Cosmic Law explained!

History teaches us that after the fall of the Berlin wall a time of World peace started. The history we learn in school does. But it is not until we learn about economics and finance that we understand that the war never ended. The battlefield and the weapons changed, but the conflict remains open. Today more than ever.

Instead of battles being fought by soldiers in open fields, in the sea or in the air, those who now fight the battles are traders, financial engineers, lawyers. The battlefields are the markets and the courtrooms. Instead of wars being won using guns or tanks, weapons in the REAL wars include lawsuits, advertising, debt, derivatives and other financial tools such as models.
The reason why there was a change in warfare is because society has "legalized" wars. Rather than kingdoms and states actually fighting each other on the battlefield for the land, resources and labour, now Corporations fight wars to increase their market share, to maximise shareholder´s weath.
In a capitalist society, who has the most capital is the most powerful. As a result, corporations now rule the world, not governments. And corporations prefer to fight wars in the legal way. At least officially.
If you are more interested in what I am talking about, listen to this speech from president Kennedy just a few weeks before his death. http://www.youtube.com/watch?v=bj3AECSKmhU

Lawsuits are the most obvious type of wars between corporations. Recently the Samsung vs. Apple case has become very famous, and I think it is a great example of one of the "market share wars" I was talking about just now,  http://www.foxnews.com/scitech/2011/09/23/samsung-vs-apple-war-hits-high-gear/

Advertising is THE "mass-brainwashing weapon". I use the term brainwashing rather than convincing because of the enourmous amount of advertising we are forced to cope with every day.

The idea of advertising is in itself genuine, providing consumers with information about the product, but the volume of advertising we are exposed to and the way sex is often exploited to sell products show that corporations utilise it in an immoral, and thus wrong, way.

Derivatives and financial models are of the same nature of advertising, I believe. Too often they have been misused by huge financial institutions like in the case of the sub-prime mortgage crisis. I believe these financial instruments can be used for good and can help the progress of our society. Of course it is up to the users themselves to chose how to use them (think about financial deregulation in the U.S.)
Debt can also be a positive instrument as long as all debtors play by the same rules, meaning there are no corporations or individuals too big to fail. Otherwise, as has been argued in the documentary "Inside Job", if you are too big to fail, you are too big to exists.

We know how it can end up if there isn´t enough regulation and control of operations in the financial industry. We have seen it in the mortgage crisis in the U.S. and are now witnessing it in the E.U., e.g. the taxpayer in Greece having to pay for the mistakes that "experts" in the financial industry did when they allowed Greece to enter the Eurozone.

Cosmic law is a Hinduist belief. It is the law that governs the universe, the engine that keeps the universe moving. The fuel that powers this engine is love. Everyone has the choice of living within the law or outside it. In the end, you and only you are going to benefit from living by it.
Of course living by the rule is hard and the path to become a better person is long. He who attains living by the rule becomes a happier person. He gets to know his inner-self. Knowing your inner-self (or spirit) brings you happiness. The more conscious you are of your spirit, the less attached you are to the material world, the more you understand that materiality is not the true source of happiness.

Now where exactly does this fit with business practice?

Should it? What do you think?

A turning point for European markets?

The Slovak parliament approved the expansion of the European Financial Stability Fund (EFSF) yesterday. As a result, markets in the Eurozone can finally take a deep breath. After a period of indecision from August to October (see below) as can be seen by observing the volatility of the German DAX (Deutscher Aktien IndeX) and the French CAC 40, confidence in the market seems to be restored.  These two indexes are considered the most representative of economic performance in the Eurozone.


DAX

CAC 40

The EFSF’s objective is to preserve financial stability of Europe’s monetary union by providing temporary financial assistance to euro area Member States in financial difficulty.

With the approval of the EFSF by the Slovakian government, the fund has now increased its powers and size. It can now directly buy government bonds, providing help to sovereigns and recapitalizing banks.

The Slovak EFSF approval resulted in investors showing confidence in the European market because of limited downside effects in the short run. Even if Greece should default on its debt, a possibility that has been the main source of market volatility, the fund will provide European banks that have credit exposure to Greek debt with liquidity needed to continue with business operations.
The fund provides insurance against eventual bankruptcies that could otherwise take place in such a scenario. It is backed by the sovereign governments of the Eurozone and by the IMF. So far its main use has been providing cash to heavily indebted economies in the Eurozone. These “bailouts”, term that has been used to describe funds received by troubled economies since the sovereign debt crisis began in April 2010, are needed to provide liquidity in the markets so that normal economic activity may continue. But they come at a high price.

The economies that benefit from the fund must implement “austerity measures”, i.e. policies that aim to decrease their deficits by cutting back on public spending, jobs, but also other areas such as healthcare and education, and sovereigns can only access the funds when proof has been shown that radical changes are being pursued.

So far the economies which needed these bailouts have been Greece, Portugal and Ireland. In some cases, the austerity measures can be so tough on the taxpayer that people have raised serious concerns about these policies and we are all left to imagine what frustration could lead to.

In the end it is the taxpayers that have to pay the highest price, and even though the current situation in these countries isn’t only one person’s fault, I believe that the people don’t realize that and prefer blaming politicians. So in their minds that makes them the victims of a situation they had nothing to do with, demotivating them from putting in the effort and making the sacrifices that are much needed if they want the situation to improve.

Monetary policy in the UK: Further QE

Poor growth of the UK's economy and scarce market liquidity played a very important role in the Bank of England's decision to print £75bn more in QE,  because the exposure of British banks to toxic sovereign debt freezes up their ability to lend money to consumers and firms. In the Eurozone, Banks are facing the same “illiquid” problem, that led the European Central Bank decision to the same decision, pumping additional funds into European Banks.

In the UK, The central bank will buy back gilts (bonds issued by the British government) with residual maturities of over 3 years, thereby pumping liquidity in the economy, that will result in increased demand for borrowing, increased output, and depreciation of the pound sterling (thereby making the UK's exports cheaper and imports more expensive). Wonderful.

But what will the result be on the inflation rate? George Osborne agreed with the MPC that in the medium term further QE will help keep inflation on target. But economics teach us that prices depend on the quantity of the money supply. If there is an increase in the quantity of money supplied, prices will increase proportionately. In an economy with increasing inflation expected to rise further, in which the average household is experiencing very tough times, with almost no money left after necessary expenses, unemployment rising (7.9% in September) http://www.bbc.co.uk/news/business-14912236 and interest rates at an all-time low (still 0,5%) making savings an unattractive choice because of low yields, at first impact it doesn't seem that QE is the best way to restore wealth in the hands of consumers. 

If inflation rises real incomes will decrease even more, that will decrease demand, and it will really not matter if business's will be able to borrow as much as they did before because there will be less demand for their products. If consumer expenditure falls, unemployment will rise, a process we have been witnessing since the beginning of the crisis in 2008, as firms cut back on costs to cope with eventual losses. If unemployment rises, more people will not be able to pay back their mortgages which increased because of low interest rates.

The last thing I want to see is Mortgage crisis 2.