Andy Mukherjee’s Poverty

Posted in Current Affairs, Gold Reserves, History, Satire, Uncategorized by Anuraag Sanghi on February 13, 2008

Andy Mukherjee – On The American Stimulus Package

Andy Mukherjee, on Wednesday, February 13, 2008, in his syndicated column used his Andy MukherjeeAsian background with devastating effect. Devastating to his (at least, partly Indian) background.

He writes,the stimulus package that has been put together to keep the U.S. economy from tipping into a recession”.

Just what is the problem with that. In the current economic thinking, all Governments are expected to create these ‘stimulus’ package.

Andy Still Talks Of Aid

He further writes,

At $168 billion, the largesse is almost three-fifths more generous … than the record $107 billion that 22 rich nations together gave out as official foreign aid in 2005 …” (ellipsis mine)

I thought every country has a right – and as per current acceptable political philosophy, it is the bounden duty of Governments to be generous to their citizens. What exactly is the objection that Andy has to the US Government’s ‘largesse’ and ‘munificence’, (his words)? I am unclear about on that till now.

Which planet is Andy on? Since he is writing a business and finance columns, is he aware (I hope he is) of the large body of research that shows how aid has in fact creates problems – and doesn’t solve any. The notorious PL-480 was abandoned because it elongated the cycle of food scarcity.

Low self esteem, Andy?

He advises,

Middle-class Asians ought to turn green with envy at the “home bias” implicit in the munificence of President George W. Bush’s administration.”

So what does Andy expect – Uncle Sam should be more liberal to Asians than to Americans? Does he expect Americans to earn and be taxed for the benefit of Asians? And just why does he think that Asians (at least Indians) will turn green with envy.

I am sure that Asia wishes to compete with the largest, best, competitive economies – but surely there is no envy involved (exceptions apart). I am also sure (unlike Andy) that, in time, we will create a level playing field (more important and more on that later) and Americans will want to be born in Asia (and most probably, India).

You want aid, Andyboy!

Andy’s Cheques by mail programme

Unlike the 111 million US households that will enjoy some tax rebate, there won’t be any cheques in the mailbox for the Asian workers.

And who exactly does Andy think, is going to send cheques by mail to Asians? Americans? Just why will Americans do that? How does Andy think Americans will fund this Andy’s ‘cheques by mail’ programme? Does Andy think that 60-80 million working Americans can suport 3 billion Asians?

And why does Andy think that Asians will queue up to take this charity? Just why is Andy’s opinion of Asians so low? Is is it because of his own low self esteem?

Asians Are Funding the US Stimulus Plan

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 my dear Andy, 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$4trillion dollars. They will lose US$ 300 billion for the privilege of lending US$4 trillion to the USA.

What? Asians Fund The USA …Dollar Reserves in Developing Economies

Why? Because the system is fixed. Go back to Bretton Woods! The Anglo Saxon Bloc controlled 80% of the world’s gold production and reserves. Hence, only they could underpin their currency with gold- which the world accepted. It is separate story that they defrauded the world – and the system unravelled within a short 20 years.

And the world has been paying a price for that moment of folly.

What Does Asia Need

Asians need to create a new financial system. That is what Asia needs – and that is what US has been sabotaging for years now.

And a case for that is what I would have expected from you, Andy – or is that too much too ask for!

Rat Migration – And History Looks Different

Posted in Current Affairs, History, Uncategorized by Anuraag Sanghi on February 2, 2008

The Loyal Black RatRattus Rattus

On February 1st, 2008, a report by an Australian researcher, traces the spread of the Indian rat. Indian rat migration, (this research shows) began 20,000 years – a corollary of human travel, and not natural migration. The route of this spread is through the Middle East – and later to Europe. This report focussed on the spread of the rat – and used modern DNA technology to track these migratory movements – with little or no historical comment.

The Black Rat (Rattus rattus) has had its role in history. But this new piece of research on the common rat adds to the re-write of history.

What …? Rat migration! Re-write history?

Aryan Invasion & Migration Theory

This report on rat migration adds to the re-look, currently underway, of (Indian and world) history.

