High Cost of Poverty?

An interesting article in the Washington Post, titled "The high cost of poverty: Why the poor pay more"
The author tries to highlight the fact that the poor are unable to reap the "whole sale" benefits that the supermarkets and retail giants offer. A reverse trend is seen however in developing countries . For Example: An upcoming release of Microsoft's OS , Windows 7, has an edition specifically targeted for emerging markets. Microsoft and other companies have been doing this for quite some time now where they strip off features from the main product and sell a bare minimum version at a relatively lower price.
This process is evident in other industries too. Indians have been sachet lovers. From shampoos to jams and ketchup, Indians will prefer spending "a little" to get "a little". Ray Ozzie, Chief Software Architect at Microsoft, is said to be inspired by this piece meal concept as he introduced the various software editions targeted at Indians.

India vs China

It is Democracy vs Communism. It is time to get back to the text books and refresh the basics and also evaluate the same wrt to India and China. It is time for the debate, "The future belongs to India, not China".

My guess is that either the debate is going to be inconclusive or there is going to be a narrow victory margin. I am not keen on the results but I am looking forward to the various perspectives and view points that the participants are going to bring to this debate. What intrigues me the most is that both these nations, with their billion plus population, have been able to "efficiently" run their economies.

Tata Does it again

After a small car, it's a small home from the Tata.

It is quite easy to dismiss this initiative as yet another capitalistic corporate venture and overlook the macro-economic growth and long term sustainability. The brilliance of the plan is clearly reflected in selection of the location for this venture.

What next can we expect the Tatas? In the lines of Roti kapda aur Makan, the latter has been already initiated.

Now imagine this : The small home owners (from Boisar) to work (to Bombay) in their small cars (Nano). [Thats how much my boss used to travel to work in NYC from his home in southern Jersey.] Lets hope that the TATAs build a high speed highway connecting the town to the city.

When the popcorn grew bigger that ticket

I came across an interesting article about how the cost of a movie ticket and a bag of popcorn have increased over the past 80 years. The author states some Hollywood economics here (Hollywood takes a majority of ticket proceeds during the first of the film's release) and also adds that the facilities such as stadium seats and surround sound systems are the causes for the rise of popcorn prices by over 666%.

Is hiking popcorn prices the only way to meet the expenses? Why not increase the price of the ticket itself. In India for example, the multiplexes can charge the movie-goer an additional "air conditioning surcharge". And again, we would not want to increase the price of the ticket alone that reduces the number of movie-goers and increases the revenues of blockbusters and netflixers.

Can we have a model such that the price rise is balanced between the popcorn and the ticket?

PS: The only solution that I can think of at this moment is for Hollywood to produce better movies that run for several weeks. Mr. Boyle, how about another flick sometime soon.

Tracking my readers

I have installed an application to track the location of my beloved readers, the time they last accessed the blog and the posting that was accessed. I have done this out of personal interest and I wish to know which posting is most visited. If you wish to erase your tracking, please do so by accessing http://live.feedjit.com/live/b44c12ca81130217/ and click on the "Remove your IP" button.

And that is why we are in trouble....

Linda is the proprietor of a bar in Cork . In order to increase sales, she decides to allow her loyal customers –most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets
around and as a result increasing numbers of customers flood into Linda's bar. Taking advantage of her customers' freedom from immediate payment constraints, Linda increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Linda's borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS.

These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items. One day, although the prices are still
climbing, a risk manager (subsequently of course fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Linda's bar. However they cannot pay back the debts.

Linda cannot fulfil her loan obligations and claims bankruptcy. DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80%. The suppliers of Linda's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor. The bank is saved by the Government
following dramatic round-the-clock consultations by leaders from the governing political parties (and vested interests). The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Finally an explanation, in the language that we understand...

Spend or Save

In the current economic condition, is it wise to spend or save? While some advocate "save" in times of trouble, others suggest "spend" to get out of the same troubled times.

Here is an interesting case I came across recently.

A company asks its employees to stop using the big courier services and use the cheaper govt run postal service for all its postal needs. This way it hopes to cut cost.

This case leaves me with the following possibilities and questions.

1. If the size of the company is small (in terms of its postal needs), the courier folks haven't lost much, but what if most small companies adopt this cost cutting measure.
2. If the size of the company is big (in terms of its postal needs), the courier folks are looking at some serious loss of business, forcing them to a few cost cutting measures of their own.
3. Is cheap better only during economic crisis? Will the company return to courier services once the situation improves?
   

Senate passes the stimulus bill !!

Updating my blog within minutes of the Stimulus bill being passed in the senate!!

"Not a moment to Spare"

The stimulus package passed in house. Senate next. In Obama's words, "Not a moment to Spare"

Economic Stimulus (Part 1)

We all know what happens as we move on from autumn to winter season. The deciduous trees shed leaves primarily because the high costs involved in their maintenance would outweigh the benefits from photosynthesis during the winter period of low light availability and cold temperatures. And in spring the we see growth, renewal and new life. But can we stimulate spring during winter and expect similar results in terms of growth? I am not an expert in that field but a similar attempt is being made (and has been made in the past too), to stimulate growth back into the economies world wide.

The argument is made that people are suffering from a decline in income, and thus the government should give them money so they can buy more and put others back to work. Sounds good - but where does the government get the money? It must either tax someone else now or borrow more money, which diverts productive saving to current consumption. Either way, it is less than a zero-sum game.

Blogging

The last post was dated Jan 11th. The date on this blog is Jan 12th. Only difference is that the two posts are about a year apart. What kept me away from blogging this long? I am sure there is an economic reason behind it, Or to put it in other words, the reason can be explained in terms of economics. Watch out for details.