These are extra-ordinary times and require similar thinking and actions.
Capitalism and private enterprise have blown their chances by playing fast and loose and are on retreat all over the world.
Central Banks have to rethink their monetary intervention policies. Tweaking OCR will not work anymore because that is the rate at which Banks get their money but not the rate at which customers get it for their loans. Banks do not pass it on fully, naturally, as they are middle-men and look to their profit and bonuses (dirty word now) especially in these lean times. And also Banks hare now afraid of lending - like the proverbial cat that drank the hot milk and shied away from milk for a long time.
The way to go forward may be that Central Banks should get involved in Commercial Banking either directly or indirectly (part nationalisation perhaps) and direct lending to desired sectors of the economy at desired interest costs so the economy could be given the boost correctly.
Western Governments can play this game and use their resources to buy up some good financial assets which they can offload later for profit. Remember the bailout funds now being given to the Banks are going nowhere now and even the Americans are being stumped as to what to do. Call it 'market socialism' or whatever. One caution though, don't hire the financial wizards from the American Universities who screwed up the world economy in the first place.
Some European countries like Sweden have done it successfully in the past.
So it is time to start thinking outside the box of standard Capitalistic and Free market style at least for the next few years.
Saturday, January 31, 2009
Friday, January 30, 2009
Early repayment penalty and Withholding tax on Bank interest
The fall in interest rates in many countries has not percolated to the home owners who had borrowed and fixed their loans earlier. In several countries like New Zealand, the Banks charge a penalty to unfix the loan and refinance at the current lower rates.
The Governments should come to the party with a Early repayment Subsidy for unfixing the loans fixed at higher rates.
The banks are getting tax payer money as bailout and guarantees. So why should not the taxpayer get help from the Government for lessening his financial burdens.
Remember it is the Central Banks which ratcheted up the interet rates in the last few years to cool the housing market. Now they are reducing it to boost the housing market and want citizens to increase their loan liabilities.
What is the guarantee they will not stiff the borrowers with higher rates again in the future.
Why should the banks be always winners and the citizens the losers.
The early repayment penalty is being collected by the Banks upfront which many may not afford.
Granted there are contract terms and all that, but consider that the whole mess internationally has been brought about by Banks and Finance Wizards playing fast and loose and now they have gone off with their fat bonuses.
Also look at the bigger picture. The financial wizards who were trusted with the tax payers' money in the form of deposits played fast and loose and lost all of it in many shcemes they themselves did not understand. They were greedy for their fat bonuses and speculated with someone else's money. Now Governments all over the world are coming to their rescueby pumping billions into the Banks which really do not deserve it.
How could an ordinary citizen who wanted to just buy a house understand the complexities of loan contracts and forecast the future losses. I also suspect that in most of the cases the borrowers' attention was not specifically drawn to the implications of all this when they signed the documents.
Besides the above subsidy, to help the elderly who have invested money in Bank Term Deposits who are affected by the lowering of interest rates, the Government should immediately remove the withholding tax on the Bank deposits may be with a ceiling. This would give good relief to those who depend on interest from these deposits for their livelihood. They have trusted their hard earned money with Banks which sadly in the recent past had not taken good care of it.
The Governments should direct their assistance correctly to immediately benefit the tax payers which will also boost the economy.
Otherwise people would lose faith in the Government as they have lost in the Finance guys.
The Governments should come to the party with a Early repayment Subsidy for unfixing the loans fixed at higher rates.
The banks are getting tax payer money as bailout and guarantees. So why should not the taxpayer get help from the Government for lessening his financial burdens.
Remember it is the Central Banks which ratcheted up the interet rates in the last few years to cool the housing market. Now they are reducing it to boost the housing market and want citizens to increase their loan liabilities.
What is the guarantee they will not stiff the borrowers with higher rates again in the future.
Why should the banks be always winners and the citizens the losers.
The early repayment penalty is being collected by the Banks upfront which many may not afford.
Granted there are contract terms and all that, but consider that the whole mess internationally has been brought about by Banks and Finance Wizards playing fast and loose and now they have gone off with their fat bonuses.
Also look at the bigger picture. The financial wizards who were trusted with the tax payers' money in the form of deposits played fast and loose and lost all of it in many shcemes they themselves did not understand. They were greedy for their fat bonuses and speculated with someone else's money. Now Governments all over the world are coming to their rescueby pumping billions into the Banks which really do not deserve it.
