An Empire built on DEBT: All you want to know about world economics, Eurozone crisis and price hike in India

The subject of the article is very demanding and I am going to touch much conceptual stuff in this article. thus I have tried to keep economic jargon as brief as possible. simultaneously I have tried to answer all possible questions that might arise in your mind while reading this article.

as per the title of this post, There are 4 broad areas that I have tried to elaborate. Depending on your requirement you can simply jump to the relevant part of your interest. However if you are new to economics, then I will recommend you to go through the article sequentially.

NOTE: This article is for understanding purpose only and and although the concepts and data mentioned here are valid and correct, they are expressed in very simple manner.

The covered subtopics are,

• Basics of economics

1. What is fiscal deficit?

2. How world economics functions

3. China`s role in USA`s economy?

4. GDP, growth rate

• Euro zone crisis: background

1. the crisis: the rich countries in deep debt?

2. what world is doing about it

• India`s Response to global meltdown

1. learning from crisis: deregulation: petroleum price

2. Why government is doing it

Basics of economics

Economics is not a difficult discipline to understand but to understand an event in economics, you are supposed to know all associated factors and concepts, and that makes this subject challenging. So to understand Euro zone crisis and Policies of deregulation going in India you will need some basic understanding of economics, which starts with fiscal deficit And then little about GDP and growth rate.

What is fiscal deficit?

A government (G1) runs like a home. You earn money from your job and then you spend it on your daily activities and when you need more money than you earn, you simply borrow it. Similarly government earn money from various sources like taxes and duties, public sector company revenue etc. and then it spend this money on government employee salaries, developmental projects etc.

often government spends more than it earns and this difference between spend amount(S) and earned amount(R) is called as fiscal deficit(D) i.e. S-R=D. (u know, fiscal=related with finance & deficit=shortage)

how world economics carry out its activities or Business

government need money equal to its fiscal deficit to carry out its business; but devoid of internal sources of tax n duties, government take help of other means i.e. it resort to borrowing money and  it issues bonds. (bond, in general terms is a fixed deposit account) besides bonds, which are purchased by either financial institutions(big banks) of the country or mostly by other country`s government (G2).

But funny thing is other government G2 is also suffering same problem of fiscal deficit like G1!

Now a simple question arises, if both are suffering then why would G2 will help G1? (if this question has not raised in your mind just skip following para.)

Well, the answer is simple; today the governance has also become a business. Let’s understand this with an example of US and china. and then you will also understand why n how China is said to be a world power.

(Here I am going to use a term GDP (gross domestic product), if you don’t know what it is, don’t bother, just for time being assume it as total money generated in a country in 1 year)

for 2010 China`s GDP is ~$5trillion and fiscal deficit ~223billion while USA has GDP of $15trillion and fiscal deficit of ~$1.5trillion. thus considering the hugeness of amount, obviously USA`s fiscal deficit is more as compared to china.

To fill this deficit government of both countries will issue bonds. as matter of fact, USA being the richest country, it is considered as safe place to investment. also the government of USA has never defaulted! and value of US dollar hardly fluctuates and mostly it appreciates making more returns at maturity for the bond.

so with this lucrative offer, Suppose china buys these bonds and invests their money in USA fixed deposits.  then china has a security that USA will return its money after maturity of bond plus china will get some interest on these bonds!

And from where china will get that much money? Simply via the ‘made in china’ stuff! The international trade is carried out in US dollar only; and china has plenty dollars earned via the export based trade, as the international trade is carried out via US dollar. (for same reason, USA has strongest economy!) so there cannot be a better and safer place than USA to invest the huge chuck of money! Above all its china`s money that will be supporting USA economy(as it is fixing fiscal deficit) so obviously USA will have a soft side towards china. And this hugely matters in international politics. (Obviously you will be grateful to the person who is helping you.) Thus china prefers to invest in USA`s debt.

And to fix its own debt, china also issues bonds which are bought by other countries just as mentioned above. Thus, the universal principle governing global economics is bigger economies gets cheap funds from other big economies to fix its deficits. And such investments are done to gain favour from other countries in international politics. (As matter of fact, by means of bond, today USA owes china about a trillion USD!)

why not print more currency to fix deficit?

