[WAT] Everyone hates China’s rich kids

Over the last few decades, China has seen one of the highest rates of growth in the world that has catapulted it to the position of the world’s largest economy in terms of PPP GDP. This exponential growth, driven mainly by the secondary sector has created quite a few billionaires in modern day China and increased the income disparity significantly.

To make matters worse the prodigal sons and daughters of these billionaires are now grabbing eyeballs by their ostentatious displays of wealth. Flashy cars, burning notes and gambling are just some of the vices that the newly rich fuerdai have begun to flaunt. The infamous picture of a pet dog of one of these kids wearing two apple gold watches made the rounds on Instagram lately, with people comparing these kids to the likes of Paris Hilton. The problem however, is much deeper than just a few kids showing off their wealth. As the global economy slows down, China will have to work twice as hard to sustain their growth. A saturation in the manufacturing sector will also need a refocus towards the services industry. And it is this very generation of people who will have to build this China. The fear is that a generation that has only been taught how to expend wealth not create it will not be able to take over the reigns from perhaps one of the most entrepreneurial generations in China, leading to a massive slowdown.

China may be wise to learn from Japan and the Asian tigers which followed the Japanese pattern of growth to reach where they are today, or it may soon fall into a pit of no return, much like some of the European economies. Discipline and focus are tough to maintain once a certain level of wealth and power is reached, but if China wants to maintain its position in a competitive world market, it fuerdai will have to step up and take responsibility of their nation’s future.

Topic courtesy: Juan

 

 

[WAT]Minimum education level for ministers

India, the world’s largest democracy is now poised emerge from its slumber to enter the global greats. While a strong and entrepreneurial working population will be the major catalyst of this change, the importance of the ruling class in this growth cannot be denied. With an increasingly proactive urban populace participating actively in the political dialog, the question of whether a certain level of education should be made necessary to hold a ministerial post is slowly emerging.

The advantages of such a change are quite clear. An educated politician will not only be able to take better policy decisions on critical issues of national interest, but an intellectual ruling class will also improve India’s image on the global scale. Most developed economies have businessmen and graduates from Ivy leagues in senatorial positions, which certainly gives them a substantial advantage while making policy decisions. That being said, this move is somewhat antithetical to the concept of a perfect democracy as well as a bit detached from the ground realities of the country. We still have a literacy rate of around 74% which is a huge improvement over our pre-independence number of 12%, but still lagging considerably over most nations. Only 3.1% of Indians complete tertiary education, which makes having this group represent the broader masses seem a bit elitist. Also an elected representative from a rural uneducated constituency will probably need to be somewhat similar to the people to fully comprehend the nature of their problem and work on redressing it. Taking both sides of the issue into consideration an ideal middle ground will have to be reached, to come up with an effective and pragmatic solution.

There have been a set number of constituencies reserved for women candidates throughout the country. The idea of a meritocratic reservation, wherein a certain number of constituencies are reserved for people with a degree from an accredited college can be pitched. While this will keep the fundamental ideas that our founding fathers had intact, it will also give a good mix of the intelligentsia to our upper and lower houses.

 

[WAT]Subsidies in India- Boon/bane

In a country with nearly 22% of its population below the poverty line, and nearly 70% of the rural population dependent on agriculture and allied activities, subsidies will always be a critical instrument of fiscal policy. Recent events like the food security bill of 2013 have brought subsidies into the public eye and spurred an animated debate between its proponents and opposers.

The basic economics of subsidies is straightforward, and in most parts largely negative. They create substantial deadweight losses while the economic incidence of each subsidy depends largely on the elasticity of the demand and supply curves. They also entail a corresponding increased pressure on the tax base of the country and are largely deemed as fiscally irresponsible. That being said, the need for subsidies in India is undeniable. While fuel subsidies help keep the retail inflation in check, food subsidies are critical for a large mass of the Indian poor who grapple with malnutrition and starvation. Education subsidies and mid-day meal programs which get a sizeable portion of the Indian children into schools and help mobilize the nation’s demographic dividend are necessary expenditures to the fiscal purse. But as research has shown time and again, aid and subsidies do very little for the long-term growth of the country. At best they keep the situation unchanged, at worst they slow the economy down.  Replacing the extremely inefficient form of Indian agriculture which includes small farmers and lesser technology with the American model to cater to our fast growing needs is critical. While this will lead to a lot more prosperous farming population, it will also lead to a large exodus of the displaced farmers to urban centers. We need to have a substantial amount of jobs and the requisite infrastructure in place before this can happen.

In conclusion, while the need of subsidies in current day India is undeniable, the aim of fiscal tightening and enabling a more self-sustaining system shouldn’t be forgotten. Let us help our poor out of their misery into a productive world, not keep them there forever.

