finanacial freedom...

In a realistic world, total freedom is not possible without financial freedom. Below are the links to some stimulating insight into the subject which troubles most of us blue and white collared employees.

Part 1 : Is Your Job Running Your Life?

Part 2 : Four Rookie Mistakes People Make That Keep Them Poor.

Part 3 : Five Steps I Took That Helped Me Become Financially Independent.

small is beautiful...

Quotes from Small is Beautiful by E F Schumacher:

"Education can help us only if it produces “whole men”. The truly educated man is not a man who knows a bit of everything, not even the man who knows all the details of all subjects (if such a thing were possible): the “whole man” in fact, may have little detailed knowledge of facts and theories, he may treasure the Encyclopedia Britannica because “she knows and he needn’t”, but he will be truly in touch with the centre."

"No system or machinery or economic doctrine or theory stands on its own feet: it is invariably built on a metaphysical foundation, that is to say, upon man's basic outlook on life, its meaning and its purpose. I have talked about the religion of economics, the idol worship of material possessions, of consumption and the so-called standard of living, and the fateful propensity that rejoices in the fact that 'what were luxuries to our fathers have become necessities for us.'

"The way in which we experience and interpret the world obviously depends very much indeed on the kind of ideas that fill our minds. If they are mainly small, weak, superficial, and incoherent, life will appear insipid, uninteresting, petty, and chaotic. It is difficult to bear the resultant feeling of emptiness, and the vacuum of our minds may only too easily be filled by some big, fantastic notion – political or otherwise – which suddenly seems to illumine everything and to give meaning and purpose to our existence. It needs no emphasis that herein lies one of the great dangers of our time."

"Man is small, and, therefore, small is beautiful."

"A modern economist is used to measuring the 'standard of living' by the amount of annual consumption, assuming all the time that a man who consumes more is 'better off' than a man who consumes less. A Buddhist economist would consider this approach excessively irrational: since consumption is merely a means to human well-being, the aim should be to obtain the maximum of well-being with the minimum of consumption. . . . The less toil there is, the more time and strength is left for artistic creativity. Modern economics, on the other hand, considers consumption to be the sole end and purpose of all economic activity."

"It is clear, therefore, that Buddhist economics must be very different from the economics of modern materialism, since the Buddhist sees the essence of civilizations not in a multiplication of wants but in the purification of human character. Character, at the same time, is formed primarily by a man's work. And work, properly conducted in conditions of human dignity and freedom, blesses those who do it and equally their products."

"The most striking thing about modern industry is that it requires so much and accomplishes so little. Modern industry seems to be inefficient to a degree that surpasses one's ordinary powers of imagination. Its inefficiency therefore remains unnoticed."

where's my oil...

“We are the consumers. We are the by products of life style obsession. We have jobs we hate to buy shit we don’t need…Things we own end up owing us…”

Tyler Durden of Fight Club (Directed by David Fincher) inspires a lot of scepticism in me especially, when I am having nightmares of the rising inflation.

I get dreams like I am riding my Pulsar and suddenly the fuel is over in front of a petrol pump but five kilometres away from home. How cruel! When my monthly fuel budget is already in deficit, I can no longer afford to buy petrol unless I realign my food budget which, too, is about to dry up because of rising food prices. I have to push that 140 KG of machine all the way to home, or better sell it off. When I am about to sell my beloved stead, suddenly I wake up and realize that I am currently in London, far away from the whirlpool of rising prices, but only for a short time.

Prices are rising. Not only in India – everywhere. Indians abroad are wondering why they are not able to save as much foreign currency as they used to a couple of months ago, while Indians in India cringe when they hear rest of the world (Ms Rice) say that hike in food and oil prices is because of the rising demand in India and China, which in theory is true though not the complete answer. One - USA’s bio-fuel programme is turning the grains into fuel and more here.

