Analysis of Business for Succesful Entrepreneurs

SLEPT analysis is a method of scanning the external environment in the business. SLEPT is termed a Social, Legal, Economic, Political and Technological analysis of the business environment. A best analysis and forecast is key to business success.

Developing Countries Should Change their Forex Reserves Portfolio

Bloomberg states that Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars. He said, “the major part of Indian reserves are in dollars -- that is something that’s a problem for us,”

Presently, there is a domination of US $ as a global currency reserves. Russia and China have already stepped up calls for a rethink of how global currency reserves are composed and managed. They are planning for a system to maintain the stability of the major reserve currencies.

It has increased further uncertainty to Developing countries foreign exchange reserves holding and investment as well. Foreign exchange reserves portfolio of developing countries like Nepal must be changed so as to avoid likelihood foreign exchange loss.

Likelihood Bank Holiday in US

Recently US president Obama proposed a new regulatory structure for US financial system declaring that it is needed to protect the rights of ordinary consumers and to guard against the murky practices that led to the current financial crisis. Analysts have predicted that he is planning for bank holiday in US in near future. It expected to happen for late August and early September.

On 26 June 2009 CNNmoney.com reports that in US the number of bank failures so far this year has already exceeded last year's total of 25, with an average of 7 failures per month. Local banks in Georgia, Minnesota and California were closed Friday by state regulators, bringing the total number of failed banks this year to 45, according to the Federal Deposit Insurance Corporation.

Marketwatch.com quotes the Harry Schultz Letter (HSL) report "Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days.”

In addition, globalresearch.ca refers the Bob Chapman’s influential International Forecaster’s report on the possibility of a so-called “bank holiday” planned for late August or early September. According to Chapman’s sources, U.S. embassies around the world are selling dollars and stockpiling money from respective countries where they operate.

Similarly, Schultz believes the global elite are in the process of engineering an FDR-style “bank holiday” of undetermined length in order to “sort-out the bank mess” and impose new bank rules. On March 5, 1933, in the depths of the banker engineered “Great Depression,” newly elected Franklin D. Roosevelt (FDR) declared a “bank holiday” that forced banks closed for four days. Roosevelt then rammed the Emergency Banking Act through the legislature. Passed by Congress on March 9, the act granted FDR near dictatorial control over the dealings of banks. It also allowed the Secretary of the Treasury the power to compel every person and business in the country to relinquish their gold and accept paper currency in exchange.

It was also known as the Emergency Banking Relief Act of the United States Congress spearheaded by President Franklin D. Roosevelt during the Great Depression. It was passed on March 9, 1933. The act allowed a plan that would close down insolvent banks and reorganize and reopen those banks strong enough to survive

On March 10, Roosevelt issued Executive Order No. 6073, forbidding people from sending gold overseas and forbidding banks from paying out gold. A few weeks later, on April 5, Roosevelt issued Executive Order No. 6102 ordering Americans to deliver their gold and gold certificates to the Federal Reserve Bank in exchange for paper fiat money. In other words, it is called, FDR engaged in one of history’s greatest rip-offs — that is until now.

FDR not only ripped-off the American people, but foreigners holding dollars as well, thus ensuring the “Great Depression” would spread around the world like a bankster engineered contagion.

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On March 5, 1933, the day after Roosevelt's inauguration, he called a special session of Congress which instituted a mandatory four-day bank holiday. This act provided for the reopening of banks after federal inspectors had declared them to be financially secure.

As Schultz notes, another forced “bank holiday” will likely lead to a formal devaluation of the already broadsided U.S. dollar. “But devalue against what? The euro? Doubtful. Gold? Maybe. Or vs. the IMF basket of currencies,” which he feels is more likely.

Likelihood bank holiday in US in near future (August Last or early September) ultimately devaluates the dollar. Devaluation is also an interest of US because its goods will be competitive in global markets. If dollar heavily devaluates it will affect the securities and dollar deposited by the developing countries in US. Nepal may loose significant amount of dollars, if foreign exchange reserve is held in dollars. Therefore, it is better to purchase gold and silvers and held a forex reserve in Euro and pound so as avoid foreign exchange loss.

