THE SCAM THAT WILL NEVER BE REPORTED

Govt agrees to infuse Rs 12,517 cr into PSU banks by March

…and not a whimper from any quarters.

Right under our nose, government is using our money for some sinister reasons and not one person from the media is standing up and asking a question, why?

Why in a potentially inflationary environment is government putting money into the system?

Why is the money required to be infused into the banks?

Why are the very banks whose NPAs are rising and have bad loans being incentivised by the government with our money?

When we have the RBI that looks over the banks , why does the government find it necessary to intervene?

Has the RBI become incompetent?

The question can even be extended to include why the deputy governor of RBI has been retired without finding his successor?

All these questions lead to a certain angling in the government quarters.

No one is telling the public that for 8 years now the PSU banks have been subsidising the big ticket real estate companies, all the time allowing them to keep up the prices of their real estate assets.

Do you know that if the banks were not financing and refinancing the same projects of realtors, we would be able to get the same flats for nearly half the prices.

However in the deal that is going around, if the banks allow the prices of the projects to be lowered/slashed, their own loans extended become more than the value of the assets.

In some cases the realtors had approached the banks for taking over their projects, since they did not have any buyers. In such cases the bank forwarded even more funds to the realtors to continue their projects.

How the NPAs(non performing assets of the banks rise):

A developer approaches a bank with a plan of building on a land that is not effectively his. Bank finances the loan for buying the land and the project at much higher value than the actual cost of the land (naturally because it is not developed).

When the project is launched , the buyer is encouraged to go for loan from the bank that has approved (financed) the project. Now effectively the builder shows that he has sold so much of the project (in terms of loan value and not the no. of flats or shops).

As a result now the bank has financed the project with 2 loans (1 to the builder and 1 to the buyer).

With time the builder effectively hikes his prices and has less and less buyers.

He approaches the bank (which is effectively hand in glove with the builder) to forward some more loan either to show extension of the project or a new project on the same land.

Now the bank has given a lot more loan than the asset value – these assets being illiquid cannot be realised.

The loans are not being serviced by the creditors and the builder is not interested in paying back anything , because he has recovered his margin by selling a few flats.

…and the process goes on.

In this entire tangle the only person losing out is the Indian public.

Which is either paying a lot more for it’s home – than it is worth it- as in Mumbai.

Or being made to pay indirectly by such “infusions” into the banking system by the government.

If you do not believe or understand the above.

Just imagine you receive 1 crore from your uncle in lieu of the financial hardship that you are undergoing because of some money you lent out to a friend or money that someone has taken from you and not returned to you.

How is this money going to look factually on your books?

You are going to receive it and say Ok now I don’t have to worry whether that guys pays me back or not.

That is how the bank are going to behave- and the system will go on and defer the problem.

This is exactly what happened with the subprime crisis in the US.

Same thing is going to happen here whether we have subprime rate or not.

What we should raise our voice in the parliament is not against FDI and other things.

We should raise our voice against financial impropriety being conducted by the government because we have a strong and a worthy RBI and a unflinching governor.

How I wish our primeminister would have been like that.

Alas! To think that he was a RBI governor once too.

Now What?

First the Old Surd was considered absurd.
Incapable of holding the high office where he was put .
He was considered a person who would not open his mouth even to a dentist.
Ahluwalia and SMS were considered the true and original Santa Banta.
The Govt. was rightly talked about has having a policy paralysis.

...TAKE II
       ....
Diesel prices go up by Rs. 5, LPG is restricted, FDI is liberalised in Aviation, pension, cable and multi brand retail.

...Again the politicians sitting IN and OUT for last 8 years are ion business of protesting.
Looks like the unemployment rate has come down , for at least a section of the population, even if the inflation and prices have gone up.

Point is, who is going to decide what is to be done for the people.
That should not allow the ruling coalition to go Scott free either. If this steps were correct - what were they doing for last 3 yrs. Why were they playing with the economy - that's criminal!
...the opposition is doing it's job well. It is opposing everything that is done ... good bad and ugly!


 

The Anti Kassab mentality

What is it with the world?
How can we get so short sighted.
How can we ignore the obvious.
How can we only chase the shadow and forget the object?
How can we love to hate the weapon and forget the hand.
How can we hang Kassab and forget the  hands (whoever and where ever they are).
Political lives are abound with conspiracies and counter conspiracies.
Why should we aim at these midgets when our own representatives have done far worse for their own public.
We hate Kassab's biryani and 5-star jail when we should be targetting the contractors and officials who have provided him with them.
We are indeed so naive and uninformed and we simply form half baked opinions and post them on FB and call it a Right to Speech and expression.... pathetic.

THE SIXTY FIVE YEAR OLD WOMAN

On this day a lot of people have flogged themselves and the country and also the administrators of the country.
I agree with them that what we are undergoing is something very sad and pathetic.However blaming the entire 65 years of existence on someone else is something totally unwarranted.
How many of us have not been able to live upto the expectations of our parents and how many of our parents have not lived upto the expectations of their parents.
Further how many of us have actually been able to FORCE our childfren to live our dreams (if that is correct at all).
How many joint families do we live in anymore.

