Although Double Dip Recession is Expected and Numbers Justify it, I still don't believe in it.

Yesterday's Housing report sent shock wave in economists in US and there are more and more people saying about Double Dip Recession. Graph Below clearly shows direction towards south in Home Prices.

US Housing Price Graph in % Change.  Ref : http://foreclosurenv.wordpress.com/2010/12/01/united-states-housing-prices-still-crashing/

In India, Graph Below shows Interest Rates rising again towards "Previous Crash" level. So definitely it's another number supporting recession.

India Interest Rates Chart

In China, Interest Rates have started going towards North, and there are reports of Real Estate crash already.

China Interest Rate Chart.

With all these Data many are already concluding that we are entering in Phase 5, 6, 7 of economic cycle and Hence Recession !!! 


However I don't believe that Recession is underway because in western world despite Stimulus, Inflation level has not been out of hand. This will give a clear license to Central Banks to have another Rounds of Quantitative Easing / have more easing under current QEII or Simply Allow banks to lend freely. In emerging markets there may not be Stimulate. And they may raise interest rates in "baby steps", Carry Trade (i.e. borrowing money from places where interest rate is low, and investing in other country) will keep liquidity high.


In 2011 / 2012 time frame I think governments across world will be busy in stimulating economies further and convince people by steps like..


1) Raising Minimum wage.
2) Encouraging Employers for Higher wages to counter higher living prices.
3) Never increasing Interest rates aggressively enough to allow bubbles blast.
4) Ask people to compromise on "Prices vs Unemployment".
5) Redefine Comfort Level of Price Index .. e.g 2 is considered as OK in US they will say let's have 5 as OK. in India 5.5 is considered as "Comfortable Level" They may say Let's have 8 as Comfortable level.
6) Asking banks to resume lending activity more generously to help economy grow again.
7) Keep on telling people that as prices are increasing, so will your wages and everything will be normal.
8) Keep on telling people that it's temporary and everything will be fine soon. 
9) At some stage when inflation goes beyond control they will introduce "Price Control" i.e. to restrict food / essential commodities at government control prices.


Concluding central banks and Governments will Prevent Double Dip. Instead by resuming Lending, they can give very good results in short to mid term of course for Wall Street !! .


It will be however very interesting to see how countries like Germany / Singapore react to all this. There is a very good chance that they may opt for entirely different path towards austerity.

The Ball is in China’s Court. Part 1

Last month I was in my home place in India. While traveling, an article in Times of India (leading Indian News Paper) caught my attention. Article was about CBSE Board (One of the Key Educational System) introducing Chinese Language (Mandarin) in Schools. In article it was clearly mentioned that looking into growing economic importance of China, Mr. Vineet Joshi Chairman of the board has decided to introduce Mandarin in schools.

I was happy to read that article. Breaking the barriers of conventional way of education i.e. Local Language + Hindi (India’s National Language) + English, CBSE board decided to go for Mandarin. Obviously China's growth story deserves this attention. Recently China developed a train that can run at 262 Miles per hours (Fastest in World). It's developing Aircrafts now, There are huge number of patents  by Chinese Scientists. So it’s not just low cost manufacturing anymore and there is a lot that china has achieved over years. Clearly we are today in a world where everyone is ready to accept China in its new role of economic superpower (Willingly or unwillingly). Map Below tells us why.

Map of countries by foreign currency reserves and gold minus external debt based on 2009 data from CIA Factbook

While having all these thoughts in mind I turned some pages of Newspaper and found one more article on China. I don’t remember title exactly but it was related to “Attitude Issues of China with its neighbors”. It was clearly mentioning unhappiness of China’s neighbors e.g. India, Japan, S Korea. In recent incidence of arrest of marine Japan found itself in kind of secondary position. (Historically Japan has upper hand in Wars with China and obviously knowing Japan they won’t forget such insults easily) China has issue with India over Arunachal Pradesh, Stapled Visa for Kashmir residents, and hence is not considered partner of trust by Indians (No matter how many times Wen Jiabao visit to Delhi and whatever he says). All this bad “body language” clearly brings clouds of suspicion on China’s position as economic superpower. As George Soros rightly said, China must understand the advantages and responsibilities that come along with Leadership position, looks like probably they still don’t understand it.

