Why Indians invest in Gold/Silver?

The chart below shows the returns from gold and silver in Indian rupees during last few years.

Interest rates in India currently are about 7%. While the average returns from gold/silver is above 12%. This is why many Indian prefer to invest in precious metals instead of bank deposits.

During the last 17 years (1-Jan-2001 to 31-Dec-2017), average Indian stock market returns are 17.9% (based on Nifty index); but while investing in stock market taxes and commissions are deducted. So the actual return, in hand, to the investor is much lesser. Since most buy/sell of gold/silver happens in cash, usually no taxes are paid. Hence Indians prefer gold/silver investment as compared to stock markets.

Bail in / Depression coming.

World news keeps talking about the poor finances of PIIGS (Portugal, Italy, Ireland, Greece and Spain) nations. The chart below shows the NPA of Indian banks.

India's financial situation is as bad as PIIGS, but the news media creates the impression that India's economy is doing great.
How will this problem end? There are only 2 solutions

1. Hyperinflation.
2. Depression and bail-in.

In Hyperinflation, the government creates lot of currency. This wipes out the debt. But it also causes all savings to be lost. Currency notes become almost worthless. Indian politicians will likely not choose this option voluntarily because the chances of revolt are high. The government will likely fall, if inflation rises.

So India during the next few years will have a depression. The government will likely

• Make high denomination notes invalid.
• But limits of bank cash withdrawals.
• Seize some percentage of currency in bank accounts.

By looting from people, the banks will be saved. Prices of stocks and real-estate will fall by a huge percentage.

To prepare for this bail-in, the government is passing FRDI bill. Prepare accordingly.

Why BJP should suffer in Gujarat?

In 2012 Gujarat state elections, BJP had got 115 seats. In current elections, the results will be declared on 18-Dec-2017. I hope that BJP receives much fewer seats than 115 because BJP has made some big mistakes e.g.

• Demonetization hurt many people.
• GST is causing problems for small businesses.
• Religious fanaticism has increased under BJP rule.

If BJP is not punished, it will get more bold in continuing its existing path.

FRDI bill puts depositors at risk

Indian government is about to pass FRDI (Financial Resolution and Deposit Insurance) bill. Once this bill is passed, then if a bank incurs losses, the losses will be passed to the depositors.

Let us take an example: Let us say Bank-A has lot of NPAs (non-performing assets). Now, instead of share-holders (usually government for most banks) bearing the losses, as per the new FRDI bill, the depositors will have to bear the losses i.e. all deposits in the bank will be used to compensate for the NPAs. So if I have money in my savings a/c and fixed deposits in Bank-A, and Bank-A makes huge losses; then I will lose my money, even-though it was no fault of mine that the bank lost the money.

How to protect our savings from this bail-in? Keep minimum amounts in banks.

Indian ranking for ease of Business

India's ranking in terms of "Ease of doing business" index has gone up from 130 to 100. The Indian government claims success of Demonetization and GST. But, in fact, both these polices were never taken into account while computing this index.

India's rating has improved because Indian government

• Simplified the process of starting new business, terminating existing insolvent business and getting loans.
• Simplified the process of getting construction permits, enforcing existing contracts and simplifying corporate income tax.
• Taken steps to protect smaller shareholders.
• Digitization of Employee Provident Fund.

Demonetization has failed. The rich don't keep their black money in cash. They keep their black money in real estate, Gold and Dollars. So Demonetization has had almost zero impact on black money.

GST overall has good intentions, but it has multiple problems e.g.

• Small business people find the paperwork extensive. They will have to shut down or do business in cash only. The limit for tax exemption should be raised from 20 lakhs per annum within state to 5 crores within and inter-state per annum.
• GST rates are too high. In India, GST is on-average 18%. So a person pays about 30% income tax when he earns money and he will pay 18% tax when he spends his income. This means taxation is about 48% in India. In Singapore, GST is about 7% and income tax is less than 20% for most people. So most people pay less than 27% of their income to government.
• GST procedure is too complex. Most countries have a flat GST. India has different rates for different products e.g. what should be GST on chocolate ice-cream? The GST on Chocolate is different from GST on milk. So is chocolate ice-cream a chocolate product or a milk product?
• Asking business to file GST returns every month is too cumbersome. In Singapore, businesses file GST returns every quarter. Why should Indians file GST returns every month?

Indian ranking will not improve because of Demonetization or GST in current form.

