I don't know if this article will be archived or not and hence posting in full.

http://www.wikigold.com/commentary/?p=6452

By Jeff Nielson
November 3, 2009

Given that this was such a simple news story – with nothing especially surprising about it – my first inclination was that it did not merit a commentary on the subject. However, seeing the reaction to this news convinced me that my first inclination was wrong.

Reading several reports on this news item, the “analysis” is remarkably the same: India’s purchase is a “surprise” because everyone expected China to grab the first share of this gold, but this “removes some anxiety” from the gold market which the IMF’s long-promised sale supposedly caused.

Addressing these two themes in order, certainly most knowledgeable commentators in the precious metals sector fully expected China and India to buy all of the 403 tons which the IMF has been authorized to sell. Those with reasonable memories will recall that China and India jointly called for the IMF to sell all of its thousands of tons of gold only a few months earlier. Obviously, with the IMF selling only a small fraction of their gold, China and India would be expected to be jointly standing at the front of the line-up to buy the IMF’s gold.

Whether the IMF announced a sale of gold to China and then India, or India and then China, or both together, there are no “surprises” here. Indeed, the real “surprise” is the claim by the writers of these various news items that the proposed IMF sale has caused “anxiety” in the gold market. What anxiety?

When two of the world’s new, economic powerhouses make it clear that they covet the thousands of tons of gold being held by the IMF, there was never a possibility (as claimed by one writer after another) that this gold would be sold “in the open market”. Indeed, the “voice of reason” through this long, drawn-out farce has been gold-sector icon, Jim Sinclair.

If Sinclair was not the first to scoff at the potential impact of an IMF sale of gold, he was certainly the loudest. He pointed out that in the past, such official sales of gold have tended to be gold-bullish – because when such gold was rapidly absorbed by the market, and where that same market demonstrated that its appetite for gold had not even begun to be sated, that this reinforces the bullish sentiment in this sector.

Indeed, the only people who expected (or at least hoped) that the paltry sale of 400 tons of gold would “depress” the gold market, or at least cause genuine “anxiety” are the anti-gold cabal. With respect to this group of hardly-unbiased observers, we can observe their own sentiments by reading the words of their “mouthpiece”: Kitco’s Jon Nadler.

It utterly mystifies me why anyone interested in the precious metals sector would listen to a word of the disinformation on the gold market from this sleazy snake. Consider this: Nadler has worked for a precious metals web-site, during a decade in which the price of gold has nearly quadrupled - and yet Nadler, himself, virtually never thinks that “now” is a good time to buy gold.

True to form, Nadler desperately tried to twist the sale of IMF gold to India in a manner which was designed to try to generate some “anxiety” in the gold sector about this non-event. Nadler referred to the sale of gold to India as “removing one cloud” which supposedly hung over the gold market. In fact, as someone who writes about this sector on a full-time basis (and thus is regularly exposed to the daily news in the market), Nadler’s remarks demonstrate his complete lack of sincerity.

In the real world, the anti-gold cabal has been trying to depress the gold market for a year with the proposed sale of gold by the IMF. Long before the IMF even had approval to sell this gold, the anti-gold Manipulators were “announcing” and “re-announcing” this sale roughly every six weeks to two months. With the exception of last autumn, when the Wall Street-engineered “crash” of global markets took everything down, this proposed sale of gold by the IMF has had no relevance at all to the gold market.

As I wrote back in July, in “Two Short-Term Scenarios for the Gold Market“, during gold’s traditional “seasonal weakness” from May through the summer, the gold market completely shrugged-off the IMF non-event – despite the increase to weekly sound-bites about this sale, which the anti-gold cabal continuously fed into the market during this period to try to depress sentiment.


The Manipulators were totally unable to push the price of gold lower during this period, despite the fact that India (typically the world’s largest importer of gold) had virtually stopped its gold-buying for most of the year. Indeed, the one thing which was totally obvious in this sector, after countless “announcements” of this IMF-sale is that selling this gold would have no impact on the gold market (at least, no negative impact).

Most likely, most of the people writing these “news” pieces today were simply fishing for some “angle” to fill up space – and turn this trivial announcement into a “news story”. Obviously, such an excuse does not apply to Kitco’s Nadler. As someone who writes a daily column, he has years of practice in simply “filling space” in his writing.