Max Mueller’s theory, a German (orientalist, whatever they are) popularised a theory that originates the Indic civilisation from the Central Asia down to Iran – whether migration or invasion is possibly immaterial. Max Mueller’s theory is questionable due to his “open” agenda of Christian propaganda and the British colonial state patronage.

As per Max Mueller, from Iran, the Aryans branched out to Europe and India. Hence, the similarities in languages. There are alternative historical scenarios being mapped out. Politically, Max Mueller’s theory created a political divide in India that proposed Aryan conquest (by North India) of Dravidians(from South India). Unfortunately, our schools and history books still carry this suspect theory.

Recently, after racist attempts in the USA to push this theory, some NRI /PIO academics have carried out further research – which has made this theory look very flimsy.

From India To Babylon and Russia

In 1906-07, an Turkish archeologist , Theodore Makridi-Bey, started excavations at Hattusas (Boghazkoi), 150-200 kms from Ankara, in Cappadocia. He was joined by Hugo Winckler, a German archaeologist, specialising in Assyria. They unearthed more than 10,000 clay tablets which proved to be of tremendous interest. Till the decipherent of thes tabets, some 15 years later, it was assumed by Euro-centric historians that this must, “undoubtedly have been the temple of Jupiter, mentioned by Strabo.”

Deciphered cuneiform tablets show worship of Varuna, Mitra and Indra – Gods worshipped by Indo Aryans. Rulers and Kings had names likes Shutruk (Shatrughna), Tushrutta meaning “of splendid chariots” (similar to Dashratha; Master of Ten Chariots) Rama-Sin (Assyrian Moon Good was Sin; in other words Ramachandra) Warad (Bharat) immediately before and after Hammurabi – the world’s first law giver. The Elam culture had a language which is similar to modern Tamil language. The Mitannite, Kikkuli, wrote on how to manage chariot horses. Egyptian king, Amenhotep I, married a Mittanite princesses. Elamites were founders of the first kingdom in the Iranian geography.

The Amarna letters (written by Tushratta) have made historians sit up – and a reluctant re-interpretation of history is beginning.

Post colonial historical revision is proposing new theories. New archaelogical evidence supports history that shows Aryans moved from India to the Anatolian plains and established the Sumerian, Mesopotamian, Babylonian cultures of Elam, Mitannites, Kassites along modern Syria to Turkey. The Elamites, Mittanis, Hittites competed and traded with the Egyptians.

West Asian reluctance to give up slavery, made Indo Aryan rulers disengage politically from West Asia and Middle East. Judaism, Christianity and Islam, the three ‘desert religions’, gained the first converts from slaves, but continued with slavery till the 20th century. The 3 ‘desert religions’ instead of reforming slave societies, just transferred slave titles. Old slaves in turn became the new slave masters. Non-political Indian role in West Asia and Middle East continued to grow in terms of trade and learning. Babylon became a part of Alexander’s empire (and then the Roman Empire).

What Does This Mean

European historians have traditionally dated Aryan Indian civilisation at 1500-1800BC. The Indus valley was dated 1500-2000BC. At these dates, Hammurabi, ancient Babylon were already established. Greece was flourishing.

As for India – (following Max Mueller’s theory), it was a desolate, backward civilisation, awaiting Aryan conquest. Aryan conquerors came, raped Indian women, pushed Dravidians to the South, and ruled India. India’s progress was thus entirely due to the colonisers. This was history that was used by British colonisers and is accepted today.

And this colonial history is suspect – and being questioned.

Scientific Proof – Apart From Theory

A further bolster to the new theory is DNA and mitochondrial mapping done by various teams. These mapping and analyses (Sanghamitra Sahoo, et al) show that there has been no major DNA (Analabha Basu, et al) inputs into India. Some expert interpretation show that this data may require more and further research – as everything does all the time. More research done in India also throws up similar results regarding domestic DNA. This same research also shows that Indians share certain DNA markers with West /Middle East Asia – which supports Indian presence in Egypt, Mesopotamia (Syria, Iraq) and Anatolia (Turkey).

DNA research shows that a band of Indians went into Europe – now referred to as Roma Gypsies and share Indian genetic code. These Roma Gypsies have been living at the edge of European society – and have been severely persecuted through history. While Nazi and Croat brutalities against the Jews is known, that against the Roma Gypsies is swept under the carpet. European derisory references to Indian untouchability, overlook their own treatment of co-inhabitants for at least 1000 years is matter of shame for Europe.

