Tuesday, December 15, 2009

Why India needs a "Bond Market"?




Why India needs a “Bond Market” ?

Swelling capital inflows in the equity markets is concerning me a lot. The only comforting fact is that Rupee has not yet appreciated beyond the crawling peg range and it is still long way away form pre Lehman era of 39-40 levels against the Dollar. What concerns me is that the FII inflows have flooded the equity markets and there is no mechanism in place to channelize these robust inflows to key areas of the economy like infrastructure and other priority sectors. The markets are fair valued at these levels and any upswing or bullish run beyond these levels with create an asset bubble and overvalued assets. A well developed Corporate Bond Market would have been handy in these circumstances.

India lacks a well developed Corporate Bond Market and the fact we badly need one was highlighted by PM Manmohan Singh at the recently concluded Indian Economic Forum. Through corporate bonds FIIs can join the Indian party by investing in long and medium term assets both through direct and institutional investment. We need a mechanism to channelize these savings in the corporate and infrastructure sector particularly by having a very well lubricated and functional corporate, municipal and even local government and project bond market. We not only need fast track reforms to develop a functional bond market separate from government treasuries but need judicial reforms to speed up the process of justice in case of a default, delinquency or worst case scenario of a bankruptcy . Only when the judicial reforms guarantee some faith in the judiciary can a well structured bankruptcy code be developed and implemented, which is not less then a lifeline for investors in the bond market.

Monday, December 14, 2009

Outsourcing Traffic Management

Sum proposes an outsourcing model for traffic management in India
Outsourcing has a simple business philosophy; a process or a function should be outsourced if it gives the company a cost leadership (or even cost saving) and can be performed or executed with more precision and efficiently than if performed or executed by the company itself. “Bangalored” as outsourcing is popularly known in US, has given a lot of companies billion of dollars in cost savings and given some other companies a more focused approach towards their core business operations and functions while preferring to outsource the peripheral activities and operations. Dell is an example how a company can gain competitive advantage with outsourcing. It outsources its production such that it is now just an assembler of customized PCs and Notebooks. It has the advantage of maintaining minimum inventories by adopting a JIT inventory approach.

While private sector is reaping the benefits of outsourcing, public sector is not left behind. A large chuck of BPO Company’s revenue in India comes from domestic outsourcing a bulk of which is from the public sector. TCS is in advanced stages of implementing a pilot project for preparing fast track passports.

The other day I was driving down a rickety and poorly managed national highway with chaotic traffic management when it occurred to my mind, why not outsource “traffic management” in India. Suddenly my mind was filled with pictures of smartly dressed men and skimpy dressed lady ‘private cops’ managing traffic with outmost precision. Never have traffic management been better or more profitable. The revenue from traffic tickets and other offences is booming and I am conferred a noble prize for putting forward such a path breaking successful idea. My dream is broken by a pot bellied traffic cop who had signals me to stop, only for me to realize later that he wanted a lift from me. I still envy his job where he can just mismanage, bully, stop and barb at anyone. Never has any other job given such perks. All said and done I strongly vouch for a outsourced model of traffic management in India, the specifics of which I can specify over a couple of hundred sheets of paper. Just as bill collection, call management or even passport issuance (issuing an identity of national importance) be outsourced so can the traffic be outsourced, where there is no external or internal threat. The traditional traffic police force can of course be coordinated and integrated with the outsourced traffic management cops.

Thursday, November 12, 2009

Reading Buffet's mind.....


Sum evaluates what are the key “take away” from Berkshire Hathaway buy of Burlington Northern Santa Fe Railway?

He bought a rail road company spending USD 45 billion coz he says his father didn’t bought him a toy rail when he was a kid. Buffet’s biggest Private Equity deal involving buying the remaining 78% stake in Burlington Northern Santa Fe Railway (BNSF) is being read by market watchers for signals on how the smartest and richest American Investor assess and evaluate America’s prospects going forward. After window shopping in Asia and Western Europe for nearly a year he chose to invest back home in capital intensive transport sector which traditional he and his company avoided. Buffet’s Berkshire Hathway thought PE investments in capital intensive businesses had fewer opportunities for generating value and making profitable exists. If his timing and foresight is anything to go by, his investment in Goldman Sachs is up 20 %. Goldman turned to

He remained invested with a minority stake in BNSF all through the recessionary times and waited for clear skies to invest even though BNSF share hit a bottom of around USD 51. The deal price of USD 100 per share aggregating USD 45 billion for a 78% stake is undervalued as per Buffet and he believes he can make a profitable exit. A striking thing about this takeover is that Buffet closed the deal very neatly in less than ten days and without the help of any investment banker. No valuation done, no due diligence process, it’s a firm decision swiftly executed.