We (emerging market citizens and developed country citizens) are not doing that bad anyhow. Only our savings are not that much we can boast any longer. Worst hit are those countries where food is the indispensable commodity – the third world. Prime Minister of Haiti resigned when he couldn’t do anything about the rising food prices and about the rioters shouting slogans of ‘We Are Hungry’. Many got killed in Mexico riots. Army is guarding the paddy fields in Africa. Military is baking bread in Egypt. And to make things worse oil is touching $135 per barrel which is not at all a good price, not because it is high, but because it shows an alarming shortage of oil. Such sharp economic turns change the course of future, leaving layman in shock.

In theory - inflation is caused by either of the two shocks – Demand Shock or the Supply Shock. Demand Shock, as the term sounds like, is a sudden sharp increase in the demand of a commodity which drives the price higher, which is most conspicuous in the housing markets in booming times. Supply Shock is when there is a sudden drop in the supply of a commodity with an unchanged demand, like in case of oil prices.

People say ‘problems never come alone’. India was celebrating the Sensex touching 21k at the beginning of the year. Then suddenly the weather changed from sunny to cloudy to very cloudy and now it seems it is about to rain (if not pour). Elections are approaching, Gujjars are whirling their sticks around in Delhi, commodity prices and crude oil prices are rising. Now this is a really tough challenge for a government, which is interested in coming into power once again. Let’s keep fingers crossed for the best greater good and pray that our policymakers will see an opportunity in this problem instead of burying their heads in the sand like an ostrich to later blame each other and some invisible ghost. And everyone will be left wondering where the oil went.

money... my take...

Often, I am bedazzled by the concept of money. From simple barter of things to complicated derivative instruments - we have covered a long way across the evolution.

Once upon a time, two cows were bartered for one ton of barley, one acre of land for three beautiful wives and three silver coins for a sumptuous supper at a place where naked damsels served the food.

Today, the barter has become so complicated that without having an MBA in finance, it is almost impossible to understand what is being bartered against what. Consider this - 'X' bank gives loan to its customer 'Y'. The bank received that money by selling equity stocks in the financial market. A mutual fund bought those equity stocks in hope of making profit, and also hedged the losses by signing some derivative contracts which were sold by some foreign investment bank. There is no wonder that customer 'Y' himself invested in the money in the same mutual fund which bought the equities from the bank which helped the customer to procure the loan. Now, you call that the messy barter.

Still, simple barter does exist. 12 INR for a glass of juice, 99 INR for a pair of allegedly 'imported' sunglasses, £1 for a bottle of orange juice, $1 for a diet coke. But then, £1 is traded equal to INR 80 and $1 equal to INR 40 in currency markets. George Soros, made $1.1 billion on September 16, 1992 by short-selling $10 billion worth of pounds. Now, you think that's simple?

No, it's no longer simple. Different people have different views about money based on their education, culture, upbringing and last but not the least 'how-much-of-it-they-already-have'.

There are worldly, practical, realistic people who think that money is everything, money is power etc. Also, there are poetic, idealist and dreamers who think that money is not everything, and they even go to the lengths to saying that money is the root of all evil, or even money is evil.

I say - both of them are wrong. First kind does not understand the aesthetic sense of money, and the second kind misunderstands its beauty. Money has power, no doubt. It has power to purchase things. But how that power gets exercised, depends on the most complicated organ of human body called brain.

While spending money, we make choices. Those choices depend on our personal values, which we develop throughout our lives. Consider this situation where there are two guys 'A' and 'B' who are given 50,000 INR each to spend. Now what will they do with that?

1. 'A' buys a multifeature mobile phone with 50,000 INR and person 'B' puts it into her savings account and forgets.

2. 'A' buys a multifeature mobile phone and person 'B' after seeing 'A' also buys a mobile phone.

3. 'A' and 'B' collaborate and invest their 100,000 INR in a new business.

4. 'A' goes to a pub and throws a party to his friends. 'B' buys some mutual fund.

Anything is possible.

We have unlimited wants, but limited resources. Based on this and our predilections we make choices of where to apply our available resources and which wants to satisfy. Economics is the study of this, at individual level (micro-economics) and at country/industry level (macro-economics).