Road Development Process.....{direct from Nalanchira}

Trivandrum,Kerala: The MC(Main Central) Road Development and Widening - The sacrifices made by people for a better tomorrow. 

                           Many media's and others may think I'm going to blame this project and the state government...... Sad news for those who think so. I'm just placing  pictures to prove that this generation young, middle aged and old are willing to sacrifice their time, .......              
   for such a cause  ................        

But surely, the Govt could have done it better. They should have improved the roads running parallel to the MC road for easy transportation.

Some more pictures

Mar Ivanios College.... View from the college auditorium

                                                             Rock 'N Roll

from the college canteen

My Snapshots....

I caught this on my way to Nagercoil

Just Before the rains.........(A man and his son speeding home)

Evening is the best time for photos

Human Development Report 2010

United Nations has released its HDR 2010

Human Development Report 2010 —20th Anniversary Edition

The Real Wealth of Nations: Pathways to Human Development

The first Human Development Report in 1990 opened with the simply stated premise that has guided all subsequent Reports: “People are the real wealth of a nation.” By backing up this assertion with an abundance of empirical data and a new way of thinking about and measuring development, the Human Development Report has had a profound impact on development policies around the world.

This 20th anniversary edition features introductory reflections by the Nobel Prize–winning economist Amartya Sen,............................ click here to read

Pocket Banking

THE MOBILE REVOLUTION PROMISES TO MAKE BANKING, AS EASY AS A PIE...

                Mobile phones have found a place in every market and nearly on every individual’s pocket. I intend write about banking on the move. In this era of USB 3.0, SSD’s ... it seems irritating to wait and especially in banks, where things seems to move in a slow pace. Happy News!!.. We no longer need to wait in long queues or even maintain a cheque book. Thanks to mobile banking and online banking; this has revolutionized banking. Now one can recharge mobiles, pay bills, buy movie tickets etc... from mobile phones.

Pay Using Mobile Phone

                Obopay is an application that allows you to pay using mobile phone. It’s ‘Easy Money’ option is just like a top-up for your mobile. Obopay has tied up with Nokia. All you have to do is walk into a Nokia priority store and pay cash, this amount will be credited to your obopay account. You may use this amount to pay using your cell phone. Another service named ‘Easy Send’ allows you to transfer money from person to person or pay merchants for their products or services. To activate this service, you will have to go to a Nokia priority showroom and download the application. Then you’ll have to fill a ‘know – your – customer’ form (as per RBI rules) to open a Yes Bank account. This service will be activated within 48 hours. Sadly, Obopay services are currently available only in Pune and Chandigarh.

                Another payment option using mobile phone is ‘mCheck’, which most of the users know. Through service you can securely pay for your phone bills, flight tickets, insurance premiums, online shopping etc... mCheck integrates with your Visa/ Master Card, Credit/Debit Card, allowing you to make payments through your phone. It allows you to key- in details for a credit or a debit card, and for each transaction it demands which card to be used. After selection of cards, transactions must be authenticated using the mCheck PIN number.

                Compared with ‘Pay Mate’, mCheck and Obopay are newer services. Pay Mate links your cell phone to your existing bank account or Credit/Debit card, letting you pay for online purchases and much more. When you wish to make a transaction online or offline, all you have to do is share your mobile number and you will receive a sms confirming the status. You can have more than one account linked with Pay Mate. If you do not wish to transact using your credit card or debit card, you can even purchase a Giftmate voucher, which allows you to transact using a pre-paid balance.

                ‘Pay Mate’ has also introduced a Green Money Transfer Service in association with corporation bank and Tata Teleservices. It is a person to person mobile money transfer. A person who wishes to send money has to go to a Tata Green PCO and submit in cash, the amount to be transferred and follow the procedures as they tell you. Currently services are limited to registered customers of Kerala and Karnataka.

Mobile Banking   

                Almost all major banks now offer customers the convenience of mobile banking at no extra cost. Earlier; what the banks offered were just sms alerts regarding transactions and checking balance, you can now carry out full-fledged banking transactions. How to start mobile banking?.. A big question? Not really... It’s quite simple. Just follow m-banking link of your bank and download the application. Then follow the rules. You can conduct transactions to a maximum of Rs.50,000 per day(this may vary from bank to bank ). Mobile banking is 99.9% safe, as it is user specific and requires a four digit pass- code, just like an ATM, the application blocks itself on feeding three consecutive wrong pin entries. In case you loose your phone, call the 24 hour customer care and request them to block the application.

