Tuesday, April 26, 2011

The coming clash between elites and global IT culture

From a survey of over 5,400 adult Internet users from 13 different countries, conducted by the Oxford Internet Institute (OII) and INSEAD, in collaboration with comScore, “designed to better understand cross-cultural differences in user behaviour and attitudes”, it appears that there is emerging a global consensus around “core Internet values of freedom of expression, privacy, trust, and security”.

For a discussion of the survey, which is “a contribution to The Global Information Technology Report 2010-2011”, see: http://tinyurl.com/3ug4rxq

A couple of questions arise, to which I cannot immediately see an answer in the report:

If a global Internet culture is emerging, with the "values" of freedom of expression, privacy, trust, and security, how come different elites/ governments/ countries continue to have totally different levels of actual commitment to such values?

And what of the future, as a clash develops between the values of elites (e.g. in China) as against the values of the internet world, not only at the global level but specifically at the level of their own populations? Sphere: Related Content

Thursday, April 21, 2011

Where to invest right now

If the world's central banks (or some of them) are indeed going to start withdrawing liquidity from the market, THEN:

- stocks in those countries are going to stabilise (not grow fast); I would short the top companies but be neutral on those at the next level - at least for the moment

- expect commodities to continue their stellar growth till the next crash

- invest in those things that are "down" at present. What are those? At present, primarily the dollar. So invest in the dollar. Invest in any commodity that is underpriced at present (is there any?). Invest in any large/ top stock which is underpriced, provided it is not likely to go bankrupt (is there any?). Avoid medium-sized businesses, unless you know them personally and consider that their strategy will get them to number one, two or three in their industry - and, if they are already in that position, are in a growing market. Invest in those small businesses that you know personally, that have a competitive edge, and that are trying to build long-term.

How long will this next "cooling" phase in the economy last? Ddifficult to say. It will depend on the skill of central bankers in withdrawing liquidity from the market at an appropriate speed. They want to cool the market, not freeze it. Let's pray they are successful. Sphere: Related Content

The state of reform in the global financial system


Is Professor Charles Wyplosz perhaps being over-pessimistic?:
http://graduateinstitute.ch/Jahia/site/iheid/cache/bypass/institute/news?newsId=112999 Sphere: Related Content

Tuesday, April 19, 2011

So what about the argument that governments have profited from the support they gave to banks during the crisis?

That's an argument that is often heard nowadays.

Ignoring the fact that, in several countries, banks were simply subsidised by their governments in one way or another, here is at least one view from the UK, where its Public Accounts Committee says banks did not pay enough:
http://link.ft.com/r/P75VYY/9Z0L60/KTN4/D4VWC8/C5CILO/MQ/t?a1=2011&a2=4&a3=20 Sphere: Related Content

So we are in another global bubble

At the height of the previous bubble, we had the highest inflows into the hedge fund industry ever.

That record has now been broken. Assets under management in the global Hedge funds industry have soared to an all-time peak of $2,002bn.

As the head of the IMF has said that we are only one spark away from another global financial meltdown, it will be interesting to see how much further the hedge fund industry will balloon before our next global crash. Sphere: Related Content

Friday, April 15, 2011

So is Strauss-Kahn right on Europe's debts?

Dominique Strauss-Kahn, head of the IMF, was quoted by the BBC as saying that "A lot more has to be done by the Europeans to fix the problem (of national indebtedness)".

He is not quoted as saying anything about HOW the debt problem should be addressed.

So let us consider the following.

"Modern" debt often happens when individuals or organisations borrow money to try to speed up growth.

This does contribute to national debt nowadays, and may even be a principal contributor, but national debt is created primarily because tax revenues and other incomes amount to less than the amount the government spends, for example on the military, on subsidies, research, infrastructure, health, education, employment or pensions.

Governments usually borrow by issuing securities, government bonds and bills., though less creditworthy countries also borrow from international institutions such as the IMF.

Government debt can be internal (lent by citizens and organisations within the country) and external (lent by foreign individuals or other entities).