Nadler has been the loudest voice in broadcasting the message of the Manipulators. Yet, despite a year of evidence that this propaganda-campaign has been utterly ineffectual, today he is still spouting the same drivel. With many commentators providing useful and honest advice and commentary on the precious metals sector, investors could use their time much more productively than by reading the tired, repetition of the same anti-gold message from people such as Nadler. The only possible value of Nadler’s pseudo-insights into this market would be as a contrarian indicator for this sector: if Nadler says gold is going down, then now is the time to buy!

With the IMF’s remaining 203 tons of gold clearly set aside for sale to China, hopefully we will not be subjected to more “news” stories depicting that upcoming event as a “surprise”, as well. If there is any real “news” regarding these 403 tons of IMF gold, it’s that it comprises 20% of all the gold which will be sold under the “gold agreement” of Western, central banks over the next five years. The latest of these five-year agreements began as of October 1, 2009.

The IMF gold-sale was desperately patched-into this sales agreement – despite the fact that the IMF is not a Western, central bank. The reason for this is that the anti-gold cabal has run out of gold which it can persuade these bankers to dump onto the market. During the last year of the previous five-year agreement, which called for a target/quota of 500 tons per year, Western central banks were only willing to sell less than 200 tons.

The new agreement has reduced the new target/quota to 400 tons per year. Yet, even with the inclusion of the IMF sale of gold into this deal (for no real reason of any kind), there is no chance of the Manipulators being able to persuade its central banker allies from selling anywhere close to 400 tons per year.


What this really means to the gold market is that this gold-sale (and any/every future, official sale of gold) has absolutely no significance or news-value as a “cloud” or source of “anxiety” for the gold market. Instead, the only significance of such announcements is that it provides an opportunity for the many, national governments who are eager (if not desperate) to add to their gold reserves – without immediately driving the price of gold higher.

The semi-knowledgeable journalists (and disingenuous serpents, like Nadler) who provide their own “explanations” of such events should simply be ignored. During the years when central banks were large, net sellers of gold, there was some bona fide news value in announcements of official gold sales.

Having entered a new era in the gold market, where central banks are now net-buyers of gold, the significance of such gold-sales dwindles considerably. Instead of being important market-movers, such future sales should be covered in much the same manner as Gordon Brown’s foolish decision to dump half of the United Kingdom’s gold – at only a tiny fraction of its value. In other words, such sales are not “threats” to the gold market, but rather examples of misguided politicians and bureaucrats squandering an invaluable asset.

It means that notwithstanding the fact that USTs pay a coupon and gold does not - that the RBI expects the decline in the purchasing power of the USD (due to various reasons including wanton printing of the currency) to more than offset the coupon USTs pay i.e. gold will provide better principal protection value for India's foreign exchange reserves. Or at the very least this purchase provides a better balance in the various components of India's fx reserves in the opinion of the RBI.

I am personally very happy with this. Sometime ago I had put forward the idea of the rupee being backed by a "representative gold standard" using household gold saved in India. In meeting that ultimate objective it does not hurt if GOI officially also bolsters its gold reserves.

Posting in full



http://ibnlive.in.com/news/govt-revs-up ... ml?from=tn


This is something which I was expecting to be a part of the budget, I guess they waited for the economy to show concrete signs of recovery.

what i would like to know is the reason behind the Home Minister making the statment that disinvestment of profitable PSU through listing should proceed.
the Finance Minister or if there is one, the Disinvestment Minister should speak about such matters to maintain the discipline of the Cabinet.
or do the powers that be want another change and everything is not as calm as it appears to be?

^^it was the routine thursday cabinet meet. one of the members of the cabinet briefs the media after the meet. this day, it happens to be chiddu. nothing amiss..?!

X-posted from leadership dhaaga for feedback from RM ji,

None of those ideas sound particularly palatable. In fact, they sound quite draconian. But that would be getting ahead of the issue. Let's start with the premise itself - what is the urgency regarding 'curbing' the informal 'black' economy about, that necessitates such massively intrusive 'solutions' ? As an economy matures, the gamut of economic activities progressively becomes more and more formalized.

Suraj ji,

I did not understand the comment.. Why should black economy not be curbed? I am not a student of economics but from what I understand, black economy hurts the overall economic performance of country.

