yeh hum jo hijr mai deewar-o-dar ko dekhte hain
kabhi saaba ko kabhi nama’bar ko dekhte hain
Line 1/2 - In the times of this separation from you, I keep looking absent minded at the doors and walls of my home. Sometimes I wait in anticipation of the messenger and sometimes for the wind coming from your direction for the winds coming may have some hint of you.
wo aaein ghar mai hamare khuda ki qudrat hai
kabhi hum un ko kabhi apne ghar ko dekhte hain
Line 3/4 - My lover has come to my house; it's a miracle from the God. I sometimes look at her, and sometimes I look at the ruins that are my only abode. Such beauty amid the desolation and ruins! How do I get to deserve this luck? This has to be a miracle from God.
nazar lage na kahin us ke dast-o-bazaboo ko
yeh log kiyu mere zakhm-e-jigar ko dekhte hain
Line 5/6 - May I not cast an evil eye looking at the lovely hand and shoulder of my beloved? Why do people look at my tortured heart (due to this unflinching love) and gossip about it? The poet says that he has been cautious to not stare at his beloved so as not to cast an evil eye and also catch the society's attention. Yet why do people not let me live peacefully?
tere jawahir-e-taraf-e-kala ko kiya dekhen
hum auj-e-talaa-e-laal-o-gohar ko dekhte hain
Line 7/8 - What to see/say about your jewelry and your golden belt and that crown of yours? The poet laments on the stark social differences between them and says that I see my luck and my position (lowly existence) on one hand and your opulent string of pearls and diamonds on the other.
Meaning of difficult words :-
saaba : wind
nama’bar : messenger
hijr : separation
dast-o-baazoo : hands and shoulders
jawahir : jewellery
taraf : golden belt
kala : crown
auj : position
taala : luck
laal-o-gohar : pearls and diamonds
Read more posts on Ghalib.
Albert Camus : The Stranger (Summary)
I just finished reading Albert Camus's "The Stranger". A short book, but no less depressing. The story is simple to read, but the narrative is not that forthcoming. The story starts with news that the mother of the protagonist has died and he would have to take some time off for the wake. There is no hint of grief or remorse in him, instead he seemed distant. It's not as if he is indifferent, he is very aware of the surrounding like the detail with which he describes the heat, the people at funeral. He is also not a recluse either as the very next day he is seen flirting with his on and off girlfriend and going to a movie together. Later in the story, he gets involved with some Arabs and end up killing one. He is arrested and the later half of the story revolves around his trial and his abject resignation. The focus of the trial is not the killing, but the emotional detachment the protagonist displays.(not that it would have mattered). He treats the killing of another person trivially. It's not that he is an outlaw (the killing just happened), it just that what has happened has happened and any amount of remorse is not going to make amends. The protagonist is not guided by morality, not by what people think or what social mores are. He instead is guided by his actions and decisions and he stands by it however wrong. He is not willing to look back and ponder for he believes in present. He does not let his fantasies roam with thoughts of religion or remorse. He sees things as they are. He believes in what he can see and feels. Anything that does not happen while he is on the face of earth does not matter him. He is not hopeless (for he does not believe in one), instead he believes that these hopes weigh a person down. He is aware of the absurdity of his meaningless life and does not try to reason or make amends. He exists as he IS, not trying anything more, nor trying anything less. At the very end he rejects God and reconciles to death not because of any guilt, but because everyone is going to get one sooner or later. He thinks when it is all over, he would be glad that it's over. He is the stranger, stranger to everything other than what his senses sense.
Life in a Village : The Long Lost Times
I had been thinking about writing this for a long long time.. to write about the current rage is much more easier and spontaneous than to write over distant memories that come at their own pace, sometimes of moments that were ordinary and yet still are their in your head for significance unknown among the mindless mambo-jumbo that modern city technology and finance heavy our lives have become. I still yearn for that easier life, though I am not so sure if it would be that fulfilling now. Probably I have outgrown it, but hey! everybody needs a crib. This is my crib.
My grandfather died peacefully sometime back. He was always a hands-on man. Always on to something, never tired and always restless. Never a thing he could not do. I surely had lot of fine moments with him specially on the fields that used be part of our old house (and later the newer house that was built beside it). I still recall what a wonderful green mini-forest we had and all the fruits and vegetable and trees we used to grow. I remember the festive mood that was when we dug out taedu (yams) during Shivratri. I remember the summers when the twirling toona (tunn) seeds would fall out of the sky like snow flakes and the terrace would be filled with it. I remember times when I (along with my sister) would be on the sehtoot (mulberry) tree plucking the sehtoot with our hands and mouth stained by its colors. I recall my grandfather on the big tutari tree (paper mulberry) cutting its branches for fodder of our cows. I recall those winters when we would devour on the sweet & sour chakotra (pomelo) in the winter sun. I remember the times when my grandfather and I sometimes would go to the other field down the railway line to bring the chari (sorghum) and bajra (pearl millet) grass for cow fodder. Sometimes we would bring a bag full of dal (rice bean) pods that would grow intertwined among the tall millet grass. The dal was used to make stuffed paranthas. I remember when we would dug the field to plant mandua (finger millet) and jau (barley) for fodder as well as flour. I remember the big dune the wheat chaff made when the wheat thresher bellowed. I remember the excitement at the great crop we had once of arhaar dal (pigeon pea). I remember the back breaking effort that went into planting the rice seedlings and then later he extracting the seeds from the crop. Sometimes we went to the nearest mill for milling rice and couple of times we went for milling mustard. I remember the very green and gentle barsi (berseem,clover) grass that was grown for fodder. Sometimes our dog (mili) would be running in big leaps having the fun of their lives in those clover fields. I remember when we used to roll the wodden handle (sometimes jointly) of the grass cutting machine. I recall the everyday breakfast of green vegetables mainly rai (rapeseed),meethi (fenugreek) and chaulaai (amaranth). I remember that season when we had so much aeskos (chayote) that it was cooked for our cows. I remember the tall tree of jamaun (jambul) whose fruit we hardly had as it was too high. I remember the vegetable creepers of pumkin, karela (bitter gourd) , cucumbers, loki (bottle gourd), chachinda (snake gourd), tori (ridge gourd) and many other beans that would cover the trees of nashpati (asian pear), mango, tunn, guava, gular (fig racemosa), bedu (fig palmata) and many unknowns. I remember so many days when we both would pick the ladder to pluck the vegetables from these creepers that went straight into the kitchen. I recall when we used to go to break waters for our fields from the bigger canal and in those overflowing fields sometimes a white heron could be seen. I remember the arvi (eddoe) pakodas that were made from its giant green leaves by my mom. I recall the summer season's aam (mango) picking that was a summer holiday must do activity. I can go on and on for a long time for those memories would not stop.