Interview of Paul Samuelson

An interview of Paul Samuelson, a renowned and noble laureate economist, has been published in the Atlantic. I have copied the glimpses of his comment on other economists like Milton Friedman and Alan Greenspan. Here are the full interviews: Part I and Part II. Thanks to Conor Clarke, who published this interview.

"Milton Friedman. Friedman had a solid MV = PQ doctrine from which he deviated very little all his life. By the way, he's about as smart a guy as you'll meet. He's as persuasive as you hope not to meet. And to be candid, I should tell you that I stayed on good terms with Milton for more than 60 years. But I didn't do it by telling him exactly everything I thought about him. He was a libertarian to the point of nuttiness. People thought he was joking, but he was against licensing surgeons and so forth. And when I went quarterly to the Federal Reserve meetings, and he was there, we agreed only twice in the course of the business cycle."

"When the economy was going up, we both gave the same advice, and when the economy was going down, we gave the same advice. But in between he didn't change his advice at all. He wanted a machine. He wanted a machine that spit out M0 basic currency at a rate exactly equal to the real rate of growth of the system. And he thought that would stabilize things."

"However, unlike someone like Milton, Greenspan was quite streetwise. But he was overconfident that he could handle anything that arose. I can remember when some of us -- and I remember there were a lot of us in the late 90s -- said you should do something about the stock bubble. And he kind of said, 'look, reasonable men are putting their money into these things -- who are we to second guess them?' Well, reasonable men are not reasonable when you're in the bubbles which have characterized capitalism since the beginning of time."

Paul Samuelson's advice to starting graduate study in economics. "Well, I'd say, and this is probably a change from what I would have said when I was younger: Have a very healthy respect for the study of economic history, because that's the raw material out of which any of your conjectures or testings will come. And I think the recent period has illustrated that. The governor of the Bank of England seems to have forgotten or not known that there was no bank insurance in England, so when Northern Rock got a run, he was surprised. Well, he shouldn't have been."

"But history doesn't tell its own story. You've got to bring to it all the statistical testings that are possible. And we have a lot more information now than we used to."

Read yourself : Part I and Part II

Pro-Poor Free Market System

Tata, the Indian company that made worldwide headlines with its $2000 Nano car, now plans to build 1000 tiny apartments outside Mumbai. It would also start such projects in Chennai and Kolkata and subsequently to other Tier-I and tier-II cities. Tata group has once again caught the attention of the world media with its announcement of the launch of a low-cost housing programme. According to the Tata Group, the houses will cost less than Rs.4 Lakh. This is an example, how market mechanism supply goods for poor.

There is enormous wealth at the bottom of the pyramid. In his 2006 book “The fortune at the bottom of the pyramid”, Mr. Prahlad describes the people at “the bottom of the pyramid” as those 4 billion people living on less than $2 per day. He believes that embracing innovative, low-cost services have wider benefits for the economy, for example, low-cost housing, affordable educational hubs, and reliable health care facilities. Nano products are low price products. It is affordable to low-income people that raises their capabilities to goods and services.

Tata Group aims to achieve two things from this venture – first, fulfill its corporate social responsibility and second, make profit. Tata Group is to effectively use this idea of the “bottom of the pyramid”. First they came up with Tata Nano. Now they are planning to repeat the success of the idea with its Nano homes. With this, Tata Group is once again setting a great example as a company that cares not only for profits but also for people.

What the people, who are against capitalism, say about it? This is one of examples that free market system is pro-poor ideology.

Condolence : Professor Sir Clive Granger

Professor Sir Clive Granger died on May 27 aged 74. In 2003 he shared the Nobel prize for economics with the American academic Robert Engle for their work on the concept of co-integration – ways of analysing sequences of economic data recorded at regular intervals, known as time series. Granger causality test is another popular econometric test for bi-directional causality. Granger's contribution is unforgettable in the history of economics and econometrics.