Speculatively speaking

More RatsWhen enterprising Indian traders set out from India and slowly spread across the Middle East to Turkey – spreading their languages, religion and social systems, travelling in caravans of bullock-carts. And ships of the fabled land of Ophir, from South India, known as Oviyarnadu, came to West Asia, carrying ivory, peacocks, monkeys, sandalwood (says the Bible).

These loyal rats travelled with the intrepid Indian traders, on their ships and bullock carts, is how I think these rats spread. This is yet another part of the jigsaw – in which the Amarna letters, the Boghazkoi tablets and the DNA sampling of Indians (and Indian rats) disprove the AMT /AIT theory. These incidents point to another version of history.

India – Beyond Individuals

Posted in Current Affairs, History, Uncategorized by Anuraag Sanghi on January 26, 2008

Bhagvad Geeta4, 7Bhagvad Geeta4, 8“Whenever and wherever there is a decline in righteousness, O descendant of Bharata, and a rise of evil — at that time I manifest myself. To deliver all those who believe in goodness and to annihilate the evil, to reestablish righteousness, I will appear, in millennium after millennium.” Bhagwad Geetha IV, 7-8.

Who was Kalidasa? No one quite knows. After composing some of the best lyrical poetry ever, (in Sanskrit), little is known about him. His life lives in his works. Who was Ved Vyasa – the writer of Mahabharata? Or for that matter Valmiki! No one knows. About any one of these people.

Yet, whenever, India had needed, inspirations have come. To lead us … असतो मा सद्गमय From untruth to the truth … तमसो मा ज्योतिर्गमय … From darkness to light … मृतयोर् मा अमृतं गमय … from termination, to eternity …

Portrait Of Tipu SultanTipu Sultan unceasing opposition for more than 30 years (The Mysore Wars – 1767-1799) to the foreign rule before the 1857 War made the British rulers cautious about waging war in India. Immediately thereafter was the challenge of the Sikh qaum – led by Ranjit Singh. The death of Ranjit SinghRanjit Singh & Laili - His Favorite Horse in (1839) gave them another opportunity. Then followed the Afghan wars and the Sikh Wars (between 1839-1850). In 1857 was the India‘s first war of Independence.

From 1857 to the 1900, the British colonial government decimated Indian leadership. Bahadur Shah Zafar was sent to Rangoon. Rani Lakshmibai of Jhansi. Ahalyabai Holkar. Tantia Tope. Leader after leader came to the fore. And India continued to redefine itself.

Swami VivekanandaFrom feudal and hereditary leaders, the leadership slowly changed. From political to social. In parallel. In 1828, Raja Ram Mohan Roy formed the Brahmo Samaj. In 1875, Swami Dayanand formed the Arya Samaj. On 24th December 1892, Swami Vivekananda reached Kanyakumari – after travelling across India. He was entertained by rajas and the रंकDadabhai Naoroji (commoners) of his day.

Then followed the political leadership. Dadabhai Naoroji’s (Congress President in 1886, 1893 1906) research and quantification of the British Loot from India started a new set of leaders against colonial rule – and a new definition of India. Tilak’s demand for ‘swaraj’ and ‘swadeshi’ Lokmanya Balgangadhar Tilakgoods unnerved the colonialists. The colonial British Government deported Balgangadhar Tilak to Rangoon. He came back stronger than before. In other countries, when old leaders and rulers were removed or replaced, those countries descended into dictatorship, confusion, poverty. In India, we had wave after wave of leaders – and each time India moved forward. In a direction which has no precedents in world history.

What Happened In Other Countries

Why do Australia and Canada still acknowledge the British Queen as the head of the state? Spain has Juan Carlos I as its king! Did you know that Belgium has Albert II as it King? And Queen Beatrix rules over Holland (The Netherlands). King Akihito is venerated by the Japanese – and is the head of the state. Sweden is ruled by King Carl XVI Gustaf. Luxembourg has the Grand Duke Henri as its equivalent to a King! King Harald V lords over Norway! Queen Margrethe II rules over Denmark. The world still has quite a few monarchies – especially in the OECD. Why?