How could an ordinary citizen who wanted to just buy a house understand the complexities of loan contracts and forecast the future losses. I also suspect that in most of the cases the borrowers' attention was not specifically drawn to the implications of all this when they signed the documents.
Besides the above subsidy, to help the elderly who have invested money in Bank Term Deposits who are affected by the lowering of interest rates, the Government should immediately remove the withholding tax on the Bank deposits may be with a ceiling. This would give good relief to those who depend on interest from these deposits for their livelihood. They have trusted their hard earned money with Banks which sadly in the recent past had not taken good care of it.
The Governments should direct their assistance correctly to immediately benefit the tax payers which will also boost the economy.
Otherwise people would lose faith in the Government as they have lost in the Finance guys.
Wednesday, January 28, 2009
Open letter to Obama
Bravo, President Obama
In your interview to Al-Arabiya you have said all the right things in the right tone and manner. Now you have taken the issue to the Muslim world and it is transparent that you want friendship and peace with all the peace-loving Muslims. I am sure there will be positive reactions to this. America under your leadership seems to be putting the correct step forward.
Please make sure all your administration embraces these sentiments and style and then you will win hearts and minds.
I am also impressed by Robert Gates when he talked about the limited goal of the world community in Afganisthan. The focus should be to 'get the limited job done quickly and get out'. If you also follow through on your promise to get out of Iraq within a short time-table you would show your sincerity to the world.
But remember USA also has a commitment to rebuild the countries ravaged by it. May be the present economic circumstances in USA do not permit you to start a Marshall Plan for Iraq but you have the responsibility and liability to start some rebuilding going there.
I wish you all the best.
In your interview to Al-Arabiya you have said all the right things in the right tone and manner. Now you have taken the issue to the Muslim world and it is transparent that you want friendship and peace with all the peace-loving Muslims. I am sure there will be positive reactions to this. America under your leadership seems to be putting the correct step forward.
Please make sure all your administration embraces these sentiments and style and then you will win hearts and minds.
I am also impressed by Robert Gates when he talked about the limited goal of the world community in Afganisthan. The focus should be to 'get the limited job done quickly and get out'. If you also follow through on your promise to get out of Iraq within a short time-table you would show your sincerity to the world.
But remember USA also has a commitment to rebuild the countries ravaged by it. May be the present economic circumstances in USA do not permit you to start a Marshall Plan for Iraq but you have the responsibility and liability to start some rebuilding going there.
I wish you all the best.
Wednesday, January 21, 2009
Obama, the Economy and India
The whole World is expecting 'Jesus Obama' to do nothing less than save the world (may be from the Americans themselves). Good luck. God Bless.
As some of his priorities I think Obama has to say sorry on behalf of USA to the thousands of Iraqi innocents and the American soldiers who were killed in Iraq because of the War started by USA there on false grounds and get the hell out of Iraq immediately. Then he should focus on putting the American economy in order and abolish lobbying in USA to prevent future fiascos.
He can also allow the United Nations Security Council to expand and remove the veto system there and promote adopting majority decisions in UN.
Speaking of putting the economy in order, how about the following for the banks in USA.
Get 51% stake in all the major banks for the money invested in them
As majority owner, get the Treasury nominees on the board of the Banks and may be CEO and CFO too, so the banks can be run tight
Fix ceiling on remuneration of top executives and introduce performance ratings which will govern pay increases
Limit the activities of Banks to basic banking and make sure they do not enter into exotic financial products
Write down the loans of poor home-owners affected by the sub-prime and housing crisis to match the capital pumped into these banks. For those who paid their mortgages honestly in the last 3 years, give a cash refund of the principal paid by them (which might compensate them for the fall of house value)
Give directions to the Banks for prioritising their lending to important sectors of the economy and make sure they actually lend.
Let the Hedge funds go bankrupt and let the shareholders take the loss.
If this all sounds like Socialism or Mixed-economy then let it be. After the runaway excesses of Capitalism, it may be the bitter medicine needed. If necessary they can get expertise from India which nationalised banks a few decades back and is still having an healthy dose of public-private sector banking mix with good regulation.
In a lighter vein it seems like the Americans may also have to take a leaf from Indian Banks’ famous (infamous) ‘Loan Melas or Loan Festivals’ if the Banks there do not come forward to lend again, inspite of all the funds they got as bailout from the Government.
Obama is all set to spend more than one trillion dollars to prime the pump in America. That much money will attract all kinds of shady lobbyists. He and his team have to be very careful in how the funds are deployed. It will be a good idea to withdraw America from all the wars immediately to save money. This will save American lives and pockets. There is no threat to America from anywhere or anyone in the World. With the Department of Homeland Security running effectively they can stop all perceived terrorist attacks on American soil.
