Friday, June 27, 2008

Extreme Currency

The first thing that one can observe after a series of very high inflationary periods is, higher denominition notes.
Recently Zimbabwe launched 100 million zimbabwean dollar bills owing to the very high inflation which is hovering around 165000%.

Imagine the situation, where each loaf of bread costs around 16 million zimbabwean dollars. The currency depreciation made the currency trade at around $1 = 200 million zimbabwean dollars.

This lead me to a search for the world's largest denominition bills:
To begin with,
a) The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengo, (100,000,000,000,000,000,000, or 10 to the power of 20).

The Post-WWII hyperinflation of Hungary holds the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (4.19 × 1016%) for July, 1946, amounting to prices doubling every fifteen hours!!

b) Largest bank note with zeroes was in Yugoslavia (1993) 500 Billion Dinara

The above figure is of a 500,000,000,000 (500 billion) Yugoslav dinar banknote circa 1993, the largest nominal value ever officially printed in Yugoslavia, the final result of hyperinflation. Yugoslavia suffered 5 × 1015 % inflation between 1 October 1993 and 24 January 1994.

China which is perceived as having one of the most undervalued currencies as of now, had to go through tremendous hyperinflationary periods during late 1940s owing to which their currency was depreciated to order of a million.

The existing high inflations are no where close to the hyperinflation trends.
All the devaluations of currencies are obviously due to the hyperinflationary trends present in those countries. The details of all the hyperinflationary trends can be obtained from http://en.wikipedia.org/wiki/Hyperinflation

I hope the existing turbulent conditions will not lead us to any such situation, which will force people back to nomadic times.

Monday, June 23, 2008

Only god can remove me from the power, not britain or any one else

Couple of weeks ago I said these statements in a rally.

Guess who am I?

Iam running the country for the past 28 years, after some heroic efforts.

In all these years of rule I hardly did anything for the economy, but I've ensured that I had all the luxuries.

Now Iam 84 years old, but still Iam eager about power.

Because of lot of international pressure I agree to conduct elections...My main opponent is a trade union leader and has been the strongest critic of mine for a long time...looking at the situation I predicted that it might be a landslide win for the opponent, so I went ahead and started annihilating all the supporters of the opponent party.

I even scared the people who were willing to vote to the opponent member.

In order to act as a mediator I invited the prime minister of the powerful country in the continent, who is the only supporter of mine and ensured that any troubles are overcome.

In spite of all the efforts, in the elections held in March' 08 I lost the elections. I could somehow manipulate and show that I secured 43% of votes and the opponent got 48%.

But because the government is in my hand and I could frame the rules, I said that the opponent did not get a great majority and hence there has to be a by-election because I knew that the opposition did not have enough strength left to contest in the by-elections.

Now, I went on a rampage and did not spare anybody. I threw the people who might have voted for the opposition from their homes. I killed the other party supporters. I ensured that the rallies of the opposition party are boycotted.

I arrested the main strategy maker of the opposition party on the pretence of a treason. I publicly declare that god has given me the power and only god can take me out of this throne. No one else can do that.

Finally the opposition party leader could not bear all this and said that because of the increased violence he is not going to contest in the by-elections.

Once, this was declared there was no stopping of mine. I attacked the headquarters of the opposition party and the party leader fled into the Dutch Embassy and took refuge over there.

So much for the fights. I dare any one who wants to contest with me.

Guess who am I?

The opposition party leader is: Morgan Tsavangirai
The prime minister of the strongest country in the continent is: Mr. Mbeki of South Africa
The Dutch Embassy is in Harare, the capital of Zimbabwe.

You should have guessed it by now...

Iam Robert Mugabe, the self proclaimed ruler of Zimbabwe.

Thursday, June 05, 2008

Petrol price hike: Increased arbitrage for committing crime

"Lets not burden our children.." these are the quotes of Mr. Manmohan singh after the fuel price hike declared yesterday. It is a basic common sense that all the oil companies will be dead without these price hikes. Not that these price hikes will lift them from the deep losses, the amount of direct subsidies atleast will come down.

The imminent affect of the fuel price hike will be felt by the normal consumer is two ways:
a) The increased price per litre
b) The quality of the fuel

One may wonder, how does increasing the fuel price hike affect the quality of the fuel. Because, the increase in the fuel price hike occurred on Petrol & Diesel but the prices of Kerosene remain UNTOUCHED. The arbitrage value can be understood from the below graph.



This will provide more impetus to the petrol aduleteration whose victims are the millions of vehicles, the environmental pollution and the famous Mr. Manjunath of IIML who was brutally murdered because he suspended the license of petrol pump involved in petrol adulteration.

I guess to ensure that Kerosene is properly used, the sale of Kerosene is stopped in the open market and is only distributed to the needy through public distribution schemes. But, alas, it is estimated that close to 40% of the Kerosene distributed in PDS is used for petrol adulteration.

Even if we estimate that in a litre of Petrol, it is adulterated in the proportion of 25%, then the margins for the petrol pump owners who are involved in adulteration would be around rs.10 per litre of petrol and on the similar lines for Diesel.

So, if the petrol pump sells around 2k liters of petrol/diesel per day, the margins for the petrol owners would be more than 20k per day. These numbers may not sound astounding but these are very conservative figures.

India consumes around 4 million barrels per day of petrol. If 25-30% of that is adulterated, then we are looking at a margin of more than 1 crore per day for the owners. With the increased petrol/diesel prices and the constant kerosene prices and with minimal check points on PDS, the owners of the petrol pumps will find petrol adulteration more lucrative and hence the nexus would become more stronger.

So, even if one more Manjunath gets in, the chances that he will make any dent into the existing system have already reduced with these price hikes.