Obituary to the greatest citizen of Bharat who ever lived - Dr. A. P. J. Abdul Kalam - A salute by Team Ethmos

Dr. Kalam at the convocation ceremony of Nirma University, Ahmedabad

July 27, 2015, is a  very important day - a day in the making of history because on this day, Dr. A. P. J. Abdul Kalam has left his body and started  permanently living amongst us in our hearts.  The great man who made our Bharat a power to reckon with, a man who was denied an entry into the Armed Forces (which was his childhood dream) but fought all the battles of life valiantly - and won - to ultimately become the Supreme Commander of the Armed Forces.  The man who gave us Agni, Aakash, Prithvi, and the Brahmos (missiles) but who strongly advocated peace (unlike some of his Pakistani counterparts who were just a shade better than neurotics) - a man who believed that true peace came with power and power came with sustainable social and economic development of the nation.  The man who never made any excuse of poverty, not having enough money to study, not getting enough and proper resources, not getting the correct guidance - who fought against all odds to become an engineer (and a damn good one at that!) - please forgive our use of language.

The man who had the caliber to have gone abroad and earn millions of dollars but instead chose to stay in his country and serve it - not by becoming an IAS or an IIM graduate after studying aeronautical engineering - but by becoming a scientist, a researcher, a man who used his technical know-how to make Bharat's first indigenous missile technology.  In short, a man who stood for everything that we at Ethmos believe in and fight for.

We are not getting the words to describe any further what this great man has done for us because words won't suffice to do that - what will describe what he has done for us will be to emulate the same in our own lives and in our society.  We at Ethmos believe in doing rather than saying and hence we, in our own small way are paying our tribute to this great soul by reinforcing our commitment and determination in eliminating the scourge of corruption from our country, to make this country and this world a better place to live for our future generations to come, and to make sure that each and every person on this planet has an ethical atmosphere to not just sustain or survive - but to LIVE his/her life to the fullest so that s/he can give back much more to the society than s/he has taken from it.

We salute Dr. A. P. J. Abdul Kalam and pray to God to give us the strength of character to live up to our commitments.  We WILL NOT pray for his soul to rest in peace but instead to STAY IMMORTAL in our minds and hearts because if we can even become a small part of what he was, our lives will be fulfilled.

For the first time, we would say a MOURNING ETHMOS to all.

A Salute From Team Ethmos

The GOLDen investments - An Ethmos perspective

Gold is considered to be one of the precious metals.  Bharat is one of the major importers of gold. As far as Bharat is considered, the rate of gold is an important topic in the household where wedding is about to be held. Because in these big fat Bharatiya weddings, the 20 % or more of the expenses will be towards gold jewellery and other ornaments. These ornaments are made not with investment in the mind but rather as an "ego-booster" to appease the groom’s parents and increase the reputation in the society that  “Mr so so has given so much gold in his daughter’s wedding." On a serious note gold rates are actually affecting the Bharatiya economy.

Gold is an auspicious metal in Bharatiya mythology; we Bharatiyas celebrate “Akshay Tritiya."  On this day, it is customary that gold will be bought. This shows the emotional attachment of the Bharatiya public with the yellow metal.  Suddenly the gold prices in Bharat are at an all time low since 2009. This calls for an analysis - how will it impact the Indian economy?

For understanding the reasons, you need to understand the basics of demand and supply.  When demand of anything is more and supply is less, the prices rise.  When demand is more and supply is adequate, prices remain stable.  And when demand falls while supply rises, the prices reduce.  This principle applies to the gold also - the demand for gold has reduced - but where?  In Bharat?  NO - actually it is in the world's mightiest economy - the United States, which is what is causing this price reduction of gold.

What happened in US markets?

United States had been fighting one of the worst recessions since 2009 but the economy is coming back on track.  And hence for the first time after 7 years, the US Federal Reserve has shown indication that the interest rate on bonds will rise.

What does that have to do with gold?  Investors during the time of recession avoided the investment in bonds and banks because of zero or nil interest rate regime. However after a long time US fed has proposed that interest rate will increase. The bond market has improved significantly.  Investors are showing interest in investment in bonds as they are safer to invest than any other investment even though the opportunity cost is low.  Please note that the first thing anybody will think before putting their hard-earned money is that whether their money will remain safe or not - and what will be safer than the bonds guaranteed by the US government.  Hence, the sudden surge in the bond market actually made investors move the investment from other form of securities (like Gold) to US bonds.  So we can say that gold is not glittering any more in the US now.

How it impacts Bharat? Major impact will be the outflow of FIIs (foreign institutional investors, i.e. the foreign investment firms (and not individuals) who have invested heavily in Bharatiya markets).  This will directly impact the Foreign Direct Investment that have been planned by the Modi Government for young  and vibrant Bharat; however, the Bharatiya Rupee is also quite stable at this point of time (although running very weak!).  The outflow of funds from Bharat will directly affect the stock markets - plainly speaking, our share market will fall and the US markets will rise, although for a very short span, and the outflow of funds will also impact our forex reserves to some extent. Probably the US dollar will strengthen more against Indian rupee in the near future, i.e. the dollar will be more costlier and the price of rupee will fall.

Now gold as an investment at this point of time is quite tempting, but probably by November-December, the gold may touch an all time low. The reason being the declining prices at the world level. The prices at the world level are impacting the prices in India as well. It is expected that more and more gold will sell at commodities exchange as the investors are preferring to move to  other safe securities such as US bonds.  So it is expected that prices will again decline at the world level.  It is expected that the same will pass on to the Indian gold markets as well.  However, the reduced prices of gold will directly impact the gold reserves of Reserve Bank of India and gold loan portfolio of the leading public sector and private sector banks. It has been observed that the gold loan portfolio of banks have increased considerably. This might hamper the value of gold that has been pledged against the loan as well. So the appropriate steps need to be taken up by the banks.

Step that can be implemented by the Reserve Bank of India and other banks is that they can invest in gold at all time low prices, which will help them in having the considerable amount of liquid security at low opportunity cost and it will also control the price of gold in domestic market to an extent.

