Finance & Economics:Idea Hyper

REMOVING THE HAZE ON INDIAN ECONOMY

2013-07-13T20:51:00.002-07:00

Removing the Haze

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India’s widening current account deficit (CAD) over 4.8% & dangerous fall of rupee (from 44/- to over 61/-) are concerns for all & being analyzed & written about daily in newspapers, magazines & discussed on TV by economists, experts, columnists & journalists, but I am sorry to say all of them are saying the same things (points), which most people (public) know, the causes for the two as experts are saying : reduction in exports, increase in imports, huge oil import bill, import of gold, reduction in inflow of foreign capital, US economic recovery, etc.

The RBI has warned in its “Financial Stability Report” recently, that macro-economic risks Indian economy facing, is on the increase & a high CAD is a worrying sign for an economy that is slowing down.

Many people are advising that to overcome CAD & Rupee problems, the RBI should issue foreign currency bonds & give them to oil Cos to use them in place of dollars to buy oil, but they forget that falling rupee may render them to “junk status” by rating agencies (already India’s rating faced “junk status threat” 4 months back).

But real reasons for Indian economic fall are:-

India has frittered away all its money in absolutely unproductive & corrupt Panchayti Raj schemes & MANREGA schemes (both Panchayti Raj & MANREGA have how badly failed & how big loots happened, numerous reports have already revealed & TV programs exhibited), rather than investing in Infra, Railways, Roads, Airports, Agriculture & Industry, these things are tangible & can be seen, also hugely labour intensive, therefore give huge employment to all, mainly to rural people (over 80% of employment generated for them, also permanent employment) & great thing is that these things build the country. And also pulls in foreign investments. (That is what, not coming today & India sliding)

We have utterly failed in this.

I will not blame two UPA Govts for this, even if Indian economy in such a dire state, as this writing is not political or to criticize, but to analyze & clear the dusts economists & experts are failing to see though.

FIN; CRISIS & A New Concept: “NATION’S SPENDING CAPACITY INDEX”

2011-08-26T17:48:00.000-07:00

FINANCIAL CRISIS, A New Concept: “NATION’S SPENDING CAPACITY INDEX”

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I have analyzed financial crises of one country after another: USA, Eurozone Nations. China (also having high trouble of overheating economy, inflationary pressure, as there has been excess forex buildup resulting into & contributing to crises for other nations’ economies), also India is under impending financial trouble due to excessive money printing by Indian Central Bank for funding populist Govt Schemes, I have come to develop a New Concept, unthought-of so far, the concept as I have named “Nation’s Spending Capacity Index” (NSCI).

It has been imperative to create “Nations Spending Capacity Index” (NSCI) for each country i.e. for all countries, be it poor or rich, which will be an index or a pointer to, how much is a nation’s capacity to spend i.e. the capacity of a given Govt to spend in a given economic scenario!

That is, how much a Govt is capable to incur budget deficits or resort to debts, so that any financial crisis can be averted, as it (the panel) will caution & alert the concerned Govt through this index i.e. “NSCI”, its capacity for incurring deficits & debts, so that a Govt does not fall in an irretrievable pit & future financial crises can be averted.

In this way economists will also have an active & a real say on a Govt’s capacity to bear deficits & debts.

A panel of eminent economists shall be constituted by each country (mind, not the rating agencies, which fail to do this & which only rate, that too after a disaster occurs), that panel will monitor or issue standards & specific figures to the Govt & public, that a concerned Govt how much in a position to incur a certain amount of deficits or debts in a given scenario.

It will make every thing very transparent & scientific and also involve economists actively to advise on the dangerous situation the world is facing today, beforehand, Govt’s will be free to choose their advisory economists for the panel.

I think this new path breaking concept of “NATION’S SPENDING CAPACITY INDEX” (NSCI) will dramatically change risk factors of a country that it may face.

(Note: I write my theories & concepts in short as I am a banker & have little time to write in a book like or research file like form, but I do feel these theories & concepts must be circulated for the good of the world & people, anyone is free to elaborate or write on them)

Subhro Das

Conceptualized 25/8/11, Written 26/8/11

THEORY: DEPRESSION WAITS AFTER INFLATION

2011-08-05T05:13:00.001-07:00

THEORY: DEPRESSION WAITS AFTER INFLATION

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In high inflation, there is excess money supply by the governments, governments go on money printing spree or resort to huge debts, either from domestic market by various means & instruments or from abroad, this leads to price rise galloping over 10% per annum and there is a high devaluation of money, that is “inflation” is almost 10% or more, but queerly (please mind it very carefully) there is no jobloss, rather money is in the pockets of all, some making huge, some making daily wages only, so apparently a very happy situation, I termed it “Thin Ice Platform Syndrome”.

But what actually happens in this situation is, one’s money & savings are depleted by two effects, one “price rise” gobbles up one’s pocket money & the other, inflation eats into one’s savings, the rich get richer & the poor get poorer.

There is a phenomenon of high production by companies & businesses, in this situation to cash in price rise & raw money in the pockets of the people, so there is a BOOM at every corner: jobs, shares, profits.

A charged atmosphere.

It goes so long as one sector (any one) of the economy tilts a bit, that is, products or services of a sector have no takers or a little lesser takers, may be due to price hike, over production, depletion of money of people of a certain section or a replacement of the product has come. As soon as the sector tilts, job crash happens, price falls(due to above mentioned reasons) so also the profit falls of that sector, production slows, businesses of that sector go out of business taking along with jobs of that sector too. This creates a whole effect on the economy “then & there” & to one after another sector, this creates more joblosses, more fall in wages, so also fall in demands of goods & services.

And The Depression begins.

“Thin Ice Platform Caves in”.

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In India tendency is highly this way, food prices are going berserk & if Govt goes to a little austerity, as now in huge spending spree, market will crash, a recession will begin,

That is the classic example of the phenomenon “a recession waits after a boom”, resulting into following things: jobloss, low production, low offtake of loans, money held with the ultra rich & people depleted.

Subhro Das

(Conceptualized 25/08/10 Written/Blogged 05/08/11)

In this regard I wrote following analysis two months back (in June’11), also posted it in the net :-

DANGER:RUNNING ECONOMY BY “MONEY PRINTING”

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India Govt is running its economy by printing money, it’s a very dangerous trend, as HT Reported that RBI to print (already started the job) 18 THOUSANDS TONs of notes, also cautioned it is a very very large amount by any standard, be that US Dollar, EU Euro or Chinese Yuan.

Infusion of such huge amounts in the economy will be very disastrous, the inflation, the price rise, especially the FOOD PRICE RISE will break every body’s back & send the economy in swirl, the Govt is forcing the RBI to be on this money printing spree just to squander away the money in HIGHLY POPULIST but UNPRODUCTIVE programmes, if this POLICY brings this country to its knees, then this “Sonia Congress UPA Govt” will be fully responsible. Only stopgap measures of raising INTEREST RATES by RBI too frequently are no SOLUTION at all.

EU Nations are facing similar uncontrollable disasters, Greece, Portugal, Ireland, Spain, one nation after another in black hole, EU is pressing hard on them to reign dangerous budget deficits & implement VERY TOUGH Austerity Measures, even there are no takers of their Govt Debt Funds i.e. bonds of these countries (as Govt debt is so high), EU, IMF are arranging for their bail outs, sitting frequently. In USA a last minute Compromise with Opposition for a Debt form US Central bank saved USA, as “earlier debt ceiling” failed to pay the

maturing debts in next two days.

In India RBI (RBI Governor Dr. Subba Rao himself) also is also now saying “Legal Autonomy is Imperative for RBI, backed by a legally monitoring committee”.