Money Manager

                With online and m-banking, one is bound to spend more when disposable money is available with you anywhere. To solve this concern, there is an online application by the name ‘Intuit Money Manager’ (www.intuitmoneymanager.com). It helps you to monitor your transactions, and allows you to monitor your transactions, and allows you to consolidate all your financial accounts. You can map your spending trends and can even fix your budget; when you reach the limit, you will receive a sms or email alert asking you to stop spending. You can even monitor your stocks with this application. This application is available with a 90 day free trial and Rs.365 for an annual subscription. Another website which offers the same services is perfios.com. As of now, this service is free. The best part is that the application even allows mobile access.  

DID YOU Know.......?

 The World Health Statistics 2010, released by WHO (World Health Organisation) has placed India in an unbelievable position. India has the highest number of Tuberculosis (23% of the world’s patients), Leprosy (54% of the world’s patients), Pertussis (29% of the world’s patients), Polio (42% of the world’s patients), Tetanus (22% of the world’s patients) and Malaria (55% of the world’s patients). It is the second highest in measles, the fourth highest in Japanese encephalitis and fourteenth highest in cholera. It has highest percentage of the world’s underweight children below the age of five years (43.5%). This is all far in excess of the percentage of world’s population, that India supports. To no other country goes the dubious distinction of being the first in so many areas.   

GLOBAL WARMING AND OCEAN

Did you know that ocean absorbs nearly half the volume of Carbon Dioxide (CO₂) produced in the world? You might be happy to hear this! But friends it will cost dearly. First the marine life; scientists estimate that the marine life would vanish by 2100 (Really nearer than we think). This is because, as the amount of CO₂ in the water increases, oxygen dissolved in the water goes on decreasing. Oxygen is an essential component even for the marine life. Another impact – ‘The Coral Reefs’; one of the main tourist attractions known all around the world…… What will happen to these reefs? They’ll die too!! This is already occurring at an alarming rate. We need to check this immediately.

                                                                      

What should we do???

Do what we are supposed to do. You know it perfectly (For those who don’t know what to do it is wise to kill yourself rather than kill the already Burning Planet).

Some scientists and researchers are trying hard to save the dying coral reefs. What they do is: They take a fresh and living part from a dying coral and create a mini coral garden in the shallow waters of the sea. After a certain period they are ready to be transplanted in the seabed. This is a good venture; we should really be proud of them.

IT IS UP TO US TO CONTRIBUTE SOMETHING. IF ALL OF US CONTRIBUTE TO CHECK THE GALLOPING RISE IN GLOBAL WARMING; THE TOTAL CONTRIBUTION WILL SURELY BE 100%.

START YOUR ROLE NOW!!!!!

Without Greenhouse Gasses??? Hey we need it!!!

Without the greenhouse effect, life on Earth would not exist. The Sun emits radiation to the Earth. If we could imagine a flat surface at the top of the atmosphere, that radiation is about 340 watts per square metre (340 W/m^-2). Just over 100 W/m^-2 is reflected out again by atmospheric aerosols and clouds, and the Earth’s surface, leaving some 240 W/m^-2 that heats up the surface of the Earth. The system must be in balance—energy “in” must equal energy “out”—so the Earth needs to re-radiate this amount back into the atmosphere. But the amount actually re-radiated depends on the Earth’s surface temperature: the hotter the surface is the more it will emit radiation. The outgoing radiation takes the form of “long wave” infrared thermal radiation. If the system balanced “naturally”, then the Earth’s surface would have a temperature of about –19° C (-66° F) since at this temperature 240 W/m^-2 would be emitted. Obviously, something else must be happening because at such low average temperatures life would not exist. The Earth’s surface is very much warmer than this “natural” level (around 15° C/59° F) and hence far more radiation is emitted than the 240 W/m^-2. What happens is that a lot of the Earth’s re-radiation bounces back to the Earth’s surface because it gets absorbed mainly by water vapour and carbon dioxide (CO₂) in the atmosphere. Water vapour, CO₂, and a few other minor gases act like a “blanket”. The balance is secured as follows:
Incoming solar radiation: + 340 W m^-2 Reflected from clouds, the Earth’s surface, etc.: - 100 W m^-2 Net incoming radiation absorbed by the Earth = + 240 W m^-2

