Cash on Nash to Lash at Communism but it's not making a Dash despite the Bash!

I haven't watched or read 'A Beautiful Mind' and hence when someone told me that John Nash and his wife met with a fatal car accident I just joined in a collective gasp. Only later did I learn that Nash was the genius behind the famed 'Nash Equilibrium'. My tryst with Nash's work was during management studies and my respect grew when I found the man's work helped various fields from economy to psychology. May their souls rest in peace and equilibrium.

John Nash won the Nobel memorial prize in economic sciences in 1994 despite his contributions primarily had to do more with mathematics than economics. He had very less interest in economics too. Then why economics? Well could be because Nobel prize didn't recognise mathematicians (Alfred Nobel supposedly lost his lady love to a mathematician) and hence economics, as a centrist would tell you. Or because Nash's work helped in economics the most than other fields as a conservative would tell you. Or because it was all a big fat conspiracy by the western world as a communist would tell you.

Why is it a conspiracy some might wonder? Well the reason is though the work itself was devoid of any particular politico-economic ideology it was used to further the 'capitalism is best' idea. 

The crux of the Nash Equilibrium in layman's terms can be defined as - when two or more person strategise rationally for his/her own benefit taking into account the others' decisions they are said to be in an equilibrium and would tend to achieve the most optimal result. Extending this to economics one might conclude that if each player is selfish and is after his/her own betterment then each would achieve optimal performance (wealth). Thus it was arrived that capitalism and free markets were good. Businesses compete in a free market for their own selfish goals and eventually making the market a better place to live in for all.

Uh huh but, Houston, we have a problem! Not all humans can be expected to be rational in this age. In today's cut throat competition, businesses employ hook or crook methods to make money. Bribes are freely given and taken, competing businessmen not companies are eliminated, cartels are formed, resources, environment and the unassuming, innocent, Homo sapiens are exploited. The term for all this in vogue is crony capitalism. But by definition it's a free market, no one is stopping the others from doing all the above and they are well within their right of being selfish!

And not just that! Inequality, a serious problem engulfing the world, is feature of this capitalism says a new age economist who has done some serious research. He has compiled his work into a book 'Capital in the Twenty-First Century ' which incidentally is a best seller (I keep falling asleep while reading it, promised myself to get back after finishing Gone Girl). He is a Frenchman with a very French sounding name, Thomas 'no not Friedman' Piketty. 

This video though dated gives a clear understanding of Inequality in the USA which sells the American dream

And it makes sense. Can someone start with millions or even billions of the green back from the best of Wall Street and aim to compete successfully against the likes of Costco or Walmart in their own game? They may disrupt them with an alternate delivery channel like what Amazon or eBay does but in their own game of brick and mortar behemoths? Not unless they have really shitty management. Even in the alternate channel the success of the disrupter lies in the failure of the disrupted. If Google waked up to the potential of a social network earlier, I doubt Facebook would even exist today.

Thus in a capitalist economy, the haves have a clear advantage over the have nots and some government intervention is needed to bring about a level playing field.

And Mr. Piketty isn't quite finished yet. He comes with his analysis on previous revolutions like the French and Bolshevik goes on to make a scary formula

Where, r is rate of returns from capital, g is the growth rate and boom is a boom - a revolution that could overthrow capitalism and in turn democracy as we know it.

It is high time we get something to replace Capitalism. Communism may not be the answer, but a hybrid socialism could very well be the optimal solution.

Are we entering a period of USA 'neutral' Superpowerdom?

When the 'Nobel' committee decided to award US President Barack Obama the Nobel Peace Prize in 2009, I was one among the many people who criticized their collective wisdom. Here was a man who was commander-in-chief of the most powerful army in the world, involved in two of the most deadliest conflicts in the 21st century and who has proved nothing with less than one year into his presidency. What I didn't know then was the almost psychic power of the committee to look into the then distant future.

