I personally dont like Tech Mahindra (or M and M) and RCOM. They have poor quality managements who tell more blatant lies on their balance sheet than other Indian companies (all of whom do lie to some extent). THere are better companies.
Re: Unitech, there is every risk that the comany will be wound up if someone other than Congress is in power. Same with DLF - so a future beyong 2014 depends on election results.
Re: Gold, current total value of Gold is about 9 trillion dollars. Assuming it becomes defacto gold standard, then it should represent about 10% of the total global wealth (currently 450 trillion) = 45 trillion. So gold will have to rise 5 times from current prices i.e from 2000$ to about 10,000$. If all assets have to be denominated in gold, it will have to rise to 100,000$ but obviously hard assets will remain.
But gold standard is never coming back. So one should sell much before that.
I agree with Sanjana's advice - having accumulated very little gold (like my 5%), it doesnt make sense to clean out the position just because of 2 bearish views on gold bubble. Ride the wave for some more time - but know to get out in time.
As I said, every asset is in bubble - a liquid bubble not an air bubble. The liquid is leaving one bubble and going into another bubble - like a tom and Jerry cartoon.
The 50-70 trillion dollars in deficit liquidity I talked about earlier can be easily extinguished if gold goes from 2000$ to 10,000$ - from 9 trillion to 45 trillion in value. Inflation to this level followed by a slow deflation over 30-40 years is the best way to drain the liquidity without harming anybody.
People who buy stocks and bonds are too financially savvy to be caught wrong footed.
Inducing the lay public into buying gold - especially illiquid bullion gold - is the best way to drain out the false money - allow this bubble to inflate, make a killing in the process - and leave the public holding the baby.
They could not do the same in stocks and bonds, because lay public dont hold stocks and bonds - those who hold are too smart and all know how to play the same game.
With real estate and gold, lay public which is more easily fooled into buying an inflated asset is involved - ideal situation to deflate the bubble.
If even this fails, then only general economic inflation of over 10% in developed countries can deflate this bubble. Obviously US govt would prefer to see gold, bought by Indians and Chinese, absorb the excess liquidity than see general inflation of all prices in their economy - which would bring great hardship to their own people.
One great gamble tried by the US was to have their living standards rise by having China and Japan sell them things - and then invest in US treasuries. WHile Japan has been a sucker in this, CHina has proved to be quite evasive - their 2 trillion in UST has been successfully released in Yuan into their own economy and had been more or less successfully absorbed, raising living standards of the Chinese.
India's living conditions are pathetic, making us poor. We should be careful as a country not to buy up a lot of inflated gold and see our wealth effectively drained out to support the living standards of USA and Europe. Which means, at some point, our RBI should sell its gold at the best price.
Individually, the same rule - ride the gold wave but exit at an opportune moment- and definitely much before 10,000$ (since that would represent that gold is holding the maximum of the bubble liquidity).
I would exit at 3000$ (by practiving the same exit strategy I outlined earlier)
Saturday, August 27, 2011
Friday, August 26, 2011
Extinguishing "mirage" money
Most current estimates put the total wealth of the globe around 450-500 trillion dollars. This wealth is being continuously increased by the GDP of the nations and extinguished by depreciation of the wealth assets.
Into this situation, from 2000 to 2011, there has been a wave of intangible asset creation, mispricing real assets. This includes derivatives, swaps, futures and options in stocks, bonds and commodities as well as PM like gold. Fuelled by Greenspan and Bernanke, this has caused confusion as to how much wealth the world really has. Since these paper assets have infinite loops and liquidity waves pushing up or down various assets in interlinked ways, it is difficult to exactly pinpoint total global wealth - just like the Heisenberg uncertainty principle, you just cannot know.
Probable estimate for this uncertain wealth is 50-70 trillion dollars i.e about 10-15% of total global wealth is totally indeterminate. Probably, all of this is just fairy gold - meant to vanish when the sun rises.
Question is, what is the asset which will depreciate in value enough to make this 70 trillion dollars vanish? No market is this big and 70 trillion is around slightly more than one year's global GDP. Obviously, multiple assets have to depreciate to achieve this depreciation of wealth.
Another way to put it is that people did a lot of work which was wasteful and did not create wealth (rise in living standard). WOrk was wasted and is now gone. Americans moved houses in a musical chair, without creating wealth addition. A lot of financial instruments created the illusion of wealth and were not backed by real assets and so the wealth had to vanish.
But since no market is big enough to absorb this extent of depreciation, what will fall? Whichever asset seems likely to fall, investors are fleeing and trying to hide in another asset less likely to fall.
The first asset to fall was house prices - but this was location specific and instead of absorbing the fall, it only shifted loss from the asset holder (buyer) to the banks. THe banks were reluctant to let their assets fall - rightly, it should have been AMerican and European banks which should have been allowed to fail. But they were not allowed to fail and were bailed out. Probable size of the bank bad loan size (US and Europe and global) is only around 5 trillion - only 10% of the actual short fall in wealth. SO it alone was also not enough - a recession in living standards was also needed to extinguish the fairy wealth - which would have been assured by letting the banks fail. But the US govt and fed did not do this - and passed the buck to other people to take the fall.
THe second asset to fall was global stocks. Total market size is only about 40 trillion and this market (if it halved in value) could absorb only about a third of the global shortfall.
The bank bailout had the paradoxical effect of making the stocks rebound - and so no wealth cound be extinguished - fairy wealth was re-created in the form of the 2009-10 stock bounce.
THe third asset to fall was the dollar. But there was no inflation in USA because of the recession - instead there was risk of deflation. Even now, when deflation has receeded, there is no real inflation in dollars.
So the falling dollar, instead of extinguishing the global wealth deficit by inflating out of the problem, has paradoxically caused sufficient inflation of all other assets - stocks, bonds and gold - to offset the attempted devaluation of the dollar. There is no sign of stagflation also.
SO the imaginary wealth is still floating from asset class to asset class, refusing to be extinguished.
Ultimately, it is imaginary and will be extinguished. Smart people know this and leave every asset class just before it starts to show signs of extinguishing wealth. To me it looks as if this will continue like a never ending game of ping pong. On each bounce, some of the imaginary wealth will die out, hurting some people, but the ball will continue to keep bouncing for years - thanks to the financial ingenuity and complexity created by the Wall Street pros.
Gold is no safe haven in this scenario - it is only one of the asset classes into which people temporarily flee, pushing up prices, until it starts to looks shaky - when people flee gold into some other asset. SO gold is only fools gold - true fairy gold.
The only thing a participant has to do in this game is to hold the ball while it is rising and pass it on to someone else before it falls. In this game, there is no fundamental analysis involved - assets rise and fall for reasons other than fundamentals. You cannot put the rules of cricket into this game of ping pong - you cannot put the rules of fundamental analysis into this game of money. Only technical analysis will help.
There are two ways to play this game - one is the short term game - hit the ball and run. Other is to catch the ball, ride out a few falls, and then let go just before a bigger or perhaps even the biggest bounce of all. Both games are equally dangerous.
You might buy an asset just before fall and then sustain losses - and be the patsy who extinguished some of the fairy wealth. You might buy and asset and keep holding it for long time waiting for it to rise - only to find that you missed the selling chance and now the price will only fall never to rise - and again become the patsy who extinguished more of the fairy wealth.
One option is to spend the money as quickly as possible on useless gadgets or whatever - and extinguish your wealth but get a bang for your buck. Nobody can beat the AMericans at this game - they have already spent the surplus wealth of next 20 years.
Indians instinctively do not do this.
Understanding the situation should help one make a wise choice.
Real estate in this scenario can also serve as an extinguisher of wealth. You can buy at a high price and be left holding an empty shell of an asset for years to see any gain - or you can buy and exit quicky, timing the market and making notional gains - letting another sucker carry the asset, but then - you have to keep playing. As long as the music of liquidity keeps playing, you have to keep dancing - if you stop dancing you are OUT - you have lost your money on a useless asset.