France removed and guillotined the monarchs – and they got Napoleon Bonaparte, as dictator! Russia tried – and they got 70 years of communist dictatorship. Italy asked King Victor Emmanuel III to go – and got Mussolini. The British exiled the Kaiser of Germany – and the Germans had to put up with Hitler thereafter.

Britain terminated the Turkish Ottoman Empire – and Turkey got a benign dictator, Mustafa Kemal Attaturk, and then not so benign dictators – and is yet to recover! East Europe (Romania, Poland, Czechoslovakia, Albania, etc) promptly started fighting with each other, within and without – after the kings were removed. China became communist after the last emperor – and still has a communist dictatorship. Iran, Egypt, Iraq, Libya, most of Africa, South America – same or similar story.

This history is why Canada and Australia cling to the skirts of British Monarchy.

Republican Democracy

America became one of the first successful Republican democracies – from 1789, when George Washington became the first elected President of USA. (70 years later there was a Civil War). America survived.

Israel, (propped up by massive US aid) is another country which has been a republican democracy for more than 50 years. Switzerland (with guaranteed neutrality from the European powers) is another in modern history to survive 50 years of republican democracy. Srilanka has been another country which has survived 50 years as republican democracy – but just about.

India is the youngest Republican democracy – and we have completed a historic 50 years as republican democracy – Jan 26th 1950, till date.

Gandhiji’s Conquest

But before the republic, came the unification of India – the crowning achievement of Gandhiji. Not the political union (achieved by Sardar Patel) – but the ideological union!

Garibaldi (united Italy), Bismarck (united Germany), Simon Bolivar (liberated and united South American countries) were unifiers who succeeded with the help of armies.

Gandhiji (armed with a walking stick) unified a larger India (and Pakistan) without an army. An India and a Pakistan – bigger than what the largest empire in the history of the world, the British Empire could not conquer with its armies.

One Clean Break

To make a one clean break from the feudal-colonial past – and succeed! That is a dream – never before in the history of the world. India made history – by surviving for 50 years with a republican democracy.

In 1947, India was a feudal society with more than 500 Kings and (some) Queens at the time of Independence. (No, the British did not rule over all of modern India). Large parts of India also had to change from a colonial mindset.

How Is India Unique

However, no other country has 15 official languages.

Switzerland has only 4. Sri Lanka’s Sinhalas do not want to accept Sri Lankan Tamils as full and equal citizens – hence the 20 year old civil war.

Social Equality

The liberation of Blacks in the USA is a 1970s phenomenon. It took non-violent protests (Martin Luther King) and violent threats (Malcolm X) for some kind of real emancipation and equity to come in.

Blacks in the USA legally got full and equal liberty only in 1964 after President Kennedy’s Civil Rights Act of 1964. Earlier in 1954, President Eisenhower had to send in the army (the National Guard). In the Cold War scenario, under international media glare, during the Little Rock School stand-off, Eisenhower (a Southerner himself) reacted. The Mayor of Little Rock, Arkansas closed down the school rather than de-segregate. De-segregation (between the Blacks and Whites) happened clearly and fully only by 1970-75. Non-violent protests by Martin Luther King (inspired by Gandhiji’s) till 1968 and violent threats by Malcolm X thereafter, made desegregation a reality. Not to forget Martin Luther King’s assassination in 1968. The eyeball-to-eyeball confrontation during the Kennedy years produced the Civil Rights Act of 1964.

But, Gandhiji’s first step, after coming back from South Africa, (many decades before India’s Independence, Unification and the creation of the Republic) was to start social reform against untouchability.

Enforcement – or Help

India and America, created their own constitutions without external enforcement. Republican democracy in Germany was imposed by the Allied Powers – hence their record is blemished.


In most countries, religion divides. In India, we are different. India has the world’s second /third largest Muslim population. The Indian Christian population is equal to that of most majority-Christian countries – excluding just a few big one like USA, Russia, Mexico, Brazil, etc. Buddhists number nearly 50 lakhs. Sikhs, Parsis (Zoorastrians), Bahais, follows their own religion. Iranians, Armenians, Jews, Chinese have come to India – when persecuted in their homelands.

