The Troika verses Cyprus

Cyprus, the tiny Mediterranean island nation of 800,000 people (20 times less than the population of Delhi), managed to evade bankruptcy and exclusion from the Euro Zone by successfully negotiating a deal with The Troika - the three largest lenders and debtors in Europe - The European Central Bank (ECB), The European Commission (EC), and The International Monetary Fund (IMF).  

However, rejoice not yet, for this $13 billion bailout comes at a massive price.  Never mind that Cyprus' debt is now going to be 100% of its GDP, but in order to avail of this $13 billion loan, the Cypriot government has to raise about $5 billion on their own (AP).  But how is a nation, whose GDP is about $20 billion, supposed to raise 25% of their GDP in six months?    Simple, they are going to take away bank deposits over $100,000 from Cyprus' second largest bank - Laiki.  Like the US, bank deposits in tax-haven Cyprus are insured by the government for up to $100,000, anything above that is non-insured deposits, which the Cyprus Government plans to use as part of their $5 billion "fund raiser".  The legality of such an action is still under discussion, but if it is sanctioned, people may lose up to 40% of their deposits at Laiki.  Most of this money actually belong to foreign depositors, mainly Russians, who use Cyprus as a tax haven.  

Laiki is going to be split into a "good" bank and a "bad" bank.  The good bank with its insured deposits will merge with Bank of Cyprus, the largest bank in Cyprus, and the "bad bank" with all its toxic and uninsured assets will be dissolved!  Not to mention all deposits in Bank of Cyprus over $100,000 is going to be frozen indefinitely and there is a withdrawal limit of $100 per day to stop a "run on the banks".  A very bold move indeed.

Austerity measures have already bludgeoned the economy with everyone from contract teachers to businesses taking heavy hits, and now the dissolution of private bank funds is only going to make the public more enraged.  Cyprus, once one of the most economically sound countries in the world with a net median income of about $30,000 per year (CIA), is now tottering on the brink of economic extinction.  How did this happen?

Again, it all traces back to the US sub-prime mortgage disaster of 2007.  Truly when the US sneezes, the whole world catches a cold.  Cyprus, with its low tax rates is a haven for foreign, particularly Russian deposits. This created a bloated financial sector eight times its GDP!  Like Iceland, the Cypriot financial sector had made a series of poor investments, including buying Greek bonds as a precursor to this crisis.  Coupled with slowdown in the tourist and shipping sector due to the global economic meltdown, the Cypriot economy was unable to recover to its pre-2009 fundamentals.  The massive size of the banking system also prevented the government to raise enough liquidity domestically to bail out its banking system.  

For the past year (2012), Cyprus has relied on an emergency $2 billion dollar loan from Russia, Cyprus' closest partner; but a refusal on Russia's part to extend the loan resulted in Cyprus approaching the EU with their begging bowl.

Perhaps Cyprus has managed to evade bankruptcy and exclusion from the Euro zone with this bailout, but whether Cyprus' restructuring will be a Renascence moment is difficult to gauge.   But, a good time to buy property in Cyprus I reckon.

For further reading.

Sources: Associated Press, Reuters, CIA Fact Book, BBC.

We Are All Slaves

"Students who acquire large debts putting themselves through school are unlikely to think about changing society.  When you trap people in a system of debt they can't afford the time to think.  Tuition fee increases are a disciplinary technique, and by the time students graduate, they are not only loaded with debt, but have also internalized the disciplinarian culture.  This makes them efficient components of the consumer economy."

~ Noam Chomsky

And that is just the tip of the iceberg... 

India Declares War on Italy!

Now that I have your attention, let me assure you that India is not actually declaring war on Italy.  Although the question of whether we should is a legitimate concern in the minds of several people.

For the unaware, here is the quick recap.  In 2012 two Italian marines protecting an Italian merchant ship from Captain Jack Sparrow, shot two innocent Indian fisherman off the coast of Kerela.  The Supreme Court of India ruled that India had jurisdiction in the case and placed the marines under arrest.  In December, at the behest of the Italian government, and the promise that the marines would return to India to stand trial, the two marines were sent home to vote in the general elections and spend Christmas with their families.  But, here's the kicker.  The marines didn't come back.  

