It is commonly believed that financial market scams originate due to lack of appropriate regulation. Less appreciated is the reality that such scams, at least in developing economies, and especially in India, originate in the public sector; even less recognized is the reality that such scams invariably tax the poor to subsidize the rich. The Public Provident Fund (PPF), as currently administered, is one such scam.
For once the governments have got it right, and the market has not. Or so it appears if one reads the G-7 communique on currencies that was issued by G-7 in Dubai. The message was that “exchange rate flexibility is desirable in major countries or economic areas to promote smooth and widespread adjustment in the financial system, based on market mechanisms” (italics added)
I have been following, with some amusement, the statements of myriad apologists who defend the artificially cheap Chinese yuan, pegged at 8.3 to the US dollar for almost a decade. I had documented that this undervalued peg was a major contributory cause for the East Asian currency crisis and that the East Asian devaluations occurred because "if China would not revalue, the rest of the currencies would devalue" (Chinese Mercantilism - Currency Wars and How the East was Lost", Developing Trends, August 1998). Some five years later, I am not alone anymore - others who believe that the yuan should revalue (by at least 15 to 25 percent) include the US government (president Bush and Treasury secretary Snow), the European Central Bank, President Schroeder of Germany, and even the IMF, the last named obviously circumspect and speaking in several tongues, but managing to make the point that mercantilist trade imbalances need to be corrected just as much as trade deficits.
It will only get murkier from now on. The UNESCO report on gender inequality in the world, with India as the star culprit, is just the opening salvo in what is likely to be a pitched battle, not for truth and equality, but for the pocketbooks of those who are not intellectually dishonest, but are rich and white. I get ahead of myself. First the facts. The UN body in charge of education, UNESCO, reported that not only was their little gender equality in education in the poor world, but also that progress had been slow and hence that the much hyped millennium development goals (MDG) for equal education for boys and girls was unlikely to be reached by 2015. Sorry, this time not me but the UN bodies were ahead of everybody else.
My good friends, and especially my very good friends, always remind me of my election forecast of 1991. I had stated, on the basis of opinion polls, that Rajiv Gandhi would win by an easy majority. The rest as they say is history. But my friends will never remind you, so I will, about the time I got the 1989 election "spot on"; or how in the last general election, I was the only forecaster who said that the Congress party, despite or because of Sonia Gandhi as its leader, would gain only 116 seats. The lowest forecast among all opinion polls was 150 seats. How many did Congress get - 114. The rest, unfortunately for me, is not history. Nobody is beating down my door asking me to pontificate on elections.
It is open season on the Congress after the rout that they experienced at the hands of a sans dynasty BJP. Gurus are claiming that Ms. Sonia Gandhi has led the Congress down the garden path - again. But the pundits may have it all wrong. Is it not the case that three women won the coveted job of a Chief Minister? Well, what does that tell you - the people of India want women as their leaders, that's what. India Today was keen to underline this point. It's cover (Dec. 15, 2003) read "Women for women: While a decisive women's vote brings three women chief ministers to power". Add to the fact that three women won, the reality that the only Congress leader who won was a woman. And the only state that did not return a woman as Chief Minister was the state where two (male) crooks were fighting. This is the age of the female voter - I also want their vote.
There is no fan I know of, including my 11 year old son, Sahil, who does not constantly calculate the possibilities of his team's performance, and of his team winning the World Cup. We do it in different ways, but not necessarily in a less accurate manner. To every person who criticizes the market because illiterate peasants do not know calculus to calculate marginal costs, remember the simple truism - they act as if they knew calculus. Same with probability forecasts - no rocket science to come up with a legitimate, defensible view. Which is why the match-fixing scandal was such a shock to sports fans (excluding the sport administrators and some players). How dare they mess up our innocent fun.
The first reaction of most, if not all, observers is to dismiss the recent reforms announced by the finance minister, Mr. Jaswant Singh, as election propaganda. An editorial in this newspaper entitled "Ad hoc, improper" went several steps further and felt that the action was "unprecedented", that the content, context and timing of the so-called reforms left a lot to be desired and concluded in an apocalyptic fashion "the government has opened up the economy to the dangers of a possible fiscal crisis" (Business Standard, Jan. 9, 2003).
There is a classic 80/20 divide with respect to India and it's economy. As you might be familiar, life is best thought of in 80/20 terms e.g. 80 percent of wealth is controlled by 20 percent of people; or 80 percent of world trade is accounted for by 20 percent of the countries (actually with the large undervalued exchange rate of China, the 80/20 Pareto rule may need to be modified to 90/10); 80 percent of the poor live in a fifth of the countries; 80 percent of land area is barren and only 20 percent is inhabited. Some aspects of life belong to the 70/30 regime - the top 30 percent of batsmen account for 70 percent of the runs.
The "Beyond Logic" series has temporarily, and hopefully permanently, outlived its relevance. It was aimed primarily at decision makers in India, the knowledge-proof babus. Nowadays, this tribe has become less relevant (thank globalization for this happy occurrence) and some of them are even tuned in, and a small minority perhaps even ahead of the curve. This article marks the beginning of a new column entitled "Calling the Bluff". Derived from poker, the term means the asking of a showdown with the presumed bluffer being asked to display her cards and prove to the world they are as strong as she is claiming them to be. The person calling the bluff typically has a very strong hand and is liable to win the bet by successfully "calling the bluff".