Racism! Anyone?

No, thanks!

India has the Caucasoid stock – spread over the North and West India; Australoid stock spread over South India and the Mongoloid stock spread over of East and North East. There is also a very small sprinkling of the Negroid stock – less than 1%.

The Challenges Ahead

The challenges ahead are defence and economics.

India’s defence unpreparedness is beyond comprehension. Worse, is the lack of threat perception. Indians (sadly and truly) limit their threat perception to the Pakistanis – and the Chinese. with the world’s largest private reserves of gold India becomes a target. The resultant global and emerging threats are unrealised. We spend billions of dollars on buying arms all over the world – but our domestic arms industry is starving.

The second is economics. The world trade systems, financial agreements, currency management continue to drag down India – and many other countries. Navigating these uncharted waters successfully is the other.

And I am sure that another set of new leaders will arrive and take India forward to another level.

Sooner – not later.

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India’s Silent Revolutionaries

Posted in Business, Current Affairs, History, India, Media, politics, Satire by Anuraag Sanghi on December 9, 2007

“Mr. Bond, they have a saying in Chicago: “Once is happenstance. Twice is coincidence. The third time it’s enemy action.” Ian Fleming, in Goldfinger.

In 60 years of post-colonial India, 3 significant developments will win the award for deepest impact – but least appreciated or known.

Potti Sreeramulu - Spirit Of The Linguistic State Reorganization (Image source - hindu.com). Click for larger image.

Potti Sreeramulu - Spirit Of The Linguistic State Reorganization (Image source - hindu.com). Click for larger image.

1953 – The Language Genie

An issue on which the colonial rulers ‘set up’ the new rulers of India for failure was on the contentious issue of language. Rightly, the colonial rulers pointed out that there never has been a successful country with so many languages.

Nehru, Subhash Chandra Bose were all for one national language – much like numerous western countries, whose success they so wanted to rival or exceed. And the language of their choice was Hindi.

What kept Europe divided, amongst many things (not that they need help), is language. Belgians (a country with 1 crore population; smaller than Chennai) are being prepared for probable split between the Flemish and the French speaking populations. Canada has been at the precipice for 100 years – torn between two languages. The Balkans , homeland of Alexander the Great (who wanted to make one world), have been at each other for the last 80 years – after they became independent of the Ottoman Empire.

There never has been a country, in modern history, which has had 2-3 languages, without splitting at the seams. One man, who is forgotten and who made a difference was Potti Sreeramulu. A believer and follower of Gandhiji, he pushed Nehru for re-organising India on linguistic lines. Nehru vacillated. Potti Sreeramulu, like Gandhiji, went on ahunger strike. Nehru ignored Potti Sreeramulu’s hunger strike. Potti Sreeramulu died.

The ground swell of international (and also domestic) opinion forced Nehru’s hand. He was left with little choice. And India has since then been administered on linguistic lines. This has given enough space for every sub-culture – without diluting their renewed Indian identity.

In the meantime, Indians have become adventurous in their integration. Idli and Dosa are a part of a Punjabi households and salwar kameez have become popular in Kerala. Hindi film industry is second only to Telugu film industry.

If India had followed colonial administration’s advice of one national language, Tamil Nadu would definitely have seceded in the 1960’s. Ask Sri Lanka. I do hope that Malaysia does not make the Sri Lankan mistake.

A Young PV Narasimha Rao1991 – Problems From Outside

Rajiv Gandhi came back from Sriperumbudur in a coffin. Assam problem seemed beyond resolution. The common Indian had given up on Punjab. The 1984 anti Sikh riots only strengthened the negative outlook. Kashmir was simmering. The Indian electorate had given a fractured mandate. A hung Parliament.

Indian economy was going downhill – and nothing seemed to get the economy out of the “Hindu rate of growth”. India was on the verge of a debt default. Indian debt was downgraded by western rating agencies. The Asian Tigers had done wonders – under US tutelage. China was furiously reforming – and succeeding at it. USSR India’s faithful ally, was breaking up. Corruption was endemic and every politician was an Untouchable – nobody or anything could touch them. There were no laws. Many across the world shook their head and could be heard saying, “I knew … I told you … It had to happen …”

All bets on India were off.

