U.S. RECESSION FEARS : Dollar to drop on S&P, flows seen to safe assets

The U.S. dollar is likely to take a further beating against the Swiss franc and Japanese yen on Monday, while global stocks could tumble after the United States lost its top-tier credit rating from Standard & Poor's. Losses against the euro, however, could be tempered by the euro zone's escalating debt crisis as officials there discuss ways to reduce borrowing costs for large euro zone economies Spain and Italy. The dollar's fall against the safe-haven Swiss franc and yen could be limited by possible intervention by the Bank of Japan and Swiss National Bank to stem their surging currencies. Stocks in Tel Aviv, one of the first global equity markets to open since the downgrade, dropped over 6 percent on Sunday in response to S&P's action late on Friday to cut the U.S. long-term credit rating by a notch to "AA-plus" from "AAA."
The move by S&P drew criticism from some of the world's largest investors. "Obviously, we're going to get freaked out a little bit and the dollar will get hit, but it's only going to be for a couple of days," said John Taylor, chairman and chief executive officer of FX Concepts, the world's largest currency hedge fund. Over the past month, the dollar shed 6 percent against the Swiss franc and about 4 percent against the yen. "This downgrade is not that important and if you ask me, too silly. The U.S. is in a much better position than any, I repeat, any European country," Taylor added.
It was not yet clear whether European policymakers would be able to come up with measures to allay concerns about their own region's fiscal crisis, though all the signs were that they were keenly aware of the importance of reassuring markets. Sources said the European Central Bank will hold a conference call at 1700 GMT to decide whether to buy Italian government bonds in the secondary market. One ECB source said that if the ECB council opted to intervene on Italy, the ECB and national central banks would start buying Italian bonds when markets open on Monday. The ECB last week resumed its purchases of government bonds in the secondary market after an 18-week hiatus, but its decision to restrict such purchases to Irish and Portuguese bonds led to sharp declines in Italian and Spanish bond prices, and borrowing costs soared to 14-year highs. "There is no reason why the ECB cannot simply go ahead and imply that they are going to support the Italians and the Spanish," said Mike Lenhoff, chief strategist at Brewin Dolphin in London. "It is better that they don't say anything, but go in and show there is another side to the market.". Any ECB buying would offer relief to beaten-down Italian and Spanish bonds, although the extent of any rally in these bonds will depend on the size and persistence of the bank's bond purchases.
U.S. RECESSION FEARS

Worries of another U.S. recession and concern about the euro zone crisis have sparked a global stock market slump that wiped $2.5 trillion off companies' values in the past week. The fall in global share prices, as measured by the MSCI All-Country World Index, was the biggest weekly decline since early October 2008, according to Thomson Reuters Datastream. Consumer discretionary shares of firms dependent on external demand are likely to be singled out for more punishment.

Still, some investors believed the expected sell-off in stocks on the U.S. credit downgrade had been largely priced in and may not last long. Some expressed doubts about the S&P decision as they are well aware of questions on the S&P's calculations of the projected U.S. fiscal deficits. "The U.S. track record -- over the past 200 years -- on its ability and willingness to fully service its debt is impeccable and the debt statistics should be interpreted not in isolation but in conjunction with the flawless track record of the U.S.," said Stephen Jen, managing director of SLJ Macro Partners in London, a global macro hedge fund. "This will have no lasting effects on financial asset prices," he added. U.S. Treasury debt yields are also expected to rise on Monday. Yields on benchmark U.S. 10-year Treasury notes rebounded to 2.56 percent on Friday, but were not very far from a record low of near 2 percent hit during the throes of the 2007-09 global financial crisis. The sharp swings in financial markets have piled pressure on policymakers. Finance ministers from the Group of Seven most developed economies are on Monday to discuss the U.S. sovereign rating downgrade and Europe's debt woes, Japanese news agency Kyodo reported on Sunday. "Be wary (Monday) of irrational depression as markets take flight," said Justin Urquhart Stewart, a director at Seven Investment Management in London. "We are dealing with the knowns and not the unknowns, but what we have a shortage of at the moment is political leadership."

