustain such a high cost of debt. If Greece had the power to print the Euro it could have easily repaid these loans, but the EU doesn't have a monetary union which allows its member countries to print notes and get out of jail. The EU treaty has a mandated the European Central Bank (ECB) to expand money supply i.e print notes at a certain fixed level. Eventually it had to approach the member countries for a bail-out.

b) Ireland - It also had similar story as Greece and it also had to approach the EU countries for bail-out.

c) Iceland - A non-EU state had a huge boom in real estate prices, being a country having a small population such price rise was unsustainable and had attained bubble proportions. The exposure of 2of the largest banks of Iceland in real estate loans was higher than the GDP of Iceland, when the 2007-08 financial crisis struck it was the first nation to seek help, the real estate bubble burst which lead to huge non-performing loans following which the banks faced huge losses. These banks were bailed-out with government i.e. tax-payer and IMF borrowed funds. Iceland was in a favourable position because it could print its own currency which was severely devalued during the real-estate crash and due to which it could restrain foreign capital from leaving its shores.

d) Spain - Spain also saw a real-estate bubble which was propped up by Cajas (Loca Savings Bank are known as cajas), the typical case of sub-prime lending. Even its real estate bubble burst post the financial meltdown and the Cajas are sitting on potential NPAs of billions of dollars. Just a few days back the EU sanctioned a $100 billion bail-out package to re-capitalise these banks.

Similar story resonates around other EU nations like Portugal and Italy. Till now Iceland, Greece, Ireland and Portugal have received bail-out funds from EU and they have stopped issuing fresh notes as there is no  market for their debt instruments. Greece's 10 year note has a yield of 27%. All the nations (except Iceland) approached the EU for assistance after the yield on their 10 year notes crossed 7%. As of today the yield on Spanish and Italian 10 year notes is 6.5% and 6% respectively and rising.

This the background of the current imbroglio and in the following post I shall provide further details with regards to the measures adopted by the EU, current state of the economy in the USA and China, and finally the impact of all this on India as well as our own follies.                        

Beautiful Dream Run (Part Two)

So having being put into bat, we sent in our openers CP and NA; with CS on the sidelines watching our every move and providing guidance.

Batting First

1st Over - Bowled by a woman

CP managed to take a single on the 1st ball and put our main batsman NA on strike, we collected around 15 runs from the 1st over, all thanks to CP's single and some power hitting by NA.

2nd till 5th Over

We can retire our woman player after the 1st over is bowled, so coming back to the pavilion accompanied a huge round of applause was CP. Next up was UE, he and NA has an amazing time in between and batted on till the 4th over. We lost UE in the 4th over and in came JT he took a few balls to settle down, CC was hoping that JT would perform well as he had put in a good word for him to CS. After a few hiccups we managed to reach a competitive score of 61 for the loss of 3 wickets in 5 overs. JT's performance was average and that's putting it very mildly.

Now Bowling

1st Over by CP

She had received a lot of inputs from CS on Saturday, and now was the time to follow-up on them. CP did a fine job at keeping the woman batsman on strike for 3 balls and conceding a couple of wide deliveries. For the remaining three balls Team Two could put up a score of 10 runs at the end of the 1st over.

2nd over by TT   

After going through a disastrous time in the previous edition of the cricket league, it was time to make things right. The 1st ball was lofted to long-on where RR was fielding, some sloppy fielding yielded 2 runs. This prompted UE to swap places with RR, 2nd ball was once again lofted to long-on, and UE made the catch look easy; his fielding change and TT's bowling were vindicated. 3rd ball was once again lofted to long-on and another catch by UE, this was turning into a dream spell for TT. The rest of the three went for 8 runs, a boundary included.

3rd and 4th over by NA and CC

These two overs went well for Team Two and they were in the game, thanks to our fielding to a very large extent. NA bowled well, the batsmen playing and missing most of the times. The only wicket to fall was by a run-out, which was a pretty eventful one; the batsmen edged a ball to the keeper and it spun after it landed, being sloppy as ever TT, the keeper, misjudged the spin and the ball went past him. They easily completed the single and went for a risky second. Now TT had a conundrum whether to go for a direct hit or throw at the bowlers end to get a run-out. As he wasn't sure about either he ran towards the stumps with more than 11 people screaming, " throw the god-damned ball", and when he was about 3 feet from the stumps he threw the ball and it hit, it bloody damn hit. God saved the day and his ass.

