Monday, August 31, 2009

How is the US able to spend so much more than its Income?

Its quite amazing as to how the US has a savings rate of -7% (yes negative) and yet it holds the world in almost all matters.It is true that it is funded. How? Now thats the big question!I did quite a bit of research and here are the few reasons which I managed to find-->

1. USD as a Global Reserve Currency:

The US has a spectacular credit rating which has enabled the dollar to become the globel reserve currency, meaning that the probability of the US Govt defaulting on its loans is very low which in turn means US Dollar will be a very strong and stable currency. Every country has to hold reserves of some foreign currency/gold in order to save itself from potential political/financial crises. Hence most of rest of the world holds US dollars. Holding US dollar in terms of currency notes don’t give any returns, so they are used to buy US Treasury bonds. The bondholder has actually lent money to the US Govt.

2. Global Trade:

Most of the commodities (Oil, Gold, Silver etc.) are traded on USD globally. This means buyers and sellers of these commodities have to hold dollars. Hence there is a constant demand for dollars across the globe. Oil plays a very important role here since it is the backbone of every single economy in this world. Whichever currency in which Oil is traded, rules the world. There are theories which suggest that the reason behind Iraq attacks is that Saddam Hussein wanted to sell Oil in Euros which threatened the dollar dominance in the world. Same reason for potential attacks on Iran.

3. Artificially low interest rates:

Since the begining of the 21st century, the US has seen a period of artificially low interest rates. This was done initially to save the US Economy from the 2000-01 recession which was worsened by the 9/11 attacks. The economy made a smart bounceback because of the low interest rates. Consumption is inversely proportional to interest rates. When the interest rates are high, there is an incentive to save and when the interest rates are low, there is an incentive to borrow and spend. Hence the US consumers kept borrowing which was funded by the rest of the world.

4. Absence of an Institution called Family:

I have borrowed this point from M R Venkatesh, a noted economist from Swadeshi Jagran Manch. He says the prime difference between the saving nature among Indians and Americans is that the family culture in India is a huge deterrent to reckless spending. It is very common to see that Indians start accumulating wealth after marriage. This, he says is absent in America. The presence of Social Security and Healthcare benefits further redice incentive to save.

5. The strong consuming nature of the US:

The US is a very strong consumer in the international market. They import much more than they export, which is evident from their trade deficit year after year. The US pays dollars to exporters (Say China, Japan, Thailand, Korea, India etc.). These countries do not convert these dollars to their own currencies. Instead they are used to boost the forex reserves of the country. This in turn increases US debt.

6. Emergence of South Asia as a cheap manufacturing hub:

South asia’s emergence as a cheap manufacturing hub shifted US industries from manufacturing to services. This increased their imports massively as there was no incentive to produce the goods inland when they could be imported for a fraction of the cost. This is actually a result of the strong dollar and weak south asian currencies since weak currencies make exporting very easy.

All the points listed above are strongly inter-related and you could find a lot of cause-effect relationships. They could not have individually led to the present situation but collectively they have.

Monday, August 10, 2009

The climb....

Miley Cyrus.

Aah...a not so bautiful girl with a oh so beautiful voice.
Love her....especially this song....really liked it.

Guess its inspiring.
Do read on....

I can almost see it
That dream I am dreaming
But there's a voice inside my head saying
"You'll never reach it"

Every step I'm taking
Every move I make feels
Lost with no direction
My faith is shaking

But I gotta keep trying
Gotta keep my head held high

There's always gonna be another mountain
I'm always gonna wanna make it move
Always gonna be a uphill battle
Sometimes I'm gonna have to lose

Ain't about how fast I get there
Ain't about what's waiting on the other side
It's the climb

The struggles I'm facing
The chances I'm taking
Sometimes might knock me down
But no, I'm not breaking

I may not know it
But these are the moments that
I'm gonna remember most, yeah
Just gotta keep going

And I, I got to be strong
Just keep pushing on

'Cause there's always gonna be another mountain
I'm always gonna wanna make it move
Always gonna be a uphill battle
Sometimes I'm gonna have to lose

Ain't about how fast I get there
Ain't about what's waiting on the other side
It's the climb, yeah!

There's always gonna be another mountain
I'm always gonna wanna make it move
Always gonna be an uphill battle
Somebody's gonna have to lose

Ain't about how fast I get there
Ain't about what's waiting on the other side
It's the climb, yeah!

Keep on moving, keep climbing
Keep the faith, baby
It's all about, it's all about the climb
Keep the faith, keep your faith, whoa

Sunday, August 9, 2009

"At" some time....

Its been an agonizing month till now. So much planning and so little execution. It feels bad. Really bad. Never knew I could be so frustated. May be I am like that.
Till now, no good news. Seems like eternity from the last one(did it ever happen?).Good question....isn't it?
Perhaps I am trying too hard. One friend even mentioned that casually. I couldnt pick it up.
Rather I ddnt.

Felt nice after watching Jab We Met(this I guess was my 16th time). I dont know why but I liked it. Mindless film. Yet enjoyable.



I guess so.
On the other hand,why do I guess so much?

Its 5o' clock in the morning now. Maybe I am a tad little too tired. These days nothing seems right. Yet everything is! problem? yet to come.

Want to work very hard.

Very very hard.

Hah!!....I laugh....I laugh out loud!

Nothing like solving puzzles at 3o'clock in the morning with a hot cuppa(? was just a cup of tea).
Yet just 180 degrees behind my eyes, I feel tensed.

Anxious would( or should?) be the word....the assignment isnt over yet.


Good memory. You can really insult people well. Thrice down and still going


I am mad.
Yes....I am not insane...I am mad.

Check up that dictionary for the difference...and you will only find the summation!


You big bully....SHOOOO!

No wait!...I forgot to mention one thing....

Dont look behind.

I am slow....but I will gain.

Look up.....more than 80 not there,,a little to the a little a little....another speck....yeah thats.....oh God....not again!

Should I?

SHUT UP!!!!!!!!

P.S.- Not for the faint hearted I must say.
Intended intentional warning....BEWARE.