After above business another question might creep in your mind, why so complex? Why borrow money? Just print more currency n fix deficit! When I was studding this stuff I had asked my teacher same question Then he answered, ‘a note is simply a treasure bill that is issued against a fixed asset’. And I was more confused! The economists love to see the expression of frustration on your face and they get extreme pleasure in talking that jargon! (But you see, he used just 13 words to answer correctly! N I will be devoting a para to answer the same.)

So in simple language, the money or a note of Rs.100 or Rs.500 that we use is issued by RBI against some fixed tangible asset owned by the government. traditionally This asset was gold as per gold standard; that is a central bank was supposed to keep gold of same amount aside to print notes. however with maturity of economy today it is carried out on basis of bonds. Here the government issues bonds to central reserve bank, and upon this bonds central bank issues currency.

The bond remains liability of government. but you see, the bond is a type of debt and RBI issues money based on debt! money created out of debt! funny right? but that’s how it works. 

now, If government asks RBI to issues more notes, then it will dilute worth of money already in circulation. it simply works on principles of demand and supply! if a commodity is more its value will be lower. More money in peoples hand more mouths to eat, but with fixed production, scares becomes the resources. And thus with simple rules of demand and supply, higher the demand and less is the supply, scares will be the resources leading to higher prices and hence inflation. (and this is the  reason for current inflation in India. We will come to that again in last section.)

Thus a wise government never opt to printing more currency to fill the deficit.

in economic jargon, the currency floating in economy is also called liquidity. Its just like melted water out of frozen iceberg and the RBI maintains the iceberg, by various ‘fiscal measures’(REPO and reverse REPO rate) central bank (RBI in India) controls this ‘liquidity supply’

Emotions: the essence of being human

why, mr. Anderson, why? why, why do you do it? why, why get up? why keep fighting? do you believe you’re fighting for something, for more than your survival? can you tell me what it is, do you even know? is it freedom or truth, perhaps peace – could it be for love? illusions, mr. Anderson, vagaries of perception. temporary constructs of a feeble human intellect trying desperately to justify an existence that is without meaning or purpose. and all of them as artificial as the matrix itself. although, only a human mind could invent something as insipid as love. you must be able to see it, mr. Anderson, you must know it by now! you can’t win, it’s pointless to keep fighting! why, mr. Anderson, why, why do you persist?

frankly speaking what i have discussed in this article has very less to do with this video clip but what i want to highlight here is that the computer and machine is really killing the human aspect of human being, its also my personal experience. 

I know that this movie matrix holds a really deep philosophical values and one need to relate those things with the real world to assimilate that. But that is the problem! To relate an idea one needs sound, healthy and open mind: an intuitive thinking mind. I believe every human being has it; by birth the nature fits it inside our brain. (it`s my humble request to readers to use it while reading this post!) This intuitive thinking mind  makes us human being; and as human being we also get gift of emotions. We are all emotional by birth. we feel pain, love, affection, jealousy, grudge, anxiety, fear, worry, happiness, nervousness, comfort, disdain, scorn, contempt and many more list of emotions are endless. (and that is the problem!)

going back to the clip, how can agent smith feel these emotions? Poor fellow is an artificial intelligent program which lacks emotions and hence empathy. Neo (Mr. anderson) being human being can only feel these emotions that is why Neo ardently says ‘because i choose to!’. That is what I am trying to deal in this article, understanding emotions: the greatest asset of human being: to empathise others emotions. Let’s be human beings and not machines.

Human beings are emotional by birth and since childhood these emotions shape our habits. But as we grow up we start getting numb towards these emotions due to changed social values. We start getting extrovert rather than introvert. The external pleasure starts mattering more to us than anything else as a result we become numb towards our intrinsic feelings; the external mirage of feelings simply puts on coatings on our tender human mind which was self conscious once.