So why it is that a Private Equity investor like Buffet can add value to a company while the present management is unable to do so. And more so Private Equity funds are able to buy distressed and underperforming assets at dirty cheap prices, turn them around and sell them at a premium making a neat return of a couple of hundred basis points. The answer lies in better management of these assets/ companies by integrating the interests of senior managers with the long term valuation of the companies. In a normal company with a public float there is increased pressure on managers to maintain a company’s stable or growing dividend policy or maintain the company’s share price and report quarterly figures (all short and medium term goals). The company’s performance is dissected by numerous markets participants like analysts, brokers, market makers for search or undervalued or overvalued securities and there is a lot of pressure on meeting analyst expectation. Focus is on achieving long term goals and incentives to achieve them by senior managers of the company are very strong in a PE set up. Secondly PE replaces the high cost debt of the company by repaying it and leveraging the company’s capital structure by borrowing at low cost. PE funds are able to borrow at low cost because of their excellent debt repayment reputation. As the company is turned around the operating cash flow and EBIDTA generated is used to deleverage the capital structure. There is restriction on payment of dividend till the debt is repaid and all funds generated are used to deleverage the company to normal acceptable levels.

So coming back to our basic question, what signal can we read out of this big ticket investment? First take away for many would be Buffet’s confidence in American economy and an expectation of a medium to fast recovery. This dispels doubts of a prolonged slowdown. Clearly he is investing in a company which will weather the oil price spike better than trucking companies or the airlines. He expects oil to spike in the near term and business to shift to rail road from trucking and airlines. Second with all the climate change and environment talk in the town he is expecting subsidy and tax credits for green companies from the congress. If you give any weight to his proximity to law makers, cap and trade and environment regulation is a take away and expects some movement on this from the congress going forward. He is also betting big on increased trade between China and America particularly through the opening of Panama Canal for trade. Walmart has already set up a big warehouse to transport exports from China through Panama Canal to mainland US. Thirdly he is expecting American to get realistic and mend their spending patterns particularly when it comes to travel. He has put all his money on a cheaper mode of transport so all those who trust his trading skills can short stocks of airlines and trucking companies.

For me the biggest take away is that going forward he has recognized and realized that America will no longer be as flamboyant as it used to be. It has just survived a major stroke and now America is expected to return to cheaper ways of life. All said and done I am very excited to see how Buffet profits from this investment for this is one investment I really do not agree with him.

Wednesday, November 11, 2009

Sum' frontruns the "Economist"



Sum frontruns the "Economist" on applauding NREGP. (Sum blogs on Oct 13,2009; "Economist" follows with a similar article in the Nov 7-13 issue.


Sum frontruns "Economist" this time. A blog which I posted applauding UPA's flagship NREGP on October 13 gets similar applause from the the heavy weight business and economic weekly "Economist". The parameters of applause are much the same so I am happily posting an article from a Firang Magazine which I have frontrun at least by a fortnight. Read the "Economist" Nov 7-13 edition. The article in the Finance and Economics section is headlined "Rural Job Guarantees - Faring Well". The introduction lines read "India's grand experiment with public works enjoys a moment in the sun".

Sunday, November 8, 2009

Hot Money ....




FIIs touch make emerging economies steaming hot.


Its a problem of plenty for emerging economies like India and Brazil. With ultra low interest rates in the developed nations there is a reverse flight of hot money in emerging economies. It is creating an asset bubble particularly in the equity markets of emerging economies. Emerging economies as an asset class constitutes the biggest proportion of private equity funds, hedge funds and big ticket investors. For an emerging economy like India or Brazil all money is welcome money but with such robust inflows central bankers are in a quandary to avoid bubbles and prevent markets from over heating. Brazil imposed a tax on all FII inflows (2 % or thereabout), India is still scratching its head to find a solution to the problem of excesses. Any interest rate rise at this juncture will further give impetus to FIIs who are facing near zero interest rates in their home countries. It'l be interesting to see how central bank handles the robust inflows while raising interest rates to rein in the threat of inflation. Inflation in consumer goods sector is already in double digits and the full blown effect of weak monsoon will pinch even more in the coming weeks. RBI is now caught between a catfight of its wife (economic growth) and mistress (inflation control). Lets see how RBI balances its marriage and who comes out a winner; the wife or the mistress.

