For the past one year, I have been able to just write a few posts on this blog. Yet the good thing is that I am still getting regular visitors for my some good written articles of past.

My project for which I stopped blogging, unfortunately, had failed miserably. Apart from monetary loss,  I lost thousand of productive hours and peace of mind.

In fact I also lost PageRank of this blog.

When I left blogging, this blog was having a healthy PageRank of 4.  Now it has come down to a  PR 2 Blog.

Well I read somewhere that :

” What you are left with is more important and valuable than what you have lost”

While trusting my faith on this great saying, I hereby start my new innings as a blogger here

So I am back. Permanently this time !!

He will soon come back…Amen !

I have updated my privacy policy for this blog.

This policy update was important to comply with some revenue program I am using on this blog.

Read : Privacy policy for Indian Blogger.com

Regards

Eklavya

In one of my earlier posts, I wrote about the causes of global recession. This post become quite popular and hundreds of people thanked me for the simple explanation of this phenomenon. This is article is in continuation of what I wrote in that post.

Sub-prime mess which was the main theme of that post and the prime reason that eventually sparked a world wide recession is at best an immediate cause of the recession. In this post, I will throw some light on the reason behind the very emergence of a sub-prime situation and why despite pumping of billions of dollars into the world economy, it is still not showing any sign of recovery.

In my first post on recession, I told you about how availability of an easy credit situation prompted the US lending institution to lend money to sub-prime borrowers and how these risky deals turned into a nightmare for big financial institution. In this post, we will be discussing three main issues :

(1) How American economy became so full of cash that made availability of loans for almost everything so easy?
(2) Why American banks could not foresee the risk involved in sub-prime loans?
(3)  Why the situation is not improving as fast as expected despite stimulus package of billons of dollars?

From where the Cash came in US ?

In order to understand how US economy got flooded with dollars, we need to go back in time by a decade. In 1997-98, the tiger economies of Asia (a term used to refer the countries of South East Asia like Thailand, Malaysia, Indonesia etc) suffered a major economic crisis. Though it is not necessary to know the details of this crisis, a brief overview of that crisis will help us understand the current mess in world as it is all linked.

During those years, several countries of South East Asia had developed worrying financial weaknesses which were the results of heavy investment in highly speculative real estate ventures, financed by borrowing either from poorly informed foreign sources or by credit from under regulated domestic financial institutions.

The crisis began with wrong banking practices.  In those countries crony capitalism (where borrower had the connections with government) became too dominant.  The minister’s nephew or the president’s son could open a bank and raise money both from the domestic populace and from foreign lenders, with everyone believing that their money was safe because official connections stood behind the institution. Government guarantees on bank deposits are standard practice throughout the world, but normally these guarantees come with strings attached. The owners of banks have to meet capital requirements (that is, put a lot of their own money at risk), restrict themselves to prudent investments, and so on. In Asian countries, however, too many people were granted privilege without responsibility, allowing them to play a game of “heads I win, tails somebody else loses.” And the loans financed highly speculative real estate ventures and wildly overambitious corporate expansions.

This bubble was inflated still further by credulous foreign investors, who were all too eager to put money into faraway countries about which they knew nothing (except that they were thriving). It was also, for a while, self-sustaining: All those irresponsible loans created a boom in real estate and stock markets, which made the balance sheets of banks and their clients look much healthier than they were.

However, this bubble had to burst sooner or later. At some point it was going to become clear that the high values Asian markets had placed on their assets weren’t realistic. Speculative bubbles are vulnerable to self-fulfilling pessimism: As soon as a significant number of investors begin to wonder whether the bubble would burst, it did.

So Asia went into a downward spiral. As nervous investors began to pull their money out of banks, asset prices plunged. As asset prices fell, it became increasingly doubtful whether governments would really stand behind the deposits and loans that remained, and investors fled all the faster. Foreign investors stampeded for the exits, forcing currency devaluations, which worsened the crisis still more as banks and companies found themselves with assets in devalued baht or rupiah, but with liabilities in lamentably solid dollars.

In 1996 capital was flowing into emerging Asia at the rate of about $100 billion a year; by the second half of 1997 it was flowing out at about the same rate. Inevitably, with that kind of reversal, Asia’s asset markets plunged, its economies went into recession, and it only got worse from there.