Gold, Real Estate, Stocks, Bonds - they are all the same - as long as the global liquidity of imaginary wealth keeps sloshing around.
Being prudent in this scenario- spending less, making systematic investments, asset allocation - all can turn out to be foolish in time, for no fault of yours. BEst is to do what the AMericans do - spend it today on whatever strikes your fancy.
Dont stop to think about tomorrow (paraphrasing Fleetwood Mac)
Into this situation, from 2000 to 2011, there has been a wave of intangible asset creation, mispricing real assets. This includes derivatives, swaps, futures and options in stocks, bonds and commodities as well as PM like gold. Fuelled by Greenspan and Bernanke, this has caused confusion as to how much wealth the world really has. Since these paper assets have infinite loops and liquidity waves pushing up or down various assets in interlinked ways, it is difficult to exactly pinpoint total global wealth - just like the Heisenberg uncertainty principle, you just cannot know.
Probable estimate for this uncertain wealth is 50-70 trillion dollars i.e about 10-15% of total global wealth is totally indeterminate. Probably, all of this is just fairy gold - meant to vanish when the sun rises.
Question is, what is the asset which will depreciate in value enough to make this 70 trillion dollars vanish? No market is this big and 70 trillion is around slightly more than one year's global GDP. Obviously, multiple assets have to depreciate to achieve this depreciation of wealth.
Another way to put it is that people did a lot of work which was wasteful and did not create wealth (rise in living standard). WOrk was wasted and is now gone. Americans moved houses in a musical chair, without creating wealth addition. A lot of financial instruments created the illusion of wealth and were not backed by real assets and so the wealth had to vanish.
But since no market is big enough to absorb this extent of depreciation, what will fall? Whichever asset seems likely to fall, investors are fleeing and trying to hide in another asset less likely to fall.
The first asset to fall was house prices - but this was location specific and instead of absorbing the fall, it only shifted loss from the asset holder (buyer) to the banks. THe banks were reluctant to let their assets fall - rightly, it should have been AMerican and European banks which should have been allowed to fail. But they were not allowed to fail and were bailed out. Probable size of the bank bad loan size (US and Europe and global) is only around 5 trillion - only 10% of the actual short fall in wealth. SO it alone was also not enough - a recession in living standards was also needed to extinguish the fairy wealth - which would have been assured by letting the banks fail. But the US govt and fed did not do this - and passed the buck to other people to take the fall.
THe second asset to fall was global stocks. Total market size is only about 40 trillion and this market (if it halved in value) could absorb only about a third of the global shortfall.
The bank bailout had the paradoxical effect of making the stocks rebound - and so no wealth cound be extinguished - fairy wealth was re-created in the form of the 2009-10 stock bounce.
THe third asset to fall was the dollar. But there was no inflation in USA because of the recession - instead there was risk of deflation. Even now, when deflation has receeded, there is no real inflation in dollars.
So the falling dollar, instead of extinguishing the global wealth deficit by inflating out of the problem, has paradoxically caused sufficient inflation of all other assets - stocks, bonds and gold - to offset the attempted devaluation of the dollar. There is no sign of stagflation also.
SO the imaginary wealth is still floating from asset class to asset class, refusing to be extinguished.
Ultimately, it is imaginary and will be extinguished. Smart people know this and leave every asset class just before it starts to show signs of extinguishing wealth. To me it looks as if this will continue like a never ending game of ping pong. On each bounce, some of the imaginary wealth will die out, hurting some people, but the ball will continue to keep bouncing for years - thanks to the financial ingenuity and complexity created by the Wall Street pros.
Gold is no safe haven in this scenario - it is only one of the asset classes into which people temporarily flee, pushing up prices, until it starts to looks shaky - when people flee gold into some other asset. SO gold is only fools gold - true fairy gold.
The only thing a participant has to do in this game is to hold the ball while it is rising and pass it on to someone else before it falls. In this game, there is no fundamental analysis involved - assets rise and fall for reasons other than fundamentals. You cannot put the rules of cricket into this game of ping pong - you cannot put the rules of fundamental analysis into this game of money. Only technical analysis will help.
There are two ways to play this game - one is the short term game - hit the ball and run. Other is to catch the ball, ride out a few falls, and then let go just before a bigger or perhaps even the biggest bounce of all. Both games are equally dangerous.
You might buy an asset just before fall and then sustain losses - and be the patsy who extinguished some of the fairy wealth. You might buy and asset and keep holding it for long time waiting for it to rise - only to find that you missed the selling chance and now the price will only fall never to rise - and again become the patsy who extinguished more of the fairy wealth.
One option is to spend the money as quickly as possible on useless gadgets or whatever - and extinguish your wealth but get a bang for your buck. Nobody can beat the AMericans at this game - they have already spent the surplus wealth of next 20 years.
Indians instinctively do not do this.
Understanding the situation should help one make a wise choice.
Real estate in this scenario can also serve as an extinguisher of wealth. You can buy at a high price and be left holding an empty shell of an asset for years to see any gain - or you can buy and exit quicky, timing the market and making notional gains - letting another sucker carry the asset, but then - you have to keep playing. As long as the music of liquidity keeps playing, you have to keep dancing - if you stop dancing you are OUT - you have lost your money on a useless asset.
Gold, Real Estate, Stocks, Bonds - they are all the same - as long as the global liquidity of imaginary wealth keeps sloshing around.
Being prudent in this scenario- spending less, making systematic investments, asset allocation - all can turn out to be foolish in time, for no fault of yours. BEst is to do what the AMericans do - spend it today on whatever strikes your fancy.
Dont stop to think about tomorrow (paraphrasing Fleetwood Mac)
Saturday, August 6, 2011
On US debt downgrade
Quote:
Originally Posted by SanjanaSingh
S & P has downgraded US debt -- absolutely surreal, and will have disastrous effects on managed money around the world. This is stunning.
S&P Downgrades US To AA+, Outlook Negative - Full Text | ZeroHedge
Wiseman, Venky, please comment in detail [ if you're not speechless like me, that is ]
What's the outlook for markets on Monday ?
I am quite speechless and dont really know what this means.
First reaction:
1. US treasury yields will head to 3.5 and refuse to come below that. QE3/4/5/6 whatever will no longer be able to work - they wont be able to budge the yield to less than 3.5%. Those who are holding treasuries - like China and Japan and pension funds, are going to hurt a lot because what little return they get from the treasury is going to be negated by falling bond prices
2. Sentiment which was already quite bad will be affected even more: Double dip recession is inevitable, despite the good show in jobs yesterday.
3. Money is likely to move back from treasuries into stocks, as people sell off treasuries until we get a 3.5% yield at least. People who sold stock in a panic on Thursday and moved to treasuries are going to regret their decision - it has badly boomeranged.
4. Returns on equities are however going to be more difficult because earnings will be affected by the rising rates and poor sentiment
5. Gold will continue to be safe haven. No brainer hold/buy for gold.
6. Over the next 6 months, if yields become fixed around 3.5%, pension funds will pull money out of emerging markets and seek a safe 3.5 % yield.
7. This downgrade is probably is a Republican conspiracy - S and P is probably under their control - it seeks to stymie the QE3 before it has started. Whether it succeeds depends on what happens to bond rates. Obama is doomed though - I am 60% sure he will lose the election. I would have been more certain except for one thing - Unfortunately the Republicans are like the BJP - they have no credible leadership. I mean, apart from his looks, Romney is a sleasebag and Michele Bachman is a moron. As pathetic as Advani, Swaraj, Jaitley and company. Both right wing parties need a real leader and not these idiots.