Is India will get such back up as EU nations or go Mexico & Zimbabwe way, if

India

remains this reckless, who will provide us back up, as Govt now can now print any amount of money, even in normal circumstances as now, as there is no “Debt Ceiling” like in US ?

Now, about China, IB Apr’10,

China

’s Overheating: consumer prices rising, giving the massive money supply, danger is, that inflation may go out of hand.

Chinese Govt admitted, inflation posed a threat to social stability (Please mind the sentence). Govt has taken measures like raise reserve, check on money supply, control on lending, increase down payment for loans(margin money), lending to endpoint(no direct money to borrowers, but input suppliers & builders).

Subhro Das

(Some additions & alterations done on 05/08/11, while reposting)

FINANCIAL CRASH,A NATURAL DISASTER: MY THEORY

2011-07-26T08:39:00.001-07:00

FINANCIAL CRASH,A NATURAL DISASTER: MY THEORY

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Too high inflation & financial crashes are natural disasters.

Financial crash is such that none can escape it, only one can avoid it by getting out of its way or ducking it or bearing some losses(as minimum as possible), saving a little or saving oneself only.

So the more little you carry or the smaller you have, the handier things you have, the better you are. This is the Theory of Crash Survival. It is effective for also in financial crash & too high inflation survival.

In natural disasters like storm, flood, quake- Money (card too is your money, but there is always doubt about its paying capacity after a crash) is the best as light to carry.

But (Mind the bend starts here), in financial crash & inflation it is first thing that is hit, that is most affected, so it must be dumped first, surely as much as you can & change it into suitable materials, depending upon situation & one’s suitability.

As even if inflation slows down in three to four years or the financial crash is over in five to six years, one’s present value of money will never come back.

So MONEY is the last thing to hold (saving are money too don’t forget, investments are not, but very risk prone, so depends on judgment & analysis), in financial crisis & high inflation.

One can put forward an argument in

financial crisis, should one hold houses with prices were falling drastically two or three year ago, by not selling them off, turning them into money? Yes, one must hold, if one did not exit out before the crisis, as if one were God, knew the crisis coming, as turning them into money, in the crash will be calling for further trouble, like jumping into an unfathomable gorge in fear.

Subhro Das

Conceptualized 10/09/10, Written 25/07/11

(Mind it I have written various theories & concepts & I write in only a few words, don’t take books to elaborate, it is for your information)

RUNNING ECONOMY BY MONEY PRINTING

2011-07-05T21:04:00.001-07:00

RUNNING ECONOMY BY MONEY PRINTING

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India Govt is running its economy by printing money, it’s a very dangerous trend, as HT Reports that RBI to print (already started the job) 18 THOUSANDS TONs of notes, also cautioned it is a very very large amount by any standard, be that US Dollar, EU Euro or China Yuan.

Infusion of such huge amounts in the economy will be very disastrous, the inflation, the price rise, especially the FOOD PRICE RISE will break every body’s back & send the economy in swirl, the Govt is forcing the RBI to be on this money printing spree just to squander away the money in HIGHLY POPULIST but UNPRODUCTIVE programmes, if this POLICY brings this country to its knees, then this SONIA Congress Govt will be fully responsible. Only stopgap measures of raising INTEREST RATES by RBI too frequently are no SOLUTION at all.

EU Nations are facing similar uncontrollable disasters, Greece, Portugal, Ireland, Spain, one nation after another in black hole, EU is pressing hard on them to reign dangerous budget deficits & implement VERY TOUGH Austerity Measures, even no takers of their Govt Debt Funds i.e. bonds of these countries (as Govt debts too, is so high), EU, IMF are arranging for their bail outs, sitting frequently.

Is India will get such back up as EU nations or go Mexico & Zimbabwe way, if

India

remains this reckless who will provide us back up ?

Now, about China, IB Apr’10, China’s Overheating: consumer prices rising, giving the massive money supply, danger is, that inflation may go out of hand.

: Subhro Das

ALL ARE SICK !

2011-06-27T09:31:00.000-07:00

ALL ARE SICK !

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Nothing will happen in this Anti Corruption Drive, all (80-90%) are ill, that is, “morally corrupt”, be it poorest of the poor or the rich, all for money anyhow, no ethics but pride in earning money, be that illegally earned, even family members, father to mother to wife/husband to children boast, say with pride that “upri Kamai” i.e. Bribe earning of him/her is this much.

Society is jealous of one’s bribe income, not hates but is jealous. That is, society too wants there should be one in the family who will bring home a lot of bribe money, salary (honest) income is not given value, prestige is in bribe income. So all are sick & morally corrupt.

Why we are in this state of mind ?

Capitalism (I know communism & socialism have badly failed & capitalism saved China, East European nations from disasters), I think took away all the ideals in old times world had.

Now education is teaching skills for earning money only, all from youth to elderly are morally corrupt, family members are proud of illegal money, feel no shame in asking “how much upri(extra) you earn?”.

Then the cost of living, penchant for luxury life style, inflation, food price rise, population growth, rise in fundamentalism, increase faith in astrology, vastu (see TV, it’s now a mind boggling industry & we say we are modern!), people know (the poorest & the richest), money only is the survival.

So we are not living in a mentally corrupt system, but a naturally corrupt system (mind, I used NATURALLY CORRUPT SYSTEM), that is a system by the nature, a naturally evolved system, be it India, European nations, USA, China(see IMF chief in jail, world bank chief in controversy for spending millions in luxury to attend conventions to save environment).

Then ?

Nature actually understands far ahead of us, the techniques, technologies we are discovering today, the nature has discovered & used them far ago, be it aviation or physics, biology or anything, so seeing this unmanageable population growth, wide spread plundering of natural resources & limited natural resources, NATURE has taken this CORRUPTION ROUTE for survival, to save the wealth of the world & to save the world from extinction, to ensure further development of the world or this world will just be scattered away, spilled away, will fritter.

(I add that, this analysis may be right, but is highly controversial, I will like anybody to counter this theory & prove it wrong, I will welcome, if this concept is defeated. Also wherever I used “all”, I actually meant “most” i.e. 80%, 90%).

Subhro Das

Conceptulised 11/05/11, Written 27/06/11

FOOD PRICE: THE MOST SURPRISING

2011-06-07T18:59:00.000-07:00

FOOD PRICE: THE MOST SURPRISING

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When food prices are not to come down, as food prices are very crucial & very SURPRISING THING among all things as shooting food prices can bring down prices (can cause crash) of all other items, can make "the money" totally useless, as well as can give rise to uncontrollable inflation.

Food has to bought & daily, one cant defer it, can postpone any other item, but not food, so if food prices shoot up steeply other items will suffer & lose price, that is even if on the face, prices of other items may not seem to fall, but actually are falling as high inflation due to food prices is deceasing the value of money very fast.

Here is the point, as your money is losing value so the prices of other items are decreasing, even if they appear standstill.

Also as agriculture cost will rise due to rise of food prices as a causal effect so agrarian labour cost will sharply rise, so will cause reduction in employment & agriculture will turn into less labour intensive & dependent on mechanization also contract farming will replace traditional farming more & more.

One or two persons will manage a large tract of farm land along with this large agriculture farm fields are being taken on lease by one country in other far away countries, this is being done to make sure meeting the large future need of food, but will enhance food cost tremendously, IT IS HIGHLY IMPORTANT FOR TODAY’S ECONOMISTS TO ANALYZE THIS ASPECT.

