[reverse_gear]

Originally Posted by maddy42

Last point, there is massive investments in our country from the nri population. If the economy in the home country fails, which may result in job losses and strained income, how would that in turn affect the investment?

Originally Posted by Samurai

Careful... using economics to analyse is one thing, but using it to predict the future is something else.

I think there is a subtle difference between predicting outcome and scenario forecasting. Maddy42's question goes into the latter category. ie, if eventuality A were to occur, what would be the impact on parameter X. This is something that macro-economists are trained to do, and policy decisions are often driven by this. When Raghuram Rajan says that he is cautious on interest rate reductions because there is a possibility of rising inflation in the future due to weak monsoons; he is using weak monsoon as an eventuality to assess impact on parameter of inflation, and using this to drive policy decision on interest rates. All central banks as well as the likes of IMF have large teams that work on economic forecasting models.

Coming to maddy42's specific question, one thing to keep in mind is that largest share of remittances into India comes from more developed economies including U.S., and Western Europe. Bulk of the rest is from the Gulf. The western economies are more creditworthy and generally stronger than the Indian economy (even if our growth is more), so the risk of these countries going down is lesser. Even so, overall remittances are very large and would have a significant impact. Currently 4% of our annual GDP comes from cash remittances from NRIs, plus significantly more coming in investments, real estate, gold, etc. Whenever there is an economic downturn, this does take a hit. But we have seen over a period of time that the base in terms of NRI population is large enough (25 million) and widespread enough that problems in any one of those countries would not affect India as a whole. However, problem areas do exist. For example, Kerala is one of the most remittance dependent economies, with bulk of its remittances from Middle East. Oil price declines have shrunk the economies there recently, which poses a huge potential risk to Kerala as lower disposable income in the hands of their NRIs in the Gulf will mean lower remittances to Kerala.

Last query i had was with regards to what kind of society is ideal. I know this is a toughie. Do you think capitalism like Mericaaaaa where health care and very limited social net is good or like a canada or a finland where taxes are high, but costs like healthcare and support are free. What is our current model called or what would you call it?

I think Our model is crony capitalism where the government and businessmen in nexus benefit themselves at the cost of everyone else. The ideal system is the one where people are the happiest. By that logic, I guess you want to follow Switzerland or one of the Scandinavian countries.

[alter.e.go]

Around 40% of the US Debt is owed to the Federal Reserve (the central bank) and the remaining to other entities/ countries.
What is state in India ? Does India owe our Central Bank anything ? Where can I find exactly what is India's internal debt ?

-- This is part of a study I am doing to understand the cause of monetary inflation

[reverse_gear]

Originally Posted by alter.e.go

Around 40% of the US Debt is owed to the Federal Reserve (the central bank) and the remaining to other entities/ countries.
What is state in India ? Does India owe our Central Bank anything ? Where can I find exactly what is India's internal debt ?

-- This is part of a study I am doing to understand the cause of monetary inflation

This is from the Ministry of Finance website:

Government borrowings

External borrowings detailed

Please note that the external debt tables includes all debt - ie. banks, corporate and government debt. The classification is also given.

This is another useful link from RBI website.

Ownership pattern of Government of India dated securities

Note that the above is only dated securities and does not include other internal borrowings.

Hope this helps.

[arunkumarsarat]

Originally Posted by alter.e.go

-- This is part of a study I am doing to understand the cause of monetary inflation

As per my understanding, debt in itself does not cause inflation.

However, if a government burdened with internal debt, resorts to deficit financing, which is the printing of new currency notes, to tide over its debt then the result is definitely inflation.

This was what Germany did after the word war II and caused hyper inflation in their economy.

A high debt to GDP ratio in itself is not a concern if the increasing debt is being utilized for economically productive activities. As the economy grows in size, debt which looks to be presently high becomes manageable and is not a cause of concern. Thus in high growth economies debt is not a problem. Countries with strong central banks which constantly monitor the economic indicators can issue advance warnings on down turns around the corner and make the government take steps to manage their debts.