Goldman Sachs strategists said there was a one-in-three probability of a U.S. recession due to the worsening European crisis, the possible failure to extend payroll tax cuts and elevated levels of joblessness, despite a slight dip in the U.S. unemployment rate in July. That would bode ill for the benchmark MSCI all-country index, which last week hit its lowest since September 2010 and has accumulated losses of more than 12 percent since late July. "Market sentiment appears acutely vulnerable given the build-up of concern on a sharper U.S. slowdown and speculation on the appropriate policy response and lingering fears stemming from the sovereign debt crisis in Europe," Citigroup strategists said in a note.

Indian Affairs Reality Check: Indian Affairs Reality Check: $2.5 Billion In Swis...

Indian Affairs Reality Check: Indian Affairs Reality Check: $2.5 Billion In Swis...: "Indian Affairs Reality Check: $2.5 Billion In Swiss Banks & Counting – Our Hard ... : 'It's official now -- Indians hold about $2.5 billion ..."

Long Live Middle Class!

Middle class makes up for a sizable chunk of the society but that hasn’t really transformed into any sort of real power. Yes, numbers do matter and we can take to the streets a la, Jasmine revolutionaries or piggy riding on the likes of Anna Hazare or Yoga Rockstar, Baba Ramdev but that’s as far as we can go or think of going. Middle class is meant to suffer in the hands of politicians, bureaucrats and under the weight of its own expectations and ambitions.The idea of this post came from recent diesel and LPG price hike. Whether its rising inflation, increased commodity prices, skyrocketing real estates, nasty service tax/education cess or rising cost of everything under the sun, it’s essentially middle class population that has to bear the brunt. I wonder, whether all these talks of inflationary pressure on our household expenses has any effect on the rich echelons of the society?! The middle segment has neither the resources of the rich nor the fatalism of the poor who silently perish. For any government, middle class has always been a soft target.

There can’t be any cataclysmic change which will prove instrumental in uprooting this curse. On our part, Indian middle class is no less responsible for some of the mess. It has stopped the celebration of the ordinary and taken the baton of new superpower or new-age consumers high on the Viagra of more spending capacity, far too seriously. They call it ambition, moving to the next level but in reality, it is more likely a case of blatant mimicking of the ‘rich’.

Not long back, we had global financial meltdown. Agreed, it was triggered/conspired/instigated by the banking behemoths but segment that really suffered was middle class. Whether it was axing of jobs, reduction in salaries or inability to splurge, the “half-have’s” had it really tough. Yet, if we look closely at the phenomenon, the primary reason behind the breakdown can be attributed to people’s inability to save and useless addiction to splurge. All the large banks, mortgage firms, stock brokers, marketers, advertisers etc know all they need to do is to arouse that “I belong” feeling within the foolish middle class population.

Most of these victims couldn’t balance their own checkbook, so what they got was overdraft fees. No prizes for guessing, the banks forced them into not paying attention, right? They had to have those 50” 3D LCDs/Plasma because this will make them feel affluent. Again, they added that price tag onto their credit cards and yet they complained about lack of savings. The neighborhood uncle talked about this phenomenal stock that was going to give 1000% returns in a month and they got burned!

I am not done yet. Some of my friends/colleagues, typical middle-class junta but high on house mortgage, bonuses, perceived above average salaries, are not really familiar with what a budget is but will turn into gluttons once they come across a fast-food joint and will buy useless smartphones, without knowing what android refers to. Despite all that, the middle class wannabes still have the gumption to blame banks for all the horrible decisions taken by them. So either this category is completely brainless and blind when it comes to managing their finances or they should accept that they are spineless enough to be controlled by high-flying shrewd bankers from some dark dungeon board room or something!