I miss those days. I really do.
My grandfather died peacefully sometime back. He was always a hands-on man. Always on to something, never tired and always restless. Never a thing he could not do. I surely had lot of fine moments with him specially on the fields that used be part of our old house (and later the newer house that was built beside it). I still recall what a wonderful green mini-forest we had and all the fruits and vegetable and trees we used to grow. I remember the festive mood that was when we dug out taedu (yams) during Shivratri. I remember the summers when the twirling toona (tunn) seeds would fall out of the sky like snow flakes and the terrace would be filled with it. I remember times when I (along with my sister) would be on the sehtoot (mulberry) tree plucking the sehtoot with our hands and mouth stained by its colors. I recall my grandfather on the big tutari tree (paper mulberry) cutting its branches for fodder of our cows. I recall those winters when we would devour on the sweet & sour chakotra (pomelo) in the winter sun. I remember the times when my grandfather and I sometimes would go to the other field down the railway line to bring the chari (sorghum) and bajra (pearl millet) grass for cow fodder. Sometimes we would bring a bag full of dal (rice bean) pods that would grow intertwined among the tall millet grass. The dal was used to make stuffed paranthas. I remember when we would dug the field to plant mandua (finger millet) and jau (barley) for fodder as well as flour. I remember the big dune the wheat chaff made when the wheat thresher bellowed. I remember the excitement at the great crop we had once of arhaar dal (pigeon pea). I remember the back breaking effort that went into planting the rice seedlings and then later he extracting the seeds from the crop. Sometimes we went to the nearest mill for milling rice and couple of times we went for milling mustard. I remember the very green and gentle barsi (berseem,clover) grass that was grown for fodder. Sometimes our dog (mili) would be running in big leaps having the fun of their lives in those clover fields. I remember when we used to roll the wodden handle (sometimes jointly) of the grass cutting machine. I recall the everyday breakfast of green vegetables mainly rai (rapeseed),meethi (fenugreek) and chaulaai (amaranth). I remember that season when we had so much aeskos (chayote) that it was cooked for our cows. I remember the tall tree of jamaun (jambul) whose fruit we hardly had as it was too high. I remember the vegetable creepers of pumkin, karela (bitter gourd) , cucumbers, loki (bottle gourd), chachinda (snake gourd), tori (ridge gourd) and many other beans that would cover the trees of nashpati (asian pear), mango, tunn, guava, gular (fig racemosa), bedu (fig palmata) and many unknowns. I remember so many days when we both would pick the ladder to pluck the vegetables from these creepers that went straight into the kitchen. I recall when we used to go to break waters for our fields from the bigger canal and in those overflowing fields sometimes a white heron could be seen. I remember the arvi (eddoe) pakodas that were made from its giant green leaves by my mom. I recall the summer season's aam (mango) picking that was a summer holiday must do activity. I can go on and on for a long time for those memories would not stop.
I miss those days. I really do.
Translation - Na Tha Kuch Toh (Ghalib)
na tha kuch toh khuda tha, kuch na hota toh khuda hota
duboyaa mujh ko hone ne, na hota main to kya hota
Line 1/2 - When there was nothing, God was there.. If there had been nothing, there would have been God. In emptiness, God would still exist. In nothingness Only God would exist. In the beginning nothing was there, except God. If there would have been nothing, God would have still been there. My existence has let me down. Becoming (My being) has defeated me. If I did not exist, what would I be? If I did not existed, what harm would it be?
An alternate meaning of these two lines could be -
If I were nothing, then I would be God. If I am nothing, I would have been God implying God is a personal experience. Now having become God, I have become alienated from my True Self by all the vices and corruption of the human existence. What good was my life? If I did not existed, would it have really mattered?
hua jab gham se yuun behis to gham kya sar ke katne ka
na hota gar judaa tan se to zaannon par dharaa hota
Line 3/4 - When the mere existence has become a burden and a curse by the pain and suffering all around, then what is pain at the head being cut off? My loss of faith in God has made life such a misery that death looks to be the only solution and I have no qualms about it. If it would have not been cut off (for God is merciful, and He would spare my life from this violent death), it would always be bent to my knees in devotion to the God to make amends to my faithless and immoral existence.
hui muddat ke ghalib mar gayaa par yaad aataa hai
woh har ek baat pe kahna ke yuun hota to kya hota
Line 5/6 - A long time has passed since Ghalib passed away, but he still comes back to the memory. Saying every-time that had it not been this way, then how it would have been? The contemplation that if I have lived my life differently [followed the correct way] what would have I been. Would it have mattered? Would it have amounted to anything other than death because eventually death is the final Truth?
Meaning of difficult words: -
behis : shocked
zaannon : knees
Read more posts on Ghalib.
duboyaa mujh ko hone ne, na hota main to kya hota
Line 1/2 - When there was nothing, God was there.. If there had been nothing, there would have been God. In emptiness, God would still exist. In nothingness Only God would exist. In the beginning nothing was there, except God. If there would have been nothing, God would have still been there. My existence has let me down. Becoming (My being) has defeated me. If I did not exist, what would I be? If I did not existed, what harm would it be?
An alternate meaning of these two lines could be -
If I were nothing, then I would be God. If I am nothing, I would have been God implying God is a personal experience. Now having become God, I have become alienated from my True Self by all the vices and corruption of the human existence. What good was my life? If I did not existed, would it have really mattered?
hua jab gham se yuun behis to gham kya sar ke katne ka
na hota gar judaa tan se to zaannon par dharaa hota
Line 3/4 - When the mere existence has become a burden and a curse by the pain and suffering all around, then what is pain at the head being cut off? My loss of faith in God has made life such a misery that death looks to be the only solution and I have no qualms about it. If it would have not been cut off (for God is merciful, and He would spare my life from this violent death), it would always be bent to my knees in devotion to the God to make amends to my faithless and immoral existence.
hui muddat ke ghalib mar gayaa par yaad aataa hai
woh har ek baat pe kahna ke yuun hota to kya hota
Line 5/6 - A long time has passed since Ghalib passed away, but he still comes back to the memory. Saying every-time that had it not been this way, then how it would have been? The contemplation that if I have lived my life differently [followed the correct way] what would have I been. Would it have mattered? Would it have amounted to anything other than death because eventually death is the final Truth?
Meaning of difficult words: -
behis : shocked
zaannon : knees
Read more posts on Ghalib.
What's Next?