As years pass the result of these coatings is, we feel emotions as they reach into their secondary, ternary or beyond mode; that is in its extreme forms. And we act to suppress these emotions in its extreme form. Our decisions are greatly shaped by these extreme emotions today and mostly these extreme emotion driven decisions creates catastrophic results. Let me put it in simplest form with following example,

Bob is a student. Bob wants to learn about management theory so purchases a book related with that topic: a 700 pages bulky book. Now he is all exited to read that book as the book is most recommended by his subject teacher and bob knows that by reading that book thoroughly his all questions will get satisfying answer. So with that excitement bob starts reading the book. First 10-20 pages all is going well, next 20 pages bob starts feeling restless as he finds that to get hold on idea of management he has yet to cover 600+ pages more which makes him nervous. Simple reason behind this is bob just want his answers in shortest possible duration he don’t want to wait till those 600+ pages. As he progresses further, 50-60^th page his excitement and anticipation turns into anxiety which is caused due to the anticipation of waiting for something which bob usually hates doing. (of course bob is a youngster belonging to the fast food generation) Now this anxiety starts projecting in bobs gestures as he begins to chew his nails and starts shaking his leg. (his mind is shouting, common dude just finish this book I am fed up of waiting!) And as this anxiety reaches its climax, bob puts the book aside; this is a basic response developed by his brain after years of training. The response is like: anxiety implies unpleasant emotion, and for any unpleasant emotion bob should get rid of it as soon as possible. To get rid of this anxiety bob opens his drawer pulls out a cigarette and starts smoking which is clearly a distraction from what bob was supposed to do: understand the management theory. Now bob`s mind is distracted and after this bob calls his friend or simply moves over his computer and start playing dotta! (some game) or the best facebook!

Here the emotions flow like, excitement-> nervousness-> anxiety-> distraction=> wasted!(this is not emotion itself, but result of previous emotions)

the whys and hows of this is very simple, this is just a single case of today’s youth. There are many such cases where uncontrolled or un-comprehended emotions causes catastrophe. The results are like, smoking, drinking, rapes, murder, abuse etc.

jokes apart, on a serious note a severe form of expression of emotional burst is rape; where emotions flows like, excitement-> arousal-> desperation-> lack of empathy-> rape. (All these feelings are coated by recklessness and/or don’t care attitude)

(the viewer of ‘Lie to me‘ serial might get Déjà vu from above example, well the entire serial is based on research work of eminent scientist Dr. Paul Ekman.)

so a question might arise in your mind, if the science is able to analyze the situation and problem to such minute details, they even know cause of trouble then why they are not fixing it? or even if they are, what is way to deal with it?

well certainly there is a way, and science fraternity calls it emotional intelligence. which i have discussed in next part of this article.

Empathy: a gift worth rejuvenating

[previous: Emotions: The essence of being Human]

To Maintain balance between intellect and emotion is wisdom

-: shree shree ravi shankar

For years our intelligent society is build upon IQ that is thinking ability and logic taking emotions for granted. Our education system, selection procedure all is based on IQ. Since we left aside emotion in this 100 or more years of course and only concentrated on single aspect of human behavior i.e. intelligence things have came to an halt and as a result we are experiencing chaos in society. We have tried to pull only one aspect of human mind keeping the vital aspect stagnant. Where it is given that both emotion and intelligence are ‘the’ things which makes us human being: different form of species that all living beings.

he solution of this lies in self awareness, putting it exact words of Daniel Goleman we need to make the society ‘emotionally intelligent’.

This self awareness, putting in simple words stands like making one aware about his feelings. In case of bob of previous example, if he realize that his excitement is root of his nervousness and his chewing nails and shaking legs adds into his anxiety, he could have controlled his emotions and preventing himself from getting distracted from his aim.

The horizon of EQ is not just limited to the single person but on large scale it is related with understanding others feelings: to empathies. I strongly believe that the most of problems in today’s society are result of lack of empathy. The IQ based society has little place for empathy as it teaches and makes us dominating and ruthless. Our education system trains us so that we will get a job but it cannot assure whether the student will live for next day or not. The stressful life, depression followed by suicide among students and young professionals is alarming but still we are not really serious about emotional values. These are all consequences of numbness towards one`s own emotions and emotions of their loving peoples: parents, friends and relatives.

