Monday, 30 December 2013

Banking : The World's Best CON System


What names comes to your mind if I ask you to list the richest 5 countries in the world ?
You will probably say United States, United Kingdom, Germany, France, Japan right ?
at least most of us will put the above countries in top 10 richest countries in the world.

Here's a small addition to your knowledge base, According to the latest IMF report, those are the top 5 indebted countries in the world, in that order.

US heads the list with more than $17 trillion in debt, which would be more than $22 trillion in the next 4 years.

If you check the list of debt as a percentage of GDP, these countries wont fair well there too. All these countries feature in the top 30 list.

So what does it mean? why are the countries we think as the richest and prosperous are the ones which are in serious debt ?

The reason is because, the banks create money as DEBT.

If you are thinking that your government creates money, you are 100% wrong.
And if you are thinking that your central bank creates money, you are around 3% correct, because 97% of the money circulating in our economy is created by the banks out of thin air as debt,
only around 3% is created by our central banks, which are in the form of notes and coins.

All the money created by banks is just some numbers on your computer screen, numbers in your credit card.

For those who are unaware how banks create money with the stroke of keyboard, here's a quick gyan.

Imagine that there are only two banks in the world, with a central bank mandating fractional reserve ration of 10%.


Assume you ask the banker for a $100 loan, banker will provide you the loan by crediting your account with $100.
Bank now will have $100 as loan asset, $100 as deposit liability and $0 in reserve.
Bank needs to have $10 as reserve, which they can borrow from the central bank or from the second bank.

Reserves at the central bank is created by the asset of the central bank including the amount of physical money and the government deposits in the bank.

Lets say, you gave the $100 you took from the bank to me in exchange for some goods, I'll put it in the second bank. Now the second bank has $100 in deposit, which it can turn into reserve and lend $1000 to you again.

As you can see, within the banking system, the reserve never comes down unless we are going to take everything from banks as physical notes and keep them in our home, of course which is not going to happen.

With the central bank having reserve of $10 physical note as it's asset, more than $1000 entered the system as debt created by the banks using some keystrokes in their computer in just two transactions.
Observe, it's the loan which created the deposit, not the other way around.

It's a classic text book theory that, banks save fraction of their deposits and lend the rest as loan.
For example, if you deposit $100 to bank, the bank keeps $10 as the reserve requirement and lends the remaining $90 as loan.

But this is exactly how the way banks don't work.

"Banks do not, as too many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo – extending a loan to the borrower and simultaneously crediting the borrower’s money account."

source :  Credit Money Leverage.

 Lord Adair Turner (was the Chairman of the Financial Services Authority until its abolition in March this year).
"Under the present system banks do not have to wait for depositors to appear and make funds available before they can on-lend, or intermediate, those funds.
Rather, they create their own funds, deposits, in the act of lending. This fact can be verified in the description of the money creation system in many central bank
statements, and it is obvious to anybody who has ever lent money and created the resulting book entries."

          - The Chicago Plan Revisited; by Jaromir Benes and Michael - IMF

"Banks lend by simultaneously creating a loan asset and a deposit liability on their balance sheet.
That is why it is called credit "creation"--credit is created literally out of thin air (or with the stroke of a keyboard).
The loan is not created out of reserves. And the loan is not created out of deposits: Loans create deposits, not the other way around.
Then the deposits need a certain amount of reserves to be held against them, and the central bank supplies them."

  Paul Sheard, Chief Global Economist and Head of Global Economics and Research Standard & Poor’s Ratings Services.
Source : Paper - Repeat After Me.

         Whatever may be the process but the real problem is that you have to pay back the bank $1100 with interest, which never exists. of course when you pay back the loan, it will be destroyed with another key stroke, but Literally you'll never be able to pay the non existent interest on the loan you took without you taking one more loan or someone taking loan from the loan and giving it to you.

This is the problem with banks creating money as debt. It can never be paid back.
When economy booms, just more unpayable debt enters the system or vice versa.
When no one takes loan from the banks or in other words, if everyone starts to save, no new money gets created and the system simply comes to an halt. Depression.

So to keep this system running, people and government has to get into the debt and pay back the bankers with interest which was never created.

This forces the government to cut it's spending on the social work and welfare and increase the taxes, just to satisfy the debt created by the banks and the imaginary interest which is not even exist.

This sounds even more absurd as banks doesn't lend to anyone who desperately need the money. They always run behind those who already have plenty.

"A bank is a place that will lend you money if you can prove that you don't need it."

 - Bob Hope

Indirectly banks create the inequality around the world by forcing 99% of the world population to work all their life paying interest and taxes just to hand over everything to the wealthiest 1% .

For instance, Credit Suisse Global wealth database 2013 shows that the top 0.7% owns more than 40% of the global wealth. And the top 10% owns more than 80%.

Figures are almost same if we consider the inequality at the level of individual countries.
For example, 40% of US national wealth is held by top 1% of it's population.

The number of millionaires has increased by 2 million this year compared to last year and the report predicts significant increase in the number of millionaires and the billionaires in the world in the coming years.

When all the money entering the system in debt and rich gets richer, clearly it's the bottom of the pyramid which pays back all the debt and interest created by the banks.

According to latest UNICEF report , more than 20,000 children (under the age of 5) die everyday due to poverty not because there's a shortage of food in the world, but because there's a shortage of common sense.

In fact The Food and Agriculture Organisation (FAO) of the United Nations has estimated that each year, one third of all food produced for human consumption is lost or wasted: around 1.3 billion tons
America's food waste alone is enough to feed every hungry person in Africa.

Around 8000 people die everyday because of AIDS, not because our scientists haven't found any medicine to cure HIV, but because these people don't have enough magic numbers
the bankers create. What kind of system have we created around ourselves where money decides who should live and who should die ?

What else can be done in the poor countries, if the so called richest country in the world had to shutdown, fighting with it's budget plan to bring health care reform.

The process of sending the nations to debt works even so swiftly and it's so simple.