After Tunis, Cairo is the other capital that has fallen to people power frustrated over the lack of reforms, employment and long reigned monarchs that are aloof to the sufferings of the street. Of the 22 countries that constitute the Arab League, only 3 were democracies. The rest 19 (including Tunisia & Egypt) were ruled by despots and autocrats. So there are still 17 more color revolutions waiting to happen. Wonder if there are so many colors available :) The 3 members that are democratic are Lebanon, Iraq and Palestine Territories. Each of the three are still mired in no less existential crises at home. So democracy or no democracy, this region will never have a slow news day i guess. Anyways, hiccups in democratic setups in these countries is no excuse to authoritarian regimes that Arab world is so full of. Three Cheers to the people power and remember there are 17 more to go! Keep the ammo ready and dry!
Excerpts from James Joyce : So What Is Beauty?
"But what is beauty?" asked Lynch
Stephen said "Plato, I believe, said that beauty is the splendor of truth. I don't think that it has a meaning, but the true and the beautiful are akin. Truth is beheld by the intellect which is appeased by the most satisfying relations of the intelligible; beauty is beheld by the imagination which is appeased by the most satisfying relations of the sensible. The first step in the direction of truth is to understand the frame and scope of the intellect itself, to comprehend the act itself of intellection. Aristotle's entire system of philosophy rests upon his book of psychology and that, I think, rests on his statement that the same attribute cannot at the same time and in the same connexion belong to and not belong to the same subject. The first step in the direction of beauty is to understand the frame and scope of the imagination, to comprehend the act itself of esthetic apprehension.To finish what I was saying about beauty, the most satisfying relations of the sensible must therefore correspond to the necessary phases of artistic apprehension. Find these and you find the qualities of universal beauty. Aquinas says: AD PULCRITUDINEM TRIA
REQUIRUNTUR INTEGRITAS, CONSONANTIA, CLARITAS. I translate it so: THREE THINGS ARE NEEDED FOR BEAUTY, WHOLENESS, HARMONY, AND RADIANCE."
"Look at that basket" Stephen said.
In order to see that basket, said Stephen, your mind first of all separates the basket from the rest of the visible universe which is not the basket. The first phase of apprehension is a bounding line drawn about the object to be apprehended. An esthetic image is presented to us either in space or in time. What is audible is presented in time, what is visible is presented in space. But, temporal or spatial, the esthetic image is first luminously apprehended as selfbounded and selfcontained upon the immeasurable background of space or time which is not it. You apprehended it as ONE thing. You see it as one whole. You apprehend its wholeness. That is INTEGRITAS.
Then, said Stephen, you pass from point to point, led by its formal lines; you apprehend it as balanced part against part within its limits; you feel the rhythm of its structure. In other words, the synthesis of immediate perception is followed by the analysis of apprehension. Having first felt that it is ONE thing you feel now that it is a THING. You apprehend it as complex, multiple, divisible, separable, made up of its parts, the result of its parts and their sum, harmonious. That is CONSONANTIA.
"And what is CLARITAS" said Lynch wittily.
The connotation of the word, Stephen said, is rather vague. Aquinas uses a term which seems to be inexact. It baffled me for a long time. It would lead you to believe that he had in mind symbolism or idealism, the supreme quality of beauty being a light from some other world, the idea of which the matter is but the shadow, the reality of which it is but the symbol. I thought he might mean that CLARITAS is the artistic discovery and representation of the divine purpose in anything or a force of generalization which would make the esthetic image a universal one, make it outshine its proper conditions. But that is literary talk. I understand it so. When you have apprehended that basket as one thing and have then analyzed it according to its form and apprehended it as a thing you make the only synthesis which is logically and esthetically permissible. You see that it is that thing which it is and no other thing. The radiance of which he speaks in the scholastic QUIDDITAS, the WHATNESS of a thing. This supreme quality is felt by the artist when the esthetic image is first conceived in his imagination. The mind in that mysterious instant Shelley likened beautifully to a fading coal. The instant wherein that supreme quality of beauty, the clear radiance of the esthetic image, is apprehended luminously by the mind which has been arrested by its wholeness and fascinated by its harmony is the luminous silent stasis of esthetic pleasure, a spiritual state very like to that cardiac condition which the Italian physiologist Luigi Galvani, using a phrase almost as beautiful as Shelley's, called the enchantment of the heart.
What I have said, he began again, refers to beauty in the wider sense of the word, in the sense which the word has in the literary tradition. In the marketplace it has another sense. When we speak of beauty in the second sense of the term our judgement is influenced in the first place by the art itself and by the form of that art. The image, it is clear, must be set between the mind or senses of the artist himself and the mind or senses of others. If you bear this in memory you will see that art necessarily divides itself into three forms progressing from one to the next. These forms are: the lyrical form, the form wherein the artist presents his image in immediate relation to himself; the epical form, the form wherein he presents his image in mediate relation to himself and to others; the dramatic form, the form wherein he presents his image in immediate relation to others.
---Excerpts taken from James Joyce's "A Portrait of the Artist as a Young Man". Highly recommended read.
Stephen said "Plato, I believe, said that beauty is the splendor of truth. I don't think that it has a meaning, but the true and the beautiful are akin. Truth is beheld by the intellect which is appeased by the most satisfying relations of the intelligible; beauty is beheld by the imagination which is appeased by the most satisfying relations of the sensible. The first step in the direction of truth is to understand the frame and scope of the intellect itself, to comprehend the act itself of intellection. Aristotle's entire system of philosophy rests upon his book of psychology and that, I think, rests on his statement that the same attribute cannot at the same time and in the same connexion belong to and not belong to the same subject. The first step in the direction of beauty is to understand the frame and scope of the imagination, to comprehend the act itself of esthetic apprehension.To finish what I was saying about beauty, the most satisfying relations of the sensible must therefore correspond to the necessary phases of artistic apprehension. Find these and you find the qualities of universal beauty. Aquinas says: AD PULCRITUDINEM TRIA
REQUIRUNTUR INTEGRITAS, CONSONANTIA, CLARITAS. I translate it so: THREE THINGS ARE NEEDED FOR BEAUTY, WHOLENESS, HARMONY, AND RADIANCE."
"Look at that basket" Stephen said.
In order to see that basket, said Stephen, your mind first of all separates the basket from the rest of the visible universe which is not the basket. The first phase of apprehension is a bounding line drawn about the object to be apprehended. An esthetic image is presented to us either in space or in time. What is audible is presented in time, what is visible is presented in space. But, temporal or spatial, the esthetic image is first luminously apprehended as selfbounded and selfcontained upon the immeasurable background of space or time which is not it. You apprehended it as ONE thing. You see it as one whole. You apprehend its wholeness. That is INTEGRITAS.
