Archbishops, the financial system, and the FT

In its Comment ("Canterbury tales", September 25), the Financial Times criticises Archbishops Sentamu and Williams for not having "a proper grasp of how modern finance works". See: http://www.ft.com/cms/s/0/e07ff498-8b2a-11dd-b634-0000779fd18c.html

As readers of my Blog will know, Archbishops are hardly my favourite characters. However, to the degree they may not have such a grasp, the FT is right to excuse them - for the reasons it gives.

But I notice that the FT defends the current system by saying that "Everything from home-ownership to old age pensions relies on a successful and sophisticated financial sector".

What reasons or excuses should be adduced for the FT's failure to acknowledge that what we actually have is rather different from its purely rhetorical defence of modern finance.

What we actually have is a supposedly sophisticated financial sector that has shown itself to be so massively and totally unsuccessful as to threaten to subvert all human organisation around the globe.

Many folk may even now not see the threat. But it is looming. In spite of all that American politicians can do to avert it. Unless much more profound and fundamental changes are put in place - regarding which I have commented earlier in my Blog as well as other places. Sphere: Related Content

Understanding the Chinese government mentality

I thought my view of India-China relations was my utterly singular. So I am a little astonished to see that it is shared by Arun Shourie - with whom I rarely find myself in agreement!

His latest book, just published is: ARE WE DECEIVING OURSELVES AGAIN?

The reference is to India's self-deception in response to Chinese assurances of peaceful intent in relation to India between roughly 1950 and 1962 (when the Chinese invaded India).

China has astonishingly risen to world power status in some 20 years. Equally rapidly, as I have suggested in this Blog, it may find itself descending again, speeded on the way by the current global crisis. Meanwhile, China's rise, under authoritarian rule, is the first direct challenge to liberal democracy since Fascism in the 1930s. The Chinese modus operandi of promising peaceful intent, but then employing force to change facts on the ground, is well documented by Shourie. And India is not the only country that has to learn to deal with the realities of China.

I strongly recommend this book to governments in the USA, the EU, Switzerland, Russia, Japan, Taiwan, South Korea, the Philippines, Vietnam, Laos, Malaysia, Brunei, Indonesia, Singapore, Myanmar, Bangladesh, Sri Lanka, Nepal, Pakistan, Afghanistan, Tajikistan, Kyrgystan, and Kazakhstan and Mongolia - though some of them have their own, even older, experience of China - an experience that is hardly less painful. Sphere: Related Content

Does America have too much regulation - or too little?

As I am not a citizen of the US, I can afford to cock a snook at both Presidential candidates.

It is interesting to see Mr Obama reminding the US: "There’s only one candidate who’s called himself ‘fundamentally a deregulator’ when deregulation is part of the problem.”

However, Mr Obama clearly does not understand (as Mr McCain does not understand) that the problem is not whether there is too much or too little regulation in the USA.

The problem is rather that the US has too much regulation of the wrong kind.

What it needs is very much less regulation, but regulation of the right kind.

What is the right kind of regulation? That which tends to create global transparency, reliability and steady growth (as distinct from boom-bust) for the economy. Sphere: Related Content

A very interesting review of the book"RSS, School Texts and the Murder of Mahatma Gandhi: The Hindu Communal Project", written by Aditya Mukherjee, Mridula Mukherjee and Sucheta Mahajan, is to be found at:
http://www.dnaindia.com/report.asp?newsid=1191244

The spirit of Gandhiji is still being murdered afresh every day and every moment by the ideology of Savarkar and Golwalkar. Sphere: Related Content

Democrats and Republicans tussling over the rescue package

Apparently, a struggle is taking place in the US Congress regarding the exact terms of the rescue package for the US (and international) financial system. Equally apparently, the proposed bill was supposed to have been $500bn, is now $700bn - and no one knows what the final size of the bill may be.

A statement issued on behalf of Nancy Pelosi, the speaker of the House of Representatives, reportedly says: “Congress will respond to the financial markets crisis by taking action this week in a bipartisan manner...(but the Democrats) “will not simply hand over a $700bn blank cheque to Wall Street....(and would like to have) independent oversight, protections for homeowners and constraints on excessive executive compensation.”

