Friday, October 15, 2010


When I was writing this article I gave a hard thought regarding the name of the topic. For a moment I made up my mind that I will make the topic name exactly to the objective of the article. But I was compelled to take this Name of the topic.Whta made it so is follows at the end.
We are all well acquainted with the words named DEVELOPED and UNDER DEVELOPED. We can define the meaning of these two words from all corners from an economic condition of a country. But precisely saying developed means more economic growth, revenue generation, more motivations towards income formation and less focus towards education. In fact education for these developed countries stands out be an activity of leisure. In year of 1990 we all know where India was standing on the global foot map .If I use hard words then India could have been defined as a poor economy with no proper civilized guidelines of growth and development. We often used to be called as beggars on the global platform when we used to ask for loans for construction of infrastructure and even for the surviving of the climbing population of India.

After 20 years the picture is well clear. We the developing poor countries stand out to be leaders of the Drama of Exploitation. Well it is surprising to find out the sudden jump of new names. Yes exploitation of the resources. This what the developing countries have been doing under the name of Super economic income .Developing nations have been able to generate super economic growth due to extravagant exploitation of resources. Resources over here I mean the ones provided by nature. Incomes have the main focus of these developed nations. They never wanted to travel the path of growth. Since if they have travelled through the path of growth then it should have been sustainable and disciplined growth. They went for income. They exploited the natural resources like oil, coal even human capital.

They generated income through exploitation of the human capital and resources. They never gave a thought to growth. Otherwise they should have preserved it and should have developed alternative system of income generation. Developed countries made new technological advancements and made new discoveries. The more discoveries they did the more wings of the nature got scrapped. They developed new strategies of manufacturing generating superfluous income and not growth. Since their technology replaced human capital. The more automation they adopted more human capital became unemployed.

Now it raises the debate that does technological advancement leads to loss of human capital. No never. Technology is for the development of growth and not generating income. Developed countries discovered technology to generate income and not capital. If technological development was made with a mindset of growth then human capital should have never suffered. We explore huge quanatum of coal and oil for our livings. They are nature provide. Statistical figures and statisticians will never be able to dig out when these resources will meet their end. So we will not go with the figures. Did the developed countries ever in the past 40 years give a thought that these resources will come to an end. We all know the gold prices and the reasons behind their huge prices. Did we ever give a thought that once the gold mines across the world comes to an end then what we will leave for the next generation. We are eating up all the resources for the generating income. Does any of my readers can say is Gold bringing growth. Gold is only generating income. In the same way the developed countries have been exploiting the resources and generating income.

We are doing infrastructural developments and other activities to drive the growth. But we are using a small quantum of the resources provided by nature. We are not using the alternative resources which nature have provided abundantly. We are scratching our head over a small quantity of resources.

Each year we develop strategies for productivity improvisation, efficient use of resources like Six Sigma and Balance Score card. Does they bring growth or income. They bring exploitation and depletion of resources. No theory or strategies can bring growth until it is developed for generating growth and not income. Since growth grows slowly with consistency where as income remains a volatile through its life of generation.

We complain a lot about bureaucracy existing around all corners of the world. Do we ever gave a thought for the reasons for birth of this bureaucracy. We included all the income generating people in the system and not the ones who are focuses towards long term growth. Bureaucracy gave birth exploitation of resources and less inclination towards growth. The result stand out that we all today are running for income depending on the bureaucrats. Can any one explain me where Balance Score Card or Six Sigma will come into play.

Please keep in mind I am not criticizing the management principles but helping you out to find that what principles we are formulating and for whom. Is it for growth or income? We formulated the principles with the mind of income and not capital. Since capital remains an asset where as income depletes with time. What we need is to create policies and guideline to create and protecet wealth and not generate superflous profit.