Then, said Stephen, you pass from point to point, led by its formal lines; you apprehend it as balanced part against part within its limits; you feel the rhythm of its structure. In other words, the synthesis of immediate perception is followed by the analysis of apprehension. Having first felt that it is ONE thing you feel now that it is a THING. You apprehend it as complex, multiple, divisible, separable, made up of its parts, the result of its parts and their sum, harmonious. That is CONSONANTIA.
"And what is CLARITAS" said Lynch wittily.
The connotation of the word, Stephen said, is rather vague. Aquinas uses a term which seems to be inexact. It baffled me for a long time. It would lead you to believe that he had in mind symbolism or idealism, the supreme quality of beauty being a light from some other world, the idea of which the matter is but the shadow, the reality of which it is but the symbol. I thought he might mean that CLARITAS is the artistic discovery and representation of the divine purpose in anything or a force of generalization which would make the esthetic image a universal one, make it outshine its proper conditions. But that is literary talk. I understand it so. When you have apprehended that basket as one thing and have then analyzed it according to its form and apprehended it as a thing you make the only synthesis which is logically and esthetically permissible. You see that it is that thing which it is and no other thing. The radiance of which he speaks in the scholastic QUIDDITAS, the WHATNESS of a thing. This supreme quality is felt by the artist when the esthetic image is first conceived in his imagination. The mind in that mysterious instant Shelley likened beautifully to a fading coal. The instant wherein that supreme quality of beauty, the clear radiance of the esthetic image, is apprehended luminously by the mind which has been arrested by its wholeness and fascinated by its harmony is the luminous silent stasis of esthetic pleasure, a spiritual state very like to that cardiac condition which the Italian physiologist Luigi Galvani, using a phrase almost as beautiful as Shelley's, called the enchantment of the heart.
What I have said, he began again, refers to beauty in the wider sense of the word, in the sense which the word has in the literary tradition. In the marketplace it has another sense. When we speak of beauty in the second sense of the term our judgement is influenced in the first place by the art itself and by the form of that art. The image, it is clear, must be set between the mind or senses of the artist himself and the mind or senses of others. If you bear this in memory you will see that art necessarily divides itself into three forms progressing from one to the next. These forms are: the lyrical form, the form wherein the artist presents his image in immediate relation to himself; the epical form, the form wherein he presents his image in mediate relation to himself and to others; the dramatic form, the form wherein he presents his image in immediate relation to others.
---Excerpts taken from James Joyce's "A Portrait of the Artist as a Young Man". Highly recommended read.
Global Warming : The Feedback Loop
Among the lot of alternative careers that I wish for, one that would have ranked up high in the list would have been climate change researcher. I feel very strongly for this subject and I guess everyone should. We have this earth not for ourselves but for posterity. I had wanted to write this post for long, about the vicious cycle and the slow changes that work behind the global warming phenomenon. Everyone knows that carbon dioxide from human activity is causing an increase in greenhouses gases in atmosphere leading to global warming as global temperatures rise due to heat being trapped in the atmosphere. This post highlights little known facts about the global warming process to give you a bigger canvas of the momentous changes happening slowly as we live and as we sleep.
Fact 1 : If you see the amount of CO2 in the atmosphere over a year, the figures tend to vary dramatically due to the fact that northern hemisphere in winters does not absorb any CO2 leading to an increase of CO2 percentage in the atmosphere while the amount goes down in northern hemisphere summers. So the graph of CO2 amount over a year is zig-zag and not constant, but the trend is definitely upward over long term.
Fact 2 : The northern hemisphere warms more than southern because there is much larger land in north which heats more than sea. Besides there is more ice cover in north.This is causing the arctic circle ice shelf to melt dramatically while some sectors in antarctic ice-shelf are gaining ice, but the net-net is negative.
Fact 3 : The warming is forcing ice caps to melt and increasing the global temperature which increases the moisture content in the air causing a feedback loop since water vapour is a mild green house gas. So the more temperature causes more water vapour and hence more temperature and the cycle goes on.
Fact 4 : The increasing temperature will lead to decreasing ice caps and ice cover, which will cause less and less of sunlight to be reflected back and more to be absorbed by ground and water causing another feedback loop.The dark water and land absorbs more heat as compared to ice cover as ice reflects it back. So the more ice melts the more land/sea gets exposed and absorbs even more. Another tragic feedback loop.
Fact 5 : The increasing temperature in the polar and sub polar region will cause the permafrost to melt. Now this permafrost is frozen for probably millions of years and hold vast amount of organic matter. Once the temperate rises, this permafrost will thaw causing the organic matter to decay and releasing the vast amount to methane/CO2 trapped inside causing another feedback loop since methane is many times for greenhouse causing gas then CO2. More temperature means more permafrost melt and hence more greenhouses gases in air and consequently more temperature. Besides permafrost will melt and flow to the sea or lose its rigidity causing vast arctic and siberian plains to be uninhabitable,.
Fact 6 : Colder water absorbs more CO2 than warmer water. As the greenhouses gases increase, the sea temperature will also rises, causing the CO2 in the oceans to decrease and that gets released to the atmosphere. Another feedback loop that will cause an increase in temperature to contribute yet more increase.
Fact 7 : As temperature in Arctic increases, it is causing lakes and rivers over the ice cap and glaciers that barrel through the width of the ice cap and lubricate the surface between ground and ice above causing the whole ice mass to move to the sea. This fresh water flow goes down in crevasse and slowly melt the underlying foundation of the ice-cap making it more prone to flow towards the sea. As temperature rises, more of these lakes and rivers get formed that increases the water that is reaching the continental shelf.
These are just some of the various factors that go into the complex climate science and since these time scales are so large and effects so small and variables so many, it is still and evolving science that is difficult to fathom to many. People find it hard to believe the idea that just cars and factories can affect the whole climate of this vast planet. But the brutal truth is that what if the science is right, what if we really cause. We do not have a luxury of a second home. This Earth is all we have!
Fact 1 : If you see the amount of CO2 in the atmosphere over a year, the figures tend to vary dramatically due to the fact that northern hemisphere in winters does not absorb any CO2 leading to an increase of CO2 percentage in the atmosphere while the amount goes down in northern hemisphere summers. So the graph of CO2 amount over a year is zig-zag and not constant, but the trend is definitely upward over long term.
Fact 2 : The northern hemisphere warms more than southern because there is much larger land in north which heats more than sea. Besides there is more ice cover in north.This is causing the arctic circle ice shelf to melt dramatically while some sectors in antarctic ice-shelf are gaining ice, but the net-net is negative.
Fact 3 : The warming is forcing ice caps to melt and increasing the global temperature which increases the moisture content in the air causing a feedback loop since water vapour is a mild green house gas. So the more temperature causes more water vapour and hence more temperature and the cycle goes on.