Investment tips 

Short selling:  Probably after November/December, the prices of gold will stabilize as by that time the US fed will declare the bond rates. So the short selling will be an opportunity for investors.

Long term:  If the investment is for a long term, then it will be beneficial if the investment is made in November/December as by that time, the prices of gold will stabilize.

We believe that for an educated investor, there is always opportunity in any market regardless of whether it is a bear or a bull run.

Happy Ethmos to all!

A foolproof system to prevent tax evasion and destroy the black money economy - An Ethmos perspective - PART III

You might be thinking by now that the Ethmos guys have gone complete nuts considering the stupid and moronic things we have been yelling and telling since the past few days about Greece, black money, financial trails, and the corruption that leads to the black money.  So just to reinforce your views, we present another piece of crap for you to think and contemplate about.

Public audit systems (PAS)

What is audit?  Audit is nothing but the checks and balances in any system in the form of re-verification and certification of any completed or ongoing work.  It is nothing but an independent view regarding the loopholes in the system as well as the improvements that can be brought about in the system.  Why is it required?  In simple terms, it is required in create a fear of accountability and serious repercussions in the head of the person who thinks of doing any mischief or who thinks that just completing the job somehow regardless of quality will do just fine.  But then, if such checks and balances are there, why is that so much corruption is existing in the country?  We believe that the audit systems presently prevailing in the country are simply inadequate to create the "threshold" limit of fear and accountability in the officials responsible for the public work.  Hence, we would like to introduce the concept of public audit systems.

So what will be this system?  The public audit system or PAS as we would like to abbreviate it will be a system by which any common man can go and verify the records of any public office.  This will be more or less an extension of the right to information act but the only addition being that in PAS, the citizen gets the right to verify the information provided by RTI.  In case of RTI, we are solely dependent on the information provided by the concerned department and the same is taken at face value.  Many a times, the RTI replies are given in an ambiguous manner so that the procedure is dragged based on stupid technicalities and it is more or less a test of the applicant's persistence and perseverance to get a clear cut reply from the government departments.

Now the question will arise that if any such system is introduced it will also lead to interruption of regular work being done by the departments and most of time will be utilized for additional audit replies for comments from the PAS audit.  And PAS audit will be apart from other internal and external audits, which will consume more time for the departments.  To overcome this problem, what we suggest is that just like the RTI cell in every organization, a PAS cell should also be created in every organization and department which will handle the PAS.  Any citizen willing to conduct a PAS will have to approach the PAS cell just like he approaches the Chief Information Officer of the concerned department for RTI.  The applicant has to clearly state which file he needs to audit and as with all our other suggestions, we suggest that the entire thing be made online so that no manual application or paper wastage is to be done for doing this and proper tracking of applications can be made.  Further it will remove the possibility of duplication of work because if one file is being audited by one entity, then at the same time, it need not be done by another person.  The results or comments of this audit will be published online and if any further queries are there, any other citizen can conduct a fresh audit or "continuation audit" of the particular file.

Receipt monitoring system (RMS):  This will be an added tool for monitoring by PAS.  Many a times, you would have got a challan from a traffic constable who would have stopped you for not wearing the helmet or "supposed" over-speeding.  After you pay the fine, the official will issue you a challan for the said amount.  Now how to determine if the amount you paid has actually been remitted to the government account?  That's where RMS comes to the fore.  RMS will be the central database of all challans issued throughout the country.  Challans should NOT be manual and have to be issued through a centralized device (like ticket issuing devices) and the database should be updated on a daily basis.  Every challan should have a unique "challan ID" which can be able to input in the RMS database and check whether the amount has been credited to the public account or not.  If you have received a challan but say after 2 days also, the challan amount is not getting reflected in the database, then there should be a functionality to inform the same online so that corrective measures can be taken and accountability fixed.

These two systems apart from the M2 machine, CETRAD, OPOF, & EUF will lead to a system wherein hiding of unaccounted money will become next to impossible for the wrongdoers.  Please note that the M2 machine deals with the overall black money economy; CETRAD, OPOF, & EUF will deals with the black money in business segment of the economy; PAS & RMS deals with the black money in the public sector/government sector; and the FTR (financial trail reports) deals with the already "corrupt rich."  We strongly believe that, if these measures are implemented, then it will become nearly impossible to store black money as cash/currency/money but again for the imaginative & creative corrupts, we give the idea of barter system!  Don't worry we will surely think of a way to overcome the "barter corruption" also - just give Ethmos some time.

Happy Ethmos to all!

Introducing Mr. Nobody by Ethmos

We thank all and everyone for the support given to Ethmos and Ethmag.  Today on the launch of our domain, www.ethmag.com, we would like to introduce you to our new mascot.  We named him appropriately as Mr. Nobody.  Funny??  You will see why.  First of all for all those feminists out there, please note that although the title is that of "Mr.", our Nobody is a gender-neutral entity and since it is Nobody, logically speaking it can be anybody!  Here is the photo of Mr. Nobody as envisioned by us.

So, who or what is this Mr. Nobody.  To give a precise and concise answer, Mr. Nobody is nothing but our own conscience to whom we sometimes listen and sometimes won't.  Mr. Nobody is the inner self who asks very logical questions and even discusses these questions but only within their own closed groups and friend circles (like why do schools charge exorbitant donations for giving admissions to even meritorious students and why is that the donations are collected not in the name of the school but in the name of the trust which runs the school?).  Mr. Nobody discusses these questions with his friends and colleagues but seldom does he goes to the school principal or management to ask the same because of various social, economical, and psychological reasons. And this is precisely the reason why Mr. Nobody does not have a face or any particular expression because our conscience is faceless and is never expressed out, and even if done, it is on very rare occasions.

