A Paradigm Shift

If you talk to any Indian or talk to yourself about India, sooner or later you will end up about talking about flaws in governance which lead to leakages of lakhs of crores of rupees. This time we are fortunate enough to have a government who talks about these issues almost as much as we do. Other than focusing on the major pillars like agriculture and farmer welfare, rural sector, social sector, education, skill, job creation, infrastructure, financial sector reforms, ease of doing business, tax reforms, fiscal discipline the government is spending most of its time trying to improve governance.

 

The process of governance has six steps. First the government must find the person for whom a particular scheme is made. After finding the person, the government has to empower the person. To empower the person and give the person benefits, the government has to reach the person. In the process of reaching out to the person the government has to minimize leakages, record and secure everything. The last step is to scale it up. The problem is that there is a problem in each step. Wrong people take benefits, subsidies are stolen by middle men, people are never identified properly, complex processes delay everything, records are incomplete or missing.

 

Government has given 2,66,691.84 crore rupees in subsidies in 2014-15 and most of this money was leaked. For example, in Bihar 92.4% of the food grains and essential commodities were diverted. 67% of the total stock of the public distribution system was diverted last year in our country. The present government has taken this problem very seriously and that is what I will be writing about in my blog today.

 

Due to the fact that we need a comprehensive approach to fix the various problems in governance it is obvious that technology is the key. The integration of technology in the government processes is called e-governance. Due to a fundamental change in technology in the past 5 years, the entire model has to change. The present government realizes this as much as we do and hence has launched a very ambitious project called the digital India program. The nine pillars of the programme include broadband highways, public internet access program, information for everyone, early harvest programmes, universal access to phones, IT for jobs and eKranti (electronic delivery of services), Electronic manufacturing and finally E-governance.

 

The programme required a massive grassroots implementation of basic processes, for example replacing multiple old systems of identification like ration cards, passports, voter ID, driving license, etc.

 

 

Screen Shot 2016-07-13 at 12.00.14 AM

The picture above is Indian governments technical strategy. It is not easy to understand because of the number of components involved, but it must be appreciated due to the amount of thought put behind it and the amount of possibilities it will bring to the table in the near future. Its key components on the soft infrastructural side include Electronic sign, Jan Dhan Yojana, Aadhar, Mobile, Unified Payment Interface, Digilocker, Navik, Digital India and Biometrically Authenticated Physical Uptake or BAPU.

 

Example of the possibilities created are as follows. A farmer has to go from his village to the city to sell his stock to the middle men there and get exploited to sell his stock every time he had something to sell, but soon all he will have to do is take out his mobile and tell the department about the stock he or she has. The government will take it from his land and the farmer would get money immediately in his bank account, leaving no space for corruption or malpractices as everything is digitally being done and hence being recorded.

The government has focused a lot on India stack. To understand it we should first understand what uber did and did not do. It did not make the maps, google made them, it did not make the payment methods, MasterCard and visa made them. It did not even make the GPS and satellites. All it did was assembling these components to make a fascinating product. Although there must be a lot of effort put behind to make it the company it is today, it is a fact that uber had most of its component made before hand.  India stack is the exact same thing. They want to give app developers all the components before hand and hence is providing so many possibilities, it is truly fascinating.

 

The next thing that amazed me was digilocker. Using digilocker you can just go on an app to apply for jobs and when they ask you to provide certificates, all you will have to do is access your digilocker account where you will find all your certificates, IDs, etc. and tick on the ones you want to submit.

 

You will be shocked like me when you get to know that there are companies who tell other companies how much a person lied when applying to the company. They provide a percentage of how much the person lied and recommend those who lie less than 27% because average lying rates are 79%. Mr. Modi is changing this by introducing digilocker. These examples were just to tell you how deeply our present government is thinking about small and big issues.

 

This is how things are going to change in almost everything and you are perhaps going to work in a world where this would have already become a reality. You have to prepare yourselves for this world, so learn hacking and new methods of frauds otherwise your future is very delicate and risky. This was a joke, nowadays it is important to specify that you are joking, if you learnt nothing from this blog today, at least learn this.

 

There must be 3 questions in your mind right now which I have not addressed yet because right now I am at a very superficial level and you people want to murder me when I write blogs of over 3000 words. The first question you must have is, What about illiterates? The government is taking that very seriously and has many new schemes for them, but there is a fact which the government agrees to, the future is not for illiterates.

