MONEY DIVERSIFICATION (ADDED NEW CONTENT: 6/6/2015 - WIP)
1. What is my opinion about cryptocurrency/bitcoins?
Though this mode of currency appears to have its own purpose, my personal belief is that the world is not ready for cryptocurrency at this point in time. The main reason being that majority of the population is not well versed in this area, and hence such currency system could result in a new kind of wealth gap with majority at the receiving end.
2. Does it mean that we should not have such a currency?
No. May be, it could be explored in smaller scale for specific applications to see how this system evolves.
3. What could be a long-term solution to address large fluctuations/depreciation in real value of currency, and limit currency related issues?
With GDP for several countries increasing over the last two decades, during the next decade, the world should consider having one global central bank with satellite centers that oversees the functioning of the central banks of countries around the globe. As part of this process, there should also be one central currency, which can be pegged against individual currencies. This new currency system should strictly adhere to basic principles of currency valuation.
Further, the currencies around the globe should be streamlined and be limited to a handful of currencies in line with the different continents. Due to this reduction in number of currencies, there should be some leeway for countries with lesser absorptive capacities to manage the new currency valuation while growing their country's economy. This global central bank should be represented by restricted number of members (on a revolving basis) from each continent.
This discipline in currency valuation through a new central bank could potentially limit the global risks coming out of financialization, will increase accountability, and bring some level of fiscal discipline across the globe. Moreover, centralizing the currency system might also help in addressing private and public debt with respect to gdp, which appears to be at an all time high in many parts of the world. World should also realize that inflating out of problems is not the way to address fiscal and monetary issues.
4. What is my thought on Milton Friedman's expansionary economics?
We still have expansionary economics (which should be obvious considering that the global population has increased significantly during the last 100 years), and it is the reason that the global gdp has increased way past 80 trillion dollars. But, with unforeseen levels of globalization along with population differences across the globe in addition to technological innovations all happening at the same time, we may not see global expansion reflected uniformly across countries. Moreover, it is important to understand that expansionary economics could be misleading, if we were to take into account inflation of home prices, health care cost, educational cost, private debt etc across the globe.
NEW CONTENT ADDED ON 6/2/2015 -
5. Why such a strategy?
First of, I would like to clarify that finance and economics go hand in hand when it comes to currency markets and currency valuation.
The above-mentioned strategy is not to undermine US$ or due to lack of confidence in US$. Instead, such a strategy would help in balancing out any unfair advantage that any particular country had unknowingly or knowingly gained over time by not adjusting the currency valuation in line with the growth and buying power of the citizens of a particular country (please understand that we can't point fingers at any particular country. Rather, we should blame the system that we had in place - Everyone participated directly or indirectly with or without our knowledge). It certainly will bring more accountability from every country. Moreover, it would help in reducing arbitrage coming out of wide dispersion in currency valuation between neighboring countries, which in turn can give valuation illusion to the citizens of the country with higher valuation. It can also help in optimizing the impact on trade surpluses/deficits well before the issue goes out of hand. For example, I remember the times when wide difference in exchange rate between US$ and Canadian $ gave an easy way out for even financially less-savvy individuals to capitalize on the difference by living in Canada, while utilizing resources in US. Over time, with almost parity in exchange rates (until recently), the economic impact from such an arbitrage appeared to got reduced.
6. What is going in favor of US, and what other developed nations can learn from US?
US has consistently kept the country open to the world, which has helped in building a population of 320 million compared to approx. 140 million in Russia, 36 million in Canada, 23 million in Australia. This size supports the demand economy very well, and offers diversity in talent and workforce. Moreover, diversity in demographics provides various avenues for growing the economy. Further, considering the size and population of the country, US has energy sufficiency, and also food diversity in terms of availability of food variety. Further, food appetite of the people of the country spans the entire gamut resulting in various options.
Compared to US, if you were to take Russia, though majority of the people have had land sufficiency, and also some level of energy independence, limited diversity and less than half the size of US population repeatedly plaques the economy (in terms of domestic demand) from growing. More soon in the LWL section.
7. What should US and most of the world focus on?
As mentioned earlier, infrastructure to begin with. Infrastructure plays a vital role while addressing water and food demand, and also global warming directly and indirectly. Educational offerings should align with infrastructure development, and to improve various other key areas (health, food, energy to name a few).
While developing educational offerings, Universities should remember that the inflationary rate seen for educational expenses across the globe is not sustainable especially, when there is a good possibility for supply/demand mismatch in jobs happening time and again.
