Petro Dollar

Last few days, I was reading about about monetary systems and then I came across this interesting thing called petro-dollar. It was a surprise to me to start with and my interest grew as I read on. So here it goes.

Suppose I am a member of a community. Each member has a printing press which can print bills aka money. Somewhere back in 1945 (in Bretton woods), I made a pact with the leading members of the community to use my bills for any buying-selling (trade) of wheat. At that time, almost half of the wheat produced in the community came from my fields. I was among the richest man in the community. I was the biggest trader too. So take example the washer woman says that she will clean my house and take some of my wheat in return. I say you can do barter but thats a old way. Lets do the new way wherein when you clean my house, I give you some money and that money can be used to buy wheat from my house, or you can very well use to say buy spices from some one else. As wheat was something which everyone needed to buy so everyone was convinced. I added that the money I give you is backed by gold i.e. if you have accumulated some of my money and dont want so much wheat from me, I can give you gold in return. At 1945 I had almost 80% of the community's gold so that was not an issue to me. At that time, I was good. I produced a lot more wheat that what I consumed in other products like rice, spices or services. Simply put I produced more value than I consumed hence I had sucked up so much gold from the system. I was running a capital surplus while others were running deficit as they were buying more wheat from me than selling me stuff which they produced. And that was 1950's.

Gradually things changed, I became lazy. I added up production slowly. Other ramped up their production fast. Being used to comfort and thrift, I started consuming more what others produced. The system remain the same. Only that I started consuming more rice which others produced and paid them with my money. Others were not able to spend all of my money which they got from me to buy wheat. They dont require so much wheat so asked for my gold. I had to give them my gold for the extra rice I was consuming. So my gold reserves dropped. It dropped to a level wherein for every 100 units of money which I had already given to others and promised them to repay it with 100 units of gold, I had only 20 units of gold. This was 1970. I knew people had my money and can come up to my door and asked for gold and I was able to pay only 20% of the total value. So I was about to default. So what do I do. Things were worse on the wheat side. Others had caught up and now I produced and sold only 20% of the wheat. People were now buying wheat from others. I was in a terrible situation.

So the first thing I do to solve the gold issue is to delink my money to gold that is I renege on my promise that I will give gold for my money. I know other wont take it lightly and dump my money back to me and make me bankrupt. So I still need to show them that my money still is important and has use so that they still keep my money and dont return it back to me. So I made a pact with the Sauds who were now producing and selling around half of the total wheat sold in the market. I convinced them to still continue selling wheat in my currency (in return I provided them protection. I acted as a mafia - so what?)

So in the market, people still bought wheat in my money and sold it in my money although now the seller were the Sauds and I was a buyer. Now I was producing less than what I was consuming. I have drained my gold reserve. Still I had 20% of the wheat market but I was buying more rice and spices than the amount of wheat I was selling. Now how was I able to support it. I devised the petro currency. Now as the Sauds were getting a lot of my currency, they need to use it. I was not producing enough services to sell those services to the Saud's than the amount of money they wanted to use by buying my services. So they started putting money into my house, my stock exchanges and so on. The money came back to me and increased my asset price. My land became more valuable. People were buying it with more of my money. Although the land remained the same - the price increased because of the current situation. Things were going fine.

I kept to my usual ways. I consumed more than I produced. I just printed my money notes and bought things from other people using it. People wanted my money because they need wheat from the Saudis. The Saudis took only used my money to sell their wheat because of my pact with them. Then in turn put the money to buy my assets raising their value up. This went on till end of the century.

The world changed. Wheat still had its value but now steel and code came into picture. Some of the older guys in the community had kids who were called chinkus and desis. These guys were good and they worked hard and they produced a lot. They did not produce wheat. The chinkus produced a lot of steel and the desis produced a lot of code. Still as both needed the wheat to survive, they needed my money. So they sold a lot of their steel and code to me which I happily consumed and just printed more money and gave it to them. They got a lot of my money, a part of which they spent to buy the wheat but still they had a lot left. They also bought some of my assets but they figured out that the price of my assets were inflated and were not really worth it. So it was a losing game for them. They just kept my money in their lockers and it gave them no return. So they started ganging up against me. They knew that I was just printing my money and consuming services which they produced with their blood and sweat (khoon-paseena). So they ganged out with some other guys and tried the saudis to accept their money instead of my money.