Protections for homeowners are needed and will be popular. Constraints on excessive executive compensation are equally needed but will be unpopular (at least with the executives of financial institutions).

However, the real question is whether the US legislative system has the nous to put together with any speed anything like the brief required to put together any agency for "independent oversight".

Indeed, the US needs to ask whether another agency is what is needed. Rather, can the entire fragmented US system not be put together within one framework that, at the same time, avoids the overlapping monopolies of the different agencies there while allowing for much more competition? Sphere: Related Content

The King is Dead, Long Live the King: On the Fall of Investment banking (and its potential rise)

So Goldman Sachs (GS) and Morgan Stanley (MS), the last surviving global investment banks, have become regulated banks! That is to say, they are now subject toregulation by the Fed.

In addition to giving GS and MS the ability to take deposits from savers, thus reducing their reliance on funding in the short-term repo market, both GS and MS can now take advantage of loans from the Fed against the various kinds of collateral that are acceptable to the Fed.

It is worth recollecting that investment banking started as a separate industry following the consensus, after the Depression, that the "mixing" of insurance, mortgage, investment banking type activities with much more mundane banking activities, was at least one key cause of the Depression. The Glass-Steagall Act separated the two kinds of financial activities, till the Gramm-Leach-Biley Act stripped away towards the end of 1999 the regulations separating banking from investment companies, insurance companies and mortgage guarantee companies.

The Glass-Steagall Act's separation had been removed for only a few years before the current collapse, and many (including myself) would argue that the inter-relationship of investment, insurance, mortgage and banking industries that the Gramm-Leach-Biley Act allowed, was one key factor that led to the collapse.

If this analysis is correct, bringing GS and MS into the regulation of the Fed is only a partial solution.

Morever, there must always be room for creativity and innovation in the financial services industry as in every other industry.

I am not convinced that the current plans by the US government are adequate - though I hope and would like to think so! However, if and when, and for whatever combination of reasons, we recover from the current crisis, I have no doubt that innovative investment bank type activities outside the regulation of the Fed will reappear significantly. That would be altogether healthy.

However, one key regulation should be put in place now. Unregulated financial activity must never again be allowed to become many times the size of the regulated activity.

What should be the limit? We can argue about it. We need innovation but we also need system stability. Here is my offer, as an initial stab the limit: how about 25% of the regulated activity?

What should happen if unregulated activity starts exceeding such a limit? The top 10 firms involved in unregulated activity should be immediately made subject to regulation.

Innovation and creativity are important, and they have their place. Sphere: Related Content

How best to discourage tourists from visiting India

A friend's message prompts the following thought.

"How to most thoroughly discourage tourists from visiting India" must have been the subject of several intensive brainstorming sessions for the best minds of India over several years.

The results have been very thoroughly implemented.

It is no longer possible, for example, to get a visa by post in the UK.

So, wherever in the UK you live, whether relatively nearby (say an hour away, in another part of London) or across the water in e.g. Northern Ireland), you have to first arrange to travel to London, then you have to arrive at the office during working hours, join the long queue to submit your papers, stay somewhere overnight, and come back to join the queue the next morning for (you hope!) your visa. That's two days. A pity that India's best brains could not come up with something more complicated, so that it would take longer - and several more visits.

However, India's best minds haven't done too bady. Naturally, there is no guarantee that the visa will be issued. Bureaucrats can usually find something wrong with your application - for example, that the signature is too large or that there is something not quite right with the photo.

This is real progress for the tourist industry. So now a much greater number of tourists from the UK can be expected in India than in the bad old days.

Very good for the country during the global economic crisis, and other sources of income for the country are going to be limited anyway. Sphere: Related Content

Comment regarding my post, on Western media coverage of the ethnic cleansing going on in Orissa and other parts of Idia

Dear Prof. Guptara,

I am surprised to learn that the killing of Christians and destruction of their habitat is considered by the Western media to be by what you term"religious nutters".

In fact it is a planned attack on Christan's by VHP (VIshwa Hindu Parishad) and Bajrangdal on the tribal Christians in Orrisa because these tribals and backward class people have found freedom in Christianity from the caste system and from bondage to the upper castes.