There are so many couples getting divorced after 15-20 years of marriage.
What I'm driving at is that in our small lives and small families , how many of us have been able to achieve an ideally desirable state .
If not how can we ever think of expecting some of us to rise to the positions of power and achieve a state of perfection .
If Japan rose- after 1945 it had to do with the national character of the common man.
If US achieved something of greatness- it was due to the inherent pride of the common man.
If Germany after WW II it was due to the decadence in the society which bred hatred.

In essence what we can achieve in our personal lives- will in turn determine what we will achieve as a nation.
We as middle class made a crore for the first time- well our leaders made a few thousands of them too.
Why? Because they are us. It is I who is up there.
If lacs of crores are stashed abroad , it is because the small unit of the country started making black money in their small deals. Whether it is land deals or small amount via Hawala from abroad.
How many of us small time earners from abroad changed our $s in the black market /
The intention is that whether it is a Raja or a Kalamadi- they have arisen from us in OUR lifetime and rose to dubious fame.
It is not them that we should hate - in fact we don't hate them - we are jealous of them. My God! Why could I not do the same thing?
Moment someone achieves his 100 crores we either idolize him or start admiring how a stupid fool could make so much money.
We are not different from the country that we live in.
We are not becoming because the country is corrupt and inefficient.
The country is so(if it is so) because of us,
Across all ages we have waited for a messiah to deliver us from OUR sins.
Now how convenient is that. we sin and wait for the Ganges to come to our doorstep to wash away our sins.
Pls promise yourselves if you have to .
Because if you want to see a change- you have to be that change.

TALK ABOUT ANOTHER SOOTHSAYER OR DOOMSAYER. I CAN'T FATHOM HOW THIS GUY IS ANY DIFFERENT THAN THE ONES WHO ARE PREDICTING THAT THERE WILL BE NOTHING AFTER 2012.
UNFORTUNATELY , THESE GUYS PREDICT EVERYTHING BUT DO NOT DO ANYTHING TO IMPROVE THE CONDITIONS.
NOBODY HAS WRITTEN A WORD ABOUT THE MARVELOUS GOVERNOR OF BANK OF CANADA, WHO HAD VERY PROACTIVELY STEERED CANADA AWAY FROM ITS NEIGHBOUR. 

The idea in life of most of the journalist is to create furor,mayhem and scintillating headlines- that attract attention.If someone has done something right it does not make any news.
It is for nothing that the Noble Prize for Economics has not been given to the only Governor of Central Bank of the only country of the developed world- CANADA.
Not once have aI read anything - good or bad, about Canada.
Is that a oversight or deliberate

 

WHERE DO WE GO FROM HERE

Reply to a friend who in response to yesterday's post about decline of west- asked me- WHERE DO WE GO FROM HERE?
Hello XXXX
It’s true that the article does not tell us anything new that we don’t know.
However it is what is not written that is important.
It is the concept of Organic growth as opposed the fast track.
It is the Indian psyche to be a bit laid back and believe in the karma- we’ve been doing it and will continue to do it.
The average Indian out there still believes in the Five fold path of Buddha- even though sub consciously.
When that farmer grows groundnuts in his farm and cultivates to sell it to another man who will roast and sell it on a small cart- it will happen to be the basic step in economics. The first principle as in differential calculus. The very concept of growth will start from there.
He’s done something that the doyens of Wall street cannot do- produce a good.
After the wheels of entrepreneurship are set into motion everything will happen.
India’s strength is not it’s population but the ability of the population to give themselves job and save some money from that.
That is why in a country where we retail YSL and Chanel we can also talk of minimum daily sustainance at Rs.28.
We are headed in the right direction irrespective of the 10 crore population that will be trained by the National Training Council in next 10 years- or not.
The CEO of Franklin Templeton once said in a TV interview 12 yrs back- In India the industry starts first, then the govt. forms rules and forms the regulatory body.
It is a fact that, if we need to move ahead we’ll have to be original.
We’ll have to shake off the pre meditated conditioning that is provided in MBA colleges.
Just like Japan defined its own code of management. We’ll have to be original in our scope and outlook.
At the end of the day whatever goes up must come down (a fact of law of gravitation)- however it is often overlooked that the faster you go up, the harder you fall (I think that would be First law of Motion).
Now you can look at it either from a philosopher’s perspective, scientist’s or even a economist’s. It has to hold good.

Sorry but my talk has given me a headache- b4 it does something to you I’ll stop.

Why the decline of the West is best for us – and them. By R Vaidyanathan, Professor of Finance, IIM Bangalore.

Why the decline of the West is best for us – and them. By R Vaidyanathan, Professor of Finance, IIM Bangalore.
by Ishwar Jha on Monday, November 7, 2011 at 10:17am

Ten years ago, America had Steve Jobs, Bob Hope and Johnny Cash. Now

it has no Jobs, no Hope and no Cash. Or so the joke goes.

