Induced Spending

The buzz word doing the rounds from the advent of "recession" is how to induce the consumer spending when they are quite skeptical about the future security. America is the leading example in this. America has brought in various fiscal and monetary policies which induce the people to spend more and save less. Policies are reducing the borrowing rate, reducing the value of the currency so that more money is spent constructively. But how much of it is actually done? American investors are sending their money to overseas markets where there are more returns on investments. How much is actually been spent to improve the economy?

As a parallel to this, India in the ancient times was very rich. Most of the population was wealthy and had some occupation to perform. There was no urgency in spending the money to buy items of desire. They had enough liquidity with them to spend as and when required. Also the people believed in savings and longevity of material goods.

This situation can be seen as an issue to the country's financial circulation. If people do not spend much and there is no consistent demand, then how can enterprises define their raw material pipeline? And as raw material for enterprise A is the output product of enterprise B, with this vicious circle there can be a devastating crumble of the system. With this crumble citizens tend to save more and spend less as there is no future security.

With this situation in mind and the recent festivities doing the round, I was amazed at the rituals which were formulated for all the festivals of our nation. There are numerous festivals, effectively making someone celebrate a festival or occasion everyday. All these occasions require people to invite guests and also give some money as "shagun". Now with this kind of raw money changing hands, the system is finally able to run the mill. People are spending during the festive seasons and saving during the odd seasons. These festivals are an imbibed feature of us Indians. We cannot live without it. Its our culture.

So without blaming any culture, I will say that if the festivities are made about such that people are compelled to spend, then you have your financial machinery running smoothly. There won't be any need of fiscal or monetary policies to Induce Spending.

Is Near Zero Interest Really Helping the Economy?

With this economic recession major developed nations started to role out various schemes to simulate spending amongst the consumers which was believed to help the businesses in their nations. For this to be useful, the banks started lending at never heard of low rates – nearly 0% interest rates. These rates were never heard of even during the previous economic depressions. The American banks were still lending at nominal rate of 2% during those hard days.

Lending at near 0% interest rates specifically means that the borrower need not pay huge interest sum on its principal amount. People would then start borrowing from the banks to spend on the luxuries or objects of their desire. This is believed to create currency inflow into the businesses in the country and thus making them self sustaining. But is there any chance of this not being helpful and in turn more detrimental than lending at 1-2% interest rate?

With a particular point of view, this does seems to be helping people and the nation. The per-capita spending power is increased. There is more purchase of the items from the markets. But the depositors of the bank need some returns, even the banks need to generate profits from lending. How will they be functional yet be profitable with zero interest lending? They start investing in other investment options like real estate, commodity markets, petroleum, etc. This in turn increases the cash inflow for these investment opportunities and raises their prices to unsustainable prices.

Dot com debacle was followed by Real Estate debacle

According to the Austrian School of Economics, the real estate debacle was a direct fall out of the policy decisions taken after the dot-com bubble burst and the 9/11 incident. The federal fund rates had dropped to around 1%. This was necessary so as to bring the economy out of recessionary trend and make it a self driving force. This policy was continued for more period than required which offered nearly free money to the borrower. This measure was intended to pump in the monies into the economic activities, but it eventually got invested in high earning activities like the derivatives, commodities, real estate, developing market equities, etc.
These low interest rates facilitated the growth of debt at all levels of the economy, chief among them private debt to purchase more expensive housing. High levels of debt have long been recognized as a causative factor for recessions. Any debt default has the possibility of causing the lender to also default, if the lender is itself in a weak financial condition and has too much debt. This second default in turn can lead to still further defaults through a domino effect.

This easy money allowed people to buy houses which they could not afford, inducing artificial demand for the real estate. The borrower credit ratings were ignored to boost consumption which was not backed up by appropriate resources. Banks also brought in their innovative derivatives product which could be traded on the market to hedge the banks risk of lending a low quality mortgage. These instruments were traded by many huge institutions looking forward to earning quick bucks at high risk. With sky rocketing prices and limited income sources there was increasing trend of defaulting on payments. Large default rates on subprime mortgages were only the contributors to the severity of the crisis. Rather, low-quality mortgages acted as an accelerant to the fire that spread through the entire financial system. There were several factors that are unique to this crisis:

• The transfer of assets from the balance sheets of banks to the markets.
• The creation of complex and opaque assets.
• The failure of ratings agencies to properly assess the risk of such assets and the application of fair value accounting.
• Failure of regulators and supervisors in spotting and correcting the emerging weaknesses.

