Rahul Deodhar's Blog, page 2
May 6, 2019
Comments on Ray Dalio's post on Monetary Policy 3 and MMT
Ray Dalio's comments are always well researched and interesting. For starters, I think, Principles for navigating Big Debt Crises is must read. (Its free PDF). His recent post on his LinkedIn blog is about Monetary Policy 3.0 and MMT.
Some fundamental comments about present crisis: QE only creates a space for fiscal response : Central banks and governments alike misunderstood the role of monetary policy in the 2008 financial crisis. The crisis was different than others we have faced since Great Depression. Per my reading of Keynes (which seems to different than Keynesians and neo-Keynesians both), in such crises, the proper response has to be from fiscal side. The monetary policy merely creates space for the fiscal response or accommodates the fiscal response preventing untoward consequences. The response had to be holistic - a coordinated and sustained monetary and fiscal policy response. Fiscal policy amplification mechanism is broken : Broken may be a harsh word, we may choose "has become messy" in its place. The point is, fiscal policy needs an amplification mechanism. When government starts infrastructure spending, it needs some real value-creating sector to take it from there and start driving the economic engine. At present we do not have such "real value-creating sector" that can boost employments and wages generally. In 1980s we had tech, in 2000s we had internet, now we need something. In absence of a big driver, we need many small ones. If such capability is difficult to create in one sector it is quite difficult to create in more than one sectors too. The solution is to let inherent advantages play out. Inherent advantages are muzzled : Inherent advantages have stopped driving international trade since east asian crisis, and at a larger scale with China's entry to WTO. Instead, we have pegged exchange rates (soft/hard/overt/covert), manipulated tariff and non-tariff barriers, and, in general, non-transparent trade policy. Until that is fixed we cannot have trade based on pure competitive advantage. Small business innovations are indefensible : When people talk of China usurping Intellectual property they usually talk about submarine plans etc. But I am talking of something very basic. Check out new funding projects on kickstarter - innovative shoes, innovative bags, innovative pens, anything that takes your fancy. Just search on alibaba or just wait for few months you will see some products like those (invented by kickstarter entrepreneurs) in the market on mass scale. These products are not sold by those companies who invented them on kickstarter or such platforms. This is IP theft that hurts the most. It removes new business competitiveness right at its infancy. Trickle-up always works; trickle down some times : Monetary policy practitioners and academic economists in general prefer trickle down economics. But empirical evidence says reverse is true. Trickle-up works all the time. Thus, when there is a choice of bail out, we must lean to lower strata. (A) It is more fair and just, (B) better optics and (C) right incentives. But MAIN reason it works because it balances the bargaining power of both sides. Bail out the top and they lean on to regulation to prevent or constrict trickle down stifling the economy. Bail out the bottom and lo and behold all the incentives align beautifully. Certainty of employment and wages is the one super-indicator : The best solution to any crisis is to get certainty of employment and wages going, rest follows from that. Today we have almost full employment but it is uncertain. Wage predictability is also uncertain. That's why the lack of demand is so persistent. Interest Rates are like friction : Too much and too little friction are both bad. Sames goes for interest rates too much is bad, too little is ALSO bad. Some comments about Monetary Policy 3: Debt financed Fiscal spending financed by QE : I don't agree with Ray Dalio that this was pursued after 2008 financial crisis. The fiscal spending was essentially going to the same group who could access the QE funds. Yes, there was fiscal deficit and increased fiscal spending and yes there was QE to finance it. But this is exactly the wrong kind of stimulus as I have written since 2009 itself. Giving $10,000 to one person Vs $100 to 100 persons Vs $1 to 10,000 people : Helicopter money is not easy to design. The behavioral response in each of three cases varies drastically.The range of outcomes possible is mind boggling. Spending conditions interfere political rights : If I am tasked to spend $10,000 can I give it to someone from my family to pay down her loan? Does that amount to spending? Should I buy something? What thing? These questions are difficult to answer, monitor and control. A little inflation is necessary : People will spend when they can surely afford it (condition above - certainty of employment and wages) and it will get costlier tomorrow. Inflation is important, zero inflation may not be that great.The examples of Monetary policy 3.0: The best part of the analysis is the historical perspective Ray Dalio gives. Sharp readers of this blog will immediately note that there are fundamental differences between the conditions in various situations described and those existing now. That is acceptable difference.
Particularly interesting is the Roosevelt response in 1930s. It still forms the basic template for solution today. However, we are at a slightly different position today than in 1930s. So we have to make more adjustments than Dalio may seem to suggest. [Dalio is NOT suggesting it - it appears simple but it is incredibly complex - politically, fiscally and economically]
In SumDo not understand these comments as put down of Ray Dalio (as if he cares what I think!). I admire the man because he is being honest and creating a framework to solve the crisis. Good intentions and honest efforts deserve praise - even if the guy making those efforts is one of the richest.