The Italian government is now contesting the Supreme Court ruling on the grounds that the shooting happened in International waters which is beyond the Indian government's jurisdiction.  Call it bad faith or simply lying, the Indian government was stunned at the turn of events, especially in the light of recent events involving in a billion dollar corruption scam with the Anglo-Italian helicopter manufacturer AugustaWestland.

So what does our beloved UPA government led by, and here's where the irony comes in, led by an Italian (read: Sonia Gandhi), do?  Simple, bar the Italian ambassador from leaving the country.  Meanwhile, the two marines are given a hero's welcome! Cool, so what happens now?  We await with bated breath.  Good thing Italy doesn't have nuclear weapons, eh?  

Perhaps on the good news... which we have so little of these days, India was not ranked as the rudest country in the world to tourists!  You may not agree with the ranking, but makes interesting reading.  Ironic that the Americans are writing an article on rudeness!

The Three Wise Friends

My friends came visiting.  Three wise ones followed the Ghat to my humble little abode.  They brought in some welcome laughs and reminiscent winds, but most importantly they brought gifts!

Finally my new LP player and LPs are here.  Old friends like New Order, Depeche Mode, and the Psychedelic Furs... truly, my bosom for a pillow is on the 45.  If you didn't get that pop culture reference, then too bad.

Photo courtesy: Dilanie Devadoss.  Thanks.

Also in the delivery was a super cool green laser.  The geek liveth again.

Thanks SS, Megha, and Amit!  You'll are the best.  

Honorable mention to Maggie C!  Your thanks is DM concert tour this fall.

How to Save The Economy

Mssrs. David Mitchell and Robert Webb show us how the government decides to bring the economy back on track.  What renowned Econometricians do behind closed doors.  

What I Was Reading... and Watching... and Listening

I had some interesting reading and watches this week... well actually over the last few weeks but I'm only getting to writing this now.

Salman Khan (no not our beloved drunk driver), but the founder of Khan Academy gave a fantastic commencement speech at his alma mater, MIT in 2012.

Next, "the worm", returns to the world of Chaos - Dennis Rodman on his visit to DPRK.  Rodman, who was once the member of perhaps the greatest Basketball team of all time (and less famously the husband of the "Baywatch thespian" Carmen Electra), spoke to George Stephanoppolous about his recent tete-a-tete with Kim Jong Un on The Week.

A fantastic read on the processed food industry and the science behind junk food addiction in the New York Times.  A must read.

This afternoon I had two conversations, where as per standard rules, I ended up doing most of the talking.  The conversations reminded me of a bunch of "things" that I had stored in the back of my attic brain which I divulge to you now.  
The first was regarding the conspiracy theory behind the Moon landing.  Somehow the conversation drifted from Physics HL to astronomy, dark matter, telescopes and finally... the "fake" Moon landing.  It reminded me of a brilliant sketch by the genius British comedy duo David Mitchell and Robert Webb from their sketch show The Mitchell and Webb Look.  Have a gander.
The second conversation, started with a girl with a guitar, meandered around mandolins, ukuleles, banjos, and The Infamous Stringdusters and The Goat Rodeo Sessions (The collaborative album by Chris Thile (mandolin), Yo-Yo Ma (that's right!), Edgar Myers (double bass), ans Stuart Duncan (violin)). While I was talking, two distinct images entered either side of my head: Eddie Izzard talking about Tigers and Banjos, and The Ukulele Orchestra of Great Britain covering "The Good, The Bad, and The Ugly".  Have a hark.

I also recently had a conversation with a few people about Formula 1 racing as the season started last Sunday.  We got around to the topic of drift racing, and someone mentioned The Fast and The Furious: Tokyo Drift.  I was reminded of Keiichi Tsuchiya - the original "Drift King" who made the sport popular.  But who I want to write about today is the master of the Gymkhana - Ken Block!  Kudos to BBC Top Gear for another brilliant set.  Enjoy!

Till more, excelsior!