As money goes to buy food, other items suffer & as other items suffer, so the other sectors (industries) suffer as it results into low take off industrial products, so blue colour employees as will be highly hit, so the white colour ones too will also be gradually hit, as high food price will slacken other sectors.

Printing money to counter the high food price & to create employment will add to higher food price & create unemployment, as a money printing economy will generate only a negative impact, unlike in usual recession & inflation, it requires very deep analysis, as it has a wide ramification & world is sitting on this, also food tracts are being converted into bio fuel plant farm lands & special economic zones.

So point is FOOD PRICE is a very surprising thing, as it has a queer effect.

Subhro Das

Conceptualized July10 to August10

Written 01/06/11

INFLATION & SAVINGS

2011-06-02T10:06:00.003-07:00

INFLATION & SAVINGS: SAVING FOR THE RAINY DAY

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There is a tendency in most people that when there is high inflation (i.e. over 7% per annum), that is, when prices of things are going up & one is finding to buy things (any, small to big getting costlier by the day), to hold money, i.e. tendency is not to buy or defer purchases & hold.

The tendency develops because of an inherent tendency to keep, envisaging a gloomy future, sensing a rainy day looming ahead, as high inflation that causes the fast price rise, generates a fear psychosis, which makes people more prone to keep money as deposits & to hold more for future safety.

But here they actually go absolutely wrong. That, theory is, which does not come to anybody’s mind, that when it is good time, inflation is moderate, one should save, not go for over spending, and set aside some money, more or less keeping in mind one’s future need, one’s plan & ambition.

But never overdo with savings (I have come across many middle class old persons over 60, keeping as fixed deposits more than Rs30, 40 lac,(Indian rupees), without a need, just anticipating a rainy day, they spent whole life i.e. up to 60 miserly & curtailing expenses & now still doing the same, is there a life after 60? You may die at 70 or 80, does it matter? Because you will not get younger, your abdomen will not support your tongue, your body will not match your thoughts, then why the money? Spend it & if you can’t, give away to the needy. BUT, DON’T HOARD.

In this nature everything will perish & decay; the human the most valuable thing created by the nature also does not live for ever only 70/80 years & after 60 begins to sag & the universe itself will one day perish, when The Nature itself does not hoard, then why should you?

2nd part of the theory is, spending when there is high inflation, that is in an inflationary economy one must increase one’s spending to gain maximum out of inflation or minimize the loss due to inflation, avoid erosion of value of money, it may appear a very bad idea & absurd to many, but is actually a truth.

That, in high inflation if you keep paper money (in the shape of cash, bank deposits, fixed deposits or bonds), you are actually amassing worthless papers,(I am not talking about stocks & equities as they are actually not money but materials I will explain why so, just now), so do away with your money in high inflation & spend or change them to materials: goods, metals, land, house & stocks, now you can follow why I categorized stocks as materials, as value of a stock lies in the value of an entity(the company), surely one has to be very prudent about picking up a suitable stock i.e. a good company & has to envisage future prospect of that entity & be very selective in this matter, it is like seeing the future prospect of a material.

But, main point, THE THEORY, is in high inflation one must do away with cash & cash forms & spend & take up material & material forms & at good times save reasonably.

Conceptualized: 01/01/11

Written: 02/06/11

FLOATING THEORY

2011-03-04T04:56:00.000-08:00

EQUITY/STOCK/FINANCE
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FLOATING THEORY

I have discovered this theory i.e. “floating theory” all on a sudden, while thinking over economy, recession, boom, rise & fall of stocks & MARKET CRASH, one evening this theory came to my mind, probably on 10/05/2010 & I jotted it down on 20/05/2010.

The Theory is, in nutshell: - Why recession comes at all? Answer is from Boom.

For a boom is created (or a boom time) due to increase in demand of certain commodities, such as for computerization, change of usage e.g. plastic in place of wood & bio products, mode of connectivity e.g. mobiles, infrastructure spending, government money pumping, loans etc etc, so has to recede, just like in a BLAST, an expansion then a vacuum, if you apply floating theory to it (this situation), as in stock market, you probably know when to abandon the boat/ship or to board.

Floating theory says the higher price is(e.g. stock), the lesser the buyers are(with reducing purchasing power), so if you exit a stock at 25 (supposing you bought at 15), the buyers you will find(number of buyersyour value of money i.e. value of 500 will be reduced to almost 15, that is to today’s value(i.e. 500 will be equal to 15), due to inflation, growth of economy, uncertainty factor & cost of things after 10/20 years.

2. There is always a blast behind a shock wave i.e. a shock wave always created by a blast, so there is always an event behind a BOOM and as a blast wave always comes & goes, so a boom must go, if it is an economic boom or boom in a certain sector, it must go & next cycle will come, but difficult to say when & in which sector in case of economy. Even a keen watcher may not predict perfectly but can foresee probability better.

3. Formula of Stocks:-
—2—4—3—2—3--.
-------a piece of paper floathe wind------.
(digits denote heights & lows).

As a float (a piece of paper in the wind) is very abrupt in its flight path, as shown in above graph, so grip it when as low, reasonably l
Now Buying: Buy, when it is reasonably low, no wait that lower it may go, actually it may dip further down, but don’t wait for future, see the present only.

Know, PAST is dead & FUTURE never comes (i.e. the future one thinks).

A reasonable gain is enough, you may lose too, but that will be a reasonable loss, a bearable loss.

Selling: 15/20(low,grip/hold)--(high,overlook)---------------------------------------------(low,buy)20/25.

Above is only an example, a methodology in general to explain the theory & formula.

Subhro Das
Araria
India
Written 20/05/2010

The Inadequacies of Modern Economic Theories

2010-11-13T05:48:00.000-08:00

The Inadequacies of Modern Economic Theories

1. In respect to the above I put forward my analyses of “classical & modern economic theories” as I have found most of them are grossly ineffective to deal with modern economic situation of the world.
It must be said modern economic theories are inadequate to explain present economic environment which some classical ones do somewhat successfully.

I will deal with both modern & classical theories in short.

I begin with the famed quote of Daniel Fusefeld : “A prosperous economy requires levels of spending high enough to employ the work force fully”.

Most economists from time of Adam Smith believed that capitalistic & market oriented economies can provide full employment.

The lower the wages the more workers will be employed.

If wages are flexible a competitive economy will maintain maximum employment.

Now coming to J.B. Say’s law : “Production of goods creates its own demand; it generates an income that is equal to the goods produced, so production process will automatically provide people with buying capacity”.

Are above theories & laws equally applicable in modern economy? Or some new concept is required to explain it?
As per Say’s law intt rate depends on demand of capital & supply of it. In a bad economy (in an economic down turn) as there is job loss & savings dwindle so intt rate will tend to go higher, but as loan offtake is lesser so intt will tend to go down. And in a growing economy as demand is more & more so there will be more & more investment for production so there will be more job creation, hence more savings will take place therefore intt rate will stabilize to a normalcy.

But in a super charged (heated) economy saving will vanish as people will go for more consumptions as now in China & a bit like in India which are charged due to huge money pumping.

So a normal economy is a 4 to 5% growth rate & a 3 to 4% inflation rate. It is the exact balance.

2. Keynes contradicted classical theories mainly on following points:-

He said savings depend on “national income” (NI), so to increase NI, infuse money in the system, when economy in depressive/shrinking mode. It is only partially true as he did not envisage paradox of modern economy. He missed on some major counts, infusion of money will increase consumptions in all sectors he assumed, from gadgets to foods to clothing to housing to education, but my point is if one sector takes away the most?

He called for pumping money when there is a depression, he talked of domestic production & domestic demand but he had no clue if depression was caused by free trade, inflicted by other economies.

