2ndlook

Bretton Woods – What they wont teach or tell you …

Posted in Business, Current Affairs, Environment, European History, Gold Reserves, History, Media, Uncategorized by Anuraag Sanghi on October 8, 2008

Prequel to Bretton

Keynes’ first book that gained him some following in the world of economics was the ‘Indian Currency And Finance‘. This work examined in significant detail the workings of the Indian currency system. The Indian colonial currency system was anchored to the British pound – and various other local Indian currencies were in use – and even legal tender in large parts of India.

G5 will take on G8

G5 will take on G8

Thus there was always great pressure on Britain to keep the British pound on gold standard – as there was always the option for the common citizen to use coinage from other kingdoms and princely states. In 1900, the British colonial Government tried to enforce circulation of British sovereigns in India – which failed.

Of course, gold importation into India was severely restricted. The gold blockade against India was effective as the major gold production centres were under Anglo Saxon occupation (Australia, Canada, USA, South Africa, Rhodesia, Ghana, etc.).

The Birth Of Bretton Woods

As WW2 was winding down, the Anglo Saxon Bloc went ahead and devised the Bretton Woods system. This system was a copy of the Indian currency system – where instead of the British pound, the American dollar became the Index currency.

Instead of milking only India, the Anglo Saxon Bloc could now milk the whole world. Keynes noted how America when dealing ‘her dependencies, she has herself imitated almost slavishly, India.’ So, when the time came, it took very little time for the US to scale the Indian currency model on the rest of the world.

The success of Bretton Woods-I depended on blockading India from buying gold – which was effectively done by Morarji Desai. (I wonder why the ungrateful Anglo Saxon Bloc has not made a statue of Morarji Desai at Mount Rushmore). He has after all been the single biggest contributor to their prosperity for the last 50 years.

What was Bretton Woods

The world stamped their approval on Bretton Woods.

As per the agreement, all countries of the world would use the dollar as the index currency – for international trade and foreign exchange reserves and for nominal exchange rate fixation. This system allowed the USA to print ‘excess’ dollars. These ‘excess’ initially in limited quantities, but soon at an accelerating pace. Today the USA has flooded the world (and the USA markets with more than US$50 trillion) of excess currency. The housing bubble, the M&A frenzy, the credit crisis are by products of this printing of dollars. With these excess dollars, the US consumers and others bought what they wanted – and US went ahead and printed some more dollars.

Bearing the dollars cross

Bearing the dollar's cross

Behind Bretton Woods – Gold

If the Bretton Woods system was defective, unfair, weighted et al, why was it accepted? Why did the world believe that only the Anglo-Saxon Bloc could deliver.

Why?

In 1944, the Anglo Saxon Bloc (countries, colonies and companies) controlled more than 90% of gold production and reserves. The largest private gold reserve in the world, India was still a British colony. Hence, it was fait accompli.

The Cornering Of Gold Supplies

For the last 150 years, the ABC countries (America, Australia, Britain, Canada) comprising the Anglo Saxon bloc (countries, colonies and companies) have controlled 90% of the world’s gold production. Till (a large part of) India was a British Colony, they also controlled more than 50% of the above-the-ground gold reserves. This gave them absolute liberty to print depreciating currency and flood the world pieces of paper(called dollars and pounds), manipulate the world financial system and keep other populations poor and backward.

Who paid for the dollar hegemony

Who paid for the dollar hegemony

Bretton Woods – Broken Promises

The promise of the Bretton Woods system was stability. USA promised the world that they will redeem the US dollar for gold – at a rate of US$35. Anyone could (except Indians and Americans) buy an ounce of gold from the USA for US$35 – managed by the the London Pool system. Within 20 years, the first promise was broken. Redemptions of dollar for gold to individuals was stopped in 1968 (March15th).

The Bretton Woods system worked for 20 years because Indians were not allowed to buy gold. India’s finance minster during that crucial period, Morarji Desai, (allegedly on CIA payroll during Lyndon Johnson’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967.

His break with Indira Gandhi began when the Finance portfolio was taken away from him. Morarji Desai’s ban on gold imports allowed the sham of Bretton Woods to continue for 20 years. His adamant attitude on gold cost the government popularity and electoral losses – and the Indian economy and Indians much more. Was it a co-incidence that many of the RBI functionaries later got (and even now) plum postings at LSE (IG Patel) and BN Aadarkar (IMF)?

The Bretton Woods Twins

Bretton Woods also gave rise to the the Bretton Woods twins (the IMF and the World Bank) which are run and managed by the Anglo Saxon countries. The ABC countries, their client states like Japan, OECD, etc. have 65% of the voting rights. With this huge voting majority, less than 5% of the world’s population (of the ABC countries) decide how 95% of the world lives.

The Bretton Woods twins (the IMF and the World Bank) been significant failures. Aid (spelt, ironically, very similarly to AIDS) projects are approved – which are tied to imports from these Anglo Saxon countries.

Bretton Woods Fraud

The Bretton Woods system was technically created by more than 700 delegates from the 44 allied nations. But the match was fixed.

It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Notice how much Britain resisted and finally did not join the European Currency Union. This system has swamped the world with accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with vast reserves of a depreciating currencies.

Nixon Chop And Bush Whack

From the Nixon Chop to the Bush Whack final months of Dubya’s Presidency, the Bush Family has been in the Presidency for 12 years of the 37 years. And in positions of lesser power for the entire period. George Bush Sr. was the US representative to the UN during the Nixon era – when Nixon made his infamous remarks to Kissinger about the ‘sanctimonious Indians’ who had pissed on us (the US) on the Vietnam War’. George Bush Sr. was also the US Vice President during the 8 years of Reagan Presidency.

The bend in the flow

The bend in the flow

During these 37 years – between the Nixon Chop (1971) and the Bush Whack (2008), the world has changed significantly.

The Nixon Chop

On August 15th, 1971, President Nixon after a two day huddle with 15 advisers at Camp David, delivered the Nixon Chop to the world. The Nixon chop (my name for this event), one month after his China breakthrough, cut the convertibility peg of US$35 to gold as US gold reserves were severely depleted.

The French had been regularly redeeming gold for their dollar earnings – and for this ‘perfidy’ the US had not forgiven France. This was much like the pre-WW2 French methodology of devaluation, new peg, old debt for new gold routine which got the US hackles up. Many decades have passed since these redemption by France, and the new French President, Sarkozy believes it is now possible to renew US-French relations again.

On the opposite side of the world, a beleaguered Indian Prime Minister was celebrating 24 years of Independence with a “ship-to-mouth” economy, dependent on PL-480 grain. Private gold reserves in the Indian economy after nearly 25 years of post-colonial rule, were steadily rising. Over the next 10 years, the western world (and most of the rest) blamed OPEC for post-1971 inflation, gold scaled US$800 an ounce; the Hunt Brothers launched their bid to corner the silver market; stagflation made an entry and Soviet power grew. Nixon Chop , itself the result of many years of gold reserves erosion, was one in many steps that brought the US$ to its knees.

Can the dollar be fixed?
Can the dollar be fixed?

On August 15th, 1971, the world got the Nixon Chop – where even Governments could not redeem dollar holdings. The dollar was put on float. In little time, dollar value depreciated from US$35 per ounce of gold to US$800 in 1980. Over the next 20 years, through various clandestine methods (check out the Edmond Safra and the Yamashita stories links), gold prices were managed and brought down to US$225 per ounce – but still 80% reduction in value of dollar value. Foreign reserves of poor countries got eroded. It was a gigantic fraud on the world – especially the poor, developing countries. And the fraud continues.

Every Few Years

Every 10-25 years, the world seems to go from one financial crisis to another. Trucks full of economic analysis follow each crisis – and everyone agrees after each meltdown, that there will not be another catastrophe. What the poor (and not so poor) economists don’t see is that the Anglo Saxon bloc with 80% of the world’s gold production in a choke-hold does what it wants.

On December 31st, 1974, nearly forty years after Roosevelt nationalized private American gold stocks, Americans were allowed to invest in gold again. Again Indian liberalization (1991) of gold imports happened a good 17 years after the US laws (1974) were liberalized. I wonder, how that was tied.

And that is what has happened for the last 60 years. Of course, all good (for the Anglo-Saxon Bloc) things come to an end. And so has Bretton Woods – I & II.

Recessions, Slowdowns, Slumps – The US Role

Posted in Business, Gold Reserves, History by Anuraag Sanghi on March 1, 2008
What has happened as a result of unsustainable policies (simultaneous budget and current account deficits, and loose monetary and fiscal policies) in the US is that a huge liquidity bubble of $7-10 trillion has caused massive inflation in global prices for all asset classes: property, stocks, commodities, etc. – Percy S Mistry / New Delhi February 28, 2008 (bold letters mine).

How many Zeros In a Trillion?

I dont know. I was not prepared for this figure. It simply too huge.

To put it in perspective. The whole of India, produced last year, goods and services worth US$1 trillion. Did banks lend out 7-10 trillion US$ in doubtful loans (Why didnt I get any of this?)? Who will pay the price for this? How will this get financed? Can we continue running the world financial system like this?

Every Few Years

Every 10-25 years, the world seems to go from one financial crisis to another. Asian currency crisis, US housing slump, Northern Rock, Soc Gen derivatives scam, et al. Trucks full of economic analysis follow each crisis – and everyone agrees after each meltdown, that there will not be another catastrophe. What is behind this? Who is behind this? What can we do to avoid this?

What is the system behind this fraud? Why has ‘this’ system been such a failure? Simple!