 

Second question you must have is what if someone hacks into the servers? We cannot afford to loose this opportunity for something as menial as a possibility of someone hacking into the government websites and servers. It is a fact that every time someone has hacked into big data there is a new layer of security made which is much stronger than before.

 

Third question is that how will people know about the schemes? One-line answer: You will get a popup on your phone if you are the person the scheme was made for.

 

Using these schemes, the government aims to create a cashless economy one day so that corruption, black money and income tax problems are over. According to me, we are fortunate to have such a visionary government.

 

Goals are Funny

Before you read any further, this is not a very informative blog, in other words it is not the kind of blog I usually write, so skip it if you not into the moral stuff.

A great friend of mine adviced me a few months ago -when i just began blogging- that i should write about general topics, something that everyone can relate to. Her name starts with S by the way. So i said no one wants to read all this and anyway there are millions of articles outthere about all this moral stuff, but anyway i love this friend a lot and if i am free why not do it. So, the story about to come may be true may not be but the human mind gets bored at times and wants to write stupid crap so,

Imagine you are in an airplane. You are sitting on a window seat and have nothing to do. You stare at the clouds for a while and get a little creative. You look at different clouds and observe that all of them look like something. One of them looks like god himself. A man meditating is what god looks like to me. A voice in your head says ask for any three things you want and i ,god, will give them to you. You will get three wishes every three months and if you work for just a bit for them, i will give them to you. The only condition is that they should be wishes you can complete without me.
So i giggled a bit and said alright, i want either a 9.8 or 10 on 10 CGPA, I want to get into mit launch, and i want to be the captain of my schools house. I am a big fan of hollywood and so i know nothing is free. I asked him what does he want in return. He said i dont want that you worship me, but i want you to forgive me for every bad thing that has ever happened to you. Well my childhood was not all cute. But i wont get into that, lets just say it could have been way worse but it could have been a hell of a lot better. I asked what would happen if i forgive you, he said thats the only thing that makes me happy, to have one less hater and anyway after a while heaven is boring. Anyway, 3 months are up. Today results were out, got a 9.8, i am the captain of my house and i am reaching mit in 11 days.

These three things are all i dreamed of, all my life. Well i was a kid all my life, i am just 15 as of today, so my goals were small but all of them happening was and still is a big goal. Even though i have it all, it is true that i am still not happy. I watch people around me, they are around their loved ones like their girl friends or best friends and they are much happier than me. It gets me thinking what matters in life?

Today i write this blog in a plane, looking at clouds which look like yatchs, baloons, animals and a voice in my head just said, its time for your next three wishes. This time I ask for one simple thing instead of three. Before i tell you wht i wished for i want you to know that if your goal is to get everything you ever dreamed of then you will never be happy because you always dream for more. So what i asked for was hap…..

Terrorism Global Tentacles

What was ironical about the terrorist attack in Paris?
The word ‘terrorism’ comes from the word ‘terrorisme’ which comes from France itself and was first used during the ‘Reign of Terror’. During the French revolution starting from 1789 the leader of the Jacobean club Maximillian Robespierre started the reign of terror. His definition was, “terror is nothing but justice, prompt and flexible” It was an amazing definition for a gruesome act.reign-of-terror

In modern times, terrorism represents the killing of innocent people by non governmental, political or religious activists, often as a public statement. It is a form of asymmetric warfare, and used due to the impossibility of engaging in direct conventional warfare. Alex Schmid said, “act of terrorism = peace time equivalent of war crime”. In 1987 LA Khan said, “terrorism sprouts the existence of aggrieved groups.” Terrorism is a Hydra headed monster if you chop off one head another head pop up. This is a fantastic analogy for terrorism, unfortunately, this is a very demoralizing definition because no matter how developed a nation is, aggrieved groups will always exist.

1-alex-schmidIt is interesting to note that if the State labels a person ‘terrorist’, he/she will always label himself differently. He or she will always call himself or herself a revolutionary, rebel, freedom fighter, liberator, emancipates, guerilla warrior or separatist. So one mans enemy is another mans freedom fighter. The British said Bhagat Singh – an Indian freedom fighter – was a terrorist, but the man who hanged him – another British – said he was a freedom fighter.