Mr. Nobody is the feeling that you experience when you have to needlessly bribe a traffic constable for no fault of yours because according to the constable, you were over-speeding and need to pay either Rs. 1000/- fine or Rs. 100/- as bribe to him just to get out of the hassle.  Mr. Nobody is the thought that if there was a provision to let him go without a fine, then why was fine collected as a "bullying fees" from the poor man.  Mr. Nobody is the feeling of helplessness, powerlessness, frustration, & being wronged and the worst part, not being able to do absolutely anything about anything.  Mr. Nobody is the person who earns the least in the form of meager salary or wages but meticulously pays all the taxes but all he gets in return is the bullying & hooliganism of the big and mighty in and around him including the ones sitting on high positions of public authority and power.  Mr. Nobody is the one who pays for the college education of an IIT bloke who ultimately joins the civil services after 3 to 4 years of doing nothing other than coaching and mugging (while ideally s/he should have contributed back to the economy by way of his knowledge and skill); travels in a chauffeur-driven car with chest puffed up like Alexander the Great & bullying Mr. Nobody himself if at all Mr. Nobody approaches him for any help.

In short my friends, Mr. Nobody is the you, me, and us.  WE ARE THE Mr. NOBODY; WE ARE ETHMOS.

Happy Ethmos to all!

A foolproof system to prevent tax evasion and destroy the black money economy - An Ethmos perspective - PART II

In our previous article (click here to read the same), we had proposed the root cause of the black money economy in our country, which is nothing but the HARD CASH being utilized so rampantly in our economic system without any system for tracking the same.  In this second part, we will discuss about how the corruption in the "general public systems" is leading to tax evasions and ultimately the creation of black money in the economy.  "General Public Systems" include both the general public (including individuals, proprietors, partners, companies, etc.) as well as all the concerned government/semi-government and private departments/firms.  Since the topics are a bit complex to clearly understand by the general layman public, we will explain the same using some examples.  We also recommend our readers to go through our article on financial trail reports to get a better understanding of the subject:

Example 1:  Under-billing of transactions

As mentioned in our previous article, every transaction that takes place in cash has the potential to be "under billed" by the person doing the same.  For example, if you are purchasing any item worth Rs. 200/- and if you are not taking any bill (which is the case with most of the grocery stores or small shops in majority of the localities) or taking only part-amount bills, say for items of only Rs. 100/- instead of Rs. 200/-, then chances are there that the person getting the money will not account the same in his income leading to nonpayment of all types of taxes including income tax, sales tax, VAT, etc. and thus increasing the corpus of black money in the economy.

Example 2:  Billing of the transaction but not accounting the same in tax returns

There is also a possibility that a shopkeeper or a supermarket owner who has sold items worth say Rs. 3000/- on a day and is having computerized billing facility in his shop.  The computerized bills will be provided to the customer for the full amount but after the business hours, the bills in the database can be deleted manually so that the total receipts of say Rs. 3,000/- can be changed to Rs. 2,000/-.  But then the question arises, how will s/he account for the Rs. 1,000/- difference in his stocks kept at the store.  This difference of Rs. 1,000/- is shown as wastage of stock during transit or environmental conditions, etc., and is written off as losses in the books of accounts of the shopkeeper.  This leads to a dual benefit of not paying a single penny of tax for Rs. 1,000/- plus claiming lower profits and thus paying still lower taxes to the government.

Example 3:  Under-billing of goods in transport

Many a times people export their goods from one place to other; say a textile merchant in Gujarat sells goods worth of say Rs. 10 lacs to another wholesale dealer in Tamil Nadu or Karnataka.  The truck or vehicle in which the goods are sent show the value of the goods as say Rs. 1 or 2 lacs only instead of Rs.10 lacs and the excise duty is also paid for the same value, which leads to enormous tax evasion and erosion to the exchequer.  As already mentioned, the undervaluing of goods result in declaration of only 10% to 20% of the actual value of transaction resulting in loss of income tax and sales tax to the government while the businessmen make merry with the excess amount stashed in various places.  Even the transactions are also done in the same way, i.e. only the billed amount is taken as cheque or account transfer while the "unbilled bill" is taken in the form of cash.  If the same transaction is done for international export transactions, the actual loss to the exchequer is double since there is also loss of the crucial foreign exchange that the country was supposed to get.  Also, there are also "pseudo export" transactions wherein export is only shown on paper so as to get the export subsidy and nothing of value is actually exported out of the country.

These aforementioned examples are only some of the "hypothetically real" ("hypothetical" because there is no concrete proof to prove it until and unless someone goes and seriously investigate these matters and "real" simply because it is actually happening in reality) situations that we have mentioned to just give you a rough idea as to how the black money is generated in our country.  Now what is the solution to this?

Solution by the Nobodys of Ethmos

The "Nobodys" of Ethmos offer the following solution, and as with all our solutions, this too is very very far fetched and requires very high level of commitment from the masses, classes, and the government to implement - BUT if implemented, then black money will be history.  Please note that this is apart from the M2 machine that we had discussed in our previous article. So here goes:

1.  Make a central electronic transaction database (CETRAD as we can fashionably abbreviate it!).  All the dealers or shopkeepers or anybody carrying on any sort of business in the country need to use this mandatorily and no other billing software has to be used.  The bills generated by this software SHOULD ONLY be given to the customer and no other bill in whatsoever form given will be considered as invalid and given with fraudulent intentions to evade tax unless proved otherwise.  The software should be made available both in the form of a computer program as well as mobile-based application.  Those not having a smartphone should better purchase one if you want to carry on business in the country!  Any sale made by the businessman needs to be entered into this software either on the computer or on the smartphone - regardless of whether a bill is issued to the customer or not.  A functionality of automatic mobile message to the customer can also be enabled in the system provided the seller enters the mobile number of the customer while doing the data entry of the bills.

What purpose it will serve?

a.  Nobody will be able to hide his/her sales transactions anymore.

b.  The government will get a clear and correct estimate of the actual GDP (Gross Domestic Product) of the country which is nothing but the total production of materials and services in the country.

c.  Since the transaction has come to the knowledge of the government, the seller needs to pay all the applicable taxes including but not limited to sales tax, income tax, VAT, and if applicable, wealth tax also.