From my side, I solved this crisis puzzle back in 2009 itself.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms"
April 9, 2019
World War 3 Watch 05: China's navy upgradation
How is China modernizing its navy? This article provides some perspective about China's navy modernization.
New ships are being put to sea at an impressive rate. Between 2014 and 2018, China launched more submarines, warships, amphibious vessels, and auxiliaries than the number of ships currently serving in the individual navies of Germany, India, Spain, and the United Kingdom. Eighteen ships were commissioned by China in 2016 alone and at least another 14 were added in 2017.2 By comparison, the US Navy commissioned 5 ships in 2016 and 8 ships in 2017. Should China continue to commission ships at a similar rate, it could have 430 surface ships and 100 submarines within the next 15 years.Source: China Power
Further, as pointed out by GPF, the US Naval War College released a research paper worth looking at titled Surging Second Sea Force: China’s Maritime Law-Enforcement Forces, Capabilities, and Future in the Gray Zone and Beyond.
As per the report, China has merged few of its departments that had its own patrolling capabilities into a Chinese Coast Guard. China has also used commercial fishing vessels to further its scouting and minor naval defense capacity. GPF shows this graphic about changes to Chinese Coast Guard. From GPF.
I remember there is a law that China flagged vessels are required to maintain capacity and design to aid and assist Chinese forces if required. It means these commercial vessels too may be deployed in naval conflict. The scale of Chinese Navy - PLAN and China Coast Guard CCG both needs to be reassessed.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms"
April 3, 2019
People are rethinking cities
National Geographic magazine has an issue on urban development. Seems to be a collectible. Here are some important articles I liked:
To build the cities of the future, we must get out of our cars. It has fantastic pictures by Andrew Moore and Robert Kunzig has done great by summarising the developments walk-friendly cities.
It refers to the emerald city planning guide by Calthorpe Associates. You can download it here.
The cities of the future infographic is super awesome.
The related articles also features one of my favourites: Want to visualize inequality? View cities from above. It features pictures by Johnny Miller. The Johnny Miller website is treasure trove of many such pictures.
The development of Tokyo is documented quite well.
The photos feature titled This man spends 8 hours every day commuting. He's not alone. is quite good. In my paper How cities Develop I have explored the commute as distance travelled in acceptable commute time. Those insights seem to be bearing out.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms"
To build the cities of the future, we must get out of our cars. It has fantastic pictures by Andrew Moore and Robert Kunzig has done great by summarising the developments walk-friendly cities.
It refers to the emerald city planning guide by Calthorpe Associates. You can download it here.
The cities of the future infographic is super awesome.
The related articles also features one of my favourites: Want to visualize inequality? View cities from above. It features pictures by Johnny Miller. The Johnny Miller website is treasure trove of many such pictures.
The development of Tokyo is documented quite well.
The photos feature titled This man spends 8 hours every day commuting. He's not alone. is quite good. In my paper How cities Develop I have explored the commute as distance travelled in acceptable commute time. Those insights seem to be bearing out.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms"
April 1, 2019
Socialism or capitalism - Big government is a consequence, Small government an objective
Look at what they do NOT what they say!Socialism or Capitalism - it is one of the central discussion points these days. Socialist too form a broad spectrum - from Bernie Sanders to AOC to Elizabeth Warren. The capitalist are not yet vocal but many are simply dismissive of the left-leaning neo-politics. But are there really left-right differences? Not too much. And I say that as I look at what they do NOT what they say.
Governments get biggerThe basic aim of government at the formation of Amercian revolution was twofold - Army formed protection force protecting citizens from outsiders AND legislation, police, courts system formed Law and Order for resolving disputes among citizens.
Gradually government came to provide diverse services - education, healthcare, insurance, subsidies, legislation and regulation of various industries. Each of these activities has grown in scale over the past 100 years.
When you want government to take up more responsibility then you will end up with a big government.
Big government = MORE TAXESFirst objective of taxes is to pay for the government. In some countries the salary expenditures of government account for more than 50% of the total expenditure of the government. This is not counting the maintenance cost and other regular expenses government has to incur just to exist. = MORE TAXES.
Then all these people employed by the government have to do something. Even if they do nothing and just make presentations they consume a lot of money. That requires even more budgets = MORE TAXES.
To make it worse usually they add to procedure and impose cost on society. They prevent innovation. They make it their responsibility to say NO. That stops entrepreneurs before they can create value. It means MORE HIDDEN TAXES.
It all eventually leads to more taxes. Big Government attracts big responsibilityPeople have started viewing government as a provider. Governments have encouraged that view. In effect whatever we want to get done, we want government to do it. We would like universal health care, you ask government. You want insurance for all - you ask government.