US Trade DeficitThe Bretton Woods Fraud

After WW2, the global financial system has been governed by the Bretton Woods Agreement. The Bretton Woods Agreement is a millstone around the developing world. As WW2 came to a close, British-American economists came together and devised this system. The Bretton Woods system was technically created by more than 700 delegates from the 44 allied nations. But the match was fixed.

It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Notice how much Britain resisted and finally did not join the European Currency Union. This system has swamped the world with accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with vast reserves of a depreciating currencies.

Bretton Woods – Broken Promises

The promise of the Bretton Woods system was stability. USA promised the world that they will redeem the US dollar for gold – at a rate of US$35. This was supposed to be done out of the London Pool system. Within 20 years, the first promise was broken. Redemptions of dollar for gold to individuals was stopped in 1968 (March15th).

The Bretton Woods system worked for 20 years because Indians were not allowed to buy gold. India’s finance minster during that crucial period, Morarji Desai, (allegedly on CIA payroll during Lyndon Johnson’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967.

His break with Indira Gandhi began when the Finance portfolio was taken away from him. Morarji Desai’s ban on gold imports allowed the sham of Bretton Woods to continue for 20 years. His adamant attitude on gold cost the government popularity and electoral losses – and the Indian economy and Indians much more. Was it a co-incidence that many of the RBI functionaries later got plum postings at LSE (IG Patel) and BN Aadarkar (IMF)?

The French Perfidy

In the 1960s, most of the world was buying gold at an artificially low price US$35 – and the USA was bleeding gold. The French team of Charles de Gaulle and his economic advisor, Jacques Rueff did quick maths. It was clear this मेला would not last long. The USA was printing dollars and dumping it in world markets. Based on huge dollar ouflows, the French decided they will call the bluff. The French started redeeming gold for their dollar earnings – and for this ‘perfidy’ the US had not forgiven France.

The French redeemed their dollar holdings (1958 onwards), sent the French navy (in 1965) to take delivery of gold from USA and bring it to Banque de France. The French raised gold reserves and dumped dollars. Banque De France finally, by 1968, increased its gold reserve to 92% (as a percentage of total foreign currency /monetary reserves).

This was much like the pre-WW2 French methodology of devaluation, new peg, old debt for new gold routine which got the US hackles up. Many decades have passed since these redemptions by France, and the new French President, Sarkozy believes it is now possible to renew US-French relations again.

The Nixon Chop

In 1971 (August 15th), the world got the Nixon Chop – where even Governments could not redeem dollar holdings. The dollar was put on float. In little time, dollar value depreciated from US$35 per ounce of gold to US$800 in 1980. Over the next 20 years, through various clandestine methods (check out the Edmond Safra and the Yamashita stories in these links), gold prices were managed and brought down to US$225 per ounce – but still 80% reduction in value of dollar value. Foreign reserves of poor countries got eroded. It was a gigantic fraud on the world – especially the poor, developing countries. And the fraud continues.

The Bretton Woods Twins

Bretton Woods also gave rise to the the Bretton Woods twins (the IMF and the World Bank) which are run and managed by the Anglo Saxon countries. The ABC countries (and their client states like Japan, etc.) have more than 67% of the voting rights. With this huge voting majority, less than 5% of the world’s population (of the ABC countries) decide how 95% of the world lives.

The Bretton Woods twins (the IMF and the World Bank) been significant failures. Aid (spelt, ironically, very similarly to AIDS) projects are approved – which are tied to imports from these Anglo Saxon countries.

How Does This Work

Highly paid (mostly western) consultants are paid by aid recipients from debt funding – who recommend more debt and more imports which creates greater indebtedness and rising interest payments which need more aid for which more highly paid consultants are required. At the other end, some of this aid, finally ends up with corrupt bureaucrats and politicians – who tax the citizenry more to pay increasing debt.

US Trade Balance (Image source and courtesy - nytimes.com).

US Trade Balance (Image source and courtesy - nytimes.com).

Asians Are Funding the US

Asia lost last year (my estimate) more than US$300 billion dollars due to the monetary policy of the USA. Deliberate, well thought out monetary policy by the USA Government.

The truth is that American lifestyle is being maintained due to Asian stupidity. The Chinese, Japanese, Indian, and other ASEAN countries have lent the USA – which is in the hock by over, US$2 trillion dollars. They will lose US$ 300 billion for the privilege of lending US$2 trillion to the USA. They designate trade in US dollars worth another few trillion dollars a year – which is zero-cost-to-US depreciating currency ‘float’ that the US benefits from.

The Big Mac index (based on two simple ideas of PPP and a standard industrial product) shows the dollar is overvalued against most currencies of the world. This over-valuation range is about 53% in case of India. What that means is that the US pays India only half the amount of what it should actually pay. And India pays double for whatever it buys from the USA.

Who Is Behind This

No one person is – but an excellent representative is Ben Bernanke – the US Federal Reserve Chairman. In his celebrated speech, he sneeringly informed the rest of the world that the USA can start printing dollars – and helicopter drop them.

If the world doesn’t take him seriously now, who can blame him. He has told the truth. The latest is economists are waiting for him to release his M3 (money circulation) figures. Of what use is that. He has already told the world that the US Mint presses are working overtime.

Dollar Reserves in Developing Economies

Dollar Reserves in Developing Economies

West Being Held To Ransom

While the West, especially the Anglo Saxon printing presses are working overtime, propagandists, (called neocons these days), blame the rest of the world for imaginary problems. One favorite whipping boy – Oil producers.

One such neo-con (emphasis on con) Brendan Simms starts with his “western capitalist democracies find themselves held to ransom.” rigmarole. All that OPEC wants is a market driven price. Any problems? Why does the West not explore and drill for oil along their huge off shore areas and kill their dependence on oil. If the Oil producers are wary of the dollar price due to depreciating dollar, who can you blame.

If the West wants ‘helicopter Ben’ wants to print more dollars, who will pay the price ? The rest of this gullible world? Does Simms think, that oil rich countries will ship out limited oil resources with the same speed that Bernanke prints money – or helicopter drop dollars?

Is Simms getting this feeling because of the price that the Middle East is charging a full price for oil.

Simms-bhai, I know the feeling, believe me! We, have been through that. It is the similar feeling that we in India, (and developing countries) used to get while negotiating for food purchases (called aid) after the Bengal Famine and while rebuilding collapsed agriculture economies in post colonial India.

Behind Bretton Woods – Gold

The world stamped their approval on Bretton Woods. Why? Why did the world believe that only the Anglo-Saxon Bloc could deliver. Why? In 1944, the Anglo Saxon Bloc (countries, colonies and companies) controlled more than 90% of gold production and reserves. The largest private gold reserve in the world, India was still a British colony. Hence, it was fait accompli.

The Cornering Of Gold Supplies

For the last 150 years, the ABC countries (America, Australia, Britain, Canada) comprising the Anglo Saxon bloc (countries, colonies and companies) have controlled 90% of the world’s gold production. Till (a large part of) India was a British Colony, they also controlled more than 50% of the above-the-ground gold reserves. This gave them absolute liberty to print depreciating currency and flood the world pieces of paper(called dollars and pounds), manipulate the world financial system and keep other populations poor and backward.

Things are still the same

Global Foreign Currency ReservesThe Anglo-Saxon bloc of ABC countries is still the largest gold production bloc in the world. The Anglo-Saxon Bloc (countries, colonies and companies) still control more than 80% of world’s gold production – and significant natural resources, like oil. They administer 3 out of the 5 largest countries in the world. Hence, their currencies still have significant heft. Apart from military power.

Financial manipulation comes naturally to them. The USA is trillions of dollar in debt – and Ben Bernanke, the Fed Chief says we can always print more money – or drop it from a helicopter. For instance, the above diagram shows the increase in global dollar reserves – mostly held by Asians.

What happens to the Indians, Chinese, Russians – who stupidly even today believe in the American dollar? Well! Anglo Saxon law says, caveat emptor – buyer beware!! Their latest victims – good old India and China. India and China have significant dollar holdings. The value of dollar had depreciated by 75% in the last 10 years – from US$225 to US$900.

What Can Change

India has emerged as the largest (private) reserve of gold in the world. The countries of South Africa, Ghana, Peru, Indonesia, China, Russia, Papua New Guinea account for nearly 50% of the world’s gold production – though gold operations in these countries are controlled by largely Anglo Saxon Bloc.

A currency bloc, underpinned by India’s private gold reserves – and future expansion of the currency system guaranteed by 50% of the world’s gold production is a feasible start point.

This will make the world more equitable and reduce financial volatility. This will also wean the world away from the savagery of the Anglo Saxon bloc countries who have been involved in every major conflict for the last 400 years.

Must India Curb Gold Imports: Why It’s A Bad Idea

Posted in Business, China, Current Affairs, Gold Reserves, India, Pax Americana, Propaganda by Anuraag Sanghi on February 10, 2013

India imports 800 tons of the 2500 tons of gold produced each year. This creates pressures on the dollar-currency architecture of the modern world. What can India do to resist US pressures on this front?

Gold smuggling has gained a new life with higher import duties on gold to curb rising demand, according to Indian financial intelligence agencies |  Graphic source & courtesy - economictimes.com

Gold smuggling has gained a new life with higher import duties on gold to curb rising demand, according to Indian financial intelligence agencies | Graphic source & courtesy – economictimes.com

Fourteen months ago, in December 2011, as the Western world took a break for Christmas, India and China took simultaneous actions to restrict demand gold in their respective markets.

Chindia in Tandem

China, till December 2011, was installing gold-ATMs to ramp up gold buying by its citizens.