8. Oil is likely to drop. Which should act as a stimulus much better than stupid old QE3. If I was Ben, I would have raised rates and not looked to QE3 to stimulate the economy - falling commodities are the best fertilizer for economic recovery
9. Long term - I think this is a good thing. No unnatural stimulus, QE and zombie creation. The free market will actually become free and act the way it is supposed to. Long term rates should be determined by business prospects and the free market, not by fed fiats
10. US economy is likely to recover better if the fed stops its stupid QE program and lets the economy get on with it.
11. I think markets will move up on Monday as people exit bonds and slosh the liquidity around. Oil up, gold up and stocks up, bonds down - but as I said, this is really unpredictable.
Like removing a Jenga block from the bottom and waiting for the pile to fall - and trying to predict the exact shape of the pile after it finishes falling. Impossible to really predict.
Originally Posted by SanjanaSingh
S & P has downgraded US debt -- absolutely surreal, and will have disastrous effects on managed money around the world. This is stunning.
S&P Downgrades US To AA+, Outlook Negative - Full Text | ZeroHedge
Wiseman, Venky, please comment in detail [ if you're not speechless like me, that is ]
What's the outlook for markets on Monday ?
I am quite speechless and dont really know what this means.
First reaction:
1. US treasury yields will head to 3.5 and refuse to come below that. QE3/4/5/6 whatever will no longer be able to work - they wont be able to budge the yield to less than 3.5%. Those who are holding treasuries - like China and Japan and pension funds, are going to hurt a lot because what little return they get from the treasury is going to be negated by falling bond prices
2. Sentiment which was already quite bad will be affected even more: Double dip recession is inevitable, despite the good show in jobs yesterday.
3. Money is likely to move back from treasuries into stocks, as people sell off treasuries until we get a 3.5% yield at least. People who sold stock in a panic on Thursday and moved to treasuries are going to regret their decision - it has badly boomeranged.
4. Returns on equities are however going to be more difficult because earnings will be affected by the rising rates and poor sentiment
5. Gold will continue to be safe haven. No brainer hold/buy for gold.
6. Over the next 6 months, if yields become fixed around 3.5%, pension funds will pull money out of emerging markets and seek a safe 3.5 % yield.
7. This downgrade is probably is a Republican conspiracy - S and P is probably under their control - it seeks to stymie the QE3 before it has started. Whether it succeeds depends on what happens to bond rates. Obama is doomed though - I am 60% sure he will lose the election. I would have been more certain except for one thing - Unfortunately the Republicans are like the BJP - they have no credible leadership. I mean, apart from his looks, Romney is a sleasebag and Michele Bachman is a moron. As pathetic as Advani, Swaraj, Jaitley and company. Both right wing parties need a real leader and not these idiots.
8. Oil is likely to drop. Which should act as a stimulus much better than stupid old QE3. If I was Ben, I would have raised rates and not looked to QE3 to stimulate the economy - falling commodities are the best fertilizer for economic recovery
9. Long term - I think this is a good thing. No unnatural stimulus, QE and zombie creation. The free market will actually become free and act the way it is supposed to. Long term rates should be determined by business prospects and the free market, not by fed fiats
10. US economy is likely to recover better if the fed stops its stupid QE program and lets the economy get on with it.
11. I think markets will move up on Monday as people exit bonds and slosh the liquidity around. Oil up, gold up and stocks up, bonds down - but as I said, this is really unpredictable.
Like removing a Jenga block from the bottom and waiting for the pile to fall - and trying to predict the exact shape of the pile after it finishes falling. Impossible to really predict.
Friday, August 5, 2011
On the global sell off
In 2008 we had world wide competitive devaluation by lowering of interest rates.
By 2011, India, China, Brazil, Greece, Spain and Italy have been forced to hike their rates - either because of inflation (BRIC countries) or because of poor economic performance forcing debt default fears (southern Europe).
That leaves just Japan, USA and North Europe in the race for competitive devaluation. The only real way for a devaluation to work (in increasing local manufacturing and exports - which is what central bankers hope) is to devalue own currency in the face of other currencies maintaining or increasing value/interest rates. If everyone devalues at the same time, there is no effect - which is why QE-1 and 2 failed.
So will QE3 suceed in stimulating the US economy? Devaluation did not work in Japan for last 20 years. They finally seem to be losing their competitive advantage - look at Sony and Toyota. Augurs bad. Their per capita GDP actually seems in a decline in dollar terms in the last 20 years - and I havent even tajken dollar depreciation into account.
Currently US short term rates are actually negative (not in inflation adjusted levels, but in actuality - one bank on Wall Street is actually charging for keeping people's cash!!!!) while long term rates (10year) are at 2.5%. Even more bizarre - 30 year bonds are at 3.5%!!!! Surely this cant last?
After US jobs data came out strong, 10 year rates are heading back up, so maybe the bond market will actually decide the fate of QE-3. I think it would be foolish of the fed to go for QE-3: it wont do any better than QE2.
Only time will tell, too difficult to call the current roiled markets
To me, it seems that the fed is trying to stimulate a dead body - at great expense to those who had been prudent and had actually saved - and at taxpayer's expense. Playing with US savings in this way is really unfair and will definitely get Barack Obama defeated next year. (If US were my household budget, I would have cut loose the junk debt papers and bancrupted the useless banks.)
Ultimately, all the cash generated from stock and oil sell off has to go somewhere. Looks like Sanjana might be right and it will all head back into gold.
OR-oil might drop sufficiently and economy might respond to the adrenaline injections - and the liquidity sloshing around might head back into equity. I have a feeling this is what will happen.
In this flood of liquidity, the only easily visible high ground is gold. Not Indian equity, not BRIC, not European equity, not bonds at such ruinous rates, not indistrial commodities when economies are floundering.
Only gold is left. Or perhaps US/North Europe equities if they fall enough to look attractive.
Gold is also very dicey - at the first sign of a bond sell off, gold will collapse.
If you are a global investor, bite your nails. Not much more you can really do.
If an Indian investor, have a diversified portfolio and exclude nothing - my good old 30-30-30-10 distribution continues to feel right.
PS: I bought a lot of equities in small quantities from my buy list today. I plan to buy at every dip. With this much global turmoil, RBI is likely to pause rate hikes. India inflation is structural and due to supply constraints and govt bottle necks/poor governance. It will not respond to RBI rate hikes - which will only convert inflation into a stagflation.
RBI is fairly sensible and is likely to (finally) pause rate hikes. Given that our short term rates are like 8% and long term bond yields are like 8.5%, it would be just plain silly of RBI to keep hiking.
By 2011, India, China, Brazil, Greece, Spain and Italy have been forced to hike their rates - either because of inflation (BRIC countries) or because of poor economic performance forcing debt default fears (southern Europe).
That leaves just Japan, USA and North Europe in the race for competitive devaluation. The only real way for a devaluation to work (in increasing local manufacturing and exports - which is what central bankers hope) is to devalue own currency in the face of other currencies maintaining or increasing value/interest rates. If everyone devalues at the same time, there is no effect - which is why QE-1 and 2 failed.
So will QE3 suceed in stimulating the US economy? Devaluation did not work in Japan for last 20 years. They finally seem to be losing their competitive advantage - look at Sony and Toyota. Augurs bad. Their per capita GDP actually seems in a decline in dollar terms in the last 20 years - and I havent even tajken dollar depreciation into account.
Currently US short term rates are actually negative (not in inflation adjusted levels, but in actuality - one bank on Wall Street is actually charging for keeping people's cash!!!!) while long term rates (10year) are at 2.5%. Even more bizarre - 30 year bonds are at 3.5%!!!! Surely this cant last?
After US jobs data came out strong, 10 year rates are heading back up, so maybe the bond market will actually decide the fate of QE-3. I think it would be foolish of the fed to go for QE-3: it wont do any better than QE2.
Only time will tell, too difficult to call the current roiled markets
To me, it seems that the fed is trying to stimulate a dead body - at great expense to those who had been prudent and had actually saved - and at taxpayer's expense. Playing with US savings in this way is really unfair and will definitely get Barack Obama defeated next year. (If US were my household budget, I would have cut loose the junk debt papers and bancrupted the useless banks.)