Eventually International Monetary Fund (IMF) had to step in to save these economies. How these economies later recovered and at what cost is a different story.  However, this crisis brought with it some major lessons for the Asian economies. One of the most important lessons for them was to create a solid Foreign Exchange Reserve so as to withstand the most volatile exit of the money from their markets. High reserves promise safety in a storm. Therefore, most major economies of Asia (including the big China and India) adopted a strategy of maintaining high forex reserve so as to ensure safety from any such crisis in future.  This shift in priorities created a very interesting situation.

In the mid-1990s, the emerging economies of Asia had been major importers of capital, borrowing abroad to finance their development. But after the Asian financial crisis of 1997-98 these countries began protecting themselves by amassing huge war chests of foreign assets, in effect exporting capital to the rest of the world.

To say in other words, the Asian economy came in to a Saving mode. In order to maintain huge foreign reserve, they also started buying US securities. This resulted in a huge inflow of dollars into the US economy. As more and more dollars kept coming into the US economy from world over, the American investors started devising very sophisticated and innovative methods to convert the flood of money from Asia into a borrowing and spending spree for American consumers.

Now instead of writing as to how and why this saving tendency of Asian Economies has resulted into the current global mess, I would like to point you towards two excellent articles on this issues written by two of my favorites economists. These articles are very well written in a layman’s language and they will clarify all your doubts about the role Asian economies in current global recession.

The first article is : High forex reserves can worsen recession

Written by Swaminathan S. Anklesaria Aiyar who is Consulting Editor, Economic Times, the popular financial newspaper of India. He is my favorite columnist.

Second article is :  Revenge of the Glut

Written by noted economist, the Nobel winner Paul Krugman. In this article he has concluded that the world is suffering from a global paradox of thrift.

The above two articles provide useful information on how a global saving glut is worsening the recession. I did not feel the need to write on these topics as these two excellent articles are sufficient in explaining the role of Asian economies in the present global recession.

So let us again reconsider the three issues we started with:

(1) How American economy became so full of cash that made availability of loans for almost any thing so easy?

It was all because of the insistence of Asian economy to generate a huge Foreign Exchange Reserve that ultimately created an imbalance of global money flow. If you read the above two articles, you will understand this clearly.

(2) Why American banks could not foresee the risk involved in sub-prime loans?

As Paul Krugman has pointed in his article, it is because of the depth and sophistication of the country’s financial markets. In his own words, “American bankers, empowered by a quarter-century of deregulatory zeal, led the world in finding sophisticated ways to enrich themselves by hiding risk and fooling investors.”

In America which has such a long history of free capital markets, financial institutions have mastered the art of hiding risk and fooling investors. When a huge inflow of money is coming your way, a sense of wealth and greed becomes dominant in our mind. After all capitalism is all about profit and maximizing your return. Isn’t it?

(3) Why the situation is not improving as fast as expected despite stimulus package of billions of dollars?

One of the top global economist of the world (I don’t know his name)  has declared that the present crisis is a structural one , reflecting a serious global misallocation of money in recent years, which had created many bubbles that had now burst. Pumping in more money could not resolve the problem, since it amounted to an attempt to reflate the old bubbles. Instead painful structural change are the need of the hour, he said, and this could take years.

What we are seeing the world today is a global saving phenomenon.  American who were the front runners of global borrowing and spending spree have started savings seriously.  The national savings rate of America has bumped up to 5% in January from 3.9% in December. A year ago, it was at 0.1%.

Saving is not a bad idea. But if everybody on earth starts saving and no one choose to spend, the saving will lose all its meaning. It is a well documented theory in economics known as the Paradox of Thrift.  Suppose people decide to become more thrifty, that is, they decide to save more at each level of income, one might expect that this would increase the total amount of savings. But the simple Keynesian multiplier model predicts a paradox of thrift that total savings will remain the same and income will decline.

So when the situation will improve?

I believe in the spiritual mantra of “This too will pass”. This is not the first recession the world has ever seen and certainly this is not going to be the last. I think the need of the hour for individuals is to not loose hope and prepare themselves for future. Keep learning new things, improve your skills and above all don’t loose heart. The best brains in the world are at work to find solution to this recession. Eventually, we’ll find a cure. And even if nothing works, the greatest healer of all – the time – will subside this recession one day.