Only, it’s no joke. The line is pretty close to reality in the US. The

less said about Europe the better. Both the US and Europe are in

decline. I was asked by a business channel in 2008 about recovery in

the US. I mentioned 40 quarters and after that I was never invited for

another discussion.

Recently, another media person asked me the same question and I

answered 80 quarters. He was shocked since he was told some “sprouts”

of recovery had been seen in the American economy.

It is important to recognise that the dominance of the West has been

there only for last 200-and-odd years. According to Angus Maddison’s

pioneering OECD study, India and China had nearly 50 percent of global

GDP as late as the 1820s. Hence India and China are not emerging or

rising powers. They are retrieving their original position.

The dollar is having a roller coaster ride at present.

In 1990, the share of the G-7 in world GDP (on a purchasing power

parity basis) was 51 percent and that of emerging markets 36 percent.

But in 2011, it is the reverse. So the dominant west is a myth.

Similarly, the crisis. It is a US-Europe crisis and not a global one.

The two wars – which were essentially European wars – were made out to

be world wars with one English leader commenting that ‘we will fight

the Germans to the last Indian’.

In this economic scenario, countries like India are made to feel as if

they are in a crisis. Since the West says there’s a crisis, we swallow

it hook, line and sinker.

But it isn’t so. At no point of time in the last 20 years has foreign

investment – direct and portfolio – exceeded 10 percent of our

domestic investment. Our growth is due to our domestic savings which

is again predominately household savings. Our housewives require

awards for our growth not any western fund manager.

The crisis faced by the West is primarily because it has forgotten a

six-letter word called ‘saving’ which, again, is the result of

forgetting another six letter word called “family”. The West has

nationalised families over the last 60 years. Old age, ill health,

single motherhood – everything is the responsibility of the state.

When family is a “burden” and children an “encumbrance,” society goes

for a toss. Household savings have been negative in the US for long.

The total debt to GDP ratio is as high as 400 percent in many

countries, including UK. Not only that, the West is facing a severe

demographic crisis. The population of Europe during the First World

War was nearly 25 percent and today it is around 11 percent and

expected to become 3 percent in another 20 years. Europe will

disappear from the world map unless migrants from Africa and Asia take

it over.

The demographic crisis impacts the West in other ways. Social security

goes for a toss since people are living longer and not many from below

contribute to their pensions through taxes. So the nationalisation of

families becomes a burden on the state.

European work culture has become worse with even our own Tata

complaining about the work ethic of British managers. In France and

Italy, the weekend starts on Friday morning itself. The population has

become lazy and state-dependent.

In the UK, the situation is worse with drunkenness becoming a common

problem. Parents do not have control over children and the Chief Rabbi

of the United Hebrew Congregation in London said: “There are all

signs of arteriosclerosis of a culture and a civilisation grown old.

Me has taken precedence over We and pleasure today over viability

tomorrow.” (The Times: 8 September ).

Married couples make up less than half (45 percent) of all households

in the US, say recent data from the Census Bureau. Also there is a

huge growth in unmarried couples and single parent families (mostly

poor, black women). Society has become dysfunctional or disorganised

in the West. The government is trying to be organised.

In India, society is organised and government disorganised. Because of

disorganised society in the West the state has to take care of

families. The market crash is essentially due to the adoption of a

model where there is consumption with borrowings and no savings. How

long will Asian savings be able to sustain the western spending binge?

According to a recent report in The Wall Street Journal (10 October

2011), nearly half of US households receive government benefits like

food stamps, subsidised housing, cash welfare or Medicare or Medicaid

(the federal-state health care programmes for the poor) or social

security.

The US is also a stock market economy where half the households are

investors and they have been hit hard by bank and corporate failures.

Even now less than 5 percent of our household financial savings goes

to the stock market. Same in China and Japan.

Declining empires are dangerous. They will try to peddle their failed

models to us and we will swallow it since colonial genes are very much

present here. You will find more Indians heading global corporations

since India is a very large market and one way to capture it is to

make Indian sepoys work for it.

A declining West is best for the rest and also for the West, which

needs to rethink its failed models and rework its priorities. For the

rest—like us—the fact that the West has failed will be accepted by us

only after some western scholars tell us the same. Till then we will

try to imitate them and create more dysfunctional families.

We need to recognise that Big Government and Big Business are twin

dangers for average citizens. India faces both and they are two asuras

we need to guard against. The Leftists in the National Advisory

Council want all families to be nationalised and governed by a Big

State and reform marketers of the CII variety want Big Business to

flourish under crony capitalism. Beware of the twin evils since both

look upon India as a charity house or as a market and not as an

ancient civilisation.

R.VAIDYANATHAN

PROFESSOR OF FINANCE

INDIAN INSTITUTE OF MANAGEMENT

BANNERGHATTA ROAD

BANGALORE

INDIA_560076

TEL: 91-80-2699-3086

FAX:91-80-2658-4050

E mail:vaidya@iimb.erne