Let us look at some famous terrorist organizations. Firstly, Taliban, which means students; it is an Islamic fundamentalist protest in Afghanistan to implement sharia law. It started as a small group in the early 20th century and by the end of the century they governed a nation (Afghanistan).

WORLD TRADE CENTER SOUTH TOWER IS IMPACTED BY HIJACKED UNITED AIRLINES
FLIGHT 175.

Next we look at Al Qaeda, which means the base/ foundation. PS – If it wasn’t a terrorist group, it would have been the name of my blog. From 1998 to date it is a global militant Sunni Islamist movement created by Saudi Arab resident Osama Bin Laden. It was joined by the Arabs fighting USSR in Afghanistan called Mujahideens. Osama Bin Laden came from a very rich family and was a millionaire himself but he was very upset that American soldiers were allowed on the land which he considered holy. For this reason, he wanted the removal of Al Saud family – the rulers of Saudi – from the country. Icing on the cake; Mujahideens were fighting USSR in Afghanistan and hence were funded by America, the president of USA – Ronald Reagan – met the leaders of Al Qaeda in the Oval Office! The Mujahideens turned into a Frankenstein monster and became uncontrollable. From Al Qaeda came the modern day ISIS – also known as ISIL. This is why people say America is reaping what it sowed. Don’t get me wrong I love America, the wall street, the billionaires (except Donald Trump), the Silicon Valley, the universities, etc. but unfortunately one mistake cost America much more than money.

Nigerien soldiers hold up a Boko Haram flag that they had seized in the recently retaken town of Damasak, Nigeria

Next we look at Boko Haram. Boko means useless and Haram means bad/ not allowed. What is that bad and useless thing that is not allowed? Western Education. Boko Haram is the bloodiest organizations running Islamic insurgencies. It is an extremist Islamist group of Nigeria. Its objective is to make all those suffer who have obtained western education. Michelle Obama started a twitter trend #BringBackOurGirls. The reason she did this was that Boko Haram kidnapped hundreds of girls who were obtaining western education and forcefully wed them to Islamist insurgents. She believed this was shallow even for terrorists.Screen Shot 2016-05-12 at 8.25.07 PM

Finally, ISIS. These are salafi jihadists. They follow the Sunni Wahhabi extreme doctrine. Wahhabism is the most extreme Islamists conservatists and shockingly the entire Al Saud family is a Wahhabi family. But the even more shocking fact is that ISIS says that the Al Saud Wahhabis are not the real Wahhabis, we are the real Wahhabis and we are coming. They declared a world wide caliphate in 2014. Today their leader is Abu Bakr Al Baghdadi.

Screen Shot 2016-05-12 at 8.47.35 PMToday there is a fantastic friction between ISIS and AL Qaeda. The reason is that the radicalized people either join ISIS or Al Qaeda and both of them want more and more supporters. This is the reason ISIS makes the most gore and heinous videos on the net. For example, they hijacked a plane in Jordan and kidnapped the pilot. They could have shot him but to attract radicalized people across the globe, they kept him in a cage, burnt him alive and made a video. It is needless to say that the video went viral and millions of young boys and girls saw it. In the young age the mind is so flexible, elastic and impressionable that one may immediately get radicalized. It is after a few years that these people realize what a mistake they have done by joining these organizations and when they realize it, it is too late. If you try to leave you get a worse death than the poor pilot. Taliban was never exposed to the modern world which basically means that the recruits never saw big cities. ISIS recruits are not idiots, they are extremely sophisticated and believe me they are recruiting very sophisticated people.

It is important to note that Saddam Husain was a tyrant but at least Iraq was united. Hosni Mubarak was a tyrant but at least Egypt was united. Muhammad Gaddafi was a tyrant but at least Libya was united. Saddam Husain was killed, look at the condition of Iraq. Hosni Mubarak was killed, look at the condition of Egypt. Muhammad Gaddafi was killed, look at the condition of Libya. The west can not wash its hand off and say that it is just a victim, because if it is a victim today, it was the assailant yesterday. It is a very painful truth, sorry for saying it but that is how it is. If one thinks that west can set things right, he or she cannot be more wrong.

