US Housing, Financial, Credit and Sub-Prime Crises-2008

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The biggest world economies have still not been able to recover from something that happened in the year 2008. The economy of USA was completely shaken but behind it economies like India (basically BRICs) were also affected. Indian economy was doing well before the US sub prime mortgage crises. After 2008 it was only in 2015-16 that the economy could get back on its feet. Today I will be writing about the US crises 2008. It is a topic related to finance, so all the people here from a non finance background, you will get to read about a lot of new things today. Those of you from a commerce/finance background, you will also get to read about a lot of new things today too. It was a joke. But I guess you didn’t laugh.

Screen Shot 2016-04-23 at 11.30.45 PMThis blog is highly technical and to understand the story in it we must understand many economic terms before hand. So please bear with me and carefully read the upcoming 12 paragraphs. By the end, I promise, you will know more than your economics teacher.

 

Today global business is a reality. But how is it possible? It is possible because of a marvelous financial system under it.

The system has three components. The first one is a system of payment across the borders.  The second one is insurance because when things go wrong we need someone to help us out. The third one is information and market. When this structure is made we can move towards global business.  The large scale flow of private capital across the world in the past thirty years aided by massive deregulation, is called financial globalization. Before private capital flow IMF and WB controlled the game. They still exist but are very small now (comparatively). How did they control the game before 1980? Let me answer this question with another question. Before 1980, If countries needed money where would they go?

 

The eclipsing of Bretton woods system, deregulation of the currency markets, domination of private capital flows, very poor regulatory frame works, domination of Wall Street’s extreme capitalist model and global connectivity were the six major developments which came together in 1980.  Why are we about to study global connectivity or internet in finance’s context? The reason is that all the instant information today solely depends on the internet. The company listed in Bombay stock Exchange is also listed in Wall Street and NASDAQ. If a company is listed in both then instant information is coming on all the screens. Hence, the entire financial system which has made global business possible is only possible due to global connectivity.

 

black swan.jpg  Nassim Nicholas Taleb predicted the crises. He is the author of the famous book the black swan. As per him ‘Black Swans’ are highly unlikely events which turn out to be a reality. These are mostly negative by nature. From 2001-2007 the world GDP growth rate was very favourable. It went from 4 to 5 to 6 to 7 to 8% per annum.  Everyone predicted it would go to 9 then 10 and on and on and on. But in 2008 it crashed in India. This is a classic example of black swan. What was its effect? Due to everything being connected, everything crashed, this caused the ambitious schemes in India to fail, the tax collection to fall down drastically and hence caused mass deficit. This is the challenge Narendra Modi’s government is facing. To bring GDP growth rate up, investment is necessary. Where will the money come from? It can come from India and it can come from abroad. Indians do not have high savings and foreigners don’t trust us. After excessive travelling he has been successful in bringing the GDP growth rate up and this is the reason I am his fan.

 

maxresdefaultNext we talk about financial contagion. It is a scenario where small shocks which initially affect only a small part of the economy, spread to other financial sectors and countries, just like a medical disease. They destroy confidence. I will give a very simple example. Imagine you have 1 million dollars. You lend it to many people at a fixed rate of interest and keep some property as collateral. 50% people you gave the money to gave you fake property papers. These people give this money to other people for collateral and interest. Many of these new people gave fake papers. They lend the money further. This goes on and on and on. You think you are getting very rich, which you are, on paper, but when reserve bank of India comes for an audit it asks who was the first person you lent money to. After an audit of that person it tells you that 50% of your collateral papers are duds and hence 50% of your borrowers are NPAs or non performing assets. But you have your company listed on the stock market, both at Bombay Stock Exchange and the Wall Street because brokers were extreme capitalists. Your investors get the news that 50% of your borrowers are NPAs and they lose confidence. They take out their money, invest in land and gold and hence enter the real street. This is a classic spillover of a wall street problem into real street. Did you see the mix of black swan, wall street, real street, extreme capitalism and financial globalization? Imagine this on a huge scale, where almost every person of a country is involved. This is the reason people say life 50 years ago was very nice. Everything was independent.

 

subprime-mortgagesA very important term we will be using again and again in the crises is ‘sub prime mortgages’. They are loans given to less worthy individuals to buy homes, during the US housing bubble of 2000. These mortgages eventually burst the bubble in 2000s.