When governments become bigger, governance becomes difficult. Hence laws turn into fine prints, every step of industry is managed by dozens of legal clauses. Compliance becomes a cost.
Big government is a consequence - Small government is an objective We need to prune governments regularly. On one level that means improving productivity of government servants. But on other level we need to reinvent our systems to be designed for less government. But remember, no matter what they say, they will increase the size of government AND they will increase taxes AND they will default towards socialism.
To prevent it we must actively reinvent the system to stay on the money. We shall discuss how in subsequent posts.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
Governments get biggerThe basic aim of government at the formation of Amercian revolution was twofold - Army formed protection force protecting citizens from outsiders AND legislation, police, courts system formed Law and Order for resolving disputes among citizens.
Gradually government came to provide diverse services - education, healthcare, insurance, subsidies, legislation and regulation of various industries. Each of these activities has grown in scale over the past 100 years.
When you want government to take up more responsibility then you will end up with a big government.
Big government = MORE TAXESFirst objective of taxes is to pay for the government. In some countries the salary expenditures of government account for more than 50% of the total expenditure of the government. This is not counting the maintenance cost and other regular expenses government has to incur just to exist. = MORE TAXES.
Then all these people employed by the government have to do something. Even if they do nothing and just make presentations they consume a lot of money. That requires even more budgets = MORE TAXES.
To make it worse usually they add to procedure and impose cost on society. They prevent innovation. They make it their responsibility to say NO. That stops entrepreneurs before they can create value. It means MORE HIDDEN TAXES.
It all eventually leads to more taxes. Big Government attracts big responsibilityPeople have started viewing government as a provider. Governments have encouraged that view. In effect whatever we want to get done, we want government to do it. We would like universal health care, you ask government. You want insurance for all - you ask government.
When governments become bigger, governance becomes difficult. Hence laws turn into fine prints, every step of industry is managed by dozens of legal clauses. Compliance becomes a cost.
Big government is a consequence - Small government is an objective We need to prune governments regularly. On one level that means improving productivity of government servants. But on other level we need to reinvent our systems to be designed for less government. But remember, no matter what they say, they will increase the size of government AND they will increase taxes AND they will default towards socialism.
To prevent it we must actively reinvent the system to stay on the money. We shall discuss how in subsequent posts.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
March 14, 2019
World War 3 Watch 04: Indian Defense Equipment strategy
India needs to up its defense game. India is dealing with potential conflicts on two fronts. On both these fronts we have belligerent neighbors engaged in asymmetric multi-dimensional confrontation. Pakistan is more of warfare and China is more of competition. Yet, India must prepare for the potential conflict. And in this we need to improve our preparation substantially.
AirforceJust cursory look at the Air force in the region will set us back. Pakistan Air Force generally known combat strength is about 500 aircraft. China is about 1600 aircraft. India is about 600. While the numbers are not exactly a way to differentiate - but considering the length of border and our defense requirement India should aim for 2000 combat plane air force.
This means HAL cannot produce 16 aircraft per year. It has to produce 16 aircraft per month. Using private participation we need to improve this number quickly. Second, it appears we need full Rafale deal AND a F16 manufacturing line at the same time.
IAF should also think of getting larger number of combat drones. These drones should be able to manage to fly with manned aircraft. This one manned aircraft (M) -coupled with around 10 drones (D) or more. Thus one mission unit with M-D combination. Then you can add mission units with xM-yD.
These mission units will need to collaborate and coordinate with share intel. That will require a robust ICT interface.
Airforce needs support from ground and space in the form of missiles and information. We should develop mechanism for coordinated launch of missiles controlled by the aircraft pilot herself. We can augment it with coordinator based ground support too.
ArmyThe future soldier will be an augmented information soldier.
We need to up our game in terms of equipping the soldier with top-class equipment. AK-203 is a step in the right direction. But we need to lighten the soldier and get every soldier a robo-buddy. The buddies could be in multiple form - carrier mules, terrain mapping drones, communication bots and combat drones (sniper buddy). For this we need very intense development in robotics and again the ICT component will also play a role.
We should experiment with augmenting the soldiers with exoskeletons and other techniques to improve battleground performance.
Air-cover has been neglected part of the army. Apache helicopters in air support is essential.
NavyFuture of navy is stealth platforms. As the US stealth ship Zumwalt goes for a maiden mission, China is developing aircraft carrier buster missiles. The Chinese missiles are hyper-sonic and thus almost impossible to intercept. In this context any above surface ship will find it difficult to beat the defenses. Hence reliance of submarine platforms should be increased.
Sub-marine drone tech is actually quite interesting. It can be used on sink-and-forget wait mode. Thus we should be able to plant and move around many depth assets on wait and watch basis. Without humans on board this is (a) easier and (b) safer. It also improves the counter-strike and defense capability. These drones should be easy to manufacture in large numbers and low cost. These drones need not be large they can simply be attachments to ammunition that can help the ammunition to navigate and activate.