The last ray of hope is India as even though it has such extremely vivid cultures, religions, traditions, interests and languages it mostly stands united and controlled. It does not matter that we as a nation are poor and made fun off, we are the last ray of hope. I can go on and on about terrorism and believe me I have not covered 1% of this Kraken topic but I will have to end now with one last fact because the human mind can only absorb so much.
The makers of the Indian constitution knew the problems India will face in the future due to the diversity in everything. They wanted to put the line “Satyameva Jayate Na-anrtam – satyena panthaa vitato devayaanah |Yen-aakramanty-rsayo hyaapta-kaamaa – Yatra tat satyasya paramam nidhaanam ||” but knew that if they inserted the entire line in the constitution they would be thoroughly abused for next 500 years (Sarcasm). So they put the phrase “Satyameva Jayate” which means “Truth alone wins, not untruth” I believe this was the best thing the makers of the constitution could have done considering the fact that the moto of almost all of the rest of the world is “In god we trust.” Hope you get why I wrote that. Thanks for reading!

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

financial crisis

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.

mortgage-bubble-bursting-by-the-sub-prime-mortgage-meltdown

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.

Cartoon

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.)

veda3

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.

1280px-Infinite

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?

main-qimg-915ab5687c12a29e2322f3f0ba6e8e4d

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.

panamapapers.jpg

 

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.

bl04tca_JPG_648721f.jpg

 

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.

159303_600

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.
  6. china-xi-jinping-discipline-inspection-jan13-2015.jpg

 

 

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?

 

battleroyal

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!)

 

memap

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.

Evstafiev-afghan-apc-passes-russian

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

Mankind and the Universe

 

Screen Shot 2016-03-26 at 9.22.32 PMEarth was formed 5 billion years ago, it cooled down and life emerged on it 4 billion years ago. In a billion years’ blue – green algae proliferated. Due to photosynthesis a lot of oxygen was produced and nearly a billion years after the algae was formed oxygen became one of the dominant gases of our planet. Two billion years ago Eukaryotic cells came into existence and one billion years ago sponges, jellyfish and other simple organisms like flat worm inhabited earth. The Cambrian explosion or Cambrian radiation was the relatively short evolutionary event, beginning around 542 million years ago in the Cambrian period, during which most major animal phyla appeared, as indicated by the fossil record. 0.006 billion years ago the first human Lucy appeared on Earth and 0.0002 billion years ago the modern human appeared on Earth. Even after knowing this we humans call ourselves the owners of Earth. If I use the common WhatsApp language to convey my emotions to this extreme ridiculousness of humans I would just say LOL.

Geologic_Clock_with_events_and_periods.png

The equation of life is => water (solvent) + {carbon + mixture} + right temperature = possible life. An interesting fact is that C-H-N-O-P-S can make all the biological structures possible. Hence I believe this equation is more or less correct.

2000px-CHNOPS.svg

Now enough of these stupid mortal talks! Let us think big. Before I tell you what the mediocrity principle is let us understand how big the observable universe is. Imagine yourself on Earth. You are nothing more than a dot when you are compared to the Earth. The Earth is nothing more than a dot when compared to the solar system. The solar system is nothing more than a dot when compared to the solar interstellar neighborhood. The solar interstellar neighborhood is nothing more than a dot when compared to the milky way galaxy. The milky way galaxy is nothing more than a dot when compared to the local galactic group. The local galactic group is nothing more than a dot when compared to the Virgo super cluster.  The Virgo super cluster is nothing more than a dot when compared to the local super cluster. The local super cluster is not even a dot when compared to the observable universe. So basically you are a dot within a dot within a dot within a dot within a dot within a dot within a dot within a dot within a dot. Wow I am a little woozy.

 

The mediocrity principle is the reason governments started investing money for space exploration. It says that if the universe is so vast that there are 100 octillion or 100,000,000,000,000,000,000,000,000,000 stars in the observable universe which is  1 followed by 29 zeroes, then why should we think that life is just on Earth. If life is on Earth, then it surely exists elsewhere. When Frank Drake was asked “ Sir, what is the chance we will meet ET?” He said, “ N = R*. fp. ne. fl. fi. fc. L ” Then he explained

frank-drake-formula.png

N = The number of civilizations present in our galaxy capable of using radio technology.