 

[WAT] Juvenile justice bill

The gruesome attack on Nirbhaya in late 2012 brought the topic of whether teenagers in the 16-18 age group should be tried as adults for serious crimes like rape and murder. Proponents of the bill believe that this will act as a deterrent to further incidents in the future, where criminals get away just because they are a few months short of 18. There is also the other side, which believes that justice should be reformative not retributive, and even more so when the perpetrator is below 18.

In December 2015, the Rajya Sabha passed the Juvenile Justice bill under which people in the age group will now have to face a special Juvenile Justice board, which will have 1 magistrate and 2 social workers, atleast one of whom is a woman. The board will then decide if the child should be tried as an adult or sent to a corrective home. While sentencing a person under 18 years of age as an adult may seem a bit harsh, it would be prudent to consider the malice in the actions and its impact on the victim and their families.  Reformative justice, will always be the choice in a democracy like India, but any measure that will make a potential criminal think twice, shouldn’t be stopped by labelling it retributive.Existing research has proven that extreme action(i.e capital punishment) isn’t a deterrent in violent crimes, but the impact of having some punitive action where none was available earlier has been tremendously positive.

I believe as we move forward in our quest to be a leading world power, having a safe and nurturing environment for out women is of the essence. The bill is a strong step in this direction, providing a fair and efficient solution to a problem that haunts the Indian society today.

 

[WAT] Go Solo

Every day, the world gets smaller and smaller. From haircuts to entertainment everything is now customized specifically for the end user. At first glance this looks like a great thing, people developing their individualism in a new developing India, but the ground reality may be a lot different.
New companies on the market now enable people to record and watch television shows on their own devices. So the age old clash of the husband wanting to watch that all important football match while his wife wants to gorge on her favourite TV soap may soon be a thing of the past. For most people the positives are abundant- more liberty, more choice, and most importantly fewer disputes in the household! Personally though, I wouldn’t vouch for this new advance. I may be a bit old-fashioned, preferring the scent of an old book over a kindle, but the loss this would cause to our interpersonal relations can’t be denied. There was joy in watching Tendulkar smash players out of the ground or Shah Rukh play the eternal lover, but I think the real joy was watching it huddled around a TV with your friends and family. Seeing people bite their nails as the match reached the death overs or the movie reached its climax. Entertainment was something that brought people together. And I fear with the rise of the “ultra personalized” entertainment this may soon be a thing of the past.
Before I am mistaken for the Unabomber, let me clarify that I am not vehemently opposed to technology. As long as it brings us happiness and adds value, let us use it freely. But let us not sacrifice the things much more important in life in pursuit of this development.It would be wise to tread carefully, and remember that when everything is lost, all we have, is each other.

[Quora]What is NIFTY/Sensex? How is it calculated? Based on what do the points in Sensex increase or decrease?

Sensex

What is Nifty/Sensex?
The Nifty and the Sensex are both stock indexes.
The Sensex is an index of 30 top( large, well-established and financially sound companies across key sectors) companies from the Bombay Stock Exchange, where as Nifty is an index of the 50 top companies traded in the National stock exchange.

How do you form an index:
The market capitalization of the index is found out based on the free float market capitalization(M) of individual companies.
M=( Total shares* Market price each share* Free float ratio).
The free float ratio is nothing but the percentage of the company’s outstanding shares that are present with the general public.
The total market cap for the Sensex is merely the summation of these 30 Ms.

How do you calculate the value of the sensex:

Day0: The base value of the stock index is 100 for the Indian exchanges(A standard default, set when the indices were made).  Let is assume that X=100crores (i.e the sum of all the market caps of the index is 100 crores)
Day1: On day 1 lets assume that X goes up to 105 crores. This is a 5% increase, and is reflected by the sensex going up to 105.

On any given day you can calculate the value of the Sensex by this formula

 

The value of either indices thus increases or decreases based on the performance of the stocks that are a part of that index.

Based on my Quora answer

[Quora] How would you explain the sub prime lending crisis and the ensuing recession to a 10 year old?

Let us think of the housing loans as cookies and the cookie salespeople as the banks.

In this virtual world of ours, for every box of cookies that the salesperson sells, the customer pays her a token, claiming that he will pay for the cookies in installments(of 10$ each) over the next year(=120$). Since she has to give the cookie company only 100$, this seems like a pretty good deal, so she sells the cookies.

Till this moment, the responsibility of choosing the “right customer” is on her, since if the customer refuses to pay(defaults), she loses the money she has paid to the cookie company and doesn’t make any profit.

Introduction to CDOs(Collateralized debt obligations)

The salesmen together sell 100 cookie boxes in our imaginary world.

