Bernoulli, De Moirvres, in context of Bond yield and Price

 By 

Sampson Iroabuchi Onwuka


Bernoulli and Risk Averse theories


Daniel Bernoulli

"value of an item must be not be based on its price" "but rather on the utility it yields. The price of the item is independent only on the thing itself and is the same for every one"

"Utility however is dependent on the particular circumstances of the person making the estimate"

"The determination of the value of an item must not be based on its price, but on the particular circumstances of the of the person making the estimate"

"It becomes evident that no valid measurement of the value of a risk can be obtained without consideration being given to its utility"

One man who theory is of great import in understanding Risk is Daniel Bernoulli who based his interpretation of risk and 'moral certainty' of the individual person making the decision and the utility. Of course, he is better known as a man who solved the puzzle of St. Petersburg Paradox, and did so by first citing the comment from his brother, Nicholas Bernoulli that "The utility resulting from any small increase in wealth will be inversely proportional to quantity of goods previously possessed" and then went on to describe that it was next to impossible for anyone to achieve a certain number for instance I, when the average expectations of the divisible half of the equal numbers does not give you 1. That is if you add 1/2 + 1/4 + 1/8 + 1/16 + 1/32 does not exactly give you 1. Although there is something of Pythagoras in the saying for instance, "if an odd number measures (+divides) an even number, then it also measures (+divides) half of it", which of course will prove that square root of 2 i irrational.


But subject raised by Daniel Bernoulli on the Wealth to Utility relationship has given reason to a whole lot of interpretation, and nearly every economist with interest in Risk management will not fail to rehearse some of the basic assumptions associated with the Bernoullis and why they or may not be relevant to the society such as the Welfare and Public housing, such as Shelter and prison. In the instance we have to measure that even the social services or Public Shelters houses has multiplied all of the place and is generating untold wealth for the 1% percent non-for profit, including women but yielding no results or helping few and fewer people. But this condition is not new that the more money you add the less result - for instance in Casino- it however appeals to the two 'EE' Efficiency and Effectiveness in business and not in terms of utility.

In terms of utility, some will argue that those who give the Residence less are forcing the equation of 'more' from them and not less, where as more is the case is dependency ratio. People are so to speak more dependent when they are denied of services or assistance or are not fed or not well fed and like Oliver Twist may demand that they want some more, than when they are well fed and begin to think. In the circumstance, we may also argue that most people do stupid things when they are drunk or commit crimes only when on drugs, so more in this case, should not lead to excess, perhaps a form of distribution along a mean, but greater tendency towards the positive. But this is not what the angle to the statement of Bernoulli that we shall delve into, this instance requires the comparing the reason why Bond rise and prices fall.    

But this theory receives mixed reviews and sometimes can be applied different, and by different people. But it appeals to me that the instance raised by the Bernoulli may be quite fitting in describing why American Bond Yield may be inverse related to price. 

William Poundstone 'Fortune Formula; The Untold of the Scientific Betting System, cited the early presumptions associated with Bernoulli statement, by citing the British Economist; William Stanley Jevons (1835-1882), who along with others described the statement as 'Logarithm utility applied to consumer wealth.'

And according to Poundstone, Jevon's commentary carries some weight that "As the quantity of any commodity, for instance, plain food, which a man has to consume, increases, so the utility or benefit derived from the last portion used decreases in degree" and Poundstone added 'that's how all you can eat restaurant stay in business'.

William Stanley Jevons 'Theory of Political Economy'; 1871, that "Value depends entirely upon utility" that in hindsight "We have only to trace out carefully the natural laws of the variations of utility, as depending upon the quantity of a commodity is our possession, in order to arrive at a satisfactory theory of exchange".>This last line appears elsewhere and one of the more popular quoted line of Jevons, yet the question raised about utility by one my favorite English man Jeremy Bentham concerning utility and the community, which must be considered in the light on individual interest, yet  "...when the tendency it has to augment the happiness of the community is greater than any it has to diminish it" the greater emphasis should be placed on the community.

This was applied to many English projects including constructing a place for children who slept under the London bridge. For here, the comparison between the individual interest y was considered in terms of the x, such that as y draws to a 0, x moves to 1, which is Limits under normal restriction. Therefore x is risk averse to y when x closer to 0 than Y to 1. 

In respect to the American Paul Samuelson, Poundstone adopted his position to Paul Samuelson that 'The nub of the issue is that Bernoulli's 'utility function' is psychologically unrealistic at the extremes of Wealth' but in the process of digesting the rest of the psychology implausibility of Bernoulli's, he resorted to the "bliss level".

It does appear to the best of us, that Paul Samuelson's position is based on a statement already made by the Gottfried Von Leibniz, who in a commentary on 'Jacob' Bernoulli's one of the Bernoulli citation's of Nicholas Bernoulli's comment, mentioned that "Nature has established patterns originating in the return of events, but only for the most part. New Illness flood the human race, so that no matter how many experiments you have done on corpses, you have not thereby imposed a limit on the nature of events so that in the future they could not vary"

It is has been said before and more than once, that the last line in the statement by Leibniz is a precursor to the invention of Large Numbers as propounded by Jacob Bernoulli,  later day theories associated with 'Mean Regression', which in recent times was made popular by Harry Malkowitz and William Sharpe.

Whether or not nature or numbers have a way of making a return to the mean may or may not apply to the comment of Bernoulli, but for the fact that a part of it returns as opposed to the adoption of Pythagoras numbers, which divides         

 
Peter L. Bernstein responding to this saying in his book 'Against the Gods' commentated on this saying by suggesting that "considering the nature of man, it seems to em that the foregoing hypothesis in apt to be valid for many people to whom this sport of comparison can be applied".

There is aloofness in this statement and there is no denying that the author had something in mind that may require a visit to early English society of Malthus to understand, but we are sent to a different direction by Bernstein, towards a clamping on the nearly poor in terms of the oddity of spending or social secularizing the poor or minority through benefit where as the more we spend on them seem to create the need to spend more. Yet we come to address that he was making a point based on what the Mathematician Bernoulli is saying. But History of Mathematics is not mathematics.

It is important to point out that theory that Peter L. Bernstein applies to Bernoulli does not immediately apply to Bernoulli and in fact Daniel Bernoulli's statement may not entirely apply to the original intent and design of Nicholas Bernoulli, that it is in fact quite wrong. There is nothing in the immediate commentary by Bernoulli of the inverse relationship between want and supply that mirrors the use of consumer judgement as William Jevon wanted to know.

For all intent purposes, we can summaries from guts of past interpretation of Bernoulli's statement as from Daniel Bernoulli St. Peterburg Paradox and as from Poundstone, that Wealthy English men/women or Wealthy Americans are not more apt to play lottery than the lesser fortunate American. That this is not so much a question of moral certainty, as for the quantitative reason that the needs of the poor may drive the poor into seeking money by any means necessary, for instance playing lottery for what they don't already have. To be fair, need in this case is replaced by utility and the human provisions which Bernoulli mentioned, has also been challenged by many experts.

What is missing from this argument is the theory of 'expectation' which Moivres argues to be different or changes with due respect to risk, what is the total expectation of the people or a people from what it considered...

It may be important to mention that the quantity as described by Bernoulli is borrowed from real life circumstances, and from that we can suggest that the fore going on Bernoulli's position that "The utility resulting from any small increase in wealth will be inversely proportional to quantity of goods previously possessed", can be represented graphically and arithmetically, and that his theory can better be understood through a Bond market, particularly U.S Bond yield.


Nearly all economist will agree that the U.S bond yield is inversely proportional to price and the reason for this sort inverse relationship is not exactly knowable.

