Read reviews of "The Dollar Trap" by Eswar Prasad. He agrees that dollar is losing the credibility of a reserve currrency but it would continue primarily because it does not have an equivalent challenger. This is a particular case of linear imagination reaching nowhere. It can predict for some years but cannot see what can be the disruptive change. I thought that same could have been said of Pound in 1930s. I think that good scholars of money don't go much back into history before reaching their judgements. Why is it so that only two countries India and China controlled 60% of world trade for nearly 2000 years before 1849? There is something hidden in the intrinsic business and monetary models of these two countries that is fundamentally different from the western model of money. I don't know exactly what these models were but they were not definitely what we have today. In order to revisit our ancient business and trading strength, we need to merge three ideas- denationalization of money across the borders, choice of currencies for all the users and commoditization of money. These ideas are not unique but not tried in Indian context. Denationalisation of money means that we need to allow money flows with full transparency in and out of the country. Every year, there is hawala route transferring money in trillions across the nations. All money is national but works in a global reality with international forces of demand and supply. Why it cannot be a transparent exchange instead of being an illegal one? There have been 100 currency crises during last 40 years across the world. Nearly $100 billion of capital has moved out of India in last five years because the businessmen were deeply worried over the weakening and poor value of Indian rupee. Could they use a currency of their choice for whatever investment while sitting within India? If Indian rupee can bend before dollar, pound and euro and fetches a very poor exchange value, we need to create a better choice of investment available to Indian traders and business. Why to limit them to a choice where they will always have a weak exchange ratio? How to do it is a question but first of all, we need to realize the fact that Indian business is not happy with fluctuating and poor exchange value of rupee? Give the choice of currency to one and all beginning with those who can invest. Secondly, let there be more Indian currencies to choose from within India. Why cannot ICICI, HDFC, SBI, Vodafone, Airtel or Reliance issue currency with sound money standards? If they can issue shares, why cannot they issue currency notes? After all, a share is a guarantee of preservation of purchasing power. If govt cannot safeguard our purchasing power, let others take over this function if they can. It will be a minimum government with maximum governance. Third, a money without any anchor is vulnerable to arbitrary fluctuations but this thing can be stopped if there is commodity anchor in form of gold or silver. Some more commodity anchors can be tried. Let there be plural control of money. Today, a city is as large as a world and a world is as large as a village. You are a group both as small as only two and as large as 8 billion. If world can have many currencies, why a city cannot have many currencies? When this can happen without serious backlash or government interference or with popular support? This would be a reality particularly when we lose our fixation with paper currency notes and use electronic money. E-currencies are global and local simultaneously; so, the big change may happen any time after 2016, when global smartphone population crosses 200 crores. This would be ripe time for change-over. Be ready for that.
Thursday, June 19, 2014
Tuesday, June 17, 2014
Can you move out of an inflation-prone monetary system? That is simply impossible if you want to keep using currency issued by national governments. This is simply a financial suicide. You would be locked out of any transaction business. Either, you would be thrown out of the current system or you would have to develop a new currency for new system of exchange.
Can you move out of an education system where degree is the only parameter of one’s educational achievements? If this system rampantly indulges in grade inflation and refuses to correct itself, can you move out of this system? This is simply a professional suicide. You would be locked out of any job opportunity. Either, you would be thrown out of any employment or you would have to develop your own entrepreneurship.
Can you move out of a political regime where election maths would decide who would rule. This is a system where the entire power is in the hands of the few people sitting in the parliament that cannot change the status quo of traffic jams in your city, garbage dumps in your locality, pollution level of your air and water and so on. This is a system where you need good Mayors and good Sarpanches than good ministers but you get none. Can we shift local politics into our own hands by protest? This would be a political suicide. You would be locked out as an anarchist. Either, you would leave the country or you have to become another political party.
When the system itself goes survivalist, the individual has only one solution- suicide; either a slow one or the instant one. If you want to avoid this, the only option is to change the rules of game. Either get busy dying or get busy living.
Thursday, June 12, 2014
A sudden futuristic imagination disturbed me in the morning. In year 2016, some 18 million students in around 100 countries suddenly left their colleges and universities midway because there were better options available online. It may seem absurd to ask but still, it should be asked. What is the difference between a Professor teaching in a university class and Murari Bapu giving discourses on Ramcharitmanas to hundreds of spectators in a Pandal? An 8-day session of Murari Bapu is equivalent to somewhat annual salary of a Professor. In terms of salary and audience, the difference is real but in terms of function done, the difference is not that real. If compulsion of syllabus or examination are done with, the difference comes down to nothing. If courses are taught in open mode in a university or a college or online, the practical difference comes down to who teaches really well and who interacts with students on the widest possible reach. This question has been never asked rather it has been buried deep inside syllabus, time-tables, examinations and top-down management styles of our colleges and universities. When all of this is being challenged by new modes of learning, teaching and interaction, the wall of secrecy is nearly falling. Teaching is a profession borne out of freedom to learn and freedom to teach. The irony is that systems have imprisoned this universal spirit. In another five to ten years, most of the colleges and universities would simply die if they don't overhaul their campus learning culture in a fundamental manner. A teacher needs to be reborn. This can only be the one who can teach and who know how to teach. Degree babus and copycats would face very rough days soon.