A “intellectual” politician, was called back from retirement – to become Prime Minister PV Narasimha Rao. Forgotten today.

By 1995, he set up India for today’s growth. In a matter of 4 years, he cleared 40 years of cobwebs. The direction that he put India on has been now been followed for more than 15 years – with great success by more than 5 Prime Ministers. His biggest success was accountability. Heads of administration do not appear in a court of law – which PVN did. Election Commission, CAG, Supreme Court acquired fangs – earlier docile shadows of their purported design of BR Ambedkar.

Naidu And Vajpayee1992 – The New Paradigm

One of India’s chronic under performer, Andhra Pradesh got a new Chief Minister – N. Chandra Babu Naidu. In the next 9 years, Andhra Pradesh moved in the Top 5 investment destinations.

Technology savvy, focused, driven – he changed the political idiom in India. State governments now pattern themselves along Naidu’s lines. Privatisations (instead of expanding public sector), tax cuts (instead of increases), administration automation (instead of increased recruitments), hand picked bureaucrats with a development agenda (instead of personal loyalty agenda earlier) were the cornerstones of his strategy. His state administration reform agenda convinced PM Vajpayee to commend Naidu’s template to other state governments to follow.

The Source

These 3 reformers were from Andhra Pradesh – carved out of the earlier Nizam state. The Nizam state was the largest Indian state (in Europe or any other part of Asia, it would have been a few countries) – ruled by an Indian ruler. The last Nizam of Hyderabad, considered at one time the richest man in the world, was also a very simple man. Famously, he never threw away half smoked cigarettes – frugality for world’s richest man. Especially, when other Indian Nawabs out did each other with their spending and peccadilloes in London and Paris.

Andhra Pradesh (most of) was not administered by colonials. Hyderabad is the largest modern Indian city – without a history of Colonial administration. Kolkatta, Chennai, Bangalore, Mumbai, New Delhi were cities ruled by Colonial India administration before the creation of the Indian Republic.

Indian consumer companies test market their products in Hyderabad frequently – as it lends itself to the Indian idiom. Other major metros (with a history of colonial administration) many a time give a “false positive”. Andhra Pradesh supports the world’s largest film industry – bigger than Hollywood and of course, Mumbai film industry.

Two significant creative minds were adopted by Hyderabadis as their cultural mascots. One was Allama Iqbal of “सारे जेहान से अच्छा हिंदुस्तान हमारा” “Saare Jehan Se achcha Hindustan Hamara” fame.

Chirkan, the second mascot, is the “poet” of dirty ditties. Chirkan was the irreverent break from the feudal and colonial Indian mindset – before the Indian Republic.

His rhymes on Qutub minar (a phallic symbol of feudal /colonial majesty of another era) have been repeated by every school child as his very own. He was feted at cultural events – and was a legend in his lifetime. His “sher” on a princess (the Nizam’s daughter) is repeated by schoolboys even today with raging hormones. It is to the Nizam’s credit that Chirkan was not persecuted – but given a token punishment of banishment from Hyderabad.

Forgotten today by the mainstream, Chirkan’s books still circulate in the underground. Chirkan’s rhymes and jokes spread to all of India. 75 years later, every teenager makes his rites of passage with Chirkan’s jokes. Most of Mumbai film industry’s dirty jokes are a take off on Chirkan.

China’s Bullion Reserves – Gold, Silver and Silk

Posted in Gold Reserves, Uncategorized by Anuraag Sanghi on November 26, 2007

Modern economic research estimates that through most of last 1000 years, China and India have accounted for about 50% of the world economy. 20th century was different for both. While Indian gold based systems are better known, Chinese gold story is very different.

1. China & Neighbours – Gold Producers

India was always an importer of gold. Domestic gold production in India’s core geography has historically been negligible – or low.

China, on the other is different. Mongolia and China have been significant gold producers in history. Estimated gold reserves from current ore mining in China exceed 600 tons – and exploration efforts are expected to increase this to 3000-3500 tons. China is the world’s 4th largest producer of gold – ahead of USA and behind Australia, and expected to overtake South Africa soon.

