Recession - An insight into

Pajja is the proprietor of a Siri-Paya and Nehari Shop in Lahore. Sales are low and, in order to increase them, he comes up with a plan to allow his customers to eat now and pay later. He keeps track of the meals consumed on a ledger.

Word gets around and as a result increasing numbers of customers flock to Pajja’s shop. Pajja’s suppliers are delighted and are very willing to sell more and more raw materials for the meals he prepares. Pajja shows them his ledger of receivables and they extend him credit.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and gives Pajja a credit line and then increases Pajja’s borrowing limit.

Taking advantage of his customers' freedom from immediate payment constraints, Pajja jacks up the prices of his Nehari and Siri-Paya. Customers don’t mind as they are not required to pay on the spot. Sales volume increases massively; Banks and suppliers lend more; Pajja opens more outlets. He sees no reason for undue concern since he has the debts of the customers as collateral.

At the bank's corporate headquarters, expert bankers recognize Pajja's customer loans as assets and transform these customer assets into BONDS. These negotiable instruments are given exotic names such as SIRIBOND, PAYABOND, MAGHAZBOND and BONGBOND. These securities are then listed on the Stock Exchange and traded on markets worldwide. No one really understands what the names mean and how the securities are guaranteed but, nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a credit risk manager of the bank decides that the time has come to demand payment of one of the debts incurred by Pajja. Pajja in turn asks his clients to pay up. One by one they refuse; the clients cannot pay back the debts. Pajja refuses to serve them any more. The clients stop coming.

Pajja is really screwed now. He cannot fulfil his loan obligations and therefore claims bankruptcy. All Bonds drop in price by between 80 to 95%.

The suppliers of Pajja, having granted generous payment due dates and having invested in the securities are faced with similar problems. The meat supplier defaults on payment to the sheep and cattle supplier and claims bankruptcy. The atta supplier is taken over by a competitor; Pajja lays off the cook and staff. Bankruptcies soar, unemployment mushrooms.

The bank that lent the money in the first place is set to collapse. It is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties with Pajja commuting back and forth in his Executive jet and Mercedes 500SEL, brokering the deal.

The funds required to save the economic collapse are obtained by a tax levied on the citizens, most of whom do not eat Nehari or Siri-Paya.

The disaster of 'me,me'

This happened in Mangalore as February 14 — now marketed as Valentine’s Day by traders to sell their wares — was approaching.

S Gurumurthy

Upset with public drinking by boys and girls, a freak by name Pramod Muthalik got mad. He got some of them in a pub beaten up like their parents would do, but unlike them. He had informed the media about his show so that the news cameras were in place to telecast the Muthalik action everywhere. Thus the Muthalik show was a joint venture between him and the media to keep away the state police, which could spoil the show. Predictably, the whole world pounced on poor Yeddyurappa who heads the BJP government in Karnataka for allowing Muthalik to take the law into his hands. The BJP, ever torn between its love of Hindu culture and its desire for a modern image, was greatly embarrassed. With the BJP in power in Karnataka, Muthalik knew the publicity value of his show. Had he enacted his theatre elsewhere, like when the Shiv Sena raided pubs years ago in Mumbai and Pune under the ‘secular’ Congress rule, it would have been far less noisy.

More. By just one mad act, Muthalik turned many, including a minister, into full-scale lunatics. Renuka Chowdhury, a minister of state, supported a “pub bharo andolan” to take on Muthalik, thus openly encouraging young boys and girls to take to mass drinking in public. And believe it or not, her portfolio is Women and Child Development. Came an even more mad response to Muthalik’s take on Valentine’s Day. “I support every kind of love, heterosexual, transgender, marital, extramarital”.

This is Arundhati Roy sermonising to youths. Why she left out incest from her catalogue of love is not clear. Now, take the secular media. It quickly equated pubgoing with individual rights, and held Muthalik as an offender against human rights. Evidently, the mad act of a freak Hindu in a distant corner of India is sufficient to turn the whole of secular India into lunatics. Now move away from this trivia to the danger to which Renukas and Arundhatis expose the nation’s economy.