One more thing I would like to add here is, as a nature’s gift and in course of evolution the females have much more developed scene of empathy and this is a well accepted fact today. Sadly in society they are not given enough room to express these skills and the existing world just makes room to accommodate them in existing rigid workspace which was once created by some men as per their preferences. We need to give enough room to females to express and utilize their empathetic skills in their work style to get optimize their natural skills. Otherwise the existing work culture can perish the emotional aspect of women’s ‘motherly touch’. some consequences of that are visible today in the young generation. This is a vicious cycle of lack of empathy since the tender mind of child shapes itself in its earliest days when it is self conscious and if it is given touch of empathy during that time, the impact lasts long on the child’s mind. I am not saying that every women then should stay in home to protect their child, here I want to revive a forgotten role of educational institutes. (which existed in our culture ages back) these institutes need to wake up for this new role of teaching emotional intelligence to the young minds.

I think the real essence of human life lies in these emotions and feeling them, it’s a gift of nature to us human beings where we can be self conscious about our own feelings. And as we empathies them we understand how others are feeling. As we grew emotionally intelligent we can deal with the sad and unpleasant feelings at its root when it starts building thus achieving optimum performance and peace at conscious level which intern adds into our intelligence resulting in maximum pleasure at work.

 putting together, as per Daniel Goleman The domain of emotional intelligence stands on following pillars,

1. Knowing your emotions
2. Managing your emotions
3. Motivating yourself
4. Recognizing and understanding other person`s emotion
5. Managing relationships and others emotions.

_{*Daniel goleman has delt with each of these topic at length in his book emotional intelligence: why EQ matters more than IQ.}

The field of emotional intelligence is still very young only 20-25 years old and still research is going on yet the results are strong enough to believe in its utility and correctness. As Indian we have very strong reason to believe in it. If any of reader is familiar or following any form of meditaion, vipashana then I don’t need to give explanation for this since all of them talks about self awareness. Now EQ is putting that in more comprehensive form and what I think is rather than fighting and wasting time in claiming the fame for EQ we should strive to imbibe those skills to make the society a better and sustainable place to live for next generations.

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*dedicated to Mr. K. M Pathi n my parents who taught me emotional intelligence and related interpersonal skills.

2010 in review

The stats helper monkeys at WordPress.com mulled over how this blog did in 2010, and here’s a high level summary of its overall blog health:

The Blog-Health-o-Meter™ reads This blog is on fire!.

Crunchy numbers

A Boeing 747-400 passenger jet can hold 416 passengers. This blog was viewed about 1,700 times in 2010. That’s about 4 full 747s.

 

In 2010, there were 12 new posts, growing the total archive of this blog to 53 posts. There were 5 pictures uploaded, taking up a total of 919kb.

The busiest day of the year was April 17th with 44 views. The most popular post that day was Doing it in open source way….

Where did they come from?

The top referring sites in 2010 were facebook.com, bigextracash.com, mail.yahoo.com, employmentfor.com, and orkut.co.in.

Some visitors came searching, mostly for plastic pollution, facts about indian education, indian education system, sanyaldk, and india education facts.

Attractions in 2010

These are the posts and pages that got the most views in 2010.

1

Doing it in open source way… August 2009
7 comments

2

14 facts about Indian education system and a remedy September 2009
24 comments

3

can we change this? September 2009
129 comments

4

Finolex ‘Anarchy of Management and Technology’ April 2010
12 comments and 1 Like on WordPress.com,

5

3. Twelve transitions from academics to corporate life September 2010
1 Like on WordPress.com,

4. Calculated RISK of opportunity

previous article: The essence of engineering and technology 

“There is much in the world to make us afraid.

There is much more in our faith to make us unafraid”.

~Frederick W. Cropp

Risk is a most interesting part of life and a characteristic of the youth! If directed in proper way the risk can be managed without any sort of hazard. Fear is always associated with the risk, it’s an interesting feeling some people fear the ‘fear’ and restrain themselves from the challenges, While some embrace their fears and achieve greatest success in their life. What make them successful is they take calculated risks by believing in their self rather than just following adhoc methods. It is these ‘calculated risks’ which converts the hazardous risks into opportunities and hence success.

watch the following video, its not explicitly related with technology but the  implicit message is more important… to DARE.

Complexity and risks are inherent in the technology, so rather than staying away from it and being dependent on somebody else, one should run towards it just like shown in video. The complexity, risk and fear are inherent part of engineering and technology one should accept this eternal truth and just go for it with scientific temper.

Remember in technology if your logic is correct based on scientific fact, nothing can go wrong as long as you are working with scientific temper. Your calculated risk in such cases will always turn as risk of opportunity making your experiment a fruitful event.