First, the credit rating agencies like S&P, Moody comes and says, your country is not credit worthy, you have too much of debt so we are downgrading you to the junk status.

As a side note, these credit rating agencies are private, for profit organizations who gives ratings for whoever pays them.

In April 2007, one S&P analyst told another,
“We rate every deal. It could be structured by cows and we would rate it.”
How credit worthy are these credit rating agencies ?
Well many lawsuits have been filed against these agencies and prosecutions are going on, specially about giving AAA rating to high risk CDO's even after knowing that they were going to fail.

Look at the defence of these agencies
"Everyone should have ignored S&P’s ratings because (and I kid you not) no reasonable investor would ever rely on them, and therefore S&P should not be blamed for the catastrophe."
This is the part of email found during the prosecution,

       "Lord help our fucking scam . . . this has to be the stupidest place I have worked at," writes one Standard & Poor's executive.
        "As you know, I had difficulties explaining 'HOW' we got to those numbers since there is no science behind it," confesses a high-ranking S&P analyst.
       "If we are just going to make it up in order to rate deals, then quants [quantitative analysts] are of precious little value," complains another senior S&P man.
        "Let's hope we are all wealthy and retired by the time this house of card[s] falters," ruminates one more.

And then the world bank comes into the picture and says, we'll help your country in coming out of existing debt by sending you more into the debt. But because your rating is low, you have to give higher interest!!

You just have to implement Austerity measures - increase the taxes, cut the jobs, reduce public salaries, scrap social welfare spending.

Don't care if your people starve, don't worry if your people come to street protesting, demanding for job. Allow our multinationals to setup factories and companies signing nonsense pacts to loot your country.

This is called national debt restructuring. This is how world bank helps countries come out of debt problem.
Moreover, if banks go belly up by bankers playing with derivatives, you have to pay your tax money to bail them out.

Greece: People protesting during credit crisis.

"I don't think anyone sets out to malign poor people but certainly that's what we do through organizations such as the World Trade Organization, the World Bank and the International Monetary Fund."
 - Bob Geldof

This is the absurd system we are having where factories will be there , machines will be there, people are ready to work but are not allowed.
Enough food is there in the world, but more than 800 million people don't have access to it.

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
          - Henry Ford

This is the reason why people getting into the street around the world, protesting against the inequality, through the Occupy Movement.

"If you have a Gun You could rob a Bank But if you have a bank you could rob everyone"
- Bill Maher

There's a different movement altogether called, The Zeitgeist Movement to completely move from money based system to the recourse based system.

These kind of movements have had their fare share of appreciation as well as the criticism; they also have raised some interesting points and proposed an imaginary system which they feel would solve all the problems of poverty and inequality.

If you have not seen the movie yet, take a look at it, ZEITGEIST: MOVING FORWARD.

Idea seems bit over the top, but sure is an interesting watch, which makes you think, if you watch till the end.

So the point is, money is not the problem, the problem is the way it is getting created.
And the question is not whether this rubbish system is going to end or not, the system itself is so flawed that it itself will collapse in the near future, but the question is whether we are going to wait for it to end or we going to end it.

Why does the government has to borrow money from the banks and pays it back with the interest ?
Can't it print all the money it wants for itself ?

First thing that comes to everyone's mind is inflation/hyperinflation.
How do you stop the amount of money entering the system ?
With politicians having their hand on the printing machine, they definitely will be reluctant to press the pause button.

We have seen in the past how insane printing of money led to lot of pain and suffering of the nations.
But inflation occurs if there's more money in the system. That doesn't occur if we replace bank money by debt free public money. Everything would be same except, this money can be evenly distributed for the welfare of the citizens without having to get into the debt.

Inflation starts if the government starts to print more money than the actual production of the country. of course this has to be taken care of.

For instance there would be strict budgets every year and the government can use the allocated money for spending, if there are any signs of inflation, it can raise the taxes as a first step of reducing the amount of money in the circulation.

This makes the government to concentrate it's energy in increasing the productivity of the country by creating more jobs and creating better social welfare programmes
to better help the people rather than worrying about financing the projects by borrowing from banks and foreign investors.

Good news is, the system of governments creating it's own money for spending is not a new one.
It has already been tried with success and has ended under unusual suspicious circumstances.

Debtless Money in the past.

The US Greenbacks.

Abraham Lincoln was finding it difficult to finance the Civil War, reportedly money lenders offered loans at 24% to 36%.

So in 1862, the Lincoln government came up with it's own money, popularly knows as the Greenbacks. Just because they were printed with green ink on the back to distinguish from the other notes in circulation.

Nearly $450 million worth Greenbacks were put into the circulation in less than three years.
It was debt free money created by the Lincoln government, so they didn't had to pay any interest on this money to any bankers.

This is what Lincoln wrote, after issuing greenbacks,
"... (we) gave the people of this Republic the greatest blessing they have ever had - their own paper money to pay their own debts..."
As you can guess, the move of Lincoln obviously was cheered by the public but not by the bankers, mostly Europeans spearheaded by the Rothschild at that time.
Bankers were all over the London times expressing their anguish and concern.
"If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce.
It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe."
Towards the end of the war, the money chargers were successful in seeing the "National Bank Act" passed by the congress, which made banks as the only creators of money in US, taking power off the federal government.

But Lincoln was considering this short successful experiment of greenbacks seriously and was eager bring back the power of creating money to the hands of federal government, but soon after he re elected, he was assassinated.

Greenbacks were gradually taken out of circulation. 1994 marked the official end of greenbacks.
With contracted money supply, US went to depression, people started to protest for the reissue of greenbacks in 1877.

It was at this time, The American Bankers Association secretary James Buel wrote a letter to it's members saying,

             "It is advisable to do all in your power to sustain such prominent daily and    weekly newspapers, especially the Agricultural and Religious Press, as will oppose the greenback issue of paper money and that you will also withhold patronage from all applicants who are not willing to oppose the government issue of money. To repeal the Act creating bank notes, or to restore to circulation the government issue of money will be to provide the people with money and will therefore seriously affect our individual profits as bankers and lenders. See your congressman at once and engage him to support our interest that we may control legislation."