More money is out of law's coverage, hence less money is there with banks and government (in form of taxes). This leads to higher interest rates of the loans. IF all the transactions start happening via legal route (that is through banks recognized by RBI), then there will be more money with the banks, thus loans will be cheaper. This means easier credit, easier way of raising money for small and mid-cap businessman. Thus more capital will be available in market, along with FDI will accelerate the growth of nation. India's growth won't have to wait for foreign capital. All the problems (Social-economical-political) which arise owing to dependence on foreign money will decrease.

Also, more taxes, hence more money at the disposal of government for its developmental work.

Cash transactions is one of the most common way of evading the taxes and scrutiny. Also the corruption is easier due to the currency notes of higher denomination. when large number of people earn less than 200 rupees a day, why do we need notes of 100, 500 and 1000? Won't the currency notes of Rs 50 enough for all the daily wage earners who are poor?

Those who play with higher notes can do so via internet banking and/or cheques. Net-banking is more preferable. Furthermore, withdrawal of currency notes of higher denomination will starkly reduce the problem of fake-currency. It takes Rs 40 to print one note, be it of Rs 50 or Rs 1000. If everything above 50 rupee note is invalidated, it will be exponentially expensive and difficult for pakis and other forces to print fake Indian currency and introduce them into circulation.

Withdrawal of all taxes and levying of some transaction tax at source will make things cheaper, it will be difficult to evade taxes, and money distribution will be efficient. It will be bank's duty to distribute the money between central govt, state govt, local govt and its own profits.

Urgency is required for curbing black economy. IF there is some higher truth for not doing so, apart from vested interests of politicians, I don't know them as yet. Please enlighten.

Chiron: I don't mean to suggest that there's nothing wrong with the informal economy. I'm asking why is it so urgent to curb it that demands such draconian, and IMHO, patently impractical, solutions. As I asked previously, what makes the informal economy so dangerous that necessitates such direct action, in such a manner ? I disagree that 'urgency is required to curb black economy' is any sort of self-evident truth, and can think of several others things that are far more critical, e.g. removing all distortionary inter-state tariff barriers like octroi, or clarifying eminent domain and land acquisition laws.

From my perspective, the premise is too weak, and the solution presented disproportionately invasive, not particularly well thought out (e.g. how does one make a large transaction when there's no access to the internet/phone ? Needing 10+ Rs.50 currency notes just to pay a cab fare from Bangalore airport-city ?) and practically unimplementable. Any attempt to implement these would lead overnight to a massive parallel economy dedicated to maintaining the existing informal economy, and where implemented, a massive reduction in the velocity of monetary transactions, because a disproportionately large part of the employed base is unorganized or small-scale, who primarily deal in cash.

The economic history in India has shown time and again that the stick approach rarely yields the desired results, thanks to unintended consequences. I would always prefer a disincentive over an overarching ban or some such action. Any form of enforcement is prone to inefficiency, or the potential for corruption and/or misuse.

While I agree that the general premise towards discouraging the informal economy is right, I disagree that it is something that needs such urgent action, and do not think the proposed measures are either sensible or feasible. There will always be a cash economy at the small scale level, even in mature economies. Greater economic development leads to lesser utility for large cash transactions. If at all I were to consider proactive actions, I would prefer guidelines to the effect that economic transactions like car and house purchases require formal banking involvement.

Black money is a pseudonym for unaccounted wealth. But it is instructive to speculate its origins.
The principal reasons for the generation of Black money is the legal framework we have designed for ourselves. Both Direct and Indirect tax legislations whether at the center or state level are worded in a lax manner. the drafting lends itself to differing interpretations.
next the laws themselves have pegged taxes at very high levels. taxation rates are ludicrous. Taxation levels in the direct taxes field are the same as the Developed, highly industrialised economies. In the field on indirect taxes we are adopting VAT and soon GST (Goods & Service tax) it is expected that this tax will ensure a trail from manufacturer, service provider to end consumer. the result are generally mixed. tax inflows rise but they do not do so(IMVHO) because of greater compliance but due to general growth of the economy.
an unitended conseqence is that tax related disputes clog the supreme and high courts and tax tribunals.
historically the slashing of tax rates has lead to much better compliance.
as a thought if everybody were to pay all taxes due the Govt would squander it. Developmental activities are always welcome but from what i hear the costs of roads, canals, public utility infrastructre is barely 40 to 50% of the moneys expended by the public exchequer.
Black Money is used by business to fund its growth in a very major way. In 1991 when the Govt relaxed lauched a scheme to bring in foreign currency most of it was indian owned money. and it was used by big business for investment.
to conclude black money is a mixed bag and it will go away as and when the economy becomes more transparent, education levels rise and the govt accounts for its own expenses properly.