R*= Rate of star formation

fp = Stars with planets

ne = Number of planets capable of supporting life

fl = Planets with life

fi = Intelligent life

fc = Civilizations willing to communicate

L = For how long signals have been sent

Let that sink in. Those who understood this equation realize how valuable life is.

 

So what are we doing to find terrestrial life?

Well all intelligent organisms communicate in some way or other. These ways of communication are called languages. There are over 6512 languages on Earth so how can we say that the other intelligent beings communicate using English. So scientists thought about it and concluded that there is only one universal language and that is love. LOL, don’t take that seriously.

 

There is only one universal language and that is math. Only an intelligent being can make a series of prime numbers and send it out in space. Sequences like 31, 33, 37 can not be made by nature. So if any being has basic knowledge of math it can send out a radio signal of a prime number sequence. SETI has hundreds of telescopes across the planet which look for such signals. You can download a program from SETI’s website and your computer will become a part of the millions of SETI’s computers which are looking for patterns in the data.

 

But one day Enrico Ferni asked a very innocent question, “Where is everybody?” The answer is Fermi Paradox. It says intelligent ET life may self destroy itself just the way humans are going to by making nuclear weapons. The other reason may be that interstellar travel may be too long. If an object is faster than speed of light, then Einstein’s special theory of relativity dictates that you would become slower and things around you will move faster. This means that if some alien leaves for Earth today and reaches Earth in 20 seconds of his time, then the chances that it will meet humans is very small.

Here is a video explaining the Fermi Paradox (click Fermi Paradox for the video). BTW, it is the best animated video I have ever seen.

 

Here are the solutions for Fermi paradox – Fermi Paradox II

 

Some of you might wonder that why are we investing hundreds of billions in space exploration?

 

There are many diplomatic answers available out there on google but the reason I and many scientists believe space exploration is a necessity is due to what Stephen hawking said in 1995. According to him the human race is just a chemical scum on a small planet orbiting a small star in one of the billions of the galaxies and is most likely to kill itself and the other eight million seven hundred thousand species out there in the wild. The only way the human species will survive is by making colonies on various moons and planets in the milky way galaxy where it will be away from the dangers of not only nuclear weapons but nuclear men who can explode any time.

hawkingwwe-aliens-asteroids-ourselves-stephen-hawking-outlines-biggest-threat-to-humanity-jpeg-282934

There are many mysteries out there like can we bend space and time, what is dark energy, what is dark matter, the process of star formation, is our solar system the odd one out, etc. But science has given us answers and it will give us answers in the future. I just have one request from all those who are reading this blog today, no matter what your dream and goals are, no matter what your age is, do not let your curiosity for science go down. Science is the only thing which make sense in this universe if not the multiverse, amen!

Look at this picture carefully. It is the observable universe. Just stare at it for 15 seconds.observable universe.jpg

Now tell me what can money buy. Think about your goals, think about religion, think about what you want to do in life. Just think!

Entrepreneurship

Our prime minister started a very aggressive program called make in India. For the success of that program one thing is very important. Reforms, skill development, investments, etc. are required but there is something on which which this program truly depends on and that is entrepreneurship. There can be many kinds of entrepreneurships like social entrepreneurship, economic entrepreneurship, ancient entrepreneurship but it is very sad that when I ask you to name a few entrepreneurs you will name Steve Jobs, Bill gates, Larry Page, Warren Buffet, etc. but not Kailash Satyarthi who received a noble peace prize for protecting children rights. The reason he is not an entrepreneur for us is because we don’t understand what entrepreneurship is.

 

Professor Angus Maddison said an entrepreneur is a person who can put a thought into action. So any person who puts a thought into action is an entrepreneur. The famous word ThAct comes from here.

Unknown

Everyone can think. After 3 billion years of evolution the one thing we can do is think and it is truly funny that Indians feel extremely proud of themselves when they come up with an idea, but how many can think about the actions to place the thought in reality. Very very few can put a thought into action.