The relationship between Interest Rate and Bond Prices is inversely co-related, bond prices fall as interest rates rise, for instance currency rate between the U.S dollars and commodity prices. 
Scaling in physiology is generally defined as dividing a capacity by flow rate. That is, '...the scaling of average metabolic turnover times is estimated by dividing  a capacity (volume) by flow rate for instance "urine production", or "food intake", which if given the constants in U.S IRS receipts and total American expenditure, we may arrive at a number that quite wide between the two measurements in other to understand the full measure of U.S Economy or U.S underground market.  

Using Peter Bernstein commentary in this case, we can also indicate De Moivre "On the Measurement of Lots" 1711 ;that "The Risk of losing any sum is the reverse of Expectation; and the true measure of it is the product of the sum adventured multiplied by the probability of the loss"

Bernstein believes that 'De Moivres advance in the resolution of these problems rank among the most important achievement in mathematics"

'De Moirvre's gift to mathematics was an instrument that made it possible to evaluate the probability that a given number of observations will fall within some specified bound around a true ratio'   

That "De Moivres distribution is known today as a normal curve, or, because of its resemblance to a bell. as a bell curve, shows the largest numbers of observations clustered in the center, close to

'Drawing on both the calculus and on the underlying structure of Pascal's Triangle, Known as the binomial theorem, De Moivre demonstrated how a set of random drawings, as in Jacob Bernoulli jar experiment would contribute themselves around their average value'

One of the first things we learn from mathematics is that there is an 'inverse relationship between the length of a pendulum and its frequency' and that for instance exponential relationship of a 'square to its linear dimension'; that is surface is proportional to the square of linear dimensions and as we have also been told, this inverse relationship applies to 'volume to the cube'. The true relationship of the cubic and four side metric is best applied in Economics or in money, particular in determining the various topologies or changes or interface associated with long term bond and short term bond market. Or put it this way, why is that the square of the longest side of right angled triangle is always equal to the square root of both sides. Of course, the reasons include change in dynamics, fears of deflation, inflation, and so on that seem ultimately arbitrary but concerns are serious in the Short and interest and other economic incentives must be adjusted to accommodate it but overtime (long term) these prices tend to normalize.

Likewise we can use Riemann bi-axis or manifold to show that a right angle incurs an arbitrary beta angle which though apparent completes the three triangle of a right angle and which like Prism (a third level complex; multiplex) can switch to infinity planes but converge only the basic Euclidean R Complex (R) which some Physicist has suggested can be used to interpret almost anything.

The real demonstration of this movement is FROM LEFT TO RIGHT across the sine, cosine, tangent angles of an x and Y, the new shape cancels the old. The arbitrariness of this form is a googolplexus (googleplex) of time and space, as the future though part of the present is insubordinate to its present time. Time in respect to the future is therefore arbitrary an can only be reduced to fictional set of ordinals (limits) but in real time, time is expanding faster than the limits imposed on it, prove of things happen faster than we imagine and future breaks bad from the present, like futures and forwards, price has no history. 
And in the words of Abraham De Moivre,

"Although Chance produces Irregularities, still the odds will be infinitely great, that in process of Time, those Irregularities will bear no proportion to recurrence of that Order which naturally results from ordinary designs'

From this statement we may also witness the hint that De Moivre is reaching the conclusion that new prices or  irregularities if continued would in the long run create their of regularity.

'COOLIDGE' A New Book by Amity Shlaes; 2013

Review by

Sampson Iroabuchi Onwuka'

'Coolidge' is a new book by Amity Shlaes focuses on the achievement of the life of Calvin Coolidge from his junior years at Plymouth Notch, Vermont, to his reign in Massachusetts as both Lieutenant Governor and Governor of the State of Massachusetts. She draws from those early years in Vermont and reign as Massachusetts Governor to demonstrate how the  Presidency of Calvin Coolidge from 1923-1929 of these United States could be understood. That some of the characterization of the President, as perhaps a specialist in cut back spending is a function of the man's Presidency, yet the argument may take a new form if we add the limits of the Presidential Power under Woodrow Wilson.

According to her, "Coolidge made virtue out of inaction", citing familiar words from Coolidge that "It is much more important to kill bad bills than to pass good ones", that the congress should "Give administration a chance to catch up with legislation." The author tried to show the records of Coolidge in passing 'Revenue Tax' 1924, 'Indian Citizenship Act' sometime later and 'Radio Acts'. All these Acts including Coolidge unwillingness to spend seem to have helped the contract the role of Government in US and seem to have been an acquired taste from his years in the American Rail Road Industries.

From an exercised mind on Coolidge and the Age of Depression, this book show no signs of an expert on the subject. It writes for an audience unfamiliar with the subject - as if to lead them to a new idea. Not that we fail to come out convinced on the author's academics, but she seem to pay lip service to darker issues associated with Coolidge. It is not unkind to compare the role of FDR in the War with those of Coolidge in peace times. But how peaceful was Coolidge 20's when the word Communist was hardly a learned syllable but was gaining international reputation that both the assault in Shanghai of pro-Communist faction and the bloody counter insurgence of both 1922 and 1927, sent China into a whole new territory.

It is true that the 1920's was an era of prohibition but the censorship of wine and beer houses did not translate into the culture of free economy or chime the dichotomy of liberal involvement of the Government. In a essence, there is no time in the History of the Americas that gangsters ruled America than the 1920's. We may or may not see this as an outcome of minimum government involvement, but we cannot pretend that Hoover who challenged these gangsters -  beginning with his trumpeting of unlawful oil drilling activity on 'Government land', to the increase on Border patrol and Government spending on Military and Police that we began to see a whining down of cartels in Opium and illegal bunking of naturally resources. 

In this circumstance and judging from the incident of the later years, if not in respect to Hoover but others like FDR, it would be hard to conceive of Coolidge or a President like Coolidge who was as capable as FDR, to pursue the 'do-nothing-policy' of Adam Smith in the guise of Free Market. It surely, would have been hard to conceive of 'do-nothing-policy' at a time when for instance the Nazis, were polluting half of Europe. Politically, Coolidge was strongish and terribly educated at that, but in terms of the neutral meter of a populist capitalist empire like the United States towards domestic as international affairs - the economy vel non, the policies of the President from 1923-1929 didn't exactly match the man.

What we know from facts of history is that under Coolidge, who is perhaps no doubt a capable attorney and who brutally put down striking opposition in Massachusetts, did not do so much help to forestall the rise of racially discharged groups such as the KKK in the 1920's which culminated in their Pride match on Washington D.C in 1928. This group, KKK, contrary to all theories, were however not the only hate group operating in the 20's in the United States, but at least they took new roots in the fuller view of the wider Americans and at an age when more than once, the party had been disbanded.

At this period in many parts of Europe, including the fore mentioned Germany, a certain sect of human society were also shivering over the clouds and troubled waters of a new party.

It may be true that the Tulsa Race Riot of 1921 occurred when Coolidge was Vice President, but it doesn't save from blame since both the Police, the District Attorneys and the leading potentates in Tulsa or on Federal Assignment, actually did anything to the perpetrators.  But of course, these are tedious extensions of the matters arising from the do-nothing tradition which should or should not be attributed to Coolidge. It is common sense, however that the prevalence of Race Riots in the 20's ended with the arrival of Hoover, but the man who did anything of use in racial profiling of officers in the Army was FDR, although Taft was the man behind the execution of the project.   

                                                                  II

There is no quarrel over the 'this' and 'that' of  Coolidge's past but the psychology innuendo of a life developed from scarcity is not a masterpiece for any age. There is also a problem of the length of the book, that if she is willing to write a book of 576 pages, it matters seriously that the first 300 pages should not be wasted on stories about the Coolidge's past and upbringing. That her book is reputed to have 4 star is had to comprehend, that from what we read in her book, at least by personal doing on her 'Coolidge', the book is hardly a 3 star.

However, it is common sense to suggest that if an Amateur had written such a book, the whole morose introspection on notional U.S economy leading to the Depression which inveighed with reasons on Hoover, will amount to nothing. The biting sarcasm is that the author is an expert on the subject, yet she succumbs to the polarizing indices from Coolidge to Hoover and even in one instance misdirects Coolidge comment to Mellow to Hoover.