Flow of currency

The U.S. dollar has weakened about 6.5 percent against a basket of major currencies since September as prospects for further monetary easing by the Fed have led investors to seek higher returns in other investment options. Flow of dollars has caused currencies to appreciate in many emerging market countries such as Brazil, which offers strong growth prospects. The Japanese yen has also hit record highs against the dollar.
As a reactionary measure these countries had to act upon the inflow of currency into their markets. Japan lowered the target for its benchmark interest rate to a range between zero and 0.1 percent. The Bank of Japan also pledged to buy 5 trillion yen ($60 billion) worth of assets, in a strategy similar to the one adopted by the Fed to pump funds into the economy. Other measures include selling their own currencies to grow the foreign-exchange reserves. They had to take these steps so that their exchange rates appreciation does not destroy their exports. Commenting on these measures a noted economist Stiglitz said “But additional monetary stimulus will "clearly" not solve the problems caused by lack of global aggregate demand”.
For controlling the inflation in the developing world faced at present, the governments have imposed higher interest rates, which in turn lure the foreign investments into the fixed income instruments. As a consequence there is increase in the foreign fund flow into the countries economy making it more susceptible to exchange rate fluctuations and also increased volatility in the equity markets. To counter this many governments have taken various steps to control this, like Brazil government doubled the tax it charges foreigners on investments in fixed-income securities to 4%.

Also the investors are hunting at greener pastures like the commodities market. From past few years the investments in commodities markets have been rising, putting pressures on the prices and the general availability. Few buyers for the sense of hedging the supply risk and others for investments have been increasing the price of commodities. The food commodity prices have been rising, creating pseudo-scarcity. Although there have been other reasons for the price rise, but “purchase for investments” has become the major contributor to the price rise.

So is there another bubble building up? Yes, I believe it is highly possible the next in line for the bubble burst seems to be the “Commodity Markets”. Its then left upto the investors ethical and moral considerations and the governments regulations to keep a check on the issue.

Advertising. Is it attack on Indian traditions?

Why do the advertisers and the media time and again try to attack the Indian cultural roots to sell their products, inspiring the youth and the consumers to get away from their roots?
All of us distinctly remember the time when shampoos had entered into the Indian markets. It was promoted as useful agent to get rid of stickiness from hair oil. Indeed a necessary and an on target point, but at what cost? People reduced the oil usage. Youngsters opposed hair oil usage. And what happened? The younger generation of yesterday, the working generation of today; is facing heavy hair loss, dandruff and various other hair problems. You may argue that these problems were already present thousands of years ago when Ayurveda was discovered, but were these problems so aggravated? We had many other natural options which could effectively cleanse the hair of the extra oil and also give strong and silky hair like “areetha”, “shikakai”, etc. But to get ahead in the race to use the latest products the people started using shampoos. But when they could not see any good benefit they stopped using both shampoo and also oil. Effect – More damage.

Now the companies are bringing in products which are catering to the above problem by instilling in the minds of people that “look you people, you don’t have time for putting on hair oil. We have this shampoo which contains oil. Use this”. Phase shift of ideology for shampoo industry?

This is just an example. This is happening in other products too which had competed against the use of traditional items. Best example is soft drinks. All the soft drink brands pitched in as the new youth drink. This is “THE” drink, and the alternative natural drinks are no use. And now these soft drink companies are in a race to capture the natural health drink product markets. Interesting!

Some may term it as “Market Capture” – Erase traditional products, then re-introduce them with new packaging. To me this can be termed as “Re - Laying the base”. [I resist from using the term “Foundation” as that’s not what is being remade.]

So the question which props the mind is does selling means just sell and no ethics? No values to the inherent ideology of the nation, the traditions? I was and am still searching for the answers.

I am divided with the answers I have got till now. Sometimes the “Brain” says it’s all in the business. You need to sell the product come what may. While the “Heart” says don’t do this, its unethical. Don’t fool your traditions. But then I recollect a line from the movie “Lord Of Wars” –

Never go to war. Especially with yourself.

JK Cement

This is a classic advertisement, which puts the basic principles of advertisements to use. The principle - "You can sell any product by displaying a semi-clad lady in advertisement". This is the principle which even if you want to avoid, you cant. People who like it will like it, people who hate it will discuss about it. The ultimate goal of brand remembrance is achieved.