Ultimately, all the cash generated from stock and oil sell off has to go somewhere. Looks like Sanjana might be right and it will all head back into gold.
OR-oil might drop sufficiently and economy might respond to the adrenaline injections - and the liquidity sloshing around might head back into equity. I have a feeling this is what will happen.
In this flood of liquidity, the only easily visible high ground is gold. Not Indian equity, not BRIC, not European equity, not bonds at such ruinous rates, not indistrial commodities when economies are floundering.
Only gold is left. Or perhaps US/North Europe equities if they fall enough to look attractive.
Gold is also very dicey - at the first sign of a bond sell off, gold will collapse.
If you are a global investor, bite your nails. Not much more you can really do.
If an Indian investor, have a diversified portfolio and exclude nothing - my good old 30-30-30-10 distribution continues to feel right.
PS: I bought a lot of equities in small quantities from my buy list today. I plan to buy at every dip. With this much global turmoil, RBI is likely to pause rate hikes. India inflation is structural and due to supply constraints and govt bottle necks/poor governance. It will not respond to RBI rate hikes - which will only convert inflation into a stagflation.
RBI is fairly sensible and is likely to (finally) pause rate hikes. Given that our short term rates are like 8% and long term bond yields are like 8.5%, it would be just plain silly of RBI to keep hiking.
Thursday, August 4, 2011
On the mrityunjaya mantra
Aum Tryambakam Yajamahe
Sugandhim Pushti-vardhanam |
Urva - rukamiva Bandhanan
Mrtyor - muksheeya Maamritat ||
The famous Maha mrityunjaya mantra from the 12th verse 59th chapter of the 7th Mandala of the Rig Veda Samhita. Ascribed to Vashishta, who is supposed to have written most of the most ancient parts of the Rig Veda Samhita, this mantra is probably the 2nd most famous mantra after the Gayatri Mantra.
It actually came into my head when I was reading up on the Kundru – a plant belonging to the Cucumber family which my son found growing wild in our garden hedge, yesterday. An internet search showed that this is a very tenacious plant, very difficult to eradicate. In parts of Hawaii it has become a pest. Apparently, if you cut it away, small bits of it left behind in the soil take root and re-grow into not one but many new plants. So it is like an immortal plant. The only way to control it is to let the plant live on for ever, but pluck its fruit so that the seeds do not disperse and propagate the plant.
Strange indeed.
Coming back to the mantra, the words mean:
Aum= This is actually not there in the original mantra
Triambhaka = three eyed.
Yajamahe= we worship
Sugandhim= fragrance
Pushti =prosperous,thriving, nourish
Vardhanam=enhance
Uruvarukam=cucumber (also uruva=big, rukam= disease)
Iva=like
Bandhanan=from binding, captivity (from stem)
Mryutyor= from death
Mukshiya=liberate
Maa=not
Amritaat= nectar of immortality
An internet search reveals these two usual meanings:
1. (Sayana’s interpretation): We hail the fragrant Three-eyed One who nourishes [all] and increases the [sweet] fullness of life. As the cucumber is liberated from captivity [from its stem], may we [also] be liberated (mukshiya) from death (mrityor) not for the sake of immortality (maamritaat).
2. (Usual sense): We worship The Three-Eyed Lord Shiva who is naturally fragrant, immensely merciful and who is the Protector of the devotees. Worshipping him may we be liberated from death from our dreaded disease and may we attain the nectar of immortality
3. An alternative explanation occurs to me – is the sage trying to say the following?
Oh Triambaka, we worship you, your fragrance enhances our nourishment. Like the tenacious “Kundru” plant which is difficult to uproot, deliver us from death and grant the nectar of immortality.
Much less obscure and a simple straitforward prayer, like the rest of the prayers Vashishta has written. (Perhaps Vashishta had observed the nature of the plant!)
Regardless of its meaning, this mantra is chanted by millions to deliver them from death and disease. Markandeya, the boy who worships Shiva in the Markandeya puranam (born to Mrikandu, who choses an exceptional son cursed with early death versus a dull son who has a normal life when Shiva grants him a boon) was supposed to die at the age of 16. But he famously evades Yama himself by his mastery of this mrityunjaya prayer – averting his own certain death.
Still, the prayer occurs suddenly in the Rig Veda and is clearly separate from the other verses before it, which are devoted to simple prayers to the Maruts as can be seen below:
HYMN LIX. Maruts.
1. WHOMSO ye rescue here and there, whomso ye guide, O Deities,
To him give shelter, Agni, Mitra, Varuṇa, ye Maruts, and thou Aryaman.
2 Through your kind favour, Gods, on some auspicious day, the worshipper subdues his foes.
That man increases home and strengthening ample food who brings you offerings as ye list.
3 Vasiṣṭha will not overlook the lowliest one among you all.
O Maruts, of our Soma juice effused to-day drink all of you with eager haste.
4 Your succour in the battle injures not the man to whom ye, Heroes, grant your gifts.
May your most recent favour turn to us again. Come quickly, ye who fain would drink.
5 Come hitherward to drink the juice, O ye whose bounties give you joy.
These offerings are for you, these, Maruts, I present. Go not to any place but this.
6 Sit on our sacred grass, be graciously inclined to give the wealth for which we long,
To take delight, ye Maruts, Friends of all, with Svāhā, in sweet Soma juice.
7 Decking the beauty of their forms in secret the Swans with purple backs have flown down hither.
Around me all the Company hath settled, like joyous Heroes glad in our libation.
8 Maruts, the man whose wrath is hard to master, he who would slay us ere we think, O Vasus,
May he be tangled in the toils of mischief; smite ye him down with your most flaming weapon.
9 O Maruts, ye consuming Gods, enjoy this offering brought for you,
To help us, ye who slay the foe.
10 Sharers of household sacrifice, come, Maruts, stay not far away,
That ye may help us, Bounteous Ones.
11 Here, Self-strong Maruts, yea, even here. ye Sages with your sunbright skins
I dedicate your sacrifice.
12 Tryambaka we worship, sweet augmenter of prosperity.
As from its stem the cucumber, so may I be released from death, not reft of immortality.
http://www.sacred-texts.com/hin/rigveda/index.htm
Shiva was not a part of the pantheon of the Vedic gods (Shivam was used in the sense of good in Rig Veda). Shiva is usually equated with the vedic Rudra (God of the storms and also supposed to be a god of illness or curing – the one to whom you pray for relief from diseases – so appropriate here) but Rudra was not supposed to be three eyed. Triambaka is not repeated elsewhere in Rig Veda (perhaps once only). Zeus and Jupiter are however occasionally depicted as three eyed, the three being taken to represent all seeing. Rig veda of course antecedes these Gods by a good millennium and a half. However Shiva as we now know him might have evolved in the second century BCE keeping the three eyed Zeus as a model (just as the Satapatha Brahmana, perhaps 800BC, obviously was influenced by the depiction of the great flood described by the Jews and Mesopotamians.
The possibility of this Mrityunjaya prayer being a later interpolation or translocation from elsewhere in the Rigveda during re-arrangement cannot be ruled out.
Sugandhim Pushti-vardhanam |
Urva - rukamiva Bandhanan
Mrtyor - muksheeya Maamritat ||
The famous Maha mrityunjaya mantra from the 12th verse 59th chapter of the 7th Mandala of the Rig Veda Samhita. Ascribed to Vashishta, who is supposed to have written most of the most ancient parts of the Rig Veda Samhita, this mantra is probably the 2nd most famous mantra after the Gayatri Mantra.