Currently, illegal mining in China is big time activity and is indicted for supporting poaching!. Chinese were exporters of gold and silks.

2. Chinese – Great believers in silver

Chinese common coin was a silver coin – the tael (which came from the Malay word tahil; which came from Indian word tol; meaning ‘measure’). There were 2 taels – one was commercially pure silver ingot of one Chinese ounce called a liang. The other was a kuping tael – which was coin. Bulk silver was used as currency and called sycee. There were many other taels like Tsaoping, Peking, Tientsin, Hankow, Canton. Chinese also use silver jewellery – against gold preferred by Indian women

3. Chinese invention of Paper

Jiaozi - circulated in Sichuan in the Chunhua period of Emperor Taizong of Song Dynasty

Jiaozi - circulated in Sichuan in the Chunhua period of Emperor Taizong of Song Dynasty

Chinese rulers circulated paper money for longer (from 6th century onwards) and greater area than any country in the world. The first paper currency jiaozi was issued in 6th century – which collapsed very soon. The Song dynasty re-introduced paper currency in 9th century due to copper shortage. Probably, some Jewish merchants were also involved in the jiaozi manufacture.

Kublai Khan’s (a descendant of Genghis Khan) paper money management meant that all Chinese had to deposit all gold (or be prepared to die) with the Khan’s treasury and they got a currency note which was trade-able. This ‘system’ received wide publicity in Europe (thanks to Marco Polo). 600 years later, Roosevelt did the same with the Americans – and collected 8000 tons of gold.

4. Opium & China

Western consumers bought tea, silks and other Chinese commodities for which they paid in silver. The Chinese did not need much of Western goods – like India. To correct this negative balance of trade, Europeans promoted opium in China. When Chinese resisted the Opium trade, wars followed.

In early 19th century AD, Opium imports into China by British, French, American, Dutch, Spanish traders, sourced from India led to an outflow of silver from China – and a currency crisis. The ruling Qing state went into a downward spiral– culminating in the Chinese Civil War and rise of Communism. The Kuomintang (supported by Chinese underworld, The Green Gang, The Red Gang and The Blue Gang) was pitted against the Mao Ze Dong’s Communist Party – and both were armed and supported by Western powers.

Opium for China was produced by indebted Indian farmers and a few Parsi traders set up their offices in Hong Kong. However, the Parsi role diminished after the advent of steamships, their big losses during the Opium Wars and the rise of the cotton trade. Other Indian traders, possibly restricted by shubh labh’ compunctions played a lesser role (compared to the European traders) in this Opium trade.

Major opium trading companies like Jardine Matheson, David Sasoon & Company and sundry traders set up The Hong Kong & Shanghai Banking Corporation for facilitating this misery. The Chinese Opium problem was finally solved by several draconian measures during Communist rule.

5. Wars In China

When Chinese resisted the Opium flood, Western traders resorted to war. The Japanese emboldened by new found wealth and military technology, joined Western powers. The Sino Japanese Wars, The Opium Wars with Europeans and The Boxer Uprising before WW1 imposed large war reparations on the Chinese. The Civil War in China between the world wars destroyed Chinese commerce systems. The Cultural Revolution has left the Chinese commercially backward.

6. How did the Chinese preference for silver affect them?

In 1500, the approximate exchange ratio between gold liang and and silver liang was 1:4. Today it is 1:50. Silver mineral deposits, mining and availability is more elastic than gold. Elasticity of gold production is very low. Secondly, above ground supplies of gold are far higher than known below the ground estimates. Hence, manipulation of gold prices over a period of time is difficult.

Touchy ... feely ... selly ... silly ...

Touchy … feely … selly … silly …

7. Current Status

China, as the world’s largest holder of US dollar debt is constrained in its move to increasing gold reserves through market operations. A dollar sell off by China could collapse the world’s currency system – and the biggest loser would be the Chinese! But a negotiated conversion of some dollar reserves to gold is eminently possible.

Between 2000-2007, the Chinese Government increased their monetary gold reserves from more than 300 tons, to more than 600 tons. Official Gold Reserves of Chinese Central Bank Gold reserves are about 600 tons of gold.

