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According to data from the World Gold Council (WGC) and metals consultancy GFMS, demand for gold is currently greater than the supply by as much as 1000 tons per year. The WGC and GFMS have correctly identified two distinct economic spheres comprising gold supply and demand. In the western economies, jewelry and industrial demand are weak, but investment demand is strong, while outside the western economies broad gold demand continues to grow. India remains the largest buyer, while gold demand in China is rising. China has been aggressively adding gold to its reserves and has not only made it legal for Chinese citizens to own gold but is encouraging gold ownership. The potential influence of increased, long-term Chinese demand on the price of gold cannot be ignored.

Monetary inflation and supply and demand considerations are not the whole picture. There is a much deeper reality. For nearly four decades, gold, priced in US dollars, was implicitly linked to oil and the resulting demand for US dollars moderated the affects of monetary inflation on prices in the US. The end of the petrodollar standard and the resulting global decline in demand for US dollars will cause the price of gold to rise significantly. The value of the US dollar changed qualitatively after 1971 when it became an irredeemable pure fiat currency, no longer backed by gold; a fact that has been masked by the petrodollar standard.

Higher demand for gold also reflects a growing recognition that the US dollar and other currencies currently being devalued are not reliable stores of value. In fact, the US dollar has not been a store of value at all for 38 years during which massive quantities of fiat money, including trillions of petrodollars, flooded the global economy. The weakness of the US dollar exposed by the financial crisis, i.e., its inability to function as a reliable store of value regardless of its utility as a transactional medium, points exactly to the strength of gold. The decline in international demand for US dollars, rejected as a failed store of value, indicates strong demand for gold in the foreseeable future.

18th-century French philosopher and writer Voltaire once said that “paper money eventually returns to its intrinsic value - zero”. Understandably, Voltaire failed to consider a world where all money was purely transactional rather than a store of value, and where the relative values of currencies were managed in a loosely coordinated manner by central banks and governments through manipulation of the money supply, interest rates, etc. In theory, such a world could function indefinitely provided that currencies were relatively stable; provided that currencies were widely accepted and interchangeable; provided that large trade imbalances did not destabilize the system; and provided that currencies were not debased excessively, i.e., in a reckless or irresponsible manner, which would lead to a variety of economic problems. However, Voltaire’s inability to imagine such a world may be insufficient cause to dismiss his observation.

It seems possible that Voltaire’s superficially antiquated understanding was precisely that “paper money” can never function in the long run as a store of value, i.e., that it will inevitably, either by accident or by design, be mismanaged, and that it will always, eventually, be rejected, thus rendering its intrinsic value clear. History certainly supports Voltaire’s view in that fiat currencies tend to perish. As recently as 1999, referring to the sale of British gold reserves, Alan Greenspan, then Chairman of the US Federal Reserve, said that “Fiat money paper in extremis is accepted by nobody. Gold is always accepted.” As the Chinese discovered in the 11th century, money has a qualitative dimension and for “paper money” that dimension is confidence. In contrast, because it is a tangible asset that required an investment of human labor and other resources to produce, the value of gold does not ultimately, in extremis, depend solely on the unreliable subjective feeling of confidence.

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The petrodollar standard allowed the US to print vast quantities of US dollars without high domestic price increases because steady international demand strengthened the US dollar, thus moderating prices in the US, e.g., the prices of oil and of gold. The petrodollar standard, which can be undone in a relatively short period of time, is the Achilles’ heel of the US dollar’s world reserve currency status. What is more important, however, is that ending the petrodollar standard will put massive upward pressure on prices in the US: a fact that few have recognized.

The average monetary inflation rate, estimated at approximately 8% per year over the past 38 years, compounded annually, shows that the US money supply increased by roughly 1,863% since 1971. However, according to the US government, prices in the US have increased only 533% since 1971, a 1,330% differential. The number of US dollars exploded on a global basis to accommodate the growth in US dollar transactions, i.e., international trade, especially oil, and currency reserves.

