Friday, August 31, 2012

US: RISING FISCAL DEFICIT

From $1.4 trillion in 2009, the US fiscal deficit is projected to hit an alarming $1.6 trillion this year. One alternative that perhaps can save US from collapsing is the implementation of a nationwide VAT. by Manish k. Pandey

In fact, Uncle Sam at present needs a revenue generator and VAT is just that. “VAT has the potential to generate a large amount of revenue. US consumer spending totals some $10 trillion annually, or about 70% of GDP. The actual tax base will likely be far smaller; most countries with value-added taxes exempt food at grocery stores (7% of US spending) and medical goods and services (21% of spending). Yet, even if half of all spending were exempt, the VAT’s revenue potential would be large,” Scott Hoyt, the US based Senior Director of Consumer Economics at Moody’s Economy.com tells B&E. Even a Congressional Research Service (public policy research arm of US Congress) report suggests that each 1% of VAT has the potential to generate $50 billion. That’s certainly big money. Besides, it could also prove good for economic growth. Since in VAT saving is taxed less than consumption, people are likely save more, making more money available for investment.

However, critics of VAT argue that they are inflationary, pointing to the rise in prices that typically occurs when a VAT is introduced. “It’s a one-time change and need not contribute to accelerating prices unless it raises inflation expectations or is accommodated by the Fed in a way that introduces sustained inflation. Under reasonable policy assumptions, neither of these need happen,” says Hoyt. Even White House adviser Paul Volcker, who is known for successfully beating down inflation while serving as Federal Reserve chairman during Ronald Reagan’s tenure, feels that a European-style VAT will help US in bringing down its deficit. “ VAT, a levy on all the goods and services you consume, is not a toxic idea,” he was quoted by CBS MoneyWatch.com a few months back.

Certainly VAT has great potential. Even if it’s started at a low level, say 5-10%, it can generate big money. But, thanks to political enthusiasm, it doesn’t seems to be happening anytime soon. While Obama has promised no tax increases for 95% of the Americans, most Republicans shy away from “Tax” in any form.

But then, crisis paved the way for reforms, and America’s fiscal position is certainly not less than a crisis. This may be the last chance for US to reform its non-paying tax structure, something last done in 1986.


Posted by at
Labels: , , , , , , , , , , , ,

Thursday, August 30, 2012

So many cars? Where to go?

 It’s surprising to note that MCD’s low-cost parking service is often creating problems for scores of commuters on the busy Delhi roads. B&E analyses why it is time to announce a hike in parking rates. by Pawan Chabra
 24-year-old Sahil Arora was stunned when he was asked to pay `50 as charges for parking his car at a M-Block Market parking space in South Delhi. Sahil had moved to Delhi only a month back to join a private sector bank as a business development manager after completing his studies from Pune. While he was still struggling to adjust with the nerve-racking Delhi traffic, inflated parking charge was something that was certainly unacceptable to him.

“It was very shocking for me to pay `50 as I had left my car for just one hour in an ill-managed parking lot in South Delhi,” Sahil tells B&E. In fact, it’s not M-Block Market alone, the scenario is similar in almost all parking lots in and around delhi where customers are reportedly being charged a higher amount than the actual tariff fixed by the Municipal Corporation of Delhi (MCD). Further, with MCD arbitrarily increasing parking tariffs (much to the dismay of motorists in the Capital) in the recent past, top functionaries at the civic body seem to have failed in penalising these parking contractors perhaps indicating a nexus between the two. Ironically, MCD has also failed in checking illegal parking and providing more parking spaces to accommodate growing number of vehicles in the capital.

The story doesn’t end here. Even parking rates vary from region to region in Delhi. While a parking lot in Rajouri Garden charges close to `20 on the weekends on a single entry basis, the charges are high as `50 in areas like Greater Kailash, Janak Puri, et al. Interestingly, this is all on contractors’ will and well above `10, the actual charge fixed by MCD for a single entry in these parking lots. Considering that there are nearly 3.9 million vehicles running on the Delhi roads today (as per MCD website), one can surely imagine the amount of revenue slipping out of MCD’s hands. And if sources are to be believed, these contractors, at times, continue to run parking lots even after the expiry of the contract without paying an additional fee. So, does that mean that there is nothing that can stop this illegal activity alongwith solving the traffic woes of the city?