Adding to the points made by posters above, I don't think removal of notes with denomination higher than Rs. 50 will solve the problem of underground economy. Case in point:
My relatives were selling their house to a gentleman serving in IPS. The total price to be paid by the buyer was around Rs.50 Lacs of which about Rs. 30 Lacs was "white" money and the rest Rs. 20 Lacs was "black" (in cash). Now when the buyer came to pay the cash component, he came with a couple of constables carrying 2 huge sacks of money which contained notes of Rs. 50, Rs. 10 & even Rs. 5 denominations (basically the "toll" collected from all police nakas etc)!!! It took all the parties involved about about 3 hours to count the whole sum ....

Government is planning to sell off 10% more of the PSU's. Bad decision.

Indiscriminate selling without thinking about the consequences is bad. I heard the axe does not stop even with PSUs that are making money. Security and Stability of the country ranks among the top responsibilities of any form of government. Sometimes security and stability come at a price - inefficiency etc. These need to be offset by other balancing forces - improved efficiency in other sectors.

PSU's constitute strategic assets. Somebody is getting some mega bribes. We've already sold off our Mines, Media...

This is where the trade unions need to come in. SOmewhere we have to stop this

Sadly nobody is there to stop them. Lessons learned from history are just in books sitting on the shelves.

SwamyG, there has to be a nationalist body that will halt this. Gurumurthy, Govindacharya are people to contact in this regard. Only if the government feels the shudders of the trade unions will they stop.
First it was England and now we are enriching italy

Why should it be stopped ?. After all they are selling only 10%. Some amount of public accountability will come in. Govt still has ownership. India's experiene has been that after stake sales, the PSU profitability and performance increases exponentially in most cases. Definitely need BSNL etc to become more professional and accountable and for heavens sake get some more modern accounting and business practices in.

For exactly the trade-off SwamyG has elucidated. Strategic imperative vs. efficiency. We are beginning to see the damages from the rampant sell-offs in the last 10 years now.

If you get a chance read this write-up. It is old and long but highly relevant. Then we can discuss
http://www.portraitofindia.com/liberal1.htm

Glad those particular gents are largely out of circulation. They are just Saffron Prakash Karats. Just as brain dead, but equally dogmatic and obvioulous to facts and stuck in an echo chamber where they can hear nothing but thier own voices!

Jarita: You just threw some red meat to the crowd

Vina: NDA too indulged in these kinds of sale. And NDA had a big saffron party in its folds.

SwamyG it took me 6 years to unlearn everything I had grasped from so called Elite Indian education inst. and the media. I thought I knew my economics. Need analogies, stories and history to correctly articulate the essence.
This article was very well researched. There is plenty more online.

One can not look at things purely as black and white, similarly boon or curse. There are pluses and minuses; each country has to arrive at a balance that suits its culture, people and times. IIRC, the first 'limited company' was setup in Florence, Italy way back before 1600. You might like to read the book "Life, Inc." - at least the first few chapters that discuss how 'Corporations' were setup (again predates EICs); the tussle between Monarchy and Wealthy Merchants.

Modi Model
teaser

When even educated people on this forum question selling off parasitic PSU assets is there any hope for Bharat Mata? The GOI has 419 central PSU. Do you know how many we need to maintain our security? How about ZERO?

Even the best run PSU will never be as efficient or innovative as a private company. Why are there no PSU's writng software, designing/building state of the art computer chips, or competing in any fast paced or innovative industries in India or anywhere else? THEY CAN"T.