Fact 4 : The increasing temperature will lead to decreasing ice caps and ice cover, which will cause less and less of sunlight to be reflected back and more to be absorbed by ground and water causing another feedback loop.The dark water and land absorbs more heat as compared to ice cover as ice reflects it back. So the more ice melts the more land/sea gets exposed and absorbs even more. Another tragic feedback loop.
Fact 5 : The increasing temperature in the polar and sub polar region will cause the permafrost to melt. Now this permafrost is frozen for probably millions of years and hold vast amount of organic matter. Once the temperate rises, this permafrost will thaw causing the organic matter to decay and releasing the vast amount to methane/CO2 trapped inside causing another feedback loop since methane is many times for greenhouse causing gas then CO2. More temperature means more permafrost melt and hence more greenhouses gases in air and consequently more temperature. Besides permafrost will melt and flow to the sea or lose its rigidity causing vast arctic and siberian plains to be uninhabitable,.
Fact 6 : Colder water absorbs more CO2 than warmer water. As the greenhouses gases increase, the sea temperature will also rises, causing the CO2 in the oceans to decrease and that gets released to the atmosphere. Another feedback loop that will cause an increase in temperature to contribute yet more increase.
Fact 7 : As temperature in Arctic increases, it is causing lakes and rivers over the ice cap and glaciers that barrel through the width of the ice cap and lubricate the surface between ground and ice above causing the whole ice mass to move to the sea. This fresh water flow goes down in crevasse and slowly melt the underlying foundation of the ice-cap making it more prone to flow towards the sea. As temperature rises, more of these lakes and rivers get formed that increases the water that is reaching the continental shelf.
These are just some of the various factors that go into the complex climate science and since these time scales are so large and effects so small and variables so many, it is still and evolving science that is difficult to fathom to many. People find it hard to believe the idea that just cars and factories can affect the whole climate of this vast planet. But the brutal truth is that what if the science is right, what if we really cause. We do not have a luxury of a second home. This Earth is all we have!
The Economy Thread Part II
Couple of weeks back we discussed briefly on some basic economic terms and the way the whole puzzle works out. Today we will discuss, the brief contours of the current monetary system (fiat money) and why it is what it is today. Before we get down to detail, there are couple (actually more) of terms that i would like to be clear about.
Fiat Money - is money that has its value because of government legislation. For e.g. Rupee as its value is because government has said (and guaranteed) that it is a legal tender for money.
Reserve Currency - is a currency that is held by various governments as part of their foreign exchange reserves and most commonly traded commodities (like gold, oil) are traded in it. Dollar for e.g. is a reserve currency. Oil/Gold are dollar denominated.
Fixed currency regime - where currency is pegged to a reserve currency and can trade within a parity. e.g Chinese Yuan
Managed Float regime - where currency is fluctuates daily but central banks intervene by selling & buying reserve currency. e.g. Indian Rupee
Free Float - where currency openly fluctuates in the foreign currency exchanges. e.g. Japanese Yen
The basis of current monetary system is a fiat money based and has a managed float currency (as is case with India) with the American dollar being the reserve currency. The world initially started with Gold Standard. In gold standard, the monetary unit was a fixed weight of gold. There were lot of variants of this standard, wherein either gold coins were circulated or where silver coins were circulated that had a fixed external value in terms of gold that is independent of the inherent silver value or where authorities have agreed to sell gold bullion on demand at a fixed price in exchange for the circulating currency. A full gold standard, exists when a monetary authority holds sufficient gold to convert all of the money it has issued into gold at the promised exchange rate. This is difficult to implement as the quantity of gold in the world is too small to sustain current worldwide economic activity at current gold prices.
These systems had some inherent problems, first being in bimetallism (a system establishes a fixed rate of exchange for the two metals) where if the market forces of supply and demand for either metal caused its bullion value to exceed its nominal currency value, it tends to disappear from circulation by hoarding or melting down. Besides in the beginning of 19th century due to the imperfections in the trade, silver which was being used to stuck coins began to get drained out of the industrialized world. Over those initial years variations in trade, deficits to fight wars and variations in supply of these metals caused governments to move back and forth between various types of gold standard and silver standard and sometimes entirely off the gold/silver standard. But it was the Great Depression of 1933 that put the final nail in the coffin of the standard. Due to gold backing, the central banks in those times were bound by how much money they could inject in the system by the gold reserves they had in their vault. This hampered their maneuverability to end the crisis. Besides the central had to defend the price of the dollar(by increasing interest rates), which caused deflation and led banks to redeem the gold backing causing further reduction in notes in circulation leading to more slowdown. By 1930's most of the world had abandoned gold standard and moved to fiat money. The basis the gold standard was convertibility.The international value of currency was determined by its fixed relationship to gold; gold was used to settle international accounts. The gold standard maintained fixed exchange rates that were seen as desirable because they reduced the risk of trading with other countries. Imbalances in international trade were theoretically rectified automatically by the gold standard. A country with a deficit would have depleted gold reserves and would thus have to reduce its money supply. The resulting fall in demand would reduce imports and the lowering of prices would boost exports; thus the deficit would be rectified. Any country experiencing inflation would lose gold and therefore would have a decrease in the amount of money available to spend. This decrease in the amount of money would act to reduce the inflationary pressure.
After the WWII, to empower trade between the devastated economies of the world, so that economies could recover it was decided that an international monetary standard would be established for free trade and exchange rate stability. This also ensured that devastated countries do not devalue arbitrarily just to rig exports and set of a chain of devaluation by competing nations. Since the only nation to emerge relatively stronger from WWII was US, it was decided that the value of the U.S. dollar would be fixed to $35 per ounce, and the value of the U.S. dollar was thus anchored to the value of gold. The US Government committed to convert dollars into gold at that price. Also decided in the Bretton Woods system was a system of fixed exchange rates. The rules further sought to encourage an open system by committing members to the convertibility of their respective currencies into other currencies and to free trade. This was also called as a peg currency regime. Nations were required to establish a parity of their national currencies in terms of the reserve currency and to maintain exchange rates by intervening in their foreign exchange markets. The U.S. dollar was the currency with the most purchasing power and it was the only currency that was backed by gold. The Bretton Woods regime also led to the establishment to World Bank & IMF. This regime led to huge transfers of gold to US, massive trade surpluses for US and an appreciated dollar. To reverse this dollar flow, US started the Marshall plan to distribute aid and grant to nations besides improving dollar liquidity.