The upper castes, who constitute only 10% of the total population of India, are agitated because the tribals and other backward class people are finding the true meaning of life and freedom in Jesus and are therefore no longer prepared to believe that they were born simply to serve the upper castes.

Thus it is not that a large number of Hindus are becoming Christians which is disturbing the VHP and Bajrang Dal but the new ideology of Christianity that all are created in the image of God and are therefore equal.

Upper caste Hindus cannot see the masses of people, whom they treated as slaves for centuries, now going out of their cluthes due to the good news of Jesus Christ.

Thanks,

Praveen Sphere: Related Content

Elections (USA) and Elections (Indian)

A friend commiserates with me today over the way that the Indian elite is now totally preoccupied with the global economic meltdown and the US elections.

Not that we should avoid paying attention to these matters. B

ut that we should be paying at least equal attention to the future of the country in terms of the next national elections in India - which can, if I understand aright, in the normal course of affairs, take place any time after April 2009 (which is only a few months away, specially if one discounts December/ January due to Christmas/ New Year).

It seems to me that this election could be decisive.

India is now locked in a struggle between the sort of secularism that was established by Gandhiji et al before/ after Independence (which may be on its last legs), and a double challenge from the Naxalites (who now control 10% of India's disticts, according to Government figures), and from Hindutva forces which are already on the rampage in six Indian states as a prelude to the elections (presumably, the rampage will move to other states as well).

If my analysis has any merit, then we have to consider the roots of INDIAN secularism (which is/ was very different from secularism in the West), as well as of Hindutva and Naxalism.

We should look also at the opportunity/challenge that is represented by the BSP and associated parties that claim to represent the OBCs and SCs (in principle 65% of India); they can either renew Indian secularism or take us in the direction of Zimbabwe....

But there is little if any debate taking place about all this... Sphere: Related Content

Is BPA the culprit behind the vast increase in heart disease and diabetes in the developed world?

Regular readers of my blog will be aware of my scepticism regarding the usual explantions of the causes of diabetes and heart disease.

Now comes the first piece of research which indicates what may be the truth:
http://www.telegraph.co.uk/global/main.jhtml?view=DETAILS&grid=&xml=/global/2008/09/17/noindex/Chemical-in-food-tins-doubles-the-risk-of-heart-disease-and-diabetes.xml&source=EMC-exp_17092008

If this is not *the* truth, that truth will be something like this - in other words, cancer-causing substances (for example) will be some thing or things ubiquitous in the developed world but not in the non-developed world. Sphere: Related Content

What advice for countries at this time of crisis?

A friend who is a top economist from a developing country, asks what advice I have that might be useful for his country.

As it is a country I don't know very well, I can only offer this generality:

The crisis is the result of an unprecedented growth around the world of unsound currencies (too much money being printed, along with artificially low interest rates), as well as lax governance and regulation.

So, now that the pendulum is swinging the other way, the country that deflates first (safely!), and puts in the best regulations and governance, will win the most.

Of course that won't solve the instability of the global system - if we want to do that we have to look at entirely different solutions. These are explored in a paper that I hope to put soon on my Blog (as soon as it is published formally in the Proceedings of a Conference). Sphere: Related Content

Are two independent global investment banks enough?

Now that we have only two independent global investment banks (IGIBs) in the world, how can that be considered enough? Will politicians and regulators call for the breakup of these two, or the creation of at least a few more?

To examine the possibilities, let's look at a field that has a parallel: accountancy and audit (A&A) firms , of which there are only four. And four global A&A firms are usually not considered sufficient to maintain healthy competition.

They themselves seem to be perfectly happy with the existing situation though even they might welcome more firms in the field if only because that would fend off criticisms of oligopoly. But no one is rushing to create a fifth one, given that such an enterprise would probably cost billions (and it is not clear that there is enough talent in the world to create a fifth such giant without emasculating the existing four).

Ah! I can hear the exclamation from my analyst friends who follow the financial sector. There is a huge difference between A&As and IGIBs. The latter don't need anything like the infrastructure that A&A firms do - and there is plenty of investment banking talent available in the market at present.

Moreover, new IGIBs could be created by legislators seeking to break up other conglomerates if the Glass/Steagall act (or some version of it) is brought back - as it may well be, given that any rational analysis shows that the repeal of the Glass/Stegall Act was at least one key contributor to the current crisis.