Saturday, June 7, 2014
The actual fact is that money is nothing but transfer of value from one to the other. But when the actual value as well as the supply of money is determined by a centralized monetary regime that controls prices, wages and interest rates, it becomes an absolute power for managing both present and future. We are in democracies but in terms of money, they are dictatorships; they allow only one kind of money definition and that definition is inflationist. Every saver is at loss when he saves money that is going to lose its value. The net beneficiary is the one who consumes and keeps consuming whatever may happen to the ecology and the poor. More cars mean more and more cars and more of petrol and more of traffic jams and so on. This kind of money defintion borrows prosperity from the future and saves the present from getting any lessons in sustainable development. It is like killing our kids who will see a planet with more pollution, less potable water, barren lands, industrial waste, ghost cities and townships and so on. We are all participants in this mindless money expansion that does not have any anchor. Neither dollar, nor gold, Yen nor Yuan or anything else. Everything is topsy-turvy in its core. The day is not far off when some financial virus would create havoc among current monetary orders and devastates it. Roman civilization was devastated by the inflation. Southern America lost to North America during battle of slavery because of the same factor. A strong and sound money is the only way future can be ensured. But the one who has power to print money, has the power to create more power out of thin air. This is the attraction of paper money. But this power is going to meet its nemesis. Currencies will fight currencies and none will win.
Who owns the money or the capital? Particularly, the kind of money that belongs to common pool. For example, the money deposited by way of donations at a temple or a gurudwara. By this fact, there are thousands of tonnes of gold, silver and other valuable forms of stones etc deposited in the temple vaults. Who owns this money? If it is owned by the people, who represents the people - the government or the deity of the temple? If it is the government, it would be ultimately owned by the power elites of the current regime. If it is owned by the deity, it is owned by all those who respect that faith and faith related institutional network. India is governed monetarily by the western notion of singular control of money in the hands of power elites. They subvert it by choosing the term 'social contract' instead of any established faith-based practices. That is why any control of money by plurality of institutions is ruled out. We are ruled by monochromatic notions of monetary control. The central banks think in terms of only fractional reserve banking whereas the faith based institutions aggregate wealth by donation and philanthropic efforts thus by creating only the surplus and that too permanent surplus of capital. India needs to move from monochromatic control of money to poly-chromatic control where not one central bank would print money only. Anybody can print money but within the limit set by the amount of silver or gold, one has in its vault. There should be a straight-jacket on everybody not to issue money more than one is authorized to. Let there by thousand saviours of India and not the one saviour of India as is assumed by making Rupee the only legal tender option in India.
World money (WM) = National currency (N1)+ N2+ N3+ N4+.....................All central banks are printing more and more and this is exceptionally true for last six years. In this period, the world money has more than doubled which means that more money is actually pursuing less goods and services. At present, this is not fully visible across national markets because banks are keeping interests deliberately low across the developed economies and markets are very deficient in demand. There is no way bankers would accept any restraint on their power. The fiscal and monetary elites are hand-in-gloves with each other. Raghuram Rajan is crying for this non-system to end but nobody is listening. He may even meet much worse treatment at the hands of next government for taking this stand. This all is making the world move towards a monetary apocalypse- a world with high inflation, high rate of fluctuation of exchange rates and a total unpredictability of business decisions. This may lead to crumbling of welfare-state structures across many countries. The crux of the problem remains that we need to move from singular arbitrary monetary control to plural monetary control with gold-silver backed restraints. This is something that all elites would refuse till the last moment. All other solutions would only increase the arbitrary nature of money-printing or quantitative easing.
What to do when governments don't safeguard the value of money? Why money in India is so inflation-prone and turbulent in terms of all decisions regarding interest, wages and investment? After all, the reason lies with the discretionary power that lies with our governing elites. Whether you call it central banking, institutional politics or inefficient lending, the crisis still persists with the hidden arbitrariness behind determining purchasing power of money. How can this be curtailed? There are mechanisms but all of them are in the domain of parliamentary legislation. So, how to bell the cat remains the problem. Why would anybody restrain one's own power? Is it not possible to replicate a world currency model within India? Why cannot we have multiple currencies the way any global trader can have? But if US can issue a currency, why cannot HDFC bank or ICICI bank or SBI bank issue the same? Why the governments alone should issue a currency? Naturally, all governments would object to that. Let there be certain commodity standard behind all the currencies issued by both governments and non-government agencies. A currency that safeguards the purchasing power should be preferred over the one that does not. Let there be equal competition between the government and non-government agencies to claim the trust of people. So, does it mean that we should have gold or silver-backed multiple currencies available in India? Was it not the way India lived for thousands of years without serious national long-term inflation and unemployment?
Thursday, June 5, 2014
The problem with global monetary system is that it is controlled by singular authorities in form of national/regional central banks. Today, no such institution is talking to each other for global monetary balance. US is flooding the market with easy money; China repeats; Japan is doing the same and others are simply following. As a result, there is too much money being printed. If US does not listen or correct, nobody can do anything. After all, it is the lender of the last resort but today this lender is lending to its own government endlessly. So, it does not bother about the world. How to suck this excess cash in a unique way? Make governance of money be handed over to not singular but plural institutions. Let the RBI, all banks and financial institutions who can have minimum of 100 quintals of gold or 1000 quintals of silver should issue new currencies to the public so that there is an institutional and multi-pronged control on money supply. Let there be hundreds of different gold/silver-backed currencies and people should be free to choose the money they want to own. This will attract the global money and the entire world would follow the suit. The gold based system would suck the meaningless liquidity and stop the money printing by central banks. India has a lot of gold and silver with its people though the govt. does not have even 10% of that. India needs to be the leader by becoming a monetary Ganesha that gobbles up excess cash of global finance. But who will listen? Only when 80-100 Indian rupees would fetches one US dollar or it will fluctuate too violently. This single change would make India sone ki chidiya again.