Government of India (GoI) was tweaking policy (gold loans attracted zero-risk weightage in bank capital provisioning norms) to aid multi-billion corporations like Muthoot Finance to expand the gold-loans market.

And then the tune changed.

In India, the Prime Minster’s Economic Advisory Council (PMEAC) took a strident anti-gold stand. In the last 13 months, India has increased import tax by nearly 850% on gold – from a flat Rs.200/10 gm to 6% (roughly Rs.1700/10 gm at current prices & exchange rates).

In China, the Government cracked down on gold importers.

Dollar Drought

Three months before these concerted actions by India-China, in September-December 2011, as gold prices dropped from US$ 1900 to US$1600, global banking was seized by an acute dollar-scarcity.

Banks in Europe were raising money by using gold as collateral. India, the world’s largest importer of gold was particularly affected. The Indian rupee became Asia’s worst performing currency. India rushed to sign a US$15 billion of credit line from Japan.

China assured credit lines to some of its favored trading partners. Six months later, Africa got from China US$20 billion. Some US$10 billion of Chinese credit went to nations in Central and Eastern Europe and another US$10 billion to various Latin American countries came from China. Even before this, Chinese telecom firms made breakthroughs in Latin-America with credit.

A dollar-drought while the US was busy flooding the world with dollars?

A dollar shortage while Ben Bernanke is pumping trillions of dollars in the world economy?

As the difference increased in Indian and international gold prices, smuggling of gold too is making a comeback.

As the difference increased in Indian and international gold prices, smuggling of gold too is making a comeback.

Gold Tail That Wags the US dollar?

In the last 18 months, any drop in gold prices favored the dollar in the dollar:rupee trade.

Any drop in dollar-price of gold has been coupled with an increase in dollar price against the rupee. As a result, Indians had to spend more rupees to buy gold that was worth fewer dollars.

Now, this is strange!

On a long-term basis, gold has no positive, negative, inverse, divergent, convergent correlation with any other commodity, or exchange-traded stock. So why this short-term coupling of rupee:dollar:gold.

Is there a central bank consensus, including(?) Reserve Bank Of India (RBI), that the Indian consumer should not benefit from price-drops in gold?

Trade Deficit … Anyone?

India’s current account deficit i.e., exports + inward remittances less imports = current account deficit (CAD), is running at less than 6% – up from less than 3% at the start of the Great Recession.

Exports to a world in the grip of the Great Recession have grown slowly while imports-increase into a growing Indian economy is faster. While the Indian CAD situation needs addressal, it is by no means alarming.

It is well-known and widely-accepted that vast sectors of the Indian economy are not measured or monitored by official statistics. Hence, Indian GDP is understated. It is not surprising that Indian GDP measured on a nominal basis (US$1.85 trillion) is less than 42% of the figure obtained when measured on the basis of purchasing power (US$4.46 trillion).

Indian Gold Imports

Keeping these factors in mind, a CAD that is higher by 2% of India’s nominal GDP means a gap of about US$35 billion – no large sum for the Indian economy. Anyway, since a large part of Indian imports is gold, it further reduces the cause and need for alarm.

Ostensibly, India’s CAD situation is due to gold, India’s second largest import, according to GoI. The Indian Government has targeted gold for its policy-intervention attention. Prima facie, US$60 billion gold imports cannot be the issue for a US$2 trillion economy. There are good reasons to believe that this policy intervention by the GoI is happening under US pressure – because Indian gold imports account for one-third of total mine production of gold in a year.

In the past …

The Indian Government’s “management” of the rupee-dollar till the 1970’s meant the rupee at a higher value. Over the 1980s and early nineties in a series of devaluations, Indian rupee’s over-valuation was corrected. Before that, there was a massive arbitrage opportunity between  official exchange-rates and a thriving black market.

A blogger who has been travelling to this part of the world writes

“…in 1969 a dollar fetched 13 rupees, although you could buy 28 rupees for a dollar in Switzerland and 40 rupees for a dollar in Kabul. The official exchange rate is now 38.50 rupees for a dollar, a nice deal”

This high rupee-value gave rise to an active black market in foreign exchange, supported by gold smuggling into India; drug transshipment out of India from the Golden Crescent and the Golden Triangle. This drug+gold trade spawned a huge crime wave of global proportions.

Artificial valuation of the rupee made exports uncompetitive; imports cheap – for which there was no foreign exchange. India regularly had meetings with AID India Consortium and elaborate cases for borrowings were made. The trade deficit remained.

Will things be different this time? I am sure that a few people in the Central Bank consensus group who think that this time, it will be different.

How serious is the smuggling problem?

Gold imports through Thailand have increased as India has a free trade agreement with Thailand that allows gold imports at !1% instead of 6%  |  Image source & courtesy - economictimes.indiatimes.com...

Gold imports through Thailand have increased as India has a free trade agreement with Thailand that allows gold imports at !1% instead of 6% | Image source & courtesy – economictimes.indiatimes.com…

Why is the RBI Wrong?

RBI’s anti-gold policy is definitely misplaced.

Indian gold imports at 800+ tons are a cause of disequilibrium, with global production at some 2500 tons.

So be it.

India is at the receiving end of a bad deal in agricultural subsidies, foreign exchange reserves, technology imports, UN, IMF, World Bank – not to forget a bad deal in oil.

It is not like India controls global gold mines or production. Or is India in any position to stop other buyers from purchasing gold? Unfair apart, why must GoI + RBI take unilateral  steps to restrict gold imports into India?

Currency Printing: Like every other central bank in the world, the RBI also has been printing too many rupees. Unlike the rest of the world, Indian consumers have been sterilizing excessive printing of the Indian rupee by buying gold. This way, the market automatically sterilizes excess rupee liquidity.

More taxes is more profits for smugglers: The higher the difference between international prices and official prices, higher the profit margin for illegal imports.

In fact, raising of duty has only enhanced the profit margin of smugglers,” said a senior DRI official who did not want to be identified. (via Gold smuggling on the rise as imports turn costlier – Livemint).

“As of now, gold smuggling is limited to air passengers and carriers, which has limitations in terms of volume and cost. The bulk smuggling channels (by sea and land) have not revived, but the recent increase in customs duty will provide the profit differential to revive it,” said a senior customs official who too did not want to be identified due to the sensitivity of the issue. This person added that it would be impossible for enforcement agencies to contain smuggling through these routes. (via Gold smuggling on the rise as imports turn costlier – Livemint).

Trade Deficit: Is this increase in Customs likely to reduce India’s trade deficit? Unlikely. It will increase capital-flight to offshore financial centres – from where foreign-exchange earnings will get higher returns than in India. Higher customs or other barriers will mean more (and more) policy interventions that will increase compliance overload and reduce policy-impact.

If the proposed duties do indeed lead to more smuggling, though it would not appear in India’s balance sheet, it could continue to pressure the Indian rupee, which has been losing value against the U.S. dollar in recent months. (via Gold Smuggling Redux in India? – India Real Time – WSJ).

Questioning the anti-gold logic of the Govt apart, increasing customs duties from 2% to 6% will not change a 2000-yr of gold tradition  |  Graphic source & courtesy - economictimes.com

Questioning the anti-gold logic of the Govt apart, increasing customs duties from 2% to 6% will not change a 2000-yr of gold tradition | Graphic source & courtesy – economictimes.com

End of Bretton Woods: No fiat currency system has lasted for more than 75 years.

The Bretton-Woods system, pinned to the US dollar has morphed from a gold-based to an oil-based currency. In the last ten years, the petro-dollar surplus has decreased – and US debt has ballooned to US$17 trillion – 125% of US GDP. Add US consumer debt and corporate debt, and we are talking US debt at about 300% of US GDP.

Euro-Yuan Challenge: Euro-currency has not broken down. Not quite what Anglo-Saxon Media (ASM) has pushed us to believe. – in line with 2ndlook estimate of 2 years now. ASM also pushed the case of a Chinese hard-landing very hard. But the Chinese hard-landing is nowhere in sight. So, the Euro and Yuan are likely to increase their share in global trade. From nearly 90% of global trade, the US dollar share of trade has reduced to about 67%. As it gets close to 50%, (probably) in the next 7-10 years, we may see a greater role for gold as an objective cross-currency index. Gold trade will only increase in importance.

Rise Of The Underworld: Will we want to give the Indian narcotics-gold underworld a greater hold over the Indian economy – like it was 25 years ago. Like the narcotics-gold underworld dominates Pakistan or Afghanistan now.

Safety Net: In the face of global or local dislocations (due to drought, floods, earthquakes, war, epidemics) private gold reserves can help families to restart lives. Even without State support.

Much of the reason for Indian economic equilibrium over the last 65 years, has been the India’s private reserves of gold.

Let’s See Action

Covering a gap of US$35 billion means looking at three big targets of US$12 trillion each.

1. Increase oil refinery exports (set up two more Jamnagar type refineries), increase domestic crude output (split ONGC into four parts?) and shrink oil imports.

2. Fund 10,000 SMEs with credit for expansion and growth to add about US$12-US$15 trillion of output. Privatize city bus services and privatize train operations.

3. Sign a Third-World rupee-trade FTA, which will boost exports to the Third World by US$12 billion and replace dollar imports with rupee imports.

It is these measures which will yield answers to the Indian CAD problem – instead of curbs, taxes and barriers to gold imports.

But then …

What was on the Plate?

In October last year, the US Treasury Secretary, Timothy Geithner and the Chief of the US Federal Reserve were on a two-day India visiten-route to Tokyo to attend some IMF and World Bank meetings.