For every problem under the Sun,
there is a solution or is none
if there is one, try to find it,
If there is none, never mind it.

We all have a limited time span on this earth. A Recession, not matter how lengthy or worse it appears now, is a momentary phenomenon when compared on the global scale of our entire life time. Don’t allow this momentary phenomenon to overshadow the wonderful days of happiness and wealth which will definitely come in your life in the days to come.

Last month was one of the busiest month since I came onlinle. I had stopped blogging here as I intended to complete content for my other website. Yet, personal commitments of varied nature compelled my to devote all my spare time in mundane activities. I was in Meerut to attend/manage a marriage. Then I went to Mumbai for attending another marriage. Later I got busy in attending/organising  a family function.

Being a married man has its own compulsions. Particularly when you have a full time job and a little kid.

It appears a very long time since I last wrote something.  I am feeling like an absolute beginner. The hangover of a very busy and hectic last month will take some time to recede.

Many interesting things happen in India in past few days. I hope to return to a regular blogging schedule very soon.

Presently, I am busy completing an online project relating to a new website I’ll be launching this year. As such my whole energy is being invested into this project and as a result I am not finding any time for reading or writing.

So there may be some delay in returning to a regular blog schedule.  Please bear with me if you can

I shall be back soon.

Eklavya

It is claimed to be from a Satyam employee, who has a slightly different opinion on the whole Satyam Debacle ?  A very interesting read indeed …..

At a time when almost 90% of my Satyam friends are cribbing about the fraud and betrayal by Ramalinga Raju, I have a slightly different opinion. It’s bold of me to write this in black and white but this comes straight from my heart and experience.

Let me start by quoting an example of 2006. Most of my friends were unemployed with 50-60% plus marks in BTech, with a degree from an average University and hunting madly for a job. Whether people accept it today or not but the truth remains that Satyam was the ONLY saviour and the only mass recruiter who was ready to accept students who had back logs but had cleared them and also it did not put a very strict minimum marks criterion. And this was true not only for my small college at Lucknow but also those across India . Satyam is the fourth largest in IT in India. Looking at India’s population I really want to thank Raju for giving some 54000 Indians jobs atleast for all these years . He was the reason for the revival of confidence and the reason for the bread and butter for many a families.

Satyam training was renowned all over India. Their STC training centre created numerous love stories and unexpected rekindling of a youthful environment where girls and boys were more indepenent than their college days . I remember most of my Satyam friends felt that they made better friends at Satyam’s three to six months training than those in the four years of BTech.

Unfortunately people forget to thank God in sad times . I understand that what Raju did is deplorable and unpardonable. He should have treated business more formally and not dealt with it like a family affair . He should have been strict a couple of months or years before itself. Why did he hire so many non potential candidates and keep them on bench? When were the managers and the team mates last told that if they dont work hard, they will lose their job? Business cannot be run lousily.

I have been staying with some 200 odd girls for the last 2 years and many of them are from Satyam. Moreover I network a lot and I have lots of male friends at Satyam . I have seen how people tail gate to Satyam, how they give their swipe cards to others to swipe it on their behalf , how female employees have gone home sharp at 6am irrespective of when they landed at office, how employees sit at home for months at a stretch, prepare for all kind of post graduate entrance exams and still enjoy a full month’s pay, how often they went for movies at local theatres at office hours, how often employees went to office just to sign on registers in the morning and at evening, how often they faked their certificates , how often they put unlimited fake medical and house rental bills.

How can we blame just one man when EACH AND EVERY person was disloyal ? How can we exclude Auditors like PwC ? How can we exclude the Board of Directors who have washed their hands off so clean? How can we exclude banks who gave hefty loans without true verfication? How can we exclude the Chief Minister of AP who allowed leniency for Raju’s fellow businessman? How can we exclude managers who were never able to trace which bench employee under him had been away from office for how long ?

Yet how can people forget this is the same man whose ideas and potentials gave them an identity for the past several years? How many couples found the right match at an IT industry , courtesy Satyam and how many Andhra farmers benefited from their crores of investments in Satyam shares .How can people forget that Satyam launched its offices right at the doorsteps of a residential colony, where people can simply walk to work ?