All these things with contents of the actual letters written by the bankers and Lincoln are documented in detail in DR.R.E.Search's famous book,
"Lincoln Money Martyred". You can download the free ebook here, if you are interested.

The next president of US who had strong views against bank creating money as unpayable debt was president James Garfield.

After becoming the 20th president of US in 1881, he was eager to make some changes and was not shy to express his views like the one below.
"Whosoever controls the volume of money in any country is absolute master of all industry and commerce... And when you realise that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate." 

And guess what, within weeks of making this statement, he was also assassinated.

But it was president John F. Kennedy who realised the potential of governments issuing money and started to bring US treasury dollars debt and interest free to the circulation using Executive Order 11110.

Leaving little to guess this time, within months, Kennedy was assassinated and the day after assassination, all the money which Kennedy had issued were called out of circulation.

So time and time again, those presidents who dared to bring debt free and interest free money to the system were assassinated and their dollars were called out of circulation.

If you are wondering, whether it was only in US where government tried to bring the debt free money, you are wrong. Even Hitler came up with debt free public money called "German Labor Certificates".

German Labor Certificates.

During the great depression of early 1930's, sick of bankers creating problem and money contraction, Hitler came up with new money, and started spending it on public works like flood control, repair of public buildings and private residences, and construction of new roads, bridges, canals, and port facilities.

It created amazing results, within a couple of years Germany's unemployment problem was solved. When Hitler became Chancellor there were as many as 6 million unemployed however by 1935 there were only 2 million, and by 1939 there was a shortage of labour. While on the other side, US and most of the European countries under the control of the international bankers were struggling to recover.

Within five years, Germany was the richest country in Europe, thanks to the guts of Hitler challenging the banking system.

"I sincerely believe that banking establishments are more dangerous than standing armies."

- Thomas Jefferson

Central banks are created by the lobbying of the banks and their is little transparency on how they work.

Watch this 5mins video till the end.

So, for a change the world would be a better place, if we give our politicians, or to rephrase better, the representatives we elect, the power to create money than the bankers, who mere work to show improved numbers of their bank every three months.

Finally, this is what Lincoln said,
"The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power".


Friday, 2 August 2013

Narendra Modi and the Gujarat Model : Facts behind the overhyped, over advertised beliefs.

Narendra Modi - This man is seriously in the news. Media makes sensational news even if he sneezes, every politician in this country comes up with their own interpretation of the sneeze and enlighten this country about how secular or un secular his sneeze was, depending on whom they support.

Apparently no day passes without seeing him in newspapers or in news channels.

Without doubt he is the most controversial and famous/infamous prime ministerial candidate this country has ever seen. Surely Modism is making some noise.

There is no shortage of people who criticize him or those who admire him.

If we ask his critics, why they don't like Modi, we surely expect them to talk about the 2002 Gujarat riots.

So much has been talked and written about the riots, how he should have acted or not acted during the riots, how his poster boy image of Hindutva is going to affect him becoming
the prime minister of this country where Muslims form more than 13% of the population. So let's leave all these things.

Looks like even the man himself don't want to talk about those things.

And if we ask his admirer or follower who likes and shares pro Modi posts in Facebook, he'll tell about the economic developments Modi has done in Gujarat over the past decade.

One aspect which even his critics agree is the development. The splendid economic growth of Gujarat compared to other states.

The Gujarat Model of governance, The Gujarat Model of growth. Development oriented mind set of Modi and the way he works towards improving the economy.

This is wonderful. Let's see some of the claims of Modi, his followers, Gujarat government as the achievements over the years.
  1. In last 10 years, the agriculture growth rate of Gujarat is higher than every other state in the country.
  2. Gujarat is one of the most prosperous states of the country, having a per-capita GDP 3.2 times India's average.
  3. If it was a nation it would have been 67th richest nation in the world above many European and Asian economies like China and Ukraine .
  4. Gujarat accounts for 15.14% (USD 114.52 bn) of the total investments in India; Highest amongst all States in India.
  5. 7936 MoUs, worth Rs.20.83 Lakh crore (450 billion US Dollars) signed at Vibrant Gujarat 2011.
  6. 2,573,213(2.5 million) likes for his Facebook page, 1,974,996(2 million) twitter followers @narendramodi, 54,751 YouTube subscribers to his channel.
You must have read, heard and seen these things over and over again, in social media, in news channels, in news papers, Modi's speeches, in his own Television channel NaMO TV (it has gone offline after last election), in his own website, in his tweets, in his YouTube channel, in his Google plus page, in his Pinterest page, in his stumbleupon page, in his own Ipad and Iphone app, in his own Android app, in his Tumbler site , in his Flicker page, in his Facebook page, in his pages shared by your friends, his fans. what's left ?

But are these claims valid ? What is the ground reality ?

Well, what can I say? If it seems too good to be true, it probably is.


7936 MoUs, worth Rs.20.83 Lakh crore (450 billion US Dollars) signed at Vibrant Gujarat 2011.

This is the only thing Modi tells you which doesn't give you the true picture.

Lets give some thought to it, an amount like $450 billion doesn't make much sense to common people like you and me, who almost always deal in thousands or lakhs at the most !!

The number will make more sense only when we compare it with similar investment numbers.

How much do u think did India got as FDI for the complete year 2010-11 ?
Going by Modi's figures, if Gujarat can get $450 billion, then India should have got anywhere around 10 trillion dollars ? I'm being modest here!!

The actual FDI into India, according to RBI for the year 2010-11 was $30.38 billion !!!

Finance minister, Chidambaram even after coming up with so called second set of economic reforms and raising the limit on FDI to maximum level of 100% in many sectors like telecom and retail and trying to wove investors like never before, literally standing in the middle of the road selling India to the investors, by throwing away all kind of hurdles, India is still to get $50 billion FDI in an year.

What's the share of Gujarat in India's FDI ?
According to latest report by RBI, it's just mere 2.38%.