Outgoing radiation: - 420 W m^-2 Greenhouse effect: + 180 W m^-2 Net outgoing (thermal) radiation = - 240 W m^-2

LAST WEEK’S GOOD ARTICLES IN “THE HINDU”

(WITH REFERENCE TO TRIVANDRUM EDITION)

SUNDAY AUGUST 1

“Life can begin at 60; it is in your hands” (open page, by S. Ramachandran)

MONDAY AUGUST 2

“Climate Change In The U.K – India Partnership” (op-ed page, byPremila Nazereth Satyanand)

“Plan Progress Should not Suffer for Want of Funds” (Business Review page by P.A Seshan)

ALSO CHECK OUT THE INTERVIEW WITH VISWANATHAN ANAND in the Op-Ed page

TUESDAY AUGUST 3

“General Kayani’s quiet coup” (Editorial Page by Praveen Swami)

“Defining Prosperity Down” (Paul Krugman,   page 11)

WEDNESDAY AUGUST 4

“South East Asia and Health Related Millennium Development Goals” (op-ed page by Jai P Varain)

THURSDAY AUGUST 5

“A Green Ban” (by The Editor – Editorial Page)

“The west’s distorted view of Afghanistan” (op-ed page, by Priyamvada Gopal)

“Sponge Species Sheds Light on Animal Evolution” (Science and Technology Page, by R. Prasad)

FRIDAY AUGUST 6  

“Water Through Pakistani Eyes” (Editorial Page, by Ramaswamy Iyer)

“Waste – Pickers oppose U.N plan” (op-ed page, by John Vidal)

SATURDAY AUGUST 7

“US puts down roots in Iraq” (Editorial Page)

“Overcoming the Malthusian Scourge” (Editorial Page by Jeffrey Sachs)

A must watch video for teenage girls.......by Taylor Swift

This really brings out the true picture.... Also the lyrics are just awesome.

Watch the Video HERE
Lyrics: (from elyrics.net)

Fifteen lyrics
Songwriters: Swift, Taylor Alison;

You take a deep breath and you walk through the doors
It's the morning of your very first day
And you say hi to your friends you ain't seen in a while
Try and stay out of everybody's way

It's your freshman year and you're gonna be here
For the next four years in this town
Hoping one of those senior boys will wink at you and say
"You know, I haven't seen you around before"

'Cause when you're fifteen and somebody tells you they love you
You're gonna believe them
And when you're fifteen feeling like there's nothing to figure out
Well, count to ten, take it in
This is life before you know who you're gonna be
Fifteen

You sit in class next to a redhead named Abigail
And soon enough you're best friends
Laughing at the other girls who think they're so cool
We'll be outta here as soon as we can

And then you're on your very first date and he's got a car
And you're feeling like flying
And you're momma's waiting up and you're thinking he's the one
And you're dancing 'round your room when the night ends
When the night ends

'Cause when you're fifteen and somebody tells you they love you
You're gonna believe them
When you're fifteen and your first kiss
Makes your head spin 'round
But in your life you'll do things greater than
Dating the boy on the football team
But I didn't know it at fifteen

When all you wanted was to be wanted
Wish you could go back and tell yourself what you know now

Back then I swore I was gonna marry him someday
But I realized some bigger dreams of mine
And Abigail gave everything she had to a boy
Who changed his mind and we both cried

'Cause when you're fifteen and somebody tells you they love you
You're gonna believe them
And when you're fifteen, don't forget to look before you fall
I've found time can heal most anything
And you just might find who you're supposed to be
I didn't know who I was supposed to be at fifteen

Your very first day
Take a deep breath girl
Take a deep breath as you walk through the doors

© SONY/ATV SONGS D/B/A TREE PUBG CO; TAYLOR SWIFT PUB DESIGNEE;

Food Inflation in India

I am not targeting this article for Economic students alone, so I will try to make it simple and easy to understand yet strong.

A GENERAL INTRODUCTION

So to begin with, I must describe to my readers what inflation is?.. Inflation in simple terms can be defined as a general rise in price level. And for budding economists I will put forward the definition given by Wicksell, Hansen and Keynes: ‘Inflation is the result of excess demand over full employment’. Also one by Caul Bourn who says: ‘Inflation is a situation where too much money chases too few goods’. Inflation may arise because of two main reasons: 1. Demand increases over the supply of goods and services (Demand pull Inflation). The demand for goods and services increases well above its supply..... naturally price rises. 2. Cost Push Inflation – A situation where price rises on account of increasing cost of production for any reason. When price of various factors of production like land, labour etc... increases, cost of production is bound to increase and so is the case with finished final goods and services. Let me also inform you that there are two measures of Inflation that are commonly used. 1. Wholesale Price Index (WPI) and Consumer Price Index (CPI).In India we use WPI as the common measure of Inflation. Let me not bore you with more economic facts and get to the point straight away......