The most gruesome experience that I can recollect was when a Satyam tag wearing person was waiting to attend an interview and I overheard him saying that he was in a business meeting at the My Home Satyam ( Madhapur) office when he was sitting right infront of me at a totally different company. When employees themselves show such a lousy attitude and dont care a damn for the brand that they carry around their neck, how can they expect others to care?

I am not saying that ALL Satyam employees are bad. I have known very dedicated people too, but my point is very clear, before pointing fingers at others, introspect .There are thousands of people who have completed certifications at the cost of Satyam, got trained at Satyam. Satyam made several freshers stand on their feet to get better jobs elsewhere across the globe and attain onsite exposure through Satyam.

What Raju did was to keep the business of Satyam going at any cost. I see a very smart man in him when he understood that he should rather accept his mistake than be caught by the USA laws . I see a selfish father in him too that he put a lot at stake for Maytas. However, he resigned with a lot of dignity and his letter of resignation shows humility. It takes a mammoth amount of courage to accept your mistake in public at a time when the media is ready to blow everything out of proportion. If humans dont make mistakes who else would ?

My last salute to this man is for creating such mass employment in India for 57k employees and 57k families when even opening a beetle(pan) shop in a lane in India is a challenge !! Thanks to him for creating income for all the thousands of families who benefited through food chains, the tiffin wallahs, the transport people and all those who made money by renting their houses.

I read he donated Rs 12000 crores from his personal pocket to give the January salary of his Satyam employees. Today Satyamites call Raju a FRAUD. The true and loyal Satyamites surely have all the reasons to say this word. But all the rest who sucked every rupee out of Satyam without doing any value addition need to understand – who was a bigger fraud.

Wishing you all a very happy, prosperous and healthy new year. May 2009 brings peace, joy and happiness in your lives.

Regards

Eklavya

Recently a friend told me two interesting things about Ghajini.

The Aamir starer Ghajini is a remake of a superhit Tamil movie of the same name where the Tamil Actor Surya played the lead role. Interestingly, the same guy (Allu Arvind) – who directed the Tamil version – has also directed the Hindi remake. Even the actress (Asin)  is also the same. However, what is more interesting is the fact that even the Tamil Ghajini was also inspired from a Hollywood thriller ‘Memento’ . This Hollywood movie was so confusing to general public that in the opinion of most viewers, one needs to watch it at least twice to understand the entire movie.  The film has got some exceptional reviews which can be read here :

http://www.imdb.com/title/tt0209144/

It is yet to be seen how the Hindi Ghajini will fare at the box office. Some comparisons are bound to be there.

The another interesting thing my friend told me was about an SMS which is going around for last few days.

“Someone killed Aamir’s girlfriend and he lost his memory. Then he tries to find out the killer. Suspense Aamir himself is the killer. Now enjoy ‘Ghajini’!” says the SMS.

Whether the SMS is true would only be clear once the film releases on Friday. It may be a publicity stunt from the film makers. But let me tell you that the original movie ‘Memento’ was considered as on of the top top 5 movies with the best twist endings.

So you can expect a surprise twising end of the Ghajini.

The verdit will be out in next few days.

The website of DDA  (www.dda.org.in) and Urban India are down because of huge rush of traffic.  However, there is an easy way to visit the result of DDA Housing Schemes 2008 for the much awated 5000 flats right now.

Here is a pdf file which contains all the 5000 names of those lucky persons who have secured their names in the lucky draw. The file is in pdf format, has 310 pages and contains entire details about all the lucky winners like their name, flat allotted, category with full address of the flat.

Download the entire results of DDA Housing Scheme 2008 now by clicking on the following two links :

Rapidshare Link :

http://rs226.rapidshare.com/files/173869331/DRW_RSLT_DDA08.pdf

Mediafire Link

http://www.mediafire.com/file/ezieegnmtqn/DRW_RSLT_DDA08.pdf

One more Rapid Upload Link

http://www.rapid-upload.org/PZ4AX8IHQMK5/DRW_RSLT_DDA08.pdf.html

My name is not in the list but ….

My best wishes to all of you !