Modi called Gujarat as the "GateWay to India". Interesting to know what  he calls Maharashtra, as it accounts for 40% of India's FDI.

From 2000 to 2011 Gujarat received just about $7.2 billion in FDI, Maharashtra got $45.8 billion and Delhi got over $26 billion.

Fact of the matter is, 10 trillion dollars is more than 5 times the GDP of India, which stands at 1.87 trillion dollars. Modi's $450 billion is nearly one third of Indian GDP.

Now are you getting a sense of Modi's figures and how much does 450 billion dollars really mean?

The catch is, if I write on a white paper that I'll buy you a nice Mercedes car for you on your next birthday, that's also a MoU.
The beauty is, you can go on telling everyone that you'll get the car, but that doesn't mean that I'll actually buy you the car. If someone asks you where is the car, you can tell them to wait for another 10 years, that you'll get birthday every year.

This I'm afraid, is what Modi tells the nation every two years in vibrant Gujarat meets.

Facts suggests that, out of the total MOU’s signed under these successive summits, the share of projects implemented and under implementation have continuously declined from about 73% in 2003 to 13% in 2011. No one knows what happened to more than 80% of the MOU's signed. As expected neither Modi nor his followers talk about this truth. All they tell you is wait for another 10 years!!

The state’s share in investment intentions in terms of IEMs ( Industrial Entrepreneur Memorandum), letters of intent (LOIs) and Direct Investment Licences (DILs) has declined from early 20’s in percentage in  2005 to less than 10 % in 2011.

If this is the case, how did he even manage to get MOM signed of such insane amount ?

Well it's simple, he shells out crores to the US lobbying firm "APCO Worldwide" just for this job.
He is allegedly getting image make over service from this PR firm at the expense of tax payers money.

As given in their own website, APCO has former elected leaders; journalists; ambassadors; business and non-profit executives; government officials; market researchers; and communication and Internet experts, diplomats and policy experts who lobby at the highest level to influence public opinion and government policies in the favour of their clients.

APCO has, as given in their website, successfully done the make over of many politicians and dictators.

Modi in his website and in his government website claim that they have got whopping 889 billion dollars  MOU's signed from 2003 to 2011, which makes mockery of the total FDI inflows to India in its entire history. In fact it is way more than the FDI china received from 2003-11.

 Modi claims that 25 lakh jobs were generated in 2009, thanks to vibrant Gujarat 2009 and said it'll generate 52 lakh jobs in 2011.

Planning Commission Employment report, page no 126, suggests that, number of people employed in major sectors has come down from 25.3 million in 2004-05 to 24.65 million in 2009-10.

So, forget about creating 25 lakh jobs, Gujaratis in major sectors are losing job, thanks to Modi who scraped all regulations which required 85% of the jobs in the Gujarat industries to be given to Gujarati people.

An alarming number of Gujarat's working population  are employed in the informal sector . They usually earn low wages, have poor working conditions and low social protection. This is why Gujarat stands at 14th place in men's and women's wage rates among the major 20 states.

All these flaws are reflected in the growth rate of Gujarat compared to other states.
                           Source : Planning Commission state wise growth rate report.  

As we can see, Gujarat stands at 8th position in the list of top performing states.

In fact during Pre Modi period, Gujarat did better than all the top 5 states except Delhi.

Gujarat always performed better than India on an average, even before Modi, so the claim that he transformed Gujarat into a developing state is itself a lame one.

Also, interesting to see that all these states except Delhi have completely outperformed Gujarat in terms of growth in Modi years over pre Modi years.

I have left out many states like Assam, which have grown at the rate of 160% in last 8 years over the pre Modi years.

In fact if we leave out two dry years(98 and 99) , Gujarat grew at nearly 10% per year, which is exactly what Modi tells he has achieved in his period. So, less 98/99, Gujarat hasn’t shown even a one percentage point growth rate improvement in the Modi era.

We understand that FDI is not the only form of investment which flows, there are domestic investors as well. But surely FDI forms the bigger chunk, and when it goes for a toss, you can imagine whether domestic investors can invest more than 800 billion dollars in Gujarat.

Want more proof ? Check the growth rate GSDP in Industry sector, if so much of investment is chasing Gujarat, obviously you expect it to be number on right ?

                                           source: Planning Commission report on state wise GSDP.
 Here also, Gujarat vibrate only in Modi's speeches. It is haplessly placed at the 9th position.

Had at least half of the MOU's turned into actual investments, Gujarat would really had been the gateway of India and would have outperformed every other state or even complete china by a huge margin, as Modi claims.

This embarrassing fact might be the reason why Modi refrained from announcing the MOU's signed during 2013 vibrant Gujarat meet.

I tried to find this info in official Gujarat government sites, official Vibrant Gujarat site and Modi's website, but failed to get figures. I Could only find MOU's signed till 2011 summit.

But most newspaper articles suggests that, value of the MOU's has come down to 10 lakh crores from 20 lakh crores of 2011.

Clearly, Modi has realised that, he just can't go on feeding the nation with some insane numbers without any substance.
It's pretty conspicuous that Gujarat is heavily vibrating only because of the special effects of Modi's well paid PR agencies. But in ground reality, nothing special to speak off.

Don't think Modi tells half truth only to the people, he sees corporates no differently. Just take a look at his claim in vibrant Gujarat summit 2013,

         " Gujarat has lost zero man days due to labour unrest (strikes, lockouts etc.) "
Is it true ? You bet it's not.

Check the annual report of Union finance ministry - The Economic Survey for the year 2010/11

(page no. 235 - 236), It clearly shows the "maximum incidences" of strikes and lockouts were recorded in Gujarat. Wage and allowance, bonus, personnel, indiscipline and violence were the major reasons.

In contrast Labour unrest in the country declined by 81%.

TOURISM : Under Modi, Gujarat has turned out to be the visitors favourite destination in India.