Deep sea surveillance and AGAIN ICT is also going to be critical.
So Navy must develop platforms but also develop choking -technologies for anti-ship systems.
Space warsSpace is important front for information wars. The satellites form critical part of the ICT infrastructure we need to deploy across the forces.
Satellites should be able to perform twin functions - jamming enemy satellites and keeping ICT infrastructure working for our forces.
The ability to quickly and rapidly restore downed satellites is very important. We should also explore possibility of smaller satellites that can last only for 5/6 months and then disintegrate. The smaller the satellite the costlier it is to destroy. Also because of size, you can build for redundancy. It is also possible to launch 100 satellites in one launch. These satellites are more relevant for theater coverage rather than country coverage.
Cyber warMost of modern warfare is quite destructive and hence preventive techniques are more important than remedial measures.Cyber war allows for information and processing delays in enemy retaliation and gives us additional time and information to respond better.
Many times it is better for cyber initiatives to operate in bleeding mode than in crippling mode. Thus, it is better for cyber initiatives to delay the enemy communication rather than cripple it. Thus introducing delays and errors is better than crippling the infrastructure for short time. These cyber initiatives can also provide advanced information about enemy maneuvers. The aim is to destroy combat assets of the enemy.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
AirforceJust cursory look at the Air force in the region will set us back. Pakistan Air Force generally known combat strength is about 500 aircraft. China is about 1600 aircraft. India is about 600. While the numbers are not exactly a way to differentiate - but considering the length of border and our defense requirement India should aim for 2000 combat plane air force.
This means HAL cannot produce 16 aircraft per year. It has to produce 16 aircraft per month. Using private participation we need to improve this number quickly. Second, it appears we need full Rafale deal AND a F16 manufacturing line at the same time.
IAF should also think of getting larger number of combat drones. These drones should be able to manage to fly with manned aircraft. This one manned aircraft (M) -coupled with around 10 drones (D) or more. Thus one mission unit with M-D combination. Then you can add mission units with xM-yD.
These mission units will need to collaborate and coordinate with share intel. That will require a robust ICT interface.
Airforce needs support from ground and space in the form of missiles and information. We should develop mechanism for coordinated launch of missiles controlled by the aircraft pilot herself. We can augment it with coordinator based ground support too.
ArmyThe future soldier will be an augmented information soldier.
We need to up our game in terms of equipping the soldier with top-class equipment. AK-203 is a step in the right direction. But we need to lighten the soldier and get every soldier a robo-buddy. The buddies could be in multiple form - carrier mules, terrain mapping drones, communication bots and combat drones (sniper buddy). For this we need very intense development in robotics and again the ICT component will also play a role.
We should experiment with augmenting the soldiers with exoskeletons and other techniques to improve battleground performance.
Air-cover has been neglected part of the army. Apache helicopters in air support is essential.
NavyFuture of navy is stealth platforms. As the US stealth ship Zumwalt goes for a maiden mission, China is developing aircraft carrier buster missiles. The Chinese missiles are hyper-sonic and thus almost impossible to intercept. In this context any above surface ship will find it difficult to beat the defenses. Hence reliance of submarine platforms should be increased.
Sub-marine drone tech is actually quite interesting. It can be used on sink-and-forget wait mode. Thus we should be able to plant and move around many depth assets on wait and watch basis. Without humans on board this is (a) easier and (b) safer. It also improves the counter-strike and defense capability. These drones should be easy to manufacture in large numbers and low cost. These drones need not be large they can simply be attachments to ammunition that can help the ammunition to navigate and activate.
Deep sea surveillance and AGAIN ICT is also going to be critical.
So Navy must develop platforms but also develop choking -technologies for anti-ship systems.
Space warsSpace is important front for information wars. The satellites form critical part of the ICT infrastructure we need to deploy across the forces.
Satellites should be able to perform twin functions - jamming enemy satellites and keeping ICT infrastructure working for our forces.
The ability to quickly and rapidly restore downed satellites is very important. We should also explore possibility of smaller satellites that can last only for 5/6 months and then disintegrate. The smaller the satellite the costlier it is to destroy. Also because of size, you can build for redundancy. It is also possible to launch 100 satellites in one launch. These satellites are more relevant for theater coverage rather than country coverage.
Cyber warMost of modern warfare is quite destructive and hence preventive techniques are more important than remedial measures.Cyber war allows for information and processing delays in enemy retaliation and gives us additional time and information to respond better.