India heading for huge inflation

Indian government will create currency, about ₹9 lakh crore, out of thin air. This is about US$ 139 billion. It will be used to make the banks solvent and build roads.
India's M3 money supply is about ₹8.3 lakh crore. So Indian government is more than doubling the money supply. So during the next couple of years we will see a huge inflation. Specifically:

• Real estate will go up
• Stocks will go up
• Gold and silver will go up
• Anyone with wealth in bonds, fixed deposits, PPF, etc will effective lose wealth.

Bitcoin can be hacked!

Yes, Bitcoin can be hacked. I will give a technical explanation below, regarding how it can be done. The total cost involved in less than US$ one million. Any government or company can spend this amount to break Bitcoin.

The hacking entity will need about 50 computers say C01, C02 to C50. Each computer will initially have about 1 Bitcoin. Now, C01 will transfer one millionth of Bitcoin to C02 continuously; C02 will transfer one millionth of Bitcoin to C03; C03 to C04. Lastly, C50 will transfer one millionth of Bitcoin to C01. Now we have a cycle. A large number of transactions will need to be written on block chain i.e. distributed ledger. These transactions will have to be recorded by all computers running Bitcoin software. This will cause the Bitcoin block chain to become very slow. For all practical purposes, now Bitcoin transactions cannot be used.

You can confirm from any block chain expert, that the above method will succeed. Bitcoin and other distributed crypto-currencies cannot fix this flaw, because this flaw lies in the basic algorithm of a distributed block chain.

Disclosure: I am a technical person and have no investment in any crypto-currency.

The coming crisis

During the next few years, the entire world is going to see a financial crisis. No one alive has seen this kind of crisis before; no one alive will probably see this kind of crisis again during their lifetime.

This is what will happen during this crisis

• A large financial institution or a sovereign nation will declare bankruptcy.
• Because of derivatives, which cannot be honoured by a bankrupt entity, other financial institutions will declare bankruptcy.
• The world financial market will come to a standstill.
• People will not be able to buy/sell bonds/shares.
• Credit cards will stop working.
• Banks will stop cash withdrawals.
• Goods will stop flowing because once credit stops, oil delivery will stop.

Here the world governments will have two choices: Hyper-inflation or Depression.

The world will need a new reserve currency. The governments will insist on a new world currency because existing currency will have either lost value (hyper-inflation) or be unavailable (Depression). The World Bank will suggest governments use SDR as their world currency.
SDR is just another fiat currency like Dollar, Euro, Rupee, etc. It will allow the world bankers to create inflation / deflation on a need basis. It will transfer the wealth of the world from the poor and middle-class to the rich; because the rich friends of World Bank will be informed in advance about coming inflation / deflation. So these rich people can play in the financial markets without any chance of a loss.

We, the common-people, can protect ourselves from this coming crisis by performing the following steps:

• Keep most of your wealth in Gold, Silver, etc. Don’t store this gold/silver in any bank locker. Don’t use ETFs to buy gold/silver. Store the physical gold/silver at location where you can touch it.
• Use cash or Bitcoin (or some other decentralized crypto-currency) for transactions.
• Keep minimal cash in banks, fixed deposits, stocks, life-insurance, debt, etc.
• Pay off your debts early, if possible.
• Keep cash with you to cover expenses for 6 months or so.

A huge percentage of people across the world will not survive this crisis. But the people, who perform the above steps, will greatly increase their chances of survival. In fact, the crisis will transfer wealth from the unprepared to the prepared.

BRICS rating agency

There are three popular rating agencies in world today i.e. Fitch, Moody's and S&P. These rating agencies have consistently given a poor rating to India because

• Indian taxes are too high and complex.
• India law&order situation is weak. Justice is not delivered or often delivered late.
• Indian bureaucracy is big and corrupt. It is difficult to get work done on time in any government department, without paying bribes.

To improve its rating, India had to

• Reduce taxes
• Reduce bureaucracy, rules and regulations
• Privatize many government agencies like BSNL, MTNL, Railways, etc.
• Stream-line the justice delivery system.
• Disallow politicians/bureaucrats from interfering in the day to day running of any government owned business.

But instead of making the above changes to improve the life of Indians, the government wants to setup a new rating agency. Reference.
This is akin to a student, who keeps failing in exam. Instead of studying harder, he wants to change the teacher.
With an attitude like this the student (Indians) will not see any real improvement.

Why do Governments hate cash?