The Final Over - 14 Runs to win

Don't know whether CC had a plan in his mind about who was going to bowl the 5th over. Me thinks that he went with NA because he bowled a pretty good line. So NA with the ball, bowling the 5th over. The first ball a swing and a miss both by the batsman and the keeper (TT), so they get a bye. Second ball once again a swing and a miss by both, another bye. So they need 12 runs off 4 balls, match is still in the balance and everyone is pissed at the keeper. 3rd ball another swing, a nick and it lands just short of the keeper, but this time the keeper pockets it safely and no run given.

Final 3 balls and 12 runs to get, the pressure in on the batsmen to score and thankfully they couldn't. To everyone's bewilderment and ours included we won, we achieved our lofty goal. CS was ecstatic, however, he had to leave due to work commitments along with MIS. Congratulating the team for a very good performance and reminding us to improve our fielding for the next match which was against our old team-mate, the captain of 'Credit in a Mess' team.

PS : CC was given some more inputs for the next match, firstly that JT couldn't judge the bounce well, so to send him lower down the order and secondly to try out UE as a bowling option and if he bowls well not to give TT a bowl in the next match.   

A Beautiful Dream Run (Part One)

Third edition of the D Bank Cricket League consisted of 20 Participating teams. The match would be 5 overs a side and all matches were eliminators. Each team should comprise2 women and the opening batsman and the opening bowler should also be a woman. This was the set-up of the tournament. Now let me update you on my team.

I was part of the Scorchers Team, and our squad consisted of...

1) Captain on Call (CC) - has immense capacity to talk on the phone

2) Juvenile Thakoor (JT) - the youngest player of our team

3) Chulbul Pandey (CP) - our woman player

4) Didi from the South (SD) - 2nd woman player

5) Two overs on the Trot (TT) - this is me

6) CorpFirz (CF)

7) Hanu (H)

8) Mr. N from Admin (NA)

9) Another Mr.R from Admin (AR)

10) Chief Strategist (CS) - he was also the coach and mentor

11) Mr. MIS (MIS)

12) Tax Consultant (TC)

13) Risky Risk (RR)

The tournament was scheduled on Monday, February 20, 2012. And we scheduled our first practice session just 3 days before i.e. Saturday. It was an early morning session with one of the participating teams at a Municipal Ground near our office. Reporting time was 07:30 hours, only JT and NA were on time, TT, RR, CC and SD trickled in post 8; with 15 minutes gap respectively. The other team was on time and most of their members were present. We practised some bowling and batting for an hour; to call our efforts pathetic would be an under-statement. Most of us were holding a bat or ball after a very long time. Post practice we headed back to work. CC reported the status of the practice session to CS, and CS decided we needed another round of practice in the evening to decide what will be the batting and bowling order for Monday. The ones who had turned up for the morning practice were reluctant to go back on the field, we were already down and dusted with just 1 hour of practice.

So reluctantly we were on the ground in the evening, and post our practice the batting order was decided. CP and NA would open the batting and JT would go 1 down, and the bowling responsibilities would fall on CC, NA, CP and TT. We decided that the best we could do was win our 1st match, which was against 'Team Two'. The goal being set of winning the 1st match; in the previous two editions we used to bow down in the 1st match itself. Keeping that in mind this was truly a lofty ambition. We never used to discuss this goal openly so that we wouldn't jinx it.

Had to get up at 6 am to reach the ground at Kandivli by 8.30 am, reporting time for our match was 9.30 am. CC usually on time was late today and in his absence TT had to go for the toss. TT lost and toss and the opposing team put us to bat. So firstly we lost the toss and our strategy was to chase. While all this was happening, H came in with a new player Unknown Element (UE), on his recommendation we got him into the team and put him one down. This was a big risk but we had nothing to lose. So our team comprised of the following playing eleven (in batting order)...