In his two terms of presidency, the commander-in-chief has many peace initiatives as badges up his sleeves.

Troop Draw down was one of his poll promises and he made good of it, due to poll compulsions or not, and it has shown good results in security situation in Iraq and Afghanistan from the American perspective with less war casualties.

Iran was another bone of contention. At one point it looked like invasion was imminent and stories of 'leaked' battle plans doing the rounds. Then there was Stuxnet, a complex worm which disrupted fast spinning centrifuges, sending the Nuclear program of Iran back by several years. The president stood his ground against the hawks in the war department and chose financial sanctions instead of firing Tomahawks. Now it emerges a deal would likely be clinched limiting the Iran Nuclear program.

With Syria on the boil, it emerged Syrian President al-Assad used banned chemical weapons against his own population, a la Saddam Hussein. The policeman of the world was furious and calls for punishing the Syrian state was in the air. However, sense prevailed, largely thanks to the efforts of Russian Tsar President, Vladimir Putin.

When the Ukraine protest movement gained a critical mass resulting in its President Yanukovych fleeing to Russia and the annexation of Crimea by Putin, Obama did a balancing act of reassuring his allies and repudiate Russia through economic sanctions.

Finally the talk of lifting of the United States embargo against Cuba, a communist state right next door confirms USA has been making peace with most of the world.

Not just buying peace with enemies, the US seems to be cold shouldering its allies too.

Israel, the Jewish state on whom USA's middle east policy is based on and whose security it views as most important next only to its own has been cold shouldered off late. Be it the controversy surrounding Israel's expanding settlement policy or Iran Nuclear standoff, the Israelis weren't taken along.

Saudi Arabia, the next important US ally in the middle east had got a similar deal. Not being taken along in the Iran Nuclear deal, they have turned to Pakistan, a nuclear power. There are talks of how the Pakistanis have even pledged to deliver the Saudis, nuclear weapons, all for a price. Saudis also feel by not providing the Syrian opposition forces with more powerful weapons the Americans have let gone a golden chance to cripple the Saudi's regional rival duo - Iran and Syria. The Iran Nuclear Deal only cements the suspicion of the Saudis.

Japan is scrambling for defense ties with India and Australia to offset a possible US dormant position as China is asserting itself with new air bases and infrastructure in the South China Sea. United Kingdom the most trusted and closest ally, next only to Israel, recently went ahead and joined the China-led World Bank slayer, Asian Infrastructure Investment Bank (AIIB). Most European allies have joined AIIB. Eastern European allies are kept in the dark as well. Poland and Czech Republic were promised a missile cover which never came to fruition. Georgia and Ukraine still await their NATO membership.

All this seems to suggest that USA would enter a period of consolidation - economical and political. The shale reserves, favorable demographic situation, though shaken not flattened transparent markets, innovative and enterprising, highly skilled immigrant welcoming community, all allows for this consolidation to happen. This may not result in a multipolar world as envisioned by Putin but would result in a 'neutral' almost pre-WW2 United States.

Unless there is a Republican victory, which could change everything.

Is the Oil Rout a Russian Roulette?

Russian Roulette, is a lethal game of chance. It involves a person with a revolver and a single round. The round is placed in the cylinder and spinned into position. The muzzle is put against the head and the trigger pulled leaving to chance the outcome.

The Oil Rout (2014-2015), is an ongoing crisis in the oil markets. It has been triggered by the reluctance of the biggest oil producers (OPEC especially) to cut supply despite sagging demand driven largely by the slowing Chinese and European economies.

There are rational reasons as to why the Oil rout is happening. The United States of America is tasting success with the Fracking process in exploiting the Shale Reserves abundant in their country and is poised to overtake many existing Oil economies including Saudi Arabia in production. It is alleged that the OPEC members fearful of losing their market share have kept supplies constant.