This is a quote from Modi's website,

         "In the last year Gujarat got over 22 million tourists and witnessed a tourism growth rate of over 16%, which is double of the national tourism growth rate. From Rs. 30 crore in 2005-2006, the tourism budget today is Rs. 500 crore. "

As recorded in official tourism website of Gujarat,

Number of tourists during 2010-11 = 19,811,936 (19.8 million)
Number of tourists during 2011-12 = 22,354,665 (22.3 million)

Anyone who can do simple calculation would find out that, increase is around 13% (12.8% to be exact) and not 16% as Modi tells the nation.

On the other hand, according to the ministry of tourism, overall tourism of India grew by more than 19%. I don't understand how 13% or even 16% according to his calculation is double of 19%.

If it is unfair to compare the Gujarat's tourism growth with National tourism rate, lets see how it has done compared to other states,

Gujarat stands 9th in the top 10 states list of highest domestic visitors.

Leading the list is Andra Pradesh with 207 million visitors, followed by Tamil Nadu(184 million).

Of course if we remove Tirupati from AP, it doesn't even feature in top 15, so lets compare Gujarat with Tamil Nadu.

In terms of absolute numbers TN got 184 million visitors as against Gujarat with mere 22 million.

In terms of percentage increase also, Gujarat is no match for TN where tourism grew at 32% in 2011 and 34% in 2012.

Lets see how much TN is spending yearly,

According to official TN Tourism report, TN allocated 42.6 crores in the year 2011-12 to grow at 34%, compared to Gujarat which allocated nearly 500 crores, more than 10 times the fund to attract nearly 10 times fewer tourists.

According to Gujarat Tourism department, 70% of the required capital for this year will be funded through long term borrowing.

Surely, a thing to get noticed.

Lets keep development aside for some time and see how Gujarat model of governance is working.

Gujarat model of governance - Clean and corruption free.

This undoubtedly the best one, standing at the top of all his claims.

Well there are two ways to achieve this clean and corruption free status,

1. Make everyone from top politician to common man clean and corruption free. No one asks any bribe, commission, nobody misuses his powers and misuse public funds.

2. Remove anyone who could possibly find out that you are corrupt. Create false statistics, Heavily publicise it in all the rallies, use social media, use your followers, use you advertising PR machine, lobbying agency, making everyone believe that you have eliminated all the corruption.

Never in the history of mankind, with so many super heroes coming in, able to make our society - corruption free and politics - clean, leave alone Gujarat model and Modi, however supernatural he may seem to his followers.

Modi is left to adopt second choice, and have to say he is quite successful in it.

Comptroller and Auditor General (CAG) of India has come up with many reports on
How Modi government gave undue benefits to corporates resulting in several hundred crores loss to exchequer.
How his investments from borrowing is turning bad and how he doing excess market borrowing to finance the fiscal deficit. in it's recent annual report.

While writing this article, report is not updated in official CAG website, but you can find the copy of full report here.

There are many allegations against his government in allocating lands to the corporates at cheap throw away rate, as less as 1 Rs per square feet to Adani group.

This is the reason why, Infosys and other companies also asked the land for Rs.1 per square foot.

If you see corporate leaders like Ratan Tata praising Modi, you now know why.

Man, you give me hundreds and thousands of acres of land at that insane price, I'll completely turn my article in favour of you. What else can a corporate leader with business mind, getting undue benefits from you can say about you ?

Department of Information Technology (DIT) report prepared after assessment of e-governance projects, suggests people in Gujarat have to pay bribes — around Rs184 on average — to get services from government departments which have been computerised.

It shows, Gujarat is the only state where bribery cases in this department have gone up after computerisation under the central government’s e-governance project.


It was not because he was paid from Congress that, one of the most renowned and respected Anti-corruption activist Anna Hazare said, Modi is not worthy of being PM candidate .

He said , Modi created hurdles in setting up Lokayukta. People are tossing his (Modi's) name for the PM's post. If he is so good a candidate why did he not bring a strong Lokayukta bill?

Anna Hazare's comments are not baseless, lets see why.
Gujarat doesn't have a Lokayukta since SM Soni retired in 2003. Thanks to Supreme court, on July 2013, Gujarat has now got a Lokayukta.
There was never a period in history where Gujarat didn't had a Lokayukta from 1988, the year when its Lokayukta took his office.

In Gujarat, the process of appointing Lokayukta was as follows,
Governor on consultation with the Chief Justice of the High Court and Leader of the opposition party.
Chief Minister and the Council of Ministers can just aid and advice the Governor in the exercise of all his functions. However Chief Minister has to formally request Governor for the process of appoint to start.

Mr Modi recently changed these steps to suit him, we shall see it later.

For now lets see some of the interesting game plans of Modi against bringing Lokayukta.

(I have extracted important sequence of events from the High Court judgement copy and have made some part bold, you may read only that, as I feel it has become a bit lengthy.)

1.Chief Justice Shri Mukhopadhayaya recommended retired high court judge R.A. Mehta for the post of Lokayukta.

This is the part of letter written by the Chief Justice to Modi and to The Governor Kamla Beniwal,

         " I consider Hon'ble Mr.Justice (Retd.) Ramesh Amritlal Mehta suitable for appointment to this post. I accordingly, recommend the name of Hon'ble Mr. Justice (Retd.) Ramesh Amritlal Mehta, for appointment to the post of Lokayukta, Gujarat State, which carries more responsibilities."

2.Accordingly Governor asked for a formal request from Mr. Modi, writing

           "May I request you(Modi) to kindly get the matter processed expeditiously at the Government level in accordance with the provisions of the Gujarat Lokayukta Act, 1986. The same may be submitted to me formally for consideration at the earliest possible."

What follows is interesting,

Modi writes back to the chief justice, objecting the recommendation of Justice Mehta.
Can you even imagine the reasons he gave for the objection ? Look at the extracts from his letter,
  •  I have perused the bio-data of Hon'ble Justice (Retired) R.A.Mehta. He has crossed the age of 75 years. Looking to the arduous nature of duties and responsibilities attached with the post of Lokayukta, Gujarat State, he may perhaps not be a suitable candidate for this job at such an advanced age.
  •  R.A. Mehta is associated with a few NGOs, Social Activist Groups and he has also given services as a panellist for them. It is obvious that because of his association with the NGOs, Social Activist Groups, etc. he may be in a fixed frame of mind on certain issues relating to the governance in the State.
Seriously Mr Modi ?

