Oops – They Did It Again

Some years back the US Congress/ Senate debated the case for declaring war on Iraq. The Administration’s claims were clearly hyped, not many agreed to the justification for the war, most of the Senators and Representatives had private doubts. But the Administration termed the requirement urgent and, so as not to appear unpatriotic, (anybody who voted against action supposedly directed at the perpetrators of 9/11 clearly would have been denounced as a traitor*) the people’s representatives voted the resolution through on 11 October, 2002. It passed the Senate by a vote of 77 to 23, and the House of Representatives by a vote of 296 to 133. To those unaware of US politics, it might seem strange but most of the opposition voted for the war along with the ruling party.

Today, once more the same US Administration is putting forward a case for invading the financial markets to the tune $800 billion. Similar “inaction is not an option” justifications have been put forth. Similar objections are being raised by Congress regarding the resolution being too broad and too premature. And despite all the objections, you can be sure that the resolution will be passed through by elected representatives of both Democrat and Republican parties.

There is plenty of material on what effect the bailout shall have (the Wall Street Journal site has great coverage and the reader’s comments section is also excellent) but I will provide my own opinion on why it will fail to meet it’s stated objectives:

1. Too little time and effort has gone into the plan. How did they calculate that $800 billion figure? Why not $1 trillion? Why not $600 billion? Just a month back the Administration had clearly stated the economy was on a sound footing. Within a month that line has changed to “We need to spend $800 billion or we’re through”. The proposed plan has been drafted within a few days when nobody still has any idea as to the magnitude of the crisis
2. The creators of the plan are the same people who hold a big responsibility for creating the crisis in the same place and have certainly shown no expertise in dealing with the crisis in the past month. Even Paulson’s recent comments as to why executive compensation must not be tied to the plan (because banks may refuse to participate) betrays cluelessness. When the alternative to participation is bankruptcy, wouldn’t shareholders insist their management participate? Would even the most money grubbing CEO want the image of putting personal interest over his/ her company’s interest? And if the plan is for the good of all Americans why is the Treasury Secretary demanding immunity from legal or governmental inquiry?
3. There is no right way to deal with what’s at the heart of the plan – valuation of the low grade (I detest the word ‘toxic’ which has become so popular) sub-prime securities owned by banks. If the valuation is realistic the banks won’t get any relief. If the valuations are inflated the Treasury will end up holding a huge mess of mortgage securities which are backed by the creditworthiness of submerged in debt individuals (if that isn’t a scary prospect, what is?).
4. The plan is geared to helping Wall Street while it claims to be helping Main Street. My personal opinion is that Wall Street will absorb most of the benefits before it even reaches Main Street. The banks are already making overtures to the Treasury/ Federal Reserve for managing the disbursement and asset management process.
5. Where does it stop – today it’s Wall Street banks, tomorrow it’s the Community Banks, day after it’s the automobile industry and after that? Ditto for home loans, education loans, credit card debt. Then $800 billion, $1 trillion, $1.5 trillion…
6. To make the bill politically savoury, lawmakers shall no doubt ensure that home owner relief and other forms of debt get added to the resolution. When the dust clears, who will get it in the neck? The tax payers who tried to live in a fiscally responsible manner, who did not take loans knowing they could not repay them.

Probable net result of the great bail out:
1. Ballooning of the fiscal deficit
2. Massive devaluation of the US$
3. Huge mess for the next administration to deal with (best of luck Obama/ McCain)

In the current election, Senator Obama has made much political capital about the fact that he was opposed to the war in Iraq (even though he wasn’t even a voting member of the Senate or House at the time of the Iraq war resolution). Four years later a similar claim shall be made by someone who will say that he/ she opposed the You’ve Got Bail resolution. That shall become the centerpiece of another political campaign. Will that help things? If history offer any indications, the answer is NO. Obama may have been against the Iraq resolution, but he will still vote for the bailout. McCain was for the war in Iraq and he will also vote for the bailout. They never learn…

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* Naturally the common people don't want war: Neither in Russia, nor in England, nor for that matter in Germany. That is understood. But, after all, It is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the peacemakers for lack of patriotism and exposing the country to danger. It works the same in any country. – Herman Goering at the Nuremburg trials

Modern Indian Myths

There are some famous modern (post 1900) Indian myths (Indian here refers to the original India) which have been floating around for some time now. What is interesting is that nobody seems to know how these myths have originated, but they exist all the same and are also being confused with facts. So here is my humble venture to set a few records straight:

Myth No. 1 – General Dyer (of the Jallianwala Bagh massacre notoriety) was killed by a Punjabi freedom fighter in England

The person who got killed (he deserved it, too) in England was Michael Francis O'Dwyer, the Lieutenant Governor of Punjab at the time of the Jallianwala Bagh massacre. General Reginald Dyer who ordered the firing at Jallianwala Bagh died of natural causes in 1927.

Myth No. 2 – In 1965 the Indian Army under General J N Chaudhuri had surrounded Lahore when Prime Minister Lal Bahadur Shastri declared peace with Pakistan

The Indian Army was nowhere near Lahore when hostilities came to an end in 1965. Towards the end of the war, Lal Bahadur Shastri had asked General Chaudhuri about whether India could win a significant victory if the war continued. The General had replied that most of India’s ammunition had been used up. Actually only 14% of India’s frontline ammunition had been fired and India had almost twice the number of tanks available to Pakistan (which was near total exhaustion). An interesting case of the civilian prime minister willing to be aggressive and the General being unwilling to continue the war.

Reference – read the official history of the 1965 war released by the Indian Ministry of Defence. You can download the pdf version from the Bharat-Rakshak website at http://www.bharat-rakshak.com/

Myth No. 3 – The Indian Army was about to boot out the Chinese in 1962 when Nehru stopped the war

The fact is that in 1962 the Chinese could have pretty well wiped us out if they had wanted to. Since nobody knows why exactly they started the war, possibly it is logical that no one knows why they ended it.

Reference – read “The Guilty Men of 1962” by D R Mankekar or “The Untold Story” by General B M Kaul. For that matter read any book on the 1962 war.


Myth No. 4 – The Nazi Swastika was the reverse of the Hindu Swastik (swastik should be the correct spelling, but bloody foreigners insist on misspelling it) thus becoming a swastika of death or something like that. Fact is that both the swastiks face the same direction. The only real difference (colour or background really don’t matter) is that the Nazi swastika was crooked while the Hindu swastik is straight.

Reference – do a google image search and figure it out for yourself.

Know of any more? If so, please add them here (but do provide references or links)