I also hope Obama does not meddle too much in the Kashmir affair and make it difficult for India and Pakistan to solve the issue. In the guise of neutralising Taleban, Obama and his team should not be drawn into the Kashmir issue and lose their goodwill with democratic India.
Finally I can’t escape the irony of George Bush and Dick Cheney wanting to get rid of Osama and instead getting Obama to head the USA. Just an alphabet change, but what a change it is for America. And it is funny that Bush and Cheney lost the war against the Muslims and paved the way for an African-American with a Muslim middle name to become the President of USA. I know I am taking a cheap shot here, but could not help myself.
As some of his priorities I think Obama has to say sorry on behalf of USA to the thousands of Iraqi innocents and the American soldiers who were killed in Iraq because of the War started by USA there on false grounds and get the hell out of Iraq immediately. Then he should focus on putting the American economy in order and abolish lobbying in USA to prevent future fiascos.
He can also allow the United Nations Security Council to expand and remove the veto system there and promote adopting majority decisions in UN.
Speaking of putting the economy in order, how about the following for the banks in USA.
Get 51% stake in all the major banks for the money invested in them
As majority owner, get the Treasury nominees on the board of the Banks and may be CEO and CFO too, so the banks can be run tight
Fix ceiling on remuneration of top executives and introduce performance ratings which will govern pay increases
Limit the activities of Banks to basic banking and make sure they do not enter into exotic financial products
Write down the loans of poor home-owners affected by the sub-prime and housing crisis to match the capital pumped into these banks. For those who paid their mortgages honestly in the last 3 years, give a cash refund of the principal paid by them (which might compensate them for the fall of house value)
Give directions to the Banks for prioritising their lending to important sectors of the economy and make sure they actually lend.
Let the Hedge funds go bankrupt and let the shareholders take the loss.
If this all sounds like Socialism or Mixed-economy then let it be. After the runaway excesses of Capitalism, it may be the bitter medicine needed. If necessary they can get expertise from India which nationalised banks a few decades back and is still having an healthy dose of public-private sector banking mix with good regulation.
In a lighter vein it seems like the Americans may also have to take a leaf from Indian Banks’ famous (infamous) ‘Loan Melas or Loan Festivals’ if the Banks there do not come forward to lend again, inspite of all the funds they got as bailout from the Government.
Obama is all set to spend more than one trillion dollars to prime the pump in America. That much money will attract all kinds of shady lobbyists. He and his team have to be very careful in how the funds are deployed. It will be a good idea to withdraw America from all the wars immediately to save money. This will save American lives and pockets. There is no threat to America from anywhere or anyone in the World. With the Department of Homeland Security running effectively they can stop all perceived terrorist attacks on American soil.
I also hope Obama does not meddle too much in the Kashmir affair and make it difficult for India and Pakistan to solve the issue. In the guise of neutralising Taleban, Obama and his team should not be drawn into the Kashmir issue and lose their goodwill with democratic India.
Finally I can’t escape the irony of George Bush and Dick Cheney wanting to get rid of Osama and instead getting Obama to head the USA. Just an alphabet change, but what a change it is for America. And it is funny that Bush and Cheney lost the war against the Muslims and paved the way for an African-American with a Muslim middle name to become the President of USA. I know I am taking a cheap shot here, but could not help myself.
Thursday, January 08, 2009
How to stop the carnage in Gaza
The rich Arab countries in the Middle East are cozy with USA and are spending billions every year to buy arms and ammunition from USA, even though there is no threat of any country invading them and taking over the oilfields.
USA is the main backer for Israel which also receives arms/ammunition from USA. The Arab countries instead of spending on arms can give their funds to the Palestinians by way of grant every year to live peacefully in their cities without provoking Israel.
Granted the land is precious to both the Jews and Palestinians, but some sort of peaceful co-existence can be worked out with enough cash for the Palestinians from the Arab countries till they settle down.
It is horrible to see the Muslims being massacred by the Israelis. USA can't solve this issue because of its role as the main arms-supplier. I am sure the ordinary citizens of Palestine will be ready to lead a normal life with cash support from the Arab countries and get on with their lives.
I think USA is the main culprit in keeping the Middle east situation alive, because it gives an oppoprtunity for the arms makers to continue to sell to both sides and make money. The Arabs should realise that they are being taken for a ride.