Personally, US will become a more complete leader when majority of the country has at least a bachelor's degree or more from meaningful and valued educational institutions.
Globalization: Every country should understand that globalization is the best path forward, and no country, irrespective of how big or small, can thrive on their own.
8. How to combat inflation in education in US?
Every state should optimize the number of state universities, which along with existing private, credible institutions/colleges should provide various avenues for students. The number of universities in a state should align with the demographic size of the state. A complete SWOT analysis should be performed, and each state should optimize their educational offerings in alignment with the SWOT analysis (based on their demographics). SWOT analysis would also help in identifying whether there is a need for bringing in new talent from other places, and to optimize the number and nature of jobs in a state.
9. How about other areas?
Other areas such as, sports, certainly helps in a thriving economy. But, please, such areas should not cause other bubbles, and provide another outlet for a selected few to manipulate the system.
10. What is the role of MOOC mode of education?
Personally, I believe that the world is not ready for a socialized educational system yet with so many other issues happening at the same time - just for the fact that the global economics and personal family finance may not be able to react/adapt to such a disruption with educational institutions being one of the major employers around the globe. Instead, the nature of innovation should keep the brick-and-mortar educational system alive. If you were to consider behavioral science and economics, we, humans, are social beings, and schools/colleges/universities provide the best avenue for a healthy social interaction, and also provide an opportunity for many to see diversity for the first time. Further, to make the traditional educational system thrive with necessary innovations, HR management process should align with the offerings of the educational institutions, and vice versa. MOOC, instead, can supplement the offerings of Universities/Colleges.
At the same time, Universities should understand that social networking sites & WWW, in general, provide various avenues for people to find out the credentials of others, and there will be all kinds of questions floated around, if qualifications don't align with the positions in the coming years. Hence, Universities/Colleges should invest in enhancing performance metric system first in their own institutions before educating other organizations.
Bottom line - Meritocracy should come into place- It is what US was known for, and had set an example for others' in the past. I believe that technology will help in strengthening the claim for meritocracy further in the future.
EEO policies should be revisited time and again to adapt to changing demographics; May be, the suggestion put forth by President Thomas Jefferson to optimize constitution every 19 years (may be, different time window) should also be considered for the changing times. This happens to be the case in many other parts of the world.
11. How should we define meritocracy?
It should be a combination of individual and team performance, education, experience and overall contributions to the organization. Meritocracy should also be connected to compensation structure that aligns with the long-term growth of the organization.
12. What else can be done to limit bubbles?
- Addressed currency bubbles
- Stock valuation: Basic principle of finance should come into place while evaluating a company. Again, no one is to blame for such happenings rather than the system in place. In order to control stock bubbles coming out of unheard valuations, some control measures should be put into place.
- Housing bubbles should be limited - first by creating awareness as I had done in my app; limit FDI; prevent currency and stock bubbles, thus restricting the odds of seeing extreme bubbles in another area.
- Connectivity between regions to limit housing bubbles, and to improve family stability, which goes hand in hand with infrastructure and transportation
- Creating an environment for thriving smaller enterprises - governments around the world are working towards that front (References 6 - 10)
- Financial awareness leading to financial flexibility and some level of self-sufficiency along with increase in percentage of educated masses with right education would allow individuals and the overall society to understand and adapt in line with the overall ecosystem - Quanta$avers will do it, and so will other organizations such as Quanta$avers
- Increase or Utilize satellite banking centers such as, Credit Unions, Community Banks, and the interest rate should support it (over the long-run) - In this way, majority of the population would not have to rely on stock market appreciation as a major additional source of income (It will also address financialization to some extent) - (this suggestion shared earlier)
13. What is my opinion on the terms, inflation and deflation?
Personally, I believe, that we are giving too much weight to these terms. Think about, what is the use of $1 million dollars, when it is worth 1/10th that of what it was x-years back. There is nothing wrong in having stagflation, deflation etc, if the overall majority is not struggling, and their aspirations/ education will match with opportunities (provided wealth gap is controlled). It will serve the overall society in the long-run, even those, who would like to become billionaires in the fastest time possible.
I would also like to add that I am for individuals' aspirations to come true, but not by over-exploiting the majority intentionally, or due to excessive manipulation of the loopholes in the system.
I am confident about my abilities, and don't compare myself with others (as mentioned earlier in another posting). I am also not afraid to learn to adapt to the changing times. The above point of view about EEO policy was presented after teaching close to 70 courses at various levels from 2009 onwards, and interacting with diverse group of students from all walks of life.
10. Check out this course - https://www.coursera.org/course/internationaltaxation on International Taxation Law