Opinion: After Kedarnath and Kashmir, are there more natural disasters waiting to happen?

There were floods in Kedarnath last year and Kashmir this year. The triggers for both of these disasters, sequence of events and the learning are almost same. If we a take look back on both the events, it becomes clear they were not one time events and this may not be an end. Here is an effort to explore why it is so.

Sequence and reaction

This seems to be the sequence of events in both the cases.

Extensive rain causes floods ->   Water in low lying areas rise -> Transportation,  Electricity and Telecommunication are cut -> Rescue efforts seem inadequate and many a times cannot not reach in time ->  Causalities rise.

The typical reactions were as follows.

Army begins rescue efforts. Relatives of those affected pray the God. State Govt. start collecting relief funds. Newspapers blame weather forecast failure. TV channels run live shows focusing on victims and how their good life came to ruins in a short time. Opposition party blames ruling party for insufficient action. One research organization does root cause analysis which no one reads and recommendations do not get implemented.

Few months or years pass. One more natural disaster strikes in another place. And the history repeats.

Random pictures showing the impact of floods at Uttarakhand and Kashmir

Why Mother Nature became ultimate destroyer?

All the rainwater collected in the catchment area flows to the rivers also filling in water bodies, ponds, lakes on the way. Rivers act as a natural drain to the rain water. When the clouds burst and it rains for days, rivers see overflow, everything on its shores gets washed away, seams burst and the feeding channels to the rivers see the rise in water levels. Water reservoirs on the way hold more water giving it time to flow through channel. But during the dry years, there is encroachment on the route of the rain water flow. Civil constructions make those channels narrower. There is habitation built on the lake beds. People build their homes on low lying areas. They live in comfort only to risk their lives when the extensive rains come back.

Increase firefighting capacity or build better infra?

So what is the better solution for this recurring tragedy? Add more people in the emergency services to rescue who get struck or do better planning? For a country which has mastered rocket science and did Mangalyaan, town planning is not a challenge. But the devil is not in the planning but the economics of building infrastructure. Ever increasing population puts pressure on people to find new land to live on. It takes years before infrastructure gets built for them until the population reaches a mass to pay back the investments in infra. Mother Nature does not care for business cycles or wait until the man builds suitable infrastructure for himself. Ask your Meteorologist expert friend, he would say that the extensive rains in the catchment area are a recurring phenomenon and are sure to come back at least once or twice in a span of century though there could be a gap of decades in between them. So when the disaster strikes, it hits severely those living on its path. Thanks to low running bridges, poor quality roads, they flow with the water when the rain gods smile at them.

While there is no quick solution in place, both the Govt. and the civilians have to take certain precautions and steps forward toward disaster management. Efforts in understanding the monsoon dynamics needs to be intensified and thereby making the weather forecast more reliable. Ecology of the region and scientific challenges need to be understood thoroughly before building new dams and putting the civil infrastructure in place in the rain catchment areas. Habitation should not be encouraged on the lake beds and so on. Otherwise history keeps repeating until we learn from it.

Opinion: The rise and fall of Gold

Pricing of any commodity depends on supply and demand of it. But for gold it does not appear so, at least in last 8 years. And gold is no ordinary commodity. It is considered as ‘store of value’ for many centuries. When the fiat currencies fail to store value, gold comes to rescue and acts as an alternate currency. So the pricing of gold depends on what is happening with the currencies in circulation all over the world as well. And the biggest of them is USD. The Federal Reserve, central bank of US did few experiments with its monetary policy and gold had to respond to that.

Look at the following two charts. Gold had a fantastic run from 2008 to 2012. It appreciated from $800/troy ounce to $1800 which made many wonder if it will ever end its dream run. The Indian women (including grandmothers) who advocated buying gold all the time and at any price point appeared to possess more wisdom than anyone had thought. But gold too topped out and it saw price erosion despite few shouting ”It is a good time to buy” and now it is at 4 year’s low price.

Look at the other chart below it. It is the chart of US 10 year Bond Yield. It bottomed out when gold was at its top in 2012 and both reversed their directions from there on wards. So gold pricing was inversely proportional to bond yield in the last 8 years. And bond yield depended upon the demand and supply of the underlying currency, USD.