Many times it is better for cyber initiatives to operate in bleeding mode than in crippling mode. Thus, it is better for cyber initiatives to delay the enemy communication rather than cripple it. Thus introducing delays and errors is better than crippling the infrastructure for short time. These cyber initiatives can also provide advanced information about enemy maneuvers. The aim is to destroy combat assets of the enemy.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
Indian Defense Equipment strategy
India needs to up its defense game. India is dealing with potential conflicts on two fronts. On both these fronts we have belligerent neighbors engaged in asymmetric multi-dimensional confrontation. Pakistan is more of warfare and China is more of competition. Yet, India must prepare for the potential conflict. And in this we need to improve our preparation substantially.
AirforceJust cursory look at the Air force in the region will set us back. Pakistan Air Force generally known combat strength is about 500 aircraft. China is about 1600 aircraft. India is about 600. While the numbers are not exactly a way to differentiate - but considering the length of border and our defense requirement India should aim for 2000 combat plane air force.
This means HAL cannot produce 16 aircraft per year. It has to produce 16 aircraft per month. Using private participation we need to improve this number quickly. Second, it appears we need full Rafale deal AND a F16 manufacturing line at the same time.
IAF should also think of getting larger number of combat drones. These drones should be able to manage to fly with manned aircraft. This one manned aircraft (M) -coupled with around 10 drones (D) or more. Thus one mission unit with M-D combination. Then you can add mission units with xM-yD.
These mission units will need to collaborate and coordinate with share intel. That will require a robust ICT interface.
Airforce needs support from ground and space in the form of missiles and information. We should develop mechanism for coordinated launch of missiles controlled by the aircraft pilot herself. We can augment it with coordinator based ground support too.
ArmyThe future soldier will be an augmented information soldier.
We need to up our game in terms of equipping the soldier with top-class equipment. AK-203 is a step in the right direction. But we need to lighten the soldier and get every soldier a robo-buddy. The buddies could be in multiple form - carrier mules, terrain mapping drones, communication bots and combat drones (sniper buddy). For this we need very intense development in robotics and again the ICT component will also play a role.
We should experiment with augmenting the soldiers with exoskeletons and other techniques to improve battleground performance.
Air-cover has been neglected part of the army. Apache helicopters in air support is essential.
NavyFuture of navy is stealth platforms. As the US stealth ship Zumwalt goes for a maiden mission, China is developing aircraft carrier buster missiles. The Chinese missiles are hyper-sonic and thus almost impossible to intercept. In this context any above surface ship will find it difficult to beat the defenses. Hence reliance of submarine platforms should be increased.
Sub-marine drone tech is actually quite interesting. It can be used on sink-and-forget wait mode. Thus we should be able to plant and move around many depth assets on wait and watch basis. Without humans on board this is (a) easier and (b) safer. It also improves the counter-strike and defense capability. These drones should be easy to manufacture in large numbers and low cost. These drones need not be large they can simply be attachments to ammunition that can help the ammunition to navigate and activate.
Deep sea surveillance and AGAIN ICT is also going to be critical.
So Navy must develop platforms but also develop choking -technologies for anti-ship systems.
Space warsSpace is important front for information wars. The satellites form critical part of the ICT infrastructure we need to deploy across the forces.
Satellites should be able to perform twin functions - jamming enemy satellites and keeping ICT infrastructure working for our forces.
The ability to quickly and rapidly restore downed satellites is very important. We should also explore possibility of smaller satellites that can last only for 5/6 months and then disintegrate. The smaller the satellite the costlier it is to destroy. Also because of size, you can build for redundancy. It is also possible to launch 100 satellites in one launch. These satellites are more relevant for theater coverage rather than country coverage.
Cyber warMost of modern warfare is quite destructive and hence preventive techniques are more important than remedial measures.Cyber war allows for information and processing delays in enemy retaliation and gives us additional time and information to respond better.
Many times it is better for cyber initiatives to operate in bleeding mode than in crippling mode. Thus, it is better for cyber initiatives to delay the enemy communication rather than cripple it. Thus introducing delays and errors is better than crippling the infrastructure for short time. These cyber initiatives can also provide advanced information about enemy maneuvers. The aim is to destroy combat assets of the enemy.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
AirforceJust cursory look at the Air force in the region will set us back. Pakistan Air Force generally known combat strength is about 500 aircraft. China is about 1600 aircraft. India is about 600. While the numbers are not exactly a way to differentiate - but considering the length of border and our defense requirement India should aim for 2000 combat plane air force.
This means HAL cannot produce 16 aircraft per year. It has to produce 16 aircraft per month. Using private participation we need to improve this number quickly. Second, it appears we need full Rafale deal AND a F16 manufacturing line at the same time.
IAF should also think of getting larger number of combat drones. These drones should be able to manage to fly with manned aircraft. This one manned aircraft (M) -coupled with around 10 drones (D) or more. Thus one mission unit with M-D combination. Then you can add mission units with xM-yD.