It actually came into my head when I was reading up on the Kundru – a plant belonging to the Cucumber family which my son found growing wild in our garden hedge, yesterday. An internet search showed that this is a very tenacious plant, very difficult to eradicate. In parts of Hawaii it has become a pest. Apparently, if you cut it away, small bits of it left behind in the soil take root and re-grow into not one but many new plants. So it is like an immortal plant. The only way to control it is to let the plant live on for ever, but pluck its fruit so that the seeds do not disperse and propagate the plant.
Strange indeed.
Coming back to the mantra, the words mean:
Aum= This is actually not there in the original mantra
Triambhaka = three eyed.
Yajamahe= we worship
Sugandhim= fragrance
Pushti =prosperous,thriving, nourish
Vardhanam=enhance
Uruvarukam=cucumber (also uruva=big, rukam= disease)
Iva=like
Bandhanan=from binding, captivity (from stem)
Mryutyor= from death
Mukshiya=liberate
Maa=not
Amritaat= nectar of immortality
An internet search reveals these two usual meanings:
1. (Sayana’s interpretation): We hail the fragrant Three-eyed One who nourishes [all] and increases the [sweet] fullness of life. As the cucumber is liberated from captivity [from its stem], may we [also] be liberated (mukshiya) from death (mrityor) not for the sake of immortality (maamritaat).
2. (Usual sense): We worship The Three-Eyed Lord Shiva who is naturally fragrant, immensely merciful and who is the Protector of the devotees. Worshipping him may we be liberated from death from our dreaded disease and may we attain the nectar of immortality
3. An alternative explanation occurs to me – is the sage trying to say the following?
Oh Triambaka, we worship you, your fragrance enhances our nourishment. Like the tenacious “Kundru” plant which is difficult to uproot, deliver us from death and grant the nectar of immortality.
Much less obscure and a simple straitforward prayer, like the rest of the prayers Vashishta has written. (Perhaps Vashishta had observed the nature of the plant!)
Regardless of its meaning, this mantra is chanted by millions to deliver them from death and disease. Markandeya, the boy who worships Shiva in the Markandeya puranam (born to Mrikandu, who choses an exceptional son cursed with early death versus a dull son who has a normal life when Shiva grants him a boon) was supposed to die at the age of 16. But he famously evades Yama himself by his mastery of this mrityunjaya prayer – averting his own certain death.
Still, the prayer occurs suddenly in the Rig Veda and is clearly separate from the other verses before it, which are devoted to simple prayers to the Maruts as can be seen below:
HYMN LIX. Maruts.
1. WHOMSO ye rescue here and there, whomso ye guide, O Deities,
To him give shelter, Agni, Mitra, Varuṇa, ye Maruts, and thou Aryaman.
2 Through your kind favour, Gods, on some auspicious day, the worshipper subdues his foes.
That man increases home and strengthening ample food who brings you offerings as ye list.
3 Vasiṣṭha will not overlook the lowliest one among you all.
O Maruts, of our Soma juice effused to-day drink all of you with eager haste.
4 Your succour in the battle injures not the man to whom ye, Heroes, grant your gifts.
May your most recent favour turn to us again. Come quickly, ye who fain would drink.
5 Come hitherward to drink the juice, O ye whose bounties give you joy.
These offerings are for you, these, Maruts, I present. Go not to any place but this.
6 Sit on our sacred grass, be graciously inclined to give the wealth for which we long,
To take delight, ye Maruts, Friends of all, with Svāhā, in sweet Soma juice.
7 Decking the beauty of their forms in secret the Swans with purple backs have flown down hither.
Around me all the Company hath settled, like joyous Heroes glad in our libation.
8 Maruts, the man whose wrath is hard to master, he who would slay us ere we think, O Vasus,
May he be tangled in the toils of mischief; smite ye him down with your most flaming weapon.
9 O Maruts, ye consuming Gods, enjoy this offering brought for you,
To help us, ye who slay the foe.
10 Sharers of household sacrifice, come, Maruts, stay not far away,
That ye may help us, Bounteous Ones.
11 Here, Self-strong Maruts, yea, even here. ye Sages with your sunbright skins
I dedicate your sacrifice.
12 Tryambaka we worship, sweet augmenter of prosperity.
As from its stem the cucumber, so may I be released from death, not reft of immortality.
http://www.sacred-texts.com/hin/rigveda/index.htm
Shiva was not a part of the pantheon of the Vedic gods (Shivam was used in the sense of good in Rig Veda). Shiva is usually equated with the vedic Rudra (God of the storms and also supposed to be a god of illness or curing – the one to whom you pray for relief from diseases – so appropriate here) but Rudra was not supposed to be three eyed. Triambaka is not repeated elsewhere in Rig Veda (perhaps once only). Zeus and Jupiter are however occasionally depicted as three eyed, the three being taken to represent all seeing. Rig veda of course antecedes these Gods by a good millennium and a half. However Shiva as we now know him might have evolved in the second century BCE keeping the three eyed Zeus as a model (just as the Satapatha Brahmana, perhaps 800BC, obviously was influenced by the depiction of the great flood described by the Jews and Mesopotamians.
The possibility of this Mrityunjaya prayer being a later interpolation or translocation from elsewhere in the Rigveda during re-arrangement cannot be ruled out.
Thoughts on productivity
After going through a lot of IMF data and previous discussions, I feel that one can arrive at broad levels of productivity ($ per capita per annum) in large polulations as follows:
Personal productivity level
Illiterate subsistence: <500 $/PA
Literate/Semi skilled: 2,500 $/PA
Skilled 10,000 $/PA
Intelligent and skilled 20,000 $/PA
Governance Pemium National productivity level
Non-existent governance Same as personal productivity
Poor quality governance Double personal productivity
Good governance but corrupt Quadruple personal productivity
Good governance without corruption Eight times personal productivity
Regional deflator:
Above average population: 1.25
Average 1
Below average 0.75
Personal productivity levels:
1. Illiterate subsistence: These are basically living in iron age agrarian subsistence level or below, without mechanization. Examples are Africa, Indian subcontinent, Burma. People living in Neolithic hunter gatherer tribal levels have a per capita GDP of about 200$. Depending on climate and rains, agricultural settlements can range from 200 (famine in Orissa or sub-Saharan Africa) to about 500$ (=25000Rs=2000Rs per month) per annum in most illiterate agrarian communities. Bihar at 350$ is an example, as is Burma, rural UP and most of rural India.
2. Literate/semi skilled: This includes agrarian communities with some amount of irrigation, some amount of mechanization. For example, Rural Poland, Ukraine, rural Byelorussia, rural Slovakia, Rural North Korea, Indonesia, rural Malaya and Thailand, Rural China. Also for semiskilled workers like weavers, metal workers, carpenters, masons, BPO workers etc. Range of productivity from 2000-5000$ (80- 250,000 Rs per annum = 10,000 -20,000 Rs per month). Many of the worst exploited industrial workers in India, China, Mexico, Bangladesh have this level of productivity. Also includes BPO workers fresh out of school or college, without significant work experience.
3. Skilled: These are highly trained workers who can do five-10 times as much work as semiskilled workers and use the latest machinery and equipment. Similar to most blue and white collar workers in countries like USA, Italy, Germany etc, urban South Korea, Taiwan etc. (production floor workers in big mechanized factories high on machinery and low on labour, nurses, secretaries. Lack math skills and or big memory retention or independent original thinking but capable of learning and using highly specialized equipment. Most factory workers in Taiwan, South Korea, Malaysia, other healthcare professionals like nurses etc, low level IT workers.
In many developing countries surviving on wage arbitrage, such skilled workers are paid the wages of semiskilled workers despite their higher productivity. So a Hero Honda worker is probably half as productive as a Japanese Honda worker, but is paid only 15-20,000 per month, much below his actual levels of productivity – but this gets reflected in low cost of the finished product as well.
4. Intelligent and skilled: These people have the capacity for innovation, highly specialized thinking along with high skills. Include engineers, doctors, IT workers, entrepreneurs, business men, business managers, biologists, college professors, pharmacologists etc. Their productivity is to be measured in terms of managers who direct the activity of other less able workers and hence part of their value is how they help others to work.