So is a season of fun and games ahead for the M&A industry? Sphere: Related Content

The monetarist gods that have failed

The collapse of the largest insurance company, the two largest mortgage companies, and three out of the five largest investment banks - all within the last few weeks! - means that if we are not *in* something like the 1929 recession, we are certainly very near it.

Many people (including myself) have for some years now been trying to present solutions for the inherent instability of the global financial system. But there are none so deaf as those who do not want to hear! Regulators were even pressed to avoid implementing the few safeguards that existed! Entirely needlessly, tens of thousands have lost their jobs, and other tens of thousands have lost their homes in the West, while over 100 million people have been thrust into poverty around the world.

Even after such spectacular failure, some people persist in their blind trust in the market - or in regulation - or, now, increased liquidity - which will, even if it works, soon increase inflation.

Why do we not want to look at real solutions? Because a spiritual change is needed before we can be released from our addiction to greed and speculation, and turn instead to safe growth. Sphere: Related Content

Why are US corporations (Cisco, Sun Microsystems and so on) funding Hindu Terrorist organisations in India?

According to a report in The Hindustan Times (New Delhi) today, $1.7 million was raised last year by the India Development and Relief Fund (IDRF) from individuals and corporations in the United States (including Cisco and Sun Microsystems) to distribute among Sangh parivar agencies, which are now established as the premiere terrorist organisations in the country.

On what basis are these the premiere terrorist organisations in India today?

First, by the body count and general destruction and duration of terrorism this year by such Hindu Terrorist organisations.

Second, by their tactics: almost all other terrorist organisations in the country operate by stealth through individual assassinations or surreptitious bombs; by contrast, the Sangh organisations are the only ones that operate by mass action in the open.

What do U.S. corporations - not to mention the U.S. Government - propose to do about this?

(As I write, the BBC reports their attack on a police station, killing a policeman and taking several others hostage.) Sphere: Related Content

What is the nature of the current economic crisis and how does it relate to the art market?

When I was a child, at various festivals, we set off fire-crackers as part of the celebrations. Some of these fire-crack
rockets, volcanoes, some were sparklers, some were like bombs or single detonations, but some were strings of bombs, one setting off the other after an interval, as the initial explosion lit the fuse to the next bomb which exploded an indeterminate number of seconds later.

Well, the current crisis is not like a volcano, and certainly not like a sparkler. It is certainly not like a bomb either. It is most like a string of bombs, with one crisis sparking another.

The only difference is that, between the explosions, we have the huge global flock of money still trying to find safe places on which to land while the issue for the global economy is how to "squeeze excess liquidity out of the system" - that is, how to reduce the floks of money and restore money to something like its true value.

The initial problem of over-valuation started with real estate, then spread to commodities (including oil), and then to certain currencies such as the remnimbi and the euro.

I am therefore interested to see that while the financial towers tremble and some of them even tumble, the bubble in art prices still continues to inflate, as testified by the following story.

Golden calf helps Hirst auction hit £70m
Sep 16 2008 02:32
An experimental sale of new works by Damien Hirst surpasses expectations with the top lot, the 600kg bullock 'The Golden Calf', selling for £10.3m, writes Peter Aspden
Read more >>
http://link.ft.com/r/J0VG55/TVU7X/QOTI/RHQLY/8MPA2/SN/t

Watch out: the higher the prices rise, the more they are going to fall. Sphere: Related Content

How to shoot yourself in your own foot - the case of Kashmir and Hindu Fundamentalists

There are many ways of shooting oneself in one's own foot. How's this for a classic?: the opening paragraph of an email that I received today from a Hindu Fascist group is a classic (keep in mind that they want to continue to keep Kashmir in India (or "Bharat"):

"Dear Hindus The photos on the below link show the anti-Nationalism of Kashmiri Separatists who want freedom from India. How Kashmiri separatist can dare to burn Indian National Flag? Indians should force Indian Government to take strong action against such anti-National people immediately. They should be forced out of Bharat." Sphere: Related Content

Today's bomb blasts in Delhi

So terrorists have struck again in Delhi! Following other recent attacks in
Hyderabad, Bangalore, Jaipur. ...

