Sunday, May 25, 2008

When India attacks India

It's bad enough that India's borders are being constantly attacked by Pakistan, China, Bangladesh, etc; and the secret service outfits of these countries have also created militant outfits within India that keep setting off bombs every few months.

What is even worse when Indians attack themselves. Everyday the media is filled with news of how some political or semi political outfit went violent and attacked people. Just today the story is about the Gujjar community in Rajasthan attacked people, police stations, blocked highways and dug up railways tracks. Lots of people lost their lives as a result, 1000s were injured, lots of economic damage was done and people are generally in a state of fear.

Another story today is about political parties in Mumbai, namely the Shiv Sena & the MNS are attacking North Indians and destroying property. They beat up so called North Indian taxi drivers for immigrating to Mumbai and destroyed these poor people's taxis and even killed a few. Then they went around destroying museums and commercial establishments because they had the word "Bombay" in their name.

This is happening with total and complete disregard for the law. My view is that if you are unhappy with something, goto the court and complain, but don't resort to destruction and violence. When the very political parties that are supposed to govern do this, it speaks volumes of the state of affairs of our judicial system and the liberties of the common man: there is virtually no justice in India !

India, please stop attacking yourself.

Saturday, May 17, 2008

Why the US needs to lower taxes and attract foreign investments

With 30% Federal Corporate Income Tax, 10% Sate Corporate Income Tax, and in the case of New York City, another 10% City Corporate Income Tax, and with Sales Tax of nearly 10% in most states, the US is one of the most tax intensive countries in the world.

Which is a shame, because it fabulous infrastructure, highly qualified workforce, huge capital markets and large domestic market the US is one of the best places to set up a global head quarter. A company could base it global HQ in the US and cut short by many years the time it takes to grow.

But these high taxes come in the way, so instead companies want to locate the corporate head quarters in Dubai, London, Gibraltar, or are agnostic about where they locate their headquarters.

With the diminished role of the US Dollar as the world's reserve currency, the US has seen since June 2007 reduction in monthly Government Bond purchases by foreign nations from $300B a month $80B a month. This has sucked a lot of low cost liquidity out of US capital markets.

To compensate for this reduced liquidity, the US needs to go all out to woo foreign companies to shift their global headquarters to the US. And the best way to do this is to cut taxes drastically and even go as far as giving 20 year tax holidays to any businesses over $5M turnover that relocate headquarters to the US.

With businesses relocating to the US, investments will follow and the US should easily be able to compensate for the low cost $220B it is losing out every month.

Friday, May 02, 2008

The unreal world economy

Oil is at $110 a barrel, yet the price of petrol and diesel hasn't gone up in India the last 3 years. Since a year back, oil has doubled from around $60 to approximately $110 today. Yet, I am paying the same in Rupees for my petrol as I was last year.

How is this possible ?

The price of petrol is being artificially maintained. India's 3 large petrol and diesel retailing companies, all state owned, are deep in the red, their combined debt has mounted to over $2000 Billion !

This is being done to keep people happy, to keep prices from going crazy. To ensure that people can go on living and there are no major disturbances in towns & cities.

But this is not sustainable. How long can the oil companies go on borrowing? This is madness.

The price will have to correct and when it corrects by doubling, cost of food, transport and electricity will go sky high. A majority of people's incomes will go towards simply meeting these costs and people will be forced to reduce spending on new homes, new cars, new tvs, holidays, clothes, etc. The economy will come to a screeching halt.

This is not just an Indian problem, this will be a world problem. The cost of the basics is likely to go so high that people are just not going to be able to afford anything else.

Unless, the world once again gets a new source of cheap energy, quickly.

What can that be? It can only be Nuclear & Coal. I think the planet should start going Nuclear on the double. There is no more time to waste deliberating if it is good or not, it is necessary. Coal fired power has already started, all recent power plants coming up seem to be coal based.

But can all this happen fast enough, or is the planet going to be caught napping and we will end up with 7 to 10 very hard years. Well, we'll find out in early 2009 by which time oil should have crossed $200.