The Risk in general terms…

To be expert in techworld you need to be more practical than just cramming the theory. In fact it’s not at all difficult to execute most of the part of theory into practice. A lot of risk is obviously inherent in all these activities but you should be always ready to accept these risks. In plain English ‘risk is likelihood of occurrence of a hazardous event and the consequences associated with it, like some injury or financial damage‘. Risk is of two type risk of failure and risk of opportunity. There is something known as calculate risk. Risk is calculated, when you know what you are doing and you can predict possible consequences based on your observations and previous knowledge. A risk is called as  risk of failure when the risk in the project becomes reality and causes catastrophic effects on the project, that is failure. In most of the cases Risk becomes reality due to ignorance and unawareness. It is possible to control every risk if we adopt a proper strategy to deal with it.

when you accept a new endeavor or a project, always some sort of risk is associated with it. You recognize the risk involve in the project and you still carry your activity and you successfully achieve the result managing all the risks cautiously then the risk in such cases is called as risk of opportunity. it is called as opportunity since such risk not only boosts your confidence but also motivates you to pursue next level in your work, opening new doors of possibilities. ‘Nothing succeeds like success’ just like that. this also increases your credibility in the society and between your colleagues.

Converting a Risk into Success.

To understand above theory let’s put together it in practice with following video clips, again it is not directly related with the technology. But you can easily relate it with what i want to convey, ‘converting risk of failure into risk of opportunity and hence success’.

the clip is from movie Shaolin Soccer. The clips are from hindi translated version of the movie. There are 2 clips, in first part the actress is shown as  a chef in a small hotel where she cooks pastries using her special kunfu-skills. Watch how she uses her talent,

in next part when the team`s goal keeper suffers from injury and the team has no replacement, the actress turn in to the game as replacement player, Despite of the fact she has never played a single game of football. what happen next is this article is all about.

let me help you to relate the concept, in this scenario the ball is most crucial and volatile aspect of the game. If it enters in her goal post then for her team it is failure, but if it is in opponents goal post then it is success. Considering what had happened with previous keeper, standing in front of the ball was a risk, risk of injury. considering that she was playing her first football game there was also risk involved in she acting as goal keeper. overall there were two risks of failure- risk of injury and risk of scoring goal. but in spite of all this she accepted the challenge and stood to defend the goalpost.  when the opponent player got hold on the ball she kept faith in her skills and by using then she converted the catastrophic impact of ball into a mild attack and hence prevented the goal. Then she got full command on the ball using her skills again. i.e. she converted the risk of failure into risk of opportunity; an opportunity to score goal on opponent. With teamwork finally her team did score the goal and emerge as the winner of the game.

Life is all about this: identifying your skills, having faith in it and using them when the situation demands. Risk is muddled up by the fear factor, just overcome your fear, perceive the problem at its root, just be yourself and deal with the problem… you are bound to be successful. So to convert a ‘risk of failure’ into ‘risk of opportunity’ followed by ‘success’ you need to understand the system, know your skills, identifying your mentors and have faith in all.

If you have seen the video cautiously then you will notice that the girl uses her kung-fu skills as situation demands,  for cooking, for mixing the flour, for catching the pot, and finally while playing football. that’s what optimization, flexibility and adaptation is all about. Just like that you too can relate your skills like reading, dancing, singing etc. with your study, play and even while working in techworld. (if not exactly the skills at least the side products, confidence being one of them.)

• Technology is for all

Let me clear something about the technology world, it is not like that this area is a privilege of someone or you need to be gifted or something like that, neither it is fact that this is male chauvinistic field. Infact girls can also do equally well if they believe in their selves. As per my observation its natural female tendency to be on safe side and tendency to restrain from the risk factor and hence complexity of technology. girls should look to break this ‘illusion of control‘.

You should be always ready to take risks in this field, not just calculated but sometimes risk as it is without prior knowledge of the activity. in any case the experiment fails then you should have a mitigation strategy to bring the system back to normal.

What drives the engine of progress in the world of technology is your anxiety, patience and never giving up attitude- ‘A real warrior never quits’. (watch kung-fu panda, it is one of my favorite movie)  all of these driving agents needs engineering spirit as their driver, vision of the engineer. as discussed in the article, essence of engineering and technology the two aspects, engineering and technology are interrelated and complies each other.