Any bets on Geither and Bernanke’s main item on the India-visit agenda was gold?

Anyone?

The depth of the global gold market with a large Indian diaspora makes it easy to avoid excessive taxation - a short step from criminal smuggling.  |   Graphic source & courtesy - economictimes.com

The depth of the global gold market with a large Indian diaspora makes it easy to avoid excessive taxation – a short step from criminal smuggling. | Graphic source & courtesy – economictimes.com

Aww … another conspiracy theory?

John Hopkins University in Baltimore, Maryland, USA hosts since WWII the Warfare Analysis Laboratory – a part of its Applied Physics Lab. Used frequently by the Pentagon, in 2009, a unique war simulation was conducted here.

Not a nuclear or a conventional war, not even a biological or chemical war – but an economic and financial war. Simulating how an Economic Hit Man from other countries would operate, its effect on the US and the US response.

Two years after this simulation, one of the participants, James Rickards has published a book outlining some of the presumably basic models used in the exercize.

All these actions point towards a declining US using more desperate means to stay on top.

For how long?

Rising Chorus … Within and Without

All these points are well-known and understood within sections of GoI. By the Indian and global press.

Some extracts below.

Gold smuggling has acquired a new lustre with imposition of higher import duties on the yellow metal to curb rising demand, financial intelligence agencies have said, warning of a sudden resurgence of underworld activity.

Import duty on gold has risen from nil to 6% in the last 12 months. Incidents of smuggling have seen an upswing recently.

Officials in the finance ministry fear that return of gold smuggling will revive Mumbai’s underworld, which thrived on the practice until the economic liberalisation of the early 1990s.

They say a rise in the illegal gold imports will undermine the government’s strategy to curb gold imports to check a runaway rise in current account deficit, which touched a record high of 5.4% of GDP in the first half of 2012-13.

Some officials said the recent confiscations point to a growing trend of organised networks engaging “carriers”, who are paid between 10,000 and 25,000 for each trip. They said illegal transfer of gold has become more lucrative for these carriers since the hike in import duties, adding that many of them are now resorting to rectal smuggling.

Agencies also fear that smugglers may take to the sea route once again.The authorities say they have seized Rs165 crore worth of gold between April and December 2012, an 11-fold increase over the seizures in the year-ago period.

India, the world’s biggest consumer of gold, imported $56.4 billion worth of the metal in 2011-12, accounting for nearly half of its current account deficit.

The country has already imported gold worth $38 billion this fiscal, prompting the government to raise import duties again by 200 basis points to 6%. Current account deficit widened to a record 5.4% of GDP in the first half of 2012-13, with higher gold and crude oil imports increasing the country’s dependence on foreign capital inflows

via Financial intelligence agencies sound alert on gold smuggling – The Times of India.

Gold smugglers have stepped out of 1970s’ Bollywood potboilers into present day reality with the government raising taxes to curb the import of the yellow metal.

According to data from the Directorate of Revenue Intelligence (DRI), an agency that monitors economic offences, the incidence of gold smuggling in the current fiscal year has zoomed at least eight times compared with the corresponding period the previous year.

As the government struggles to rein in a raging current account deficit that is likely to cross 4% of the national economic output this fiscal, it has increased the import duty on the precious metal thrice since last year.

India’s gold imports, (are) next only to oil imports in terms of value.

The increase in import duty on gold has clearly led to a price differential between Indian and international gold, and that, in turn, has led to an increase in smuggling. Spot gold prices here are as much as 5.7% higher than in Dubai, compared with a difference of 0.1% in 2008. Typically, gold is smuggled into India from Dubai.

In the first 10 months of 2012-13, till January, DRI has seized gold worth Rs.60.17 crore (200kg at the current price of gold) and cracked 36 cases of smuggling. In the corresponding period in 2011-12, it had seized gold worth Rs.7.42 crore and cracked 15 cases.

To be sure, the number is almost insignificant when compared with the value of India’s gold imports—$38 billion (around Rs.2.03 trillion today) till December.

And it refers only to seizures and the gold smuggled into India could be much more; DRI officials admit that they detect about one in every 10 cases.

“The duty rate hike in phases, from Rs.100 per 10g to 6% (about Rs.1,800 at the current price) now, has not really dampened the demand. In fact, raising of duty has only enhanced the profit margin of smugglers,” said a senior DRI official who did not want to be identified.

While the government’s actions are intended at discouraging import of physical gold, DRI and customs officials say the recent 2 percentage point increase in the import duty on the precious metal will make it difficult for enforcement agencies to contain bulk gold smuggling in India.

On 22 January, India raised the import duty on gold to 6% from 4%.

After restrictions were lifted on gold imports and a few commercial banks were allowed to import gold and sell the yellow metal to jewellers and exporters in 1997, the spread between international and local market prices shrank dramatically, but with the rise in import duty, it is now widening.

Modus operandi

Explaining the modus operandi of gold smugglers, the DRI official said most of the smuggled gold is brought into India through air mostly from Dubai and Thailand, concealed in either cabin baggage or different parts of the body. People carrying this gold are called carriers, or mules, and they work in pairs. Going by the data collected by DRI, on average, each mule carries at least 5kg of gold per trip.

According to the DRI official, the return on investment for a smuggler in a year amounts to as much as 200% for such trips.

Here’s how the math works: At the current price, it costs Rs.1.44 crore to buy 5kg of gold in Dubai. The cost of an air ticket, hotel expenses and the commission of the mule plus hawala fees to send the money to Dubai after the gold is sold in India comes to another Rs.2 lakh. The same gold can be sold in Mumbai for Rs.1.51 crore, netting the smuggler Rs.5 lakh for a single trip.

Such an operation typically takes four days. Theoretically, this means a smuggler can churn his initial investment seven times a month. Over a year, that means a profit of Rs.4.2 crore on the original Rs.1.5 crore investment.

“As of now, gold smuggling is limited to air passengers and carriers, which has limitations in terms of volume and cost. The bulk smuggling channels (by sea and land) have not revived, but the recent increase in customs duty will provide the profit differential to revive it,” said a senior customs official who too did not want to be identified due to the sensitivity of the issue. This person added that it would be impossible for enforcement agencies to contain smuggling through these routes.

Customs officials also claim their job has been made tougher by a 2011 Supreme Court ruling under which individuals arrested for violating the Customs Act can be released on bail. The apex court’s decision, both officials mentioned above said, has taken away the powers of the customs department to deter smuggling.

via Gold smuggling on the rise as imports turn costlier – Livemint

For some, it’s almost Haji Mastan time again.

There has been a 10-fold increase in the number of gold smuggling cases in recent months. Between April and June this year, authorities impounded gold worth 940 crore in some 200 cases of smuggling, up 272% over the same period last year, finance ministry data shows.

Smugglers make money if they can successfully avoid paying duties – 4% customs duty and other taxes, which add 5%-plus to the landed cost of gold.

via Weak rupee makes gold smuggling, bets attractive – Economic Times.

An increase in the import duty on gold, the third in less than a year, is expected to lead to a rise in smuggling of the precious metal into the country. On Monday, the government hiked the import duty on gold from 4% to 6%.

Air customs officials speculate that more gold will be smuggled from abroad through airports as import duty is now at its steepest.

There has been an increase in smuggling of gold through Chennai from Sri Lanka, Singapore, Malaysia and other Southeast Asian countries over the past three years.

This is the third time the government has raised import duty on gold. In March 2012, the government doubled import duty on standard gold from 2% to 4%. In January 2012, it increased duty from 1% to 2%. Of the 800 tonnes of gold that India imports every year, one-fourth is accounted for by Tamil Nadu.

While customs officials are apprehensive that they will have to be on their toes, bullion traders are unhappy that high duty will push up attempts to smuggle in gold by evading taxes and will lead to loss of jobs for local goldsmiths.

Jewellers say smugglers, couriers and middleman can make as much as Rs 1,800 for every 10g of gold imported (6% of Rs 30,000).

“With imports of 50kg, the margins can be as high as Rs 1 crore,” said a jeweller who did not want to be named. Jewellers say the government has seized close to 900kg of unaccounted gold in the last year.

via Import duty hike to up gold smuggling – Times Of India.

Gold smuggling is not new to India; in fact, many villains of Bollywood movies in the late 1970s were often smugglers. One of the most memorable Bollywood smugglers was Lion (pronounced Loyan) played by actor Ajit in movies like Kalicharan and Yaadon Ki Baraat. Even superstar Ambitabh Bachchan was a smuggler in his blockbuster movie in 1975 Deewar.

“In the late 1980s and early 1990s, the price of gold in India was 65% higher than in other countries,” wrote Douglas Farah, a national security consultant in the U.S., in a paper in 2004.

Citing a report by Interpol from the mid-1990s, Mr. Farah said that gold worth $4.2 billion was smuggled into India in 1991.

In the early 1990s, as part of India’s economic liberalization, the Indian government removed the restrictions on importing gold.

This eventually helped lower the price gap between prices in India and abroad.

If the proposed duties do indeed lead to more smuggling, though it would not appear in India’s balance sheet, it could continue to pressure the Indian rupee, which has been losing value against the U.S. dollar in recent months.

via Gold Smuggling Redux in India? – India Real Time – WSJ.

The government has raised customs duty on gold in bid to curb imports that are largely responsible for the high current account deficit and weakening currency, but a spurt in smuggling threatens to undermine its efforts.

“The operation is currently on…there was intelligence on a sudden jump in gold jewellery imports from Thailand,” said an official with the organisation privy to the development.

India has a free trade agreement with Thailand that allows gold jewellery imports at a concessional customs duty of 1 per cent.