The access to CETRAD should also be given to the general public.  Why?  Say for example, you purchased items worth Rs. 2000/- from a supermarket.  The Rs. 2000/- will be including of the VAT/Sales Tax of say Rs. 190/- and the Sales Tax Registration number will be printed on the invoice given by the supermarket.  Now, if you want to ensure that the tax that you have paid to the supermarket is actually going to the government, all you need to do is to put the Sales Tax Registration number of the supermarket in CETRAD and get the details of the transaction on that particular date regarding whether the tax has been remitted or not and if not, then the same can be informed to the concerned department through an easy interface functionality in the CETRAD website.

2.  OPOF & EUL - One Person One Firm concept AND End-use of License concepts
Our economics textbooks tell us that we have liberalized our economy in 1991.  What this actually means is that now it is comparatively easier for any person to get a business license and set up a business.  But this "liberalized approach" is being used by many "good" businessmen to hide, under-report, divide, and divert their real business incomes and ultimately pay less to the government exchequer.  For example, take an example of a person involved in a service industry of say providing tax consultancy or any other service (you can name anything!).  The person takes a license in the name of a firm M/s ABC for which he will be the proprietor.  Then he opens another firm in the name of his wife called M/s XYZ.  The wife will not be knowing how to spell the word TAX but the income of the husband will be diverted to the wife's firm and all the necessary taxes (just to the barest minimum!) will also be filed in his wife's name so that the genuineness of the firm is maintained and he can take a loan from any financial institution in the future if he needs one by clubbing the income of his wife with his own income to show inflated income levels.

There are also examples, where the same person takes licenses in the names of M/s ABC, M/s DEF, M/s GHI, etc. etc. and does rotation of money within these firms and files the microscopic minimum of tax that he is supposed to pay.

So, in order to curb these practices and to get the real dues of the government we propose the OPOF concept - one person one firm - no person should be allowed to open another firm IN THE SAME LINE OF ACTIVITY without prior approval from the competent license giving authorities and the reasons given should be genuine (a proper record of such approvals need to be maintained and the records should be subjected to internal departmental audit, CAG audit, as well as external audits to prevent misuse of this facility).  Such approvals should not become the order of the day and be given on a day-to-day basis but given with utmost use of prudence and judgment on the part of the license issuing authorities and they will be held personally responsible for any lapses in the same.  Implementation of this scheme will prevent rotation of money among the businessmen in their own sister concerns/associate concerns and will lead to correct accounting of income.

The second thing that we proposed was the "EUL" or the End-use of License concept.  There is a rule in banking called "End-use of funds."  Whenever any loan is given to a person, it is the fiduciary responsibility of the banker to inspect and certify that the funds have been utilized for the said purpose given in the loan application (for example, a loan taken for agricultural purpose cannot be utilized for purchasing a flat).  This is a very crucial monitoring tool wherein the utilization of money is monitored to ensure undue inflationary pressures on the economic system.  The same concept has to be generalized for ALL THE GOVERNMENT DEPARTMENTS.  For example, a municipal authority who is issuing the trade/gumastha license to any shopkeeper or businessman has to ensure that the person who has taken the license has actually opened such a shop and is actually doing the  business as indicated in his license application.  This will curb the practice of some of our "intelligent" businessmen from opening firms in the name of their wives and portraying their "housewife" wives as women of high business acumen independently running their own businesses.  Of course, there are genuine cases also wherein women do their own business and that is the reason why a proper inspection and monitoring of the issuing licenses is required in order to curb the malpractice of diverting the business income in the name of one's spouse.  The license issuing authority has to regularly conduct field inspections and surprise visits to all the units at least once in a quarter and ensure that business is actually run in the premises as per the law and the person running the business is the person in whose name the license is issued.  A quarterly certificate regarding the same should be taken from the license-issuing authority.

Whew....that was tiring, but friends, this is another utopian dream that we are seeing and making you all see but just give it a thought for a while as to how our country will be changed once the same is implemented.  Even by all conservative estimates, if the domestic black money is tapped in, may be you never will have to pay a single ruppee for payment of your medical bills for your near and dear ones.  We are doing it for all of us and let this message reach each and every one, from the person on the streets to the person on the highest echelons of power corridors of Delhi.

Jai Hind & Happy Ethmos to all!

WHY WHAT HOW OF GREECE - PART II - A SOLUTION OFFERED BY ETHMOS

Mr. Nobody’s solution : are you brave enough to implement it???

Greece has been receiving the money/cash/financial help from European Union, International Monetary Fund [IMF] and the European Central Bank [ ECB ]. This holy trinity has just now sanctioned a fresh package of 7.45 Billion Euros. This package will be used towards payment of earlier loans sanction by EU and IMF so that fresh line of credit can be sanctioned in the near future.

The holy trinity had been trying their level best to avoid Greece bankruptcy. Why Greece bankruptcy  is such a big issue? We know that this might trigger the economic crisis in other EU member nations as well, but that is not an excuse  for the world fraternity.

Restructuring package has come up at the right time. Henceforth we will be using the term restructuring instead of bailout package because the third bailout is nothing but restructuring of the existing credit facility of Greece (Restructuring is nothing but giving a loan to repay the existing loan or just extending the repayment period of the existing loan). As Greece will not be paying anything, instead Greece has been sanctioned a fresh line of credit so that it might not default in its repayment commitments towards the holy trinity. This is a farce in the face of the world that Greece is paying to its lenders.

But this financial help is not going to solve the problem of Greece in the long run. Germany has been manipulating the EU decision with their pristine presence on the board. However, nobody has come out in the open to accept this elephant in the room situation.

The exports are at all time low, Greece is fighting the worst inflation and unemployment is at all time high. We at ETHMOS are of the view that “Spade is a Spade”. Nobody is going to pay the people for sitting idle. At present, Greece is fighting against natural calamity as well.

