Repatriating the profits back to US and its impact on the Indian Rupee

I am not really convinced that repatriating profits from external territories will help spur the US economy.

To understand the matter more clearly, we can probably just keep aside the repatriation issue and ask the CEO's of the companies that plan to bring back the profits just one question, "Do you plan to invest in USA or in the Pacific and Latin Emerging Markets for future growth of your firm?". If the answer is not to invest in USA(which is what most of the CEO's are doing), then the tax break that the Fed has recently announced (taxing only 5.85% on repatriated profits from 30% previously) will not serve as carrots for the horses.

The only advantage is that if the US companies plan to divert their money from one international location to another. This is where the rules become a bit tricky and it might not be as easy to move the capital, lets say from India to China. Thus the money brought back to USA may help to navigate the capital liquidity movement.

Initially I was of the opinion that the Indian Rupee would depreciate in 2006 due to this tax relief provision of the US Fed, since the temporary relief in the repatriation of profits may cause at least a good amount of the estimated $320 billion(Need to figure out how much of this amount is spread between China, India and other emerging markets) to flow back into the US and thus impacting the Indian Forex. But I would not bet on that, as I see most of the US Multinationals in India(Software Sector) have embarked on a growth curve and hence would take advantage of the Tax "Deferral" scheme of USA Tax system and defer all their taxes, which will be ploughed back in the same country for future growth.

Some up tick in Forex activity will definitely happen in some pockets of year 2006. Especially when the US companies that are well established in India and China, such as Procter&Gamble, Johnson&Johnson, which have been making great profits for many years, decide to bring back a part of that profits . These US multinationals are out of the embryonic stage and on to self sustained growth curve, hence might not want to hold back their profits and will definitely want to keep the money close to their heart(USA).

Finally, those who plan to send money to India or China, just hang on, you may get better exchange rate in 2006, when the companies start to repatriate.

Swanson's Unwritten Rules of Management

Business 2.0 has provided in a nutshell about Swanson's Unwritten Rules of Management also known as "The CEO's Secret Handbook". It's a wonderful reading and a must for any professional, not necessarily a management professional.

Here is another rule, which I think is worth every word in gold. Not sure where I picked it up from.

Motivation is what gets you started.
Habit is what keeps you going.

On Current Account Deficit (CAD) and India

It is interesting to note that the current account deficit(CAD)of India is considered to be good for her and the same is an issue for US. Of course the magnitude of CAD of each country is the primary reason of comfort or panic, since a modest CAD or CAS(Current Account Surplus) is not an issue of concern. I always believe that if a country has right investments in mind, which will add a lot of value to the people and nation, it probably makes sense to take on debt (Current account deficit due to flow of capital) and implement the idea as early as possible.

India is attracting the money and it has many important investments which if executed well could catapult India into a very advanced developing nation and would guarantee good returns. Especially the Infrastructure projects which cannot be outsourced and would employ a lot of man power of India. Hopefully the Keynes Multiplier factor effect will kick in for the better of the economy.

Some prudence from the financial minds of the Indian government would be needed to keep the Current Account Deficit modest and not run into a financial crises that hit South Asian countries in 1997-98. Hopefully India will stave off that situation because of its high Forex Reserves.

Talking about US, it's been attracting most of the savings of the world and is not sure of investment ideas which would give a guaranteed high returns. This is because US is already a developed nation and hence has to keep innovating to churn the economy in the positive direction. Higher dependence on innovativeness in the US economy makes it a rather riskier investment destination. It is strange,however, to find that the "Savings Glut", from Germany, China and Japan is diverted towards US. USA is just serving as a broker or a common pool into which all countries invest and then USA eventually invests in developing countries/emerging markets. Probably it's time that countries directly chase the investments in developing countries rather than channeling it through US.

The following article by Swaminathan S. Anklesaria Aiyar, makes an interesting reading in the aforementioned context, Welcome the current account deficit

How the housing bubble could have been avoided.

After the bust in the US stock market in 2000, the US economy has shown a different and quite unpredictable behavior. I say unpredictable because USA has avoided a recession; a miracle!

Having easy credit availability is one thing and using it to further a better economic development of the nation and its citizens is another. The past few years have shown that easy credit is just being diverted into real-estate and not much into research and development or in weaving the growth fabric of the nation. Consumerism is an important component of a progressive and developing nation. To give an analogy, no student will be motivated unless s/he can see her/his work being appreciated and eventually rewarded. Similar is the economy and development of a nation, it cannot advance if people don't buy things and give that added(capitalistic) push and motivation to the people who work in innovative companies and contribute towards the progress of the nation and its economy.( Let's keep aside the Military and Security rational for spending on R&D)

While US believes much in Keynesian economy, unlike UK. It is to be noted that the research and development of each country is on par, though USA is having a lead(slowly losing its grip on that status) compared to any other democratic country in the word. So does that mean that a Keynesian economy is the underlying reason for this progress.