Governance premium: National productivity level
This is reflected in governance success or failure. I have tried to ball park my estimate of its value as indicated above. There can be no doubt that it can boost productivity in geometric progression. So the same doctor has a value of say 20,000 $ per annum in India but 160,000$ per annum in USA – eight times higher, because of the improved governance, refected in superior productivity at every level.
1. Non-existent governance: Govt doesn’t work. Includes Africa, Rural India, Burma etc. Most populations living in illiteracy are because of this kind of govt failure. India probably has pockets of poor quality governance alternating with large swathes of no governance. So the current 1200 $ per annum per capita GDP reflects an average between enormous numbers of illiterates with no governance, small numbers of literates/semi skilled/skilled/skilled with intelligence living in no governance areas and many small pockets of poor quality governance like Gujrat, Bombay and other big cities. Extremely small numbers live in good governance but corrupt levels of governance, largely within the confines of a big companies campus, where to some extent the pervasive government failure is held at bay. For example, Infosys, Jamshedpur, some of the Bombay companies, some areas of Gujrat etc.
2. Poor quality governance: Deeply flawed non-democratic govt. Includes, Stalinist govt like in USSR, Mao China and other communist regimes which are no more, current govt of Burma, Cuba, Venezuela and other South American and Central American countries, North Korea, Indonesia, Soudi Arabia, Iran, Egypt, Algeria etc. These flawed govts differ from the non existent govt in 2 main respects – their populations will show either cent per cent literacy or higher levels of productivity of their country as a whole from about 2500-5000 $ per annum. The few parts of India which have governance have this kind of flawed socialistic and ineffective governance. It is manned by inept people and run on flawed governance principles. So unnaturally loud and vociferous people (NGO, commies, socialists, loud and abrasive media) are able to sway and influence this governance. Until one gets right thinking people at the top and widespread literacy and some level of appreciation of capitalist principles, such a government will remain ineffective. Corruption in such governments is not only pervasive, it has the effect of stalling all meaningful work. Despite that, some things work. So Cuba’s health system, Mao’s education system, Russian military, Indian banking system – all work well.
3. Good governance but corrupt: These are highly efficient capitalist govt but having populations unused to corruption free existence. Include Southern Europe (Spain, Italy, Greece), Eastern Europe (Ex-communist countries), Deng’s China, Recent Brazil, Mexico, Turkey, Syria, Iraq, Malaysia, Thailand. The degree of corruption and level of efficience can vary within a range. Some aspects of US government in recent years falls within this (as it did from 1870 to 1930). Mostly these are countries which have been affluent for only a generation or so and include a lot of Crony Capitalists, Robber barons, Mafiosi, but have better administration so that capitalism can perform its magic. These countries will have periodic crisis because the corruption magnifies the economic cycle effects causing deeper and more pervasive recessions. For example the Greek crisis, the South East Asian crisis of 1998, Chaebol failures of South Korea, Dubai RE crisis of 2009, even the US crisis of 2008 marred by regulation failure in the face of corrupt lending practices. Older recessions in USA like the great depression, the recession in the 1870s, the 1890s, the 1907 also fall within the Crony Capitalist/Robber baron territory. The bursting of the South Sea bubble, the Dutch tulips etc also fall within this.
From 1850s or so, most of northern Europe moved from the “good governance but corrupt” to “good governance without corruption” phase. There are very few additions to this group since then. Japan is the great success. South Korea will probably join soon, along with Taiwan. USA, Italy and Spain continue to flirt with it. Most of the USA probably is solidly within, but significant populations show poor governance and corrupt practices associated with a less developed state. China is very very far away - as also rest of East Asia and West Asia.
4. Good governance without corruption: Mainly North Western Europe, Japan, parts of USA, parts of South Korea and Taiwan. Characterised by a population which has been affluent for a significant number of years or centuries of affluence. Highly law abiding and hard working. No tendency to break rules. Govt is efficient and doesn’t have corruption problem.
Regional deflator:
Countries away from equator (North Europe, north America, Argentina, Australia, New Zealand, Japan) have a tendency to have harder working population with high levels of intelligence, hence leads to a higher proportion of the population taking up skilled and intelligent jobs. Such countries tend to be more productive and I have jacked in 1.25 as an inflator for these. Mainly these are north Europeans, Jews and Japanese. Small pockets of classes within every average population, usually for historic reasons of hard work like with Koreans, some classes of Chinese, East and Southern Europe, West Asia etc and some classes within India (otherwise mainly slothful) also have such tendencies.
Rest most of the countries have average levels of intelligence and hard work and perform averagely
Some countries have slothful populations who demonstrate an inability to learn and improve themselves. Africa, Indian Subcontinent, Burma and small pockets elsewhere (Ukraine, Peru, Yucatan, Jamaica, Borneo, SriLanka etc) usually characterized by very bad (hot or cold) weather and historic national character of laziness. I have put in a 0.75% deflator as a ball park figure. People are not going to change their national character in a hurry. What the masses within a country do defines the country – small elites cnnot change national character.
Comments:
Countries with literate populations tend to have poor quality/communist govt. Such countries have per capita GDP ranging from 2500 (literate but ungoverned like North Korea) to 5000 (literate 2500, double for poor quality govt = 5000). Such countries are currently trying to finish the basic step of literacy. India is one such country. Such countries are currently in the transition from 2500 to 5000$ per annum. Examples are Egypt, Algeria, Ukraine, Indonesia. Literate populations within India are in the same stage. Until they achieve this basic level of productivity, further increases are difficult.
Some Countries with highly efficient but corrupt govt are currently in the high growth phase. Examples are China, Brazil, Russia, Mexico, Malaysia. These countries have recently acquired efficient govt. Their population is largely agrarian (China, rural Russia, Malaysia) but is systematically transitioning to Literate/semiskilled and to highly skilled levels. Hence their national average reflects proportions of their population in these levels of development. So China has mainly Semiskilled labour (2500$ = 5000Rs per month) mixed with skilled (10,000$ per annum). Because of efficient govt, these are then multiplied by four. Hence national GDP per capita of around 4000$ with 1.3 billion people.
Countries like Mexico (60 million population) , Brazil (200 million population), Russia (140 million population) have national GDP of 10,000 $ average. So does Poland, Malaysia etc.
In this scheme:
Lowest productivity is around 500$, highest is around 200,000$ productivity.
If you are intelligent and skilled (20,000$), live in efficient non corrupt country (8 times = 160,000) and are of north europe/Japanese (1.25) then you can be productive to the extent of 200,000 $.
India has a zero govt with focal poor quality govt.. Most population has 500 x 1 level of productivity. Some have 2500 x1 productivity. Very few have 10,000 x 1 and 20,000 x 1 levels. So if you are intelligent and skilled and adopt the non-corrupt efficient hard working ways of the north european/Japanese, maximum you can produce is 20,000 x 1.25 = 25,000 dollars.= 2000 dollars per month = salary expectation of around 1L per month ON AVERAGE for the best population pockets in India, assuming your salary reflects your productivity. So company salaries can be expected to be between 50,000 and 2L per month = the best you can do within India (usually best practices of north European levels are only found to some extent in software companies). Of course, small number of managers in manufacturing relying on semi skilled workers (2500 $ = 10,000 Rs per month salary) can earn whatever amount – since these are a small elite group running the working of much more inefficient workforce. Company can pay them much above 200,000 dollars also, depending on their value to the company.
Please note that because of very poor govt, no matter what you do, you cannot be more productive than 20,000 x 1 or 20,000 x 2 = no way out except emigrate for achiving higher levels of productivity (and hence income)
China: It has a efficient but corrupt govt and has average per capita GDP of 4000$ = average of 500 x 4 levels (rural) and (2500 x 4 = 10,000 levels of production along with small numbers in the 10000 x 4 levels.