He advocated for an artificial increase of national income which would create demand & people would get back the employment, but in the present modern economic scenario would it happen? The capital infusion will go in vain.
Theory of Insulation answers this dilemma.

Keynes although criticized wartime infusion of capital, but the truth is US mostly benefited from 2nd world war & that advantage ran up to 1980.

He misconceptuatized trade unions & modern labour market as trade unions can’t now prevent job loss & control wage market.
Modern trade unions are not at all Keynesian models.

The most influential of his theories is “money supply” & creation of “aggregate demand” & thereby enhance employment; here he collided with classical economists head on. But his money pumping theory is totally clueless in today’s economy.

Actually problem is that, not much economic theories have evolved in economics as in physics or other sciences, so economists are bound by so called modern economics theories of 1930s to 1950s, many of them may have bagged Nobel prizes it may sound harsh, but is true.
Yes, some great modern times’ economists (if they are also taken as economists) like Nash & Borlaug are mathematician & agronomist, I am sorry to point out.

3. Milton Friedman’s Hypothesis: This is very interesting in respect of cost of education, as he assumed “transitory consumption components” are unrelated to “permanent consumption components”.
This is absolutely unfit in modern financial system; please refer to “Financial system & Cost of education”.

4. R. G. Lipsey’s “theory of equilibrium of income” is not a sufficient tool to solve paradox of modern economy, also Keynes’s “consumption function & investment function” the most powerful components as per him fail miserably to explain world economic scenario of today.

Liquidity Trap: When there is an excess liquidity in the system & as there few are takers of funds as demand (that is because of lesser spending by people) is down as in a jobless economy, govt spending has no effect to revamp the market.
This creates the “crowding effect”, govt borrowings may raise intt rate but as the govt spends the borrowed money it crowds out public spending.
This happens when public is jobless, but a large liquidity in the market due to govt spending, money goes to a few people & they make huge money.
But Keynes & his followers attach main importance to “fiscal policy” & put it superior to “monetary policy” to the point “where money does not matter”, the Keynesian model of employment is to raise output (production) by using fiscal policy, which is according to his theory; it is possible to eliminate deflation & achieve employment by infusing money.

This is no more a viable option in modern economic system unless there is a “market of demand” already existing & that is exploited, be that within or out of national boundary. For example, as China is doing today.
To quote P.H.Thurow “The final function of money is its purchasing power & money tends to live a life of its own, which is difficult to control. These cause a disturbing fluctuations in value, which can at one hand stimulate activity & on the other can disrupt activity & seriously damage achievement of economic objectives. Is this not happening today?

As per Keynes money supply by govt in a depression economy can expand output & employment, but P.A.Samuelson & Milton Friedman differed from this Keynesian view, as in a situation they called “stagflation” both stagnation & inflation can occur at the same time, i.e. unemployment & inflation can coexist.

5. Modern economists theorized increase in price level, due to inflation results in more profit & more production, so more employment, so inflation eventually becomes productive not counterproductive.
Yes, production & employment increase due to money supply, causative inflation & price rise, but money goes to only to a handful of people, 90% people lose “income”, mind it I am saying “income” not employment, as rise in price is fall of value of money, so the income of the mass does not rise, rather decreases as wages fall, that is per capita wage due to initial job losses caused by depression & wage cuts in a depression economy with inflationary force caused by excessive govt money supply, so the mass become actually poorer, even though they may have got some employment.

This was completely overlooked by Keynes & modern economists did not come out with suitable theories to explain modern economy, unlike in other sciences, where daily new grounds are broken.

Keynes has gone on records, strongly advocating that only way to fight depression is deficit financing; only way to raise “aggregate effective demand’ is to incur deficit & cover the deficit by printing “paper money”.
How wrong! If not wrong how inadequate this is in modern economy if we look at the world scenario.
If we use “cobweb syndrome”, that is fluctuations of prices & quantities overtime as generally seen in agriculture produces cyclically, to factory products, a depression economy becomes very interesting, that is if demand & price of factory products are low in previous year, then production will be less in the current year, so in the depression, the domestic production will fall in a cobweb & be caught in a bind in today’s economy.

Even to solve the basic dilemma of oligopoly “the game theory” of John Nash had to be employed & today’s modern world economy is developing a highly oligopolistic trend, a kind not seen before & China is creating this oligopoly as a leader.

Advancing Euler’s theorem, Samuelson synthesized “In the long run cost of inputs & outputs will settle towards a level, no surplus or profit will be there for the entrepreneur excepting his own wages for his labour & intt on his capital invested, so profit will be there only if there is a monopoly”.
But this is absolutely wrong theoretically, may be true hypothetically in an imaginary, perfectly built-up model.
There can be no absolute monopoly i.e. only one is producing a particular product & everyone is buying from him, in that situation production will be equal to the demand or less than the demand i.e. supply will always be lesser than the demand to sellout the whole production, to avoid stagnation of goods produced & to maximize profit.
So Samuelson is wrong as talks of a hypothetical situation. See:-

Suppose if China only is making cheapest items & others are out as China is selling at the cheapest rates, so it will have a monopoly & really it is setting a kind of monopolistic trend, in trade of many goods, but this monopoly cant give right to China to raise prices, as although others are seemingly out, but will bounce back at the slightest opportunity & at that time China will be in great trouble to lower prices as input costs including the labour cost have gone up meanwhile with rise of product prices, so China will be immediately out of business.

6. Heckscher-Ohlin Theory: Recardian theory predicts except for transport cost free trade would lead to equalization of commodity prices, later Heckscher & Ohlin added to it “endowment factor to international trade”, as per them international trade takes place due to differences in factor endowment (resource bases such as raw material, labour, capital, government policies etc). They argued a labour abundant country would always export labour intensive goods, similarly a capital abundant country would export capital intensive goods, so logically every country would import commodities which are produced with scarce factors. From this theory Paul Samuelson & K. Lancaster developed “the factor price equalization theory”. The theory states that “free trade of goods & services” across national borders would not only equalize commodity prices, but factor prices as well, although inputs are not traded, as the trade in commodities actually is trade of factors.
Here they have again gone wrong, not only wrong, but could not see through the haze they themselves created, as actually a created product when reaches its destinations (station to station) is not the factors themselves, but it is entirely something else, it may have been produced out of factors be that labour, materials, processes, packaging, transportations, like everything is made of electrons, protons & neutrons (except normal hydrogen i.e. made of only electron & proton) but final things become very different from one another, like evolution of living beings as they become very different species over time in different environs.
Take a simple example, if one only transports an object in space (by a rocket on charges) the object in space is no more a combination of original object, its parts & transportation to space, but entirely a different thing. So Samuelson & Lancaster’s theorizing that free trade will lead to factor price equalization is very misleading, neither it has happened ever, nor it seems to happen any day, yes in an imaginary situation it is possible.

Now coming to The Stolper-Samuelson theory formulated on the basis Heckscher-Ohlin theory, it made a case to tax scarce factors, as imports happen in scarce factors, so impose high tax & due to this taxation domestic produces will get higher prices, as imports will be costlier, so more domestic production will take place, as it will be lucrative to produce due to price rise & this will engage more employees.

Here they have gone very shortsighted & much narrowed, as they have harped on old protectionism method, totally failed to deliver a new concept, not to talk of a theory.
Then what is the difference between the protectionists & them?

“Theory of Insulation” does not talk of protectionism; it puts every economic activity in a new perspective, in a new dimension, a pure theory, perfect, derived from nature & totally practicable & it has to be practiced some day, as no other way out.
It covers whole activities, whole life related activities & beyond.