 

Take the example of Mu Sigma itself. The founder saw that India has tons of talent. We all know that India has a lot of talent, there is nothing new in this, but none of us made Mu Sigma. The founder saw that in America a lot of data was being formed and with the coming of smart phones the amount of data has proliferated. But the biggest thing he saw was that the companies did not know what to do with that data and that data was just sleeping in the servers. Then, he connected the dots. He thought about bringing the data to India and making the talented people here look for patterns in the data and make trend charts because ‘they’ do not know how to do it but we do. He connected everything, billion dollar company Mu Sigma was formed. This idea must have come to thousands of people but only one could give life to the idea. Such a person is an entrepreneur. The founder did not ask for funds from the government he said I will do it on my own. He brought the people and business together and started from level zero. Value creation or primary wealth creation is the second name for entrepreneurship.

mu-sigma

So entrepreneurship is all about identifying gaps or problems in existing system and offering effective and profitable solutions. Google is another great example. Larry Page and Sergey Brin saw a huge mass of data proliferating and people were trying to find something in it. His search engine was nothing more than a precise solution and AdWords and AdSense were nothing more than profitable solutions. So the definition of entrepreneurship is that it is the art of applying in which business and financial smartness is converted into a profitable solution.google

There are four factors of production, we all have learnt them in class 5. The first factor is land, the second is labor, the third is capital and the fourth which India desperately needs is entrepreneurs. It is very disturbing that in India people can not afford to fail. In countries like the U.S people wear the badge of failure with pride but in India the society despises failures. In the U.S if someone has failed in examinations all throughout his life but is talented or has done many projects but failed every time his chances of getting into a good college is equal to that of a person with good marks. While in Indian colleges the admission committee just looks at two things namely, SC/ST quota and marks.

 

This is the reason we have no choice but to disregard all things irrelevant to the exams because in the end if you want to live in India your life starts with an exam and your performance in that exam more or less determines your remaining life unless you are truly unique or your parents have good contacts. Anyway the reason I told you all this is that this race for getting good marks in higher classes does not allow a child to look beyond the main career fields and when a child works so hard for getting a good job he never thinks about being an entrepreneur. The people who end up being entrepreneurs are those who don’t get jobs. But it is nice that Mr. Modi realizes that entrepreneurs are essential for a countries development. Ah, enough sentimental and diplomatic talks.

 

So how do entrepreneurs make raise capital? The first person who invests a good amount in a startup is called an angel investor. Angel because they are actually like angels, before them you had nothing more than an unperfected product and before them you had no reputation. You say I am studying in Harvard; an investor will say so what 10,000 more are studying there. You say, sir I have an idea which has huge potential! Then he might say, “alright, here this is a cheque of ten thousand dollars.”  So now you reach the first phase. The process which keeps your company alive is called business incubation. Business incubation is a unique and highly flexible combination of business development processes, infrastructure and people designed to nurture new and small businesses by helping them to survive and grow through the difficult and vulnerable early stages of development. In other words, a hen sits on her egg 24/7 and takes care of it, this is incubation. Now, big investors get interested in your business, these investors are called venture capitalists or VCs. Your angel investor can also be a venture capitalist. They can make you an over night success. But it is funny, how many nights of hard work is required to become an overnight success. Anyway, when you survive the primary phase and become a successful business, large investors get attracted. Companies like Flip kart and Snap deal have single tickets worth over 500 crores in todays date because they don’t want any more dilution. 4 years ago their ticket size was only 20 crores. If they survive today, then they will not talk below 5000 crores a few years from now because that is the size amazon is. In the last stage you can list your company in the stock market, it is mostly up to the founders.

Screen Shot 2016-03-27 at 4.50.52 PM

I have been going on and on about online businesses. Let us talk about real world businesses. Raymond Croc used to sell mixers. He saw that outside McDonalds hundreds of people were standing in line to get lunch. He was shocked. He entered the restaurant and realized that the only thing sold there was burgers, French fries and shakes. He bought the entire chain, there were two or three restaurants. After buying the chain Raymond croc applied his systems and processes on the restaurant. Today there are 30,000 McDonald restaurants. This story can take up an entire blog and hence it is better to keep it aside for the while.

McDonalds

So if you think you are a problem solver and a person who can put a thought into action please do NOT become an employee become an employer. The country needs entrepreneurs.

Sovereign Debt and the European Crises

The USA sub prime mortgage crises was a set of events that created a financial crisis in the USA and by contagion lead to recession in the world. A rise in the defaults on sub prime mortgages created this crisis. The main reason was private competitive mortgage securitization.