Taiwan and South Korea have around 25000$ productivity i.e. average of 2500 x 4, 10,000 x 4 and small numbers of 20,000 x 4.
Japan, UK, USA, north Europe has a large number of 2500 x 8 = 32K, many 10,000 x 8 = 80K and some 20,000 x 8 = 160 K leading to an average of around 45000$ per annum.
Trends: Non-existent governance usually goes with slothful nature and illiteracy. Such countries like India, Bangladesh, Burma, Africa usually have per capita GDP of less than 500 (illiterate plus zero in govt plus 0.75% deflator)
Mexico and Brazil have a lot of 2500x4, few 10,000 x 4 and miniscule 20,000 x 4
Future Trend:
This analysis clearly indicates that India is in a different position from China, Russia and Brazil.
Growth in India is coming from shifting people from 500$ of productivity to 2500$ of productivity. This has to coincide with shifting from non-existent governance to poor quality governance. So far, this shift has been very difficult to manage (excruciatingly slow politicians) but slowly our younger population are becoming literate and employable at 2500$ productivity level. Since this has to coincide with a shift of the governance premium from single to double, India can look forward to shifting from 500$ per annum to 5000$ per annum productivity over the next couple of decades.
This means a ten times rise in AVERAGE productivity levels = 1000% return on human capital = 10,000% return on any smart business which is able to capitalize on this gigantic shift in productivity levels.
Russia Brazil and China can at best look forward to shifting from 5-10,000$ productivity levels to 20,000$ productivity levels = 2 times return on human capital. All three countries have skewed economies. Brazil has a growing population with commodity export economy, Russia has declining population and commodity export economy while China has a declining population with cheap manufacturing (2500-5000$ type) of economy.
Shifting Chinese to 10,000$ productivity by a mix of 5000 and 20,000$ productivity should be easy enough. Then it will hit a demographic impossibility to grow.
Shifting Russia from 10,000 to 20,000$ is probably more difficult because of declining education and engineering abilities. They have probably reached the best level of productivity they can. Russia is where China hopes to reach. Then both will pause without growth.
Brazil has the best growth possibilities of these 3, because of increasing population and massive tourism opportunities. Probably it will shift from 10,000 to 30,000 levels within the next 3 decades.
There can be no doubt on two things:
India is a structural long term bull run in equities and for real estate for next 50 years (ours and our children’s lifetime)
If you had money in 1950s, you should have invested in USA. If you had money in 1980s, you should have invested in China. If you had money in 2000, you should have invested in Brazil.
If you have money in 2011, invest in India.
Personal productivity level
Illiterate subsistence: <500 $/PA
Literate/Semi skilled: 2,500 $/PA
Skilled 10,000 $/PA
Intelligent and skilled 20,000 $/PA
Governance Pemium National productivity level
Non-existent governance Same as personal productivity
Poor quality governance Double personal productivity
Good governance but corrupt Quadruple personal productivity
Good governance without corruption Eight times personal productivity
Regional deflator:
Above average population: 1.25
Average 1
Below average 0.75
Personal productivity levels:
1. Illiterate subsistence: These are basically living in iron age agrarian subsistence level or below, without mechanization. Examples are Africa, Indian subcontinent, Burma. People living in Neolithic hunter gatherer tribal levels have a per capita GDP of about 200$. Depending on climate and rains, agricultural settlements can range from 200 (famine in Orissa or sub-Saharan Africa) to about 500$ (=25000Rs=2000Rs per month) per annum in most illiterate agrarian communities. Bihar at 350$ is an example, as is Burma, rural UP and most of rural India.
2. Literate/semi skilled: This includes agrarian communities with some amount of irrigation, some amount of mechanization. For example, Rural Poland, Ukraine, rural Byelorussia, rural Slovakia, Rural North Korea, Indonesia, rural Malaya and Thailand, Rural China. Also for semiskilled workers like weavers, metal workers, carpenters, masons, BPO workers etc. Range of productivity from 2000-5000$ (80- 250,000 Rs per annum = 10,000 -20,000 Rs per month). Many of the worst exploited industrial workers in India, China, Mexico, Bangladesh have this level of productivity. Also includes BPO workers fresh out of school or college, without significant work experience.
3. Skilled: These are highly trained workers who can do five-10 times as much work as semiskilled workers and use the latest machinery and equipment. Similar to most blue and white collar workers in countries like USA, Italy, Germany etc, urban South Korea, Taiwan etc. (production floor workers in big mechanized factories high on machinery and low on labour, nurses, secretaries. Lack math skills and or big memory retention or independent original thinking but capable of learning and using highly specialized equipment. Most factory workers in Taiwan, South Korea, Malaysia, other healthcare professionals like nurses etc, low level IT workers.
In many developing countries surviving on wage arbitrage, such skilled workers are paid the wages of semiskilled workers despite their higher productivity. So a Hero Honda worker is probably half as productive as a Japanese Honda worker, but is paid only 15-20,000 per month, much below his actual levels of productivity – but this gets reflected in low cost of the finished product as well.
4. Intelligent and skilled: These people have the capacity for innovation, highly specialized thinking along with high skills. Include engineers, doctors, IT workers, entrepreneurs, business men, business managers, biologists, college professors, pharmacologists etc. Their productivity is to be measured in terms of managers who direct the activity of other less able workers and hence part of their value is how they help others to work.
Governance premium: National productivity level
This is reflected in governance success or failure. I have tried to ball park my estimate of its value as indicated above. There can be no doubt that it can boost productivity in geometric progression. So the same doctor has a value of say 20,000 $ per annum in India but 160,000$ per annum in USA – eight times higher, because of the improved governance, refected in superior productivity at every level.
1. Non-existent governance: Govt doesn’t work. Includes Africa, Rural India, Burma etc. Most populations living in illiteracy are because of this kind of govt failure. India probably has pockets of poor quality governance alternating with large swathes of no governance. So the current 1200 $ per annum per capita GDP reflects an average between enormous numbers of illiterates with no governance, small numbers of literates/semi skilled/skilled/skilled with intelligence living in no governance areas and many small pockets of poor quality governance like Gujrat, Bombay and other big cities. Extremely small numbers live in good governance but corrupt levels of governance, largely within the confines of a big companies campus, where to some extent the pervasive government failure is held at bay. For example, Infosys, Jamshedpur, some of the Bombay companies, some areas of Gujrat etc.
2. Poor quality governance: Deeply flawed non-democratic govt. Includes, Stalinist govt like in USSR, Mao China and other communist regimes which are no more, current govt of Burma, Cuba, Venezuela and other South American and Central American countries, North Korea, Indonesia, Soudi Arabia, Iran, Egypt, Algeria etc. These flawed govts differ from the non existent govt in 2 main respects – their populations will show either cent per cent literacy or higher levels of productivity of their country as a whole from about 2500-5000 $ per annum. The few parts of India which have governance have this kind of flawed socialistic and ineffective governance. It is manned by inept people and run on flawed governance principles. So unnaturally loud and vociferous people (NGO, commies, socialists, loud and abrasive media) are able to sway and influence this governance. Until one gets right thinking people at the top and widespread literacy and some level of appreciation of capitalist principles, such a government will remain ineffective. Corruption in such governments is not only pervasive, it has the effect of stalling all meaningful work. Despite that, some things work. So Cuba’s health system, Mao’s education system, Russian military, Indian banking system – all work well.