In the US, it has become fashionable to include not only the actual debt at present, but also all future government liabilities, including future pension, health and other goods and services the government has in some way committed to pay. This is both reasonable and unreasonable, because one has no idea of whether a government will honour its commitments in the future or find some way of welching on its commitments, and one has no idea of the future value of money, and indeed of future government income. Future-oriented doom-mongering is usually created by right-wingers who wish to reduce spending in the name of “responsibility”. However, such doom-mongering should not be entirely dismissed because it comes from right wingers nor because their proposed “solutions” (draconian cuts to social spending) seem unpalatable. The warnings should be considered warnings, and kept in mind, without allowing one to be panicked into accepting right-wing or left-wing solutions.

Understanding public debt requires one to understand the risks posed by debt, which is a complicated subject that I can’t go into right now.

The extent to which debt crises may be caused by too much spending, by fraud, and by speculation is a matter of debate. However, European governments appeared to accept that speculation had some role because they banned “naked short selling” for at least a period. The role of credit rating agencies in contributing to the crisis is now well recognised, and there has been reasonable scrutiny of this issue.

However, if a country's debt is measured in a way that ignores that country's monetary policy, you get ridiculous results. For example, China's public debt shows up as something like 18% while Japan's debt shows up as something like 225%. Again, if one looks only at a country's debt to foreign lenders, the US appears incredibly indebted, as its external borrowings are 97% of its GDP, while China appears to be an extremely comfortable position because its external debt appears to be only some 5% of its GDP.

Whatever the actual levels of a country’s debt, and however those are measured, there are only four ways to handle national debt:
- devalue the currency
- control spending
- increase tax revenues
- borrow at more favourable terms and pay off those whose payment terms are worse (the last resort does not reduce the total amount of debt, but reduces the impact of debt because the cost of paying for the debt becomes more affordable).

European governments are pursuing a combination of the above, and they seem publicly confident that they are in control of the situation, whereas Strauss-Kahn seems to be publicly concerned.

My view continues to be that as long as debt is considered a “good” way of financing growth, we will continue to have the problem of debt spiralling upwards till it gets almost out of control, followed by draconian actions to get it back in control for a while, before the cycle starts again.

Breaking out of that cycle requires a reassessment of growth for the sake of growth, and asking questions about the nature of growth (is all growth good?).

If one follows that virtuous path, one ends up somewhere near my recommendations for a more responsible and just global order – which is the only way that we can get beyond currently dominant ways of patching things together with glue and tape, and mere delusions (such as calls for a global currency: even Europe can hardly make the Euro work, so how can any intelligent person think that a global currency will work?!) Sphere: Related Content

IMF head too says the crisis is not over

Due to all my travels, I do not post my Blog as regularly and frequently as I wish, but you may have noticed that I have consistently argued that the crisis is not over.

I am glad to see the Head of the IMF, Dominque Strauss-Kahn, speaking yesterday at the meeting of the G20, saying the same thing.

Will this persuade "experts", authorities and the public to move to taking any of the sorts of steps that I have suggested to reform the system? I do not know. Sphere: Related Content

Wednesday, April 13, 2011

The moral foundations of political freedom

An Op-Ed just publised on Fox News by Vishal Mangalwadi analyses why freedom does not flourish in every culture, reflects on the prospects for democracy in places such as Africa and the Middle East, and examines the decline of freedom in the USA:

Sphere: Related Content

By far the best analysis of the prospects for West Asia and North Africa

Thomas Friedman is sometimes simply superficial, and sometimes profound.

I don't know why it is, but he has turned out the most insightful analysis that I have read of the prospects for the current people movements in North Africa and West Asia (the latter is called "the Middle East" by people in Europe and America).

Friedman's article is at: http://www.nytimes.com/2011/04/13/opinion/13friedman.html?_r=2&nl=todaysheadlines&emc=tha212 Sphere: Related Content

Examining the current challenges in West Asia/ North Africa

A typical article by folk who don't know the region well, or don't think about it too deeply, argues that the region's future prosperity depends on governments
ensuring that young people have the right skills for the jobs being
created. What's wrong with that argument? Just that, while the young people there are as intelligent as in any other part of the world, the key challenge in many countries is motivation: in some cases, young people believe that they will be discriminated against (for whatever reason); in other cases, the young people have simply too much money to be motivates to apply themselves either to learning or to work. Anyway, the article is at:
http://e.mckinseyquarterly.com/1af01c5dflayfousublo3jtiaaaaaa7vxpx3sjgvcfyyaaaaa Sphere: Related Content

Tuesday, April 12, 2011

The state of the Current Global Crisis

The IMF has issued a public alert regarding the state of the finances of the USA. It will be interesting to watch the reaction to this.

