Future of gold: Is lust for gold falling?

Future of gold: Is lust for gold falling?

It is historically proven that gold is a safe investment. However, in recent times, gold has become an insecure asset as its price is rapidly falling. Paul Craig Roberts, former US assistant treasury secretary, said that selling tones of gold by Federal Reserve is a concerted effort to scare people away from gold and get them to buy dollars instead.

Now..., investments in gold have been caught between the devil and the deep blue sea because if investors do not sale gold then they will suffer from losses because of further drop in price and if they sale at present lower prices then they may loss the benefit of future rise in price.

Over a decade, a great increase in gold price from $272 an ounce at the end of December 2000 to $1970 on August 23, 2011 panicked the Federal Reserve because the US dollar was losing its value in relation to gold.
Now, it is predicted that gold prices are likely to move much lower, toward $1,000 by 2015.

Why is gold price falling? Some theories are as follows: First, gold prices tend to spike when there are serious economic, financial and geopolitical risks in the global economy. Now the peak of financial crises has gone.

Second, gold performs best when there is a risk of high inflation, as its popularity as a store of value increases. But despite very aggressive monetary policy by many central banks global inflation is actually low and falling further.

Third, gold is not a direct source of income. While equities have dividends, bonds have coupons, and homes provide rents. Now that the global economy is recovering, non-gold assets provide higher returns.

Fourth, gold prices increase in response to expansionary monetary policy that causes a fall in real interest. This is in effect the time to buy gold when real interest is negative and returns on cash and bonds are negative and falling. However, over time, US and other countries will exist from expansionary monetary policies.

Fifth, highly indebted government such as Cyprus and Italy are going towards gold sale. Nevertheless, it is opposite to the theory because in highly indebted governments, bonds are insecure while gold is secure.

However, if we look from the side of consumers then situation is different. India is the largest buyer of the gold and according to some estimates, India will increase 20% demand for gold this year. The India will be followed by China. It is also argued that central bank of emerging economies will increase the demand of gold.

Right now supply side is bringing down gold price and demand side is not enough strong that it can halt falling prices.

What will happen in future?

Hitting the worldwide gold prices is a well-calculated strategy. If we look from the developed nations point of view then it can go to a point which is difficult to return back. However, if we look from developing countries point of view then increasing demand will absorb price fall in near future.

Once again, it is the time for wide income distributional consequences. Who will be rich and who will be poor? It is difficult to say. In my view, those who will take lead will benefit from artificial prices and who will follow perhaps sufferer from this whole scenario

You are the best, I accept, now leave attitude.

You are the best, I accept, now leave attitude.

We all want respect and want to avoid rude behavior but we face it. Why do people misbehave? There could be many reasons to explain misbehaving. Yet, four key reasons of misbehaving are attention, power, excitement and revenge. My focus is on the first one that is attention- more formally, attention deficient hyperactivity disorder (ADHD).

People ...have an imaginary status in their mind; this is a different question whether this imaginary status is based on perception or reality. When people do not find their imaginary status in the society then they turn out to be rude.

Seeking attention for expected status is not necessarily an abnormality but the point is why people generalized their misbehaving for all. Some of the people give them their due respect and acknowledge their status. However, misbehavers usually do not make distinction while misbehaving. In practice, sometimes, people who give more respects, they receive more misbehaving-perhaps they appear as soft target.

Point: Misbehaving is itself bad but generalization of misbehaving is tremendously bad.

Question: Why do people generalize their misbehaving?

Empowerment of individuals: Now individuals are more powerful than ever.

Empowerment of individuals: Now individuals are more powerful than ever.

Once I was doing my routine research work in my PhD office at Adam Smith Building in the University of Glasgow, UK. A strange air noise was constantly disturbing my ...focus on the work. I came out of the building and looked up in the air where two helicopters were hovering at 30-angled position. This was something unusual and difficult to interpret.

I asked a Scottish student about this. He told that these are the Glasgow police helicopters that are monitoring an illegal party in the Kelvingrove Park where around 10,000 people gathered to have a fun. I asked why it is illegal.

He told that this party is arranged by two young students on face book without formal permission from the council.

This was amazing that two individuals were able to have an effect on thousands of people and administration of the Glasgow.

