The Inflation Problem in India

The Indian Government has long been struggling to tame the inflationary pressures that run in the excess of 6%. Since early 2010, the Reserve Bank of India has increased the interest rates six times, but, has still failed to meet the longing objectives. Why?

The simple answer is that they are trying to fix the wrong side of the problem. It's true that demand is high in the Indian market, but, more than just demand, it is the supply-side that is highly constrained! By increasing the base rates, the RBI has just been trying to bring down the demand, so as to tame the inflation. The actual, and thus the long-term, solution to the problem requires on the government part to invest billions of dollars in fixing the pathetic supply-side problems. But, fixing the supply-side of the problem requires guts, courage, discipline, honesty, accountability, high-standards of governance, and tons of money.

Instead of tackling the real-and-higly-challenging problem, the government is busy giving the world, especially to the global investors, an eyewash by frequently increasing the interest rates. Sad? Indeed.

The Global Currency War

The global fight to reducing the value of currencies is peaking up. It might reach to its zenith, with the Fed further printing crispy US dollars, and pumping those dollars in the global economy, either directly or indirectly. The Fed is thinking of buying the US Treasuries, with its new crispy greenbacks, and is going to keep the interest rates near to zero, for a long time. If this happens, the US dollar will get diluted, and US exports will become more competitive on the global markets. Thus, it is a direct, currency-war response to China. But, the challenge for China is to move its currency further down, in tandem with the greenback, against a basket of currencies. Thus, China needs to keep buying US-dollar denominated assets, especially US debt, extending its love-hate relationships with the greenback. For global investors, it is a no-bariner to guess the US treasury yield, and, for the global market, it's a no-brainer to guess the direction of the new money!! :-)

Another challenge for China is to weigh-in the costs and benefits of continuing its currency war, as it holds almost 10% of US debt -- the dollar asset the value of which goes down, every time the dollar is getting devalued. So, the ultimate question for China is to consider whether it is worth keeping its currency devalued so as to export more and more, and then keep buying US-debt with the money earned so to keep exporting even more and more, and, then, somewhere in the cycle, the US brings down the value of the debt down by printing new greenbacks!! Undoubtedly, it is a vicious circle!!! A vicious circle in which China has a huge chance of losing, rather than of winning!! Isn't it illogical to bet on someone else, especially when your entire fortune is at stake? But, it appears, for China it is not!! China has been keeping most of its economic strategies US-centric!! China really needs to come to grips with itself -- that it is a behemoth and it should now be inward looking rather than outward looking!

Although, it all started with the US and China, but, of late, some more countries have hopped on to the bandwagon in the currency markets to manipulate their currency in order to export more and more, such as Japan, South Korea, Indonesia, Brazil, etc., making the currency war global. It's a dangerous-and-quite-pointless fight the world is getting into, as it is purely a beggar-thy-neighbor policy, which is not only mean, but also cheap!! Why? In one way, this unequivocally proves that the world has run out of real innovations, or, at best, it proves that the world has really given up on real innovations, which are the real-and-awesome sources of renewed exports that bring livelihood to all, including the producers and the consumers alike. But, instead of focusing on this aspect, the whole world is getting into a dog fight!! May God save us all. Aamin!

China and Its Human Rights Issues

It was not surprising that the Chinese government harshly criticized the Nobel Peace Prize that was given to its jailed political activist Liu Xiaobo, claiming that the Nobel committee unlawfully interfered with its internal affairs and humiliated China in the eyes of the international public.

The obvious question is whether China was right in condemning the Nobel committee. The simple and unambiguous answer is, NO. Why? Here are the reasons, as stated by Mr. Thorbjorn Jagland, the chairman of the Norwegian Nobel Committee, in his article in the NYT.

"International human rights laws and standards are above any nation-state, and the world community has a duty to ensure they are respected. The United Nations, founded after the two disastrous world wars, committed member states to resolve disputes by peaceful means and defined the fundamental rights of all people in the Universal Declaration of Human Rights. The nation-state, the declaration said, would no longer have ultimate, unlimited power.