Tuesday, October 13, 2009

Intangible benefits of NREGP

The flagship program of UPA government that guarantees a minimum of 100 days of guaranteed employment to the unemployed in India especially in rural and semi urban cities has been a huge success. This is one scheme that clicked the right cord with the rural poor and instantly turned into votes for the Congress led UPA in the last elections. The scheme exceeded all the tangible benefits estimated or expected from it. Rural poor have a guaranteed employment scheme they can bank on that provides them a source of livelihood even if they are fired from their farm job or the crop on their tiny land holding fails. But it’s the intangible benefits which were unintended and untargeted initially that has made this scheme a huge success or at least a success which can serve as a launch pad for future rural development schemes.

NREGP helps control population growth among the rural and semi urban poor. No, it does not provide funds to laminate your libido or make you pop pills; it just raises the opportunity cost of having a child. A lady has to forgo her wage for at least a year if she bears a child. That translates into an opportunity cost of around Rs.40000 for the entire year she ‘wastes’ in childbirth and the costs associated with it. The men will rather prefer their ladies to have fewer children. A minimum standard wage also ensures incremental wages for them when they are employment in other sectors. In fact farm owners in Punjab had difficult time employing farm labor at rates close to those provided under the NREGP for sowing the kharif crop. They had to pay more than the minimum wage to attract farm labor. No doubt the NREGP wage rate is acting as a floor and incremental wages in other sectors brings a hope of better incomes and resulting subsistence livelihoods for the poorest of poor. As the opportunity cost of their time goes up, less time is wasted in activities like child birth and maternal leaves for the mother. On the flip side providing a subsistence wage may mean increased diversion of poor towards the only entertainment activity they relish or have access to. Education and awareness can play an important part in spinning a web of education, employment and population control among the poor. The development efforts at the base level should target these intangibles apart from the tangible benefits. Well done Team Manmohan in your batting power play (with the initial launch and success if NREGP), with wickets in hand (time to go before next election), lets hope you keep up the scoring rate in the middle overs and go for the slog in the final over. We seem to have an exciting match on our hands.

Monday, October 12, 2009

Congratulation President Obama !

Dear President Obama
Many congratulations for the Noble Peace Prize. Indeed this couldn't have come at a better time. The Noble Prize reaffirms the American Pledge and your 'Hope' of a better and secured world for all future generations. Your extraordinary efforts to strengthen international diplomacy and cooperation between people has given the world a new hope of a better and secured future. Your carefully crafted and well delivered speeches on Nuclear Disarmament and Climate Change have acted like a catylst for initiating a process of change. Many congratulations once again to you, Michelle, kids, dogggie and all Americans who are the fore bearers of your slogan of change, hope and peace. .


Some of the things that have spoken about (or thought in your mind) have helped create a better and peaceful world. The decision to close down Guantanamo Bay detention center, lending a hand of dialogue and talks to Iran and North Korea, troop withdraw from Iraq (and focused approach in AfPak), encouraging talks between Palestine and Israel and a respectful approach towards erstwhile cold war enemies makes the world a peaceful and relaxed place for all the citizens of the world. Acknowledging the difficulties faced in difficult and complex issues like climate change and nuclear disarmament, yet resolving to move towards a peaceful resolution makes you not only a better (and popular) President but also a better citizen and world leader.
Under your leadership we expect to see America restored to its old glory with a less hawkish attitude. We also expect you to carry on with your resolve to make America and the world a better and safer place for future generations. Much needs to be done to pay for the gratitude and confidence the world has bestowed upon you by blessing you in advance with a Noble to motivate you to accomplish your unfinished agenda.

We expect the world from you
With Warm Regards

Citizens of this world

Saturday, October 10, 2009

Travel Agency Market and the “Lemons Problem”



Travel Agency Market and the “Lemons Problem”

If you bought a second hand car recently (well, that’s what most of us can afford in recessionary times) chances are that you have bought yourself a ‘lemon’. Noble Laurette George Akerlof discusses information asymmetry or the “Lemons Problem” in his paper titled "The Market for Lemons: Quality Uncertainty and the Market Mechanism" which discusses a market situation in which seller is more informed about the product than the buyer. He states this with the help of used cars market example. There are good used cars and defective used cars ("lemons"), but because of asymmetric information about the car (the seller knows much more about the problems of the car than the buyer), the buyer of a car does not know beforehand whether it is a good car or a lemon. So the buyer's best guess for a given car is that the car is of average quality; accordingly, he/she will be willing to pay for it only the price of a car of known average quality. This means that the owner of a good used car will be unable to get a high enough price to make selling that car worthwhile. Therefore, owners of good cars will not place their cars on the used car market. This is sometimes summarized as "the bad driving out the good" in the market.