Meanwhile, the USA's Journal of Accountancy reports the results of a biennial survey conducted by the AICPA’s Private Companies Practice Section in conjunction with the Texas Society of CPAs. According to this, accountancy firms reported that half of their clients are still in crisis:

And that is in the USA!

Elsewhere, commodity prices are falling, and equity prices are stuck.

But the authorities would like us to believe that the crisis finished two years ago.

So much for the authorities.... Sphere: Related Content

Monday, April 11, 2011

Reflections, before I issued the exclusive to PTI, on my name being dragged into the Hassan Ali case

In India, one seems to be always faced with interesting dilemmas.

The latest one concerns the problem that my name is being dragged, through radio, TV, newspapers and the internet, into the Hassan Ali case as if I am significant in this context.

When that sort of things happens, I guess one has only three options:
- speak/ write to each of the media channels to ask them to desist from involving one's name in the matter and hope they agree (unlikely that anything will come from such an approach, but it is one possibility)

- hope that the matter will cease to be of interest to the media

- make a public statement (but who is interested, and how can one ensure that the whole statement is printed and not some odd phrase taken out of context?)

Well, as I had written off the first possibility, and want a quiet life, I had hoped that the second would happen. But it has not happened, and my name keeps cropping up in the media. At parties and in relatives’ and friends’ homes, and even via phone calls and emails, I am getting asked about the matter, even when people can’t recollect who the main case concerns!

So here are the facts, the full facts and nothing but the facts, as I recollect them.

Switzerland is a small country and Zurich is a small city (population some 300,000) in which foreigners form a small fringe. Every Indian knows almost every Indian, one way or another – at least by name. Thus it was that one Philip Anandaraj introduced himself to me at the Rietberg Museum some years ago during their annual event, where we were both with our families – as many other Indians were, because the Rietberg Museum has the oldest event – a sort of mela - at which Indians (and those interested in India) gather.

Some time later, he rang me and wanted to come and see me with someone he knew who was in a certain difficulty with which I could help. I agreed.

Anandaraj introduced the man as a descendant of the Hyderabad royal family, said that the man had family property which was in dispute within the family, as a result of which he needed money, and that his personal account, which had nothing to do with the dispute and was with UBS, had been frozen because of the family dispute and could I help put the facts of the matter to the relevant authorities.

I live a busy life and did not have the time to check whether the Hyderabad royal family has any living descendants and if so whether this man was indeed one of them, what the disputes were, why his account was frozen, whether it might possibly be reopened and if so on what grounds, and so on.

So I explained that I was in a different department, and had nothing to do with such matters but, as I always try to help fellow-Indians, asked them to put their side of the matter in a letter to me, which I would pass on to the people concerned.

Shortly thereafter, a letter did arrive, and I did pass it on to the department concerned.

Mr Anandaraj rang me a few days later to ask if there was any news, and I told him that I had done my part, and that it was up to the authorities concerned to respond, and nothing further to do with me.

However, as I ran into the person to whom I had sent the letter at an evening occasion soon after sending it to him, I asked him whether he had received the latter (I had not had an acknowledgment of it from him) and he said he would check. The next morning, I received word through a colleague (who apparently does not recollect the matter now!), that I was “naïve” to have received and passed on the letter, that I should keep away from the matter, and that they would deal with it.

No one likes being called "naive" but I had certainly had no intention of being involved further, and I had already fulfilled what I had undertaken to Mr Anandaraj.

UBS did issue a public statement saying that the man had no account in UBS.

Some time later, I heard that Mr Anandaraj had left Switzerland for reasons to do with the bankruptcy of one of his businesses (no idea then or now whether that was true, though he certainly wasn’t seen or heard from by me again).

Still later, I learned that he had been arrested in India in connection with involvement in something, but I did not know him well enough, and whatever it was had nothing to do with me, and I was too busy anyway to find out the details.