The best that can be said about the author for a start is that she write for instance a new graduate on the subject but with the velocity of an accomplished Novelist.   

That as from facts as from her 'Coolidge'-, Coolidge was for Free market and minimum Government intervention. It was Coolidge Bull that that galvanized the more radical shift towards Government spending, it was Hoovers' and began in 1929, eight months into his office. To be sure, the book is not about Hoover and to be clear on Hoover, he was responsible for some of the gullible offenses of Taxes and Tariff in his regime as President and it was his responsibility to steer the country from the problems that the Americans were facing. But such acquired opinion, only lames in the light of the fact that Hoover also expanded the role of Government and initiated a recipe for the New Deal, especially Farm Subsidy.

It is not surprising that the three primary statues, the security Act of '33, Securities Act '34' and Securities Act of '44, was made in respect to the problems associated with Free Market. The bang on "full disclosure" on the activity of the securities, time of scheduled disclosure, merit review, all took place as reaction to   

                                                               III

In one short sense, it is possible to argue that Amity Shlaes is not an Economist. But this is not the central issue from the book, for sure, there is a huge gap in the treatment of Coolidge's Economic side despite her numbers, but on the tussle that one perceives her Psychological analysis of Coolidge - who is quite central to the Depression - as more important than the Economic problems, then the book achieved its aim. It may also seem true that author Amity Shlaes is for Free Markets, and may be leaning towards the Austrian School of Economics but Adam Smith's popular dispatches on Free Market better surmises the 'do nothing' approach of the President.

To be fair, we not deny that the Austrian School as championed by Ludwig von Mises helped to stabilize European markets for a while in the 19th century. This school includes, Henry Hazlitt, and Murray Rothbard. Of Course they were other such as August Hayek and Joseph Schumpeter, but these men were purer but original members of the Austrian School and nearly all of them did not believe in Government expansion and Goodwill spending. From Von Mises we learn of "A sound currency tied to Gold" out of which he argued that Europe needed a sound system to help distribution of income and enhance the staying power of European Economy through saving. In any event, the rationale of Moises and other members of the Austrian School is that "free market" involved some government responsibilities but too much of it, and this view of sound currency tied to Gold ultimately drove the four leading European economies to bind their currency to gold, and when these European nations including Britain experienced problems of any sort with their economy it paralleled U.S market, in that if Britain, Germany, or Europe as they say sneezed, America caught Cold.

This was common from 1870-1914 or reconstruction era and it was also a period of the Gold Rush in California and in South, which in times of the demands for Gold in Europe as equal to money, America, particularity California was their final destination. It is not impossible to exaggerate that the Shift from Europe to America, for no other incident was particularly instrumental in the transfer of people and intellectual resource-power from Europe to America than the Gold rush of the late Reconstruction Era, but then, there was the Pogroms in Russia and its May Laws of 1895. In essence, either the faith on gold which misplaced in the 19th century or that gold misplaced European faith, but as the migration continued to America including Chinese who will be decimated in time, until America began to appeal to all asunder. This was the era the these gentle men, FDR, Hoover, and Calvin Coolidge were born, and the respective last was at the threshold of the Old America, the other was transition handle, the first Championed a new America.

From this era, it may also seem that America who like Europe, placed a measure of Gold to their Dollar was already catching up to the World Powers and was in fact ahead by the end of the 1900. When the Reconstruction ended and with that came also the Federal Reserve System in 1915. But from the end of reconstruction, America has already started to expand, and while Europe choked Africa in names of Commerce, Colonization, and Christianity, American resorted to building industries in America and throughout North America with lessons from reconstruction and engineering experience from the Civil War, such that as Europe depended on goods from the Africa and Asia, America deepened its local resources. The end result was currency stability managed through gold and America was already breaking the barrier long before the Great Depression. The Central Crux of Coolidge was these years, how immigration that brought Europe to America, brought the Old to the New.        

Adam Smith 'Wealth of Nations; 1776', was believer in an Invisible hand controlling the markets, that the markets may experience bouts of disappointment and ups and downs, but it somehow repairs itself. He also mentioned that "the invisible hand" somehow set prices and wages according to the market. It is taken that this return of the markets to certain form or average is not different from 'mean reverting' but with the invisible hand goes to the theory of a divine force, that if we can allow it to function will naturally fix the market. The invisible hand the unknown and in many ways than one the 'demand' side and in some circle until Keynes, it was central banks and their Chairman. Coolidge was aware of this theory since he worked in the Rail Roads and saw the role of the Banks and the Bonds market in expanding the economy, that price was inversely correlated to bond yield and with rates at one all time low, such price was increasingly sensitive. People were better off with stock market, or for the fact that the Federal Reserve under Benjamin Strong bought much of the Bond from Treasury, meant that stocks prices were high since Bond was proving expensive.

Benjamin Strong (Big Ben I) was also concerned about the full market participation of the investing crowd and the money in circulation, and was the first or among the first to have mentioned that the Fed will be buying until when the market level up to certain and was concerned with the need to keep money in circulation even it means spreading the money from Helicopter. The Helicopter Ben as he was called, as reiterated by Milton Friedman and Anna Schwarz; 63' A Monetary History of the United States; 1867-1960' was in many ways the Architect of the 20's bull. In fact themes from Irving Fisher 'Money Illusion' 'Stock Market Crash and After' 'Theory of Interest' to Keynes many publication including the 1936 classic 'The General Theory of Employment, Interest and Money' all has the hallmarks of Benjamin Strong.    

Coolidge, faced with the departure of the Big Ben 'Benjamin Strong' and the rise of the Kuln, Loeb, and Co, as the Trust, and Andrew Mellow as Treasury Secretary, half her level in economics would have started from here, that the Feds action of buying into the bond, kept inflation low, but forced the gap between the Government Spending and Low Taxes to converge and above placed enormous faith on Stock market. But by the time, Hoover arrived, at the time that Feds Chairman, Strong, had succumbed 1928 to Tuberculous, the world was no longer at ease and the clearing house which was now overhaul with oversea investment tethered on the verge.

From the money side, the first and early things that can be said about Coolidge, must and must matter. That one, he was  from his early years a Rail Road man, and within the rising rank of his group, he was no stranger to the politics of the Bond Market, which as any body could tell tanked in the 1870-1914, reconstruction.

But there was something else, if we are going to get anyone their money back via the Bond, and keep the rates low, the stock market must maintain a certain momentum. If futures rates were higher than forward, the sensitive bias is positive. 

This level is the stuff learners and younger students of money.  

Peter L . Bernstein; 96, summarized an argument like this, that “production fell in 1930 by 9.3% and 1931 by 8.6%”, and the “...very bottom, in June 1932, GDP was 55% below its peak 1929 peak, even lower than it had 1920...” That “Total dividend paid by publicly held companies were cut on nineteen occasions between 1851 and 1929....”  

If we compare the dividends from publicly traded companies from the 1871 at the beginning of the reconstruction to 1915 at the birth of the Federal Reserve, the returns will show a loss by more than 30%, largely because of the Bond Market which performed higher than the Stock. If we add the benefits from 1914 of these public traded companies, most economist and economic historians will agree that these companies had a slashed dividend of more 40%, yet many of them did not manage to shed the stock market Bull from 1921 through 1929.

In fact, the statistics from 1929 at the beginning of the dive of the Stock prices downwards and the somewhere in 1933, publicly held companies from a number of sources will show that these companies has about the same number of losses as the years leading to the Great-Depression Era economies.

Here we may begin to look at the assumption in her book very clearly, for sure, the main event in Coolidge is not his Psychology but his Economic views. After all, Coolidge was the man who coined the saying, "...The Chief business of the American people, is business....".