• Illusion of control

Illusion of control is anything that holds you back from taking an action just because you think you are not worth of doing it. the concrete wall of assumption in which  you  try to enclose most volatile thing in the world… your mind. Problems, mistakes, fear all of these lies in your perception- illusion of control,

‘your problem is not actually your problem, your reaction to the problem is actually your problem’.

Therefore you must let go the illusion of the control to achieve the greatest success, what you truly deserve. To break the illusion of control  you must break the wall and be open to accept the truth. your own mistake will help you a lot, learning from history is very crucial aspect of our life, one who learns from own mistakes as well as others mistakes achieves the heights in less duration with less pain. (Hard work is inherent part of success so I say less pain (: )

Remember the last glory you achieved and keep in mind that you have done this before and now you are going to achieve it again. It really works but just don’t give up at all, you will be successful.

• Learning from the mistakes…

“One of the greatest and most comforting truths is that when one door closes,

another door opens, but often we look so long and regretfully upon the closed door

that we do not see the one that open for us.”

 

Your passion for the work that’s all matters, success is just matter of time, because in life no body ask how badly you fail but they always look upon how you stood up after falling. This is the most important lesson your should always remember in your failures, don’t keep crying after being fail, as failure is also relative term and momentary truth. It doesn’t mean that you are not going to achieve it ever but just not at that time.

In such situation you should analyze the system to check which risk became reality and if there was something unexpected factor which caused the damage. Learning from the mistake is what I call this. Learning from the mistakes and avoiding repetition of mistakes is crucial aspect of engineering and technology education. One irony is that you are always open to do new mistakes, as most of the discoveries are accidental not intentional. But it’s also very important to learn from the mistakes each time.

learning from the mistakes involve taking note of own mistakes as well as listening to the advice of your mentor or experienced person to reduce risk. It also include learning lesson from others mistakes. This activity helps in self criticism and acts as barrier in yourself and the evil of ego.

• Help yourself

While working you should always try to do things on your own based on some guidelines. It can be based on your previous knowledge or guide lines from manual or blog. If you came across any difficulty try to solve it using Google and if that also don’t work, ask your trusted guide. A guide can be anyone, topper of your class, your subject teacher or any teacher, your friend. Just make sure that he actually knows about the technology about which you are going to ask.

to get clear cut idea how it works just check out the following flowchart. the flowchart is how we people learn any new software, i have learn photoshop just like that!

trust me technology is this simple, your patience, endurance, anxiety and logic that’s all it take!

So all along this article I want to say that, risk is inherent part of technical education and rather than fearing it, one should accept it as a challenge and just go for it based on own logic and past experience if any. Learning process should be on going while doing any project. The doors of technology are open for such persons only and are independent of any other factor.

conclusion:

i know that this article was a bit of heavy so i am writing this part separately,

1. always have faith in yourself in your skills. never underestimate yourself.
2. have faith in your mentors, teachers and technology. respect them.
3. success and failure are momentary truths so don’t get over exited by success and depressed by failure. enjoy it n learn from both.
4. never repeat your mistake, although you are free to do new mistakes but learning  lesson from it is most important. (this doesn’t mean your work should be error prone (; )
5. don’t run away from the problems and difficulty, just go for it with scientific temper and test the fruits success that you truly deserve.
6. ‘an original is hard to find but easy to recognize’: know your skills sharpen them with help of your mentors, role model but never loose your originality. don’t discard yourself, be more of it.
7. ‘opportunity is missed by most people because it is dressed in overalls and looks like work’. don’t run away from the work, optimize it for your benefits. your assignments are just another form of opportunity, have you ever thought of it in this way?
8. ‘keep your face to the sunshine and you will never see the shadows’. (follow the above 7 steps and you will never regret for what you are and what you are doing)

in the next article i have tried to introduced you with the world of open source. open source is something which cannot be told what it is one has to be there to feel it. (just kidding, this blog is also part of open source.) nevermind! check out the next part of article, open source true essence of freedom.

This article is dedicated to one of my favorite teacher and friend Ms. priya nagwekar, who imparted above mentioned skills in me n all my friends during our academics, by concealing the complexity of engineering management stuff in general terms.