Food Inflation based on the WPI for food articles & food products reached double digits in April 2009 and have crossed the 20% level by December. We must have in mind that Inflation in retail level is more important than the wholesale level because it is what matters in the case of consumers. This is true in the case of all Economies. In order to maintain the consumption pattern or level, Indian consumers should spend about 20% more on food compared to previous years. This is surely going to worsen food and nutrition deficiency, which remains at a very high level.    

THE GENERAL TREND OF INFLATION

The average annual inflation based on the WPI (1993-94) was close to 6% during 1994-95 to 2004-2005. But during these periods, food inflation varied between 4% to 7% and comparatively it was lower than that of normal inflation rate. But the scenario changed after 2005; food prices increased at much faster rate than non-food items.

It is to be noted that food inflation touched near to 20% in January 2010. The annual average of food inflation during the period 2006-2009 was very much higher than that of ordinary inflation. Statistics show food inflation was 80% more than ordinary inflation during this period. The highest inflation is observed in the case of pulses and the lowest in the case of edible oils. Now let me throw some light on the reasons behind the current food inflation.

FACTORS AFFECTING FOOD INFLATION

The acceleration in food inflation towards the end of 2009 have been caused by several factors , relating to a shock in supply, trade, global prices, food management, speculative activities and demand.

                        
          (1)Production

In India, food inflation commenced accelerating in the beginning of 2008, even though production was double than that of the domestic demand. But a major portion of this did not enter domestic market (supply). As global price soared in 2007 and 2008, exports seemed attractive. The share of exports in domestic production of food increased from 6.2% during 2003-04 to 2005-06 to more than 10% during 2006-07 to 2008-09. This resulted in the seeping in of global prices to the domestic market to a certain extent. The main cause of an increase in food prices during 2008 was the influence of exports led by high global prices.

Global food prices cooled down considerably during 2009. The FAO Food Price Index in 2009 was 20% lower than in 2008. In contrast to the global trend, domestic food prices followed a rapid increase through 2009. The main factor underlying high food inflation during 2009 and beyond is that, growth in food production during 2008-09 fell short of demand. Contributing to these woes large parts of the country experienced deficiency of 2009 southwest monsoon resulting in draught, which caused considerable loss to kharif output. According to the advance estimates issued by CSO, food grain product in 2009-10 is estimated to decline by 8% and oilseeds and sugarcane by 5% and 11% respectively. The decline in food production was bound to occur since we have no mechanism to promptly correct the imbalance in demand and supply.

                        
          (2)Trade and Global Prices

Changes in international prices exert direct and indirect influence on domestic prices. However this influence varies greatly across commodities. The prices of edible oil in India turned out to be lower than that in 2008, even though the domestic production fell by 5%. Imports which meet around 40% of domestic demand for edible oil is the major factor holding edible oil prices at low level.

Then how come the prices of rice, wheat, egg, sugar, pulses, meat, fish etc... have not decreased? In commodities like pulses, the global market is very thin. The total trade in pulses is around 10 million tonnes, out of which India imports about 30%. The global market does not seem to be having the capacity to meet India’s rising demand for pulses.

The lack of cooperation between the centre and the states further complicates the likelihood of a quick execution of the import option to meet the domestic shortage, as was seen in the case of sugar recently.

CONCLUSION

It is relevant to ask whether proper food management could check this high inflation levels. India needs to be stronger in food management like keeping more buffer stocks and utilising it properly. Proper implementation should be in order and the gap between desired action taken and actual action taken should be minimised to a great extent. India needs to invest heavily in expanding storage capacity for various types of food in public and private sectors. A food market regulator should be established to check hoarding and speculative trade. To keep food inflation at low levels, India must develop improved technologies for raising food production to meet the ever increasing demand.    

   

The Finnish Move!

The government of Finland has announced that 1Mbps broadband access will be a fundamental right, starting from July 2010. The move comes as a precursor to a larger plan to ensure that all the citizens have access to at least 100Mbps connection by 2015.