Keeping the tap flowing serves dual purposes for OPEC. It enhances delivery mechanism and infrastructure with the client thereby strengthening the business relationship wherein the client won’t look for alternate oil exporters. The other sinister purpose is with falling prices, Fracking, a laborious and costly process, would lose some of its sheen, breaking the balance sheets of the companies involved. This would be the ‘sweet crude’ news the OPEC members would be waiting to hear, Pun Intended!

A few years ago the US would have lunged into the situation in the middle east, brought a war or instability about, constraining production of crude which would lead to stabilizing of price. They are not interested in stopping OPEC this time. The reason, they are happy to see their other, old adversary, Russia, suffer. Russia being a predominantly export economy with Oil and arms as major exports is hurt. Once seen as the solid wall in the BRIC, the Russian Bear is expected to post its first negative growth rate this year.

But what if all this was grand game from the country that once dominated Chess. Therein lies the conspiracy (albeit, a far fetched one)!

Islamic State or ISIS or ISIL, a Sunni militant group is involved in fighting Shia governed countries - Syria and Iraq. It is not a secret that ISIS enjoys some patronage from other Sunni nations like Saudi Arabia and UAE. Even NATO member Turkey was reluctant to let the Kurds fight ISIS even after USA designated ISIS a terrorist organization. The reason was simple, in order to play a regional power Sunni nations needed to have proxies like ISIS to keep Shia dominant Iran and Syria at bay.

In the earlier days of victory ISIS controlled vast swathes of land adjoining Iraq and Syria. They were able to sell oil in the black market at discounted prices to maintain their war machinery. It was said the revenue was in millions of USD. They looked indestructible and was seen achieving a critical mass wherein their expansion furthered their oil revenues which feeded their expansions. 

However, the wheels of fortune greased by crude changed. With fall in prices, the revenue of ISIS probably fell. They have lost territories they once held. They had demanded ransom of $200mn from Japan for hostages. It seems they are no longer the fearsome power they used to be. 

And mighty Russia might, just might, be silently celebrating their master strategy yielding fruit. They helped their allies, warned its neighbours, took possession of a leased port along with Crimea, tested NATO’s resolve and reassured its ethnic population all in one big game plan.

Hillary Clinton likened Putin to Hitler. I feel Putin might be playing a Stalin - initiating a Scorched Oil Policy, burn a little and return victorious!

Bent for Barack or Flexed for Fission?

As the Air Force One lifted off it was time for us, Indians, to ponder what has been achieved. Both Obama and Modi are 'charismatic' in their own right and were great orators who were able to rally people with their speeches and mesmerized them to vote for them. It was therefore imperative to read between the lines to see at what cost, deals were achieved, as the spell of the #NamObama bonhomie cleared.

The one thing that stood out was the Indo-US Nuclear deal. This was achieved on day one of the presidential visit. The main bone of contention was the Civil Liability for Nuclear Damage Act, 2010. The act supposedly holds not just the operator (in our case the Nuclear Power Corporation of India) but also the supplier of the Nuclear Plant (the General Electrics and Alstoms of the world) and the fuel supplier. Now this legal minefield has been completely bypassed by the Government of India establishing an Insurance Pool to the extent of INR 1500 crores of which INR 750 crores is expected to come from five Government owned Insurance companies viz. General Insurance Corporation of India (GIC), New India Assurance, Oriental India Insurance, National Insurance and United India Insurance and the rest from the Central Government. I am impressed with the brilliant idea, however, I am equally or more concerned about the impropriety of this decision. 

Not long ago India entered a specialized group of select nations for having sent the Mars Orbiter Mission (Mangalyaan) to Mars. Not many people know that India never insured this rocket launch. Not only this India didn't insure Chandrayaan either or the countless other launches made using Indian rockets. They only insured rocket launches made from other countries with New India Assurance. New India Assurance in turn would reinsure it with other Global Reinsurance companies (like Spaceco of the Allianz Group). The Indian Reinsurance Company, GIC, was said to be lacking expertise or capacity or both.