Indeed this principle has been used a lot of times for many great advertisements, but what the heck? There should be some linkage to the product being advertised and the content of it.

Well whatever be the case of the content of this advertisement, it has achieved its purpose. The advertisement has created buzz on the television media and online media by "hate blogs". Any kind of publicity is a publicity.

Am sorry about the quality of the video, but that's the best available online. If i get hold of good quality, will post it. But who cares about viewing a better version of this crap TVC. Do you? then let me know, i will get it for you.




amateur video advertisement for JK Cement.
And this video too has benefited as an outcome of the above advertisement. People have started hitting this video on youtube.

Whose IDEA is it?

The Absolut Vodka commercial was released earlier, from which the Apollo Munich commercial has borrowed heavily. Below are the two commercials.

Indeed a brilliant idea for the promotion of both the brands. Even their commercials are named the same "Anthem". And yet both the products are at the either ends of spectrum. Each helping the consumers /customers to go to the other...

Absolut tvc a true brilliance for creativity.



Apollo Munich has gone forward for brand upgrade from Apollo DKV. They wanted to remake their image, focussing over the "Uncomplicated" policies with less of "Jargons". The Absolut tvc was utilised to the fullest for this purpose.

Why we need Bt Brinjal (Baingan Tadka)

“One step for man; one giant leap for mankind”.

Great quote which creatively resonates with the expansion of human adventures. We are great explorers thanks to our never ending quest for exploration – craving for unknown.

Starting from being the chimps who wanted to explore their surroundings, we have come to the extent of being present on every inch of this lovely planet. We have explored the outer universe and still trying to figure out what lies beneath us. We just know the depth we need to explore, but not its extent. We are even exploring the avenues and the methods to bring into us the qualities of living beings surrounding us. First we experimented with “Life After Death” for our beloved sheep – Dolly was the new name. Next we thought to get into experimenting bringing cross cultivation, by mixing genes of two different species. The only hindrance to this was the objection by governments against human trials. But now we have taken the detour to do this with plants. We are slowly progressing in imbibing qualities of other living organisms into us. We are bringing ONENESS to its truth.

All the living beings require staying together for mutual benefit. Now we have started exploring this option. We wanted to bring in the “Bacillus thuringiensis”, so we developed the Bt Brinjal. Actually the word Bt stands for “Bacillus thuringiensis”, which is a soil bacteria, and hence the BT Brinjal is actually the normal Brinjal, with an additional gene from the Bt bacteria, which produces Bt protein. This new Brinjal was researched on by Mahyco (Maharashtra Hybrid Seeds Company) and is promoted by University of Agriculture Sciences, Dharwad, and Tamil Nadu Agriculture University, Coimbatore. Now the genes of this little bacterium can freely integrate with our body. Totally unrestricted and unaffected by our immune system. This is true bio-diversity integration.

We can definitely neglect the reports of soil infertility due to using Bt Cotton, animals dying by eating the Bt crops, fauna extinction. We the Indians are the super powers of the next generation. We need to prove to the whole world that we can be the best “guinea pigs” available on earth. Why go anywhere else, Indian soil and its inhabitants are the best test objects. We have the out of the world immunity power which can thwart off any bacterial or viral attack from inside our body.

Why stop at “Bacillus thuringiensis”, check the mutation with the hepatitis virus, or AIDS virus, with these viruses as part of our body, we will enhance our capabilities against these diseases. Then India will be the only AIDS free nation in the world. Even tough the western companies initially will conduct extensive trials with their proven medications and procedures; they won’t succeed in selling those drugs in Indian markets as we will be the AIDS resistant human species. All their money will be lost at treating the guinea pigs of India.

On the future developments front, we have very bright prospects for the Indian companies. We should stop at nothing and start integrating the genes which will build up our antennae like cockroaches, create highly sensitive nose like dog, eating machine like pigs which can survive on any shit.

HAIL, INDIA!!!

HAIL, OUR POLITICIANS!!!

You can read the following articles to get the latest update

http://ibnlive.in.com/news/not-so-scientific-bt-brinjal-report-full-of-errors/109519-11.html

One more news, we can have genetically modified forests too. And this time USA doesn’t want to stay behind, so they will experiment with forests.

http://www.scientificamerican.com/article.cfm?id=eucalyptus-genetically-modified-pine-tree-southwest-forest