It took time and I opposed it a lot but gradually it happened. As they now dont need my money to buy the wheat, they started dumping it. When I tried to give them my money for their steel and code, they did not take it instead asked for their common money. My money lost its value in the market. I suffered in two ways. First I was not unable to just print my money and buy services. Secondly as no one demanded my assets, their price tumbled. My land prices went down as was the home price and so on. As I was producing a lot less than I consumed, I had given others a lot of my money (or was in debt financed by others) which they had accumulated. Now they were using my money which they had saved to buy whatever little I purchased. So things turned terrible to me. I had to work hard and produce stuff which the chinkus and desis bought after I was able to get all of my money back from their reserves hence clear my debt, I started accumulating their money and things got better because earlier, even if I sell I just get my money back which I cant use in the market to buy what I need as it has lost its value and no one wants it now. Now I have the currency which is in demand so its better for me.

So this is the story. I am the US of A and my money is dollar. The wheat in question in oil. Everyone is selling their produce to me and ready to take my dollar which I printed at no cost to me as they need oil and oil is sold only in dollar. Once that changes to Euro, the demand for dollar will fell. Right now I take part in about 10-12% of total trade in the market but people have over 90% of their reserve in dollar. Gradually it will align to my trade volume and all those dollars, trillions of them will come back to me and I need to give something in return. The table would have been turned back to me and I will be in trouble for sure.

Update:

1. Countries leaving the dollar
2. Sinking Currency from Yahoo
   

Bogex

Recently a mail was sent to our alumni group wherein one of us was ranting about the group being kept alive only to send picnic and meeting requests and no one cares about his startup and hence entrepreneurship. He wanted/expected the alumni to join and promote his site.

Hmm. too much expectations from us. Marketing is the entrepreneur's job and not the alumni. If his startup aka site sucked so what can we do?

Some one replied voicing similar feelings and also suggested that its not that he is the sole entrepreneur among us but their are more and some of them have tasted success too.

I found a real good one called Bogex which has come up with a nice solution called Bogex SMS zipper. Its a nice mashup of google sugggest (AJAX) suggesting txting language (used is sms's) and as usual a free sms facility and its fast. The sms came in a second much faster that yahoo or other services which takes minutes if not hours.

Try it out .. its good .. http://8r1.syminet.com/zipper/

3 years done

Today I complete my 3 years in TS2 and the feeling is like the initial lines of these songs.

Mysore Trip

On Monday when I reached home, plans were being made for a trip to Mysore. I was not much enthused as I had already been there. But Garima's and aunty's constant pestering to come along forced my to consent. So there it was. All planned.

Leave Bangalore at 6:00 am. Qualis was booked. Everyone took bath the previous day and some even went to the lengths to get their legs and hands waxed. For me it was a night of gossip and thought. Slept late but woke up at 5. A quick glass of horlicks and a bath with cold water set me for the day. The Qualis came on time. We boarded it and started to the tunes of 'Woh Lamhe' (nice songs btw).

The roads were empty and we cruised along. Once we were out of the city, it started drizzling. It was already cloudy but it was not so in the city. Gradually the drizzle turned to a downpour and again to a drizzle and sometime dry and the tango went on. The wind was cool and everyone slept. Being in the front seat and after a cold water bath, I was wide awake.

It was a nice ride, cool winds, slight rain and a nice road (Bangalore Mysore highway). I missed the ride of the Avenger (Feel Like God.).

First we touched base on Balamuri. It a small irrigation project which uses a small concrete wall to hold the water. The water splashing from the top of the wall gives a feel of a rapid. Took some pics and then moved into the water. The water was pleasant but a dip of half an hour brought in the shiver in my skin. The level of water was also rising so we moved out. Changed clothes and moved on to Mysore. Had our breakfast and moved straight to the Mysore Palace. Built by the Wodeyars, its magnificent, huge and beautiful.

We strolled through the visitors area and took some pics from the outside. Then went to a Mysore Sari and Handicrafts store and bought a sari for mom. Post that had a lunch and went to Chamundeswari Temple on top of a hill nearby. Full of monkeys, the place was a hell for Garima and we used this information to the hilt ;).

It was evening now and we moved down to hill to Krishna Raja Sagar (KRS) dam on Cauvery. One of the first dams to be built in India, it was the first to produce hydro-electricity and light up Bangalore. It has also has the renowned Brindawan Gardens at its base. We went through the garden till we reached the gates. The dam was full till its brim and the gates were opened to let out the excess water.

We stayed back there till it was time to experience the musical fountain. It was good. Thereafter we left for Bangalore. It rained heavily on the way back hence our destination time got pushed till 11 but we reached safe to Vineet bhaiya's house for a nice dinner to end the day.

Mysore Trip 24.7.2007

Cluster Maps

Just saw this cool Web 2.0 tool so thought why not try it out. It shows location of the visitor mashed on Google Maps. Lets see how cool is it really !!

Did you know?

Its a cool video about whats going on and what may happen in future. Nice video packed with facts and is worth a view.



Did You Know?

Sensex Scales 15000

Sensex scaled 15K for the first time and I am doing a tango with it with a ratio of 5. Hope to increase it as it goes up up and all the way.