By late 1950's the US balance of payment went negative, besides for $35 an ounce convertibility to work, the peg has to be maintained in the open gold market as well to avoid nations from buying gold from US and selling it in open market for profit. Rising US government spending in the 1960s, however, led to doubts about the ability of the US to maintain this convertibility, gold stocks dwindled as banks and international investors began to convert dollars to gold, and as a result the value of the dollar began to decline. Facing an emerging currency crisis and the imminent danger that the US would no longer be able to redeem dollars for gold, gold convertibility was finally terminated in 1971. The gold backing requirements for the US dollar were also repealed. This marked the end of the international gold standard and the fixed currency regime. Within five years, most of the nations moved to a floating currency regime.
One question that maybe in readers mind is since all currencies today are fiat money, what is stopping central bank from printing money and handing everyone 1000 Rupee notes. Yes it is true that there are no gold backing requirements that bars central bank from printing endless money, but increasing money supply will lead to inflation and hyperinflation.
The next part of this series would be on 2008 financial crisis.
Fiat Money - is money that has its value because of government legislation. For e.g. Rupee as its value is because government has said (and guaranteed) that it is a legal tender for money.
Reserve Currency - is a currency that is held by various governments as part of their foreign exchange reserves and most commonly traded commodities (like gold, oil) are traded in it. Dollar for e.g. is a reserve currency. Oil/Gold are dollar denominated.
Fixed currency regime - where currency is pegged to a reserve currency and can trade within a parity. e.g Chinese Yuan
Managed Float regime - where currency is fluctuates daily but central banks intervene by selling & buying reserve currency. e.g. Indian Rupee
Free Float - where currency openly fluctuates in the foreign currency exchanges. e.g. Japanese Yen
The basis of current monetary system is a fiat money based and has a managed float currency (as is case with India) with the American dollar being the reserve currency. The world initially started with Gold Standard. In gold standard, the monetary unit was a fixed weight of gold. There were lot of variants of this standard, wherein either gold coins were circulated or where silver coins were circulated that had a fixed external value in terms of gold that is independent of the inherent silver value or where authorities have agreed to sell gold bullion on demand at a fixed price in exchange for the circulating currency. A full gold standard, exists when a monetary authority holds sufficient gold to convert all of the money it has issued into gold at the promised exchange rate. This is difficult to implement as the quantity of gold in the world is too small to sustain current worldwide economic activity at current gold prices.
These systems had some inherent problems, first being in bimetallism (a system establishes a fixed rate of exchange for the two metals) where if the market forces of supply and demand for either metal caused its bullion value to exceed its nominal currency value, it tends to disappear from circulation by hoarding or melting down. Besides in the beginning of 19th century due to the imperfections in the trade, silver which was being used to stuck coins began to get drained out of the industrialized world. Over those initial years variations in trade, deficits to fight wars and variations in supply of these metals caused governments to move back and forth between various types of gold standard and silver standard and sometimes entirely off the gold/silver standard. But it was the Great Depression of 1933 that put the final nail in the coffin of the standard. Due to gold backing, the central banks in those times were bound by how much money they could inject in the system by the gold reserves they had in their vault. This hampered their maneuverability to end the crisis. Besides the central had to defend the price of the dollar(by increasing interest rates), which caused deflation and led banks to redeem the gold backing causing further reduction in notes in circulation leading to more slowdown. By 1930's most of the world had abandoned gold standard and moved to fiat money. The basis the gold standard was convertibility.The international value of currency was determined by its fixed relationship to gold; gold was used to settle international accounts. The gold standard maintained fixed exchange rates that were seen as desirable because they reduced the risk of trading with other countries. Imbalances in international trade were theoretically rectified automatically by the gold standard. A country with a deficit would have depleted gold reserves and would thus have to reduce its money supply. The resulting fall in demand would reduce imports and the lowering of prices would boost exports; thus the deficit would be rectified. Any country experiencing inflation would lose gold and therefore would have a decrease in the amount of money available to spend. This decrease in the amount of money would act to reduce the inflationary pressure.
After the WWII, to empower trade between the devastated economies of the world, so that economies could recover it was decided that an international monetary standard would be established for free trade and exchange rate stability. This also ensured that devastated countries do not devalue arbitrarily just to rig exports and set of a chain of devaluation by competing nations. Since the only nation to emerge relatively stronger from WWII was US, it was decided that the value of the U.S. dollar would be fixed to $35 per ounce, and the value of the U.S. dollar was thus anchored to the value of gold. The US Government committed to convert dollars into gold at that price. Also decided in the Bretton Woods system was a system of fixed exchange rates. The rules further sought to encourage an open system by committing members to the convertibility of their respective currencies into other currencies and to free trade. This was also called as a peg currency regime. Nations were required to establish a parity of their national currencies in terms of the reserve currency and to maintain exchange rates by intervening in their foreign exchange markets. The U.S. dollar was the currency with the most purchasing power and it was the only currency that was backed by gold. The Bretton Woods regime also led to the establishment to World Bank & IMF. This regime led to huge transfers of gold to US, massive trade surpluses for US and an appreciated dollar. To reverse this dollar flow, US started the Marshall plan to distribute aid and grant to nations besides improving dollar liquidity.
By late 1950's the US balance of payment went negative, besides for $35 an ounce convertibility to work, the peg has to be maintained in the open gold market as well to avoid nations from buying gold from US and selling it in open market for profit. Rising US government spending in the 1960s, however, led to doubts about the ability of the US to maintain this convertibility, gold stocks dwindled as banks and international investors began to convert dollars to gold, and as a result the value of the dollar began to decline. Facing an emerging currency crisis and the imminent danger that the US would no longer be able to redeem dollars for gold, gold convertibility was finally terminated in 1971. The gold backing requirements for the US dollar were also repealed. This marked the end of the international gold standard and the fixed currency regime. Within five years, most of the nations moved to a floating currency regime.
One question that maybe in readers mind is since all currencies today are fiat money, what is stopping central bank from printing money and handing everyone 1000 Rupee notes. Yes it is true that there are no gold backing requirements that bars central bank from printing endless money, but increasing money supply will lead to inflation and hyperinflation.
The next part of this series would be on 2008 financial crisis.
The Resonableness Deficient
Reasoning is something that is really in short currency these days. Common sense and logical thought is being replaced by hysteria and arm-twisting. Couple of stories that have been playing over and over again in the media shows how the debate is polarizing the societies (in two vastly different countries) leaving the people in the middle squeezed and with no room for rapprochement.