Notionally, market power of banks may increase so also preferred factor with financial institutions and holdings, but the lack of general supervision and lack of specialty banks such as IMF or World Bank in the 1920's, placed a big burden on the Government who failed to deliver in the years leading to depression and the in depression era and after. In reality, the Depression Era was no such the problem of productivity since Government was activity spending, it was a matter of Deflation which Keynes mentions was primarily caused by fall in wages and demand. Yet the fall in production did not affect the country in the years preceding the Crash, it was the new tariff embargo and control of human activity of American soil, that placed accountability on Companies who from expenses to IRS income illegally operated under the radar, that the Psychology from a badly managed economic decade eventually correlated the unhealthy economy ridden to price fluctuation. Free market and lack of general oversight forced Value out of the market in the 1920's, that many European countries developed their own value along the currency which they still tied to Gold. The relationship between spot and forward rates is usually determined by interest rate of two countries, and since Europe was placing too much faith of high rates and from Gold ridden to Rothschild and Kuhn, it was a problem for the U.S Assets and for commodity prices. The fall of 1929 was a consequence of that age of doing nothing Presidents and Irving Fisher citing that a Plateau in market was reached knew what he was talking about.

Re-denominating the Nigerian Naira and the Problems of ECOWAS

By


Sampson Iroabuchi Onwuka


                              I   Charles Soludo and  Re-Denominating Nigerian Naira

We should begin by citing that the man who began this effort to stabilize the Nigerian Naira is the former Central Bank Chairman Charles Soludo. Charles Soludo was perhaps the first in recent years to speak of re-denominating the Naira and the persecution he got for it didn't seem to raise the curiosity of many Nigerians. The question is no longer is he was right or whether his suggestions of re-valuating the last 00 integer on the Nigerian Naira is a good canvass or not? The question is now how exactly did he propose to integrate his suggestions or other right course of action as from Sanusi into the growing economic gap of Nigerians and the World. The other question which we should not try to answer is if Soludo fall from grace was from this issue and from other public persecution? It must be said that Nigeria from its earlier years has always stressed the importance of its currency and from earlier years until now, it has tried its hands with various means of managing its currency including occasional reprinting of these curios notes to stem the tide of laundry.  


There is the issue of liberal notes of foreign denomination in Nigeria, the prevalence of foreign notes or currencies in Nigerian Black Market and on the street has paved the way for several attempts at money laundry, where as criminal organization would have found it hard to earn through currency, heavily available Nigerian Naira for foreign currency of any type is increasingly lucrative and indulgent exercise.  But all these can be arrested if the currency is re-denominated.


Balance of Trade, Deficit Spending, Inflation, and improper employment gauges are part of its sickness, then there is issue of 'implosion', characterized by undue plutocrats and monopoly by a new and rising few in Nigeria. To suggest that Nigeria as a country is actually doing better than its looks is hard case given the fact that many people living now around the world have not seen or heard of MADE IN NIGERIA product. The question is, how do Nigerians fail to profit from the big booms in the world, for instance the Internet, where as the poor crowd in these countries will be expected to have to manufacture these products themselves or import it a highest price to the country. In force, one of the problems why Nigeria, to some degree Ghana and West Africa is a dumping Ground for all illegal products - particularly drugs - is the issue of import Tariffs which many of these importers have no time of day to follow. It needs be mentioned in current time, it was Ghana that took the advice seriously and went the distance of removing the re-denominating their Ghanaian Cider. Ghana today is a success story largely for the fact that the age of Military finally gave way to a way of life in Ghana, and with that new way of life is the discovery of crude oil in Ghana.

Whereas the same advice for currency re-denomination that Soludo petitioned for was resisted in Nigeria, and some of the basic reasons for the resistance is that many persons of interest stood to loose a lot of very personal business and there was also the problem of exchange rate. Perhaps the resistance was due to the fact that the country was not ready for it then, which does not in anyway mean that Nigeria is now ready for it. For the fact that country is not ready was any changes with its currency does not mean that it is not the right course of action.  Whatever may be the case, we can argue that Nigerian Naira has not exactly attracted the attention of the world since the currency is relatively new and that Nigerians, may not be doing something that wrong or unheard since the end result of any currency is in its application.  
 
It is this author argument that re-denominating Nigerian Naira is however appropriate now in the country now than anytime and that the nation need act decisively and without excessive consultation regarding the placement of its resources and foreign embargo, since any such future would force the notional speculations on Naira's future and adverse outcome in shorting on the Naira to be fully exercised. That will be very bad for Nigeria or for the exercise. I also recommend an Indian System and the dalliance with crib notes.The re-denominating the Naira (even if it means removing a couple of Zeros of the Naira as Soludo suggested) is appropriate since the Nigerian Economic Structure, efficient money system is not well developed for that, Nigeria re-denominating its currency will propel itself into the future with the new resolve. It is not advisable to engage this exercise when your economy is doing badly, it is better when you are fairing better than expect, this is the whole meaning of St. Peterburg's Paradox and ordinals of Daniel Bernoulli



                                           II     THE PROBLEMS  ECOWAS


May 28th, 1975 is a date that many old West African citizens living now remember as a date when the theory of economic "self sufficiency" of the Economic Community of West African States was initiated. The first phase of that initiative was designed to cover the ECOWAS experiment was slated to cover the questions of trans-border trade and then the process of economic unity between the member states. Ultimately these economic co-operation - not unlike the European Model - it was meant to arrive the West African nations a home run on one single currency. Some of the assumptions from the ECOWAS resolutions were eventually challenged by Nigerians and Ghanians, with individuals of import such as Ralph Onwuka (no relation) throwing in their dissent, including latterly, Amadu Sesay, and Aluko Olajide who joined the fore mentioned in 86 'The Future of Africa and New International Economic Order';86. Needless to say that their book raised several questions about the illusions of West Economic Society and NIE 'New International Economic Order' as derived from Europe, but did not exactly convert the questions to answers. But from the defense pact and from policies prodded by Government, it seems common sense that the business structure on these West African countries was likely to change, so also the structure and business community.


The full implementation of ECOWAS took place in 1979, set against the cultural unity of Expo '77, West Africa, braced the region for a future which included single currency money, but did not incorporate the price of that economic banter, for instance, debt across the border, problems of credit and the issue of acceptance in the Global economy. In Nigeria and in West Africa these days, we hear of the 'Millennium Development Goals', 'Privatization Schemes', 'Balance of Payment', 'Austerity Measures' (removal of oil subsidy), 'Foreign Direct Investment', IDAs, FDI; Foreign Direct Investment', 'Debt Crisis', but all of these are IMF measures which Nigeria that is U.S centered has no real party.  But these Schemes exist and part of Nigerian politics and part of the Nigerian running of their plans for BETTER LIFE. This better life the case of Argentina and Mexico, like Brazil of the 70's and Korea of 70's, will not be achieved under these programs that are run by IMF.


If the total amount of energy required to create a business circle is equal to the force produced, then the growth of a third world Nigeria is priced into the overall growth of the IMF owner countries, and such endless conundrum is created to enabled degree that the present continuous time economic scheme and development project in Nigeria or other third world economies would never be enough to break free from the grips of the G-7. By accepting loans from IMF and WORLD BANK, the good fortunes of these Nigerians is stymied by process such that they can never succeed in current market and by future adverse effects since the Schemes creates an uncontested cyclonic pyramid and the end result is that Nigeria for instance, will always diminish in value.