Rise and fall of gold

After the financial crisis in 2008, Fed announced Quantitative Easing (QE) a way of pumping to more dollars into the system by buying treasury bonds, a bull run in the gold had begun. Interest rates were kept to minimum to help trigger the economic growth. That means dollar supply was more than gold so one has to pay more dollars to buy the same quantity of gold. QE2 came during Nov 2010, quickening the rise in gold and reach an all-time high. QE3 began at the end of 2012 but it was intended to but only mortgaged securities unlike QE1 and QE2 which were aimed at buying treasury bonds. So it did not help gold to appreciate. As the speculation of QE tapering began in the early 2013, downward journey in gold prices started and by the time Fed confirmed its intentions to begin taper at the end of 2013, gold had given up most of its gains and bond yields which were suppressed were popping up again.

Outlook:

Expansion of balance sheet at Fed would stop from next month as bond buying program ends. So the focus is now shifted to the other policy measure Fed controls, interest rates. Fed has not yet revealed its plan and wants to keep rates low until US economy sees further revival but that time line may not be very far from here, probably 6 months to an year. And the rise in rates is expected to be slow and gradual as well. Until then gold prices are likely to remain in a range. So around the time rates begin to go up, gold may see its bottom and gradually begin to rise. Chart suggests it may not fall below $980 which may act as a strong support. For gold lovers, mid to end of 2015 might be the beginning of bargain buying opportunity.

Opinion: The king is no more; long live the Dasara

The town of Mysore never disappoints the travelers. It has enough interesting places to keep the tourists occupied for days. Closer proximity to many other places of interest bring many dedicated tourists to the town again and again, year after year.

The cultural capital of Karnataka celebrated its 404^th Dasara festival last week. It was first celebrated in the year of 1610 by Raja Wodeyar I, and its splendor has never diminished since then. But what was different this year was the absence of Royal Darbar of the Wodeyar scion, following the demise of Srikantadatta Wodeyar. The point of discussion now is whether the Mysore Kings were the prime reason behind the famous Dasara festivity which Mysore observes or were they the enablers of it while the festival was truly hailed by its citizens?

The Mysore kings were next to God for their citizens. The goddess Chamundeshwari was family deity of Wodeyar dynasty. While they worshiped her, they promoted Dasara as ‘Naada Habba’ (State festival). It was the kings who organized the festivities and gave it prominence as the grandest festival observed in the kingdom. A look into the history suggests ‘Dasara’ was a grand festival well before the time of Mysore kings and the Wodeyar dynasty made it grander.

The Mysore kings were not independent rulers in the beginning but viceroy to the Vijayanagara kings. And Dasara was the grand festival observed in the Vijayanagara kingdom until the fall of its empire in 1565. The beginning of Dasara celebrations in Mysore by Wodeyar’s in the early 16^th century was a reintroduction of the festival in an effort to rekindle the lost glory and might have been a way to win the hearts of commoners and gain wider acceptance in establishing their kingdom. Also the Mysore kings put their heart and passion into it and Dasara turned grander ever year passed under their rule.

Left: Goddess Durga slaying Mahishasura; Middle: Dasara procession during Mysore kings rule; Right: Modern procession

Though the effort of Mysore kings behind Dasara can never be undermined, the Navaratri festival is about worshiping the goddess Durga or Chamundeshwari. The goddess is worshiped since the time unknown and the legend has it that goddess Chamnudeshwari slayed a demon ‘Mahishasura’ whose name the modern name of the town is derived from. Another legend has it that the Banni tree (where the Dasara procession ends) was used by the Pandavas during their ‘Ajnatavasa’. Long before the Mysore region had its own ruler, goddess Chamndeshwari and Banni tree were worshiped. The kings, when in place, promoting the festival by worshiping the goddess Chamundeshwari and leading the Dasara procession that ends at Banni tree helped the popularity of the festival to reach its zenith.

After India gained its independence, the kingdoms fell apart. But the royal family of Mysore had a role to play in the Dasara festival while the State government was responsible for organizing the festival. This year Wodeyar dynasty lost its prince and no other family member is officially recognized as the head of the family yet. And the festival of Dasara could not wait for it. The king is no more, long live the Dasara.