Yet the government has proceeded painfully slowly on counter-terrorism cooperation with other countries. For example, the EU-India security dialogue was held only twice in the last four years. The counter terrorism meeting took place in 2008 after a gap of three years.

We Indians have a serious problem, not because the problems we are facing are serious (they ARE serious!) but because we refuse to regard them as serious.

I repeat once again my call for a Government of National Unity to address all the problems of the country in such a way that Government works for the good of the common person, and not merely for lining its own pockets. Otherwise the country will continue to deteriorate - and that rather quickly. I repeat once again that India has only 2 years in which to be seen to at least start doing something substantial about such issues. Sphere: Related Content

Sovereign Wealth Funds - China

Those who decline to advocate special rules for Sovereign Wealth Funds from non-democratic funds might wish to consider evidence that China, at least, is using financial muscle for political purposes:

Beijing uses forex reserves to target Taiwan
Sep 11 2008 23:30
The secretive government agency that supervises China's foreign exchange reserves used its funds to help convince Costa Rica to switch ties from Taiwan to Beijing last year, according to files obtained by the FT
Read more >>
http://link.ft.com/r/ZE9K33/WA3J1/KTN4/1ARDE/RU7KF/6C/t Sphere: Related Content

Comments on Western media coverage of current developments in Orissa, India

Western media coverage almost uniformly takes the view that this is merely "religious nutters" (mad or crazy people) attacking each other. Is this really the case?

What are the real reasons for the sustained and widespread attempt in Orissa to identify and kill Christians by members and agents of the Word Hindu Organisation or Vishwa Hindu Parishad (VHP)?

Here is my analysis:

1. When people who want to exit the dominant caste-based Hindu system turn to Buddhism, Christianity, Islam OR Maoism (Naxalism), why is it that Christians are most often attacked, rather than the others? After all, only 2.3% are Christians, while 11% of the country's population is Muslim; Nepal has just become a Maoist country, and already 10% of India's Districts are now controlled by Maoists (according to the Government's figures): Maoism is clearly a much bigger challenge. So why do "nationalist Hindus" not go after the "bigger targets"? First, precisely because the "smaller target" has fewer numbers. Second, and more important, because most Indian Christians are committed to avoiding any violent response, in accordance with the teaching of Jesus. By contrast, whenever Muslims, for example, have been attacked by VHP-types, sufficient numbers of them fight back with violence, to give pause to the VHP.

2. The violence has been caused by rich and powerful Hindus, who have benefited for some thousands of years from whatever could be squeezed out of the country by the caste system. Why do not all Hindus use such violence? Because most Hindus (like most human beings) instinctively find violence distasteful (that is why armies have to resort to mood-inducing music or drugs such as alcohol in order to get even trained soldiers to do any actual killing - I am speaking of aggressors, not defenders). Why, then, have more and more upper-caste Hindus turned to violence? Because they have found, in the last few decades, that their position and benefits are being eroded by democracy and freedom - without any parallel rise in their opportunities for upward social and economic mobility in a globalising world. Of course there has to be a body of thought propounded by such people which ensnares others. Such a body of thought started with Savarkar, and started being inspired later by Mussolini and Hitler (that is the main reason, why members of VHP-type branches wear most un-Indian boxer-type short trousers for their morning "exercises"). The fact is that "extremist Hindus" are not primarily anti-Christian (if they were, their leaders would not send their children to Christian schools in the cities). Rather the philosophy and actions of "Hindu extremists" are against democracy, freedom, egalitarianism, meritocracy, the rule of law, and other such modern ideals.

3. What we are seeing in Orissa is not an *equal fight" between Hindus and non-Hindus. What we are seeing is the use of violence by traditional, rich and powerful Hindus who wish to prevent the most oppressed from leaving their oppression.. Non-Hindus are from among the historically poorest and most downtrodden.

4. Fundamentalist Hindus like to accuse Christians of "alluring" the poorest to become Christians. But the government limits the amount of money that can be brought in - and then monitors thoroughly and systematically whatever is brought in. Despite the Government's thorough control and scrutiny over the last half century, not one case has come to light where such "allure" could be shown to have been the case. In fact, people continue to become Christians (or Buddhists or Marxists or whatever) in spite of all the traditional and modern violence that Hindu Fascists direct against them.