We at ETHMOS have come up with a pragmatic approach to the Greece problem.  But before we suggest our solution, just for our layman readers, we would like to simplify the solution a bit.  In our previous article, we had given the analogy that if you feed a person free of cost for 10-15 years and then suddenly tell him that you need to work for your food, there will be resistance from the person to do so.  The same has happened in Greece.  Years and years of free government support in the form of generous pensions and other public facilities without proportionate revenue sources have primarily led to this situation in Greece. Presently Greece is like a small household which is outliving its sources and means of income and has got into a debt trap just to maintain its standard of living.  But now the debt has increased to such a high level that the creditors want their money back but the people in the household are not willing to work to repay the debt.  In such a situation, what is needed is the WILL of the people to work hard towards generating income for repayment of the debt as well as sustaining the family.  Here is where the austerity measures are required.  When you don't have enough money, it is obvious that you need to reduce your unnecessary expenses drastically.  But who will pay the household for its services or work?  First the household has to find out its strengths as to what sort of work it is good at doing and focus on the same to generate revenue.  But whatever money will be generated, a major, say 99% portion will go towards repayment of the debt since becoming debt-free is the primary objective of the household.  Hence, only 1% will be left for consumption for the household.  But in such a situation, in order to avoid collapse of the household, it is incumbent on the creditors to provide minimum sustenance to the family like food and healthcare so that they can focus on their work and repay the debt timely.  This is what we are suggesting for Greece.  So, here goes:

1.  Pay in services – Old is Gold - Use the barter system

Greece can request EU members by offering its  maritime service for international trade and commerce. The payment of these services will be credited to the ESCROW account and the interest will be paid to the creditors first and later the money will be utilized for the general administration. At the same time Greece can offer its services to UN mission where the transportation of cargo is required. However this time it will not be a goodwill gesture.  For oil and other imports Greece will pay in services in the form of maritime services to the importing nations.

2. Mandatory use of public transport

 As an austerity measure the country should make it mandatory that public transport should be used. Other way of travelling such as cycling and walking can be promoted . As this will save the cost on fuel which will be a burden on the exchequer for importing the same. This will serve as saving for the government exchequer which can be used at a more appropriate manner.

3. Implement barter system within the country

As already mentioned - Greece does not have money, i.e. CASH to pay anybody.  So, is printing cash the problem.  NO - because printing more money will only increase the inflation and plus printing has its own humongous costs involved. The best way forward is to utilize the unemployed and jobless people in various areas where skilled/unskilled labour is required to meet the basic necessities of food, shelter, and clothing. Government should use the unemployed people to develop infrastructure, agriculture production, textile production, and any other ancillary services which are required for day-to-day sustenance of the economy but the payment will not be made in the form of cash but in the form of commodity such as food, clothes, and free shelter. The government should be firm that the food shortage should not happen in the country, as the food inflation at this point of time will destroy the whole economy.  A particular amount of ration will be sanctioned to each person [jobless people] depending upon the services they offer like doctors, engineers, teachers, lawyers, plumbers, etc.  but a minimum amount of ration needs to fixed regardless of the services offered and depending upon the members in the family.  Greece should do the MOU with other countries as well whereby these services can be offered by these professionals in other countries at a cheap cost and the much required Euro & Dollar currencies can be generated.

4.  Made in Greece

Government should request its people to use and consume the products manufactured and commodities grown in Greece as far as possible as this will directly increase the Gross Domestic Product (GDP) of the country.  This will also help in strengthening of Made in Greece as a brand.

5.  Restriction on Cash

Last but not the least - absolute and complete control of CASH by the Government.  As we have already explained in our previous article (click here to read why cash is the bane of all problems in the economy and how to solve it)  should encourage the people to use the e-payments, commodities, or services as a tool  to  purchase instead of cash.  This will drastically reduce the pressure on the Central Bank of Greece.

  

At the end, we would like to say that “ Tough time never last; tough people do. “

Happy Ethmos!

A foolproof system to prevent tax evasion and destroy the black money economy - An Ethmos perspective - PART I

REMOVE BLACK CASH CAMPAIGN - ETHMOS

 BLACK MONEY

We will come straight away to the point - black money is nothing but the illegal money that is generated out of illegal means and/or on which the due tax has not been paid to the government and regarding which the government has no knowledge as to the whereabouts of this money - the primary reason being that the black money exists in HARD CASH.

But then why should we or you be concerned?  If some bloke wants to stash up cash in his bathroom or bedroom or bank lockers, why are we getting so worked up?  According to the people who earn black money, they don't want to pay tax since the government is already "looting them" by not providing proper infrastructure and not controlling rampant corruption (The people who think this do not understand that they are the fathers and progenies of this corruption!)  As far as you and we are concerned, we don't actually have any problem if anybody has kept excess cash with him/her but just consider this small "hypothetically real" situation:-  You are a middle-class tax-paying salaried individual.  You want to purchase a house.  You search for the same on the net and with the local builders and zero in on a building.  Now you approach the builder for the purchase.  At the same time, our "innocent black money stashing" bloke also approaches the same builder and incidentally for the same building that you want to purchase.  Now whom will the builder prefer?  The answer is, in majority of the cases, the preference will be given to the person who will help the builder in some "personal tax saving", i.e. by keeping his income UNaccounted to the government.  Say if the building is priced at Rs. 20 lacs, then the "black money bloke" will tell the builder that he will pay Rs. 10 lacs in cash and the rest in cheque (so that both the builder as well as he himself is not put into any trouble by the tax authorities regarding the source of funds).  Now the builder will put a condition before the "tax-paying middle-class salary-earning you" that either you pay Rs. 10 lacs in cash or else the deal is gone.  Now from where are you going to bring this Rs. 10 lacs?  Do you think any bank will finance you for evading tax by paying Rs. 10 lacs as cash?  Banks generally give loans based on the sale deed amount and around 10% to 20% of the loan amount for some furniture or interior work (which brings your loan amount to hardly Rs. 10 to 12 lacs).  Now you are either forced to take a personal loan at say around 15% rate of interest or just dig into your hard-earned savings.  So, in short, this is how the black money affects the common man and this is just a simplified example - because a person who is having excess cash with him will be willing to pay even double for any commodity or service, thereby pushing the prices upwards in the market leading to the high "on-road" inflation. 

So what is the solution?

We are proposing an extremely radical solution to this problem since the problem is extremely deep rooted in the Bhartiya economy and is further complicated with the fake notes racket being run by our neighboring hostile countries aimed at ruining our economy.  Hence, we propose TOTAL ABOLISHING of CASH from our economic system.  Instead of cash, we should use digital currency either in the form of plastic money (like debit cards, ATM cards, etc.) or what we are proposing as the M2 machine

THE M2 MACHINE AS WE IMAGINE!