7. Economics of Protection
--------------------------------.
R.G.Lipsey: As some trade is better than no trade, so a normal proposition is “a bit more trade is better than the current trade”.
How wrong he is, actually misleading, as his postulation ends up to “absolute free trade” with absolutely no restrictions, but as per theory of insulation this is against nature, so will cause devastation.

The Case for Free Trade: As advocated by modern economists “specialization & free trade lead to an efficient allocation of world’s resources, they enable all nations to have more of all the goods than in absence of free trade”. It is based on Recardian principle of “comparative advantage”. Opposite of free trade has been termed as protectionism, as in Stolper- Samuelson theory, taxing the scarce factors (i.e. tax imports of scarce factors) is the only theoretical solution of the crisis, how ludicrous, at one hand modern economists talk of free trade, at other talk of restrictions, actually they could not grasp the matter.

Here we can see a very funny thing, Norman.E. Borlaug who halted India’s grueling famines by bringing in green revolution in India, by increase of food production manifolds by introducing high yielding hybrid dwarf varieties & by extensive farm mechanization (Borlaug is revered highly in India), but Mr. Amartya Sen theorized that those famines were artificial, caused due to hoardings of food grains, not due to low productions & he got Nobel for this research.

Modern economists always freely deride Abraham Lincoln’s famed quote “I do not know much about the trade, but I know this much: when we buy manufactured goods abroad, we get the goods & the foreigners get the money. When we buy manufactured goods at home, we get both the goods & the money”. Economists say “only first eight words of Lincoln are correct, i.e. I do not know---”.
But modern economists are now in a situation to be derided, by the present economic crisis, as they have gone belly up with limitations of their theories.
Most of the modern economists are data crunchers & data interpreters & can’t think beyond protectionism & free trade.

Referring to the analysis of economist D. Fusefeld, it clearly expresses the inability of modern economic theories to explain modern economic situation.
The view of great American economist Henry Clay is interesting in this regard; it comes very near to finding the law i.e. “the theory of insulation”, but gets entangled in protectionism veil & falls short.

Almost all economists have advocated free trade & explained protectionism as only political, but theory of insulation does not talk of protectionism, it has nothing to do with protectionism, it gives an economical, theoretical, scientific & social explanation for viability of survival, trade with social context.

Subhro Das
Araria, India
Conceptualized: 2002 to 2006
Written: 15/09/2010

"THEORY OF INSULATION" :REVISED.

2010-03-28T19:56:00.003-07:00

Theory of insulation

Preface

-------------.

When globalization was a hot matter & everybody was gunning for it, mainly from developed countries & there were discussions all over on how important were GATT, WTO,

Uruguay

Rounds & a few persons & groups of poor & developing nations were opposing it as they thought it was a clever ploy of developed nations to exploit their markets.

Later it was found globalization more adversely had hit the developed nations. And for the time being developing nations are benefiting (as from making & exporting cheap goods & outsourcing) as they (poor & developing nations) have enormous and endless supply of cheap labour, owing to their huge population, huge percentage of the poor and ample availability of child labourers.

One can’t curb it (i.e. the child labour), whatever law or regulations one can prescribe or try to enforce.

For a sideshow (window dressing) in some factories you will not find them, but where cheap goods & mass productions are going on in smaller, scattered factories and at subsidiaries of big companies at far away places (a smart little technique to obviate the law, but very effective one, can call stealth outsourcing) and in vast unorganized sectors: industry to agriculture to sundry odd jobs, child labour is very handy & the main stay.

Add with that huge young labour force, skilled & unskilled both, but mainly unskilled but very hardy workers, mostly illiterates or half literates, but very fit for blue colour jobs, they throng in very large numbers from countryside to cities ( if you want a proof or want to see by your own eyes? visit to UP, Jharkhand, Bihar, MP provinces of India & western & northern provinces of China).

Poor & developing nations have ample quantity of both skilled & unskilled labourers, but mostly unskilled YOUNG labourers and an “unending supply” of them.

But ultimately with the fall of economies of developed nations they also will reel down and with a more catastrophic effect, as, if these labour force undergo job losses & are driven out of work, with no assets & means to fall back upon, one should not dwell in dreams, that they will happily migrate back to the countryside, where they originally belonged and get back the sordid & low income occupations (mostly agriculture) they had left for good.

But now China’s strategy is (also of some east Asian nations) supply cheap items (I am consciously “not” using the term cheap goods) to the poorer nations, exploit the markets of poor & developing nations, as these poor now have enough raw cash to buy cheap items & developed nations are in crisis & cheap items hardly have a good market there & exporting there is also hazardous (of late China is taking measures to by investing for building bases in vantage & frontline countries to obviate this problem), so better to cash on these poor nations & their people.

This is a vast matter, it demands separate analysis, so I am leaving it now.

Now, I begin on the theory.

Law of nature

------------------------.

“Theory of insulation” says every region, estate, geographical area; nation should have an insulated, (not isolated) existence of its own, a separate identity, a separate social culture, a separate lifestyle, a separate work culture, above all a separate financial system. It is a law of nature.

Advocates of globalization were for openness, open doors, for free unhindered trade & flow of money.
Not only that, they wanted the world to bring into one financial system(globalization) by breaking of all financial barriers, so that open & unrestricted trade could be done, and also wanted free flow of money in & out, with or without a base (an office, or an installation or a collaboration). The bases too are now shifting from developed countries.

The idea was advanced by rich & developed nations, their economists & their corporates.

Here, I want to remind people of GATT, WTO, Uruguay rounds (search in internet, you will find what not they cried for, even to the extent of “principle of most favoured nation status for all” & also see, all circulations of that times “1994 to 2006”, all carried news, views regarding the above & how dislodging of trade barriers will ensure a provertyless, prosperous world.

Now, I break into my thesis.

I wrote this in 2004 & sent copies to Cambridge & Illinois economics depts. by Regd posts, but they gave no heed to it, as all economists & professors at that time were too engrossed in globalization, so could not perceive its implication & overlooked the fact. Also at that time saying anything against globalization or proposing even a little contradictory view or suggesting some precautions by discerning persons (the economists) carried risks of degrading oneself (the economist who expressed a contradictory view).

INSULATION is a nature’s law & system.

Everything survives because there is a natural insulation, insulation due to geography, distance, customs, habit, habitat, & immunity.

For example, animals, plants survive because there is insulation between groups, colonies, species, races, but NOT isolation, as isolation is being alone, being cut off, but insulation is being part of the system with protected identities.

Anything, for example, take the sun, it is the origin of life on earth and life survives as the sun is there, but we are insulated from the sun (not isolated) by distance & earth’s atmosphere, so we can live.

Globalize the sun & we evaporate.

So with animal or plant habitats, put them together they will hardly survive. But animal & plant groups are not isolated from each other, but there is insulation between the groups. All are dependent on one another for survival, all affect each other but the effect is beneficial & shapes them to be better, a healthy & protected competition, and a competition to evolve for the better.

Darwin envisaged this law of nature & conceptualized “the theory of evolution” but did not talk about “the theory of insulation” or the necessity of insulation. But I found how must is the “insulation” by my long observation of nature, not only that, I happened to apply it to “the global financial system”. Soon it began to answer many financial puzzles the world financial system is facing now.

Human beings

So are human beings, be it national or cultural or any type of colonies of human beings, they are there, because there is insulation, not isolation, as isolation will cause elimination.

Example: small colonies of Andaman’s, east pacific islands are dwindling as they are isolated.