It is the first country to have done so. The government now considers broadband fundamental enough that it cannot be provided as a commercial profit making venture alone.

Global Warming Will Not be Halted by Current Human Civilization, Warn Scientists

 Nearly 90 percent of climate experts say that current efforts to reign in global warming will fail to prevent an average temperature rise of two degrees Celsius, according to a poll conducted by the British newspaper The Guardian.

The paper sent the survey to all 1,756 participants in a March climate conference in Copenhagen, and received 261 responses from 26 different countries. Two hundred of the respondents were climate researchers, while 61 worked in fields such as industry, economics or social sciences. They included authors of the groundbreaking 2007 report from the Intergovernmental Panel on Climate Change, as well as laboratory directors and university department heads.

Many of the papers presented at the conference presented evidence that the world's climate is likely to warm faster than previously anticipated.

In the survey, The Guardian asked researchers whether it was still possible to prevent global temperatures from rising to two degrees above pre-industrial levels. This is the threshold that has been set as a target by most climate activists and policy makers, and forms the basis of most planned or suggested emissions cuts.

Average global temperatures have already increased by 0.8 degrees since the Industrial Revolution, and would continue to increase another 0.5 degrees even if all burning of fossil fuels ceased tomorrow.

Sixty percent of survey respondents said it was still technically and economically possible to cut fossil fuel emissions enough to prevent a two degree increase. Only 14 percent, however, thought that such cuts would actually occur.

Even among those who believed that a two degree temperature increase would be averted, many admitted that they based this belief on hope rather than on evidence.

Forty-six percent of respondents said that a temperature increase of three to four degrees was most likely by 2100. Twenty-six percent said that temperatures were more likely to rise only two to three degrees, 13 percent predicted increases of four to five degrees, 10 percent predicted increases of two degrees or less, and 5 percent predicted increases of six degrees or more.

How monsoon impacts the Indian economy

The much-awaited South West monsoon has hit the Kerala coast. The showers are a blessing for the country, which witnessed the warmest year in 108 years.

With the meteorological department forecasting a normal monsoon this year, there is optimism for India's trillion-dollar economy.

After last year's drought, (though a normal rainfall was predicted) this year's 'normal' monsoon would help boost the agricultural output and bring down the rising inflation.

The monsoon accounts for 80 per cent of the rainfall in India. Even if the monsoon is delayed by few days, it can have an adverse effect on the economy as about half of India's farm output comes from crops sown during the June-September rainy season.

Monsoon is a key to determine agricultural output, inflation, consumer spending and overall economic growth.

While a normal rainfall signals growth and prosperity, a below normal rainfall could spell disaster making food more expensive, aggravating the power, water shortage, hitting industrial production which in turn will put more pressure on the government's kitty.

Economic consequences of Global Warming

Calculations of the economic impact of global warming are very difficult to make. Some economists speak of a cost of two euros per tonne of carbon, whereas others suggest 50 euros. Among the various figures put forward, one estimates that global warming might cost up to one percentage point of economic growth. It is worth noting that banks, insurance companies, farmers and developing countries are likely to be the most exposed. However, depending on the capacity of adaptation shown by the economy and by political organisations and on possible technological revolutions triggered by the challenge of climate change, a more optimistic outlook is not to be entirely excluded.

IMF AND ITS NEW STAND

Recession brings the question of protectionism in our minds. Another question which still remains in academic studies of Economics is: ‘Should we keep a check on foreign capital inflows’. Brazil has already imposed a 2% tax on capital inflows during late 2009. And why did they opt for such a move? I’ve already mentioned it in one of my recent articles: INTERNATIONAL PAYMENTS AND THE INTERNATIONAL MONETARY SYSTEM. I can explain it once more once again: - Large forex inflows caused a huge appreciation of the Brazilian currency (Real). Due to this appreciation their export competitiveness saw a downfall. This might be a bit difficult for some to understand so let me explain it with an example: Suppose 1$ = 50Rs (Indian Rupee). We know that India is a major exporter to U.S. Now imagine that Indian currency has appreciated and say, the exchange rate has come to 1$ = 30Rs. U.S needs to pay more now. At the same time while we think India must be reaping a lot, India is actually facing a bigger competition now. It is because the U.S may get a cheaper alternative for the goods they purchase from India. Thus India’s export competitiveness is undermined.

