Inspired Obama

To: The Editor
Published: Asian Voice
Date: 16th October 2008
From: Nagin Khajuria FCCA

Obama cites Mahatma Gandhi to back his call for change

Your article “Obama cites Mahatma Gandhi to back his call for change” (AV 11 Oct p35) is interesting in the sense the he appeals to the American nation as a whole “to rededicate themselves every day from 2 October 2008, Mahatma Gandhi’s birthday, to 4 November 2008, U S election day.”

For sure, these 33 days are becoming very painful days all over the globe. It was always believed that banks, at least, those which were known to be “first class banks” never, or hardly ever, fail. May be all nations should reflect deeply on change as current system is too costly for 60 to 70% of the world population.

Obama also had two other men he most admired: Abraham Lincoln and Martin Luther King Jr. He took a lot of inspiration from the civil rights movement and the way the movement brought ordinary people in extraordinary positions of leadership. It struck him that lasting change came from the bottom up and not from the top down according to “From Promise to Power” by David Mendel, pages 200-01.

On one hand, we have individuals, businesses and governments who have surplus cash and want to find suitable assets where they can invest their surpluses and make some return for a rainy day. On the other hand, there are individuals, businesses and governments who want to borrow money so that they can make better use of it because of their ability to create real wealth. Financial intermediaries connect these two groups.

Currently, because paper wealth is probably anything between 8 to 24 times the underlying asset and value of a business, an individual, a government, or a country as a whole, it is impossible to figure out where the weaknesses are and where the strengths are. 

One solution could be if competition reform laws were passed where no business could have a larger than 10% share of the market, both in the public sector and the private sector, so that at least there are 20 players competing each other. Banks should be either fully private or fully public owned.

The cost of credit needs to be reduced drastically. This cost is not only the interest rate differential but all the hidden charges and commissions that are paid to financial intermediaries to broker between the savers and the borrowers when big money is raised.

A country’s exchange rate strength is the supply of or the demand for its currency. When exports are more than imports, the demand is higher than supply. When imports are more than exports, the supply is higher than demand. In the former case, the currency becomes stronger. In the latter case, the currency becomes weaker. However, when speculators start hedging on foreign currency rates, the fundamentals are changed. Why not settle imports and exports in the currencies your countries live in rather than use a third country’s currency to avoid the need for hedging in the first place? 

Nagin Khajuria, FCCA
Director, Simplification Made Simple Limited
Chartered Certified Accountants & Registered Auditors
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