Today, universal human rights provide a check on arbitrary majorities around the world, whether they are democracies or not. A majority in a parliament cannot decide to harm the rights of a minority, nor vote for laws that undermine human rights. And even though China is not a constitutional democracy, it is a member of the United Nations, and it has amended its Constitution to comply with the Declaration of Human Rights. However, Mr. Liu’s imprisonment is clear proof that China’s criminal law is not in line with its Constitution. He was convicted of “spreading rumors or slander or any other means to subvert the state power or overthrow the socialist system.” But in a world community based on universal human rights, it is not a government’s task to stamp out opinions and rumors. Governments are obliged to ensure the right to free expression — even if the speaker advocates a different social system.

These are rights that the Nobel committee has long upheld by honoring those who struggle to protect them with the Peace Prize, including Andrei Sakharov for his struggle against human rights abuses in the Soviet Union, and the Rev. Dr. Martin Luther King Jr. for his fight for civil rights in the United States.

If China is to advance in harmony with other countries and become a key partner in upholding the values of the world community, it must first grant freedom of expression to all its citizens.

It is a tragedy that a man is being imprisoned for 11 years merely because he expressed his opinion. If we are to move toward the fraternity of nations of which Alfred Nobel spoke, then universal human rights must be our touchstone."

I think China should well now be focusing on an all-inclusive growth, rather than focusing solely on the obscene amount of growth for its state-owned companies, which have been flourishing at the cost of its citizens' human rights (in order to keep the political power intact in the hands of a few and to keep its manufacturing costs down), and at the cost of its competitors (keeping its currency undervalued, so as to sell more on the international markets, making its competitors' goods comparatively costlier). It's time for change, and it will come.

My Blogs: Easier to Read, Simpler to Understand, and Friendlier to Share

I have earnestly tried my level best to make the template of my blog as simple as possible, in order to enhance the ease of readability. Moreover, now, you can share my blogs with others through your very own Gmail, Blogspot, Twitter, Facebook, and Google Buzz accounts.

As usual, please keep enjoying my blogs secretly! :-)

If, in case, you want to share your "secret-enjoyment" with me, there is a comment button down here. Kindly give your invaluable feedback and let me enjoy my blogs too. I will surely try to enhance the level of enjoyment we all derive from the blogs here. I promise. Enjoy. :-)

Is Apple Really In Trouble?

Having successfully failed to woo Apple, Adobe filed complaints against Apple to the US Antitrust Enforcers, saying Apple is stifling competition by shunning all Flash-based content from the iPhone and the iPad.

First things first, is Adobe justified in its allegation? Let me give you some perspective, before you jump to any conclusion.

Flash is Adobe’s proprietary software that currently is being used to run more than 90 percent of online graphics, animations, and videos, especially content for displaying online advertisements. And, Apple doesn’t support Flash on its products, disallowing Adobe a highly-desired, much-awaited entry into the Apple Value Chain.

But, why does Adobe want to enter into Apple’s “territory.” There are two obvious reasons for desiring so:

1) Apple’s customers, in general, are higher-spending smartphones-users. Getting their eyeballs for advertisements are highly desirable, as the chances increase manifold that those customers will buy things, when they are exposed to “relevantly-pitched” advertisements.

2) Apple may break Adobe’s hegemony on online content that generates online advertisement revenues, and may push HTML5 – an open-source standard for web-based graphics, animation and videos – as the industry standard for online advertisements. If that happens, Adobe’s value will tumble, because Adobe makes money from charging advertisers, designers, and developers for using its proprietary tools, such as Photoshop and Illustrator, for creating Flash-based graphics, animation, and videos.

Let me give you some more perspective. Why should Apple bow to Adobe? If the ground has to be leveled for all kinds of stakeholders, then why shouldn’t it be leveled by making an open-source standard, such as HTML5, as the industry standard for online graphics, animations, and videos? Doesn’t it sound more logical? Why should “the power” shift from one company to another? The power to control online revenues should be dissipated to everyone on this earth! And, that is achievable only by making HTML5, or something still better, the industry standard for creating content that generates online revenues.

Apple has vehemently been supporting HTML5!

Now, let’s get back to the original question of whether Adobe is justified in claiming that Apple is killing competition by not allowing Flash-based content on the iPhone and the iPad. What do you think? I think, “Not a tad!”

