G.’s Blog

Archive for the ‘Economics’ Category

India’s Demographic Advantage?

Posted by G. on February 6, 2010

I keep hearing about India’s demographic advantage as a means for economic growth. Here’s Jim Jubak at MSNFinance, giddy at the thought that India will only have 6.7% of its population above the age of 65 by 2020.

As a counter point, I would like to submit that Abhyasthavidyarude Thozhilillayma (the problem of unemployment among the highly educated) was a popular essay topic in language classes and competitions back in school in the 80’s.

Population is only one resource among many required for economic growth. In fact, I would rate it towards the bottom of the scale when compared to some of the other ingredients (natural resources, innovation, nature of society etc.). It is also a double-edged sword – without proper utilization, its quite easy for a population to overrun the resources of the land.

I would think India’s diversity would be a much more important factor for growth in the long run. Because of the multitudes of languages and cultures that we accept as part of “us”, it becomes a lot easier to accept changes, even if they are of the disruptive variety. And as long as these diversities dont create a break down of the Indian Union, this provides a genuine competitive advantage compared to monocultural societies like Japan and Europe.

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Rap Beef – Hayek vs. Keynes

Posted by G. on February 1, 2010

Pretty good, in an econo-geeky kind of way 🙂

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Aurum

Posted by G. on January 25, 2010

Came across this today:  http://www.boston.com/bigpicture/2010/01/gold.html

My great uncle passed away last year. A few months before his death, he expressed regret that none of his nephews and neices had any interest in a Fixed Deposit he had at his bank for Rs. 6000. He was dismayed that nobody seemed to appreciate the struggles he had to go through to save up for that  FD, more than 30 years ago.

Here are a couple of quotes I have been thinking a lot about since then.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves – Alan Greenspan.

The truth about the long term, then, is that it consists of a sequence of short terms and these short terms are full of episodes we call history: war, peace, pestilence, progress, revolution, invention, discovery, depression, enterprise, bankruptcy, birth, death, taxes and such. Kingdoms rise and fall, debts are incurred and repaid, or – as often as not – not repaid, or repaid in money unrecognizable to the poor creditor. Interest runs for years at a time, but rarely even for decades, politics or central banks intervening to disrupt the piling up of what would otherwise be wealth too vast to be stored on the planet Earth. Through it all, just as Hall and Jastram have separately noted, gold endures, holding its value but returning no income. Well, you can’t have everything – Jim Grant.

And here’s some historic data on gold price in Rupees (grabbed from here).

Price in Rupees per 10 grams
Data from Gold Survey 2001

I’m not advocating any gold standard, nor am I suggesting going out and buying gold coins tomorrow (for all I know this post could mark the top of the recent gold price surge). I most certainly am not promoting the conspiracy-theorist/survivalist loonie-school-of-thought that has creeped into the mainstream since the financial panic of 2008. But it does confound me that, after all these years of human evolution, there still exists very few solutions to man’s search for a viable and standard way for storage and preservation of human effort (aka wealth).

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The Dragon, the Elephant and Oil

Posted by G. on May 28, 2009

In the past six months, commodity prices worldwide crashed to multi-decade lows.

In the past six months,

1. Chinalco signed a deal with Australia’s Rio Tinto that will eventually double its stake in the world’s second-largest mining company.

2. China National Petroleum signed separate loan-for-oil agreements with Russia, Brazil, Kazakhstan and Venezuela, under which China would provide loan/aid, in exchange for long-term commitments to supply oil.

3. China National Petroleum signed an agreement with Iran’s National Iran Oil Company  to jointly develop a oil/natural gas field.

4. Commercial Bank of China took a stake in South Africa’s Standard Bank Group, Africa’s largest bank and a key to securing access to the Dark Continent’s vast oil/mineral riches.

India is a net importer of crude oil, and thats before the Nano. What have we done to secure our energy supplies during this sale of the century?

 

Update 1: The Rio deal has fallen through. Apparently, now that the markets have moved past the possibility of Armageddon and Rio can raise money in the bond/equity markets again, there is a sudden uptick in concepts like national interest…

Update 2: China Petroleum Corp has completed its purchase of Addax Petroleum, giving it reserves in Kurdistan and Western Africa.

Update 3: Here’s a comprehensive article on the subject from CNN.

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The Ghost Of Malthus

Posted by G. on April 28, 2009

The following is from The New Scientist (click to enlarge).

New Scientist

Haven’t gone through all the assumptions on the basis of which the figure has been created, but some have pointed out that such apocalyptic charts arise everytime there is a period of sustained inflation (apparently predictions were made in the 70’s that the world would run out of copper by the early 2000’s). I think the nature of the inflationary pressure is a little different today compared to the 70’s – back then, there was supply restrictions due to the Arab Oil Embargo, while today, there is demand increases  due to the emerging economies. Excessively loose monetary policy without a corresponding improvement in human productivity remains the only constant inflationary theme across both timeframes.

If you do believe the data, it might be wise to keep an eye on Wayanad real estate… At some confluence of high gold price and human gullibility, who knows, we might see another gold rush in our Wynad hills…

🙂

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