Instead they should boycott USA and refuse to sell oil to the Americans. There is enough demand elsewhere for the Oil to be sold at $40 per barrel. The Americans should not get the Oil or the Oil money which is being invested there. That would put a stop to their supporting Israel. A public promise of continuous annual subsidy to each citizen of Palestine by the rich Arab for a promise not to back thehardliners like Hamas or Hizbullah will make the Palestinians realise that there is a better way for peaceful co-existence. What I am saying is 'remove the middle-men, both the Americans and the Hamas/Hizbullah' from the scene. This requires a bold vision and guts, which the Arabs should demonstrate they have and work now or lose another opportunity.
Remember what was said of Yassir Arafat-He never lost an opportunity to lose the opportunity to make peace.
However I have the feeling that all the negative opinions against Israel will not make any difference to the situation. Israel and USA will continue their policies of keeping the Middle east under tension, so they can pursue their practice of making war and money by sale and use of arms.
The US congress has laid down the gauntlet by passing a resolution supporting Israel and its right to self-defence. Will the Arab countries take up the gauntlet by passing similar resolutions expressing support for the Palestinians and pledging to do whatever it takes to see justice done and acting on the promise ?.
I am not sure. Till that will and determination is developed, America/Isarel Team will call the shots in the Middle East. Middle East has the resource which America needs but America is calling the shots. What a shame
United Nations in its current structure and rules with veto systmes is not going to be of any help.
The Arab countries are too much linked with the market in USA for their oil revenues and investments. The Palestinians are not going to get any justice soon.
There has to be a shock to the International Community. That can happen only if all nations who support Palestine withdraw from the UN, the Arabs boycott the USA and stop selling oil to USA and if the Arabs come together to give an ultimatum/deadline for the peace process to be completed. The Arabs should withdraw their investments from the Western World and look elsewhere for their security. America/Israel team is not invincible.
But what do the Arbs want?
USA is the main backer for Israel which also receives arms/ammunition from USA. The Arab countries instead of spending on arms can give their funds to the Palestinians by way of grant every year to live peacefully in their cities without provoking Israel.
Granted the land is precious to both the Jews and Palestinians, but some sort of peaceful co-existence can be worked out with enough cash for the Palestinians from the Arab countries till they settle down.
It is horrible to see the Muslims being massacred by the Israelis. USA can't solve this issue because of its role as the main arms-supplier. I am sure the ordinary citizens of Palestine will be ready to lead a normal life with cash support from the Arab countries and get on with their lives.
I think USA is the main culprit in keeping the Middle east situation alive, because it gives an oppoprtunity for the arms makers to continue to sell to both sides and make money. The Arabs should realise that they are being taken for a ride.
Instead they should boycott USA and refuse to sell oil to the Americans. There is enough demand elsewhere for the Oil to be sold at $40 per barrel. The Americans should not get the Oil or the Oil money which is being invested there. That would put a stop to their supporting Israel. A public promise of continuous annual subsidy to each citizen of Palestine by the rich Arab for a promise not to back thehardliners like Hamas or Hizbullah will make the Palestinians realise that there is a better way for peaceful co-existence. What I am saying is 'remove the middle-men, both the Americans and the Hamas/Hizbullah' from the scene. This requires a bold vision and guts, which the Arabs should demonstrate they have and work now or lose another opportunity.
Remember what was said of Yassir Arafat-He never lost an opportunity to lose the opportunity to make peace.
However I have the feeling that all the negative opinions against Israel will not make any difference to the situation. Israel and USA will continue their policies of keeping the Middle east under tension, so they can pursue their practice of making war and money by sale and use of arms.
The US congress has laid down the gauntlet by passing a resolution supporting Israel and its right to self-defence. Will the Arab countries take up the gauntlet by passing similar resolutions expressing support for the Palestinians and pledging to do whatever it takes to see justice done and acting on the promise ?.
I am not sure. Till that will and determination is developed, America/Isarel Team will call the shots in the Middle East. Middle East has the resource which America needs but America is calling the shots. What a shame
United Nations in its current structure and rules with veto systmes is not going to be of any help.
The Arab countries are too much linked with the market in USA for their oil revenues and investments. The Palestinians are not going to get any justice soon.
There has to be a shock to the International Community. That can happen only if all nations who support Palestine withdraw from the UN, the Arabs boycott the USA and stop selling oil to USA and if the Arabs come together to give an ultimatum/deadline for the peace process to be completed. The Arabs should withdraw their investments from the Western World and look elsewhere for their security. America/Israel team is not invincible.
But what do the Arbs want?
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