The duty rates for imports through normal channels are much higher after a steep increase in this year’s budget and goes up to 10 per cent on standard gold bars, gold coins and non-standard gold stand, making Thailand an attractive place for purchases.

Though, stringent rules of origin norms are in place in the FTA to ensure that any goods taking advantage of the concessional duty regime undergoes a substantial value addition in Thailand, DRI is alleging large-scale misuse of these norms by importers.

According to DRI sources, the rules of origin under the FTA envisage a value addition of up to 20 per cent but since gold rates in Thailand are at the same levels at India and value addition can only push up the cost of goods and render gold jewellery imports uncompetitive.

Customs authorities had impounded gold worth 942 crore in some 200 cases of smuggling bettween April and June this year, up 272 per cent on 243 crore corresponding period last fiscal that involved 20 cases.

via DRI cracks down on gold smuggling from Thailand – Economic Times.


Wonder what’s bothering Washington (Post)?

Posted in Current Affairs, Desert Bloc, Propaganda by Anuraag Sanghi on May 18, 2012

Indians are the biggest savers in the world. Can buying a few grams of gold be termed as lust? Sin, covetousness?

From India struggles to balance its books as citizens lust for gold - The Washington Post   |  2012-05-18 19-55-55  |

From India struggles to balance its books as citizens lust for gold – The Washington Post | 2012-05-18 19-55-55 |

International crisis

Are purchases of gold by Indian consumers an international problem?

Washington (Post) teams thinks so.

Washington (Post) thinks it is in the same league as the Greek economy; elections in Egypt or the breakdown of the State in Pakistan’s frontier areas. (See graphic above).

Let’s understand this ‘issue’ better!

In India, the world’s biggest annual bullion importer, gold jewelry plays a central role in weddings and festivals. India imported 933 metric tons of gold for private consumers last year, a 35 percent rise over five years and just under a quarter of global demand, according to the World Gold Council.

Indian households’ disposable incomes grew by 13 percent during the 2010-11 financial year, but the amount in their bank accounts rose by only 3 percent, according to official data.

High inflation often renders the idea of financial savings unappealing, and many people in rural areas lack access to banks.

India is struggling to balance its books partly because its citizens keep buying gold. The country’s current account, the difference between the value of its imports and exports of goods, services and financial-transfer payments, is running at a deficit of about 4 percent, largely because of high import bills for oil and gold — India bought 969 metric tons of bullion last year at an overall cost of $48 billion.

The lack of money in Indian bank accounts forces the government and private companies to borrow abroad, pushing the country further into the red.

“You’re not looking at something sustainable. The balance of payments becomes very skewed,”

The International Monetary Fund predicts that India’s economy will grow by 6.9 percent this year, a significant drop from the double-digit rates touched in recent years.

India’s government has been trying to exert some control this spring. (via India struggles to balance its books as citizens lust for gold – The Washington Post).

How India’s gold buying affects the world

Has crime rate in India gone up in India to fund gold consumption.

Not true.

India has low crime rates; lowest imprisonment ratios, a small police force – despite a huge number of unlicensed firearms, with really poor people.

Is the Indian Government likely to renege on its debt obligation? India has not in its history defaulted on sovereign debt.

Have Indian consumers borrowed large amounts and likely to default on their obligations to international lenders? Indians consumer debt is contracted locally – and hence Washington (Post) has no cause for worry.

Are Indians causing international flare-ups to fulfill their ‘lust for gold’?

Have Indians annihilating people?

Like the British did with Australian aborigines? Or the Spanish and European migrants did to Native Americans in North and South America? Or committed gross human rights violations like the Belgian king in Congo? Have Indians enslaved millions or invaded other countries – like Europe did in the Scramble for Africa?

Answer – None of the above.

James Gillray, a leading caricaturist in 1797, in his print Midas, published after Bank Restriction Act came into force. Prime Minister William Pitt the Younger (28 May 1759 – 23 January 1806) is using the Bank of England as a commode. From both his rear end and his mouth Pitt is showering the English people with new currency notes that also are in his paper crown.  |  Image source - rc.umd.edu.  |  Click for a larger scan.

James Gillray, a leading caricaturist in 1797, in his print Midas, published after Bank Restriction Act came into force. Prime Minister William Pitt the Younger (28 May 1759 – 23 January 1806) is using the Bank of England as a commode. From both his rear end and his mouth Pitt is showering the English people with new currency notes that also are in his paper crown. | Image source – rc.umd.edu. | Click for a larger scan.

Call this lust …

Lust – meaning.

Usually the words associated with lust are

deadly sin, mortal sin, craving, appetite, or great desire, desire, longing, passion, appetite, craving, greed, thirst, cupidity, covetousness, crave, yearn for, covet

After paying international prices, can there be covetousness, cupidity, deadly sin, mortal sin? The Japanese save money in pension funds; Americans buy gilt-bonds and shares, British savers buy shares and put money in insurance and mutual funds.

Indians buy gold.

How can retail buying of gold by small people be described as lust. Most families in India have less than 100 gm of gold. Is that craving, longing, passion, greed, cupidity?

Would you call Indians lustful, if they do not wish to undergo the fate of the British people?

War by other means

This portrayal of the Indian consumer as sinner smacks of aggressive intent.

First demonize and then annihilate. It is not as though the Indian Government is cornering the gold market – and trying to destabilize the world currency system – ramshackle as it is.

So why this attempt to demonize the Indian consumer?

If this is causing a trade imbalance, does Washington (Post) demonize American consumers – for their oil consumption, for their garbage generation? For creating a housing bubble and credit balloon which burst – causing global misery. For running a a 100-year old trade imbalance, that has only been reversed, when the US used war materiel production to enhance economic activity.

So, if crime is not the issue, default is unlikely, why are these dem fine White folks so worried about us Injuns?

On a clear day

Ahh! I get it.

It must be the Washington (Post) acting in Christian spirit of being their Injun Brother’s keeper. They are trying to save us Injun’s from ourselves.

We stoo-pid, silly Injuns.

Why can’t we take advice from Washington (Post)?

Free Trade By The Free World

Posted in America, Business, Current Affairs, Desert Bloc, India by Anuraag Sanghi on February 19, 2012

Western agriculture has to answer existential questions. Can the West do without subsidies? And the world must press for an answer.

What troubled FDR now trobles Obama - and the West?  |  Undated cartoon by C.D. Batchelor in the New York News; source - nisk.k12.ny.us  |  Click for larger image.

What troubled FDR now trobles Obama - and the West? | Undated cartoon by C.D. Batchelor in the New York News; source - nisk.k12.ny.us | Click for larger image.

Hunger, starvation and plague

Western Europe has a long history of food insecurity!

Much as it may seem strange, Western Europe either depended on imports – or starved. Food shortages are a historical constant – and the current surplus is an exception.

Before WWI (1914-1918), Russia was the main grain supplier to Europe.  Russia’s grain exports kept cooking fires burning in Europe. After WWII (1939-1945), it was Argentina that supplied Europe with food grain – to Spain at nearly double the open market price, for instance.

The Roman Empire (circa 150 BC-400 AD) depended on Egypt to supply them with grain. The French Revolution (1787-1799) was preceded by bad harvests in 1788. Supposedly, the French Revolution was triggered by the comment, “If they dont have bread, let them eat cake” by the the French Queen, Marie Antoinette. Victor Hugo’s French epic ‘Les Miserables’ (published 1862) starts with a child, Jean Valjean, stealing a loaf of bread.

Since, the land and forests, and all that lived and grew on the land and in the forest – all belonged to the king, it was the royal responsibility to ensure food availability. Friar Tuck, one of Robin Hood’s men in Sherwood forest was persecuted by English nobility for hunting deer in the forest. .

What about those who had no land or food? They could eat cake.

This was picture in Europe.

Starving victor of WWII

What was the situation in Britain – the victor of WWII.

After WWII, potatoes, eggs, milk, cheese, clothes, meat and bacon (fish excluded, petrol included) were all rationed – which finally ended in 1954. A huge bureaucracy and rules created an elaborate rationing system which finally ended 9 years after the end of the WWII – in 1954.

Reduction in Russian agricultural exports after Stalinist collectivization of farms, deprived war-ravaged Europe of a nearby source of agricultural commodities. In the Russia of  1953, one year before rationing ended in Britain, the year of Stalin’s death, grain production was below the level reached in 1913.

Instead, high cost food imports from Argentina were needed. This caused much angst and hand-wringing in the British Parliament. One British MP, Sir Waldron Smithers (Orpington) made a revealing complaint about how it “looks as if the Argentine Government took a nice commission of £49 million at the expense of the British taxpayer”.

The same MP, Sir Waldron Smithers (Orpington), further referred to “an article which appeared in “Wall Street Journal, New York,” published in the “Evening Standard” on 13th March, with the title, “How to make 200 per cent. profit on wheat … The procedure is simple. Buy wheat from the farmers for £11 to £13 a ton—sell it to the bread-hungry British for £34 a ton.” This, according to the MP, was a price that, “tops the peaks of world war I and the Napoleonic wars … They know that Britain is short of food, and they are getting the highest prices they can.

The West has been papering over this problem for the last 100 years.  |  Cartoon by Cargill in the Cortland Standard ; source - nisk.k12.ny.us  |  Click for larger image.

The West has been papering over this problem for the last 100 years. | Cartoon by Cargill in the Cortland Standard ; source - nisk.k12.ny.us | Click for larger image.

Birth of a behemoth

After WWII, with acute food shortage across Europe, with colonies going, situation in Europe was desperate. Enter the Common Agricultural Programme – (CAP).