Crash of 2008 has brought turning point in the story of China. Awkward position on reserves may also be a key source of frustration on their side, which fumes out on neighbors as they can’t say /do much to US. But they must understand that winner especially new winner has many enemies and one mistake can turn success story into catastrophe.

In short I think ball is in China’s Court. By building environment of trust and harmony with its Asian counterparts China can make 21st Century truly as “Century of Asia”. Else if they are not able to cope up with pressure / continue with attitude issues, their mistakes even can convert Asia into the battlefield of Major WAR. (May be WW III)

Impact of Paper Currency on Equity Market, Income Inequality, Marriage rate, Divorce rate, Health....

By now I believe regular readers of our blog know that we have a Big time problem with "Paper currency system" that started on 15th Aug 1971.(Recently, writing in the Financial Times, World Bank President Robert Zoellick called for a new monetary system to replace the floating rates adopted in 1971 known as Bretton Woods II.). So there is a thought process coming in mainstream that agree on flaws of paper currency.  


In this article I have tried to see "Before 70s" vs " After 70s" pattern for many aspects. Although I don't like to use maths and stats in sensitive issues such as Marriage rate, Divorce Rate or even on Health, few graphs below were too shocking for me. So I just thought of sharing with our friends.

Historic Dow Jones Before and after Paper currency

As we all know Dow Jones Industrial Index is one of the TOP Indicator of equity health of US and in turn whole world, We can clearly see "Before 70s" vs " After 70s" pattern here.

widening income Inequality 

This is pretty interesting one. (Income inequality has Increased in Paper currencies ). There is "Before 70s" vs " After 70s" pattern here. What might be reason ? Is that the previous Graph ? are people investing in Stocks (By understanding / not understanding magic of paper currencies) becoming richer? Leaving rest all poor in comparison?  Is equity Investment only best way to make money in paper currencies?

Median Annual Earnings over decades.

Here there is co-relation for Men's income. It remains in same bracket while women's income growing steadily. This should make us proud as a human race that women's are bridging the gap of income. Although  for Woman's graph increasing trend is from mid 50s and has gone up steadily so there seems no pre 70 and post 70s correlation.

Divorce Rate over decades.

This was a simply shock to me. Here I see correlation to Before 70s and After 70s . What has changed? There was a discussion within friends on this. One said "Now a days males are having more bad habits like Smoking, over Drinking, etc... That is causing all this" Another friend who suggested that "May be women's have better income now (Previous Graph) which "helps" them to take a call if they are not happy in their married life. In old days even if women was not happy she had no option but to stick with husband as she had no economic freedom so in fact it's good development due to economy". Another more conservative friend had strong argument on that comment. He said, "Look no one divorce for pleasure. But if what you are saying is correct, then after 1st divorce, their life should be better off. In reality study shows that in US, Divorce rate for 1st Marriage is 50%, for 2nd Marriage it's 68% while for 3rd marriage it's 78%. Which means that something is wrong in thinking that capacity to take divorce is "helping" factor for happy life!!!."

I had no counter argument on that ... But what worries me is are we going in right direction as a society.

Decreasing Marriage Rate.

I see a correlation here Well. There is impact on Marriage rare as well. What may be the reason ? Need to think more ... ?

Health Data from official Web Site

What to say here .. Is easy money and credit bubble making us fat also ? at least graph shows it.

Now to counter all these arguments someone may say that these social issues have nothing to do with paper currency etc..Don't blame all our problems in paper currency...  it's a new era and this is bound to happen..... To me it makes a lot of sense in believing that all this has some co-relation with each other and is connected. But I think this is a topic of debate and I welcome comments and arguments here.

P.S:  To add the data I have taken is of 50 Years + ( Thanks to Prof Reeve Vanneman at University of Maryland for her great work on .. http://www.bsos.umd.edu/socy/vanneman/socy441/trends/divorce.html ).