According to the recent Colliers International’s global parking rate survey, India turns out having the cheapest parking rates in the world. Parking rates in central business districts in Chennai, Bangalore, Mumbai and Delhi are still less than $2 a day in when compared with parking charges in cities like Johannesburg ($40), Bangkok ($12.32), Shanghai ($12.91) and Moscow ($24.62). In fact, cities like Abu Dhabi ($55), Oslo ($54.52), Tokyo ($54.5), London ($52.24) and Sydney ($51.18) reign the charts when it comes to daily parking charges. The data certainly shows a way towards solving Delhi’s problems, at least to a certain extent.


Posted by at
Labels: , , , , , , , , , , , , ,

Wednesday, August 29, 2012

NBER report proves what we knew

Unemployment benefits help in hard times, but are also likely to be misused

Undoubtedly, unemployment is a curse. It not only decreases income and consumption but also hampers national productivity. Moreover, unemployment means a sheer wastage of the national talent pool. Whenever recessions occur, unemployment emerges as a major issue, for which developed countries in particular have one ‘potent’ pill in mind – unemployment benefits. While benefits go a long way in reducing destitute living and in increasing consumption, the latest June 2010 revision by National Bureau of Economic Research of their research paper titled Unemployment Insurance and Unemployed Spells, quantitatively and statistically proves what was suspected all along: “Higher unemployment benefits are found to have a strong negative effect on the probability of [an individual] leaving unemployment.”

The unemployment benefits across the developed world are quite shocking. Norway provides 87.6% of the past salaries for 500 days as unemployment benefit. Finland gives 85.1% of the previous salary to the unemployed for one year. In other countries including Sweden, Israel, Japan and Germany, the unemployed can demand unemployment benefits between 66% to 99% of the previous salaries. An unemployed individual can claim 80% of his previous income in Luxembourg. In the US, Bush signed a bill to provide unemployment benefits for 13 additional weeks (over the 26 weeks of regular benefits), which cost $5.5 billion. The Obama administration is currently paying $290 per week per individual as benefit and planning to extend it further to 2.5 million people (the administration is paying $30 billion every week).


Posted by at
Labels: , , , , , , , , , ,

Tuesday, August 28, 2012

GaGa over Justin!

With Justin’s single ‘Baby’ having more than 243 million views on YouTube, everything seems to be going the 16-year-old pop-star’s way. Justin has replaced Lady GaGa to top the list of most searched singers on the Internet. What’s more, Bieber gets to be a comic book hero too now, though it’s to be about his life and we won’t get to see Justin in spandex yet!


Posted by at
Labels: , , , , , , , , , , ,

Friday, August 24, 2012

UK: DEFICIT CONTROL MEASURES

Why the deficit control measures given by UK Prime Minister David Cameron suspiciously point to his lack of understanding of economics

Most amusingly, the current budget released by his government shows an expected total interest outflow of £250 billion by 2015, which is much higher than even the worst estimates before budget. Is Cameron even reading what Osborne is preparing? It doesn’t stop here. UK’s public debt today stands at £903 billion – equivalent to 68.5% of GDP – and the net debt stands at 62.2% of GDP. Guess what Cameron accepts that he is going to achieve through his budget – the net debt will actually grow to 70% of GDP in 2014. Are we imagining it or has the Osborne-Cameron combine not remembered to stand up to their words of a week before? Even if we consider UK’s current national debt, which stands at 51% of GDP, it’s quite alright by international standards. Many other countries have higher national debt to GDP ratios than UK’s. For example, Japan’s national debt is close to 194% of the GDP, Italy’s is over 100%, even the US is close to 71%. The fact is that by not cutting net debt, the duo is actually doing good for UK.

Let’s jump to Cameron’s understanding of the deficit. Britain’s deficit last year was actually considerably lower than previously calculated. Deficit has actually come down from £178 billion in 2007 (5.5% of GDP), to £163 billion in 2008, and finally to £156 billion in 2009 (11.5% of GDP). What worries Cameron is the figure of 11.5%. Although this is the third largest percentage amongst EU nations, there’s less cause for concern as the deficit was mainly due to two reasons – one, the recession, and two, the bailout of UK banks, both of which are not expected to continue in the future.

But Cameron’s biggest and perhaps gravest mistake for the UK economy is his decision to curtail government spending. While in 2008 and 2009, government spending was £582.1 billion and £638 billion, Cameron has promised to cap it at £637 billion for 2010/11, conservatively increasing it to reach £711 billion in 2015/16. The problem is that the moment the rate of growth of government spending falls, it’s the biggest discouragement for GDP growth. Add to this the timing – which is right after the slowdown, when the nation requires increased spending – and we have the makings of a most dangerous GDP stagnation era.