If you disagree with me, please feel free to rip me apart – there is a button for comments right down here! I look forward to hearing your rationale too!

Adobe’s One-sided Love Affair with Apple

Apple is very clear of how it wants developers to develop applications for its products, such as the iPod, iPhone, and iPad. It wants developers to use its well-documented APIs in the manner it prescribes. Thus, it wants applications to be developed ONLY in C or C++ that could well be executed by the iPhone OS WebKit Engine.

In other words, Apple still wants to shun Adobe’s Creative Suite that includes Flash, which is currently being used for displaying more than 90 percent of online videos.

Apple, since the launch of the iPhone in 2007, has been shutting Adobe out of its value chain, even though Adobe has consistently been trying to woo Apple by sending very clear signals! For example, the new Adobe Creative Suite 5, which is expected to be unleashed soon at Adobe’s annual developers conference, has features that will give developers the ability to produce applications in a format that can work on the iPhone and iPad. But, Apple’s new developer agreement makes it succinctly clear that Apple is not going to accept Adobe’s courtship!

But, the obvious questions are: Why does Apple want to hurt Adobe? Why does Apple want to keep Adobe out of its value chain? Won’t doing so hurt Apple too? Won’t blank-holes be there when Apple customers browse the Internet, using Apple devices? What is going to fill in there, if not Flash-based videos, which already are prevalent all over the Internet?

The answers to these so-called obvious questions could perhaps be like these: No, perhaps, Apple purposely doesn’t want to hurt Adobe, but, definitely, wants to hold on to its highly enthusiastic developers firmly, raising the costs of switching for them. And, yes, doing so is hurting Apple too, but not much, as content-providers are slowly moving from Flash to HTML5, which is an open-source standard, and works fine for Apple. So, hopefully soon, there won’t be many blank-holes for Apple’s customers.

Oh yea, Apple has its own way of saying a big NO! But, it is just playing safe, as it knows what might pop up, if it lets Adobe come close to it – and to its products, services, “hegemony” over its entire spectrum of value chain, revenues, and bottom line, of course! :-)

Emirates, Off Course?

As per the International Air Transport Association, Airlines worldwide, in 2009, which witnessed the worst demand-decline in the airline history, are estimated to have lost USD 9.4 billion. For the same year, Emirates will announce even more profits, including another record for passenger traffic, perhaps above the 23 million mark! How?

Between April 2009 and December 2009, when all other Airlines were getting into a price war to lock-in passengers, in order to fend off the global recession, Emirates increased its fares by 35 percent across its network. The surprising, but strategically-planned outcome of doing so was that the demand for Emirates grew up! Seat factors went up, so did the loads!

The decision for hiking the fares did require a little retrospect for Emirates. It was quite tempting for Emirates to get into the global price-war, but, then, it realized that having spent millions of dollars in building a premium brand, getting into the price war wouldn’t make sense at all.

For example, Emirates had put first-class showers on its A380 super-jumbos; had sponsored horse racing, yachting and football events across the world. All these strategic, brand-building investments would be in a stark-contrast to its decision for getting involved in the global price-war! Thus, to show the world what it was, and, perhaps, what it is, it hiked its fares across the board. Moreover, it also identified a much-untapped goldmine in first-class and in business-class passengers coming out of Europe, Asia, and South America. Awesome! Isn’t it?

But, its competitors are crying foul, as they claim that Emirates has an undue advantage over its competitors, as it has full support of the airport and civil aviation authorities, especially of those of Dubai. But, then, that is Emirates’ strategic, niche business-model for cutting travel-time short for its passengers by creating new “city-pairs” via a single stop at Dubai, and also for realizing Dubai International Airport’s strategic growth-model that seeks to be the world’s busiest aviation hub. Now, this is called aligning your growth strategies with those of your business-partners – a strategy for devising a win-win solution for all the parties involved, even for your customers as you shorten their travel-time while still putting them on a luxurious flight!

Emirates is chalking out a big-potential-for-growth strategy by linking 500 profitable destinations worldwide under its “city-pair” business-model, up from its current network of 101 cities. It says, “It’s just the tip of the iceberg!”