[reverse_gear]

Originally Posted by alter.e.go

-- This is part of a study I am doing to understand the cause of monetary inflation

Originally Posted by arunkumarsarat

As per my understanding, debt in itself does not cause inflation.

However, if a government burdened with internal debt, resorts to deficit financing, which is the printing of new currency notes, to tide over its debt then the result is definitely inflation.

This was what Germany did after the word war II and caused hyper inflation in their economy.

A high debt to GDP ratio in itself is not a concern if the increasing debt is being utilized for economically productive activities. As the economy grows in size, debt which looks to be presently high becomes manageable and is not a cause of concern. Thus in high growth economies debt is not a problem. Countries with strong central banks which constantly monitor the economic indicators can issue advance warnings on down turns around the corner and make the government take steps to manage their debts.

He is talking about monetary inflation, which means higher levels of M1 and M3 in circulation. This is very topical as this strategy (termed quantitative easing) is the one used by the US, Europe and more recently Japan to avoid deflation and get the economy growing. Of course, it's a lot more complicated, but inflation has been one of the key targets of quantitative easing. Our reserve bank has had to do the reverse, ie. keep rates high so that money circulation is reduced and inflation is brought down.

@arunkumarsarat, what you are referring to is fiscal conditions for inflation.

[tsk1979]

Found this amazing comic on the "TPP"
http://economixcomix.com/home/tpp/

[alpha1]

Originally Posted by tsk1979

Found this amazing comic on the "TPP"
http://economixcomix.com/home/tpp/

Looks like the underlying assumption behind the comic is that money needs to be distributed equally and the local population needs to remain employed no matter how unproductive they may be. Anything else is unfair.

Of course trade treaties are nothing but more restrictions and regulations in actual free trade - so I am against them, and perhaps with you on this point.

[tsk1979]

Originally Posted by alpha1

Looks like the underlying assumption behind the comic is that money needs to be distributed equally .

No. One of the points of the comic is that when there is growth in the economy the growth needs to be distributed, and not concentrated.

Then there are points raised about how it is defeating the purpose of free trade(eg Americans cannot buy medicines from Canada due to a free trade agreement).

There are also points being raised about the secrecy, and backroom deals which allow companies to have more power than governments(Australia vs HK)

I suggest you read the comic again. Its about TPP, and how people are being forced to be part of a treaty they had no say in.

[Samurai]

Originally Posted by alpha1

Of course trade treaties are nothing but more restrictions and regulations in actual free trade - so I am against them, and perhaps with you on this point.

It all depends on whether you are a beneficiary or victim of a restriction or free market.

India is a major beneficiary of outsourcing from USA. US jobs have been flowing to us for decades now, so we like it. For the same reason US citizens hate it. But US & Indian corporations like it since they get cheap labour. It is all in the eye of the beholder.

[tsk1979]

Originally Posted by Samurai

It all depends on whether you are a beneficiary or victim of a restriction or free market.

India is a major beneficiary of outsourcing from USA. US jobs have been flowing to us for decades now, so we like it. For the same reason US citizens hate it. But US & Indian corporations like it since they get cheap labour. It is all in the eye of the beholder.

The problem is not this per se.
Jobs move. No problem with that.
However, when something which is not free market is dressed up to be free market that is the point.

The comic gives example of China. By free market logic, Yuan should appreciate, and balance of trade should even out. However, even though Americans are buying from Chinese, Yuan does not appreciate, thanks to bonds etc.,

So there is the illusion of free market, with jobs moving out of America, yet currencies not moving due to the artificial money being created.

Of course the beneficiaries of this will be happy. However, they should not use the excuse of free market. This is not free market.