Firstly, the gruesome murder of Pakistani Punjab's Governor. His being killed is not important now. What is of merit is the causes and the after response. The causes as flimsy as they may be shows the (Pakistani) society in general is losing grip with debate and reason, where loud talk gets the better of reasonable talk. Where external conspiracy theory is believed rather then looking at faults inside. Where tolerance is being replaced by mindless bigotry. And where the killer is being showered rose petals by the lawyers who must uphold justice and law of the land. Where the so called educated and facebook generation is opening approving the actions of the killer and the political class is condoning it. The debate over blasphemy has been needlessly played out in the media as if this is the only issue confronting the nation. Any talk of reason is shouted down as being anti-religious and atheist.
Secondly, the fatal shooting in Tucson which has dominated the American media and consciousness. Here the shooting unlike in Pakistan has united the nation in grief. No one is condoning the psychotic shooter's action. But the vast swath of the nation and its political class is an accessory to murder by not limiting access to guns. The whole debate over guns is something that is beyond my logic and reason. Any talk of gun control is met with such derision as if people have been asked to surrender there right to speech or privacy. In fact, it is easier to pass legislation to pry on people's phone than to control society's access to such high powered guns. Why does anyone need a pistol that can shoot 31 rounds without reload? Can any reasonable person answer this. Why would anyone need an AR-15 military assault rifle? Why? Why is there such a fear of government trampling over citizens rights? Aren't innocent law-abiding citizens rights being trampled by senseless killing in schools, churches and malls because some psychotic had access to such high powered gun due to lack of control and verification? Why such concern for people having access to these guns but none for over thousands killed in gun related violence. Here again the debate has not been over logic and reason but instead has been hijacked by rhetoric and name-calling by the 24 hour news media (as is the case in both countries).
In both the case we are not even going into the causes for these tragic events, and in any case there can be no justification for violence however 'aggrieved' the killer is. The real issues in my view is why is it so hard to talk and reason on issues where course of action is clear and logical without being branded Nazis or atheist. Back home, the lesser said the better. We are maybe getting more developed (economically), but in reality our brains are shriveling in same proportion. Last week a person died in Delhi unforgiving roads due to a (now common) case of road rage. This short fuse, this me.. my car.. my road craziness is insane. People are getting killed because nobody wants to reason, or even stop for a moment to ponder. There is no scope for middle ground. It is either my way or the highway.
Firstly, the gruesome murder of Pakistani Punjab's Governor. His being killed is not important now. What is of merit is the causes and the after response. The causes as flimsy as they may be shows the (Pakistani) society in general is losing grip with debate and reason, where loud talk gets the better of reasonable talk. Where external conspiracy theory is believed rather then looking at faults inside. Where tolerance is being replaced by mindless bigotry. And where the killer is being showered rose petals by the lawyers who must uphold justice and law of the land. Where the so called educated and facebook generation is opening approving the actions of the killer and the political class is condoning it. The debate over blasphemy has been needlessly played out in the media as if this is the only issue confronting the nation. Any talk of reason is shouted down as being anti-religious and atheist.
Secondly, the fatal shooting in Tucson which has dominated the American media and consciousness. Here the shooting unlike in Pakistan has united the nation in grief. No one is condoning the psychotic shooter's action. But the vast swath of the nation and its political class is an accessory to murder by not limiting access to guns. The whole debate over guns is something that is beyond my logic and reason. Any talk of gun control is met with such derision as if people have been asked to surrender there right to speech or privacy. In fact, it is easier to pass legislation to pry on people's phone than to control society's access to such high powered guns. Why does anyone need a pistol that can shoot 31 rounds without reload? Can any reasonable person answer this. Why would anyone need an AR-15 military assault rifle? Why? Why is there such a fear of government trampling over citizens rights? Aren't innocent law-abiding citizens rights being trampled by senseless killing in schools, churches and malls because some psychotic had access to such high powered gun due to lack of control and verification? Why such concern for people having access to these guns but none for over thousands killed in gun related violence. Here again the debate has not been over logic and reason but instead has been hijacked by rhetoric and name-calling by the 24 hour news media (as is the case in both countries).
In both the case we are not even going into the causes for these tragic events, and in any case there can be no justification for violence however 'aggrieved' the killer is. The real issues in my view is why is it so hard to talk and reason on issues where course of action is clear and logical without being branded Nazis or atheist. Back home, the lesser said the better. We are maybe getting more developed (economically), but in reality our brains are shriveling in same proportion. Last week a person died in Delhi unforgiving roads due to a (now common) case of road rage. This short fuse, this me.. my car.. my road craziness is insane. People are getting killed because nobody wants to reason, or even stop for a moment to ponder. There is no scope for middle ground. It is either my way or the highway.
What Tunisia Portends
Last week was one of the rare weeks of change in the middle east or lets say the broader Arab world. After being in power for better part of 25 years, the president of this small Mediterranean country was forced to flee the country. Let me just give you facts as to why this is important. The whole Arab world from Morocco to Iran (Iran & Turkey and not exactly Arab, but we are still branding them for region's entirety.) is filled with despots, monarch and president-for-life types rulers. This is one place where democracy has still to find its feet. Maybe this could be the trigger for broader change. The rulers of Egypt, Algeria and others need to be worried that their local alienated population does not take cues from events unfolding in Tunisia. The problems with this region are unique, especially in the sense that the region as such is not poor. Tunisia has oil wealth as well as tourism, but given the rapid population growth rates that Arab countries are experiencing, jobs are not being created to absorb them. So alienation and frustration is spilling on to streets and since there are no checks & balances in the political system, no safety valves.. it boils over. This problem is same as what is staring in the face of Egypt, Morocco and countless others. Add to this mix, the rising militant Islam, the growth of conservative Muslim influence, Al Queda lurking in the shadows in the vast Sahara and extreme distribution of oil wealth, these events have the power to reshape the entire Arab landscape. Time will tell if a small vegetable vendor's death was the harbinger of change sweeping the vast desert expanse. Time will tell!
The Economy Thread Part 1
I have been thinking of writing this one for a long long time, and yet i have not got it complete yet. This topic is one of the countless that fascinate me, the science behind the economy and factors that influence it. This is the first post in a series on Economy. It is arranged in terms for simple Q and A for easier understanding!
How can the central bank cool the economy?
It does by increasing the bank rate and the CRR rate primarily. Bank rate(discount rate) is the rate of interest at which central bank gives loans to banks. This is used to change the money supply. CRR on the other hand is the minimum reserves that each bank needs to park with the central bank. This is an important instrument in money supply. What is money supply? Suppose bank has Rs. 100 and it lends Rs. 90 as loan(10% being the CRR). The total max money supply is Rs. 1000 (How? - if bank has Rs 100, it loans you Rs 90, you deposit the Rs 90 back in bank, then bank again loans out 90% of it i.e. Rs 81 and this goes on. The total amount would be Rs 1000 like this). If central bank feels that money supply is too much it can raise CRR to 20% and the max money supply now would come down to 100+80+64.. to 500. Hence this reduces money creation and maintains purchasing power. But how can money supply maintain purchasing power??