The only constraints that it may face will be the physical constraints of Dubai International Airport, in terms of airspace, runways, and other physical infrastructure that might limit the use of its “city-pairs” concept. Emirates, off course? Of course, not!

The Global Outlook for 2010

2010 is going to be a mixed-kind of year. We are still witnessing major troubles primarily in Greece, Spain, Portugal, Ireland, UK, Dubai, Japan, and the US. But, on the other hand, undoubtedly, they all will fight back, because they ought to. There is no other choice. This is primarily a capitalistic world, which doesn't give in to pessimism. We have seen unprecedented efforts by the Central Banks and Governments worldwide. All those efforts will pay off, albeit slowly but surely. There will again be booms and busts, after all that's the cycle and that is its intrinsic nature. Isn't it? Let's be patient, and hold our grounds firmly. Good luck to all of us, as we see the waning of the modern world's second-worst recession!

There will be some pains and upsets in the globalized world, as economies try to "rein in" their Balance of Payments (BOP), especially with other economies, such as China, which cuts its manufacturing-costs at the expense of its competitors and of its buyers as well! But, that's a different story altogether.

Deflation in Japan is another concern. It has become so hard to make money in Japan. So, obviously, insane amounts of funds will outflow from Japan to economies -- especially emerging economies -- that promise robust growth, creating bubbles and then consequently sudden busts! But, is it something extremely wrong? No! It's not! But, inflow and outflow of funds certainly need to be controlled and be well monitored. EXTREME free-flow of funds is a very dangerous thing, because you just never know what's going to happen next! Economies become susceptible to the idiosyncrasies of few "funds managers!" They take the world economy as "HOSTAGE!" Isn't cartel a reality?

I just hope the policy-makers worldwide would fix the root causes of the problems, instead of beating around the bush -- that is trying to fix the symptoms of the problems. Good luck to most of us !

Walking Without a Plan

Walking without a plan? Yes, that's right -- walking without a plan! :-) It's possible. Trust me; it is. And, you can still work on an unplanned plan to completion. You can still coordinate without coordinating explicitly. You can still communicate without communicating vehemently. You can still promise without promising earnestly. Doesn't silence speak a thousand words? And, doesn't signaling work? All of these work, provided you know how to walk without a plan.

Have you ever driven any kind of vehicle on the Indian roads? In India, hardly anyone follows any traffic rules, but, still, considering how people drive out there, the number of accidents is still very, very low -- I repeat considering the way people drive out there. We are used to of "walking without a plan" -- it's what we have been experiencing since our childhood, isn't it? :-)

That was just an example to hint you at something. :-) Are you game for it -- walking without a plan? :-) Let's see. In the meanwhile, I just hope that you be a sport!

What Comes First: Price or Costs?

For marketing, in general, letting the price, and/or the profit margin, determine the costs of the product, rather than letting the costs of the product determine the price, and/or the profit margin, is the most prudent way to go forward.

First, decide the price of your product, and the subsequent profit margin, that you must make to satiate, or justify, your investments. Doing so gives you a costs window that you may put at stake in producing the product. Thus, the price – and/or the profit margin – of the product drives its viable costs structure. In the worst case, you might not be able to produce the product within the estimated costs. But, your money remains intact, and you can still use it for something better.

If you do the other way round, that is, if you first produce the product, and then aggregate the costs incurred in producing it, in that case, the total costs drive the price of the product, and subsequently drive the profit margin, which may or may not justify the investments made, keeping in mind that there is a certain maximum price the consumer is ready to pay for the product. This second method is prone to the risks of making the entire investments sour! The worst situation has the potential to wreck havoc -- that is that you might lose all your investments!

It is certainly not that the first method always is the best way of deciding on the price, and thus the justified costs, of a product. But, it certainly is the more logical way of going forward.

However, in some situations, the second method is the only possible way of zeroing in on the costs, and subsequently the price of a product, especially when both the producer and the potential consumers are completely new to the concept of the product that is going to be produced.

The call is yours, so take the shot! And, don't forget that you will be held accountable for it too, because if you miss it, the investors will not let you off the hook! You can run; you can hide, but you can't skip, my "love." :-)