Deficit, debt and government spending were the three things Cameron shouldn’t have worried about – especially after having done the great work on taxes. Sadly, he did just that. The rabble rousing worked – people love him.


Posted by at
Labels: , , , , , , , , , , ,

Thursday, August 23, 2012

NANO’S SUMO BITE!

THE SINGUR STANDOFF IS JUST THE MOST PROMINENT EXAMPLE OF HOW THE FALLACY OF ASSUMPTION CAN BE DANGEROUS IN A DEMOCRACY! WRITES ANIRUDDHA BANERJEE

Little more than two years back, Singur — a small town in Hoogly district of West Bengal — grabbed media attention for a historic standoff, which is still what we’d call ‘raw nerve news’ not only in India but also in the international arena. The dream of offering the Rs 1 lakh car to the people of lower-middle strata in India met with a serious jolt when the landless farmers of Singur came out with all guns blazing against the Left-Tata module of pseudo-industrialisation!

However, the year 2007 witnessed a clash of two dreams. On the one hand, it was Ratan Tata whose dream was to come up with the Nano — a commendable vision undoubtedly. On the other, it was West Bengal Chief Minister Buddhadev Bhattacharjee who realised that if Ratan Tata’s dream car found its destination in the soil of Bengal, it could unleash huge employment opportunities for the locals and also act as a stimulus to the ‘image-makeover’ strategy of the Left. Subsequently, Buddhadev obliged and directed his administration to acquire 997 acres of land in Singur for industrial purposes. While a few farmers really liked the idea of industrialisation and handed over their lands to the administration, there were many others who still had not made up their minds. The state machinery thought it better to bank upon the colonial Land Acquisition Act of 1894, and rather than going for dialogues and peaceful deliberations with the unwilling farmers, yanked off the land from seemingly powerless farmers. But here came the biggest blow for the West Bengal state government. Little did they realise that media activism and even political avitivism – led by the firebrand Mamata Banerjee – were waiting for exactly this to happen.

One suspects that what started as purely sporadic incidents of hooliganism against the Tata facilities – undertaken by hooligans of course – suddenly found momentum quite on its own, and to the surprise of the initiators, who realised there was something bigger rumbling under. Farmers started holding protest rallies against the state government’s land-acquisition move. When the locals perceived that a foul play was being hatched against them, many self-help groups started staging protests against the Nano project. Besides noted social activists like Mahasweta Devi and Medha Pathkar, scores of other activists rushed to Singur too, supporting the demands of the landless farmers, blaming the project to be a state-sponsored capitalist conspiracy.


Posted by at
Labels: , , , , , , , , , , ,

Wednesday, August 22, 2012

A peril here, a peril there

US has to carefully monitor direction of defence spending in Pakistan

It is said about Pakistan, that while most states have an army, this army has a state! The influence of army that inspires this extreme comment, which is reflected in the normally hefty defence budget allocation, which was increased by 17% for 2010-11 to Rs.442.2 billion ($5.17 billion), more than thrice as fast as the country’s GDP growth. This would be around 7.5% of their GDP in 2010, as per IMF estimates at constant prices. Last year’s allocation was Rs.343 billion, which mounted to Rs.403 billion, largely due to increased military operations on border areas.

Pakistan received $656 million from US for counter insurgency operations, but its military and intelligence services are under scrutiny for tacit support to jehadi terrorist organizations. Heritage Institution’s Lisa Curtis and Carnegie Endowment’s Ashley Tellis opined that US “must develop policies that approach the jehadi groups with the same urgency as the US deals with the threat from al-Qaida.’’


Posted by at
Labels: , , , , , , , , , , ,

Tuesday, August 21, 2012

F-bomb diplomacy!

All Obama requires to ensure that US is seen as a great ally by the world is to force US officials to control their urge to humiliate people

That Americans use the F-word quite conveniently in their daily communication is no Brezhnevian state secret. But the fact is that the usage of this word and the philosophy it propagates (of course figuratively) – of caring two hoots – unfortunately has filtered into the attitude of American officials when they deal with representatives of other nations, and in fact even with their own ilk.

First, some examples of how brilliantly even top US officials have gone over the board in their executive communication:

December 2003: US presidential candidate Senator John Kerry uses the F word in an interview in the magazine Rolling Stone.