(the Mobile Money Machine).  The mobile money machine will be a portable device given to each and every individual of the country by which s/he can transfer money from one entity to other (person or company or whatever) just by a few presses of the buttons.  The rationale behind this is that digitization of money will make it impossible for tax evaders to keep black money as cash because after digitization, money will be kept in the digital form in your digital wallet of the M2 machine.  Operation of the M2 machine does not require much knowledge since all the machines will come with a unique ID and all you need to know to transfer the amount to anybody is to know the unique ID of his/her M2 machine and just feed in the required amount to be transferred.  The money can either be stored digitally in the M2 itself or can be deposited in your bank account for which functionality will be given inside the machine.

How to implement this?  Many of you will be thinking that we are giving imaginative ideas straight from "Ethmos in Wonderland" but this is what we suggest for implementation of this scheme:-  You may be knowing that it is the RBI that issues the currency notes in the country and the coins are issued by the Ministry of Finance.  Let's just keep aside the coins and focus on the cash.  Every note that RBI prints has a unique serial number printed on it and we hope that RBI has kept a record of the number of notes issued with respect to a particular series.  What the people who duplicate our currency and make fake currency do is to print duplicate notes with imaginary or copied serial numbers which either do not exist or exist in duplicate form.  Hence, all we need to do is to convert this data with RBI into digitized form and keep the data safely in at least 3 to 4 data centers so that appropriate backup and data integrity is maintained.  Once the data regarding the total amount of money in our country along with the serial numbers (serial number is the most important link in this which you will understand shortly as to why) is entered, then the government can start issuing the M2 machine to the public.  The same can be done through banks as was the case with PMJBY and PMJDY schemes.

Now, say you want to purchase an item worth Rs. 20 from a grocery store.  You will pay using your M2 machine and the payment will be transferred from your machine to that of the grocery store owner's machine.  The Rs. 20/- can be either transferred as two Rs. 10/- notes, a single Rs. 20/- note, or four Rs. 5/- notes, etc. Whatever mode of payment you choose depending on the currency stored in your machine, the payment will be transferred to the other party's machine along with the serial numbers, which will enable the RBI to track each and every currency ever issued by it and to know where the total money of the country is lying.  In short, linking of serial numbers with currencies in this machine will  make it virtually impossible to duplicate the "digital currencies" since no two currencies can have the same serial number and no new serial numbers can be created by anybody except the government.  This will give the government the ultimate and absolute control over the money within the country as to how, where, and when to issue, utilize, or take away the money from the economic system.  There are a hell lot of other benefits and options available and the permutations and combinations are unlimited for this technology.

And yes, one more thing regarding the implementation - since the government has made it so easy for everyone to open a bank account, it has become easier to digitize the currency.  The public should be given 6 months' time to deposit whatever cash they have with them into their bank accounts and the cash should be deposited by the banks along with the data entry of the serial numbers into their database so that RBI can know which "serial numbers" are circulating in the market as "hard cash".  After the time line of 6 months' is complete, another extension of say 3 months can be given to the "defaulters" in order to make sure that "all the serially numbered currencies" are pumped back into the digital currency system.  Once all the deadlines are over, there should be complete ban imposed on the "hard cash" currency and no transactions whatsoever should be allowed using the same.  This will make the "hard cash" currency no more valuable than a tissue paper thus rendering all our "cash-stashing blokes" poorer by a good fortune and this cancer of black money can be removed from the system completely.

In our next article, we will focus on how black money is generated by the government departments and how to curb and destroy the same.

Till then, wishing you a very happy Ethmos.

WHY WHAT HOW OF GREECE - ETHMOS PERSPECTIVE - PART I

Greece - the epicenter of present world problems as every one might be thinking! We at Ethmos thought about giving our readers a series of articles on Greece as to the present situation and the reasons as to why it has happened, the lessons we can learn from it, and most importantly, what can be done to improve the situation.  

First of all please recall these things from your history lessons - The mighty Greece had once propounded the theories of republic and freedom; it is the cradle of heroes like Alexander the Great.

However before we begin our article we would like to quote Winston Churchill

"Hence we will not say Greeks fight like heroes, heroes fight like Greeks"

Greece is currently fighting one of the worst financial crisis faced by a country in the past decade. a referendum has been passed by the people of the Greece against any help in the form of restoration package from the European union.

Analysis

What went wrong ?

Here is a layman's perspective: Just think, if you make a man sit and eat for say 10 to 15 years totally FREE without any work and suddenly after 15 years, you tell him that if you want further food, you need to work - what will happen? Even though the man wants to work, he will not be able to since he would be very busy in his own inertia of getting free food, his skills would have rusted during all these years of inaction, and what not. And second question - What happens if you lend a huge amount (huge means more than double his repaying capacity, which is anyways zero!) to this same man and tell him to repay the same after 15 years? He will literally use the funds to enjoy more luxurious food and at the end of 15 years, instead of working to repay the debt, will ask for more debt to pay the earlier debt! This, in nutshell, is what has happened to Greece. Here is the more technical aspect of the story for our "thinking" audience.

Greece is considered to be an advanced high income  economy - developed economy with a GDP ( gross domestic product ) at $238 billions. At the same time country is enjoying a rank of 29th  on human development index. If we compare both the figures on paper, the Greece is supposed to be a nation where citizens are happy and at the same time country is doing well financially and economically. Greece became the part of European union in 1981. The European Union nations proposed the new currency for development of the business and easy access of markets for member nations. In 2001 Greece adopted Euro as its currency in place of Drachma. All the existing Drachma (currency) have been replaced by the Euro. In year 2009 majority of the nations faced the worst economic crisis of the millennium. This resulted in the global melt down of 2009 and many developing as well as developed nations are still struggling to make the ends meet because of this. This crisis created havoc among investors and employees as job cuts were frequent and inflation was high.  