This is basic Economics 101. But I am afraid, not many of them are really aware of game of economics or even history books which clearly states that, in the Crash of 1929 the politicians, the bankers and the elite, with connections in high places and enormous credit and cash reserves, bought up everything that was for sale. Yes, you read it right. The bourgeois never made money. Worse of all, this middle class always lives with one cherished delusion and that is, very presence of intellectual or artistic gifts masquerading as ‘divine attributes’ helping them in closing the distance with the ‘Have’s’. The hungry resourcefulness cannot be compensated by the careful pretensions of personas that are somehow inherently invested with a loads of aspirations colored in shades of self-pity.

The middle class segment of Indian society is anyways, the least privileged one. So, they should either accept the inevitable with a pinch of salt or try reducing the pain of reality by finding their “internal locus of control” in the bowels of their withering mind. And if nothing here written by me is making any sense then please, unplug your computer and stick a wet finger in the electrical socket.

Long Live Middle Class!

Indian Affairs Reality Check: $2.5 Billion In Swiss Banks & Counting – Our Hard ...

Indian Affairs Reality Check: $2.5 Billion In Swiss Banks & Counting – Our Hard ...: "It's official now -- Indians hold about $2.5 billion (over Rs 11,000 crore) in Swiss banks, but this figure of Switzerland's central bank ma..."

$2.5 Billion In Swiss Banks & Counting – Our Hard Earned Money In Swiss Account

It's official now -- Indians hold about $2.5 billion (over Rs 11,000 crore) in Swiss banks, but this figure of Switzerland's central bank may be a gross understatement of the total wealth directly and indirectly held there by entities from India. The ever-growing judicial scrutiny and political outcry over alleged stashing of black money in Swiss banks also seems to be forcing Indian entities to move their monies to other safe havens like the Middle East, Singapore and Mauritius.
Some half a billion dollars have been moved out in the last three years, according to the central bank's figures. In the first-ever disclosure of money held in various Swiss banks by Indians, Swiss National Bank (SNB) has said the quantum of such deposits stood at 1.945 billion Swiss francs (about $2.5 billion) at the end of 2010.

Giving a break-up of this amount, Walter Meier, the spokesperson for the SNB President, said this included about $2.1 billion dollars in the form of savings and deposits by Indian individuals, financial institutions and corporates. The remaining about $400 million is of fiduciaries largely operating for private individuals from India. Meier, however, said the bank had no further information when asked about the identity of these funds. He further said that two of the largest Swiss banks, UBS and Credit Suisse, account for a vast majority of the deposits of entities from India. Out of the 1.66 billion Swiss francs ($2.1 billion) held by Indian individuals and institutions at the end of 2010, the two banks accounted for 1.02 Swiss francs ($1.5 billion) and the remaining 636 Swiss francs ($775 million) are held in Swiss cantonal banks and private banks, he added. Experts say that the fiduciaries are essentially wealth fund managers who hold the money of Indian private holders and families in the so-called numbered accounts. A private banker, on condition of anonymity, said that the actual deposits by Indians could be as high as $15-20 billion, but also rubbished the figure of $1.5 trillion that has been reported from time to time. "I would argue that both the Swiss central bank's estimate of $2.5 billion as deposits of Indians, as well as the Indian media stories of $1.5 trillion of Indian private deposits, are incorrect and somewhat outrageous," he said. "From my involvement with banks, I would place the Indian deposits anywhere between $15-20 billion," the banker said. He also said there was a "perceptible flight of funds" of Indian holders from Swiss banks to banks in Singapore and Dubai, which are now the two main centres for Indian funds from undeclared sources.

Public Distribution System goes wrong

The Government of India has launched several initiatives towards ensuring food security to its citizens. They include the public distribution scheme (PDS), the mid-day meal program for school children, the National Rural Employment Scheme, and several others to help people below the poverty line. The well-founded plans lack the desired execution by the various governments in charge of these schemes. At the other end of the spectrum, there are millions of hawkers in all major cities termed illegal traders by the municipalities but serving the food needs of millions of urban poor and lower middle class. They are self employed serving a cause.