China has become the world’s 3rd largest consumer of gold – up from a 100 tons to 350 tons. The Shanghai Gold Exchange has made it easier for individuals to invest in gold. They have reduced the transaction size from 1 kg to 100 gm.

8. Possible Chinese Strategy

China’s investment in US$3 billion in Blackstone Private Equity /hedge fund, was the first by any country. This gives China an inside track to the world’s largest hedge fund and private equity player. The Blackstone Fund on the other, gets access to the world’s largest liquid reserve – more than 1 trillion dollars of the Chinese Government’s monetary reserves.

China is setting up a US$200 billion sovereign fund that will invest in range of markets and instruments. With this institutional framework, for China to increase their monetary reserves by a 1000-2000 tonnes is well within realm of possibility.

9. The 2ndlook alternative (Oct.3, 2008, update)

Chinese assets ...

Chinese assets …

In any new world financial reform proposal, the Chinese voice will be very important. After all they are the world’s largest creditor nation! They have US$2 trillion worth of IOUs with them. Of course, the composition of these US$2 trillion Chinese reserves is a state secret.

The Chinese will not agree to any ‘hare-brained’ scheme by ‘tin-pot’ dictators, who are sitting on some raw materials – and think that the future belongs to them. The world has so many of this variety, that it does not require me to be specific.

The Chinese need to acquire some big ticket assets – maybe, some big US companies, for about US$1.5 trillion and bring down their reserves to US$0.5 trillion. This will reduce US outstanding debt, create demand for US stocks, lift the Dow Jones, and create value for the dollar. As I see it this is the only way that the Chinese can cash in their chips. The House will not let them take it away any other way.

10. What does this mean for others

China, the largest creditor nation in the world, carries a big stick. They are not democratically accountable and transparency is not required from them. Hence, a significant conversion from dollar holdings to gold is feasible, can be done quietly (hence, at an economic price) and with trade power they have, a strong negotiating position is a given.

And that is an opportunity others may not get!

In the last 150 years, strong monetary gold reserves have been a feature of Western monetary systems (acquired mostly, by  dubious means like slavery, genocide). China’s moves, if any, will diversify global monetary reserve systems away from the dollar and the West and spread the weightage in a more equitable manner – giving rise to speculation about a renminbi bloc.

And that is something that is good for global monetary system.

What should India do …

Oil Dollar Tango

Oil Dollar Tango

Two years ago …

This post had estimated that the Chinese could possibly (and they have)  increase their monetary gold reserves. On April 24th, 2009, Bloomberg reported that China had increased

its (gold) reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in an interview with the Xinhua News Agency today. China, the world’s biggest gold producer, has increased its holdings before, Hu said in the interview carried on the administration Web Site. They rose from 394 tons to 500 tons in 2001 and to 600 tons in 2003. The U.S. has the world’s biggest gold holdings at 8,134 tons, followed by Germany with 3,413 tons, World Gold Council data show. France has 2,487 tons and Italy 2,452 tons, while the IMF has 3,217 tons, according to the council.

Another report, from Market Watch, a WSJ web publication added,

The increase makes China the world’s fifth-largest holder of gold, just ahead of Switzerland, and among the six nations plus the International Monetary Fund that have reserves of more than 1,000 metric tons. Although Hu did not elaborate on where China had sourced the additional bullion, her comments were interpreted as meaning they came from domestic sources and may included refining of scrap metal.  Traders also say the gold was accumulated systematically over a number of years. Last year China ranked as the world’s largest gold producer with 12.2% of world output, equivalent to 288 metric tons. The U.S. ranked second with a 9.9% share, or 234 metric tons.

What are the future plans of the Chinese? A report quotes an analyst

China should increase its gold reserve from 600 tons to about 2,500 tons in a short term and to 3,000 tons in a long term to cope with the versatile exchange rate risks, said Teng Tai, an economist of China Galaxy Securities Company.

Of course, this really does not mean much – except that it may keep gold prices on boil. Whether a currency is backed by a 5% or a 10% gold reserve may not mean much, in this era of rampant use of “a technology, called a printing press” as an economic tool – not just by the US of A. For long term economic stability, gold needs to be in the hands of individuals – and not Governments.

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