Speaking of the politics, Nigerian President Goodluck Jonathan, who is battling the insurgence, the Boko Haram  may have 'started' by the support of AUST; African University of Science and Technology and the promise to help Nigerian  the Film Industry with a 3 Billion Naira, is supposed to be a welcome news. He has also began work on Electric Power Authority; NEPA and has signed new contracts concerning the Rail Roads, all to be settled in dollars. Under his leadership Nigeria received all sorts of incentives and in the riverside areas of South South, there is an international help, some from World Bank in tackling the problems associated with growth over these areas. But these things are not done for free and for the most part it is a product of IMF loans which is bound to the Nigerian Crude Oil. This is not without the help and lengthy court process and going by the effects of business transaction, there is more less that can be said about this. Pump money into Nigeria system is supposed to devalue Naira, meaning, with an end of year speculation. The aggregate amount of financial loses that Nigeria could incur, does not correspond to the overall investment.



                                                      III  IMF

Nigerians has been forced to blend in to the fact that there is a New World Money Order called Euro. There is nothing wrong in accepting the doctrines of European Union and it does not seem that the policies pursued by Europe is as bad and misleading policy. Yes, some versions of the policies are desperate conceived for Third World economies or whatever name that is applicable and in terms of the quality of European Economy and its no-grow economy, these IMF programs and loans are very not called for and are basically predisposed to debtors damages.    


Nigerian Oil Subsidy, ECOWAS; Economic community of West African States, Government policies driving currencies, SAP; Structural adjustment programs, WAI; War against indiscipline, Better life Program, 1986 Austerity Measures, Privatization Scheme, Removal of Crude oil Subsidy have all come and gone but IMF has still tied the country's future to these schemes and to Debt that don't count as a credit and has forced Nigeria and some West African countries downward with its policies, policies that even a progressive third world economy like Nigeria, can no longer absorb. It may be shown that these Scheme may not be appropriate since the structure has not lasted and that Nigeria has become a tool for G-7 countries of the World to survive. By so doing, it may just be said that Nigerians have done much of their job as the case with this specialist Banks such as IMF, which is one the Banks that tare owed by the International Banks through Banks operating across European Border.  Yet in all Nigeria Naira is traded freely and floating freely and the economy itself is not doing that badly compared to many other Nations in the world. If Nigerian Naira is trading freely by the day and Nigerian Central Banks spend all the time in the world, conducting foreign currency from these same G-7 countries into Nigeria, the countries is basically hurting itself a sheer equivalence of Unequal Treaty. But International is product of a given market and the nations responsible for these trades are entirely responsible for it. 

From that vintage of Economy corporation of West African Economies, we can now begin to understand the full measure of these theories since it also managed to lay the foundations for what became an IMF dominated economic theories in West Africa and particularly Nigeria. It was only a question of time that the theories of 'Structural Adjustment Program' which the IMF first used in Mexico, was applied to Indonesia and Nigeria, all of three whom fell victims to SAP as IMF defrayed its economic losses to these countries, to some oil-rich Asian Tigers to South Americans saving Brazil but not Argentina. But it may not have the original intention of IMF, but as some people may have also indicated that it didn't matter at all given the recurrent problem of debts incurred by these countries and the IMF willingness to defray these to crude oil. Above all, IMF and eventually World Bank was also intent of pursuing through some of the highlighted options for industrial development in these areas, and in return for the funding which even India got, these countries with crude resources where to meet the obligation in debt without knowing that the total accumulation of white elephant projects in the third world economies was one of the reasons why structure damage of its finances where possible in the first place. It was supposedly initiated in keeping to the Brenton Wood Agreement and it was done through IMF in order of John Maynard Keynes.

                                                                
                                                                 Conclusion

Nigeria can better serve the World, Africa, particularly West Africa, and above all itself if it chooses to abandon the current ratio of Nigeria Naira to the rest of world as determined by a market standing that they has kept them in negative territory from day one and may not escape from given the problems inherited from the Colonials years. There is also the issue of world markets which forced Nigeria into all kinds of instability and one that failed to create jobs.

The exchange rate of this country can better enhance its business portfolio in terms of the world if as suggested by others that the last two '00' of its current note can be denominated away from its current hiatus since the expensive Naira is a currency that suffers in neglect due to its previous militarily dominated economic past. The current democratic government should not inherit such sickness, or should they should the seating government force Nigerians (general market) to suffer the excessive devaluation of its goods because of poor currency rotation. Nigerian currency rate makes it impossible for Made in Nigerian products to reach others outside Nigeria, and for that, export tanks in Nigeria saving for the diminishing 'crude' oil and for Human resources; Nigerians traveling abroad. When any nation on earth is producing for public use other than its market, it is in fact not a market in the global macro and it is ultimately an economically dependent country. If or when the country decides to act, it must remember that the Great Migration of Nigerians into China and into

Alan Greenspan and Sensitive U.S Interest Rate

By

Sampson Iroabuchi Onwuka

Alan Greenspan is an an accomplished American in all classes of respect and decorum. He is one of the few experts on American economy who is taken seriously. He was the Chairman of U.S Federal Reserve from 1987-2006, and has authored several essays on the role of Federal Reserve in U.S economy and in a recent 'Age of Turbulence' he was able to cast doubt over the future of U.S Federal Reserve, a theme that Paul Volcker recently echoed that we know expect the Feds to do too much.

In a recent June 7th 2013 commentary on the Federal Reserve $85 Billion a month Bond Purchase, he argued that it was notional for the Feds to 'Taper' off and that it will happen. But the sooner it happens, the better for all of us. That given the width in the Balance Sheet, "The Sooner we come to grips with this excessive level of assets and balance sheet of the Federal Reserve, which everyone agrees is excessive, the better"

He also mentioned that "Fed induces long-term rates to fall, it creates a buffer for shock prices to risk, but there are so many other forces at play here". This statement has also been taken to mean that the instruments necessary for financial recoveries of seriously over-exposed Reserve is not well tested or adequate to accommodate the level of tolerance exercised by keeping the rates Low, a theme and policy that the FED's today and Operational Risks associate with the symptom of uncertain recovery of U.S economy.

His concern is not if the Federal Reserve will taper of the buying streak and if even when, but if the Federal Reserve will buckle its belt when its the balance sheet gradually narrows. This has been taken to mean that the Federal Reserve should not rely so much of the rates as a way to recover or should it mean that they have enough revenue base to tolerate the excessive balance sheet gap.

Alan Greenspan may not kidding about the current financial instruments and reassures with elan that "Markets are always artificial in one sense. They have a wonderful capability of getting rid of the artificiality"  In essence, Market is really one factor that correct itself, for instance, the debt owed to sector or the retraction from debt, may be subject to market forces outside our control. All of these may be considered a general theory of U.S economy and its operational dynamic, it may throw light on the need to react that Deflation is not out-of-question yet, yet, when we fully grasp the exuberance of the market.

                             II     Bond Market

The Main event of Alan Greenspan's Discourses on CNBC is his concern "...that bond prices have got to fall, and long-term rates got to rise. And the problem which is going to confront is we haven't a clue as to how rapidly that's going to happen, and I think that we must be prepared for a much more rapid rise than is contemplated in the general economic outlook of all the people with whom I talk".  

This aspect of Greenspan's discourses on the U.S Federal Reserve is the more revealing of his general concerns about the Fed's buying activity. The word which we are not hoping to add is called liabilities (short term) which on a short term a Federal Reserve may be immune to, but from this vintage to asset (long-term) raises the problems of 'open positions'. But who said that the Feds are immune?
      

Allan H. Meltzer 'A History of the Federal Reserve; 1913' presents us with the argument that so of favor both parties, and in terms of Bernenke's recent economic low rates, Meltzer mentioned that "Historically low nominal interest rates if the early postwar years, and the confined negative real long term rates from 1946 to 1949, show that monetary policy - measured by the growth rate of money - was not important even at the prevailing interest rates" This goes to suggest that the role of Interest rate in governing a nation should not be that sensitive.

 

Yet a second branch of the saying by Meltzer tended to support Greenspan's theory that "Relative prices, including stock prices, and prices of existing real assets continued to respond to current and prospective rates of money growth and inflation." As such the Conundrum can not on one hand be reduced to a question of Interest Rate, on the hand, can not exactly be demonstrated as a system that might slow the uncertain nature of market recovery.