What is Optimum Economic Freedom?

Optimum economic freedom is my concept of an economy, which follows free market system with minimum government intervention, as much as possible. If we draw a line from the perfect centrally planned economy to perfect free market economy it is close the point of perfect free market.

What does optimum stands for? It stands for the economic freedom that maintains highest per capita income of an economy through out the time line. It is a point below and above which per capita income is less.

Nepali New Year

Wish you all Happy New Year 2066. It falls on 14 April 2009.

Entrepreneurship Education and Economic Growth: A Case of Nepal

Free market economic system is advocated as the best system for the economic development of any country. Except the case of 1930’s and current financial crisis, the system worked for hundreds of years. A historical evidence of liberal economies has proved that high economic growth, which is the goal of any economic policy, can be achieved only through free market system. Thus, most of the countries, including Nepal, have followed the liberalization policy since mid 1980s.

However, liberalization is not in itself a magic to enhance the economic growth and to increase the living standard of the people. The developing countries like Nepal, where there are few entrepreneurs, cannot achieve high economic growth through liberalization. As there are few participants in the market, the market mechanism does not work effectively to satisfy the wants of people. Under this condition, how the basic economic problems- what to produce, how to produce, and whom to produce- are automatically addressed to satisfy the increasing trend of human wants.

Moreover, background of the Nepalese economy does not show any sign that we can achieve high economic growth in long run. Because, the headlines of the daily newspapers of Nepal are sufficient to prove that we have undermined the core factor determining the long run economic growth. Ministers of Nepal Government have been found addressing the foreign investors to invest in different sectors of Nepal, especially in the hydropower projects. Banking sectors are investing in the non productive sectors and growing very faster in comparison to the growth of manufacturing sector. Rural based agricultural sector has very high contribution in gross domestic product (GDP) of Nepal.

If we point out these things, we can conclude that the country is appetite of domestic entrepreneurs for high and stable economic growth. In addition, the large number of blacklisted defaulters in Nepalese financial sector is not only caused by their unethical behavior, it is also due to their low entrepreneurial proficiency to adjust in adverse environment and globalization.

Thus, solution to all these problems is concerned with the successful entrepreneurs, which is possible only through the entrepreneurship education. The entrepreneurship education is most important for the development of any liberal economy as well as for Nepal. For example, if we will be able to produce approximately two hundred successful entrepreneurs to run large size industries; two thousand successful entrepreneurs to run medium size industries, and two hundred thousand successful entrepreneurs to run small size industries then we can achieve high economic growth, even greater than the India and China. It may take a decade in this mission but, if once it is achieved, we can sustain a high economic growth forever.

However, there is no any entrepreneurship course or program in the University education. Tribhuvan University, Pokhara University, Purbanchal University, and Kathmandu University have offered the management courses, which are just sufficient to develop the human resources to work in the business organizations. Thus, most the human resources produced by these Universities are the job seekers but not the job creators. It shows that the human resources have been underutilized due to incomplete courses of management education to develop the skilled entrepreneur.

As there is no any effective academic program of entrepreneurship education, therefore, it is the missing pillar of Nepal's development model. The country needs the domestic entrepreneurs. In any nation, the skillful entrepreneurs are able to identify environment friendly business, able to manage the funds for investment, able to diversify the risks, able to run his/her business even in adverse situation, and work under the rules and regulations of the country. Their effort can be directed by the government through economic policies to achieve high economic growth and distribute the benefit of that growth to ensure high quality of life to the people. So, only the successful entrepreneurs are the nation builders in free market economic system.

In nutshell, as entrepreneurship education is one of the pillars of economic development, let us make heavy investment on it. Sustainable and high economic growth can be achieved if the ministry of education, Government of Nepal, international organizations like World Bank and newly growing Universities of Nepal work together to promote entrepreneurship education. In comparison to other development projects, cost of this project seems to be negligible. Sometimes, simple things may be very useful to make prosperous society.