When excessive lending to sub prime customers began a decline in housing prices was observed. This lead to rising delinquencies in payments by borrowers.  Parallel to this disaster sub prime mortgage backed securities.  These were sold to investors world wide. The problem began when people stopped paying. This caused the investors to lose confidence. Which further lead to the American recession. People pulled money out of the banks and stopped investing in them. The fuel which was required to give momentum to banks was dried up. It was then that the government thought of opting for the last resort of QE.

Screen Shot 2016-03-05 at 8.54.56 PM

America loves giving presents to the world. The recession was just the beginning.Screen Shot 2016-03-05 at 8.52.20 PM.png

 

 

Let b1, b2…… be banks. You can see the inter dependence on each other. Imagine if one of these banks undergo a run on the bank situation, what will happen to the other banks? They will be drastically affected. This is the gift USA gave to Europe.

 

To understand what happened in Europe we have to go in its past.

  1. 1942 – world war 2
  2. 1990 – cold war
  3. 1990- 92 – collapse of E. European communism
  4. 7th February 1992 – Maastricht treaty
  5. 1992 – Creation of Euro
  6. 1992 onwards – Monetary union EU
  7. 2000- My birth year
  8. 2000 onwards – Problems begin, period of high accumulation
  9. 2000 – 2008 – Securitization of future government revenues to reduce debt. Property bubble- Spain and Ireland, high social spending- Greece, Uncontrolled government expenditure- Portugal (PIGS- Portugal, Italy, Greece, Spain)
  10. 2000 – 2009 – Inter bank lending and banks holding govt. debt
  11. 2008 onwards – Global recession sub prime crises

Thunder falls on Euro- a. High debt levels in Portugal, poor demand in Greece, high bank exposure in Cyprus, property bubbles in Spain and Portugal

  1. All this lead to nations inability to service debt
  2. 2010 – 2012 – EFSM, EFSF
  3. 2012 – ESM 500 billion euros.
  4. 2012 – 2013 – Pressure on top performers
  5. 2016 – Political fall out in Germany and France.

 

 

The problems faced by EU were

  1. Many govt. kept spending heavily on social sector programs due to easy credit, example is Greece (LMP)
  2. In Spain and Portugal huge property bubbles were formed and they were financed by banks. Banks demanded bail out. Government had to recapitalize banks and had to go to ECB
  3. In Portugal decades of extravagant government spending had destroyed balance.
  4. Cyprus was favorite destination of Russians to invest in but unfortunately Cyprus banks funded Greece. Banks holding Greece debt were hit hard.
  5. The best part was that all of this happened when USA was facing sub prime mortgage crises.

 

Let me tell you a story of a son who was very sweet, sincere and extremely stupid. One day his father asked him to come home before 10 PM every day. He promised he would. The next day he came back at 7PM. After that 8, 9, 9:45, 8 and one day he came back at 12. His father said, “I asked you to come back before 12 why didn’t you.” The son said sorry. The next day the son came back at 12:30. His father was left with three options, he could beat his son and knock some sense of responsibility in him, kick him out of the house or forget what happened and let the child do whatever he wants.

 

These were the actual solutions by EU.

The could go bust and let the banks drown, severe austerity, nail out at tax payers expense, ECB + IMF bail out.

 

To measure health of an economy various ratios can be created. Here are two of those.

 

 

X axis: Deficit to GDP %

Y axis: Debt to GDP %

 

6.8, 177 – Greece

1.9, 21 – LuxembourgScreen Shot 2016-03-05 at 8.52.10 PM

See, taking debt is not bad. It is necessary for developing countries. After a while saving replace debt and are used to pay back net debt.

(Net debt = Sigma deficits)

 

Year Deficit Debt
2014 D1 ND2= ND1 + D1
2015 D2 ND3= ND2 + D2
2016 D3 ND4= ND3 + D3
. . .
. . .
20xy S1 NDm= NDm-i – S1

 

 

But Eu really messed up. I don’t see savings in the near future. So I would propose these solutions.

 

1)Creation of European fiscal union is a must if nations aberrations are not to affect the entire Eurozone.

2)Strict penalties for nations who breach the Maastricht criteria.

3)Strong austerity measures.

4)High GDP growth though increase in productivity per person.

5)Imposition of a one-time wealth tax to garner extra revenue

The rest is up to you EU.