The logic as to why none of the rocket launches from India were insured was straight forward. Indian Space Research Organization (ISRO) which was responsible for launching the satellites was owned by the Government of India. Similarly, New India Assurance Insurance was also owned by the Government of India. So any premium paid and claim honored would just be funds moving from one Government coffer to another.

Now the questions in my mind:

• Going by the logic in case of satellites, is it right to use Taxpayer's money to insure and in turn absolve the liability of another country's supplier of Nuclear plant and fuel? The premium will be paid by the operator (Nuclear Power Corporation of India) to Indian Government controlled Insurance companies to absolve the General Electrics of the world from Liability.
• GIC, found wanting in expertise to do actuarial work for satellites, has expertise to assess Nuclear Power Plants? The last time I checked Nuclear Power Plant accidents killed more people than satellite launch accidents.
• The Fukushima clean up till date has cost approximately INR 120 crores and the whole decommissioning of the plant is expected to take 40-50 years after which the actual cost will be known. Considering this, will a corpus of INR 1500 be enough?
• Will the PMANE, who were accused of being incited by NGOs backed by western countries against Russia, raise these issues against US suppliers. They had often quoted the Fukushima disaster in the past and now, General Electric, the company behind the Fukushima plant looks to setup plant in India without liability it would be interesting to see their course of action.

I am a big supporter of Nuclear Power Generation mainly because of the 3Ds of coal mining - Deforestation, Displacement of Indigenous Population, Damage to Wildlife and the pollution caused due to burning of approximately 15000 tons of coal per day for 800 MW (heard orally from a private thermal power plant in Tuticorin I visited).

However, the above questions have questioned my wisdom. Bent for Barack or Flexed for Fission? Considering the fact that we gave the Russians (and probably the French in the future) a similar deal, we flexed it for Fission! Hope it is worth it!

For a better India...

“PM Modi wins the reader poll for the TIME Person of the Year” declared the message with a barrage of punctuation marks and smileys in the WhatsApp group. Within minutes came the reply “Damn! Still he ain’t THE Person of the Year” driving home the point like a cold dagger through the heart. This has been playing out for quite a while now given that the 2014 General Election was one of the most followed and fought election on the Information Superhighway in the history of India.

However, the point cannot be missed. This doesn’t happen when a Kailash Satyarthi wins the Nobel Peace Prize or an A R Rahman wins an Oscar. Even their staunchest critics and rival nominees applaud. But when the Minister, a leader of the masses, is winning a poll, trivial or not, they aren't receiving similar support from their own citizens.

I wondered what could be the reason and arrived at two ridiculous conclusions.

A few of Indian rivers are perennial so are elections in India. Being the democratic, federal structure we live in, some part of India is always facing elections or approaching elections and given the broad ideologies of the parties, left, right or centre, the federal government either align or are opposed to the Government of India. Given the situation and the campaigning involved someone with an opposing view of governance always sees the ministers more as a party ideologist and less as an approachable minister fighting for the common man’s well being. So the Prime Minister and his Cabinet colleagues must refrain from poll campaigning and exhibiting party affinity publicly. When the President, Governor or a Civil Servant can display neutrality while at work, the cabinet can definitely do it too.

When a stock broker buys a high conviction stock, he or she tends to follows news that reiterates his or her conviction. The same happens in an interview to an interviewer, once the candidate impresses him or her, he or she continues to question the candidate to reiterate his or her decision. This is called a confirmation bias in the psychological circles. Now when a person decides to become a member of a political party, he or she does so after a good amount of research. Now if the political party is making a mistake the confirmation bias kicks in and hinders the rational analysis of the situation. Rather, the mind looks for news that reiterates his or her belief that the party is somehow right which is exactly what the party propaganda machine would feed. So party memberships should be abolished and issue based support and volunteering by common people should be encouraged.

Brickbat or Compliment welcome at comments below.