Most governments, all over the world, encourage citizens to go cashless. The main reason are

• Control: If government can see all transactions, then it gives more power to government. The Government can easily see who is participating in anti-government riots, which business house/group is financing its opponents.
• Taxes: A cashless transaction is a taxable transaction. Cashless means more taxes for government.

What should common citizens do?
A common citizen should not allow government to grow bigger or powerful. So a common citizen should transact using cash (or crypto-currency like Bitcoin). This way government has lesser control over people and taxes may be lesser.

So let us be smart. Pay cash wherever possible.

Bullet train from Mumbai to Ahmedabad

The cost is expected to be 17 billion US dollars. Let us assume that cost of maintenance is 10%. So if the project is used for 50 years, the total cost over 50 years will be 13,781 billion US$.
Let us say the cost of ticket is Rs 1,000. So per day about 500 lakh people have to travel by this train so that project does not make any loss. This is impossible because the bullet trains don't have that carrying capacity and there is not so much traffic between the two cities.

BitCoin is a bubble

In Year 2000, .com stocks were going exponential. Many people, without knowledge of how to read a company financial statement, were buying .com company stocks. Some people (initial investors who cashed out before the bubble burst) did make money. But many people lost a lot of money in .com crash.

Nowadays, Cryptocurrencies (like Bitcoin) are going exponential. Many people want to buy these cryptocurrencies. This is a repeat of .com bubble.
.com companies stock crashed because the companies were not making any profit. So the shares did not have much value.
New cryptocurrencies are springing up almost daily. Cryptocurrencies have no intrinsic value. So, in future, most cryptocurrencies will crash (but some will likely succeed).

Some people (initial investors who cash out before the bubble bursts) will make money. But many people will lose a lot of money in cryptocurrencies.

Real estate as investment

Why do real estate prices keep rising faster than people's income in most parts of the world?
Governments want real estate prices to rise faster than the economy. When prices rise,

• more taxes are collected.
• more employment is generated.

To aid the rise in real estate prices, governments

• give tax concessions to real estate investments.
• lower interest rates for real estate loans.

When real estate prices rise, more people are attracted to the real estate investments. The cycle is self-fulfilling and similar to a Ponzi scheme.

How will this cycle end?
The cycle can end in two ways

1. There is a collapse of real estate prices. This is unlikely because government will pass laws to cushion the fall e.g. lower interest rates, tax concessions to real estate investments, etc.
2. Real estate prices will stay flat or be mostly stable. This is more likely because of government's support to real estate.

Real estate has ceased to be a good investment in most parts of the world. Sure, if you want to live in a house, go ahead and buy it. But, if you are purchasing property, so that you will sell it for a profit in few years; then it is likely that you will make a loss or (at best) little profit.

Reason for poor health is excess not deficiency

Most poor health discussion is about getting enough protein, omega-3, calcium, potassium, etc. But the primary reason for poor health in most people is excess, not deficiency.

Look around, most people are obese. Diabetes, cancer, heart disease, etc is caused by excess of nutrients e.g. too much fat from animal leads to heart attack, too much protein can lead to cancer, etc.

If the size of your waist/hips is much more than your chest, then it is likely that you are consuming food in excess. One way to decrease calorie intake is to replace oily food by raw fruit/vegetables.

Why did USA attack Syria?

The official reason from USA is, "Assad is killing his citizens with chemical weapons. To protect women and children, USA wants to remove Assad from power."

I think the official reason is fake. The real reasons, in my opinion, are mentioned below.

• Russia and China have made an agreement that they will not use US dollar to settle their trade accounts; instead they will use gold. This will decrease the demand of dollar. So inflation in USA will rise. Tomorrow, more countries will dump the dollar. This will cause the value of dollar to collapse. USA will lose power and wealth.
  Syria and Russia have close military ties. By attacking Syria, USA is putting pressure on Russia. USA wants Russia to cancel the gold trade deal with China.
• Saudi Arabia is a close ally of USA. Saudi Arabia wants gas pipeline, supplying fuel to Europe, to go through its country area. An alternative route is via Iran and Syria; both the countries are hostile to USA. If Assad is replaced by an USA puppet, then the pipeline will go through Saudi Arabia. So USA is helping its allies by bombing Syria.
• The long term goal of globalists is "one world government" and "one world currency (like SDR)". Today countries have their own rules and taxes. So a person, dominant in one country, can be nobody in another country. For "one world government" and "one world currency", the power of USA and Europe must decline; there should be unrest in many countries. Then as a solution to world problems, "one world government and currency" can be implemented by globalists.
  By having USA attack Syria, the power of USA declines and unrest is caused in middle-east. So the globalists are moving towards achieving their agenda.