Now, a smart guy from the locality enters and makes a deal with the sales people. Together they decide to sell these coupons that their customers give them, back to the public at 100$ with two offers to choose from

50 coupons(Group A )That will pay 9$ a month(108$) as and when the cookie customers pay back
50 coupons(Group B) That will pay 9.5$ a month(114$) as and when the customers pay back.

The catch is that the people who buy group A coupons get paid first, so for a given month, if 50 of the 100 customers don’t pay, the people from group B don’t get their money, but the ones from A do.
Think of it as a bucket with the installments from the customers as a water source.

The bubble:

Now a strange thing begins to happen. For ever cookie box that the salespeople sell, they get an assured 9$(on average), irrespective of whether the customer pays or not. This makes them sell cookies to people who are very unlikely to pay back! The demand for cookies begins to skyrocket as everyone begins to purchase more cookies. Everyone’s happy, but everything isn’t as rosy as it looks. It is the birth of a bubble

As the demand increases, so does the price of the cookies. The cookie company now sells the box for two times the price. However since people who aren’t capable of paying face no resistance from the sales force, the demand is unaffected.

The problem begins to surface when it is time to payback for the cookies. Since a lot of our cookie eaters didn’t have the money to pay for them, the funds begin to dry. The banks take back the cookies from the customers since they haven’t been able to pay.(assume that in our virtual world the people don’t eat cookies, just sniff them :P) This leads to a large supply of cookies in the market, and the prices drop. So the people who had bought the cookies at 240, will now get only 120 if they sell them in the open market. Knowing that paying installments worth 240 doesn’t make sense for a 120$ cookie box, they declare that they aren’t able to pay as well.

From there it is a downhill journey. People who had bought the cookies as well as the ones who had bought the coupons from the smart guy lose money, and the world faces one of the biggest recession in recent times.

Now if your 10 year old has lost faith in the world, show him this picture of a panda rolling downhill. Might just cheer him up!

From my Quora answer

 

[Quora]How can you explain the concept of stock market to a 7 year old?

Wow, this should be interesting.

Let’s assume seven year old Tom, a rather enterprising fellow that he is, wants to open a lemonade shop. The shop will run all through summer break( Around 60 days). Now he needs 100$ to buy the lemons, the ice, a small table and chair and a colourful canopy. But investing 100$ is kind of risky. So he goes to his classmates, and offers them a part of what he makes if they all chip in 1 $. Everyone who has chipped in the dollar gets a ticket- a share if you may.

 

The daily profit that Tom makes, will now be split into 100 parts, and each of his classmates will get 1/100th of the profit. The value of the ticket they hold therefore, will be equal to the the sum of these 1/100th amounts for all the subsequent days when his lemonade shop is working.(Neglecting time value of money.)

Now, if Tom makes a 20$ profit on his first day at work, each of his classmates will get 20 cents. Since his shop will be running for 60 days, they are bound to get a lot more(60*0.2=12$) than what they had invested. Now all his classmates want to buy more tickets at 1$ since they are hoping to get 12, and the value of each ticket begins to increase. Now, seeing Tom’s grand success Rita also starts a shop along the same street corner. Rita makes way better lemonades , and Tom’s profits slowly start falling. This causes a panic among the ones who have bought Tom’s ticket, wanting to sell it off while it is still high.

And the show, as they say, goes on…

From my Quora answer

Safe on the roof

A torch and a book was all she had. That, and the rusty old safe on the roof.

It would begin around 11, when he would come home. The noises, the utensils smashing against the wall, the screams and moans. The serene silence of the night, that cricket chirping monotone, broken by her mother’s sobs. And she would tug her book tightly, and hold on to the door of the safe.

It was dark in there, but it was darker outside.

Her father never even noticed her some nights. On others her mother would have to bear a few extra blows on account of her disappearance. But he never found out about this secret hideout, and he was too smashed to even try.

He hadn’t always been like this. He was a kind father and a loving husband. He would take them to the fairs and to the circus, and she would sit on his shoulders, eating her cotton candy, the world under her feet. Then, one day, a demon took him away.

It took him, into the shady taverns and the greasy whorehouses. Slowly it began eating on his soul, until finally he ceased to be the man he once was. Alcohol does that to people, turns simple kind men into monsters.

The tears had stopped coming now. She touched the cold rusty metal of the cupboard; and smiled, the saddest smile that a person could smile, thinking about how much it resembles her heart.

She sits there alone, waiting. Till it is completely silent, and then she waits some more.

The light scares her, darkness is safe.

Image credit: “safe” – © 2007 Paul Keller – made available under Attribution 2.0 Generic