The merchant navy [maritime shipping industry] is one of the major exports of the country. Global slowdown had drastic effect on this service industry. This results in lower exports of Greece.

Healthcare, education and pensions are the most important expenses for the Government of Greece .In the current economic scenario, high inflation, reduced exports and frequent job cuts resulted in large amount of unemployment which is a burden on the government exchequer.

All these issue resulted in very high govt debt positions. As the pension and healthcare payments have been made generously at the cost of government exchequer. This resulted in high govt debt.  As the pension and healthcare payments have been made generously at the cost of government exchequer. This resulted in further worsening of the situation resulting in higher government debt.

Since 2009 there has been a declining trend in GDP of Greece.

Year	GDP growth
2009	-3.1 %
2010	-4.9%
2011	-7.1%
2012	-7.0%
2013	-3.9%

Rating outlook of various Agencies on Greece

Agency	Outlook
FITCH	CC
Moody	Caa3   Negative
Standard & Poor	CCC-AAA  Negative

Furthermore, Greece invested heavily in the infrastructure for Athens Olympics calculating unreasonable future gains, which did not materialize and the invested money ultimately became "dead money." And since 2009 there has been a declining trend in the GDP of Greece.

As the government debt is high investors were willing to grant loan only on higher rate of interest because the chances of bankruptcy were high. At the same time, majority of the rating agencies reduced the rating of Greece to junk due to which the Greece was unable to generate cash as investors were skeptical about their investment in government debt instruments / treasury bonds. In order to have fresh investments, Greece offered higher returns on the treasury bonds and other government-backed securities to generate enough cash. The efforts of Greece again went in vain as the country was unable to find suitable investors.

A country requires the cash for two reasons. Firstly cash required to run the show because major facilities like pension and healthcare is on the house (i.e. on the government exchequer). Secondly the money of the investors needs to be repaid as rating of country is already junk and if the country is unable to pay its investors, they will further reduce the investment in the country which will result in major out flow of FDI [Foreign Direct Investment, which is nothing but the money invested by foreigners in the form of the much needed foreign currency like dollars and euros).

  

In order avoid this catch 22 situation Greece approached two financial powerhouses - IMF (International Monetary Fund) and European Union. These two agencies after analyzing the issue came up with the bailout package to help Greece. European union is primarily dominated by Germany and France. IMF and EU sanctioned the bailout package for Greece but they came up with strict austerity measures to check the government spending.  (For our layman readers, austerity is nothing but reduction in unnecessary expenses and spending).

  

Greece failed to meet the repayment of their financial assistance sanctioned by EU and IMF. Even though Greece showed some growth in year 2014 but again went in recession in year 2015.  In order to avoid bankruptcy, IMF and EU were planning for a restructuring package which could have come with its share of austerity and restrictions.

People of Greece passed a referendum against this government debt restricting – i.e., the bail out package [or the B Package as we would like to call it].  Now the major issue is, who will finance this huge govt debt>  European union is keenly following all the developments.  They very well know that if Greece falls, then other economies of the Europe such as Italy, Spain, and Balkan countries will also fall.

Repayment issue

Major hurdle in the path of the Greece was that interest rates are governed by the European Central Bank and the rates were high. This bailout came up with a number of terms and conditions, especially austerity that was expected from the people and the government of Greece, which Greece was not able to comply with and resulted in the default of the loan.  However due to global meltdown in shipping industry they were unable to generate enough cash to finance the government debt and repayment of the B package.

Now citizens of Greece are actually thinking that if they pass this referendum and change the currency back to Drachma then they will be able to control rising interest rate to be paid on loan / investments. The Central Bank of Greece will have say in the policy formation and interest rate structure.  But the European markets are inter linked and it is highly unlikely that it will not affect Greece. Even if the investors want to invest they will probably expect higher rate of interest as Greece is already fighting bankruptcy and the risk & cost of investment is pretty high.

Ray of hope is the perseverance and dexterity of the People of Greece - the Greeks. They have to think about their glorious past and try to preserve the same in modern times.

In next series of article we will be discussing the about how to implement this B-package effectively.

Happy Ethmos!

Farmer suicides, loans, bankers, and the government - An Ethmos perspective

Slow transition from farming to non-farming?

After a short hiatus of around one month, we are back.  This time we would be highlighting something that has been comfortably missed by our "regular medias."  So, here goes:

Recently there have been report of  a farmer committing suicide in Amravati for being denied a loan from a nationalized bank and subsequent action against the errant branch manager for refusal of the "birth right" of the farmer.  To make matters more interesting, the Amravati District Collector in a rare and extremely proactive, heroic, and brave act ordered criminal proceedings to be initiated against 24 branch managers for failing to achieve the agricultural loan targets.  Here is the story for you to read.  This act of bravery worth a medal is being repeated by the Amravati DC's counterparts in other districts also, probably at the behest of the Maharashtra government who thinks that bankers are the root cause of all the problems that farmers are facing.  And unfortunately our regular media is too silent about these vexed issues that our country is facing and instead is more interested in the future ratings & earnings of Salman Khan's new flick, Bajrangi Bhaijaan.