Till last year IMF was against taxing of capital inflows, because it would be a hindrance to the self adjusting economy. (IMF of course gave freedom to every economy to decide their stand on this). As economies all over the world are emerging from recession, larger amount of inflows are quite normal. This happens because developed economies seek investment in developing economies because of the laters economic growth rate and trend.

The IMF has recently revisited their belief of “Opposed Capital Controls” and states controls are sometimes justified as a part of the policy framework for an economy seeking to tackle surging inflows. IMF’s study reveals that those economies which had put restraints on capital inflows has seen a less sharp decline in GDP.

IMF’s new stand shows that they are seeking to understand ground realities and help economies to move in the right path.

Georgian media takes things to the ultimate level

“Georgian President Mikheil Saakashvili has been assassinated, Russian tanks are advancing on Tbilisi and opposition leaders have seized power”; reported Georgian television station on 13^th March 2009. This was followed by fleeing of many nationals, heart attacks and so much of havoc. And when they realized it was fake angry protests followed.

The Imedi television before airing the report announced:- “ It was a stimulation of what might happen if Georgian society is not consolidated against Russia’s aggressive plans. However many viewers missed the warning and watched in horror the 30 minute hoax report broadcast. It used archive footage of five day war in August 2008, when Russian forces crushed Georgian armed attempt to retake the breakaway territory of South Ossetia.

An angry crowd gathered outside Imedi to demand the closure of TV station controlled by Mr Saakashvili’s allies. I Russia, the Georgian TV report was denounced as a provocation.

Save Our Tigers!!!

India's National animal... the Tiger is fighting for its survival among the Human beasts that dominate India......

In the last century, our Tiger population was 40,000... Now, the state is pathetic... aren't we concerned about it? May be some are concerned... But it is surely not enough...

So what can we do to protect our tigers? Aircel(The Telecom company) has partnered with WWF-India and started a campaign called “Save Our Tigers”…. To Know more please do visit their website http://www.saveourtigers.com

INTERNATIONAL PAYMENTS AND THE INTERNATIONAL MONETARY SYSTEM

The current international monetary system allows exchange rates to be influenced by market forces. However Governments and central banks also influence exchange rates as they intervene in foreign exchange markets to control the macroeconomic effects of exchange rate fluctuations on their economies. Let us have a look at the evolution of international monetary system from the 1900’s:

The Gold Standard
Before 1930’s, the international monetary system was based on gold standard, under which currencies were required to be converted into gold at fixed prices. Convertibility into gold resulted in fixed exchange rates as long as nations kept the value of their currencies constant in terms of gold. For example the US dollar was worth 1/20 ounce of gold, while the British pound was worth ¼ ounce of gold. That is, in order to get one British pound, five U.S dollars was necessary because 5/20 = ¼ ounce of gold. Under the gold standard, currencies could fluctuate only within narrow bands that depended on the costs of transferring gold ownership between nations.

There were important consequences of international changes in gold ownership. Each nation used gold as an international reserve that constituted its monetary base. When a nation lost gold, its money supply usually decreased because of the resulting decline in its bank reserves. The decrease in money supply tended to reduce that nations price level in the long run. Similarly when a nation gained gold, its money supply usually increased, which tended to increase its price level in the log run. Under gold standard, changes in relative price level among nations caused by gold flows tended to keep currencies from appreciating or depreciating in the long run.

Under the gold standard, only a few nations followed the rule strictly. Nations hesitated to let their price level fall, for the fear that because of inflexible wages, reductions in the money supply would cause short run unemployment and recessions. To avoid changes in price level, nations commonly changed the official quantity of gold that could be exchanged for their currency. By devaluing their currency in terms of gold, they allowed it to officially depreciate.

The Bretton Woods system

Bretton Woods Conference, popular name of the United Nations Monetary and Financial Conference that took place July 1-22, 1944, at Bretton Woods in New Hampshire. The conference, attended by representatives of 44 nations, was convened to plan currency stabilization and credit in the post-war economic order. It resulted in the creation of the International Monetary Fund and the International Bank for Reconstruction and Development (the World Bank), to provide respectively short and long term credit for the world economy. The conference also proposed an international currency regime maintaining more or less stable exchange rates between currencies. This informal system maintained currency stability until broken apart by speculative pressures in the aftermath of the oil price rises of 1973. This system was also characterised by fixed exchange rates. However this system opted US dollar and tied the value of foreign currencies to it. At that time, US were in a strong financial position, whereas the wealth of the European countries had been shattered by World War II. In all countries dollar was directly convertible into gold and their central banks fixed the price at $35 per ounce.