What can we do to stop war?

• Spread this message
• Vote for party/person that opposes war
• Buy gold/silver and keep minimum wealth in fiat currencies like dollar.

WhatsApp digital payment platform set to fail

WhatsApp is about to support digital payments in India.
WhatsApp is a messaging platform used throghout the world. In India (it seems) the government has arm-twisted WhatsApp to support digital payments. Indian government thinks that by this action, digital payments will increase in India.

People pay by cash in India because

• Taxes are high
• Government regulations are high.

Whether WhatsApp supports digital payments or not, these facts are not going to change. So WhatsApp digital payments platform will have limited success like Paytm, FreeCharge, etc.

Here is an example. India levies an import duty of about 10% on gold. In local Indian market, gold is sold at about 5% more than international price. This means that almost all gold being sold is smuggled. The seller wants cash for gold. The buyer also prefers to pay cash because if a digital payment is made, then

• taxes will have to be paid.
• PAN number will have to be revealed leading to potential harassment from income tax officials.

If India wants to go cashless or less-cass, then

• Reduce taxes
• Reduce regulations

More and more people will then adopt digital payment for convenience.

Economic collapse

World debt is in Trillions of dollars; derivatives are in quadrillion of dollars. Should a major bank fail, like dominoes, other banks will fail. The world financial system is unstable. A economic collapse will likely occur during the next few months.

Here is what I expect to happen in India during the collapse:

• Stocks will fall by more than 15%.
• Rupee will fall by more than 5%.
• Real estate will continue to fall or (at best) remain at same prices.
• Gold and silver will rise.
• Indian government will attempt to steal people's money by doing one or more of following actions
  1. If you have lot of money in your bank a/c, then (unless you can prove that it is white) a part of that money will be taxed.
  2. Cash withdrawals will be reduced (by making rules) and/or taxed.

How to protect yourself from Government snooping?

New documents release from Wikileaks provide proof that government can read our emails, SMS, WhatsApp messages, Videos, photos, etc. The government can switch on the microphone/camera in our phone/computer/Laptop/TV for snooping, even if the device is supposed to be sleeping/switched off.

To protect yourself,

1. Use cash or some crypo-currency like BitCoin for transactions that you want to be hidden.
   Cheques, cards, UPI, etc can be tracked by government.
2. Use peer-to-peer server-less messaging application like BitMessage.
   WhatsApp, Facebook messenger, Google Hangouts, Microsoft skype, etc can be tracked by government.
3. Don't permanently attach a microphone or camera to your desktop computer. Attach them when needed and then disconnect them.
4. Keep a tape over the camera of laptop. This way the government can hear us, but not see us.
5. Switch off your TV/computer/Laptop at night or when unused for long periods.
6. Keep multiple phones. Consider using a basic phone for private calls, one smartphone for business, one smartphone for personal use, etc. The basic phone has limited features (no GPS, no camera) and hence is more difficult for Government to automatically switch on microphone, track GPS, snoop on videos, etc.
7. Use Tor browser or Tails bundle for surfing sites that you want to be private.

Corruption in India

Transparency International conducted a survey in India to find perception of Indians regarding corruption. These are the results:

• 85% of police is corrupt
• 84% of government officials are corrupt
• 79% of business executives are corrupt
• 76 to 78% of politicians are corrupt
• 74% of tax officials are corrupt
• 71% of religious leaders are corrupt
• 66% of judges are corrupt

The least corrupt countries in world are Denmark, New Zealand, Finland, Sweden and Switzerland.
The most corrupt countries in world are Somalia, South Sudan, North Korea, Syria and Yemen.
India is ranked at rank 79 among 176 countries evaluated on transparency. (Rank 1 means least corruption and most transparent. Rank 176 means most corrupt and least transparent.)

Corruption is dominant in India because taxes are high and their are many unnecessary rules/regulations. When taxes will be reduced and most rules/regulations eliminated; then India will be become less corrupt.

UPI payments in India

UPI has the advantage over Paytm, FreeCharge, etc because

• UPI directly debits/credits your bank a/c.
• UPI is supported by Government of India. The government forces banks to charge little or no fee for transactions. Also the government makes rules, so that UPI is accepted in many places.

Hence prefer UPI.