I read a long time ago an economist estimating the ratio of the rate of return on investment in a private co. vs a PSU of at least 2. IMHO it would be much larger. Why does BHEL have to go begging for supercritcal boiler tech. from Japan? After 50+ years BEL cannot make seeker heads for missiles that private western companies have been doing for 30 years. Up until 2 years ago the majority of BEL's products were of foreign design. Even now the high tech stuff is Israeli designed. And this in arguably one of India's best PSUs.

Indians are among the wealthiest minorities in every country they inhabit. They are poor only in India. This is a direct result of too much gov't. and too little governance. Socialism breeding poverty is a worldwide phenomenon. Those in India who can't or are not willing to wake up and smeel the coffee only perpetuate this misery.

The less said about the parasitic unions in India the better. They belong to a creed which worked slow/stopped working in OFB factories in 1962 on the orders of their patriotic CPI/CPM masters

I don't think there is any debate that private companies are more innovative than PSUs. The 'isms' like socialism & capitalism are emotive words at best. It is simple common sense to expect a balance between different entities and not shove all eggs into just one basket - a.k.a private sector (or government sector).

Education? Ah. One all gets educated by watching how the world runs. There are enough rich Indians in India too. The Indians who go abroad are some of the privileged few and/or already shown potential to shine well.

While it is correct to point out the flaws in PSUs; one hopes those are overcome or a healthy public-private parternship is established.

It is a Western notion of all or nothing, either one is pro-government or one is pro-business ithiyaadi. Time to get some balance into running of the country.

All economist in the last 2-3 centuries have studied the Western model of economics - the art of running business with a Western perspective. And when it comes to a country, one does not look just at the rate of investment from a monetary perspective. I would say there are other returns too.

Can the people opposed to selling off even minority stakes in PSUs explain what are the strategic imperatives that are impacted by this? The case for private efficiency versus government sloth - especially in India - is well known. What are the strategic imperatives that balance the need for efficiency?

Abhijeet,

going by history in India. Significant opposition to sale is done only at two

i)the first public sale
ii) the 50% mark.

Nobody even notices the other sales.

Saffron Prakash Karats

General opposition to random sales

- Strategic imperative - who are we selling too; what are the assets we are selling and how will control of the same be impacted; More important for a developing economy
- Social imperative - In situations of abject poverty need trade-off between efficiency and social good (yes, yes trickle down etc -- has not helped Indias masses in the last 20 years) - this is different for a country like US et al where the populations basic needs are being fulfiled

Media sell-out to foreign firms has literally landed a fifth estate in our midst.
What we are seeing with the mines in India is no different from what Africa has been facing - strategic assets may need to be in the public sector till the country is at a certain level

There's far too much rhetoric and too few facts on the PSU selloff discussion. Would those who are so interested and have been driving this mini-debate on the subject please do the following as and when information is available:
* List the PSUs in question
* What are the current GoI holding levels of each entity in question
* What are the planned dilution levels of each entity
* What is the sale mechanism - IPO, strategic sale etc

Thanks

Here is list of Garbage units of GOI which are being sustained to get plum postings of political leaders kith & kin.
Big source of corruption and impedement to the defence of the nation. Sell them and buy or make in private sector.
****
here we go.

Factories
Ammunition Factory Khadki (AFK)
Cordite Factory Aruvankadu (CFA)
Engine Factory Avadi (EFA)
Field Gun Factory Kanpur (FGK)
Gun Carriage Factory (GCF)
Grey Iron Foundry (GIF)
Gun and Shell Factory (GSF)
Heavy Alloy Penetrator Project (HAPP)
High Explosive Factory (HEF)
Heavy Vehicle Factory (HVF)
Machine Tool Prototype Factory (MPF)
Metal and Steel Factory (MSF)
Ordnance Clothing Factory Avadi (OCFAV)
Ordnance Cable Factory Chandigarh (OCFC)
Ordnance Clothing Factory Shahjahanpur (OCFS)
Ordnance Equipment Factory Kanpur (OEFC)
Ordnance Equipment Factory Hazratpur (OEFHZ)
Ordnance Factory Ambernath (OFA)
Ordnance Factory Ambajhari (OFAJ)
Ordnance Factory Bhandara (OFBA)
Ordnance Factory Bhusawal (OFBH)
Ordnance Factory Bolangir (OFBOL)
Ordnance Factory Kanpur (OFC)
Ordnance Factory Chandrapur (OFCH)
Ordnance Factory Dumdum (OFDC)
Ordnance Factory Dehu Road (OFDR)
Ordnance Factory Dehradun (OFDUN)
Ordnance Factory Itarsi (OFI)
Ordnance Factory Khamaria (OFK)
Ordnance Factory Katni (OFKAT)
Ordnance Factory Muradnagar (OFM)
Ordnance Factory Project Nalanda (OFN)
Ordnance Factory Project Medak (OFPM)
Ordnance Factory Tiruchirapalli (OFT)
Ordnance Factory Varangaon (OFV)
Opto Electronics Factory (OLF)
Ordnance Parachute Factory (OPF)
Rifle Factory Ishapore (RFI)
Small Arms Factory (SAF)
Vehicle Factory Jabalpur (VFJ)