'Amma' Economics

A few days back as I was scavenging my way through the thrash piled up on the information super highway I came across a beautiful story; a story of hope and brotherly love witnessed by the writer in one of the newly opened amma canteens in the city. The writer dwelled on how two boys, orphaned at a very young age, were able to fend for themselves, treating themselves to hot sambar rice from the meagre change they had on them. The story was heart rendering and eye opening to the fact that there are downtrodden people who would require a helping hand for their very survival. No wonder this scheme is being studied by many countries around the globe for replication.

 

On the same day I heard from another friend on how one of the stalls set up to distribute amma drinking water bottles gets a consignment of just 30 bottles a day. This would roughly translate to 300 bucks as revenue from sales per day and 9000 bucks in a month. The astute businessman’s son he was wondered aloud, how this will be sustainable by the government when it had to pay the employee in the stall somewhere around 12000 bucks as salary. While the math may not do justice given the fact that there are other stalls that might be eking out a profit, it is also a fact that all these services are subsidized by the state government.

 

Now should the government be doing this has been the question of many debates by eminent economists and Nobel laureates, the relatively recent one between Jagdish Bhagwati and Amartya Sen prior to the elections, what could be the alternative is the one in which our country’s best minds should be spending their time in.

 

One alternative is to spend the money on setting up regulators who could regulate prices of the food, water, medicines, salt, etc for those in the weaker section. Rather than adopting a collision course with the entrepreneurial class in the state, the government can take them along by giving them tax breaks and foregoing its revenues by offering other perks for every woman they employ, every self help group they embrace by buying their products and every common man they serve. This would open the gates to many new entrepreneurs as well. By competing with the entrepreneurs the government is only alienating them further, discouraging them from paying taxes and adding unnecessary weight to the government machinery.

Edward Snowden - the surprises that failed to surprise!

For the past month or so, Edward Snowden had become a household name. Most people I met had an opinion about him and his revelations. They shared theirs and demanded mine. There was a problem, I didn't have one.

The first time, I suppose, I heard about the National Security Agency (NSA) was in 2003 or so when I read Dan Brown's years old novel - Digital Fortress. The plot, which I vaguely remember, involved a renegade ex-employee of the NSA, ironically. I personally feel, not before a friend pointed it to me, that Michael Chricton was a better researcher than Dan Brown, not to mention the plagiarism charges against the latter, I take it that this news was an open secret atleast since 1998 when the book was first published. So I was sure that it was entirely possible to be snooped upon by one agency or the other and given the age we were living in, I was quite sure it was happening.

However, the whole episode had 'exposed' many other things that 'surprised' me.

To start with President Obama of the United States of America. Though personally I like the Republicans more than Democrats, Obama was hard to be dismissed. He won with his oratory skills - emphasizing on Hope and Change and his famous - 'Yes, we scan' slogan. He seemed to be a person of his word and his promise on transparency did intrigue me. But now he has proved he is just another actor in the World's stage after he authorized the witch-hunt for Snowden.

Another person who I admire for his nationalism and resolve is President Vladimir Putin of the Union of Soviet Socialist Republics Russian Federation. He had openly challenged the United States of America in many issues and called for a multipolar world. If there was someone who was expected to stand cold like the Russian Winter on the face of American diplomatic heat it was Putin. However, his recent statements that Snowden should stand down and stop embarrassing his 'partners' to gain asylum in Russia was a surprise of sorts.

Ecuador's earlier rhetoric and support for Edward Snowden and its sudden u-turn attributed to Julian Assange's statements suggesting that he was running the show rather than the Ecuadorean Government came in at a distant third in the surprises race.

Edward Snowden is like Steve Jobs, a prophet or messiah to a small or large crowd but to me he comes across as someone who took something old, polished it, smoothened some rough edges (rounded corners patent?!), gave a fancy name (PRISM?! How about iSnitch?!) and marketed it and became famous.