One thing is clear, when an economy goes bust, people go into a thrift mood, and even if there is profligacy, it will be towards a more secure and guaranteed investment. After the 2000 stock market bust, Alan Greenspan made the interest rate the lowest and it can be seen that people were ready to spend but only on very safe investments, like the real estates. Eventually making it the most unsafe investment.

So, how has Mr.Greenspan helped the economy? The intention of lowering the interest rate is to spur the economy. Why is USA economy still a laggard? And why is there a housing bubble, a bust of which sends shivers through the spines of all the economists. Would it trigger the next recession in the USA, and thus a global recession as the world is tightly clasped by various economic policies?

I personally feel that the Fed chief, Alan Greenspan, should have restricted the interest rates for more productive and innovative activities. It is debatable, though, if that would have laid the foundation for future prosperity, but it definitely wouldn't have created the housing bubble. The misallocation of money reminds me of the property bubble in Japan during the 1980s and the recent South Asian property bubble of 1997-98.

A nation should try to invest in ideas that adds value to its citizens life and eventually to the nation and not build dead walls with the "Savings Glut".

Divine Chants of Ganesha

Diverting away from Economics and Democracy, recently I was listening to an audio CD called "Divine Chants of Ganesha". After having listened to it n-number of times, I couldn't resist writing about this wonderful audio. It's a beautiful Fusion music woven with the core Mantras of Ganesha wrapped in a reverberating voice of Uma Mohan. I am sure the experience of this audible will euphorically transcend any listener into an ethereal plane where you can feel the command of Lord Ganesha( at least a few songs are definitely so). Uma Mohan's voice is perfectly suited to recite the chants from Vedas.

Anyone who feels that the Hindu ritual chants are boring and monotonous should listen to this audio, it will make you reconsider your opinion about the chants, and you will want to sing along with singer. The music is aptly suited for the current generation who are always on the look out for something different.

Initially when one listens to Ganapati Ghanapaath, it appears to be the most complicated recitation on the earth. Thanks to our Rishis/author(s) for using mathematics and putting a pattern in it. Anyone who is good at math can take it as a challenge and try to figure out the patterns in this mantra; it's a mind refreshing excercise. For those who get an adrenaline rush when they listen to the "Ganapati Ghanapaath" from this audio and want to learn the complicated recitation, the following link explains the patterns, Ganapati Ghanapaath Pattern

Finally, for all those "Ganesha" lovers who want to learn the lyrics of the songs(mantras) in this audio, here is a site that has most of them, Ganesha Mantras.

(Thanks to Vijay Sharma for introducing me to this audio, and to Purvi Shah for pointing me to the above links of Sanskrit documents and pattern)

Is US trying to Spread democracy in the world or is China trying to make US lose its virtue of free society?

Recently Yahoo! gave out the identity of a journalist to the Chinese government, who was eventually put behind bars. Many people from the free speech and free market world have been irked by this irresponsible behavior of Yahoo! and are lambasting it for this misdeed. Microsoft,the worlds biggest software giant has succumbed to the wants of Chinese government, by removing few words from its software( the words which USA is trying to imprint on Iraq). Another act that goes to prove that the USA corporation are ready to satisfy any customer(Chinese in this case) to any extent.

It is important to do a rerun of USA's free market and Capitalistic philosophy at this point before Yahoo! or American corporations can be blamed. Yahoo! and Microsoft's corporate attitude is an innuendo to one simple thing, "In Capitalism there is only one ethic/responsibility/value and that is MONEY". All those who think that Yahoos! attitude was of corporate irresponsibility, here is what I have to say. A corporation in US owes its allegiance to its customers, then the share holders and then to its employees(This one is becoming optional in many cases). So if a corporation has to sacrifice one journalists name in the best interest of the share holders then it's perfectly apt. Hasn't anyone heard of the umpteen stories about sacrifice for the greater cause. Well, this act by Yahoo! Was one of those. In the best interest of the share holders they did it so that they can have better relations with the Chinese government and eventually look forward to capture more market in China.

So why is everyone in US( a pure capitalistic country)cribbing about this great act of Yahoo!. And if Corporations were to really become responsible then where are those responsibilities gone when the American corporations dump American goods in the 3rd world countries and kill the local industries of those countries.

It's tough to understand this dichotomy in the attitude of people who think that USA should not succumb to the Chinese pressure but can go ahead and wipe out the self-reliance of 3rd world countries for profits. While American people and their values are great and I hope that they stay like that forever, I do think that the US corporations and people heading them need to take a dose of morals/values, and stop doing a strip-tease of the values they wear when China dangles some currency notes(Potential of capturing Chinese Markets).

Customer satisfaction is the utmost virtue and should be, of any corporation. But sacrificing virtues, which are the root cause of these companies sheer existence and prosperity in USA, to satisfy customers is something that the CEOs of American corporations need to think about.

Finally, US corporations are doing what the communists what them to do and in doing so, I am afraid to say, they are making the Americans a part of the communism. So is this the start of the fall of democracy in US or is it Just corporate Irresponsibility??