These mission units will need to collaborate and coordinate with share intel. That will require a robust ICT interface.
Airforce needs support from ground and space in the form of missiles and information. We should develop mechanism for coordinated launch of missiles controlled by the aircraft pilot herself. We can augment it with coordinator based ground support too.
ArmyThe future soldier will be an augmented information soldier.
We need to up our game in terms of equipping the soldier with top-class equipment. AK-203 is a step in the right direction. But we need to lighten the soldier and get every soldier a robo-buddy. The buddies could be in multiple form - carrier mules, terrain mapping drones, communication bots and combat drones (sniper buddy). For this we need very intense development in robotics and again the ICT component will also play a role.
We should experiment with augmenting the soldiers with exoskeletons and other techniques to improve battleground performance.
Air-cover has been neglected part of the army. Apache helicopters in air support is essential.
NavyFuture of navy is stealth platforms. As the US stealth ship Zumwalt goes for a maiden mission, China is developing aircraft carrier buster missiles. The Chinese missiles are hyper-sonic and thus almost impossible to intercept. In this context any above surface ship will find it difficult to beat the defenses. Hence reliance of submarine platforms should be increased.
Sub-marine drone tech is actually quite interesting. It can be used on sink-and-forget wait mode. Thus we should be able to plant and move around many depth assets on wait and watch basis. Without humans on board this is (a) easier and (b) safer. It also improves the counter-strike and defense capability. These drones should be easy to manufacture in large numbers and low cost. These drones need not be large they can simply be attachments to ammunition that can help the ammunition to navigate and activate.
Deep sea surveillance and AGAIN ICT is also going to be critical.
So Navy must develop platforms but also develop choking -technologies for anti-ship systems.
Space warsSpace is important front for information wars. The satellites form critical part of the ICT infrastructure we need to deploy across the forces.
Satellites should be able to perform twin functions - jamming enemy satellites and keeping ICT infrastructure working for our forces.
The ability to quickly and rapidly restore downed satellites is very important. We should also explore possibility of smaller satellites that can last only for 5/6 months and then disintegrate. The smaller the satellite the costlier it is to destroy. Also because of size, you can build for redundancy. It is also possible to launch 100 satellites in one launch. These satellites are more relevant for theater coverage rather than country coverage.
Cyber warMost of modern warfare is quite destructive and hence preventive techniques are more important than remedial measures.Cyber war allows for information and processing delays in enemy retaliation and gives us additional time and information to respond better.
Many times it is better for cyber initiatives to operate in bleeding mode than in crippling mode. Thus, it is better for cyber initiatives to delay the enemy communication rather than cripple it. Thus introducing delays and errors is better than crippling the infrastructure for short time. These cyber initiatives can also provide advanced information about enemy maneuvers. The aim is to destroy combat assets of the enemy.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
March 13, 2019
Indian Foreign Policy
Since last month's attack on Indian Security forces in Pulwama by the Jaish-e-Mohammad terrorist group, I have been thinking about the changes required in the national policy. Today we get the news that China once again blocked the proposal to declare Masood Azhar, the leader of JeM as a terrorist. In light of these developments here are some thoughts about Indian policy.
Note: Many sound quite conflicting but that is the reality. I miss Narasimha Rao.
With Israel India MUST announce a proper strategic deal with Israel including multi-faceted cooperation including defense, technology, agriculture, business, banking etc. We must improve integration with its defense network. A Multi-track developments must take precedence - Designed in Israel, made in India, (avionics and defense info-tech subsystems)Jointly designed and made by Israel and India, (missile, interception & drone tech)Designed in India and made for Israel - (aircraft and other equipment)Joint Cyber warfare development cell. We should have joint training - allowing Israeli forces to train in various conditions and set up training with them in Israel too. We should aim for Agriculture and water management technology collaboration. We should explore policies that should allow Israel-India manufacturing companies to go global - compete across the world. We need to have 3 such companies be global brands like say ikea.
With Russia India MUST announce a proper strategic defense deal with Russia as well. Russia is a long-term partner and we must improve the interaction with Russia. We must engage with Russians for heavy equipment - fighter aircraft, ships and submarine. We should further the missile development cooperation and aim for joint technology development in defense space.
Economically, we have to help Russia ween itself from Chinese dependence. Russia should be able to stall and deny China without a huge economic cost.
With United States That India and US are not friends is first the fault of India and then the fault of US. Unfortunately, today there a little bit of mistrust still left. India MUST have strategic partnership with US and must join the Quad.This will include setting up basesWe must join the information sharing treaty with USWe must have/develop defense ICT that is interoperable one with US. We need cyber defense cooperation with Quad.We need to step-up and take our responsibility in Indo-Pacific. We also need deeper collaboration and joint exercises between US and Indian defense forces.