Education also became a part of the drama of exploitation. What we read in newspaper or see in television regarding the education system. I don’t need to give further background introduction. In the year of 1990 we all can remember the educational system of India. Now at that stage we did not have so much developments and scope of higher education. But after 20 years we reached the higher levels of educational development and more advancement of education but what happened to the lower levels. Today lower education is business resulting income. The higher educational developments have become growth but the lower one became income resulting exploitation of parents’ resources. Donations: nothing more needs to be explained.

No GDP, no IIP, no consumer data was ever able to measure these faults and will never be able. We are all generating income and not growth. We are exploiting each other behind the image of growth. Its not the question of Developed or Developing countries.Its a question of future.What we are keeping for the coming generations.Only exploited fruits of income.The developing countries should not follow the path of developed countries.Since resource imbalance is creating a gap which remains threat for the coming decades.What we need is to keep the nature free from exploitation and use alternative resources. 

Now I return back to the place where I have started writing the article. I was thinking here what name should I give to the topic so that my readers are exploited. See you must also be thinking that I am also focusing towards income and not growth. Sorry to say by reading this article I did not generate income but growth of individual thoughtful minds.

In my next article I will depict the picture of how civilization come to an without education

Sunday, October 10, 2010


Is yen the villain or the China .Don’t get surprised with the question. This question is now the most debatable topic on the roads of Wall Street as well as in the CafĂ© Coffee Day mid lunch session of brokers. World economist have raised the question and debated over thousands cups of coffee to find the real valuation of the Yen should be and to find a way to bring a WIN-WIN situation for US and China both. The trade relation between the two countries once upon time was very healthy and active, In fact the one who is blaming China today were the invitees of China to the global trade platform, But is China the real villain. I find it as an hero or an helping hand.

In 2003 we find that US economist held a conference where it was declared that Us manufacturing was double of 1970 and triple of 1980 era of manufacturing. After the implementation of NAFTA and Uruguay Round agreement the US manufacturing took a hard turnaround and made robust manufacturing activity. Even the US industry added half million jobs after the adoption of the two policies mentioned above within 5 years of the adoption. When US welcomed and aggressively wanted China to join the WTO and when Chian was introduced to WTO the US administration at that point of time raised their voice saying that China is the most Favored destination.US diplomats and business society wanted to exploit the immense potentiality of the Chinese population which made the US to declare China as the Most favored destination.

Many economists at point of time have cautioned that china might end up in apposite way for the US trade and business. U.S. Trade Representative Charlene Barshefsky assured at that time, the deal protects U.S. producers against Chinese dumping of cheap goods for years to come. Even Mr. Clinton administration told that China’s admission to the World Trade Organization is a great breakthrough. It opens China's markets to more American goods, protects American investment and technology in China and further opens China to Western values such as workers' rights. US have failed earlier also in similar trade practices. When Mexico was opened up for trade activities clothing were exported to US. In the first year the export was 150% and in the next 5 years it went up to 600%. But the economists were completely against of what the US said at that time. May be they could see the future with a closed eye rather than the others opened eye US administrative.
China Boost US Manufacturing
Moreover china helped the US manufacturing at that point of time. In the year of 1988 to 1998 we find that US manufacturing grew at the most fastest space as compared to any country.US used to import goods in to their country from China. Since those goods were of cheap prices as compared to US own manufacturing. American manufactures took advantage from the lower-cost inputs from China, in products such as machine parts, office machines, and plastic moldings. These inputs allowed US manufacturers to retain their competitive edge in global markets.US was exporting its goods at a double speed and at the same time the US import was also running in the same equilibrium.US manufactures took the advantage of low priced Chinese exports and made their own manufacturing grow with super abnormal profits. In 2001 when the US manufacturing fell the import also fell with same quantum. China is a leading supplier of imported clothing, shoes, furniture, toys, sporting goods, and consumer electronics. These products are preferred more by the low class earning Americans.

According to a study from A Brookings Institution, economists Martin N. Bailey and Robert Z. Lawrence found that trade accounts for only about 12% of the nation's manufacturing-job losses since 2000. Most of the losses stem from weaker exports, not soaring imports from China or elsewhere.