Suppose there are 100 rupees chasing 10 items in the market, and the increased money supply leads to 110 rupees in the same market for those original 10 products. In short, there are Rs. 11 to buy the same item. Now, the prices will rise. This is a very simple analogy of a complex science, but that is pretty much the way it works.
What about interest rate? Does not that matter? Yes it matters. Lower interest rate means that borrowing is easier for individuals to buy stuff like cars, houses and for companies so they create new capacities and increase employment. The increased spending by individuals also in-turn boosts the economy as it produces demand for goods. On the other hand a runaway growth leads to hardening of interest rates as most of the money is being spent on consumption or creating new capacity leading to bank deposits running low, thereby curbing new loans. In those cases banks increase deposit rates and loan rates to induce people to save and make it harder for companies to borrow. Runaway growth also leads to inflation as wages rise causes more money to chase fewer items in the market, besides the increased money supply in the system is also a factor in increased inflation as there is a higher demand for credit.
How can the central bank induce growth in the economy?
To induce economy, the easiest is to lower the rate of interest so that it is easier to burrow and increase consumption. Also lower the CRR, so that money supply in the system increases that causes more money at bank's disposal.The other form of stimulus is increased government spending like government agreeing to make 8-lane all 4-lane highways in the country. The spin-off of such spending is increased jobs and consumption of goods therefore kick starting the economy. But it has a trade-off, since this government spending is financed by borrowing, this increases debt causing interest rate to rise as borrowing created a higher demand for credit. since most money is put on government debt, less money on consumption so this may negate the effects of the stimulus.
Another way to induce growth is to qualitative easing (which is done when interest rates are near zero, so there is not much scope to reduce rates.) In this the central bank prints money and buys back the government bonds previously issued to the bank so that money supply is increased in the system and this excess liquidity is used to loan money to individuals and companies to induce growth.
What is T-bills?
The US has a huge budget deficit, so it has more dollars going out, then coming in. It manages this by issuing out T-bills or bonds or notes. All these instruments are different, and have varying yields and maturity time. This is government debt. Why does countries like China buy them? Because it a an ultra-safe investment for there trade surplus dollars besides it buys a certain influence in Washington. What if China one day decides to sell it T-instruments one day. Probably the sky will not fall, as there are other buyers in the market who will chip in.
Why US/Japan is not failing despite this much debt?
The reason US is not going to go under despite the massive deficit, is due to the fact that its currency, the dollar is the world's reserve currency and most of the trade in gold, oil is dollar denominated. In short the buyers for dollar are always there. As for Japan, since about 95 percent of Japan’s debt is held domestically, there’s no risk of capital flight. Japan borrows from its companies and people, an arrangement that’s roughly the mirror image of the U.S.
Next week on stagflation, credit swaps, foreign exchange and bonds.
How can the central bank cool the economy?
It does by increasing the bank rate and the CRR rate primarily. Bank rate(discount rate) is the rate of interest at which central bank gives loans to banks. This is used to change the money supply. CRR on the other hand is the minimum reserves that each bank needs to park with the central bank. This is an important instrument in money supply. What is money supply? Suppose bank has Rs. 100 and it lends Rs. 90 as loan(10% being the CRR). The total max money supply is Rs. 1000 (How? - if bank has Rs 100, it loans you Rs 90, you deposit the Rs 90 back in bank, then bank again loans out 90% of it i.e. Rs 81 and this goes on. The total amount would be Rs 1000 like this). If central bank feels that money supply is too much it can raise CRR to 20% and the max money supply now would come down to 100+80+64.. to 500. Hence this reduces money creation and maintains purchasing power. But how can money supply maintain purchasing power??
Suppose there are 100 rupees chasing 10 items in the market, and the increased money supply leads to 110 rupees in the same market for those original 10 products. In short, there are Rs. 11 to buy the same item. Now, the prices will rise. This is a very simple analogy of a complex science, but that is pretty much the way it works.
What about interest rate? Does not that matter? Yes it matters. Lower interest rate means that borrowing is easier for individuals to buy stuff like cars, houses and for companies so they create new capacities and increase employment. The increased spending by individuals also in-turn boosts the economy as it produces demand for goods. On the other hand a runaway growth leads to hardening of interest rates as most of the money is being spent on consumption or creating new capacity leading to bank deposits running low, thereby curbing new loans. In those cases banks increase deposit rates and loan rates to induce people to save and make it harder for companies to borrow. Runaway growth also leads to inflation as wages rise causes more money to chase fewer items in the market, besides the increased money supply in the system is also a factor in increased inflation as there is a higher demand for credit.
How can the central bank induce growth in the economy?
To induce economy, the easiest is to lower the rate of interest so that it is easier to burrow and increase consumption. Also lower the CRR, so that money supply in the system increases that causes more money at bank's disposal.The other form of stimulus is increased government spending like government agreeing to make 8-lane all 4-lane highways in the country. The spin-off of such spending is increased jobs and consumption of goods therefore kick starting the economy. But it has a trade-off, since this government spending is financed by borrowing, this increases debt causing interest rate to rise as borrowing created a higher demand for credit. since most money is put on government debt, less money on consumption so this may negate the effects of the stimulus.
Another way to induce growth is to qualitative easing (which is done when interest rates are near zero, so there is not much scope to reduce rates.) In this the central bank prints money and buys back the government bonds previously issued to the bank so that money supply is increased in the system and this excess liquidity is used to loan money to individuals and companies to induce growth.
What is T-bills?
The US has a huge budget deficit, so it has more dollars going out, then coming in. It manages this by issuing out T-bills or bonds or notes. All these instruments are different, and have varying yields and maturity time. This is government debt. Why does countries like China buy them? Because it a an ultra-safe investment for there trade surplus dollars besides it buys a certain influence in Washington. What if China one day decides to sell it T-instruments one day. Probably the sky will not fall, as there are other buyers in the market who will chip in.
Why US/Japan is not failing despite this much debt?
The reason US is not going to go under despite the massive deficit, is due to the fact that its currency, the dollar is the world's reserve currency and most of the trade in gold, oil is dollar denominated. In short the buyers for dollar are always there. As for Japan, since about 95 percent of Japan’s debt is held domestically, there’s no risk of capital flight. Japan borrows from its companies and people, an arrangement that’s roughly the mirror image of the U.S.
Next week on stagflation, credit swaps, foreign exchange and bonds.
Subscribe to:
Posts (Atom)