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A basic rule of capitalism is that government does not interfere in the business of a private company. But when a company is to big to crash the government uses a bail out. When a large corporate which was profitable and employed large numbers suddenly goes bust, the government does not let that happen due to many social considerations. The financial help given to avoid the bust is called a bail out. This is called too big to fail.360_bailout_opposition_0930

 

You will see that different investors got different rate of interest in the crises. To understand that we should first understand credit risk and liquidity risk. Credit risk is the risk of loss due to non payment of debt owned by an entity. Liquidity risk refers to the situation that an entity will have insufficient cash to meet its obligations. This can happen when the company’s products are no longer in demand.

 

slide1The most important definition is CDO or Collateralized debt obligation. It is a security backed by a diversified pool of debt obligations like bonds, loans or home mortgages.

CDS which is credit default swap is a financial contact between a protection buyer and a protection seller thus it is an insurance against default. Finally Leverage is Borrowing huge chunks of money to earn huge profits by scaling up deal sizes.

 

Now that we know what CDO, CDS, leverage, credit risk, liquidity risk, bail out, sub prime mortgage, financial contagion, black swan, financial systems are, we can finally get to the US sub prime mortgage crises. So are we ready to understand this flow chart?

 

Screen Shot 2016-04-23 at 11.30.45 PM It was believed the price of homes will never go down in the US because every family wanted to live in a better house.  A typical prime family has a father, a mother, a son or a daughter and a pet, that is it. The prime family wants a better house house. But unless you are a rock star or an industrialist you can not buy a house without a loan. The family goes to a mortgage broker whose sole job is to join you and the bank. As soon as you get a loan from the bank, the bank keeps the mortgage papers, which basically means that your house is not your house until you repay the entire loan with interest. This is the ideal system and always runs smoothly, but the Gramm-Leach-Bliley Financial Modernization Act of 1999 wanted the system to move faster. The investment banks enter the picture. These are the banks which are run by the best outputs of the best colleges and universities. The job of these banks is to help people earn huge amounts of money and take interest in between. This is absolutely legal. Its sources of money before Gramm-Leach-Bliley were leverage, China and Japan and US Federal Bank. The fat cats (very rich people) who are the people with excess pension funds, mutual funds and sovereign funds invested money in US Federal bank before 1999. Other than people with such funds, huge investment banks and people with hedge funds invested in US federal bank.us_dollar

After 1999 Gramm-Leach-Bliley Financial Modernization Act allowed investment banks to deal with commercial banks. The commercial banks sold many mortgage papers to investment banks. The investment bank made a new weapon with all these papers called CDO. The investment banks made three slices of the CDO. The first slice is called AAA or safe. The people in this slice are those with a high fixed income. The second slice is BBB or okay, the people in this slice are not as well to do as the ones in first slice and the third slice is risky where people belong to sub prime families. The banks asked the insurance company AIG to insure all three slices and make CDS. Now the main investment bank is the big player. While the American Federal bank is giving the fat cats, the offshore investment banks and people with hedge funds only 1% interest rate, the investment bank is willing to give the AAA slice to the fat cats for 4% interest, the slice BBB to offshore investment banks for 7% interest and the risky slice to people with hedge funds for 10% interest. It thus spread the time bomb world wide. But the problem has not started yet. We are in 2003-2004. Everyone is very happy.

hqdefaultBut now, all the three investors call investment bank and ask for more slices because they are getting amazing interest rates. The investment bank puts the pressure on commercial banks to get more mortgage papers. The bank puts the pressure on mortgage broker. This broker goes in the market and gets many new costumers. After 6 – 12 months, ultimately one day comes when the prime families run out. All the prime families have bought the houses they wanted. The pressure messed up the situation. As a broker all you care about is your commission and to get it all you have to do is get costumers. You don’t care if they are prime or sub- prime and you develop teaser loans. A sub prime family has one father, one mother, three sons, two daughters, 6 dogs, 2 cats and an average paying job (just an example). Due to teaser loans, which are the loans with low rates of interest at first but higher rates later, sub prime families couldn’t pay back their loans after 1 or 2 years. When you do not repay loans bank seizes your property. Now the problem starts. The investors see that the money is not coming. The repossessed homes are sold. So over night property prices started dropping.  The prime families see that the value of their homes is much lower than the loan they are giving. They leave their homes and shift to a cheaper but much more luxurious house. This causes the market to fall down even faster than before. In this disaster no one knows who has which mortgage paper across the globe. So the banks stopped exchanging money overnight. The banks stopped giving loans to the people who were in need of money and the economy of USA crashed. Everyone drowned across the globe because no one knew who has which sub prime loan because the banks which monitored it closed down. The investors in this crises were investors in India and all of them pulled the money from the stock markets of India. Whenever USA will stop QE or Quantitative easing which is pushing money in the economy, global investors will stop investing in India because they have been a victim of financial contagion and trust nobody. This is how India is related. This was the US Housing crises, financial crises, credit crises and sub prime crises.