"Lemon’s market" effects have also been noted in other markets, such as used computers and the online dating "market". More recently we are noticing the symptoms in our local travel agency market (travel trade, you may call it), particularly among the un-branded, un affiliated, off line travel agencies. Much like the used cars market (where the features of a used car, good or bad are better known to the seller than to the buyer), travel agency market has got informational asymmetry of the service standards provided by different travel agencies particularly in terms of reliability, level of expertise and experience. An average consumer places all un-branded, un-affiliated, off line travel agencies in the same bracket and the only factor influencing his purchase decision (apart from price) is his personal rapport or relationship with the particular agency. There is some form of a perfect competition in the B2C segment of the travel agency market where the individual sellers are price takers selling similar products (airline seats/ hotel rooms) at the same price range . Consumers are indifferent in the choice of their travel agent (keeping personal rapports and relationships constant) as the product is standardized (everyone is fighting to sell the same airline seat/ same hotel rooms) and there is no scope for abnormal profit (or scope for generating alpha as investment bankers like to call it).


This is an interesting situation of a market being in a state of perfect competition (keeping seller-buyer personal rapport & relationships aside) with signs of a ‘lemon’s problem’. The service standards differ among agencies especially in terms of their past experience, network strength, staff expertise and reliability but the same is hardly distinguishable in the eyes of the consumers when making a purchase decision or at least approaching an agency for a purchase. The consumer is likely to select a ‘lemon’ than a good agency on the basis of his perception of buying standardized product or service (similar airline seat/ hotel room) from an agency providing average quality of service. This is disadvantageous for the agencies with high service standards as the customer’s perception of average quality places them among the ‘lemons’. The agency with high service quality standards or innovative and differentiated service delivery mechanisms is unable to charge a premium price and thus looses the motivation to differentiate or innovate or improve its service and quality standards. “The bad start restricts or drives out the good from the market”.

How should the industry regulators and trade bodies react to the ‘lemons problem’? Well its time for some introspection for regulators like IATA and local trade bodies like TAAI and TAFI to reduce informational asymmetry and provide signals to the consumers on the level of service provided by its affiliate agencies. There ought to be a grading system to differentiate among excellent, average and poor service providers. It could be left to the option and discretion of the agencies to get them graded; obviously high quality service providers would like to get graded and flaunt their high service quality standards to the consumers. However the ‘nimboodas’ (lemons) would just rubbish this as just another theoretical procedure and may lobby against it. Since most of the regulators/ trade body leaders are from the industry or will in some way seek employment in the industry after the completion of their tenure as regulators/ trade body leaders they may be biased in favor of regulations/ procedures that support the personal interests of the lobbyists (who would most likely be lemons) against any such grading procedure. This no doubts hurt the industry players who have toiled hard to structure sound systems and practices and build successful business models based on high service and quality standards. To be perceived among the lemons is reason enough for them to loose foresight and motivation to innovate/ differentiate. It just sounds like a brilliant student being given the same marks in an exam as a poor student even though the brilliant student worked hard and performs better than the poor student. The brilliant student will just not have it in him the next time. The phenomenon also contradicts the self fueled mechanism of a capitalist economy proposed by Keynes. In the final chapter of his ‘General Theory’, Keynes foresaw ‘capitalist socialist investment growth mechanism’ to be fueled by the ‘animal spirits’ of entrepreneurs and the constancy of investors, B2c, who must commit their funds to uncertain ventures for extended periods and thereby innovate and differentiate in their pursuit of abnormal gains. Maybe Keynes underestimated the problem of ‘lemons’ in his predictions that drives out innovators from the market.

Monday, January 19, 2009

Why war with Pak is a bad idea?