For your information, the current Prime minister of India is 80 year old, President Pranab Mukharjee is 77 year old, During his last year as the PM, Vajapayee was nearly 78 years old.
Youth favourite as you and your advertisements call you, is 62 year old. 75 too old ?

Of course the real reason is the second one.

Associated with NGOs and Social Activist Groups ?
Are NGOs and Social Activists are terrorists ? If you are so good, then why are you afraid of NGOs ?
why is your PR machine, not working well to impress NGOs and Social Activists ?

3. Chief Justice replied back to Modi saying he found nothing wrong.
              "During the last one and half months, I tried to gather the details about the activities of Mr. Justice (Retd.) R.A. Mehta and I find that there is no such activity, which makes him ineligible for appointment to the post of Lokayukta."

               "According to me, he is a man of high repute and integrity and always maintained high reputation while he was in Judiciary and still he is maintaining high standards in the Society.
Justice Mehta has never made any public statement, which is detrimental to the Society, nor has he shown any aspiration to any Government, whether State or Central."

              "It cannot be said that he is associated with one or the other NGO as there is nothing to suggest that he is a member of an NGO or he is asocial activist cannot be treated as a qualification for his appointment to the post of Lokayukta."

              "On the contrary, it would show the ability of a person who knows the ground reality of the society even at the age of 75, which is prime requirement for the post."

                "I, therefore, request you to take up the matter with the Council of Ministers and to forward the name of Mr Justice (Retd.)R.A. Mehta to Her Excellency the Governor of Gujarat for his appointment as Lokayukta of the State of Gujarat."

4.As expected Modi did nothing. Governor and Opposition leader sent letters to Modi asking him to send formal proposal to Governor.

Look what opposition leader wrote to Modi,

                 "I am pained to inform you that since last seven and half years, that is from 24.11.2003, the Lokayukta's post has been vacant in Gujarat. Since you became the Chief Minister you have in a blatantly illegal manner ensured that the Lokayukta's position remains vacant."

5. Instead Modi writes letters to Chief Justice and Governor not to consider Justice Mehta.

6. With no other option left, Governor issued the impugned warrant of appointing Justice R. A. Mehta as Lokayukta.

7. As expected, the same day Modi went to High Court stating that Lokayukta was appointed without his consent.

8. He also wrote to Prime Minister asking to recall the Governor.

9. On Jan 2012, Gujarat High court while delivering, rejected Modi's petition and harshly criticizing Modi's moves.

               Justice Sahai said, a “constitutional mini-crisis was sparked off by the Chief Minister” acting arbitrarily. The Governor's action, appointing Justice Mehta the Lokayukta “with or without the advice of the Council of Ministers, was for “preserving our democracy from being beleaguered and to prevent tyranny.”

             "The Council of Ministers headed by the Chief Minister had shown a “hostile attitude towards the primacy of the opinion of the Chief Justice. The Chief Minister acted under a false impression that he could turn down the superiority and primacy of the opinion of the Chief Justice which was binding. The spiteful and challenging action demonstrates the false sense of invincibility,”

10. Without any surprises, Modi shamelessly takes this case to the Supreme Court.

11. Supreme Court on Jan 2013, rejects Modi's plea to re-examine the High court verdict.

12. He didn't stop here, he filed a curative plea a to review the judgement, which was dismissed by Supreme court last month.

In between he did the most intelligent work,

This April, he passed a new bill, The Gujarat Lokayukta Aayog which allows him to
1. Choose the Lokayukta of his own choice.
2. Block Lokayukta from investigating any cases against himself or his cabinet ministers.
3. Remove the primacy of high court chief justice and the governor in the appointment of Lokayukta.

What great Gujarat Model of governance, what great deceive leader against corruption!!

Is this what you call a strong Lokpal, when you criticize central government in bringing strong Lokpal Mr Modi ?

If this is what you call a strong Lokpal, then all corrupt politicians would have backed Anna Hazare for this bill.

Lets go back to the economic developments and check the facts behind some of the other half truths.

Claim : In last 10 years, the agriculture growth rate of Gujarat is higher than every other state in the country.

As we can see, Gujarat stands at 6th position in the list of top performing states in Agricultural growth.

Just see the kind of improvement, the top 5 states have shown, on an average of 300% compared to mere 15% growth of Gujarat over the 10 years period of comparison.

If you consider only last 10 years performance, even small states like Jharkhand have completely out performed Gujarat.

How lame and baseless are the claims , that Gujarat’s agricultural growth rate is higher than every other state in last 10 years, when statistics show a completely different picture?

There are some things which Modi doesn't tell you. In social sector, Gujarat is one of the worst performing states in the country.
                     source: Planning commission report on state wise population below poverty line.

If we consider only urban area statistics, there is an increase in the number of urban population below poverty line in Gujarat.

Surely MODIfication of poor into poorest is working like charm.
                       source : Planning Commission report on state wise average tariff per unit

Gujarat is the most costliest state for electricity for domestic and agricultural use in the country. This is shocking, considering Gujarat is a power surplus state.

In 2007-08, tariff was 1.20 Rs/kwh, by 2011-12 it has been raised to 1.76.

This is the consequence of giving all powers to the corporates to decide the tariff as they want.

Education Sector :

It's better not to look at the education sector, Gujarat has one of the most pathetic record in this sector.

State has school drop out rate of 62. We can't even compare this with Kerala, Chandigarh or Delhi. Overall India has lower dropout rate than Gujarat.

This doesn't mean those who are sticking to schools are getting any quality education.

Statistics show that, Gujarat is the worst state in the country , when we look at the reading, writing and math skills of the rural students.

This is as ridiculous as, only 7% of Gujarat's class 5 kids can read English sentences, way below all India average and it's better not compare with other states.