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One thing we can learn from this is that pressure is never good. So dear CBSE lift the pressure off us. Hope you enjoyed the blog!

 

So many Misconceptions

(If you don’t like anything written in this blog, well then, keep it to yourself.)

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Some say the Vedas and Upanishads came 5000 years ago and some say Hinduism is on this planet since 10,000 years. So even if we take the average of this, Hinduism is at least 7,500 years old.  So the challenge for me today is to condense 10,000 years of evolution of a religion in a small blog post. (don’t get your hopes up, this is not going to be small). It is very very large challenge. But the heart wants what it wants (Thank you Selena Gomez for this awesome, absolutely original line)

 

When the Europeans’ arrived in India for the first time, they were shocked. They were shocked because the thoughts of religion they had in Europe and India was worlds apart. They were very confused and we should not blame them as hardly some of us know what Hinduism is really about ( lol ). So when a person doesn’t understand something he does a simple thing, he makes fun of the other person. This is what they did and this is what we do. But slowly and steadily as they understood the depth of the religion they realized what a treasure it is.

 

So even before we begin deconstructing Hinduism, let me tell you what a normal modern day Hindu would answer when I ask him, what is Hinduism? Today there are 100 crore Hindu’s. A little more. One was just born. One more. One more. Don’t worry Christians and Muslims are also being born. Hinduism is the third largest religion. So anyway, even if make a group of 100 normal modern day Hindus and ask them what is Hinduism, they all will give me different answers. That is Hinduism. It is different for every person and different for every Hindu himself. But is there a central philosophy around which this religion is built on? We will try to understand this today.

Screen Shot 2016-04-18 at 10.58.02 PMThere is a Brahman, all pervading energy. It is pure consciousness. It is everything! It is the beginning; it is the end. It never came, it never went, it was there always, it will be there always. There is an Aatma. It is the piece that comes out of the Brahman. It enters the Maya which is prakrati or nature. When the Aatma enters Maya, it is surrounded by a physical body. Now the Aatman or Aatma reveilles itself through consciousness or chetna. The chetna interacts with the body and the body interacts with the Maya. The body interacts with the Maya by three ways and by each way, karma is produced. If you think well, do well, positive karma will be generated and if you don’t negative karma will be generated.  Just like Mark Zuckerberg’s servers are noting everything like when did you login, what did you do, when did you do what you did, who did you talk to, what did you talk about, what did you like, what did you like and then unlike. They note everything. Just like that everything is being noted in cosmic registers. Every karma is noticed and balance is made. (Some of you Hindus must have become very upset while reading the last line, don’t worry you will become a good person by the end of this blog.) So every thing you do is noted, a balance is made and when you die, your karma chooses your next birth.

karmaThere are six categories. Aquatic, plants, insects, birds, animals and humans. Only a human has the gift of free will and only he can set things right. If a human generates a negative karma balance, his aatma will only go down and once the aatma goes down it takes hundreds of thousands of births and deaths to nullify the negative karma and then the aatma becomes human again. This cycle goes on and on and on and on and on and on. But in the middle, a human body is given to the aatma. If the human generates a positive karma, which is almost impossible without a guru or teacher because he will teach you that you are stuck in the natures cycle or maya cycle or maya chakra. When you realize you are stuck, you do everything possible to generate a positive karma to cut the maya chakra and reunite with the Brahman and fulfill the destiny of its human birth. If it does not realize it is stuck, then the endless cycle of life and death and life and death and life and death will go on.  Parallel to this the universe itself is getting created, nurtured and destroyed. Now this is a huge thought. This was proven by scientists in the 21st centuary but the founder of Hinduism said it 10,000 years ago. This got me thinking about the validity of Hinduism. BIg-Bounce