An economist's decision on going ahead with a full fledged war (or controlled fisher attacks) on Pakistan’s terror camps and establishments may be very different from a populist decision of a politician. Not with standing the war hysteria being created in our bedrooms daily by the breed of new age news channels, an economist will perceive this situation very different and that can have catastrophic effects on Indian Economy

A brief on current economic situation brings out a vibrant picture of a country with high GDP growth rates for the last couple of years coupled with a well developed and functional system of capital and money markets ably supported by a strong banking system. On the flip side, increased government spending on infrastructure and high farm/ oil subsidy ensures that India is one of the few Asian countries with a current account deficit, which gives it little leverage on the fiscal front. This is precisely the reason why the stimulus package of the central government to counter recession is merely cosmetic in nature.

Now lets see what happens if India goes to war with Pakistan. Since this will be a full-blown war or even if it is a fisher attack the warring parties are official armies (and not proxy army or militia as happened in case of Kargil or now with Hamas in Gaza). A war in such circumstances is likely to be a prolonged offensive with collateral damage to both countries in terms of human and physical capital. While loss of human capital would require increased spending on medical aid and rehabilitation, physical capital damage will require much more spending both in time and money to be restored to its original glory. Another cost will come in term of increased military spending and internal policing. Business is likely to be disrupted both within the country and with the outside world. There may also be a cost in terms of sanctions from certain foreign countries and a medium to long-term suspension of trade with them.

While this sounds like a heavy cost burden on the economy, let’s see what options does India have to finance this cost. On the fiscal front, as already discussed we have little headway. Another couple of thousand crores in war spending will send the current account deficit reeling and put both the currency and the country at the risk of hyperinflation. Lets see How?

India will either borrow from Britton Wood institutions to finance its war expense or under desperate and extreme circumstances, print additional currency. While debt may not be forthcoming considering there may be some sanctions in place and even a depressed world economy will not help. In war times, foreign investors will frenzy for their funds and there will be capital drain, which may be in excess of India’s current foreign reserves. Printing additional currency, though the last of resorts will increase the money supply and shoot up inflation. In such a situation inflation will take big leaps and an era of hyperinflation may be experienced. A similar hyperinflation was experienced in Germany during World War in 1920s and Zimbabwe is encountering it in current times by deleting zeros from its currency, which already has issued some billion and trillion dollar notes.

Pakistan is looking into an era of hyperinflation even without war, as its economy has failed and its political and military set up does not command any confidence. It’s being seen as a den of terror activities world over and any kind of foreign investment (both institutional and capital) may not be forthcoming. There may even be a freeze on grants by US and other western allies. Pakistan incidentally is one of the nations that queued recently in front of IMF asking for relief to prevent bankruptcy.

This is a time for economic offensive against Pakistan stopping all trade and commerce with it. Diplomatically India should ensure that countries across the world are appraised of Pakistan flip flap on terror. India has a strong case to push for a “Terrorist State” tag for Pakistan. The first tactics in any warfare is to cut enemy supplies and that’s exactly what India should be doing. Nip the terror in the bud.

Friday, January 9, 2009

Equality and Efficiency


Equality and Efficiency which form the base of economic theory rarely finds a mention in basic elementary education. The biggest reason for the growing despair, discontent and extreme activities like hate crime, terrorism and racial and communal clashes find its roots in the basic issue of equality v/s efficiency in the economy.

Before going to equality lets see how wiki describes inequality "Economic inequality refers to disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among nations. Economic Inequality generally refers to equality of outcome, and is related to the idea of equality of opportunity. It is a contested issue whether economic inequality is a positive or negative phenomenon, both on utilitarian and moral grounds.