But, other human races are surviving & flourishing, as they are not isolated but insulated, there is an exchange of everything (not only trade) between them but there is a distinction, but in remote isolated islands, there is hardly any exchange so elimination is looming.

Put all human races together, mix them, sure they will degenerate.

From my observation of nature “theory of insulation” has come and as I applied it to “financial system” I got astonishing result.

Financial systems

Financial systems are also unique to every nation, every culture, every colony, every group, even every individual and a product of nature. They (the financial systems) have evolved over thousands of years. They prospered & existed as they had their own resilience. There was exchange of trade between them from primitive to modern ways but always with insulation, so they survived and are still surviving.

Take any human civilization from mankind’s history, they survived as they had their own resilience, an insulation, a protected identity, also they had trade, exchanges, interactions, may be very primitive, may be very limited.

For example take Maya, Indus valley, Byzantine, Mesopotamian, Egyptian, Roman or Inca civilizations, all these great civilizations survived as long as they had insulation, protected identities, but also trade, exchanges & interactions, as soon as the balance went off (got too confined or invaded & exposed), they fell down.

So with our modern financial system, we are not an exception to the rule. We are very much part of this nature’s governing law. Try to flout it, try to break it, we face the devastating consequences.

It is a mathematical fact, that without insulation nothing can exist, also in “isolation” nothing can survive. I have named this “theory of insulation”.

Advocates of globalization had no idea of this theory or natural concept.

Even Joseph’s. Stiglitz who has written & analyzed so much about this subject of globalization, capitalism & finance could not comprehend it, so ended up without a conclusion or solution.

Then

--------.

if this theory is true, then all financial systems must have some insulation for their survival, as global financial system is dependent upon one another (all financial systems, may be located at different geographical areas within a national boundary or outside), so if insulation is done away with, then one fin.sys. After the other will collapse, as that happens in “domino effect”.

And now we know how to remedy the “domino effect”.

Those who say, free the markets, bring down all the barriers,
so that all will prosper & a great global fin.sys. will evolve and that will take care of all, are unaware of this “theory”.
They are not to be blamed for this as they could not envisage this “nature’s law”.

Therefore, it is imperative every market (financial system) should have its own identity, an insulation, even being a part of the global financial system. Let all survive for the sake of own survival. If we break this law, the nature will teach us a lesson for this violation in a very brutal way.

A small example, though lots have been written about this and many books also have been written on this, I actually mean “the

U.S.

financial crisis & its global fallout”.

It is due to the breaking of institutional financial barriers, in short: sub prime home loans- securitizing them- issue of CDO against them- sell them (buyers hoped high returns as home price will boom, even if not, CDO cant lose value)- issue credit default swaps the CDS), sell the CDS- then trade futures against these instruments, a dangerous amalgamation, a dangerous mix up.

So “theory of insulation” is very vital, so far unrevealed and demands a lot of research & debate as it may explain many financial riddle of modern financial system. I welcome & invite any further debate, research and additions.

(This is a paper, so I would not stretch it further as in a book, but I believe I have explained my idea.)

Subhro Das
Araria (

India

)

05/05/10

Notes:

1. Theory of insulation covers all gamut of economic activities, is all pervasive, everything on earth, even beyond earth.

2. To come to this “theory” it took 6 years of research & a long observation of nature.

(My theories & concepts

I write my theories & concepts in short as I am a banker & have little time to write in a book like or research file like form, but I do feel these theories & concepts must be circulated for the good of the world & people, anyone is free to elaborate or write on them or point out if any flaw or deficiency in the same)

Subhro Das, India

FINANCIAL SYSTEM & COST OF EDUCATION

2010-03-22T09:25:00.000-07:00

Financial System & Cost of Education

----------------------------------------------.

As I studied global financial crisis and tried to delve deep into it to find the causes for the crisis and also its effects I observed some financial relations unseen so far. It is what, a “fallout” of a situation that is going to have its impact on social, family and individuals’ financial health of individuals & countries.

I happened to observe something which was so far ignored or overlooked or was not touched upon.

My analysis took the matter to a completely unexplored area so far, “the relation between financial system & cost of education”.

Even great economists by “miss” perhaps, could not catch it or may be it escaped all eyes as it remained in disguise of a social or holy cause, so was hard to perceive, but when one analyses it on hard rocks of fact, it gives in.

Here may I point that Joseph.e.Stiglitz & others got shortsighted by dwelling too much on

U.S.

financial crisis (not their fault, situation led them to) and failed to perceive it.

As I studied educational systems, educational institutions, primary to higher to vocational levels and most importantly “the cost of education” and “connection of financial system with education”, more precisely “cost of education” for two years, I came up with some absolutely new revelations & analysis. The research or the analysis was not envisaged or done by anyone before.

That there could be a connection between financial system & cost of education is quite a new concept, but the deeper the analysis & the research were done, the more it was found, it is not only true but a fact and a mathematical & theoretical TRUTH.

-----------------------------------------------------------------------------------------------------.

I start the analysis at point blank range.

-----------------------------------------------------.

Why even after job market is crashing, the educational institutions are doing well, why are they unaffected by the crisis? Are they above all? Above the financial system?

Rationally everything is governed by the “demand supply rule” but, it appears educational system does not come under this rule, and then if it is governed by the universal rule, why cost of education has not crashed or at least come down or mellowed? Surprisingly has gone up.

But, deeper research reveals that the relation is there, but that is beyond ordinary perception, perceiving this requires a unique analytical approach.

Once you reach there you begin to see a lot of things, can analyze the present financial & social situations & coming (future) financial system & economy and the effect it is going to have on the economy & most importantly the social damage this will ultimately do.

Contemplating on this I have struck a unique analysis. I summaries this below:-

1. High cost of education (be it any) Rs20lac or more, (for example, in Indian context & in Indian rupees):- cost of education is (on other words extortion by educational institutions) very high even in a very bad job market. And surprisingly the cost of education is so high from preliminary level to higher level to vocational level. That is, too high at every level.

All the institutions charge too high and they have so many avenues to charge, so many ways to milk the students & the families.

-------------------------------------------------------------------------------.

This high cost of education is completely “irrational” compared to the job market (the availability of jobs or in other words non availability of the same) & affordability to meet the high cost of education by families & students.

As most families & students grope frantically to finance the education and end up broke (who bother about broke, bankrupt families? all scratch their heads on failed corporates.

But must one know broke families are far more devastating, damaging for a nation than the broke corporates. Broke corporates cause financial crisis, job loss, share price fall, but, broke families deplete the economy of a nation & break the backbone of a country & impoverish a nation. It is a very dire consequence.

2. Cost of education is so high but, there is no job security. Although all vocational institutes claim 100% placements, but people are actually losing jobs.

In developed countries situation is very bad.

Job market is directly related to educational institutes, (any, vocational or the other). But it (cost of education) is totally defying demand supply rule.

If job market is down so the cost of education should be down, but really is not.

As if educational institutions are heavenly bodies, are floating in the space, not earthly things, so what, if global financial system crashes! They will not come down (with their heavenly costs) you have to reach out to them. Cough up what you have.

3. To meet the cost of education, savings of families are vanishing. Now the situation is so, that families plan (save) from the day child is born or even before the child is born and begin to arrange money for the unborn child’s education.

It causes strain on their finance, as income is always limited of a family so will resort to squeeze the spending, get ready more for future expenses & reduce present expenses.

These reductions & squeezes are not enough to meet the educational costs, so they have to unlock their savings (being a banker myself, I come across so many cases).

But alas! savings alone can not meet this high cost of education (like offering bunch of grass to the elephant for food) so only recourse now left is to “borrow” & please mind it, this “borrowing” is not the first borrowing of the family, but borrowing by an already indebted family, it is a borrowing by a family who already has availed of many loans, so the repercussion of this on the economy is huge.