ASER survey released Jan this year reiterated this fact, exposing more bitter truths about Gujarat's dismal education system.

Read DnaIndia's report extracting the major contents of the survey here.

Looks like Mr Modi is too busy in building roads and providing cheap loans to the corporates, ignoring the next generation. Of course, he is very well aware of the fact that kids can't vote.

Situation in higher education is not improving either, According to Ministry of Human Resource Development 2011-12, (Page 317), Gujarat has the worst record among all the states by leading the reduction in number of woman enrolment percentage into higher education.

Gujarat Model of Debt Management : If you are in debt, don't worry, borrow more to show that you are rich.
Outstanding liabilities of Gujarat government (public debt) as a percentage of GSDP is higher than the all India average.
Internal Debt of Gujarat is one of the highest in the country, Budgeted estimates for the year 2011-12 stood at Rs. 209 billion increased nearly 20% from the previous year. This is an alarming increase.
Out of Rs.209 billion, Rs.146 billion is market loan.
The debt has more than tripled since Modi came to power. Somebody is seriously spending lot of borrowed money, which will eventually hurt not only Gujaratis but also Indians in the long run.
Obviously you will never hear this thing either from Modi, in his uncountable social media interfaces or from his followers or from the opposition, as they are doing nothing better. 
When Mr Modi is busy feeding so many half truths to the nation, how can his followers be left behind ?
  • A picture of Chinese city Guangzhou’s bus transit system was viral on social media few days back, showing it as Ahmadabad's BRTS.
  • Ridiculous claims like, the next Modi becomes the PM, petrol prices will become Rs.10 per litre.
Of course these are not as ridiculous as the claims of the leader himself.
I can go on giving, hundred more stats to support that there is nothing special in Gujarat Model as it is made to believe.
On a lighter note, let us see one last point.
Apart for all the things mentioned above, there is one more reason he is more famous in social media by the name FAKU.
There are plenty of sites available to check the fake twitter followers and paid Facebook likes, just Google, you'll find many.
One such technology firm, came up with a report that only 10% of the 2million twitter followers of the decisive leader to be genuine. It's no different in Facebook also.
Of course he is not the only one doing it, many celebrities and politicians use this trick around the world for publicity.  
                                NDTV: Truth vs Hype: Narendra Modi - The grand illusion?

Using marketing PR firms to for publicity is not bad, but how good is creating half truth statistics and information and spreading it to the nation ?

While I agree that Gujarat has made some good strides towards development in his tenure but making mountain out of a molehill called the decisive leadership you talk about Mr Modi ?

When you suggest the Prime Minister to implement Gujarat Model for India, Is this model of cult and hype you were referring to Mr Modi ?

How true are the words of Adolf Hitler's Propaganda Minister Joseph Goebbels: "If you tell a lie big enough and keep repeating it, people will eventually come to believe it".

Life would have been so simple for Modi, had we been living in 17th century, without any access to genuine data, believing whatever Modi and his PR machine says is the truth.

Disclaimer : This article is not written to defame any political party or a person, or to support any other party or person. Also I'm not paid by any political party either.
Intention of this article is just to share publicly available data, in the process examining the wrong information circulating around us.

Saturday, 29 June 2013

Printing Money, HyperInflation and Currency Failure

Asia's third largest economy's currency, Indian Rupee (INR) tumbled to its lowest ever level of 60.76 per Dollar on 26th of this month.

Indian Rupee like most of the emerging markets currencies including South African Rand, Brazilian Real  has been under the hammer from the time Federal Reserve chairman Bernanke hinted a slow down in the printing press or Quantitative Easing (QE) which is flooding insane $85 Billion per month in purchasing bonds and mortgages.

This money is indirectly entering the emerging markets like India. Unwinding of QE will definitely result in huge sell off of these already beaten down currencies, pushing them down even further.

                              Three Months USD/INR currency chart (Source: Yahoo Finance)

Rupee has got a temporary respite from
  • RBI's data that Current Deficit (CAD) of India for the first quarter of 2013 narrowed down to 3.6% of GDP as against 6.7% in its preceding quarter. 
  • The USA's GDP expanded at 1.8% from January to March, down from a previous estimate of growth of 2.4%.
 Three months back, around Rs.55 would have bought us a dollar, today one has to pay around Rs.60  to get the same dollar. Lets just imagine for a second that rupee continues to fall breaching Rs.100 per dollar, Rs.500, Rs.1000, Rs.1 Million , Rs.1 Billion, Rs.1 Trillion, Rs.1 Quadrillion, Rs.1 Quintillion, Rs.1 Sextillion per Dollar, ok lets stop our imagination here, I'm running out of names of these large numbers!!

What will happen then ?
        If you are too smart and over intelligent, you would probably be thinking that this is a great situation, All is well !!

How ?
        Hmm, if one dollar is worth lets say, one trillion rupees, if I export one dollar worth of goods, for instance a mango, I'll get trillion rupees!!
Whoa I become a trillionaire just by selling a mango!! This is ridiculous , ok, let me buy a dozen of mangos this time, what will it cost ? Rs.50 ? Uh who cares? I'll give a tip of Rs.1000 and export them to get 12 trillion rupees. This is wonderful, I need not go to work next morning !!

Well you are right and congrats for becoming an overnight trillionaire and joining the league of Ambani's. Don't even bother to resign your job, let them fire you. You can anyways go in your free time and buyout that company itself !!

Things are great, but there is a small problem.

Next morning, when you open your door to pickup the news paper, you'll not see it.
why ? Newspaper boy made Quadrillions by selling Apples !! why would he bother to do this job now ?

On the flip side, you'll have to pay a trillion rupees to an imported item which costs just one dollar.

Try going to hotel, a cool drink which used to cost Rs.10 will now cost Rs.10 trillion.
Your maid who used to work for Rs.5000/month will now charge Rs.5000 trillion. Don't worry your salary will also get increased in your company.