Now lets consider whats equality and more specifically what's "equality of outcome" and "equality of opportunity". "Equality" or "Economic Equality" fails to find any specific meaning when 'Googled' is reminiscent of the fact how these words got distorted in our lust for money and power. Equality which ought to be the backbone of a welfare state is broken and the concept foregone.
Two basic theory of economic equality are Utilitarianism and Equality of Opportunity.
While one propagates greatest good for the greatest number, i.e. make the economic cake bigger so that the pie can be bigger. Other one propagates equality for opportunity for all.
The concept of a modern nation is based on neither. A person's birth determines his levels of advantage or disadvantage in life. A rich may have a clear advantage of better education, good health facilities, better sources of entertainment and enjoyment of civil and social rights even before he is born. This in turn ensures better employment and earning capacity and thus the vicious circle is complete when the advantage carries on to the next generation. This cycle is not broken unless there is there is a spate of bad luck or bad decision making on the part of the advantageous.
On the other side, a person born poor has low chances of surviving in infancy on account of malnutrition, hunger and non existent medicare. Education is non existent and very low or non existent level of income drive them to social ills like prostitution, begging, petty crimes and suicides.
Economists are divided in their opinion over the best course of action for equitable distribution and allocation of resources in the society. Most of them agree on private ownership of assets and state protection of ownership rights. Orderly transfer of assets / resources takes place in the market place through an orderly market mechanism. Those who start poor in this model are disadvantaged and have little room to moneauvre or step up the ladder. The other theory advocates excessive taxation of the rich and redistribute the collected taxes among the poor. They say tax them till they die, but ensure equitable distribution of resources. There are enough leakages in this system as costs of tax collection is very high and excessive taxes act as a demotivate for the rich to produce (which eventually would lead to lesser over all taxes) .
An alternate model is suggested by the machine loathe operator turned President Lulla of Brazil. He suggests in a society rich and poor can coexist and we can have public policy and regulations that are advantageous both to the rich and the poor. Rich need to be told that the market for their goods and services will expand if the poor gets money in his hand . The well being of poor and their uplift is advantageous for the poor as well as for the rich (who gains by having excess to a wider market). The poor need to be told that favorable policy for the rich is important as they are in a better position to utilize the resources optimally and generate employment opportunities for the poor. State will spend on the poor by taxing the rich and more taxes can only be collected and spent on pro poor schemes when the tax revenues. For incremental tax revenues a pro rich policy is required. Its not as myopic as giving away poors' agricultural land to the rich for constructing a shopping mall but if the bigger picture envisages employment in the mall for the poor and the government ensures through proper regulation for equitable transfer of resources and prevent future downturns in the market by reducing overcapacity and speculation everyone in the society will be better off. Well said President Lulla lets hope Mamta didi is listening.




Sunday, January 4, 2009

Bailout Economics









This is just another term future economists and management students have to deal with in their text books. A lot of post Morten analysis of different country’s booster dose of Viagra to their economies will be done in due course.

Let’s try to unfreeze this entire prescription of a stimulus package for the economies and evaluate effectiveness and modus operandi. If Keynesian Economics is what doctors advocating a stimulus package follow, then what they mean is “when there is spare capacity in the economy, demand and employment can be boosted by Government Spending, Borrowing and cut in direct and indirect taxes. So stimulus package necessarily follow Keynes advice on Government Spending, but did Keynes specified where to spend and are the Governments necessarily following his advice. Well he said employ people to dig holes and later tell them to fill the holes, so that they have employment, and when they have money, they will demand and thus consumption and demand will be boosted in the economy.



So is the “Booster Dose of Viagra” doing that or is it just going around protecting big industries by offering them fancy bailout packages as Christmas Gifts. The stimulus package in US (TARP) is more of a Bypass Surgery for their financial sector, wherein the clogged arties are being cleared. But what concerns me is the nonchalance towards the basic problem of unemployment. People are being clobbered and churned out in big numbers by the private companies and they have no where to go, but look for jobs while making a living out of their savings. Bailout for financial institutions, automakers or sundries will no way help the basic problem of low levels of demand in the economy. The reason given for of these industries is that they are too big to fail and any stumble of these institutions will not be good for the economy and increase the problem of unemployment.

Well I say who allowed them to get so big, as that their sheer size is putting the entire US economy at risk. The size is giving them an advantage of creating a financial mess and being able to get away with it. In order to restructure their companies with bailout money they will anyways issue a lot of pink slips. Another thing baffles my mind is, the interest of internal stakeholders like employees not being taken care of by US government when offering the companies bailout money. Is it being ensured that the companies will not fire in the near term in order to restructure. If you are giving money to save a company only to find the company retrenches a lot of staff later in order to restructure, the Keynesian Economics certainly is in unsafe hands.

A better way out would have been strengthening of social infrastructure (by developed countries) with investments in educations, healthcare and security (yes you can actually employ more policemen and increase the size of your army). Instead of helping rich and famous save their companies focus should be to put money directly in the hands of consumers. Ensure the TARP funds generate employment opportunities by investment in the Public and Government sector. Let’s not reward companies who lack financial prudence by helping them out with tax payer’s money. Instead lets spend this money on the tax payer it self by putting the money directly in his pocket. By helping troubled banks and car makers we are indirectly penalizing the good performers of this industry as their financial prudence and good performance is ignored. Rich and Famous seem to been the mantra for Keynesian Economists of modern times.