A Europe-wide agricultural subsidy scheme named Common Agricultural Programme – (CAP) was put in place. British and European farmers increased production as massive subsidies were lined up.

The CAP was instigated against the backdrop of food shortages and rationing after World War II, to stabilise European food markets while giving farmers a steady income and consumers low prices. (from Q&A: Farm funding row).

The CAP scheme was never withdrawn – and what was an emergency scheme, is now a US$70 billion behemoth.

CAP originated as a means to avoid food shortages in Europe following World War II. By the 1990s, payments were linked to production leading to massive stockpiles of rotting agricultural produce; the infamous “mountains of bread” and “lakes of butter”. Subsequent reforms decoupled subsidies from production and linked them instead to land ownership.

Under the current system, farmers are paid, in the main, according to each hectare of land they own. But this leads to the ironic situation in which the largest farmer-holders (like the Queen) get the most subsidies, while poorer, more marginal farmers get the least. There are, moreover, several instances of “farmers” getting paid for doing nothing since they don’t actually grow anything but simply own land. (via Pallavi Aiyar: In EU, farm subsidies remain crisis-proof).

The State blesses the farmer. The imagery is revealing.  |  Cartoon by Halladay in the Providence Journal; source - nisk.k12.ny.us  |  Click for larger image.

The State blesses the farmer. The imagery is revealing. | Cartoon by Halladay in the Providence Journal; source - nisk.k12.ny.us | Click for larger image.

What now!

By 1962, The European Community (EC), started

intervening to buy farm output when the market price fell below an agreed target level. This helped reduce Europe’s reliance on imported food but led before long to over-production, and the creation of “mountains” and “lakes” of surplus food and drink.

The Community also taxed imports and, from the 1970s onward, subsidised agricultural exports. These policies have been damaging for foreign farmers, and made Europe’s food prices some of the highest in the world.

European leaders were alarmed at the high cost of the CAP as early as 1967, but radical reform began only in the 1990s.

In 2010 the budget for direct farm payments (subsidies) and rural development – the twin “pillars” of the CAP – was 58bn euros (£48bn), out of a total EU budget of 123bn euros (that is 47% of the total). In 1970, when food production was heavily subsidised, it accounted for 87% of the budget. Regional aid – known as “cohesion” funds – was the next biggest item in the EU budget, getting 36bn euros.

For the new member states – including Bulgaria and Romania, which joined in 2007 – direct EU payments to farmers are being phased in gradually.

The eastward enlargement increased the EU’s agricultural land by 40% and added seven million farmers to the existing six million. (via BBC News – Q&A: Reform of EU farm policy).

Even as European banking system and State-financing is on the edge, Europe is being forced to work out CAP reforms.

The current CAP regime will end in 2013 and “reforms” of the system are, thus, being worked out for the 2014-2020 period. According to the European Commission’s draft proposals, the CAP budget for the seven-year period would be some 400 billion euro (an amount enough to make the region’s bank recapitalisation needs disappear).

Payments will also be capped at 300,000 euro with progressive levies being charged on subsidies over 150,000 euro.(via Pallavi Aiyar: In EU, farm subsidies remain crisis-proof).

These huge subsidies cause illogical distortions across the world – especially the Third World. Starting with the fact that

the annual income of an EU dairy cow exceeds that of half the world’s human population.

Another problem is that the subsidies cause overproduction.

The EU cannot use all its agricultural products, so it sells them cheaply to the third world. This undercuts local farmers, who cannot compete with the heavily-subsidised imports, and so distorts the market (though the EU is not alone in this, as the US also dumps subsidised agricultural products on developing markets).(via The EU common agricultural policy | World news | guardian.co.uk).

Image source & courtesy - news.bbcimg.co.uk  |  Click for larger source image.

Image source & courtesy - news.bbcimg.co.uk | Click for larger source image.

All this encourages intensive farming. More fertilizer, more pesticides, more hormones, more stimulators – which finally end up in the environment.

And inside human systems.

Earlier, CAP subsidies made it profitable to use practices that are

environmentally damaging intensive farming. Its commitment to guarantee prices makes it economically worthwhile to use all available land, with the aid of chemicals, to grow more crops than are demanded by consumers.(via The EU common agricultural policy | World news | guardian.co.uk).

Most of the money, to the few

Faced with the overproduction critique, the CAP system was modified on American lines. Same results. The CAP system in Europe, in the aftermath of WWII,

was set up 50 years ago when food supplies were uncertain and nearly 20% of the population worked on the land. Today, just 5.4% of EU’s population works on farms, and the sector is responsible for just 1.6% of the economy. Moreover, the subsidy system distorts markets, encourages farms to get bigger, does little for the environment and forces small farmers off the land. The result is that the subsidies are grabbed by fewer and fewer richer and richer people.(via CAP provides another bumper payout for landowners | John Vidal | Comment is free | guardian.co.uk).

‘Real’ farmers responsible for most of EU’s agricultural farm-output, however get the least amount of subsidy.

Gail Soutar of Britain’s National Farmers Union also said it was important to direct support to “active farmers… who are producing a crop or a litre of milk, we don’t want support to go to people who are no longer producing… sofa farmers”. (via BBC News – EU plans CAP reforms for ‘greener’ farm subsidies).

Instead, the opposite happened.

CAP has become badly unbalanced, with 70% of its funds going to only 20% of Europe’s farms – predominantly the largest – and leaves nearly three-quarters of EU farmers surviving on less than £5,000 a year. Small farmers account for about 40% of EU farms, but receive only 8% of available subsidies from Brussels. According to British government figures, five UK farms receive more than £1m a year in subsidies.(via The EU common agricultural policy | World news | guardian.co.uk).

Yes! Western farms are in perpetual need of subsidy | Cartoon by Ding in the South Bend News Times; source - nisk.k12.ny.us | Click for larger image.

Yes! Western farms are in perpetual need of subsidy | Cartoon by Ding in the South Bend News Times; source - nisk.k12.ny.us | Click for larger image.

It is not surprising that release of information was being blocked by the ‘few’ beneficiaries. After prolonged activism, and much pressure, in 2009, the EU authorities directed the releaseof data of subsidy beneficiaries.

Jack Thurston, a founder of Farmsubsidy.org, said that for the first time this year the EU’s 27 governments have provided varying degrees of information on the beneficiaries of farm cash payments.

He is critical of the European Commission of failing to compile complicated and patchy data to give the public a clearer picture of how money is spent.

“The idea of publishing is that European people can have the information so debate about CAP and how it spends money is well-informed,” he said. (via EU farm subsidies paid to big business – Telegraph).

Various governments in the EU, used different methods to make it difficult to extract and analyze data. Some dispersed data, others limited data to 500 records at any one time. ‘Activistas’ used ‘web scrapers’ with some software code to comb the data and make reports.

With all this information in the public domain, it soon became embarrassing for subsidy recipients. Two German farmers approached European Court for ‘justice’. The Court ruled in 2011, that member Governments can with-hold information on subsidy payout.

The UK Government quickly decided to

grant anonymity to all farmers who receive EU farming subsidies, a Department for the Environment, Food and Rural Affairs (Defra) spokesman said that it was not possible to reveal details of any individual farmers because this would breach their privacy. All details identifying large industrial farming concerns and individual farmers have been removed from Government websites. Ministers say this follows a directive from Brussels which requires all EU member states to comply with a judgment from the European Court of Justice in Luxembourg.

Plans for the publication of a list of the individuals who have benefited from the EU subsidy last year, which was due to be released at the end of April, have now been halted.

Ministers argue that they are following advice from Brussels, but freedom of information campaigners claim they have deliberately taken draconian steps to protect rich farmers from public scrutiny.

Freedom of information campaigners argue that the Government has over-reacted to the ruling because the judgment bans the identification of private individuals but not the naming of industrial farming enterprises, which include large agricultural concerns such as the Englefield Estate.

The decision represents a reversal of an important freedom of information victory in 2005 when the Government was ordered to release the names and payouts of all those benefiting from the subsidies. (via Wealthy minister earns £2m in EU farm subsidies his department tried to cover up | Mail Online).

Who gets the money?

Under the ‘reformed’ CAP system, subsidies are paid according to the size of lands: the greater the area, the more the subsidy. This leads to some curious situations.

According to Kevin Cahill, author of Who Owns Britain, 69% of the land here is owned by 0.6% of the population. It is this group that takes the major payouts. The entire budget, according to the government’s database, is shared between just 16,000 people or businesses.

As chairman of Northern Rock, Matt Ridley oversaw the first run on a British bank since 1878, and helped precipitate the economic crisis that has impoverished so many. This champion of free market economics and his family received £205,000 from the taxpayer last year for owning their appropriately named Blagdon estate. That falls a little shy of the public beneficence extended to Prince Bandar, the Saudi Arabian fixer at the centre of the Al-Yamamah corruption scandal. In 2007 the Guardian discovered that he had received a payment of up to £1bn from the weapons manufacturer BAE. He used his hard-earned wealth to buy the Glympton estate in Oxfordshire. For this public service we pay him £270,000 a year. Much obliged to you guv’nor, I’m sure.

But it’s the true captains of British enterprise – the aristocrats and the utility companies, equally deserving of their good fortune – who really clean up. The Duke of Devonshire gets £390,000, the Duke of Buccleuch £405,000, the Earl of Plymouth £560,000, the Earl of Moray £770,000, the Duke of Westminster £820,000. The Vestey family takes £1.2m. You’ll be pleased to hear that the previous owner of their Thurlow estate – Edmund Vestey, who died in 2008 – managed his tax affairs so efficiently that in one year his businesses paid just £10. Asked to comment on his contribution to the public good, he explained: “We’re all tax dodgers, aren’t we?”