In essence, the market from both sides of the houses, should be looking at both Long and Short terms, yet the numbers can speak for themselves that as Meltzer maintained that "Long term rates at Treasury Bonds at 2.5 percent, fix short term rates and not the pattern by rates prevailing at the time."

 

                                        
                           III     Europe and U.S Bond Market

Yet we are aware of the relationship between European Bond and U.S Bond Market, where as one is exercisable at maturity with, or without interference from the general market (long-term bias), the other, the U.S Bond Market leaves us with an alternative. If there is any penny from the Bond can be made, it must be come within the changes in interest rate or in some cases changes or fluctuation in denominated currencies.

For how could the Feds easily expect a parallel shift to manifest in yield to earn (debt) between the current adverse buying and low interest rates going forward and the prospects of a recovery that will not likely benefit all asunder and meet market expectations. But then there is the reasonable gap between U.S Stock market and the Bond Market, in terms like this, we can almost certainly say that the Charts will prove that the Yields on either of part of the money house is only affects a fraction of each other. This has always been the case with U.S markets saving for the more concern fact that it mirrors the confidence level; general market-rate confidence, which is notionally a determined by a Var (Value at Risk) or a BVar, meaning that U.S Bond yields are narrow - not small thanks to Bernanke, but the markets and the overall U.S economy is also doing better expected and U.S low rates may or may longer benefit old economy or create a new one.     


It is common sense that not all Bond in U.S is sensitive to interest rate, but we may show that all the majority of the global macro has a low to negative rates, particularly the G-7. and and for this, the sensitive notions of Interest Rate is a capital R.
 

The Bank of England monetary policy committee and June dates, Bank of England ECB, left their official Bank rates unchanged at 0.5%. Mario Draghi and ECB in statement on June 7th, 2013, also released the ECB resolution that "...the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.5% and 0.00% respectively."


It is generally true that a relationship between between spot and forward rate is determined by the relative interest of two countries and this relationship forces the 'forward discount 'to another party. For instance, Europe, particularly British pounds historically trade at 'forward discount' to the dollars, but when we have a near flat curve with upward tendency, both parties are pretty much compelled to 'un-exercise' their rights. The fact the 'yield to maturity' is interest rate based makes the equation quite difficult from the perspective of Federal Reserve which has has to respond to the domestic needs of the Americans, by staying at near zero.

The other more serious question is the baying concern of the American Greenbacks as a proven Money Order and how the West is expected to react to the growing financial gap between Americans and the rest, and the impact of US Debt ceiling on the triple A rated US Treasury.

                                          Bank of Japan

Interest rates in Japan are lower in United States which are lower than interest rates in Britain and the main point is that the Americans are pretty lobbied to invest through buying Yen and we go forward. but because of the low interest of U.S at almost zero, it is impossible for Japanese Yen to cost any less going forward and in spite of the response from the Bank of Japan. If Yen is expensive, you are only likely to attract local investment and some of its in a high structure interest rate economy like Japan is not readily available, except for heavy financial injection from Bank of Japan who since April of this year agreed of aggressive injection of money. One little fact is that it may come down to simple things, which may give them a breathing chance and refocus if possible. But U.S like Europe s nursing an old wound.

In some measure, between the Japanese 'Stock prices' 'options maturity' 'instantaneous volatility from aggressive injection of money by Bank of Japan, and 'interest rate' the market risk and Var forward rates, may create a long time panic given the current confidence level in some areas are below 16% Standard Deviation. Killing of stocks to accommodate or attract American investment is desperate. At May/June stock calender, confidence level should be at the trade level of less 1% of Var     
                                             
                                          Bank of Israel


Stanley Fischer's Bank of Israel which until recently determines its interest rate through a median (aggregate) of the G-7 interest rate, in a recent diet of the Governors of Bank of Israel, hinted that the sky-rocket housing inflation index to income (value to earning) was the determinative for 'quantitative easing' beginning from June end of 2013. Bank of Israel has a 14 day disclosure date and by circumstance serve as a clearing Bank for many International Markets and BRIC Nation. Interest rate of Bank Israel is marginally dependent on the performance of EuroBanks, which is usually lower to US.
                                               

                                                  IV

What exactly is expected from this saying by Greenspan, that "...bond prices have got to fall, and long-term rates got to rise"? The central fix of this useful concern is derived from the day I impact of a change in the Interest rate. It is no secret that the current Fed's Reserve Chairman and the Policy makers, has maintained a near zero percent interest rate for over 24 months. It is poised to maintain the rate for sometime until they are sure that their target - however arbitrarily - is met.

One fact that should govern the view point of the Greenspan regarding the 'taper' is that enough money is supposedly in circulation as of today and a holier than thou approach of Banks with retailers should not replace the fact that individuals citizens are still adjusting to the shocks from 2008. But is of course if not where the problem with the Feds is associated with, a shift interest rates may or may not necessarily benefit the economy, which also means that the process is in of itself a strange endorsement of power at the top of level.

One more caveat on this seeming FEDS indifference we may suggested with a reference to a commentary on U.S economy by G. William Dornhoff; University of California, - which appeared - that "In the United States Wealth is highly concentrated in relatively few hands. As of 2007 the top 1 percent of households (the Upper Class) owned 34.3 percent of all privately held wealth, and the next 19% (the managerial professional, and small business stratum) had 50.3 percent, which means that just 20 percent of the people owned a remarkable 85 percent, leaving only 15 percent of the wealth for the bottom 80 percent (Wage and Salary Workers). In terms of financial wealth (total net worth minus the value of one's house), the top 1 percent of households had an even greater share of 42.2 percent"

                             Bernanke and Black Banks.

The main event associated with Bernanke's move is that individual home owners are mainly fixed income earners and a low interest rate offers these people a chance of a lifetime to acquire and adjust to new avenues of  by .....but using some of the examples associated with minority Banks, particularly Black Banks, that mainly participate in zip codes and exist with due respect to grants from Federal Housing Authority (FHA-HUD) programs for financing hosing loans, these Black Banks reliant on these types of programs have mainly gone under.

Although it is not the role of the Federal Bank to do the Job of the Government, but it is common sense that waiting for the Job numbers to reach a certain targeted level before profit bearing interest rates are initiated, the concern of the Federal Reserve in this case will not be any different from Government programs that earned to stem the Banks that has very thin liquid base.

In some respect, there is some measure of wisdom from experience in Greenspan, that we can not always expect the market to meet our expectations or keep up with the buying of Government Treasuries in spite of the low numbers from the market. In another language, there is a thin line between the Job of the Feds which is to maintain a balance of liquidity between Banks and the individual consumers and the Policies of the Federal Government to attract the investment of Banks who the Feds are pretty much preventing from investing U.S Treasury Bills. It however becomes overtime a question of Charity.

Black are involved or directly affected by the Market. it usually takes a while for the interest rate change to impact the Economy but the change in the rates can have direct parallel impact on the U.S market. In reality, a drain on 'public money' forces asset to plunge in value 'deflationary' and in terms of Bond and respective parties, at least they have the option of keeping

When fixed interest rate rise, fixed income bonds lose 'value', returns going forward shed in value and one way to Hedge against it, is low interest rate. This statement should be followed by the argument that If Banks Hedge their exposure, increase or changes in interest rate will not necessarily or directly impact on the Banks. These Banks which make a sizable percentage of the Federal Reserve or until recently FDIC Insured, will have the time to adjust to these changes by the Federal Reserve and convert their fixed rates into variable rates. Until recently only insured Banks can fully participate in retail business.

A bet on the changes in interest rate becomes important since there are several interesting parties toying with Collateralize Debt, and such private or profit motivated financial instrument forces into account extreme cases of put option and sometimes stand alone, it becomes less surprising when it incurs the pressure to deliver on a bond with peculiar attentions on the interest rate, or a race towards the decline of the value of a Government Bond and in this instant, an interest rate increase. Let us state that this scenario is borrowed from academic examples and not necessarily how it operates in real time.