With Japan India must enhance partnership with Japan on following fronts:Fighter aircraft developmentShip-building tech.New Drone tech With Japan, India must set up ventures to develop infrastructure in the Indo-Pacific region. Japan has the capital and technology and India will need to give its man-power.
South East Asia/ Asean / Asutralia New Zealand
We have to play very pro-active role in this region. We can work on the food side trying to reduce the cost of food and other goods in this part of the world.
About Pakistan
Pakistan will continue to remain an irritant unless we take proactive effort to eliminate the terrorist setup. It can be eliminated by imposing very high economic costs on the Pakistani Army. To this end, India needs to be part of Afghanistan solution. If US cedes Afghanistan to Taliban or to Pakistani Army backed group, we will soon have trouble on Indian soil.
Working in Middle East
India must UNDERSTAND and ACT on the fact that we are Hindu majority country AND we are the largest democracy of Muslim at once. India must use this to influence a lot of things in the Islamic sphere and give it a better direction. We must champion the reforms taken up by other middle eastern countries and overcome the regressive developments taking place. Africa India should be able to collaborate with Africa much better than any other country. We should provide the institutional support and help African companies develop as suppliers to India. Japan and other countries will surely help us in this process. We have to showcase a credible alternative to Belt and Road but with good clean reformist credentials.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
Note: Many sound quite conflicting but that is the reality. I miss Narasimha Rao.
With Israel India MUST announce a proper strategic deal with Israel including multi-faceted cooperation including defense, technology, agriculture, business, banking etc. We must improve integration with its defense network. A Multi-track developments must take precedence - Designed in Israel, made in India, (avionics and defense info-tech subsystems)Jointly designed and made by Israel and India, (missile, interception & drone tech)Designed in India and made for Israel - (aircraft and other equipment)Joint Cyber warfare development cell. We should have joint training - allowing Israeli forces to train in various conditions and set up training with them in Israel too. We should aim for Agriculture and water management technology collaboration. We should explore policies that should allow Israel-India manufacturing companies to go global - compete across the world. We need to have 3 such companies be global brands like say ikea.
With Russia India MUST announce a proper strategic defense deal with Russia as well. Russia is a long-term partner and we must improve the interaction with Russia. We must engage with Russians for heavy equipment - fighter aircraft, ships and submarine. We should further the missile development cooperation and aim for joint technology development in defense space.
Economically, we have to help Russia ween itself from Chinese dependence. Russia should be able to stall and deny China without a huge economic cost.
With United States That India and US are not friends is first the fault of India and then the fault of US. Unfortunately, today there a little bit of mistrust still left. India MUST have strategic partnership with US and must join the Quad.This will include setting up basesWe must join the information sharing treaty with USWe must have/develop defense ICT that is interoperable one with US. We need cyber defense cooperation with Quad.We need to step-up and take our responsibility in Indo-Pacific. We also need deeper collaboration and joint exercises between US and Indian defense forces.
With Japan India must enhance partnership with Japan on following fronts:Fighter aircraft developmentShip-building tech.New Drone tech With Japan, India must set up ventures to develop infrastructure in the Indo-Pacific region. Japan has the capital and technology and India will need to give its man-power.
South East Asia/ Asean / Asutralia New Zealand
We have to play very pro-active role in this region. We can work on the food side trying to reduce the cost of food and other goods in this part of the world.
About Pakistan
Pakistan will continue to remain an irritant unless we take proactive effort to eliminate the terrorist setup. It can be eliminated by imposing very high economic costs on the Pakistani Army. To this end, India needs to be part of Afghanistan solution. If US cedes Afghanistan to Taliban or to Pakistani Army backed group, we will soon have trouble on Indian soil.
Working in Middle East
India must UNDERSTAND and ACT on the fact that we are Hindu majority country AND we are the largest democracy of Muslim at once. India must use this to influence a lot of things in the Islamic sphere and give it a better direction. We must champion the reforms taken up by other middle eastern countries and overcome the regressive developments taking place. Africa India should be able to collaborate with Africa much better than any other country. We should provide the institutional support and help African companies develop as suppliers to India. Japan and other countries will surely help us in this process. We have to showcase a credible alternative to Belt and Road but with good clean reformist credentials.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
February 19, 2019
Time Travel effect of Debt
Generally in Time Travel movies the actors go back in time to change some minor thing to alter the future dramatically. Debt does this in reverse.
Debt pulls value from future and alters the present in such a manner that more value is created in the future than estimated.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
Debt pulls value from future and alters the present in such a manner that more value is created in the future than estimated.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
February 18, 2019
One problem with Indian capital risk return matrix
One problem with Indian corporate and their regulation can be summed up in the chart below.
Ideally a simplistic capital risk return matrix looks like this (click picture for larger version). In the best of places it comes close to this. Note that this is a simplistic depiction.