As for the biggest beneficiary, it is shrouded in mystery. It’s a company based in France called Syral UK Ltd. Its website describes it as a producer of industrial starch, alcohol and proteins, but says nothing about owning or farming any land. Yet it receives £18.7m from the taxpayer. It has not yet answered my questions about how this has happened, but my guess is that the money might take the form of export subsidies: the kind of payments that have done so much to damage the livelihoods of poor farmers in the developing world.

The British government has also demanded that the EC drop the only sensible proposal in the draft now being negotiated by member states: that there should be a limit to the amount a landowner can receive. Our government warns that capping the payments “would impede consolidation” of landholdings.

It seems that 0.6% of the population owning 69% of the land isn’t inequitable enough. (via We’re all paying for Europe’s gift to our aristocrats and utility companies | George Monbiot | The Guardian)

These few cases apart, further analysis by various ‘activistas’ has thrown up more reasons why the system is broken. One group that is in the forefront of this reform, is Farmsubsidy.org that

collated the EU figures which identify where the €55bn common agricultural policy (CAP) subsidies went in 2009. No big surprises there, with five giant European sugar companies netting €500m between them, a few dairy companies making tens of millions each and the top 1,200 landowners and companies on the continent receiving more than €5bn between them.

Last year, the number of farmers and food companies who received individual payments of more than €1m increased by more than 20%. Britain had 32 organisations and individuals each getting more than €1m.

The biggest handout will probably to the Co-op group, which manages 16 large farming estates and is now Britain’s largest farmer. Up near the top of the list, though, are the Dukes of Westminster and Marlborough, the former Lord Vestey’s family, the Queen, and very many hereditary landowners.

The vast majority of farmers get under €5,000 and bust a gut to survive, but in a time of recession and belt-tightening these subsidies to the richest look grotesque. That €55bn (goes to the) top 10% of big landowners, the people in least need, paying them to do little more than own land.

France and Germany, have more subsidy billionaires than any other country. (via CAP provides another bumper payout for landowners | John Vidal | Comment is free | guardian.co.uk)

Image source & courtesy - news.bbcimg.co.uk  |  Click for larger source image.

Image source & courtesy - news.bbcimg.co.uk | Click for larger source image.

For instance, Prince Charles, owner of Sandringham Farms received €3,309,318, subsidy for growing durum wheat.

Ligabue, an Italian caterer, serving luxury cruise ships and airlines, received 148,000 euros of export subsidies in 2008 for the dairy and creamer sachets consumed by international travellers.

The subsidies have included payments to Haribo, the sweet manufacturer, and Coca-Cola. Haribo qualified for 332,000 euros in farming subsidies for the sugar used in its “gummy bears” produced in Germany.

In France, the EU country that benefits the most from farm subsidies, over 103 million euros every year boosts the profits of sugar manufacturers – companies that do not own any farms.

Groupe Doux, a French chicken processor, raises no poultry itself but pocketed 62.8 million euros.

In Britain, Tate & Lyle Europe benefited from the taxpayer to the tune of 134 million euros in 2007.

Arids Roma, a Spanish construction company, received 1.59 million euros for road-making materials under EU rural development budgets that are a growing part of the CAP.

Another Spanish construction company, Pasquina, also benefited for EU farm cash, getting1.13 million euros for an asphalt factory. (via EU farm subsidies paid to big business – Telegraph).

The new, ‘reformed-again’ CAP system links payment of subsidy to ‘environment protection. This proposal raises an important question.

Should land-users get paid not to do, what they should not do in the first place – anyway.

The rest of us don’t get paid for not mugging old ladies. Why should farmers be paid for not trashing the biosphere? Why should they not be legally bound to protect it, as other businesses are?

We may reach this stage sooner than you think.  |  Cartoon by Mark Knight; on 7/8/09; cartoon source and courtesy - thepunch.com.  |  Click for a larger image.

We may reach this stage sooner than you think. | Cartoon by Mark Knight; on 7/8/09; cartoon source and courtesy - thepunch.com. | Click for a larger image.

What about the US of A?

Today, an ‘efficient’ and ‘hi-tech’ agricultural farm sector in the US needs more than US$ 15-20 billion (estimates vary) of subsidies to survive.

The US-EPA says, “By 1997, a mere 46,000 of the two million farms in this country (America), accounted for 50% of sales of agricultural products (USDA, 1997 Census of Agriculture data)– and gobble up most of this huge subsidy that lowers Third World agricultural prices.

EU ‘reformers’ are talking about a 10%-25% cut in ‘real’ terms, between 2014-2020.

Reality.

CAP spending will increase by about €15 billion overall in 2014-2020 period. Who is paying the price for this?

More than anyone else, the poor of this world.

Aid agencies say these subsidies make it impossible for poorer countries to compete, and health groups argue that they make industrial fats and sugars artificially cheap for junk food production. (via CAP provides another bumper payout for landowners | John Vidal | Comment is free | guardian.co.uk).

Trade campaigners have expressed concern at the impact on poor countries. “The biggest problem is that subsidies keep prices artificially low, mainly for grain traders, so developing country farmers cannot compete,” said Ruth Bergan, co-ordinator from the Trade Justice Movement.

Research cited by the Overseas Development Institute (ODI) shows that African and Latin American countries are particularly affected by the CAP. A study last year from the University of Lausanne argued that the world as a whole would gain from the removal of the “most distortive CAP instruments, with Europe being the main beneficiary”.

“The reallocation of resources within the economies across the world and corresponding terms of trade effects would increase world economic GDP and welfare by nearly €33bn – the European border protection (various import duties) elimination being the key contributing element,” said the study. (via EU agriculture policy ‘still hurting farmers in developing countries’ | Mark Tran | Global development | guardian.co.uk).

These lower agricultural prices devastate agriculture in Third World countries, creating man-made famines. These man-made famines, of course, gives the West a false sense of superiority.

What is the way out of this?

EU proposes

to cap payments at €300,000 ($409,170) a year for each farm, which would save €2.5 billion a year on direct subsidies. (via EU Proposes Cap on Farm Subsidies – WSJ.com).

Theoretically, this will save some subsidy – but there is a simple loop-hole. Large farms, now under single-management, could easily be ‘de-merged’ and broken into smaller units – to stay under the €300,000 limit. A large enough limit which will not inconvenience the millionaire club – and satisfy all the ‘activistas’, and keep them quiet for 5-7 years.

One of the biggest subsidies was $223 million, given to the French sugar conglomerate Tereos, one of whose subsidiaries produces rum on France’s Indian Ocean territory of Réunion. France’s Saint Louis Sucre also received multimillion-dollar subsidies and the British sugar giant Tate & Lyle received hundreds of thousands of dollars.

Last year, more than 1,200 of the recipients received more than $1 million each — a sharp increase from the approximately 900 such recipients in 2008. “The bigger you are, the more subsidies you get,” says Jack Thurston, co-founder of FarmSubsidy.org. “It is the reverse of what you think a subsidy is.” (via E.U. Farm Subsidies: Agriculture Benefits Raise Eyebrows – TIME).

This will jolt you upright

There have been other aspects to the Western model of farming.

Take swine flu — now renamed. We know it started in La Gloria, a little town in Mexico. We know a young boy suffering from fever in March became the first confirmed victim of the current outbreak, which, even as I write, has reached India. What is not said is this ill-fated town is right next to one of Mexico’s biggest hog factories, owned by the world’s largest pig processor, Smithfield Foods. What is also not said is that people in this town have repeatedly protested against the food giant for water pollution, terrible stench and waste dumping. (via Sunita Narain: The real pandemic).

There were two things about this post which made me sit up.

One – The real story behind the ‘probable’ pandemic. This is something that most mainstream media writers do not tell. Take official Government press releases, (sometimes) change the language and call it news. Sometimes, they help in the cover up. If this story does not become well-known enough, Mexico and its poor will be blamed for the starting this pandemic – by the West.

Two – the fragile state of US agriculture, specifically, and the West in general.

The other two complications are the buying and selling corporations.

Beasts of Debt & Equity

These giant corporations are aiming for entry into India – promising ‘efficiencies’ in buying (which will give consumers a better price), and higher prices for farmers (which will increase farm incomes). Of course, this will last as long as there is competition. Once, these giant corporations, fueled by huge amounts of debt and equity, drive out competition, they will lower the boom on the consumers and the farmer – like in the EU and USA.

Giant food corporations, killed buying competition with high prices (to farmers), direct buying from farmers (at higher prices), monoclonal seeds that destroy bio-diversity. And the US consumers are not getting the lower food prices that are being promised in India.

And paid hacks of these Western corporations are trying to tell Indian consumers and policy makers that these giant corporations will cut the costs of food In India.

Raj Patel, in his book, Stuffed and Starved, demonstrates how global food corporations are behind global food habits, imbalance traditional diets, creating disease epidemics (like diabetes) – and how India needs to be careful before crafting industrial policies that encourage these global corporations to destroy Indian agriculture. A book review extracts some key points as follows,

What we think are our choices, says Patel, are really the choices of giant food production companies. Millions of farmers grow food, six billion people consume it. But in between them are a handful of corporations creating what Patel calls “an hourglass” model of food distribution. One Unilever controls more than 90% of the tea market. Six companies control 70% of the wheat trade. Meanwhile, farmers across the world are pitted against each other, trying to sell these gatekeeper companies their produce. And if you think the consumer comes out on top because of all this competition, think again.