Now you must be thinking, where the freaking hell did god come from? The founder of Hinduism knew it would be very difficult for a normal human to understand complex ideas like Aatma, Brahman, kalyug, maya chakra, etc. So how can humans who in the twenty first century have difficulties understanding basic concepts like trigonometry understand such ideas. There are three ways. First way is that you understand Brahman and then you do not need symbols like gods to understand all the other things. But Brahman is formless hence it is difficult to understand. It is like sunlight, you can not see it, you can only see its effect. So the second way is that make a imaginary version of Brahma and keep it in your heart and mind, this is antaryaami or inner god. So in the second way too, there is no need to focus on tangible objects. But it is difficult. Our heart and mind are occupied by McDonalds, pepsi, boy friends and girl friends, smartphones. On the top of all this we have cholesterol. How will the poor inner god or antaryaami stay in your heart.

So is there a third way? Keep a pot of water on the ground and see the sun in it. There is only one sun so think that it is Brahman. If you do not want to do that, make a god of your choice, no problem. You assign roles to your gods no problem. Hinduism gives this freedom and it is the only religion which gives this freedom. Hinduism says you want to make fun of god, make fun of him, no problem. No religion gives this freedom. This freedom is given to you because Hinduism knows that you are making fun of sun and not its light. How can you make fun of something which you can’t see. There are six gods at top, there are many under them and many many under them. That is why there are millions of gods. Hinduism allows you to make gods because you are solving a problem. You are visualizing something no one can see. When people across the planet look at Hinduism they see a god with a trunk called Ganesh and they start laughing. They see a naked man with a snake on his neck. They see a man lying on a snake with a flower coming out of his stomach. They see it and laugh and ask the Hindu’s are these your gods? A true Hindu would reply that these are not gods these are my weaknesses. So Hinduism is a very complex topic and to understand it we must have a truly open heart.

1563488     Hinduism said everything is just energy. I can bet that when you read core concepts of Hinduism you must have thought it is nonsensical as there is no proof. Now tell me have you ever heard of the equation E=MC square. Immediately our view on Hinduism changes. Hinduism says satyug, kalyug, what is a million years for us is just a second for the brahma, this is exactly what Einstein said in his twin paradox. If two twins are on Earth and one kid leaves earth and travels for 10 years at the speed of light, when he will come back he would be ten years old but his brother would have been dead for a thousand years.img142

Hinduism said the Brahman can neither be created nor be destroyed it has always been there and will always be there. Physics says energy can neither be created nor be destroyed.

The infinite has already always existed and from that infinite an infinite can be taken out and the original infinite will remain infinite. This infinite is Brahma. This is what math says.

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Parallel to maya chakra, the universe is made and destroyed. So one may ask when did it start and when will it end. Hinduism says it never started as it was always there and it will never end. This is what science says. Big bang is followed by big crunch then big bang then big crunch then big bang then big crunch then big bang then big crunch then big bang then big crunch then big bang then big crunch………….

And science says that there maybe infinite parallel universes. This is exactly what was said in Hinduism 10,000 years ago.parallel-universe-reality

I have my own theory. I think Hinduism and matrix are similar. (Matrix is the programmed world people can live in) It will be possible in few years to upload your conscience to a computer and if we can do that then the real humans can do it easily. By making a matrix the real humans can check all our activities, observe us and therefore maintain a cosmic register. The conscience which does well as a human in the matrix can live in the real world. This makes the real world a very safe place and therefore a perfect society. If anyone commits a crime in the real world, he or she is sent back in the matrix. Maybe the idea of Hinduism was brought in the world so that people start their journey back to the real world without knowing it.maxresdefault

It is sad that people depend on their 5 mortal senses and think they know everything. Once Arjun and Krishna were discussing the same thing you and I are. (Arjun played a key role in the bhagwat geeta and was one of the 5 pandav brothers, Krishna was and is considered a god in human form) Arjun was yokel and was not ready to believe that there is a universe so vast and that there is aatma and Brahma and maya chakra. Krishna tried for a long time but Arjun couldn’t think beyond his senses. One day Krishna showed him the universe, the truth and Arjun, then, surrendered.  Swami Vivekanand asked his guru everyday, where is god? After months of asking, he was shown the same thing and he too surrendered.