4. As the high cost of education is generally met by savings & debts, so families borrow huge sums for education of their children and become ultimately debt ridden and fall in debt trap.

As they have already squeezed their personal expenses, so either they have to cut many more expenses or take more loans & divert debts (the loans taken for one purpose go to meet the other urgent obligations and the education cost), this will, naturally, create a catastrophic effect on the economy.

5. Results of above situation lead to household financial crisis.

Families take recourse to austerity; they spend less on all items & goods, so viability of the economy is adversely affected.

If families start to squeeze expenses, some families even go to the limit of starving themselves on many items; one can envisage that such an economy is not a healthy economy, rather a sick economy, an economy with shrinking growth, having a negative GROWTH variance.

6. Less buying power of families due to this situation causes a huge effect on the economy & results into a depleted economy. An economy with “less buying power of people” is an impoverished economy. It is a SIGN of a nation becoming poorer.

A nation with less buying power is a poor nation, though it sounds harsh, but is an undeniable fact, an absolute truth.

To counter it you (the govt) pump huge money into system, run a dangerous deficit financing, following a Keynesian policy, but you forget Keynes’ theory succeeded as there was 2^nd world war & America reaped huge benefit out it. Industries, mainly arms industry worked overtime, but remember in normal circumstances if you do this you become doomed as

Greece

or mildly saying now as the U.S.

7. Less spending spree (less extravagancy), please don’t mix it with less buying power, affects the economic boom.

It is a very dangerous syndrome (mind it), because it prevents buoyancy of an economy & flourishing of an economy. An economy with such a syndrome is obviously heading for the doom. Just as a healthy body has an ample RBC count in the blood & with a lesser count one is anemic so for a vibrant economy, vibrant spending by people (not by handful ones, they neither build the economy nor shoulder the economy, only they are at the fringe, ride on the given infrastructure of the economy) is required. And if people are unable to do this then economy is bound to become anemic.

8. Obvious results of above are slowing down of the economy. Job creation gets on a hold and ultimately results into job losses. And a financial crunch begins.

This financial crunch leads to loan defaults, and loans defaults are in every area of the debt market, be it credit card loan, consumer loan, home loan, education loan.

9. This results into a total financial crisis, a total economic slow down. Total economy comes under this grip. A vicious cycle, which affects all gamut of financial activities & businesses.

10. Ultimately financial institutions are affected as loan defaults happen & off take of loans is slowed, putting financial institutions in trouble.

------------------------------------------------------------------------------.

This analytical approach about the relation between cost of education & financial system has not been pointed out before.

Then, why educational institutions are still getting long queues?
Because the lesser jobs are the more is the competition, so longer is the queue. As in hot summer days in African terrains animals vie for food & water & gatecrash.

Example of this, is that if one knows only a few will get jobs then all will naturally strive more. This is a law of nature.

More will try for the best institutes so one can be a cut above others. All most all educational institutions claim to be great & all the aspirants can’t make it to the elite ones so all institutes, be that of lesser reputations will get aspirants.
Therefore educational institutions are not affected by the slow down immediately, but “this remaining unaffected” is for the time being only.

The effect of failing economy, the job losses will catch them gradually, as they will be in the mood (rather in the mode) of sucking money but the depleted, disabled families, any more could not cough up that.

This syndrome will gradually eat up entire society from inside.

Now, we have seen a financial crisis but, then we are going to see a collapse of society. a depleted society, a social rot.

Subhro Das
Araria (India)

(This research took me two years. and I took three months to summarize this analysis. now I publish it and make it public.

S.K.Das.

Written 22/03/2010

(My theories & concepts

Subhro Das, India

CURE TO EXTORTIONS BY EDUCATIONAL INSTITUTIONS

2010-03-15T08:04:00.000-07:00

CURE TO EXTORTIONS BY EDUCATIONAL INSTITUTIONS

With reference to my analytical paper dated 25 Feb2010 where I explored a new angle that is “Extortion By Educational Institutions”, now I hereby I recommend some remedies to the problem as talking about a problem goes in vain if no solution is offered or at least hinted. It is not necessary all cues suggested here are absolutely correct, many changes or amendments may be advised or many new ideas may come forth & it is welcome.

1. Eshtablishment of some community schools for unto 10th standard will reduce Extortion to a great extent. Some community schools (not religious but social community) are doing great work, but society has remained inactive largely in this regard. High net worth people can easily come forward & their investments will return back to them with dividends as school business always generates high returns & there is not botheration to take as an appointed committee by them would oversee the affairs. In the process society will have educational institutions which will provide education at reasonable costs & those which are leaching will be deprived of the freedom to extort & put up with a competition. Some brake on their monopolistic trade will come into existence & their free run to exploit will be curbed.

2. Takeover of Pvt. Schools by Govt is not a solution, but Govt can place them under public watch committees headed by DM, SDO, BDO, CO, or Corporation or Municipal Heads, or public watch committees may be appointed by them (the Govt Authorities) as mentioned above, they will report to court of law or notary public or above Govt Authorities if some institutions are practicing irregularities (watch committees will not control or govern the institutions, only be reporting bodies, will have no direct say in the affairs of the institutions) .
Most urgent in this regard is formulation of a stringent Regulation Policy by Govt to regulate Extortionist Institutions. In the absence of a stringent Regulation Policy the extortion by educational institutions is free of any reins.

3. It is solely profiteering, bloodsucking trade in the garb of social service, a business based on sheer exploitative motive. Above all it is an emotional exploitation by Educational Institutions as parents want to give good Education (good stands for costly) to their wards and children want it too or they will blame parents, in future for depriving them of good education. From small towns to cities, from primary level to higher to vocational level the story is same, game of money making, leaving the society depleted & bleeding the families. Most pathetic side of it is 90% of families/parents fall under this extortion & get depleted, become financially exhausted. Only the other 10% well-off families can manage their finance well after meeting their children’s educational expenses.

4. Entry Exams for all jobs, (not based on reputation of Ed. Insts.) like IPS, IAS, Bank Officers (POs), I. Tax (In Indian context) or other Govt. jobs where merit based exams select best guys.
No campus or off campus recruitment based on negotiations, it is origin of all sins, it must be not only banned but also made punishable offence, except at senior, experienced based levels. If all best guys of the country can get the best of jobs (prestigious, merit & skilled based jobs through competitive entry exams then why the best guys from best institutions, for example MBAs are so frightened to face selection exams? Why big corporates pick (rather bait) at their whim a few guys & brag, see, we paid for him/her 16 millions, it becomes a news, runs on newspapers, TV for days, we cant even perceive the obnoxious side of it, talk proudly about it and most socking is that the concerned institute immediately raise its fee steeply, just watch the vibrations go what far or the vicious circle, one or two students of an institution get millions just by pick & choose method and thousands suffer for it, not only thousands but whole country, whole lot of upcoming meritorious boys & girls, who will have to opt for a motor mechanic job or a cycle repair job or a call centre or some outsourcing job, as they cant afford & we are just oblivious of these meritorious millions who are doomed because of this draconian educational system & hilarious about one or two guys who have been bought by wads of money. It is absolutely like a lottery winning mentality, when we hear somebody in neighborhood has got a big ticket (very common, always happen) we also start gaming, without realizing how bleak is the chance of winning a lottery. And do you know why the companies, corporates do it! For manifestation (Advertisement), look here, how big & worthy we are as we can pay this whooping sum for this fresher raw guy.
How dangerous it is now you must have analyzed. So pick system must be banned, if any corporate want the very best MBA guy, arrange a toughest entry exam, put the guy through rigorous interview & group discussions, mark them all & take the one with best marks. It will at least bring a parity to be judged by merit & most important put check on the vicious circle & bring down the cost of education & to a competitive level, no elitist (high cost, high nose, outlaw) approach pass by any more. Touch stone is there: “Death the Leveler”.
.