Ideal Capital Risk-return matrix
In India, it looks like this:
Indian Capital Risk return matrixThis is law enforcement issue as well as information issue. There is lack of regulation on conflict of interest between promoters and investors (small and big), there are many issues related to corporate governance. There is paucity of information to ratings agencies and these days the rating rigour is under a cloud with intense competition.
The chart also tells us why India does not have a deep bond market. Since my days in CRISIL, we have been harping on the improving the depth of bond markets. But so long as the risk-return profile continues there are no incentives for it.
The dispute resolution mechanism is abysmal. It is particularly unwieldy, long winding, costly and infructuous in the end. This has hurt investment in the country. Once this is fixed India will have unprecedented growth in equity and bond investments.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
Ideally a simplistic capital risk return matrix looks like this (click picture for larger version). In the best of places it comes close to this. Note that this is a simplistic depiction.
Ideal Capital Risk-return matrixIn India, it looks like this:
Indian Capital Risk return matrixThis is law enforcement issue as well as information issue. There is lack of regulation on conflict of interest between promoters and investors (small and big), there are many issues related to corporate governance. There is paucity of information to ratings agencies and these days the rating rigour is under a cloud with intense competition.The chart also tells us why India does not have a deep bond market. Since my days in CRISIL, we have been harping on the improving the depth of bond markets. But so long as the risk-return profile continues there are no incentives for it.
The dispute resolution mechanism is abysmal. It is particularly unwieldy, long winding, costly and infructuous in the end. This has hurt investment in the country. Once this is fixed India will have unprecedented growth in equity and bond investments.
Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
February 17, 2019
How Low interest rate can be bad for small business - 2
In a 2012 post with same title, How Low interest rate can be bad for small business, I had explained mechanics of how small businesses are denied capital BECAUSE of lower interest rates. This was summarized from my book Subverting Capitalism and Democracy. Over the years few readers have asked for further explanation. So here goes.
Demand for projectsLet us look at the following schematic.
Capital Quantum and returnThe diagram shows the amount of capital demanded and its possible rate of return. The distribution is made from capital requirements of various businesses of various sizes. The financed part is the blue rectangle. The width of this rectangle and its location is determined by various factors. Now our experience tells us following details - (1) smaller businesses have higher risk profile whereas larger businesses have lower risk profiles; (2) smaller businesses have smaller quantum requirement whereas larger businesses have diverse capital needs; (3) as a corollary projects with large quantum of capital requirement and low return are dominated by large corporations.
Therefore, let me quote what I said earlier:
How low interest rate leads to mal-investment
A bank takes risk by investing in a venture. Interest rate is also a reward bankers get, for taking the risk. Ideally, even in lower interest rate scenario, those projects with best risk-return trade-off should get financed.
However, in reality, lower yielding large borrowings backed by reputed corporates get access to financing more easily than new ventures. This means, irrational mega-projects or mal-investments of large corporates get financed at the cost of genuine investments of new ventures.
Typically, such irrational mega-projects consume a lot of credit requiring load syndication. This has twin benefits for bankers. First, there is a higher degree of comfort in being with the herd. Secondly, bankers do not have to go through credit appraisal of many small entities of questionable risk profile. This makes them assign a lower risk to these projects than appropriate. Intelligent investors will find that this contradicts with the "diversification as risk management" strategy. But being with herd has a stronger lure and is treated as risk mitigation (though wrongly).
Further, at lower interest rates, debt starts being used as an instrument to amplify equity returns.
Thus the second blow to new ventures comes from crowding out. It implies that even in a low interest rate environment, small businesses and entrepreneurs may not have access to lower cost capital. Therefore this impacts the long-term strength of the economy.
The MechanicsWhen interest rates are low this rectangle starts more towards the left. This is space where there are weak business models, those that are viable only in low return scenario. This space has irrational mega-projects of large businesses like debt financed share-buybacks etc. With the superior credit rating of large businesses these projects crowd out the smaller businesses.
As the interest rates rise the rectangle is pushed rightwards. In high interest rate scenario, the irrational mega-projects seem less promising. Hence, contrary to popular belief, it may be easier for smaller businesses to compete in high interest rate scenarios.
Are few projects with consortium lending more risky?The answer to this question is easy if you understand it from banks perspective and not from bank manager's perspective. From bank's perspective more the number of projects it finances the more the diversification possibility and thus lesser the risks. But this has higher risks for bank manager who has to stick out her neck for each of this project.
But from bank manager's perspective more the number of borrowers approving the project as credit-worthy lesser the risk for bank managers. But more the risk for the bank (concentration risks).
In sumThe cumulative effect of all these is that at low interest rate the credit is denied to small borrowers at the expense of irrational mega-projects of large businesses. When the interest rates rise, as they always do, these projects turn bad and become a drag on the economy.Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".