When I got to know all of this I was as shocked as you might me right now. As we humans hardly think beyond money and materialism, we do not realise that there might be a greater reality out there. Everything said by Hinduism 10,000 years ago is being said by science today. So food for thought, is reality more than what meets the eye?

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The Wild Goose Chase

 

190111satish.jpgUSA has embassies across the globe and in every embassy there is an ambassador whose sole job is to send a telegram to the US called a cable. These cables include all the gossips, rumors and updates about a country and many of its important people. For example a cable might say that Vladimir Putin is a corrupted person with a weird face. Yes, that is how informal and delicate they are. In 2010 Julian Assange; the founder of wiki leaks, hacked into the U.S embassies and released 1.7GB of cables. This shook the world and critically damaged the relations of the United States with many of its ally countries.  In 2013 the offshore leaks of 260GB and in 2014 the Luxembourg leaks of 4GB had a huge impact on the world. But today, the Panama leaks of 2016 contain two thousand one hundred and sixty giga-bytes of highly sensitive data which is roughly 1270 times the data released by Assange. To read through the 11.5 million files at least 2 years are required and in one week twelve country leaders and 29 billionaires have been exposed. The papers have already exposed extremely influential people from over 202 countries. To understand the situation in Panama we need to understand everything about black money.

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In simple words black money is the money earned from illegal activities or transactions by bypassing the counties regulations. The proceeds of such underground economic activities are usually in cash, are not reported and hence not taxed. Recipients must hide it, spend only in the underground economies or make it legal by the process of money laundering. To prevent paying high rates of taxes companies looks for tax havens which are sovereign countries that offer very low or zero tax rate along with financial secrecy and lack of transparency and due to the fact that they are sovereign, no one other then the heads of state have a say in the policies. The black money is kept in offshore banks of tax havens.

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Large multi national companies start using tax avoiding strategies to shift their profit to low tax rate countries which badly affects the tax collection of their home countries. This is referred to as base erosion and profit shifting. As the US corporate tax is forty percent, companies like apple and google open subsidiaries which are companies whose major voting stock controlled by another company (usually referred to as the parent company or holding company), in Ireland (a tax haven) and start booking profit there.  The R&D account is put in the US. This helps a MNC save billions of dollars. But no worries, what apple and google are doing is absolutely legal although undesirable.

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But people who make money using prostitution, human trafficking, drug trafficking, deep web, terror, political dealings, etc. make money from illegal activities and hence do not report this money to the government, making it black money. These people have to convert their income coming from such activities called black money into seemingly illegitimate money or assets called white money. The conversion of black money to white money is money laundering.16034741-money-in-washing-machine-close-up-Stock-Photo-laundering.jpg

 

You might be thinking why is the heading of this blog ‘The Wild Goose Chase?’

The reason I named this blog post ‘The Wild Goose Chase’ is because the method of chasing black money is useless. What the governments of India is looking for is just 15-20% of 70% of 10% of 1 trillion dollars which is roughly 70 billion dollars. The government did not realize until the Panama papers were released that 90% of the black money which is estimated to be 50% of white economy (1 trillion dollars) is laundered within the country and only 10% goes abroad. Out of the 10%, 30% comes back to India, therefore the whole approach to find black money was wrong.

 

So why are the panama papers important? Remember when a thread of our sweater or sock used to come out and we used to pull it, more and more thread used to come out, the Panama Papers have given that thread in the hand of a ICIJ which is the International Consortium of Investigative Journalists. Now enough of the highly complicated and boring stuff let us dig into Panama. What happened in this small place which connects North and South America and divides Atlantic and Pacific Ocean?

 

BlnaY_mossack_fonseca.jpgA Panama company named Mossack Fonseca sells shell companies world wide. In a short span of 40 years Mossack Fonseca has incorporated 214,000 offshore companies trust and foundation. It does a simple thing (just kidding it is not even close to simple, but I have to write that it is simple so that you keep on reading), by offering fake directors to hide original owners name it makes shell companies look like genuine legitimate businesses. The owner funnels money through multiple shell companies in different havens and thereby makes it very difficult to trace. The money is laundered and made white by the end and it is impossible to trace the path of money due to the number of havens.