To use UPI, you have 2 choices

1. Use BHIM app from Government of India. This is the only practical option, if you have a/c with a government bank like SBI, OBC, etc.
2. Use App of your bank e.g. ICICI has iMobile app. This App will usually give you more features than BHIM and will be faster. This option is available only from private banks like ICICI, HDFC, etc.

You can install both BHIM and private bank UPI app on one mobile.

Payment by UPI will continue to grow in India, primarily because the Government of India is forcing merchants, organizations, businesses, etc to accept UPI.

As a general guideline, the order of preference is

1. Use cash, if possible. This will have maximum privacy.
2. Use Credit card for online shopping because payments can be deferred by few months and refunds are convenient.
3. Use UPI e.g. while paying to a friend, when exact cash is not available; cheque is inconvenient; not POS machine is available.

Cash Withdrawals in India

With effect from 1-Mar-2017

• 4 free cash transactions (withdrawal and deposit total) are allowed per month per savings account.
• A charge of ₹150 will be levied per cash transaction after the free transactions.
• Upto ₹2,00,000 value of cash transaction (withdrawal and deposit total) are allowed per month from home branch of bank.
• After the free cash transaction value, a charge of ₹5 per ₹1000 will be levied for cash transactions.

To combat these rules, Indians should

• Have savings account in different banks.
• Withdraw ₹2 lakhs cash per month per savings account.
• Withdraw cash by going to bank personally.
• Don't withdraw from ATM, because ATM limits is much lesser.

Cash means privacy and freedom. Accept cash and pay cash wherever possible.

Indian budget 2017 - The good, bad and ugly

A good budget

• Reduces taxes
• Reduces deficit by cutting subsidies
• Reduces bureaucracy, rules and regulations
• Gives more freedom to people.

So here are the highlights of budget 2017

• No cash transaction above Rs 3 lakhs. Bad because it reduces freedom. People should decide the mode of payment, not government rules.
• Mahila Shakti Kendra for welfare of women to allocated Rs 500 crores. 60 days interest waiver for farmers. MGNREGRA allocated Rs 48,000 crores. Ugly because government subsidies are mostly wasted.
• Tax rate for people earning between 2.5 to 5 lakh brought down from 10% to 5%. Good.
• Foreign investment board abolished. PSEs like IRCTC to be listed. Good. Lesser the bureaucracy, the better.
• Cash donation to political parties curbed at Rs 2,000. Good.
• Higher taxes for rich. Bad.

Overall the budget doesn't do anything significant. So the Indian economic conditions will remain mostly the same i.e.

• Large scale corruption
• High inflation
• Lack of skills to compete globally
• Rupee will continue to fall in value against real money i.e. gold/silver.

Corruption in India is rising

In terms of transparency, India gets 40%. Denmark has score of 90%; New Zealand 90%; Finland 89%; Sweden 88%; Switzerland 86%; Norway 85% and Singapore 84%. Reference.
Under BJP's Modi, India's rank has fallen from 76 to 79, among 176 countries evaluated. For all practical purposes, Demonetization has not reduced corruption. In fact, now people are paying more bribes e.g. to tax officials to reduce penalty, to bank officials to get cash, etc.

Why did Demonetization fail?
Corruption is not proportional to cash in circulation. Corruption is proportional to taxes / rules / regulations. The more taxes in a country, the more rules/regulations in country, the more the bureaucracy in a country; more is the corruption.
The ONLY way to reduce corruption in a country is to reduce taxes, rules, regulations and bureaucracy.

BJP under Modi has not taken any significant steps in this direction. In fact, after demonetization, the rules/regulations/bureaucracy have increased. Now, new taxes are being introduced on cash withdrawal. Hence corruption is going up, not down, under BJP's Modi rule.
Indian politicians are should remember that talk is cheap. Essentially BJP under Modi has failed to reduce corruption, inequality and poverty.

Cash situation in India is not normal

Indian government and RBI say that cash situation in Urban areas is mostly normal. That is a lie.
If cash situation is normar, then why is there a cash-withdrawal limit of

• ₹24,000 per week per savings account?
• ₹10,000 per day per ATM card?
• ₹1,00,000 per week per current account?

Before demonetization, the above cash withdrawal limits did not exist. If cash situation is normal, then why is there still a need for these cash-withdrawal limits?
As long as these cash-withdrawal limits exist, basically the bank is saying that demand of cash is more than supply. Only when all cash-withdrawal limits are removed, can we say that cash situation is approaching normal.