The strange fact is this that US trade deficit with china is due to low savings rate of US citizens. The drop in the personal savings and the federal unregulated budget on war activities widen the deficit. During the President ship of Mr. Clinton US was having a trade surplus of around $ 264billion.Under the Junior Bush Administration it went to -$436billion in 2000,-$638billion in 2004 and -$827billion by 2008.The household savings also fell to -2% in 2008.Macro economic choices made the unemployment to climb the level of 9.6% standing in 2010.
China Builds US Treasury
China holds 60% of the treasuries of US and this have helped US administration to keep their banking loan rates lower and made funding easy for war activities of US. When US administration raised bonds China deployed their export savings into US bonds and made them fight against Terrorism. If china did have invested the export surplus then US should have never been bale to fight against terrorism. After China entered WTO US wanted to exploit the huge population of China with its MADE IN AMERICA tag line since DotCom bust have changed the business strategies of the Wall Street leaving no option rather than exploitation. US wanted to diversify the resources as well as gain resources from overseas exploitation. But it failed and failed bitterly. This is also true that most of the Chinese exports to the U.S., made by Chinese workers, earning are only 4.5% of the average U.S. factory wage. But this simple point cannot make China the Villain. US has gained in many ways from Chinese economy. Over all it can be concluded that US trade with China is blessing three times more , through low-cost imports, through rising demand for our exports, and through capital inflows that keep our domestic interest rates low. It is truly a win-win-win relationship for the United States. If today US imposes the tariffs on Chinese exports it will again work against them. It would be a direct tax on US working families, especially those on modest incomes. It would drive up costs for U.S. companies that depend on parts, supplies, and other goods from China to remain competitive in global markets. Domestic demand will not support the to consume US manufacturing, since no one will ever take loans to buy livings.US administration have to understand the cultural change and of its citizens and accordingly fix up strategies. What you need is a low living cost and valuation of the dollar.

What is making the US administration to fear is the level of Brutal Facts acceptance. They are not going to accept the mistakes of their predecessors administrative and financial policies. They are more inclined to thrust the blame on some one. US have been exploiting other nations and as well as its own domestic citizens.They alwasy planned for short term gains and never for long term devlopement of the nations.Its high time for US administartion to learn from other countries economic startegies which were once blamed and cursed by themselves.If tomorrow China stops its exports to US will US be able to solve all its problems. War and capitalism cannot go hand in hand. They are opposite to each other. The U.S. and China have benefited enormously from their economic ties.

Saturday, October 9, 2010


Congratulations to the speculators of the Wall Street. They made the US stock market to climb 11000 mark, filled the pockets of the Wall Street through the stimulus packages and the CEO of the companies made their bad assets recovered from the tax savers money.

We must appreciate the game played by the speculators despite of the uneven pressure on the macro economic levels of the US economy. Some of the following analysis  will depict the true picture of the DOW JONES 11000.

US is suffering with an unemployment rate of 9.8% and clinching towards 10% level.US citizens have no money or household savings to and nor they have avenues of earning the livings.US economy grew at less than 3% after the post recession.US suffering with a very low rate of household saving rate. In the year of 1980 under the president ship of Mr. Ronald Wilson Reagan US household savings was at 12%.In the year of 2004 under the leadership of Junior bush it went to 0% and to end the story with more spices it went down to -2% in 2007.The below chart shows the Mountain of Debt of US on its household savings.

Today the US citizens are having an average 133% debt over their household savings. This means that if a person is savings $10000 then he owes to the market $13300.It relates no savings and only debt. Life at US is running on the wheels of debt. In year of 1970 their was no easy ways of availing of debts as compared to the past decade.US policies made such turn around to exploit the US citizens that they are now finally left the citizen with the burden of borrowed capital.

In 1980 under Mr. Ronald Wilson Reagan the Conservative Policy was adopted where it was mentioned that average household debts can exceed more than 50% of the household savings. Well in the year of 2007 the household debt limit went beyond 120%.