 

Everything was going smoothly, until one day one man realized after 40 years that what he was doing was not right. You see how deadly realization can be. He actually called a newspaper and said ‘give me your email id I want to send you all the money laundering records this planet has seen.'(If this was a plot for a movie you guys would give the writer a tough time!)

 

Now some of the most amazing things we got to know in seven days.

 

  1. Daughters of the president of Azerbaijan secretly control gold mines.
  2. African president Jacob Zuma is making money of oil in DRC.
  3. Putin’s friends have stashed $2 billion abroad.
  4. 500 Indian names figure in the list
  5. XI Jinpinj ( Not eleven Jinping) who is the ruler of China also figures in the leak which is shocking because he started a brutal anti corruption campaign in China and has been ruthless. His brother in law also has shares in two companies in the Virgin Islands. But the Chinese would never get to know about all this unless they use a VPN or travel abroad.
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After the coming of Panama papers some things are unambiguous.  To fight against black money, national governments have to clean up their international systems first. Shadow financial systems need to be regulated just like global financial banks. Tax evasion should be a criminal offense. Beneficial ownership records need to be created to identify real owners. Cronyism needs to be tackled. Most importantly cash should not be a medium of exchange while purchasing real estate. If we keep going on the path we are on now, then it is needless to say that the whole chase is going to be a wild goose chase.

 

In the end I would just like to tell you all that I really don’t understand why people do so much for more going more and more money. People are ready to kill others, sell others, play with the life of others and harm others. They are ready to do a hundred frauds for materialism. If you are one of these people or even if you are not, just watch the video below and realise, for the love of the almighty himself that money is insignificant.

 

What the hell is happening everywhere?

 

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In class tenth we all read Julius Caesar. In the play, Mark Antony says that Julius Caesar will take vengeance. He will release the dogs of war when he comes back and there will be death and destruction to an extent that mothers will not cry when their children will die in front of their eyes. When I read this I thought William Shakespeare is nothing more than a serial exaggerator. But now that I understand the European migrant crises and the middle eastern imbroglio I realize it is not Shakespeare who was guilty, it was me.

 

In management it is said that if you want to eat an elephant, eat it bit by bit, piece by piece and eat the smallest piece first. If we try to understand the whole middle east situation at once we will end up frustrated, so let us eat the elephant bit by bit, piece by piece. (Vegetarian Hindu friends out there, this is just a saying so please do not start protesting!)

 

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In the middle east, Saudi Arabia is the home to the worlds last religious rulers, it is an extremist Wahhabi state, Iran is a Shia state and hence a mortal enemy of KSA (kingdom of Saudi Arabia), Turkey is a secular country and an ally of the United States of America, Israel is a very small country and hence everyone has to serve in the army and finally comes Syria which is an ally of Russia. So the whole middle east is a time bomb.

 

Next we look at the formation of Islamic State. If I use the common Indian saying to tell you what the Islamic State is, I would just say sone par suhaga. So with the civil war going on in Syria, the sectarian war going on in Syria and the Proxy war going on in Syria, Islamic state is icing on the cake. So how and why was it formed? It all began on a warm summer evening in Afghanistan when U.S.S.R entered Afghanistan.

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Why they entered Afghanistan is a whole other story so we will not be focusing on it. U.S.A and Pakistan saw that there are many Afghan protesters/mujahidin’s desperate for arms and ammunition. U.S.A and Pakistan sold as many weapons as they could completely unaware of the fact that they were making a monster. This is the same mistake America made in world war 1 but what can we do, the big daddy does not want to learn from its mistakes. So when the Afghan protesters or Mujahidin’s defeated the U.S.S.R they were left alone with the ruins of a country. U.S.A gave no further assistance to them and this caused a civil war. After this the gulf war happened and for Osama Bin Laden this was an invasion on Muslim territory. This action solidified his hate for Americans and he formed Al- Qaeda which means ‘the base.’ He attacked the U.S.A on September 11, 2001. The U.S.A destroyed Al- Qaeda after that incident but never expected a child to born out of Al- Qaeda and the Mujahidin’s Taliban called I.S.I.S.