June 2004: During a heated exchange at the US Senate, VP Dick Cheney tells Democratic senator Patrick Leahy, “Go f*** yourself!”

May 2007: US Senator John Cornyn objects to John McCain’s perceived intrusion into a Senate meeting on immigration, to which McCain replies, “F*** you! I know more about this than anyone else in the room.”

August, 2009: Rahm Emanuel, Chief of Staff, at a weekly strategy session featuring liberal groups and White House aides [on a plan to run advertisements against conservative Democrats] reportedly rebukes them by calling them “F***ing retarded!”

March 23, 2010: US VP Joe Biden whispers into Obama’s ear, “This is a big f***ing deal” (for the healthcare plan).

April 22, 2010: Cheney appears on The Dennis Miller Show and takes a compliment about his “F*** yourself” comment from the host and responds, “That’s sort of the best thing I ever did.”

Why are these examples shocking? To understand that, imagine your own country’s Vice President speaking the same words Dick Cheney spoke in public! Or the words US Vice President Biden spoke. The hypothesis is not even a conjecture anymore. The fact is that American officials, while being quite comfortable with their “hire and f-off” attitude – both in language and behaviour – have started assuming that the same attitude can be blindly exercised upon the representatives of foreign nations.


Posted by at
Labels: , , , , , , , , , , ,

Monday, August 20, 2012

Finally, a wrong move?

You can look at it as an advantage or as a drawback, but when Apple makes any kind of play, it is bound to invite numerous discussions, debates and scrutiny. The same is true for its latest acquisition of Intrinsity. Is Steve Job’s new penchant for semi-conductors the ‘wrong move’ that experts had been waiting for so long? by Amir Moin

It’s hard to discount the ability of Apple Computers to offer differentiated, futuristic and well designed products that enthrall customers across the globe, a fact that the iPod and iPhone have proved beyond doubt. But Steve Jobs also realises the perils of not watching his back. In what comes out as the latest edition of Apple’s endeavours towards becoming a fully integrated consumer electronics company, Apple has acquired Intrinsity, a small Austin-based firm for $121 million, that makes embedded processor cores, circuit design tools, design services and intellectual property based on their proprietary Domino Logic.

The reason why this acquisition is ringing alarm bells in the industry is because Apple had acquired another fabless semiconductor company, P.A. Semiconductors in April 2008; subsequently, in April 2009, Apple hired two former ATI/AMD chip designers. One was Raja Koduri, the former Chief Technology Officer (CTO) at AMD’s graphics group and the other was Bob Drebin, who held the same position at AMD before Koduri.

The induction of these highly skilled hires also coincided with Mark Papermaster’s official return to work at Apple. Papermaster was instrumental in developing the PowerPC architecture with IBM. His return at Apple was delayed owing to the legal settlement between them and his former employer, IBM. These developments have led the industry to believe that Apple plans to have the chips custom made in its own backyard. Tom R. Halfhill, Senior Analyst, The Linley Group, US, tells B&E, “By developing custom SoCs and embedded-processor cores, Apple is assuming more risk, but the potential payoffs are great: less dependence on third-party suppliers, greater differentiation, higher retail prices and richer profit margins.” Given the super secretive nature of the company, this revelation shouldn’t come as a surprise.

But there is more to this than meets the eye. By acquiring Intrinsity, Apple buys four things: Intrinsity’s Fast 14 technology, exclusive access to Intrinsity’s processor cores, a skilled processor design team and a multi-gigahertz Fast 14 implementation of ARM’s Cortex A9 Dual core processor. The last item has been in development for the past one year and could figure in Apple’s plans for future iPhones, iPads, and other gadgets.

With the acquisition of Intrinsity, Apple is poised to do what IBM did in the 1980s. It will be ‘legitimizing’ tablet computers, just as IBM had legitimized personal computers with its first PC in 1981. IBM was late in the market, but set a standard that soon dominated the market. In order to make tablets practical, five technologies have to mature – lightweight rechargeable batteries with high energy density; low-power microprocessors with enough performance to run complex software; flat, lightweight screens with pen or touch sensitivity; sophisticated graphical user interfaces; and smartly incorporated broadband wireless networking. These technologies are now on the verge of a boom. “With iPad, Apple is adding its usual extra elements: superlative user interface, trendy industrial design, cultural caché & unmatched marketing hype,” says Halfhill.


Posted by at
Labels: , , , , , , , , , , , , , , ,
Subscribe to: Posts (Atom)