Apart from this general observation, in effect, there are number of classic examples that highlight how individuals have been empowered in the recent times.

For example, in August 1991, Tim Berners-Lee alone invented World Wide Web (WWW).

Thomas Edison invented light bulb but he was supported with dozens of people in his lab. William Shockley invented transistor but two of his assistance actually built it. Internet was invented by the contribution of many people. However, the WWW is Berners-Lee’s alone.

How Firefox came about? Recently, Black Ross a 19 year old from Stanford and Ben Goodger a 24 year old from New Zealand, starting from the two ends of the world, in an open source community for free, produced a browser that captured 5% of the Internet Explorer market in about six months.

Now, the era of uploading has given unique opportunities of affecting others. Therefore, now individuals are more powerful than they were in the past.

 

Global currency of 21st century

Global currency of 21st century

A generation ago, it can be expected that what teachers teach in classes can last for a lifetime of their students. However, this expectation is less convincing in today’s globally dynamic world. Today, we are living in a world where changes are more rapid than ever.

Now students need education and training for technologies which are not yet invented, for jobs which are not yet created, for economic threats which are not yet borne, for solving issue which are not yet created. Therefore, now we need innovative education, which will determine future prosperity and growth.

Recently, OECD Secretary-General Angel Gurría, said: “Skills have become the global currency of 21st Century economies.”

In addition, now focus is shifting from qualifications to skills. Thus, in future, returns to an individual and to a society would be mainly determined by skills.

Seemingly disequilibrium is perhaps equilibrium in reality

Seemingly disequilibrium is perhaps equilibrium in reality.

When someone throws litter in streets and public places, it looks odd. When bins are not available in streets and public places, it looks odd.

When poor pickers (children) desperately search for garbage to fill their sacks, to earn their livings and to go back homes early then it perhaps reflects equilibrium.

One possible future scenario:
Over the path of development, government will place bins everywhere, people will educated in enough that they would bin with responsibility.
What about poor pickers? Children will be sent to schools and elders will be employed formally by the government to clear the bins.

Q. is it equilibrium or dysfunctional equilibrium?
Q. Is it important to fix disequilibrium one by one or simultaneously?
Q. Should we wait for development spillovers?
Q. What can be done for these poor pickers?

Borrow or not borrow from IMF: Between the devil and the deep blue sea

Borrow or not borrow from IMF: Between the devil and deep blue sea

In 2008, Pakistan borrowed nearly $8 billion from the IMF and began repayments in 2011. Now Pakistan is due to pay almost $5billion by end 2014. Question arises what previous government has done with $8 billion. In principle this amount need to be used to undertake adjustments and structural changes to avoid future borrowing dependency and to create internal capacity to repay the loan. Sadly, little have been done on this front.

If Pakistan does not borrow then it will face the problem of balance of payment crisis, as foreign exchange reserves are available only for 6 weeks imports. According to Asian Development Bank, Pakistan needs between $6-$9 billion to avoid a balance of payments crisis. On the other hand, if new government goes for borrowing then it has to bear several costs as follows:

It has to impose general sales tax, which will be unwelcomed by taxpayers.

It has to reduce fiscal deficit from 8% to 3.5%, which will require tough time for those who will bear the burden, particularly poor.

Federal government has to insist provinces to generate surpluses to contribute to consolidate fiscal burden.

It has to bring public debt GDP ratio from the current 62% to 42% that will keep the government under tight constraint.

What is the way forward?

Silent Spectators on Face Book (FB)

Silent Spectators on Face Book (FB)

Where FB gave a unique opportunity of socialization to many users, it also gave a unique opportunity to silent spectators on FB to realign their social relations, to revise their judgments about friends and to update their friendship levels.

We can broadly make three categories of FB users: active users, moderate users and least active users. For third category, we can use the term of silent spectators.

These people randomly log in and quickly scroll pages for few minutes; they are expert in picking the best from a wide variety of uploads. Instead of writing a comment, they just smile and closely observe the behavior of other users from their posts and comments. Accordingly, they update their friendships levels and circles through silent observations.

The bottom line of this point is that people should be careful in uploading biased, emotional and discriminative posts/comments because many silent observers are closely watching them.