What is missing is an integrative, co-evolutionary innovation strategy based on end-to-end logistics and supply-chain that would lead to high service quality food solutions to millions of people by combining innovations in several of the ecosystem elements and also their convergences.

A Recipe For Riot

Consider the several schemes announced by various governments over the years that were meant to put an end to hunger or eliminate poverty. What is singularly lacking in all these ideas is the execution of an ideal supply-chain that could have functioned at a national level.

The PDS operates under the joint responsibility of the Central and State governments. The Central government, through the Food Corporation of India, has assumed the responsibility for procurement, storage, transportation and bulk allocation of food grains to the state governments. The operational responsibility including identification of families below the poverty line, and issue of ration cards rests with the state governments.

The Mid-Day Meal Scheme was launched by the Ministry of Human Resource Development with effect from August 15, 1995, for the benefit of students in primary schools. It involves provision of lunch free of cost to school-children on all working days. The key objectives of the program are: protecting children from classroom hunger, increasing school enrolment, improved socialization among children belonging to all castes, addressing malnutrition, and social empowerment through provision of employment to women.

The Department of Food & Public Distribution makes allocation of annual requirement of food grains under the scheme to the Department of School Education & Literacy, Ministry of Human Resource Development. About 120 million children are so far covered under the Mid-day Meal Scheme, which is the largest school lunch program in the world.

The State of Karnataka introduced the provision of cooked meals in 2002. It has successfully involved private sector participation in the program. One successful venture is Akshaya Patra, which started with leadership from ISKCON. The Foundation gets a corpus from the state government but meets a major share of its costs with donations from private corporations and individuals in the city.

The program is managed with an ultra modern centralized kitchen that is run through a public/private partnership. Food is delivered to schools in sealed and heat retaining containers just before the lunch break every day. The program contains one of the best menus in school meal programmes in India with tasty sambar, rice, vegetables and some curd on most days.

National Rural Employment Generation Act (NREGA) is an important Central law having a large demographic and geographical spread. It assures livelihood guarantee to the entire population above 18 years of age residing in rural areas of the country. The act gives the right for 100 days of guaranteed employment in manual/unskilled work in rural areas.

What Went Wrong

All the four schemes mentioned above are good initiatives but all of them have issues in implementation. The main problems with the system are the inefficiency in the targeting of beneficiaries and the resulting leakage of subsidies. Several opportunities to manipulate the system exist with widespread collusion across the supply chain.

The Planning Commission had the following to say on the PDS system in its 2005 report, “For every Rs. 4 spent on the PDS, only `1 reaches the poor.” The Supreme Court-appointed vigilance committee has slammed the PDS for “rampant corruption, black market and diversion involving a vicious cartel of bureaucrats, fair-price shop owners and middlemen”. Similar comments are available in the press for NREGAS and mid day meal programs.

The lower income groups in the country spend a higher proportion of their income in making purchases from hawkers mainly because their goods are accessible and affordable. Had there been no hawkers in the cities the plight of the urban poor would be worse than what it is at present. In this way one section of the urban poor, namely, hawkers, helps another section to survive. Hence though hawkers are viewed as a problem for urban governance they are in fact the solution to some of the problems of the urban poor. But hawking is not a licensed activity in most cities.

Over the past few decades there has been a substantial increase in the number of hawkers in the major Indian cities. Mumbai has the largest number of street vendors numbering around 250,000. Kolkata has more than 150,000 street vendors. Ahmedabad and Patna have around 80,000 each and Indore, Bangalore and Bhubaneshwar have around 30,000 street vendors. The Cuisines by the sidewalks is a successful story from Kolkata which can be copied to advantage.

Recognition of hawking as a profession would also benefit the municipalities. They would be able to officially enforce levies on hawkers. This would provide additional revenue for cash strapped municipalities. They would also be entitled to loans from public institutions thus reducing the hold of moneylenders over them.