5. Entry exam for any Educational Institutes based on merit, not donation, from 3rd Standard, it will kill off the vicious exploitative circle that they have created. Only 30% donation based entry may be allowable, 70% on merit only, not free but at a prescribed cost. The 30% who can afford entry & can pay higher charges will level off things, also most importantly it will cross subsidize the ones with merit and both sections of the society would not be deprived, a level ground will be laid & the merit which a society needs most will have an opportunity, a big opportunity, a 70% opportunity. Institutions must publish their fee charts, covering all expenses so that families can decide their affordability & capacity to meet them & can make a free choice depending on their financial positions. No hidden charges or any other undeclared charges should not levied later on or the course fee should not be enhanced later on, on the pretext, saying that there has been a price hike so we have to raise fee, yes hikes can be done but it must be according to the prevailing price index.

6. Open purchase of books & items in the market must be allowed without any restrictions, most Private Institutions (Though they run by the name of Public Schools to fool the people) supply their own items so that they can charge Rs150. whereas the market price is Rs50/- only. It is monopolistic, a trade that goes against law. If such exploitative measures are found in use by the educational institutions, they must be booked for this; school transport business is one such grey area, where a lot of money laundering is done by the institutions. Why not general public are allowed to ply vehicles for schools? They can ferry students of different schools located at the same area at a cheaper rate, also a competitive school transport business will come into being, I as a banker came across such proposals, but school authorities gave a vehement no, no, on the excuse that it would not be safe for the students. Why the private school transport operators would not be safe, when asked no satisfactory reasons were given, after all to be in the business one has to provide with responsible service or the one will find oneself soon out of business, actually the real reason is, that they don’t say “school transport business” is very lucrative for the institutions, so how can they allow others to take it away from them.

7. It should be mandatory that publishing of total cost of education or course in a clear-cut way in newspapers etc (they put page after page ads daily boasting how good they are but never say about costs involved). And those who will get entry by merit must not be forced to pay hidden cost (Educational Institutes are masters in this art), after all merit is merit. And all the items supplied by the schools must be given at a price that is lower than the market price as they purchase in bulk, it is a must, govt authorities must supervise this, that if any unlawful trade (extortion) is being done by the Educational Institutes.

Boarding & residential charges are used for milking the parents, they are great milking cows for them and they must be open about these costs. School hostels are not hotels, food must come cheap here, it must be a no profit no loss system, it should not be a trade for them. I saw in one school per student boarding profit is Rs200/- per month, this shows they (Educational Institutions) have umpteen ways to milk & all in the name of a holy cause, for a cause beyond CONTROVERSY.

S.K.DAS. (SUBHRO)
ARARIA (INDIA).
Revised 25/04/10

Extortion of Parents by Educational Institutions

2010-02-25T03:01:00.000-08:00

Thursday, February 25, 2010
EXTORTION OF PARENTS BY ED. INSTS & BODIES
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Always it comes in different articles that how much pressure parents put on their wards to excel in study and how it is causing the children so much of agony, but no where it is discussed that the pressure parents are facing due to extortions by almost all educational institutions. And no one minds or ponders over this matter, that due to this pressure, families as most families have limited financial resources, get into a financial crunch perforce, to cope with an educational system that has been created to extort & suck in the name of providing an education that will guarantee one a job or to become a fit person who will make a lot of money once he completes his education. So children’s’ education has become everything of a family, whatever the cost of education, the parents would die to meet it, along with come the mental pressure, tension to cope with daily, periodic & yearly routines of education of the children, this routine takes all the time off from parents, make them over engaged, engrossed only in one matter, that is children’s education & at last comes “emotional blankness” when children’s education is over & age catches up with the parents.
So parents today, in this so called modern educational system being run with only one motive of profiteering, from villages to towns to cities, preliminary levels to vocational levels, from every nook & corner are facing three way pressure.

HOUSEHOLD
Holidays of parents are gone due to pressure and depletion of money to meet the educational expenses of their wards and lack of gap due to tight school schedules.And early mornings (please don’t make light of it) to ready their wards for schools make daily life of parents a hell & the parents who keep their wards in residential educational institutions face more trouble, the trouble doubles up. In nutshell parents & families become subjects of educational authorities & authorities do it in the guise of shaping & securing the future of students. So it is projected this little sacrifice of parents is very normal.
And this little sacrifice is what? Draining out all the money for children’s education, going for loans, squeezing their own expenses, giving up own life, that is shunning own expenses, curtailments & living a stressful life. The story is same in all the families, barring the a few high net worth families, they are handful & they do not make any substantial impact on macro economy, actually the rest 90% families on which the economy survive, who are the basis of the economy & if they are depleted financially, the backbone of economy breaks.
FINANCIAL

Large extortionists sums of money are demanded on every pretext, for example for school gadgets, uniforms, pcs, books, labs, internet, sports, entertainment, outings, school transport & many more things, (all at a premium, all these are a great source of cut money for the educational institutions). Then comes the huge entry donations or entrance fee or admission fee, whatever you may call it, this is always very large, so large that families are slapped down by one hit, they crawl down & reel to arrange for everything for the first year/time admission, then starts each year huge re-admission fees, periodical exorbitant tuition fees, all these are enough to ruin a family. Families naturally draw deep into their savings, squeeze their expenses & borrow huge sums of loans. And the loans especially taken to meet the fee for vocational studies put parents gasping for money. Ed.Sys is draining & sucking money & sinking the finance, sinking not only the finance of the families but also sinking the total economy.
The education institutions have become draconian and extortionists.
EMOTIONAL/PERSONAL

Children after study get job away and leave parents behind, meantime prime years of parents gone. It is unthinkable that children in this modern job market would spare time for parents, leave alone staying with or keeping parents with them. They are so engaged in their own life, that parents become stale cheques, an interruption in their life. Even then (after meeting all the educational costs) if some parents are left with lots dispensable money but the time is gone, cash is there but they (the stale cheques) can not encash it. The money becomes useless, useless even to the economy.
Everything has a time limit, the nature has given a time for everything, a time limit, we human beings the greatest creation of nature have a time limit, pass different phases of life then die, so if some parents are left with huge cash at old age, that is soiled money, a burden, a hoarded money that is no use for them or the economy.

Therefore, this extortionist educational system is ruining the society & bleeding the economy. Although it is difficult to perceive as it is in “emotional & holy cause” disguise so the blackmailing is not seen as blackmailing, extortion is not seen as extortion. No doubt education can not be free as nothing is free, food to car, but price of everything is clear & always debated, compared & talked about, written about freely, no veil.
But why the thing (education) that is costing the society so much & for so long a period (minimum 15 years per person) is kept in a silent mode? As it is neither taken as a commodity or service industry, so is the cost taken for granted?

But, today’s most extortionists are not Talibans or Al Quida, but the educational institutions in social garb.
Society has to wake up to recognize this evil system and take urgent remedial steps or it will cause unimaginable & unrecoverable harm to the society, all the societies irrespective to a particular nation.

This paper is based on my analysis on different educational institutes and educational system & its effect on general families.

I hereby publish it & make it public.S.K.DAS. (SUBHRO)ARARIA.INDIA
Revised 25/04/10