Opinion: New role models in the neighborhood

Nobel peace prize has given a common platform for both Indians and Pakistanis to be proud of. Two individuals who risked their lives for the rights of children are honored with this award. Indeed this is a noble deed. Noble hearts are awarded with Nobel Prize. At the right time, it puts emphasis on why the neighbors should stop the war at the borders and the war of words over media and change their focus to internal problems.

Left: Kailash Satyarthi braved bullets to save kids; Right: Malala was shot in the head and suffers permanent injuries

If a considerable chunk of children miss going to school and end up as child labors, what kind of skills do they acquire and how do you expect them to earn a good income when they grow up to be adults? While India is advancing, many are left behind, so the average income of an Indian is low compared to its neighbors in the Asian continent like Singapore or Taiwan. No wonder why ‘Services’ is the biggest component of GDP growth in India unlike in China or South Korea where manufacturing takes the lead. Countries with higher average incomes have skilled people at work who command higher wages. These skills take years of training to acquire. The ecosystem has to encourage the promotion of skilled labor force. Putting a stop to exploiting the children is the first hurdle to overcome.

Malala said “This award is for all the voiceless children”. Political leaders of Pakistan may ignore but the children of Pakistan are sure to take a note of this. It is the children and the young who will be the next generation will decide what is good for them in the decades to come. They may not have the right to education now but no one can steal their right to choose a role model. Malala is an inspiration to many already and she has certainly kicked off the change which Pakistan needs to embrace and only that storm has to get bigger.

If Nobel Prize is a barometer, look at the below list and see how India and Pakistan fare. US top the list in all categories except Literature. UK and Germany follow, thanks to the institutions they built and their citizen’s commitment to the development of science. Three of the awards India has won were during pre-independence, starting with Tagore for literature. So the independent India has won a Nobel Prize once in fifteen years on an average. Should we be content with this?

List complied from Wikipedia data

It is high time India and Pakistan moved beyond their addiction to religion, cricket and movies. And it is time we improved our scorecard at Olympics too. For this, we need to do our bit by not employing child labor on any occasion, help them to get to school and encourage them to take up science and sports.

Opinion: When oil loses, India wins

Crude oil prices have softened from a high of $125/barrel to $90/barrel and India is looking at a cut in Diesel prices after a gap of five years. This possibility was discussed in an earlier post on this blog. (Link: http://booksmarketsandplaces.blogspot.in/2013/11/diesel-prices-and-inflation-correlation.html)

Source: http://www.investing.com/commodities/brent-oil

While crude in a bear market is good news for India, it is likely find support around $80-85 per barrel. And a bounce from those levels may not be sustainable for following reasons.

Consumer turning into a producer: The biggest oil guzzler (USA) is focusing on domestic production and reducing its dependency on imported oil. A Bloomberg report says the oil production in the US has surpassed that of Saudi Arabia this year (Link: http://www.bloomberg.com/news/2014-07-04/u-s-seen-as-biggest-oil-producer-after-overtaking-saudi.html)

Source: DOE

Overcapacity: As US reduced its import of oil and the rest of the world’s increase in oil demand does not offset this shortfall, oil producing countries are left with surplus production capacity. They cannot command the prices like before and the competition among oil producing countries led to sharp correction of prices over the last few weeks.

Reducing influence of geopolitics: With the changed scenario of the oil capacity glut, geopolitics has lost its edge on oil pricing. Most of the oil producing countries in the Middle-east, Africa and South America earn their major income by selling oil. While they were happy earning a living selling the precious natural resource – oil, the balance in the market slowly shifted from a seller's market towards the buyer. If those countries don’t sell the oil, they will go hungry. So war or no war, care is taken not to disturb the oil supply chain. As oil exploration is spreading to previously unexplored areas, it is becoming certain that oil sources are not limited to few regions on this globe, it is found at the bottom the oceans, below the glaciers, and new methods are being developed and deployed to extract the trapped oil. New oil routes are being set-up to take them to consumers. So using geopolitics as a tool to take oil prices to a new high will become a thing of the past. And a thing to forget in the days to come.

Benefits to India: 

The lower crude will help India to lower its import bills, so it reduces the trade deficit. Since the subsidy costs on diesel reduce or disappear, there is no need to finance it for the Govt. so the fiscal deficit will reduce. Narrowing deficits help Rupee to appreciate. Lower diesel prices help reduce the cost of transportation and will bring a small relief in inflation. When oil loses, India surely wins.