TARP and other packages declared by the US government were only bale to clear the dust over the street of Wall Street but failed very hard to generate employment. Toxic assets buyback and balance sheet of the debt burden companies were reduced but nothing went for employment generation.

We all know that the pockets of the US banks were adequately capitalized to spur up the lending process and so that demand and consumption picks up resulting manufacturing to come up. After the post recession the banks were left with more margin of funds than their specified limits. Their capital equals almost 12% of assets, up from less than 9% in 2006.This reveals loans were not disbursed as US citizens are not having anything to forsake. They have no means of paying back loans. So it clearly reveals that the policy of capitalizing the banks worked in favour of the banks doing investments in emerging markets and did not work for the benefit of unemployed US citizens.

Banks made their pockets swell form the investments returns made into emerging markets. Moody’s, a ratings agency, has estimated banks’ total loan charge-offs between 2008 and 2011 at $744 billion, of which $476 billion has already been recognized in their accounts. They have enough loan-loss reserves to cover 80% of the remaining $268 billion.Till date we all used to think that emerging countries and other nations were rated as poor countries. It might be true but sorry to disappoint that US poverty rate has gone from 12.5 % to 14.3%

According to the Peter Hooper and Torsten Slok of Deutsche Bank if the US citizens household savings rate climbs of4.5% a year then household debt will fall from 126% of disposable income now to around 85% in 2013.This speculation reveals that consumption will not find any space to pick standing on the shoulder of borrowed capital.US citizens are increasing their house hold savings by .5% and consumption is declining with a rate of .2%.What ever the US federal and the government does to inject capital in to the veins of the Wall street but their is no space of consumption picking up on borrowed capital and US citizens are not going to burn their fingers again. We discussed lots of facts about US capitalism after post recession. But what about the employment generation in US. Since if employment does not generate, US citizens and its macro economic situation will travel from bad to worse and even beyond worse.

We all know that each week thousand of jobs are being cut is US and making the US unemployment to climb towards 10% mark. But did we ever go in to the cultural change which took place for the past 20 years and now the present cultural change.

Earlier US never had any funds to go for any war. They felt the crisis of funds like any thing when they decided to go for war. Now if there is war they simply go for raising bonds and finally increasing the risk level of US economy in the long term. Bonds leads to solve all problems of US, what a great solution was discovered and still followed. In the area of unemployment we find that womens are being recruited and at a much lower wage line as compared to the men.

US Cultural Chnages:
In 1968, 38% of married women aged 25 to 54 with children worked out of the home. That figure reached more than 70% in the early 2000s, and it has stayed in that range since then. % Another problem of US unemployment is lack of skilled manpower. Yes this is true and shocking. The ear of capitalisms and borrowed capital have eroded the minds of quality manpower and led to dearth of skilled work force. In the past two decades we don’t find any thing about educational development in US and research. In the 45 pages document released by the Republican A Pledge to America doesn't even mention about education. No body gave any identity to the human capital.

Human capital which needs to grow along with the profit numbers of the companies. According to Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, estimates that more than 2.5% points of the current unemployment rate are attributable to a skills or education mismatch between workers and jobs. The story of the crisis of manpower began from late 1980 when jobs were given to college educated workers and hence capping further academic growth. Education and human capital are the biggest financial tools to save and come out of any crisis. The solution lies in changing the mindset of the US citizens and not exploiting them for borrowed capital living. In fact US citizens have realized this and hence consumer numbers are not improving.

During the recession, 61% of U.S. companies took at least four approaches to cost cutting and cost management, compared with 44% of firms globally. Those actions include hiring and salary freezes, layoffs, reduced bonuses and overtime restrictions. Even after post recession the bugle is still blowing. The second stimulus package being named under the tag of Quantitatve Easing will only spur Dow Jones and emerging market. Since nothing flows to develop the education or human capital segment.

Speculators are now busy for making a small profit booking in US market and again spook the Dow Jones to 12000 mark in a year. Can any of my reader find out what made the US market to climb 11000 mark when unemployment climbing at 10% levels.


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