1) Chulbul Pandey (CP)    

2) Mr. N from Admin (NA)

3) Unknown Element (UE)

4) Juvenile Thakoor (JT) 

5) Hanu (H)

6) Captain on Call (CC)

7) Risky Risk (RR)

8) Another Mr.R from Admin (AR)

9) Two overs on the Trot (TT)

10) CorpFirz (CF)

11) Didi from the South (SD)    

Spreading the word for Cricket Expansion

Have always felt that Cricket should have world following like Football or Tennis, this has led me to follow the developments and progress made by the sport in countries other than the British Commonwealth. Cricket has the numbers to be designated a world sport primarily because of the Indian Subcontinent, but I feel this concentrated support base neither sustainable nor desirable. Outside the subcontinent, cricket is not the main sporting attraction even in the other powerhouses like Australia, England or South Africa. Hence the need to popularise the sport not only in new locales but also the traditional ones.

The ICC has a 3 tiered (around 100 countries) structure for cricket, with the power centre in the first. Without getting into the politics of cricket, let's concentrate on the growth potential of the sport. So the remaining tiers consist of Associates and Affiliates. Among them the upcoming ones are Ireland, Scotland and Afghanistan; these teams consist predominantly home grown players unlike others like UAE. Ireland and Scotland being part of the United Kingdom have historically played cricket within the English established cricketing infrastructure. This is their boon as well as curse, as the English have been known to lure players from them, the most recent being the Irish southpaw, Eoin Morgan. However, the recent developments speak of good days to come; contracting players full time has led further commitment by them, resulting in better results against Full Members and the cascading effect of their improved performance has brought in the sponsors for both the Irish and the Scots. Recently Cricket Ireland came out with a roadmap to attain test status by 2020, this consist of establishing a first class structure and development of under-age cricket.

Afghanistan has been the beneficiary of refugees who have returned back home having learnt the game in refuge camps in Pakistan. They have risen from the Affiliates league to join the Associates within a span of 2-3 years; this phenomenal rise has been well documented and credited for uniting the nation. Recently hosted match against Pakistan was not only well attended (it was held in UAE) but also keenly followed in Afghanistan. Cricket can be a uniting force among the warring tribes and also bring some cheer to the ravaged country; it also plays a similar role in India, where Cricket is a very strong uniting force. 

Other nations which can rise to better levels are Nepal and Papua New Guinea, where cricket is followed and played by the locals. India and Australia share proximity to these nations should help them in their quest. A more selfish motive could be to help them achieve more political clout in the ICC. So I would like to see the following teams playing competitive cricket in 2020, Ireland, Scotland, Afghanistan, Nepal and PNG. The only place where cricket can still make further inroads is Africa where South Africa along with a stronger Zimbabwe can help bring Namibia, Kenya and Uganda to the top level.     

Abject Show Down Under

Every Indian cricket fan's pulse would be racing a bit faster out of the sheer anger over Team India's most recent debacle in Perth. Such poor display in all the three departments of our game wasn't expected out of the current team. Prognosis was that we could be the team to beat Australia in Australia, this illusion has been completely squashed.

This team was hailed to achieve greatness after winning the World Cup and scaling the No.1 slot in the Test Rankings, we shouldn't have had such high expectations in the first place as both these feats were achieved while playing at home most of the times and by players who are on the verge of retirement. Hopefully post England and Australia we will learn to put our house in order, as always we can take some tips from Aussies in this respect. Cricket Australia (CA) constituted an independent committee to identify the problems which were plaguing Australian cricket even though their standards hadn't dropped to where India has reached. Knowing the kind of people we and BCCI are, I am pretty sure we won't have anything even 1% similar to that.

My remedies for improving our performance are nothing new, these steps are known to one and all.

1) Make more sporting pitches in India

2) Atleast one India A tour to Australia, England and South Africa every year (easily possible with the clout BCCI has over world cricket ), by this we will have a standby team, good bench strength and competition within the official team

3) Do not over schedule

4) Provide enough number of practise matches before the 1st Test

We also need to give credit to the way Australians have performed not only in this Test Series but also the never-die attitude that they bring to any sport played by them. Some of the best matches ever played in cricket have always involved Australian sides because of their attitude and fighting spirit. Also a word of thanks to T20 cricket which has made test matches more interesting, most of the series that have been played over the course of last 2-3 years have been result oriented post its advent.