This system allowed nations to officially depreciate or appreciate (devalues or revalue) their currencies in terms of dollars. Nations would devalue or revalue their currencies in a way in which they can stabilize their economies. The Bretton Woods agreement also established the International Monetary System to make loans to nations that lacked international reserve of dollars.

Dissatisfaction with the Bretton Woods system developed in 1960’s. Nations, whose currencies were undervalued relative to the equilibrium, exchange rate in terms of dollars were unwilling to allow the international price of their currencies to rise because the resulting decline in net exports would have decreased aggregate demand in those nations. Another problem was that, under Bretton Woods’s rules, the US could not devalue its currency to stimulate net exports. In 1971, the US suspended convertibility of dollar into gold and by the year 1973, all the nations under Bretton Wood’s system abandoned fixed exchange rates in favour of a system of flexible or floating rates determined in part by market forces.

The Current System


The current international monetary system allows free market determination of exchange rates, but also allows central banks to buy and sell currencies to stabilize exchange rates. In effect, the current system is a managed float in which central banks affect the supply and demand for currencies in ways that influence equilibrium in foreign exchange markets. Under the current system, central banks frequently buy their own nation’s currency on international foreign exchange markets to keep it from depreciating. They often resist currency depreciation because it makes important goods more expensive to the citizens. However when central banks buy their own nation’s currency, they lose reserves of foreign currencies such as dollars. The loss of by debtor nations is a small matter of concern. When nations such as India lose their dollar reserves, the only way they can acquire more dollars is by running a balance trade surplus with the US Nations that combine a less in dollar reserves with a decline in net exports run the risk of defaulting on their international loans. This reduces the profitability of US banks that hold these loans as assets.

The current international monetary system has a paper substitute for gold called Special Drawing Right (SDR). SDR’s are created by IMF and distributed to member nations for use as international reserves with which to make international payments. SDR fulfil the role that gold played in the settling international debts when a nation lacked the foreign exchange to do so. Gold is now completely demonetized because nomajor currency is convertible into it. Gold can be bought and sold on the free market like any other good. The central bank of a country leads a major role in monitoring the monitory policies of the country

Whereas some countries like China doesn’t follow the current system as it is ; instead they fined Yuan-dollar rate, they do so in order to maintain stability in their economy. In fact, this served China well during the Asian financial crisis of the late 1990’s. But in the wake of current recession things are moving in the wrong direction. We can observe that moving the productivity of China’s export industries soared and since Yuan-dollar rate was fixed, The Chinese goods became extremely cheap on world markets. In turn they gained a huge trade surplus. Volatility of exchange rates was allowed to prevail. Then the Chinese currency (Yuan) would have appreciated sharply against the dollar. In this recession (during recession) the global aggregate demand falls. If China pursues the current currency policy, more than half of the prevailing demand will be under their control, which would in turn hinder the growth and exports of other countries. This process of fixing currency rates is known as pegging.

Another recent news points out that Brazil took a decision to impose a two percent tax on portfolio inflows. The move is to check the sharp appreciation of the ‘Real’ (Brazilian Currency) against the U.S dollar. The ‘Real’ has appreciated 36% against the U.S dollar, undermining Brazils export competitiveness. Indian rupee has also gained against the dollar recently. I may conclude by saying that there may be chances for the emergence of a new monetary system in the near future, solving the flaws faced by the economies across the world.

How This Recession Occured?

This might be a short article.... It focuses only on how it happened.

It all began in the US. US was booming in the Real Estate sector.., Economists know, when there is a boom, there has to be a Depression... Let me get back to the point. Since Real Estate seemed to be going strong, Banks gave loans without any collateral (which may be any security or assets which one holds) to anyone to come for a loan. And banks thought this land or house individuals bought as a security for the banks.
Now the story changed, many failed to pay back the loan; the banks mortgaged the land… but failed to get even half the amount they lend. This was because there was immense supply of land, but no demand, so the prices came down. Now banks had no assets and this news spread… so everyone who deposited in the banks began mass withdrawal … banks simply ran out of money. Thus banks became bankrupt. Now since the global economy is interconnected this spread like wild fire.



Coming soon: - Impact of Global Economic recession on the Indian Economy