This is the problem if everyone becomes millionaires !!
On a side note, If somebody tells you that a country will become prosperous if ever citizen in that country becomes rich, then it's a crap. You now know why.
Remember, there will be no value for a good looking and charming girl, if every girl around is as good looking and charming !!

Soon everyone will realise that nothing much has changed.
If we look at it, we have done nothing more than, just replacing numbers right ?
We have replaced Rs.1 by Rs.1 trillion. That's it. Everything else is functioning the way it was.
So, again all is well right ?


We have not yet discussed the real problem.

We have started to live in Hyperinflation and our currency is just one step away from getting devalued, Redenominated and completely thrown to the dustbins garbage very soon.

What ? We have just replace Rs.1 by Rs.1 trillion, tomorrow we will replace it by Rs.100 trillion, our income is also increasing by that standard, why should this create an hyperinflation and currency devaluation ?

This is an hyperinflation because,
  • our savings have eroded. Rs.5 Million one must have had in his bank account was more than enough to buy a nice flat and a car, which is now almost worthless.
  • Our income will not increase with the pace of our falling currency.
Our Currency will devalue because,
Demand for our currency in foreign exchanges comes down, as those who held our currency previously have made huge losses, no new buyer will come forward.
So we can't import any products from outside, as we need to exchange our currency to buy foreign currency.
It will difficult for government to raise funds by issuing instruments like bonds, it will have to pay huge interest on these bonds. Which again compels to print more money and further devaluation of it.

Finally everyone stops recognising our currency and it will be worth nothing more than toilet papers!!

 Well if you are laughing, thinking what kind of crap story is this guy telling, and these things have never happened or will never happen, then read on, this article is written exactly for you.

Fiat economy in which we are living has its problems. Currency failures are more frequent than one could imagine. To name some, Germany, Argentina, Peru, Hungary, Chile, Angola, Belarus have all had their currencies declared useless. See the full list here.

The most recent being the fall of Zimbabwe dollar on 12th April 2009. So, lets just go back few years and see what really happened.


You have to believe, when Zimbabwe dollar came to circulation in 1980, it was valued higher than USD. Just one man Robert Mugabe single headedly eroded its value with the able support of the Central Bank Governor Dr. Gono. These two have shown the world, how not to run a country and how not to run a central bank.

The man Robert Mugabe, who is famously or infamously called as democratically elected Dictator, was the Prime Minister from 1980-87 and is the controversial president from 1987 till date.

Dr.Gideon Gono, who had crashed Zim Dollor in his five year term from 2003-08, was controversially reappointed in 2008 by Mugabe to complete the unfinished job.

Till 1998, Inflation was hovering around 20%. This was high but still was under control.

While some positive inflation is healthy but when it starts to cross a certain level (RBI likes to keep it below 5%) things become uncomfortable.

This is where central banks come into the picture and start to check the flow of money into the system. It raises the interest rates, increases the minimum Credit Reserve Ratio etc.
Governments on the other hand, starts to cut down on the expenditure, increase taxes etc.

When these things don't work inflation keeps rising creating hyperinflation, this in turn increases the foreign exchange rates and decreases the value of the currency.

It then gets difficult for the government to borrow external money without paying higher interest rate. This is when things start to turn ugly.

There are only two ways to come out of this situation.
  1. Austerity - Where government cuts down spending, increases taxes, stalls hiring, reduces salary of its employees etc. As you can see this is not the popular one. Obviously politicians don't like this.
  2. Running printing press - This is more popular amongst the politicians. You want more money for government spending ? Just ask central bank to print more money for you. This is the most easiest and the most dangerous option.
No prices for guessing, what Mugabe asked his Central Banker to do.
Yeah right.
Just print more money.
This is exactly what he said in Feb 2006: "I will print money today so that people can survive."
And this is what happened, the inflation breached all possible levels.

In 2006, realising that the Zimbabwe Dollar(ZW$) was becoming worthless, they started to print new denominated currencies by chopping off three zeros.
In 2007, ZW$500,000 notes were issued. Salary hike of 900% was given to soldiers

In 2008, they came up with new currencies by chopping off ten zeros from the existing notes, as computers and ATMs failed to handle basic transactions in billions and trillions of dollars. Inflation was 231 million percent a year.

In 2009, ZW$100 trillion was issued. Inflation was just 6.5 quindecillion novemdecillion percent a year (65 followed by 107 zeros)!!. Prices doubled everyday.

The country was full of millionaires and billionaires. Kids were playing with millions of Zimbabwean dollars.                                                                                                                                                       
 Fruits and vegetables were costing no less than billions of dollars.

Shops were forced to slash prices, which took them out of business. Leading to the long queue of starved people outside empty shops.                                                                                                 

 Finally the German company, which was assigned the job of printing money stopped to print any more currencies as government couldn't provide them foreign currency to buy ink and special paper required. And people were forced to trade in Gold, Silver, USD, South African Rand, Botswana Pula, Pound Sterling.

Zimbabwean dollar was thrown to garbage and used as wall papers and toilet papers.

 Many who didn't had the access to accepted currencies, were forced to trade only in gold.

The country was headed no where. People were starved, there was no water, no electricity, no public transport. Country was on its knees.                                                                                          
Till Date they don't have their own official currency after suspending Zimbabwean dollar, they use USD for all official government transactions.
Old Zimbabwean dollars are nothing more than collection items these days. You can get them here if you want.

Positive thing to note is, things have improved in Zimbabwe in the last four years and future is expected to be much brighter.
As I said earlier, Zimbabwe is just one amongst many countries whose currency disappeared taking millions of families to misery.

Check this presentation video of Timothy D.Terrell for information on other currency collapses.                                                                                                                     

On a conclusive note, Emerging markets like India have to reduce their dependency on cheap      foreign money to fund their deficit. Once money enters the system, it will go out one day or the other, eventually selling home currency. There is no respite till the time countries offset their import cost by the export earnings.                                                                                                                                
Although Bernanke's move to slowdown printing press is causing some temporary hiccups in emerging markets. It's good for everyone in the long run that we are not going to see the below currency note in the future.