3. Good governance but corrupt: These are highly efficient capitalist govt but having populations unused to corruption free existence. Include Southern Europe (Spain, Italy, Greece), Eastern Europe (Ex-communist countries), Deng’s China, Recent Brazil, Mexico, Turkey, Syria, Iraq, Malaysia, Thailand. The degree of corruption and level of efficience can vary within a range. Some aspects of US government in recent years falls within this (as it did from 1870 to 1930). Mostly these are countries which have been affluent for only a generation or so and include a lot of Crony Capitalists, Robber barons, Mafiosi, but have better administration so that capitalism can perform its magic. These countries will have periodic crisis because the corruption magnifies the economic cycle effects causing deeper and more pervasive recessions. For example the Greek crisis, the South East Asian crisis of 1998, Chaebol failures of South Korea, Dubai RE crisis of 2009, even the US crisis of 2008 marred by regulation failure in the face of corrupt lending practices. Older recessions in USA like the great depression, the recession in the 1870s, the 1890s, the 1907 also fall within the Crony Capitalist/Robber baron territory. The bursting of the South Sea bubble, the Dutch tulips etc also fall within this.
From 1850s or so, most of northern Europe moved from the “good governance but corrupt” to “good governance without corruption” phase. There are very few additions to this group since then. Japan is the great success. South Korea will probably join soon, along with Taiwan. USA, Italy and Spain continue to flirt with it. Most of the USA probably is solidly within, but significant populations show poor governance and corrupt practices associated with a less developed state. China is very very far away - as also rest of East Asia and West Asia.
4. Good governance without corruption: Mainly North Western Europe, Japan, parts of USA, parts of South Korea and Taiwan. Characterised by a population which has been affluent for a significant number of years or centuries of affluence. Highly law abiding and hard working. No tendency to break rules. Govt is efficient and doesn’t have corruption problem.
Regional deflator:
Countries away from equator (North Europe, north America, Argentina, Australia, New Zealand, Japan) have a tendency to have harder working population with high levels of intelligence, hence leads to a higher proportion of the population taking up skilled and intelligent jobs. Such countries tend to be more productive and I have jacked in 1.25 as an inflator for these. Mainly these are north Europeans, Jews and Japanese. Small pockets of classes within every average population, usually for historic reasons of hard work like with Koreans, some classes of Chinese, East and Southern Europe, West Asia etc and some classes within India (otherwise mainly slothful) also have such tendencies.
Rest most of the countries have average levels of intelligence and hard work and perform averagely
Some countries have slothful populations who demonstrate an inability to learn and improve themselves. Africa, Indian Subcontinent, Burma and small pockets elsewhere (Ukraine, Peru, Yucatan, Jamaica, Borneo, SriLanka etc) usually characterized by very bad (hot or cold) weather and historic national character of laziness. I have put in a 0.75% deflator as a ball park figure. People are not going to change their national character in a hurry. What the masses within a country do defines the country – small elites cnnot change national character.
Comments:
Countries with literate populations tend to have poor quality/communist govt. Such countries have per capita GDP ranging from 2500 (literate but ungoverned like North Korea) to 5000 (literate 2500, double for poor quality govt = 5000). Such countries are currently trying to finish the basic step of literacy. India is one such country. Such countries are currently in the transition from 2500 to 5000$ per annum. Examples are Egypt, Algeria, Ukraine, Indonesia. Literate populations within India are in the same stage. Until they achieve this basic level of productivity, further increases are difficult.
Some Countries with highly efficient but corrupt govt are currently in the high growth phase. Examples are China, Brazil, Russia, Mexico, Malaysia. These countries have recently acquired efficient govt. Their population is largely agrarian (China, rural Russia, Malaysia) but is systematically transitioning to Literate/semiskilled and to highly skilled levels. Hence their national average reflects proportions of their population in these levels of development. So China has mainly Semiskilled labour (2500$ = 5000Rs per month) mixed with skilled (10,000$ per annum). Because of efficient govt, these are then multiplied by four. Hence national GDP per capita of around 4000$ with 1.3 billion people.
Countries like Mexico (60 million population) , Brazil (200 million population), Russia (140 million population) have national GDP of 10,000 $ average. So does Poland, Malaysia etc.
In this scheme:
Lowest productivity is around 500$, highest is around 200,000$ productivity.
If you are intelligent and skilled (20,000$), live in efficient non corrupt country (8 times = 160,000) and are of north europe/Japanese (1.25) then you can be productive to the extent of 200,000 $.
India has a zero govt with focal poor quality govt.. Most population has 500 x 1 level of productivity. Some have 2500 x1 productivity. Very few have 10,000 x 1 and 20,000 x 1 levels. So if you are intelligent and skilled and adopt the non-corrupt efficient hard working ways of the north european/Japanese, maximum you can produce is 20,000 x 1.25 = 25,000 dollars.= 2000 dollars per month = salary expectation of around 1L per month ON AVERAGE for the best population pockets in India, assuming your salary reflects your productivity. So company salaries can be expected to be between 50,000 and 2L per month = the best you can do within India (usually best practices of north European levels are only found to some extent in software companies). Of course, small number of managers in manufacturing relying on semi skilled workers (2500 $ = 10,000 Rs per month salary) can earn whatever amount – since these are a small elite group running the working of much more inefficient workforce. Company can pay them much above 200,000 dollars also, depending on their value to the company.
Please note that because of very poor govt, no matter what you do, you cannot be more productive than 20,000 x 1 or 20,000 x 2 = no way out except emigrate for achiving higher levels of productivity (and hence income)
China: It has a efficient but corrupt govt and has average per capita GDP of 4000$ = average of 500 x 4 levels (rural) and (2500 x 4 = 10,000 levels of production along with small numbers in the 10000 x 4 levels.
Taiwan and South Korea have around 25000$ productivity i.e. average of 2500 x 4, 10,000 x 4 and small numbers of 20,000 x 4.
Japan, UK, USA, north Europe has a large number of 2500 x 8 = 32K, many 10,000 x 8 = 80K and some 20,000 x 8 = 160 K leading to an average of around 45000$ per annum.
Trends: Non-existent governance usually goes with slothful nature and illiteracy. Such countries like India, Bangladesh, Burma, Africa usually have per capita GDP of less than 500 (illiterate plus zero in govt plus 0.75% deflator)
Mexico and Brazil have a lot of 2500x4, few 10,000 x 4 and miniscule 20,000 x 4
Future Trend:
This analysis clearly indicates that India is in a different position from China, Russia and Brazil.
Growth in India is coming from shifting people from 500$ of productivity to 2500$ of productivity. This has to coincide with shifting from non-existent governance to poor quality governance. So far, this shift has been very difficult to manage (excruciatingly slow politicians) but slowly our younger population are becoming literate and employable at 2500$ productivity level. Since this has to coincide with a shift of the governance premium from single to double, India can look forward to shifting from 500$ per annum to 5000$ per annum productivity over the next couple of decades.
This means a ten times rise in AVERAGE productivity levels = 1000% return on human capital = 10,000% return on any smart business which is able to capitalize on this gigantic shift in productivity levels.
Russia Brazil and China can at best look forward to shifting from 5-10,000$ productivity levels to 20,000$ productivity levels = 2 times return on human capital. All three countries have skewed economies. Brazil has a growing population with commodity export economy, Russia has declining population and commodity export economy while China has a declining population with cheap manufacturing (2500-5000$ type) of economy.
Shifting Chinese to 10,000$ productivity by a mix of 5000 and 20,000$ productivity should be easy enough. Then it will hit a demographic impossibility to grow.
Shifting Russia from 10,000 to 20,000$ is probably more difficult because of declining education and engineering abilities. They have probably reached the best level of productivity they can. Russia is where China hopes to reach. Then both will pause without growth.
Brazil has the best growth possibilities of these 3, because of increasing population and massive tourism opportunities. Probably it will shift from 10,000 to 30,000 levels within the next 3 decades.
There can be no doubt on two things:
India is a structural long term bull run in equities and for real estate for next 50 years (ours and our children’s lifetime)
If you had money in 1950s, you should have invested in USA. If you had money in 1980s, you should have invested in China. If you had money in 2000, you should have invested in Brazil.
If you have money in 2011, invest in India.
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