                                                    IVb

However, Government Bonds are usually risk-less or have little volatility and in many cases, they attract 'semi-automatic Banks', either tied to an external economic of scales such as Chinese Banks and Government or once like the so called Black Banks who were once criticized for "...for holding a large percentage of their assets in highly liquid investments, primarily U.S Government Obligations" (Bates, et al).

Although Timothy Bates was merely responding to the allegations from Brimmer, A.F, 'Black Banking', we may indicate that Brimmer statement at the Federal Reserve concludes that "If, as has been charged, Black Banks are conservative institutions preferring risk-less government bonds and bills to holding of business and household loans then, they may, in fact, be largely incapable of helping to finance the development of their communities".

From this vintage, we can widen that the reasons why Banks should not be encouraged to rain in the resources and instrument from risk-free investment, and should also be discouraged from such exercise will amount to parking one's money at a highly rewarding Bond market which drains on the Public and may lead to deflation like Japan of recent months, with or without respect to credit. Banks are not Government owned and are necessarily Banks for profits, as such other tactics are necessary given the Bank's role in income distribution and credit.

Robert J. Yancy 'The Federal Government and Black Enterprises'; 74' "In 1971 the assets of the nation's majority Banks were $700 Billion while the assets of minority banks were $600 million. Nevertheless, minority banks granted $60 million in business loans to minorities while majority  banks granted $150 million in business loans to minorities. Thus, while minority banks had assets of less than one percent of the nation's total banks assets, they accounted for more than 29 percent of the business loans made to minorities"   

 

 

 

                                  U.S O.C.C

U.S O.C.C "Office of the Comptroller of the Currency" has often maintained that about 30% of U.S Commercial Banks Assets is 'Mortgage related', which includes 'Mortgages and Mortgage Backed Securities (MBSs). Since Mortgage plays a huge part in U.S economy and is part of business and credit market, it is only common that these Mortgage Related Assets should be generally or easily affected by the changes in U.S interest rate.

Given the sluggish to slow Job growth (Job Growth) and the problems associated with a recovery process, and the problems of 'Extension Risk' or delay of payment which shows up later in the history of U.S home owners,

April 27th 2013

“We have significant concerns regarding the misuse of deposit advance products,” said Comptroller of the Currency Thomas J. Curry.  “The guidance today is an important step toward better protecting consumers and enhancing the safety and soundness of national banks and federal savings associations that may be offering similar products.”


Brain Hubbard

"Deposit advance products are small-dollar, short-term loans that a bank will make available to a customer who has recurring direct deposits with that bank.  The deposit advance loan is to be repaid from the proceeds of the customer’s next direct deposit.  These loans typically have high fees, are repaid in a lump sum in advance of the customer’s other bills, and often fail to consider the customer’s ability to repay the loan while still meeting  other financial obligations."
  
"The OCC encourages national banks and federal savings associations to respond to customers’ short-term credit needs.  However, deposit advance products can pose a variety of safety and soundness, compliance, consumer protection, and other risks. The guidance addresses how any bank offering the products may do so in a safe and sound manner without increasing its credit, compliance, legal, and reputation risks."

The 'Risk Curve'

It is said that when a stock in a given market forces a change in the yield curve that the stock/bond paradigm is a parallel shift. This market would be considered a risky asset and equity of investors are better placed or retained elsewhere. This market is also a Short term market associated mainly with badly exposed investment and poorly hedge instrument that generally affect a yield curve. A yield curve change with outward tendency may in effect  

Parallel Shifts are not dissimilar from parallel markets, but are usually significant when there is a greater emphasis on price going forward 'implied' than underlying price.

Pricing is said to be a function of any Market and in less Volatile Government Bonds, for instance U.S bonds, Bond prices are Derived from its 'Present Value'. For this, changes in prices becomes inversely proportional to changes in Bond, and given a the prevailing term structure (for first world) interest rate plays a huge part of the anomaly.

In short put, price is a function of a market as derived from present value (given/quoted/agreed), and interest rate, at least in U.S and its Federal Reserve, may be reduced to the 'function of time to maturity'.  If Y for instance is the Bond, a small placement or displacement of interest rate will price the cash at discount and may lead to repurchase agreement which is part U.S undoing in very recent time. Since the U.S Federal Reserve has agreed to enforce SWAP agreement and Basel III, then Leverages can have a determinant effect on the current. Crushing Leverages is also part of U.S undoing in 2008, but at low interest rate, some of these societies are officially taking adequate measures.

I doubt that Interest Rate of these countries - including United States will change in the next 60 days. Governments should be looking to find alternative ways of growing their economy with all due respect to Central Banks

Doing Business in 21st Century India; How to Profit in Tomorrow's Most Exciting Market' By Gunjan Bagla.

Doing Business in 21st Century India; How to Profit in Tomorrow's Most Exciting Market' By Gunjan Bagla.


Review



By Sampson Iroabuchi Onwuka



The book runs like a three dimensional transnational promotional on the latest advances in Indian economy with measured dispatches on the historical past of India leading to the financial event of 1991 currency change by Manmohan Singh, who is current prime minister of India. This 1991 single event may or may not have woken India from sleep, it certainly handed it destiny to guide the transition strategy of a major fraction from South East Asia into the 21st Century.

To be sure, Manmohan Singh does not exorcise a magic wan over today's India's economic progress, either did the re-denomination of the local currency account for this new India, rather, 21st century India has been a major player of economic community of the world - past and present - from Akbar the Great of the Mughal (Mo'gul) Muslim empire to the Dutch and British East India Company and only needed the platform to begin to show.

This Book is a good recherche on this economy. The author of the Book, Gunja Bagla, details out the growing sectors in Indian economy; defense, Infrastructure, Pharmacy, Knowledge based, Information based technologies and challenges any company is likely to face in their first visit to India and how Investing India should be in your mid-cap to large-cap companies portfolio. For instance in India these days, there are locally produced Car companies that work hand in globe with International Companies such as Hyndai group to produce a local Indian Variety; the Indica, the Indigo, cars that now rival their counterparts from around the world.

There is no doubt that India has a duty and a future as a world’s largest democracy and a capitalist based economy from its earlier years till presently. This duty involves leading an Asian example in its commitment to Food and Drug Administration. For the record, the author highlights that India as at 2008, has "...Seventy-Five FDA approved facilities, more than any country",  

Besides the cultural backdrop to India Society and Foreign Direct Investment uptake in the past 20 years, the author argues for an optimistic future which is though riddled with ‘present’ adverse uncertainty ranging for Energy to Population growth, may yet prove the overall alternative suitable for a Global Macro which is over-bearing on the USA. The role call on the names of companies presently operating in India includes Toyota, Honda, Accenture, IBM, EDS, Cognizant, ACS, CSC, Hewlett-Packard, these companies does essential proclaim a foreign invasion or the Amanda, but cast a probability light on the future of these companies judging as from IBM of US and Lenovo of China trend exchange.

The dice between the relevance of China to India was also cast, and within the indexes are leading indicators which suggest all kinds of numbers for shades of Investors. Bagla mentions that there are knowledge based software that may help an outsider grasp the structural dynamics of the Information class and the range of outsourced products. Some of these include "...Information Technology Outsourcing (ITO), Business Process Outsourcing (BPO), Knowledge process Outsourcing (KPO), Legal Process Outsourcing (LPO), Transcription Outsourcing (TO), contract Research Outsourcing (CRO), information technology enabled services (ITES)..." etc. 