The current Indian discourse on individual and human rights, which tends to smuggle in even gay and lesbian rights, apes the West. As India attempts to copy the West, it clearly misses the serious economic issues that confront West, thanks to its obsession with unfettered individual and human rights. Many in the West now seem to realise that continuously undermining the moral and social order has led to the present economic crisis. The West did not slide overnight. Beginning from the late 19th century, the Anglo-American West gradually moved away from a relation- based lifestyle to a contract-based lifestyle.

While culture and tradition govern relation, law and rights inhere in contracts.

And this move from relation to contracts became almost complete in the second half of the 20th century. With law overriding relations, even parents could not curb the rights of their wards once they legally matured.

It is the other way. If they acted against their wards, the law would punish the parents for child abuse. So contracts replaced relations, and rule of law substituted for moral order. To what effect? The rise of unfettered individualism and undefined feminism have led to the erosion of families and a rise in divorces, singleparent families, unwed mothers, lesbians, gays and almost the collapse of traditional families. Over 50 per cent of the first marriages, 67 per cent of the second marriages, and 74 per cent of the third marriages end in divorce in the US. Over 40 per cent of births are outside wedlock. Almost half of the families are headed by a single parent.

The number is more in most of Europe. It was seen as cultural erosion first. But slowly it has turned into an economic disaster.

The contract-based model undermined families and led to low or no household savings, high personal debt, credit card based living, outsourcing of household functions including kitchen work. The erosion in relation-based lifestyle soon imposed a huge social security burden on the state because the family mechanism that supported the unemployed, infirm, aged and the rest and the state had to step in to aid them. Thus the family functions were taken over by the state. The families were nationalised. The overburdened state consequently had to shed its traditional functions, like public works, and privatise itself.

The socialisation of family functions obviated the need to save for a rainy day and led to even lower savings. With the growth of individualism to the exclusion of kinship and relations, corporates and the state alike promoted unrestrained consumerism.

Result, some 110 millions US households have some 1.2 billion credit cards, almost a dozen cards per household.

As the people saved less and spent more, they got into trillions of dollars of private debt; and as the government spent more, it also ran into tens of trillions of dollars of public debt. The result is that the government is bankrupt and so households are insolvent. More, the US, the largest creditor nation of the world three decades ago, is today the number one debtor of the world, with $12.5 trillion of debt.

A quick survey shows this: all individual- centric economies are deep in debt; but nations more family-oriented and less individual- centric, like Japan, China, India, and generally Asian nations, account for over three-fourths of global savings; the individualist West lives off the savings of family-centric Asia. Today the West says that, in the present crisis only Asia, which has huge savings thanks to family orientation, can save the West, which has almost lost its traditional family lifestyle.

So the idea of unbridled human rights and unrestrained personal freedom that have led to social and cultural degeneration are increasingly seen as the cause of the present economic crisis. Weeks ago, Thomas L Friedman, a leading economic journalist, wrote in the New York Times that he had told those eating in a restaurant that they could no more afford to eat out and they had better cook and eat at home. But how will they cook and eat at home unless families are re-created? If they do, how would the US compensate for loss of employment if restaurants, which exist because households have closed their kitchens, shut down? There seems to be no solution within economic laws to the present crisis of the West. Amoral economics once yielded higher returns. It now yields negative returns.

Here Renukas and Arundhatis advocate unbridled individualism that has undermined families and morals and dynamited the economies of the West. Renuka questions the idea public morals. Arundhati advocates amoral living. Both seem unaware that an economy built at the cost of family and social morals, too collapses on the ruins of the morals it has brought down. QED: morality supports economics; lack of it ruins economies

comment@gurumurthy.net

About the author:

S Gurumurthy is a well-known commentator on political and economic issues

Save Petrol, Save Money, Contain Inflation

Nice Logic - It May work!! Save petrol, Save money!!