5. But there is a more fundamental point. Inside India, there is far more money in Hindu hands than there is in Muslim, Christian, Buddhist or Marxist hands.. Why don't these Hindus improve the lot of the poorest, so that alleged "allure" by Christians loses its allure?

6. The fact that the Government has not been able to stop all these attacks against Christians (steadily increasing since 1964 and accelerating since 2000) is a symptom of a wider weakening and indeed breakdown of civil and government institutions in the country. The only sector that is booming in the country is business. Every other sector is degenerating slowly - from the police to the defence forces, from the bureaucracy to politics, from the electricity supply to the judiciary. We like to look disdainfully down at Pakistan. Perhaps Pakistan disintegrated earlier only because it is a smaller country, and it won't be long now before India disintegrates too? I shiver as I write this. God forbid.

7. However, because of this danger, I have called for a Government of National Unity (unconditionally including the Maoists) in order to stop the rot in the country, which is entirely caused by politicians (of all parties) ignoring the real needs of the country and focusing their time and energy mainly on lining their own pockets. If a Government of National Unity changes the focus to building up the country on a basis that genuinely focuses on helping the poorest, then India has a chance.. Otherwise, in my view, the country only has 2 more years before the rot becomes irreversible. Sphere: Related Content

On Facilitating delicate meetings

As I have some experience in this area, I get invited to do this sort of fraught work. Not sure why I accept!

Usually, however, it is "merely professional" matter, in which I have nothing at stake personally, and simply wish the best for the organisation concerned.

I have just finished what turned out to be the toughest Facilitating assignment that I have ever done! This was a weekend with about 15 people, all outstanding and rather experienced in their own areas, and all with strong opinions.

What made it difficult was not the strength or diversity of opinion among the participants (that is exactly what Facilitator Training equips you to handle). What made it difficult was that I myself had strong opinions on certain aspects of what was being discussed.

Naturally, my effectiveness as a Facilitator dropped every time I dropped my Facilitator's hat and expressed my own opinion (something that happened, I'm afraid!; for example, through my body language - though I regret to say not only through that!).

In this particular situation, the participants were most gracious and forgave me, and even complimented me at the end.

However, trying to Facilitate a meeting where one has views oneself is, if not impossible, certainly most tiring.

Best to go in not knowing anything about the issue or the people or the history of the matter (though that is impossible in practice).

Second best, go in with no settled opinion, at least on the issue under discussion. Sphere: Related Content

on References

I find that it is becoming a disease to ask for a reference from anyone and everyone for posting on social networks, such as Xing and Facebook.

Someone I have met several times but do not know well, has just asked for a reference as an "Expert Resource" at various international organisations.

What can one do in such a case? I could only respond: "Dear XXX, I am honoured that you ask me for a Recommendation as Expert Resource at .... But surely I must be one of the least qualified people to do so, as I have no personal experience of your work? Moreover, I have no standing in relation to such bodies, so even if I did write a Recommendation, it would have no value in the eyes of any one who has any sense, as it will be immediately obvious that I cannot know anything in relation to your work at first hand?" Sphere: Related Content

So it WAS the Maoists!

It gives me no pleasure at all to find that I was right in my comments posted on August 25, 2008:

The Central Committee of the Communist Party of India-Maoist, released a statement on September 1, saying not only that it is indeed responsible for the killing of the far-right Hindu fascist leader, Laxmanananda Saraswati on August 23, but also that it warns the VHP of “more such punishments” if the VHP behaves in unacceptable ways - i.e. "if it continued violence against religious minorities in the country”.

The Maoists even had the gall to call for a ban on extremist groups linked to the Sangh Parivar, such as the VHP, its youth wing Bajrang Dal, and right-wing Hindu political parties (Shiv Sena and the Bharatiya Janata Party).

Sadly, therefore, my assessment was correct. We may indeed take the murder of Laxmananada Saraswait as the "coming out" of the Maoists ("Naxalites").

So I reiterate my call, made in my post of August 25, for a Government of National Unity. I reiterate my assessment that India has only 2 years in which to address its key problem of institutional decline, or the country will fall to the Naxalites - as Nepal has done. Sphere: Related Content