 

la-afp-getty-syria-conflict-anniversary-files3-j-20140327Now finally we come to Syria. You must have heard about the Arab Spring. It was a movement for democracy in the entire Arab world which started from Tunisia in December 2010 and spread to all other Arab countries. In march 2011 it hit Syria too and people demanded president Bashar Al-Assad to resign. The reaction of the government was just like we can expect. They killed as many protestors as they could. But the problem is not the civil war. The problem is that Russia, Iran and Hezbollah support Syrian government and USA, Turkey and gulf states support the rebels. But this is only a part of the problem. The bigger problem is that Shia Muslims who are backed by Iran, Assad and Hezbollah are fighting Sunni Muslims who are backed by rebels, gulf states and I.S.I.S and within the Sunni muslim supporters I.S.I.S is against rebels who are supported by gulf states. But there is one more problem. Other than the sectarian war and civil war a proxy war is also being fought between gulf states, USA and Hezbollah, Russia and Iran. So if you didn’t understand whatever I wrote in this paragraph just understand that everyone is killing everyone and only no one is safe.syria-2015-photos

 

Other than this ISIS is proliferating every day and more and more countries are being a victim of terrorism. On the top of this the prices of oil are falling down and the middle east is therefore in turmoil.

 

People have no choice but to leave the country. From Syria people are entering Egypt (1m), Lebanon (1.2m), Iraq (0.249463m) and the worst Turkey(1.9m). Why is Turkey the worst? The reason is that Turkey connects middle east to Europe. The problem is the Schengen agreement. The Schengen agreement clearly states that internal borders between countries should be removed and the signatories cannot violate the agreement in any situation. So once a person enters Europe he or she can go to Austria, Belgium, Czech Republic, Denmark Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain Sweden and Swiss.Schengen-treaty-membership

People are not only entering Europe from middle east but also from Africa. On the coasts of Africa human smugglers stuff people in boats and send them to Europe. They take money in Euros and take everything the person owns. Even after taking so much money , they stuff 200 people in a boat of maximum capacity of 100 and in Malta only 104 reached alive and 2860 died in the journey.boat

 

The problem is that Europe is  ‘sweet.’ It doesn’t let people die. If you are the worlds most wanted terrorist and are caught in Europe, you will not be executed. On the top of this, the country which you belong to has to sign a agreement that you will not be harmed or killed.

Europe has accepted many refugees and has given Turkey 3.3 billion dollars to accept refugees. If Turkey keeps accepting refugees its talks with EU for being a part of EU will begin in July, 2016. On the top of that, every time Turkey accepts a refugee, a refugee from Turkey gets accepted in EU. Hence Turkey is happily accepting refugees. But terrorism is spreading in Europe and many EU nations are violating the Schengen agreement as they do not want refugees and this is causing some serious conflicts.

Hungary Migrants

A group of migrants line up after crossing a border from Croatia near the village of Zakany, Hungary, Saturday, Sept. 26, 2015. Conciliation replaced confrontation among European nations which have clashed over their response to a wave of migration, as thousands of asylum seekers streamed into Croatia on Saturday in hopes of chasing a new future in Western Europe. (AP Photo/Petr David Josek)

 

So this was all about the European migrant crises, the middle eastern imbroglio, Syria and terrorism but there is someone more dangerous than the dogs of war. There is someone who can be the reason for the end of the worlds last super power. There is someone out there who can destroy the world as we know it and you guessed him right ladies and gentleman, that man is Donald Trump. In the last 30 years coastal economies have done well but the manufacturing sector has crashed due to the Chinese. The reason he is becoming popular is that for the past thirty years the current account balance of USA has run a perpetual deficit. The only solution US has is to regenerate its industrial economy.  Hillary Clinton, who is his only competition is stuck. She was the foreign secretary and one thing the person of that level should do is to make sure that no one can hack into their emails. She used her own mail and kept the server at her home making it extremely easy to hack into her account. This small mistake may cost her this year’s elections. One can only hope that Americans don’t elect Donald Trump to this will happen to the white house.11a1a1Screen Shot 2016-04-03 at 2.45.28 PM.png