A man eats two eggs each morning for breakfast. When he goes to the Kirana store he pays Rs. 12 a dozen. Since a dozen eggs won't last a week he normally buys two dozens at a time. One day while buying eggs he notices that the price has risen to Rs. 16. The next time he buys groceries, eggs are Rs. 22 a dozen.

When asked to explain the price of eggs the store owner says, "The price has gone up and I have to raise my price accordingly". This store buys 100 dozen eggs a day. He checked around for a better price and all the distributors have raised their prices. The distributors have begun to buy from the huge egg farms. The small egg farms have been driven out of business. The huge egg farms sell 100,000 dozen eggs a day to distributors. With no competition, they can set the price as they see fit. The distributors then have to raise their prices to the grocery stores. And on and on and on.

As the man kept buying eggs the price kept going up. He saw the big egg trucks delivering 100 dozen eggs each day. Nothing changed there. He checked out the huge egg farms and found they were selling 100,000 dozen eggs to the distributors daily. Nothing had changed but the price of eggs.

Then week before Diwali the price of eggs shot up to Rs. 40 a dozen. Again he asked the grocery owner why and was told, "Cakes and baking for the holiday". The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking, baking, etc. happen. This pattern continues until the price of eggs is Rs. 60 a dozen. The man says, " There must be something we can do about the price of eggs".

He starts talking to all the people in his town and they decide to stop buying eggs. This didn't work because everyone needed eggs.

Finally, the man suggested only buying what you need. He ate 2 eggs a day. On the way home from work he would stop at the grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.

The grocery store owner began complaining that he had too many eggs in his cooler. He told the distributor that he didn't need any eggs.
Maybe wouldn't need any all week.

The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn't have any room for eggs would not need any for at least two weeks.

At the egg farm, the chickens just kept on laying eggs. To relieve the pressure, the huge egg farm told the distributor that they could buy the eggs at a lower price.

The distributor said, " I don't have the room for the %$&^*&% eggs even if they were free". The distributor told the grocery store owner that he would lower the price of the eggs if the store would start buying
again.

The grocery store owner said, "I don't have room for more eggs. The customers are only buying 2 or 3 eggs at a time. Now if you were to drop the price of eggs back down to the original price, the customers
would start buying by the dozen again".

The distributors sent that proposal to the huge egg farmers but the egg farmers liked the price they were getting for their eggs but, those chickens just kept on laying. Finally, the egg farmers lowered the
price of their eggs. But only a few paisa.

The customers still bought 2 or 3 eggs at a time. They said, "when the price of eggs gets down to where it was before, we will start buying by the dozen."

Slowly the price of eggs started dropping. The distributors had to slash their prices to make room for the eggs coming from the egg farmers.

The egg farmers cut their prices because the distributors wouldn't buy at a higher price than they were selling eggs for. Anyway, they had full warehouses and wouldn't need eggs for quite a while. And those chickens kept on laying. Eventually, the egg farmers cut their prices because they were throwing away eggs they couldn't sell.

The distributors started buying again because the eggs were priced to where the stores could afford to sell them at the lower price. And the customers starting buying by the dozen again.

Now, transpose this analogy to the gasoline industry.

What if everyone only bought Rs 200.00 worth of Petrol each time they pulled to the pump? The dealer's tanks would stay semi full all the time. The dealers wouldn't have room for the gas coming from the huge tanks. The tank farms wouldn't have room for the petrol coming from the refining plants. And the refining plants wouldn't have room for the oil being off loaded from the huge tankers coming from the oil fiends.

Just Rs 200.00 each time you buy gas. Don't fill up the tank of your car. You may have to stop for gas twice a week, but the price should come down.

Think about it.


Also, don't buy anything else at the fuel station; don't give them any more of your hard earned money than what you spend on gas, until the prices come down..."

..just think of this concept for a while.

.................please pass this concept around....reaching out to
the masses ...the world .....