Thought for the day
In struggling against anguish one never produces serenity; the struggle
against anguish only produces new forms of anguish."
-
Simone Weil (French, 1909-1943)
Word for the day
Stinkaroo (n)
Something markedly inferior in quality
(Source: Dictionary.com)
Malice towards none
Is there any study to assess what is the role of incest in
worsening sex ratio in India?
The road less traveled has its own perils
The week expectedly started with Greece. Monday morning was overwhelmingly
dominated by Greek talk. By the time markets opened, I had already participated
in many discussions.
"What is happening in Greece?" Why people are discussing
it 5am in the morning! my wife a student of Music and blissfully oblivious
about finance, wondered.
"I am praying for Gexit. A vacation in Santorin at cost of
Bangkok would then be possible!", a dear friend exclaimed.
"Should I sell everything at the market opening? Will the
fall of Greece be as bad as the fall of Lehman Bros?" worried a traders.
"Tell me what to buy this morning, should market open
materially lower", an investor who had been looking to increase his equity
allocation, inquisitioned.
Unfortunately, I could offer no intelligent input to none of them.
All I could think was that "in 2008 the world reached a point
where two roads diverged into the woods; and the world took the one less
traveled. Seven years and few trillion dollars down the road, we find ourselves
standing at the same fork we left in 2008, only more wearied and less sure
about ourselves."
I feel taking the path less traveled was the right strategy back
in 2008, as the conventional path was severely damaged and blocked. But the
world outside US should have returned to the conventional path the moment US
chose to ditch the global cooperation forged in 2008. Following the US was
another option available.
If it appears Greek to you, let me get back to simple English.
To understand the problem of Greece and many other countries in
Europe and find a sustainable solution, it is essential to understand the root
cause.
The core of the European problem lies in the blatant fiscal
profligacy in post War era. Both European governments and people have spent way
too much more than they have earned in past few decades. Large socialist
governments, high wages, inflexible labor markets, huge subsidies ensured that
the fortunes collected through industrial evolution and colonial expansion were
squandered. The industry thus moved to Asia, constricting the new avenues of employment.
To make things worse, the human lives lost in the two wars were
never adequately replenished, making the demography old and dependent on
pension. The virtuous cycle of economic development has been replaced by the
vicious cycle of adverse demography. Most European nations have more people to
provide for than the tax payers.
In post war era, despite all the mistrust, US kept its door open
to the talent and capital from across the world. The mass emigration of
talented people and real capital to US from Europe has left Europe way behind
in technological evolution.
Following the unconventional monetary policy like US is no
solution for Europe for the simple reason - US could grow at 3-4% and repay its
debt and Europe cannot grow and cannot service its debt.
NEXT POST WILL BE PUBLISHED ON 7-JUL-15
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