Now I am told that a notarised copy of the letter sent to me by his contact (whoever he was and whatever the matter) was kept by him, has been discovered by the police and is considered a key piece of evidence.

Why would someone want to keep a notarized copy of a letter he or she writes to someone to ask for their help? I have no idea.

In any case, you cannot prevent any human being from writing to you about anything, whether they notarise the letter or not.

And if you receive such a letter as I did, you have only the following choices, as far as I can see:
- ignore the letter,
- reply to the letter saying basically “Sorry but I can’t help you” or, more rudely, "Don't bother me",
- pass on the letter to the right people.

Is it “wise” to ignore such letters? Would it have been "wiser" to write back saying basically "Don't bother me"? Perhaps.

Was I naïve to have passed on the letter to the right authorities in the company? Maybe.

But, as everyone who has anything to do with me knows, I have always been the sort of person who would rather be naïve and do my bit to help a fellow Indian abroad, specially if I can do so without too much effort on my part.

My stand on all the ethical matters involved is available to anyone who cares to investigate it, through my writings, public statements and indeed my work - which have all been in the public eye, in one way or another, ever since I was a teenager.

ENDS Sphere: Related Content

Further clarification following the story from PTI

During the email exchange, PTI asked whether I had any contact with Kashoggi. I replied that I did not. That was reported in some places as "Guptara denies his links with Kashoggi" as if I had had links and was now denying them.

To be clear: I have never knowingly set my eyes on the man or heard his voice, and I have never had any communication from him or purporting to be from or via him, nor have I ever addressed any communication of any sort to him.

To be absolutely clear: I find arms trading morally repugnant.

Further, I find this whole subject emotionally difficult to handle as my only sister was killed because she happened to be in the wrong place at the wrong time (the US Embassy in Nairobi at the time it was bombed by a terrorist). My hair instantly turned grey, and my sleep patterns reversed. My brother-in-law too is still suffering from the trauma. Sphere: Related Content

Sunday, April 10, 2011

Media statement by me regarding the Hassn Ali case

originally issued as an EXCLUSIVE TO PTI,and released by them apparently on Sunday 10 April 2011, in a version which has not been copied to me,


Professor Prabhu Guptara, the person named in recent media reports in the Hassan Ali case, has stepped forward and told his side of the story. “I did receive ‘a’ letter from ‘a’ Mr Hassan Ali,” agrees Guptara, “but UBS is one of the largest banks in the world and, as I was not connected with that side of the business, I simply passed on the letter to the appropriate authorities for their investigation and action – which, as far as I am aware, UBS did by publicly stating that Hassan Ali had no account in UBS”.

Indian media have widely repeated reports of the existence of an attested copy of “a” letter to Professor Guptara, recently retired from UBS as Executive Director, Organisational Development, at a subsidiary company, Wolfsberg. “The problem is that anyone can write a letter to me or to anyone else; one cannot prevent it.”

“While there is great weight being placed on the matter of the letter having been ‘attested’, the reality is that anything can be attested anywhere,” argues Guptara. “All that attestation proves is that the content of a copy matches the ‘original’. But was that original which was attested, the one that was sent to UBS?”

“All that I did was that, when I received a letter from a fellow Indian, I just passed it on to the authorities concerned,” said Guptara. “Was I naïve, as one of my colleagues said right then? Maybe. But I would rather naively help even an Indian I do not know. And I don't regret doing so, except that now it may cost me some goodwill, time and energy due to the insinuations since then.”

“My stand on the substantial matters of ethics involved has always been clear from my teenage years in Delhi through my career globally,” concluded Guptara, former lecturer at St. Stephen’s College, Delhi. “Everyone who knows me or my published work, most of which is available on the internet, can attest to that.”

ends Sphere: Related Content

Sunday, April 03, 2011

From unity to disunity in global economics

From the start of the crisis in 2007 to the present, the tendency has been for the world's central banks to move in sync with each other. Other things may have diverged but central bank policy converged.

That may be about to change. If you don't have much time, read at least the first 4 paras of the following:


If central banks feel comfortable enough about the global economy to now follow divergent policies, that should result in a boom in equities - so gold and other defensive assets should fall.

Buy cheap, sell high. Sphere: Related Content