As the Europe & US play out a charade of negotiations, it is Africa and Asia which is suffering from food shortages.  |  Cartoon by Peter Nicholson; on July 5, 2005; source and courtesy - nicholsoncartoons.com  |  Click for larger image.

As the Europe & US play out a charade of negotiations, it is Africa and Asia which is suffering from food shortages. | Cartoon by Peter Nicholson; on July 5, 2005; source and courtesy - nicholsoncartoons.com | Click for larger image.

Which way the wind blows

Will EU abolish their agricultural subsidies?

Different observers are reading this differently. A recent commentary thinks that in Europe, the

one constituency that remains politically off-limits is the continent’s powerful farmers. Although agriculture contributes only 1.8 per cent of the European Union’s (EU’s) GDP, Brussels is currently firming up plans to continue to spend hundreds of billions of euros on trade-distorting farm subsidies called the Common Agricultural Policy (CAP).

“Throughout CAP’s many reforms and the latest proposals are no exception, the structure of the regime might have changed but the allocations remain the same,” says Jack Thurston, an agricultural policy analyst and co-founder of the website Farmsubsidy.

But when it comes to farmers, it’s a “heads you lose, tails I win” situation, according to Thurston. “In Europe if agriculture is doing well as a sector then it’s argued that it needs support all the more to ensure its continued success. And of course if it’s not doing well, then it needs state support to help it do better,” he says. (via Pallavi Aiyar: In EU, farm subsidies remain crisis-proof).

Nearly three years ago, in July 2009, when G20 talks were headlines, and The Great Recession had started in earnest,

Leaders of five developing countries — India, China, Brazil, Mexico and South Africa — who also met for summit level talks here had separately, called for expediting a global trade agreement that would stimulate the world economy.

But for this to happen, they wanted developed nations to end trade-distorting subsidies and export sops. The G-8 declaration, however, promised only to refrain from taking decisions to increase tariffs above today’s levels.

“We will refrain from raising new barriers to investment or to trade in goods and services, imposing new exports restrictions or implementing World Trade Organisation’s inconsistent measures to stimulate exports.”

Leaders of the world’s eight most rich countries, in the same breath, vowed to keep markets open and free and to reject protectionism of any kind. “In difficult times we must avoid past mistakes of protectionist policies, especially given the strong decline in world trade following the economic crisis,” the declaration said. (via G8 refuses to cut export subsidies).

3 months ago, or three years ago, the direction seems to be pro-subsidy. If not abolish, how strong is the will and consensus on reforms?

Europe’s deep current economic crisis could be jolting officials into considering ways to overhaul subsidies. After all, with their huge debts, most E.U. governments are strapped for money. A formal E.U. reassessment of agricultural subsidies is due in 2013, but Europe’s slow crawl out of recession could pressure leaders to rethink the system before then. “The economic crisis will have a strong impact,” says Valentin Zahrnt, a research associate at the European Center for International Political Economy in Brussels. “With the budget crisis, governments are happy to save on subsidies.” (via E.U. Farm Subsidies: Agriculture Benefits Raise Eyebrows – TIME).

In the end, net, net, what is most probably likely to happen?

Right question … gets the correct answer

Central to this question is another question.

Can the farmer in EU and USA stand on his two own legs? Without State support?

The EU’s biggest farm lobby, Copa, said the commission’s plan would steer Europeans away from farming. “Many young farmers are not willing to take over the farm and older farmers are leaving the sector in view of the drastic economic situation,” said Gerd Sonnleitner, the lobby’s president.

Pekka Pesonen, the organization’s secretary-general, said the rules will make farmers more reliant on handouts from Brussels, which he estimates already account for as much as 70% of farmers’ incomes. “If you cut off the competitive edge of the agricultural sector it will affect the lives of the 28 million people who depend on European agriculture,” he said. (via EU Proposes Cap on Farm Subsidies – WSJ.com).

West is already one huge public-sector economy already. This will only become pronounced and more extreme. If something like that is possible.

What if …

What is the one reality in the entire CAP debate that must be confronted.

The West will go hungry, without subsidies.

Over the next 20-30 years, this leaves India (with China, Brazil and Russia) to cater to global food shortfalls. The Western industrial model is in its sunset phase. The Indian agricultural model can be the big winner in the next few decades – under the right stewardship.

Indian agriculture has a great future – and you ignore it at your own risk! On the other hand, industrial over-production, debt-financed over-consumption, American economic model, funded in the past by Bretton Woods /Petro-dollars /Sino-dollars, is about to end. And that is the reason why the West (America and Europe) will not lower barriers – or subsidies.

If you thought software was a big success, watch out for the Indian farmer!

What happens to Indian the farmer

Is there a business opportunity in here? Somewhere …

One part of the Rothschild family seems to think so.

China has 60 percent of the arable land of India, but it’s 40 percent more productive because of technology. That India is the largest producer of fruits, No. 1 in the world, No. 2 in vegetables, and has only 1 percent of the export market. So, those are all really big factors that we know how to fix. You fix them with technology on the ground, with cold storage and infrastructure on the ground. And if the retail sector isn’t ready to buy higher-quality fruit and vegetables, which I always thought they would be-but three years ago, it was less obvious than now-you could export them and be the lowest-cost exporter. (via An interview with Lady de Rothschild – Executives Column – Lloyd Grove – World According to … – Portfolio.com).

Most interesting!

The ‘backward’ Indian farmer working without subsidies, with low technology, lower productivity has a cost edge over his European an American counterparts? Between the US and the EU, Western farmers get a subsidy of US$100 billion – and yet they cannot compete with Indian farmers?

How well did this idea go down the European throats? Not too well … going by this reaction.

Even with the transportation and duty costs, the Indian fruit and vegetables are likely to bankrupt the European and Japanese farmers. In Europe, most of these farmers are heavily indebted as the EU paranoid sanitary norms as well as the packaging requirements of the supermarkets have forced them to invest in expensive machinery and infrastructures.

When the Indian fruits and vegetables arrive in Europe, most of these indebted farmer families will have to say goodby to their farms which will be confiscated by the banks. Many of the still remaining independent European farmers are producing fruit and vegetables since the independent livestock and wheat farmers have already been decimated by the “market economy” making profitable only the giant exploitations in these sectors. (via Rothschilds Move To Bankrupt European Farmers « Aftermath News).

How paranoid can the Europeans get?

When it suits them they can talk, from one side of their mouth, about free market – and at other times they get suspicious about small farmers from India.

The Western model of heavy urbanization and small numbers of people in the farming sector, has its admirers in India, too.

Twisted data

India’s top 20 cities account for just 10 per cent of the country’s population, but this population earns more than 30 per cent of the country’s income, spends 21 per cent and, so, accounts for just under 60 per cent of the surplus income. The next lot of cities account for 20 per cent of population, 13 per cent of income and under eight per cent of surplus income or savings. Rural areas account for 70 per cent of population, 64 per cent of expenditure and just a third of the country’s surplus income. It’s obvious then that India’s savings can grow only as the country’s urbanisation rises. Given this, the promise of creating more urban centres would be a more effective tool in getting votes from rural India. (via Rajesh Shukla: Why India’s top cities matter).

How about also pointing out, Mr.Shukla, that urban India hogs all the infrastructure investments? Or that traditional banking (in the form of money lenders) has been done to death in the rural areas – and ‘modern’ urban banks do not go the countryside. Or that the traditional health infrastructure has been demolished in rural areas – and urban areas are getting all the investments. Or that credit growth in the rural areas has been choked for nearly 80 years now – and the Indian farmer competes with the Western farmer, without the US$100 billion dollar subsidy.

Not seen is also the fact that rural India, largely a user of Indian languages, is excluded from higher education, which is transmitted in English? Has it occurred to anyone that this exclusion of India’s rural population from higher education could be the reason for the stagnation in rural areas?

Indian economic model

There is something interesting in the state of Gujarat.

Gujarat is a drought-prone state, with an irrigation cover of just 36% of gross cropped area. Increased water supply from Sardar Sarovar project, higher investments in check-dams and watersheds (as of June 2007, a total of 2, 97,527 check dams, boribunds and Khet Talavadi (farm ponds) had been constructed by the state in cooperation with NGOs and the private sector), and of course, good rainfall for the past few years has helped propel growth. (via Emulate Gujarat’s agricultural success- Policy-Opinion-The Economic Times).

While we have Westernized ‘experts’ saying that Indian agriculture is a dead end – and promoting a line of ‘there is no option apart from mega projects’, we have here in Gujarat the real solution to agriculture and water management. The Gujarat solution, which has been India’s way of managing water. Effectively, at a low cost, under the control of the people who use it and need it.

Indian agriculture has a bright future – these ‘experts’ notwithstanding.

The End of Bretton Woods

With the collapse of Bretton Woods, Western subsidy-based regime will become increasingly difficult.

September’s World Trade Organisation talks at Cancun, Mexico, where the EU is expected to come under fire for its lavish farm subsidies. EU has been accused of attempting to divide opposition in the developing world to the CAP in the hope that this will allow it to get minimal reforms through the WTO.(via The EU common agricultural policy | World news | guardian.co.uk).

Where will Western agriculture be without subsidies – in a massively high costs zone. Western food production and exports will shrivel and global agricultural prices will reach (at least) 200 year highs (my estimate).

And that will be the golden hour for Indian agriculture.

What is the only dark cloud in this scenario – GM seeds which the West is pushing down the reluctant Indian agriculturists’ throat. With significant help from the Indian Government.


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