*****
Sample 1 Ordnance Factory Itarsi

http://ofbindia.gov.in/units/index.php?unit=ofi&page=about&lang=en
click any where you get blank page

sample 2
Small Arms Factory Kanpur

http://ofbindia.gov.in/units/index.php?unit=saf

Sample 3
Rifle factory Ishapore

Note GM is PK Das ( jo kab dekho tho jab PK hi rehatha hai, why so he related to Umrao Das!)
http://ofbindia.gov.in/units/index.php?unit=rfi

Sample 4
Ordnance Parachute Factory Chute khulta nahi , every where blank page but only GM saab is mentioned.
http://ofbindia.gov.in/units/index.php?unit=opf&page=contact&lang=en

Sample 5
http://ofbindia.gov.in/units/index.php?unit=olf&page=about&lang=en
note the web page designed by GM saab ka son for his Engineering college or MCA
total garbage colors and font and claims most advanced opto electronic sightings.....


sample 6
Ordnance Factory Varangaon
http://ofbindia.gov.in/units/index.php?unit=ofv&page=products&lang=en
But all they claim to manufacture are still being imported...

Sample 7

http://ofbindia.gov.in/units/index.php?unit=oft

Its a blank again...

It goes on and on.

I am sick looking at them.

Looks like the IPO route for PSUs with a govt. holding exceeding 90%

http://www.thehindubusinessline.com/2009/11/07/stories/2009110751821000.htm

Meanwhile, the biggies (the really big biggies, I mean) are lobbying the PMO intensely in their selfless desire to do Yindia a favor by entering the market here.

Wal-Mart's New India Push





Great. Why not bring those benefits in via a JV, sir? In any case, pls show some net benefits on the ground before aam aadmi here can take your word for it, no? Seems like GoI is of similar mind too.

^^^Mall wart is known to suck it's suppliers blood dry. They are probably facing difficulties selling heavy metal filled fish and other produce from out tarrel than mountain fliends to the north. Their next target is the small Indian farmer who they know is stuck between a rock and a hard place with the corrupt politicians and the middlemen. They will start throwing a bone here and there till they fatten up the prey and then go for the kill. They will play nice till everyone is addicted to everyday low prices and that creepy smiley man. The true colors of the gora sahibs will then be revealed. Mall wart will be a modern day version of the East India Company literally!

I'm not much in favour of entry of big players into retail space, all the noise about organised retail notwithstanding. there must be a low enough ceiling to filter out the big players from this space, even if desi. if entry is at all given it should be limited to warehousing facilities for perishable food products.

well lack of a good web presence doesnt necessary imply an industry is
incapable or sitting idle. by that yardstick almost all govt run orgs in india
pale in comparison to pvt sector.

but wrt OFB ofcourse a 'truth and reconciliation task force' headed by someone like anand mahindra or ratan tata should be setup for a overall
audit and identify what needs to be done to drag them by their tails into
21st century.

I agree with that. Having many smaller foreign-local JV and small local players would be better. It would give the farmer & local manufacturers some bargaining power to have a variety of small/medium sized retailers to choose from. I'm thinking more along the lines of the 7-11 type stores.

The only thing Walmart will bring in is a crap load of stuff made in China. Its already been pointed out that the only thing India manages to sell to China is raw materials while China pushes back finished products.

If GoI works out a deal with Walmart, requiring it to source at least 35% of its merchandise (sold worldwide) from India, then it could be a big boost for our manufacturing sector.