An Integrated Supply Chain

The business processes can be identified, streamlined, standardized and automated or semi-automated using IT and sensor networks. Modernization and integration of PDS, midday meal program, vocational training programs under NREGAS, hawkers, and small food outlets using communication technologies would lead to a blockbuster industry serving the poor and creating millions of jobs for not so well educated. NREGAS can be used for training chefs, cooks, hawker owners, PDS employees, school employees, etc. Standardized and automated kitchens and IT enabled and GPS equipped push carts can be developed. The push carts can be built following standardized design and equipped with solar or gas run refrigerators and ovens. The entire process can be monitored, executed and controlled using a call center (See diagram).

The missing link here is sophisticated kitchens with chefs and cooks equipped with automated cookers, refrigerators, and ovens distributed all over the city. The location and capacity of the kitchens can be determined using standard optimization techniques from the demand estimates. Now the supply chain consisting of the PDS and kitchens and the schools participating in the midday meal program needs trained manpower. The vocational training centers can be funded through the NREGAS to train cooks, chefs, sales people, servers and millions of other jobs required for the supply chain operate well, given the perishable nature of the supply chain.

Depending on the demand one can find the optimum number and locations of the kitchens to serve the community. The processes can be streamlined using sensor networks, smart cards, cloud computing, and mobile vans equipped with heaters and refrigerators. One can use modern kitchens such as the Akshaya Patra with the help of NGOs and corporate. This new ways of meeting the food security will get rid of the prevalent corrupt practices and can be made smart and green.

The governance model for this supply-chain can be worked out with an assemblage of NGOs, Corporate, Government and Associations. Making this work is a challenge but the rewards and impact would be tremendous. It would help to give a new direction to the current system which is corrupt and not working. The new system can be designed using new technologies such as smart cards, wireless, smart kitchens technologies, new designs for push carts equipped with refrigerators and ovens, hygiene indicators and several others. In fact a McDonald’s kind of outlets can be opened to avoid traffic issues with push carts.

The Impact

Given the perishable and hygienic nature of the supply-chain, the products are made in the day and ends by night. This requires careful demand forecasting, routing and rerouting of the supplies and monitoring the anti-social activities. The program needs trained logistics and IT manpower and millions of other jobs. Several product and process innovations are needed and there are opportunities for several small and big private entrepreneurs. This is a unique opportunity for people from all walks of life: Governments, NGOs, Big business houses and small entrepreneurs and micro finance and other FIIs to come together to make this program successful.

Clinical Trails imbrogilo

CLINICAL TRIALS have become a threat to the lives of poor people. An incident of this kind came to light recently in Adarshnagar colony, Pidugurallu, a town in the Guntur district of Andhra Pradesh. A number of people who took part in the clinical trials suffered from different kinds of ailments, but could not afford treatment for the same.

The people of this colony are all below poverty line, which enabled these organizations to lure them with money in return for their lives. With the help of these organizations multinational pharmaceutical companies are able to do trails on human beings by spending much less money than is usually required for doing so, eventually putting their lives at risk. The subjects taking part in these trails should volunteer with full knowledge of the trail and get some money in return for the job. Also the research organizations are responsible for the safety of their subjects.

Unfortunately, the victims of this recent scam were innocent enough to be unaware of the post effects of the trails done on them. Poverty, illiteracy, ignorance became the factors driving them to accept the deal for petty amount of few hundreds. The existence of the ethical committee, which is supposed to take care of the health, safety and dignity of the subjects has become namesake. Every clinical trial that takes place has to be done with approval of this committee, but there are a lot of private trial sites in India which carry out their activities without the consent of the committee.

In this scenario, the most deplorable thing is that the Drugs and Cosmetics Act formulated in 1940 is still implemented in India. Even more unfortunate is the fact that there is no concrete law for the regulation of these clinical research organizations. Since there is no appropriate law, it has become difficult to take action against these CROs. It’s high time the government opens its eyes and come to the rescue of weaker sections of the society.