An increased (though very small) probability for War

Probability of war seems to have increased. It is still small but definitely increased. Though it is unlikely that India will be involved in one (we never invaded any country in 5000 years - so we dont have the mindset) But, look how different war-indicating trends are catching up.

1. China has more males in its population - typically when the pop ratio gets skewed the chances of war increases. Further, income polarization is very high in China.
2. Recession will make more people (mainly youth) unemployed and in financially distressed situation - implying combative etc
3. US-china have classical debtor-creditor problem any strong arm by China will not be taken lightly by US. China believes it may be wronged by the US. If US dollar devalues then you can be sure things wont be easy on this front.
4. War is by far the biggest domestic stimulus one can give - creates domestic jobs and stuff hence politicians are ok with war in such times.
5. The typical flash points are visible - Afghanistan Pakistan is now a flash-point. If Us forces are attacked or get in some trouble then we could see drastic actions. Earlier North Korea, Malaysian protests, Demonstrations in Greece were some flash points ( though none as big as Af-Pak)
6. Religious alignments are getting more stricter - talibanization of SWAT valley in Pakistan is an indicator. To certain degree, Obama election has reduced any polarization along religious lines that we saw earlier in US.
7. US policies and other global stimuli are going to result in more income polarization. As global inflation strikes the differences will become more evident - I can foresee Mary Antoinette - "if you don't have bread eat cake" statements.
8. Usually such conditions are off-set by economic growth (that promotes peace) - but that has near about halted in past few months. Now if things do not improve we could be in for much tougher times.

Since last year I have been advising small businesses (even if uncalled for many times - and often at risk of being sounding intrusive) to preserve cash and lower debts. This is time to tighten the seat belts and check the gun in glove compartment for bullets just in case.

So I say it again - better prepared than sorry!

Global Slowdown Solution VI: Going Green and Blue!

Given that real stimulus will take a form of modified Keynesian approach- we need to know what are the "highways" of today. During the last depression, the building of highway and rail infrastructure got the US out of trouble. This time, to my mind, it has to be Green and Blue infrastructure.

Going Green

US has been victim of development invention. Most of the infrastructure / engineering of the country is based on older technology thats not green. Few years ago when the green revolution was knocking at the doorstep, it was difficult to see how US and developed world can re-engineer the entire setup to go green in a meaningful way. Luckily the current situation presents us with an opportunity to do just that. In doing so, US will lay the foundation for competitiveness for the coming decade or more while adding to comfort on global warming.

Going Blue

While green is important, blue is even more so. By blue I mean developing potable water resources. Greening, apart from using lower emission fuels, also means creating tree cover and rebuilding green-ecosystems. Initiating this will require potable water sources. Further water is the most essential commodity for sustaining life. Investing in rain water collection ponds and lakes, water seepage assistance to rebuild ground water resources etc will have to take precedence. India has got an initiative off-ground through India water portal.

Implications for cities and homesteads

If at homestead level we can create sustainable water and green infrastructure, we will have a much better self-sustaining planet. That imlies our city-oriented development models will have to be modified to make it more sustainable.

Implications for current economic slowdown

The ability of these initiatives to create jobs is under-rated. If properly deployed these initiatives may create more jobs and more self-satisfaction than most optimistic forecast. These initiatives have unique character. They need huge manpower up front and then possibly the overall manpower requirement for sustaining this effort will be about 3% of original. This means they can create enough jobs to reduce unemployment rates by some perrcentage points in initial years. And the man-power can be freed in few years as economic activity resumes full steam.

In Sum

Green and Blue are compulsions. We either take up our share of responsibility or implications are large and life-threatening. As they say, "nature does not do bailouts". The opportunity has presented itself - lets grab it!

Elizabeth Warren on John Stewart show

Elizabeth Warren speak colloquial on John Stewart show. As he says "it feels like Financial chicken soup".

Is Recovery Just Around the Corner? | The Big Picture

Jack McHugh goes on to look for answer to famous question - Is recovery just around the corner?

Sometimes I am ashamed of how pessimistic I have become. But nothing tells me that we are closer to situations when fundamentals are sorted out. I think the bottom here is fixed - its way below from here for US markets. A slower descent implies longer time to see the bottom. Implies more pain - and slower recovery.

With current healthcare situation and age demographics as they are - I see US consumers going towards 15% saving rate as sustainable rate going forward. Under strong dollar regime it means income de-growth and therefore sustainable consumption will be a long long way below current levels. In a weak dollar regime, it would mean, higher inflation sharper fall and concentrated impact of consumption dip - with a possible under-shooting below sustainable consumption level. On a discounted basis these both will be equal impact in all likelyhood.

What this implies is that sustainable world consumption should see a 1.5 the dip seen at US (roughly). So the only way to recovery is when jobs seem safe and incomes stop falling. Note this is just the average - so we will see a dip below this to about 2X US consumption loss. So stock markets should reach corresponding levels.

Newer Orgnisation Structures

One of my pet implication of the global slowdown is changes in organization structures. I think this is one of areas where organization-citizen relationships are going to be redefined. We are going to see restoration of balance in this relationship. Currently, organizations have disproportionate leverage that is being misused. It means new value-chains, new types of organizations based on skills.

No one has noticed but Apple just did that - the application part was moved out of the organization into public domain - modifying the traditional value chain that Friedman mentions.

Further I think organization-employee relationships are going to change fundamentally. We will have new loose forms of organizations that can fail easily and not become tighly controlled - economic behemoths that can hold entire economies to ransom. The new form of organisation will most likely have Schumpeterean creative destrution switch built into their DNA making them more efficient, vibrant through fail-fast, fail-safe means.