[tsk1979]

Interesting article
http://www.theguardian.com/us-news/2...es-salary-down
CEO Pay up 54%
Emloyee pay? less than 0.5%

[Jeroen]

Originally Posted by tsk1979

Interesting article
%

Interesting article indeed! Thanks for sharing. Although I'm probably pretty much a capitalist I don't approve of these huge salaries at all. I don't think there is a rational argument to be made for it or against it. So I won't. I think this is just about what your gut tells you what is appropriate. If you are an entrepreneur and you start a company and earn a million billion trillion dollars that's fine by me. You took the gamble, good for you.

But if you are the CEO of a company, public listed or not, and you are not the founder, you are just an employee. No matter how big or complex I don't think any CEO should earn more then 1-2 million USD at best. Part cash part stock.

I like this ratio the article refers to. How much more does a CEO earn than his employees? I think it is a very interesting metric that provides some food for thought.

Mind you as I said most people would call me a capitalist, my wife and kids would call me right wing, my American friends would call me the loony lefty from Europe and I like to think of myself as a liberal.

All of the above typification are irrelevant because to me this is a matter of what you consider obscene or not. Anybody on your payroll pulling 300-400 times the average employee salary? That is obscene as far as I'm concerned, no matter what your political orientation might be

Jeroen

[Samurai]

I am a co-founder and CEO, yet I believe in salary cap. Nobody should be earning more than 25-30 times the lowest level employee. I know all the arguments for obscene salaries, like a star employee could be generating revenue 100 times his salary as opposed to a janitor who is not generating any revenue. People who do that kind of talk need a lesson in sociology, and even history. A happy society is not the one that has huge income inequality.

Estate taxes is another thing. Governments should make a law that no one should inherit more than say ₹5 crores or $1 million, to be revised to match inflation. If your kids can't make a living after $1 million inheritance (tax free) each, then they are a burden to the society. This will also ensure people don't try to horde too much money, for it goes back to the government at death.

With government getting so much income, it can be used for development of infrastructure, public programs, research, etc. Corruption will also become a moot point because estate taxes discourage hording of excess income.

If a guy who has one billion, gets another billion, his lifestyle will hardly change. But distribute that extra billion to a 1000 people (via jobs), you will hugely improve the lives of those 1000 people. People like Bill Gates or Warren Buffet have finally understood that, that is why their kids will get only a fraction of their income.

http://www.washingtonpost.com/lifest...5c4_story.html

[sudev]

With you on salary cap. Many support arguments can be made but social equilibrium is the best reason.
In inheritance tax I disagree. Let there be economic incentive for people to grow wealth and in turn leverage the economic cycle higher. If the succeeding generation is not intelligent they will as likely loose 10 as 10000...

[alpha1]

Originally Posted by Samurai

Estate taxes is another thing. Governments should make a law that no one should inherit more than say ₹5 crores or $1 million, to be revised to match inflation. If your kids can't make a living after $1 million inheritance (tax free) each, then they are a burden to the society. This will also ensure people don't try to horde too much money, for it goes back to the government at death.

But then why should people inheriting INR 4.99 crore escape this tax?

Originally Posted by tsk1979

No. One of the points of the comic is that when there is growth in the economy the growth needs to be distributed, and not concentrated.

There are also points being raised about the secrecy, and backroom deals which allow companies to have more power than governments(Australia vs HK)

I suggest you read the comic again. Its about TPP, and how people are being forced to be part of a treaty they had no say in.

So is the comic implying that there has been zero increase in average worker's wage while the CEO's have skimmed cream?
Or is it that the comic is unhappy that CEO pay is up by 54% but at the same time average worker's pay has been up only by 0.5%?

I must say that as much as a lawn gardener may have a grouse against me making more increments than him because of my company's increased profits. I can also have similar if not larger grouse in case due to govt regulations he ends up having more increment compared to me.

Regarding the point about treaty/agreement under the guise of free trade, I have already made it clear, I am against all this farce since there should be no barrier to begin with, and all this NAFTA etc only seek to control the free market movements. (Yes you may call me lunatic for living in fantasy world no more than you would called Buddha a lunatic for preaching a non violent world)