So, here is the what, where, why, and how of the problem - an Ethmos perspective

It is not an open secret that Bharat has predominantly been an agrarian economy - if not in the size of production, then at least in the sheer number of people working in this sector, even though the returns are very erratic (99.99% dependent on weather conditions rather than systematic planning) - and that, friends, is the root cause of all the problems - unlike the poor bankers (who are public servants serving over there, many a times more than 1000 km away from their family) as what the Maharashtra government thinks.  Even after nearly 68 years of independence, we are still dependent on the rain for the agricultural production.  There had been many irrigation schemes, power schemes, etc. for the rural sector but none of them really took off primarily because of bureaucratic red tapism and mass corruption in government departments (We hope our beloved Amravati Collector shows the same pro-activism and bring to book all the accountable officials in the myriad of government departments for "not doing their duty.").  What ultimately happens is that the poor Bharatiya farmer incurs loss due to multiplicity of environmental factors including but not limited to global warming, hail storms, untimely and unwanted rains, excess or shortage of rains, water level dipping in borewells, and not to mention, the corruption in government departments from procuring an electric connection for borewell pumpset, selling of their agricultural produce in public markets (APMCs) wherein nothing moves without the middlemen, and last but not the least, NONPAYMENT OF SUGARCANE PAYMENTS BY SUGAR FACTORIES (which are owned by our "poor politicians")...whew..that's a hell lot of trouble for our poor farmers.  Now all these problems lead to huge losses to the farmers who are always running in a deficit vis a vis their profits to expenses.  So, what is the solution left? - Simple, to pump in more capital into their agricultural business.  And from where does this capital comes??  Banks???  Ultra wrong !!!  THE MONEY LENDERS of course.  And who are these money lenders?  They are the local village big wigs, normally local leaders or big farmers and sometimes even local goons, who are having acres and acres of land in a multitude of names and virtually rule the village like their private fiefdoms.  And they come to the "rescue" of these distressed farmers by lending them the crucial capital at a "marginal" interest rate of only 36% to 48% per annum compounded monthly!  This turns out to be 3% to 4% monthly rate of interest - nearly 4 to 5 times what the banks charge.  And how do they lend?  Simple - they do the agreement to mortgage of the poor farmers' lands at a price of hardly 30% of the market value.  In reality, this lending is nothing but a slow and dirty process of gradually annexing the land of the poor farmer and converting the "owner farmer" to a "landless farm laborer" farmer.  This process is slow because the lending cycle continues for around 2 years by which time, the debt on the farmer would have increased to nearly 2 to 3 times of the principal borrowed.  Now the hapless farmer has no other way than to approach the banks (he should have done so at the onset but many a times due to the documentation & paperwork process involved, they think it easier to approach the money lender to get "easy & hassle-free" credit not knowing the consequences of falling into the deadly debt trap).  When he approaches the bank, another set of problems are faced.

The nationalized bank's banker is already a pressurized individual having to make a fine balance between achievement of targets (including but not limited to deposits, advances, insurance, "n" number of Prime Minister Yojanas, & various social welfare schemes) and following of the crucial "systems and procedures" set out by the bank/government themselves - which include a "critical appraisal of the loan application" and wherein there are hundreds of columns to fill in asking details about the water availability, the profitability of the agriculture loan, the repayment capacity of the borrower, etc. etc. and if any wrong information is fed and if the loan is somehow not repaid & becomes an NPA, then the banker will be banged and hanged to death by the bank and government alike.  When a distressed farmer approaches another distressed banker, a majority of the times, the farmer does get the loan but the loan amount is so small that he could hardly pay the interest of his money lender's debt. The reason for the lesser loan amount is again government apathy because the rates of loans, especially Kisan Credit Card (KCC), are fixed by the government only on an annual basis and the rates fixed are, most of the times, hardly 50%-70% of the actual cost of running the business. All this ultimately leads to the "annexation of his land via sale" at a price hardly 30% of the market value by the "helping" moneylender.  The poor and hapless farmer has no other option left than to end his life rather than live a life as a farm labourer for the rest of his life.

So, my dear friends, we have tried to shorten the story as much as possible but the complete story also includes the huge corruption that the poor farmer faces in various government departments and the APMCs wherein the commodity prices fluctuate like basketball, totally controlled by the middlemen.

Finally, we at Ethmos, totally and unconditionally support the stand of the Maharashtra government and all the district collectors in disciplining the "dirty bankers" and would like to give them more creative ideas to spread this league of morality to other departments also so as to cleanse our society of all its ills.  So, here are a few suggestions from our part:-
1.  Don't just read but IMPLEMENT the Money Lenders' Control Act in all the states (the act DOES EXIST in each and every state) but guess how many have so far been booked for the death of a farmer??  If all the collectors do some field work or let their "hard-working Talati/Patwaris" do the field work, it is a matter of just a week to know the local moneylender in your district and initiate the action.  But let us just warn you - it will not be as easy as booking the poor banker because the moneylender will be a big shot of his own district and collecting evidence against him/her will be a difficult task.  But then we have full faith in our ultra-strong, fearless, and morally upright bureaucrats.
2.  Initiate action against all the sugar factories in your district who have not paid the sugarcane arrears to the farmers.  Do the forensic audit of their financials and know the cash accruals.  Regardless of whether they earn a profit or not, they are morally bound to pay the farmer their correct dues and that too, ON TIME.  If they were not going to pay them, why did they procure the cane from them?  And what did they do with the cane for 1 to 2 years?  Sat on it to incubate and create more "canelings"?
3.  Initiate action against every electricity board/company official who makes a delay in installing electricity connection for pumpsets to farmers.  Make the system online and outsource it to some agency so that the corruption is completely finished.  Make the Junior Engineer (Electric Supply) accountable for not supplying the electricity on time.
4.  Direct the income-tax department to implement Section 269SS (no person is suppose to pay/take more than Rs. 20,000/- to another person by any manner other than an account payee cheque).  If implemented, all the moneylenders can be nailed because they all transact in HARD CASH.
5. Direct the RBI and the Board of the Banks - to issue clear guidelines regarding loan recovery policy for agriculture, government-sponsored, and priority sector lending so that the appraising official of the bank is held indemnified against non-repayment by the borrower under normal conditions (i.e. except in fraud cases).  This will instill the confidence in the lending officials of the bank to fearlessly sanction credit to needy persons.
6.  And last but not the least - DO UNDERSTAND that the money that the banks are lending does not belong to the bank but the PUBLIC.  Bankers are nothing but guardians of this public money and when any banker initiates any recovery proceedings, s/he is doing the same to safeguard the public money only and not to take the money to his home and buy new jewelry  for his wife or girlfriend.  If the public money taken as loan is not repaid, then how will the banks repay the depositors' money which they have taken for safekeeping?

If corrective steps are not taken immediately, the day will not be far when we will be faced with financial irregularities and the ultimate collapse of our financial institutions and the faith of the public in these institutions as caretakers of their money is completely lost.  We apologize for any hurt caused to anyone or any institution by this article but our aim is to bring in the harsh realities and the bitter truths in front of the government as well as the public.

Happy Ethmos to all.