Bagla mentioned that "Fifty thousand vessels a year pass through the straights of Malacca, South of Singapore, making up one-quarter of all Oceanic trade worldwide. At one point, the Navigable Channel is just a few miles wide. The Nicobar Islands, six hundred miles east of Chennai in the Bay of Bengal, are part of India and offer excellent potential choke point for this trade" The leap in Ship building industries was enhanced by Hyndai. Then, there is the Suzuki group, each vying for a piece of resurgent India, each trying to undo the influence of Reliance and its family.

According to some sources as also described by Bagla "Reliance is now building the world's Sixth largest refinery, a $6.1 Billion plant next to it's existing refinery. California-based Chevron Corporation decided to invest $300 million in return for 5 percent Ownership. At this new refinery, Exxon Mobil's research and engineering unit provided the technology for he world's largest sulfuric acid alkylation plant...." The 580, 000-barrel-per-day refinery on completion will enhance India prospects of a 5.5 million barrels a day.

Power Equipment Maker BHEL, Cement Producer Gratin, engineering firm Larsen and Toubro, India's largest private sector company, Reliance Industries Ltd, the world's lowest cost steel maker Tata Steel; which is one of the few Indian companies that chose to enlist only on the Indian Market.  

In India today, there are General Electric products, Foxboro Equipment and Power Products, Rockwell Automation and other Equipment based Industries across India. But these are also in China. In India today there are the financial products such from 'Citibank' and 'UBS' and there are others as with others in China. As such the point about the products only serve to assure the reader of what is on-going, that India local companies are part of the technology expansion yet, that more than any country, India has Award winning Industries companies in drug manufacturing, Brake System Engineering and Steering. These are watershed episodes of an Indian Economy that seen it all all.  

But from a practiced past and an Indian American experience, Bagla, defends the territorial ambitions of India in its backyard, widening the military Provisions from long range Ballistic Missiles to amphibious surface to air to water weapons in river ‘choke ends’. That "Military Planners in India view their strategic interests spanning the India Ocean littoral from Africa to the Straight of Malacca; they want its aircraft to be able to reach central Asia and its ballistic missiles to be a threat to more than just Pakistan"

Of course these are Investment Articles fitting for established societies such as the USA and Europe. Yet from these loftily with advanced economy, the book somewhat disappoints. The Book laminates on USA and European Investments in India, it throws light on Asia to Asia investment, it did not distribute the role of India in the future of World, and it did not specify why anyone would be willing to come to India where as China is believed to be far more rewarding.

Critic

For anyone interested in Investment, which is really long-term, there is very little provisions or Information for long-term India and principally speaking, Bonds. There is little information regarding limits of expectation or general of what is expected of those who stand to benefit. Growth and tighter financial constraints and the use of currency derivatives is not Toys are Us, clarifying India will not absolve it of Operational Risk, yet it may include the Invest Crowd to the Long Term India future which immediate Investment in Infrastructure in India does not replace.  

Secondly, some of the Indicators that he highlighted in his book as not necessarily standard products or at least acceptable as far as the rest of the world may be concerned. For instance, explicating the implications of the US Sarbanes-Oxley Act in terms of functional financial Derivatives and Risky Asset exposures of foreign financial instrument and product, may be necessary information if not preferred information given the expositions that both accompanies the investment of Insured and in recent times 'Uninsured' U.S Banks or foreign denominated currency. 

It is obvious that India is a country of many cultural colors and has one of the world's longest lasting religions 'Hindu'. It is true that not nearly everyone in India is Hindu as such when from the author we read of world religions; Christianity, Judaism, Janis, Sikh, Hindu, Islam, as part of Indian Intellectual and Economical table cloth, that each armed with an artisan set of workmanship in an effort to divide the elephant; India, among themselves, we are forced to listen to the author, Gunjan Bagla, since articles of faith on the platform of money is one of the issues dividing East (Middle East) from the Rest of the world.

There may perhaps be a strain or hints of 21st century India as an undying example of separation of faith and money, or the inevitability of investing in any economy free of prosecution, with or without response to the greater and more demanding religious influences.

But this was not a major deal in the Great Unraveling of Bagla's Investing in 21st Century India. Bagla maintains the quality of Indian business in terms of world globalization, and maintains that expectations for the great companies in the India and many parts of the Asia. In reality, there are several development that has taken place in the world and in our world, and nothing in his book or India offers anything beyond what the Investor can obtain Short-term going by the rates in the India.

The author is Hung Over on a India that is not so much a Sun but a financial Satellite for U.S and Europe, where as India in recent times has more than surpassed many European countries in the last few years, including England which was the last of Indian Colonial. This backhand measure of India by the author reveals India as a country that is struggling with its past, unsure of itself and relying mainland on Europe or the Americans to expand their growth.

Thirdly, we wonder why the author  failed to position India as the next best thing instead of listing the best big companies coming to India. It may have been a dream of India to be like the West, but from the rest of World, the day is breaking and there are new and urgent Investment realities. Interest Rates and Investment also go together and Scheduled Disclosure dates can offer assistance to Credit Portfolio problems.

As such an Investor will likely ask what India will do different if China was generating more expense power for the smallest dollars and when Hong Kong and the Chinese Mainland was at some point attracting $420 million a day and kept prices reasonably low and backed it with a dyke of well educated labor society. And part of the means China ensues its economic penetration to many parts of the World, commercializing on its success and helping impoverished and inaccessible areas of the world. This is important. 

Fourthly, It is once said that primary reason for ensuing balance sheet risk "...is to protect the U.S dollar value of foreign currency denominated net monetary assets from the effects of volatility in foreign exchange prior that might occur prior to their conversion to U.S dollars." (Grouhy, Galai, Mark; 2006), how does India insure that the statement of Singh that India in 1991 that India was a 'Defaulter' of its obligation does not repeat itself in nearest estimable future.

Fifthly, The author did not mentions who is who in India saving main events in Bollywood and Pharmacy, which decorated along the straights of Indian religious mosaic - to prove a point. There is no mention of celebrated or world or Asian known Indian Champions of Business and Bank Operation and mapping Rupee denomination to absorb fluctuation. 

One area the book did not mention very well and would have scored a lot of points is the aspect of matching the overall US dollars escorted into India, by local Indian Investment. Part of this would entail the logic of expansion of Indian Banks and Financial in U.S, which is active as of 2013, which encourages has encouraged Commodity Swaps via South America and virtual transnational 'Swaption' through a third party.  

These areas were not discoursed by Gunja Bagla, but in future, the author of Investing in India will do a lot of good in long term Investment.

 The Book belongs to the same genre as Thomas Freidman’s ‘World is Flat’ which Ferguson ‘Ascent of Money’ 2008, challenged as lacking in diction and for supposing that earning $5 a day in name of outsourcing  meant a world that is prosperous and ‘flat’ in spite of Child labor and India poverty rules.

Gunjan Bagla obviously sugar coated these dark and avuncular boulevards of doing business in India, the problems of Child Labor which is believed outlawed but still evident in many ways than one in India. For sure we can say for certain that this is not based on the will drive away the problems of business in that society rather, Child Labor and under--employed may be a result of Judicial Inactivity of India, it may also be due to the poverty of quality of law enforcement.

The Book suffers in quality for the mere focus on India-USA focus with tiptoes on Europe, which makes Bagla a victim of his experiences in the West. It reduces India to a Satellite of more Advance economies, whereas India as a major financial and technology player for the overall economy of world. The Book is useful and should be subjected to tall review.

If Friedman says that the ‘World is Flat’, it is an statement that many people including the rest of us may likely accept, and in terms of Bagla and India, the statement also applies saving for the collective thesis or guiding philosophy which both books lack.

The World may be curved for all we know, but Bagla does not engage us from there, but we come away from his book fulfilled with a diatribe on Indian prosperity and a possibility of an India who may yet surpass China. This is not the case today.

Between prosperity and poverty is economic growth, which now and in future is the gap India must broach. The Investments from all and asunder is a different matter, and in 21st Century India, may or may not follow the discourses of Gunja Bagla.