China is the second largest US trading partner and the primary source of the chronic US trade deficit. As trading partners, the Chinese and US economies are linked by the US dollar, but compete for oil, currently priced in and purchased with US dollars. China needs more oil and wants to buy it with Chinese yuan. By buying gold and encouraging gold ownership, the Chinese government is betting against the US dollar and positioning the yuan to become a universally accepted transaction medium. China is quietly diversifying out of US dollars, buying resources and hard assets. Ending the petrodollar standard will allow China to buy oil in yuan and make the yuan a more viable currency internationally while, at the same time, clearing the way to take on a larger role in the global economy.

With currencies being debased throughout the western world in the hope of saving banks, stimulating economic activity and restoring trade. Until the US reverses course, or until a new reserve currency is in place, gold will continue to shine. Gold investment and central bank demand will likely remain strong because gold can function as a commodity, as a currency and also, unlike the US dollar, as a store of value immune from the hazards of currency devaluation caused by monetary inflation. As the only financial asset without counterparty risk, the historical reasons for holding gold, all but forgotten during the 1990s, have never been more clear.

The end of the petrodollar standard and eventually of the US dollar’s world reserve currency status combined with increased demand for oil and gold, particularly on the part of China, is a fundamental restructuring of the global economy already in progress.

The perfect storm for the US dollar comprises the consequences of past decades of monetary inflation punctuated by the dot-com and housing bubbles; excessive levels of debt in the US economy (hampering a US economic recovery); the poor condition of US banks whose balance sheets, still burdened with toxic assets, continue to deteriorate; an expanding Federal Reserve balance sheet that includes toxic assets; extraordinary spending by the US federal government driven by Keynesian economic policies and by what are most probably economically unworkable socialist programs; rapidly declining foreign appetite for US debt; quantitative easing (“money printing”); near 0% interest rates and a growing US dollar carry trade; not to mention the imminent end of the petrodollar standard, and the eventual end of the US dollar’s status as the world reserve currency.

THERE is nothing the computer industry likes better than a big new idea—followed by a big fight, as different firms compete to exploit it. “Cloud computing” is the latest example, and companies large and small are already joining the fray. The idea is that computing will increasingly be delivered as a service, over the internet, from vast warehouses of shared machines. Documents, e-mails and other data will be stored online, or “in the cloud”, making them accessible from any PC or mobile device. Many things work this way already, from e-mail and photo albums to calendars and shared documents.

This represents a big shift. If you store more and more things online, and access more and more software through an ordinary web browser, it suddenly matters much less what sort of computer you have, and what kind of software it is running. This means Microsoft, which launches the newest version of its Windows operating system this month, could lose out—unless, that is, the software giant can encourage software developers and users to migrate to its new suite of cloud-based services. Its main rival is Google, which offers its own range of such services, and continues to launch new ones and interlink them more closely. Yahoo!, which is allied with Microsoft, and Apple also offer cloud services for consumers; specialists such as Salesforce and NetSuite do the same for companies. Amazon has pioneered the renting out of cloud-based computing capacity. Some firms will offer large, integrated suites of cloud-based services; others will specialise in particular areas, or provide the technical underpinnings necessary to build and run clouds.

The new approach has great promise. It makes life easier for consumers (no need to install any software) and cheaper, too: many cloud services are free, supported by advertising or subsidised by a minority of users who pay for a premium service. Using a cloud-based e-mail service means you do not have to worry about losing all your e-mail if your laptop dies, and you can access your mail from any web browser. As cloud services expand, the same will be true for other documents and data.

There are also benefits for companies. By switching to cloud-based e-mail, accounting and customer-tracking systems, firms can reduce complexity and maintenance costs, because everything runs inside a web browser. Providers of cloud services, meanwhile, can benefit from economies of scale. Why should every company or university set up and maintain its own mail server, when Google or Microsoft can do it more efficiently? Companies are already happy to rely on utilities to provide electrical power, after all. Cloud computing will do the same for computing power.

The ability to summon computing capacity from the cloud when needed will also give the software industry a shot in the arm. During the dotcom boom, the first thing a start-up had to do was raise the money to buy a room full of servers. If a website experienced a sudden surge in popularity, more servers were needed to meet demand. Today a capacity can be rented as needed, allowing cloud services to scale up smoothly. This lowers barriers to entry and promotes innovation and competition. It also presents an opportunity to Microsoft, Amazon and other companies that are hoping to create the cloud platforms on which other firms will offer services.

To anyone familiar with the history of computing, there is an obvious concern: that one company will establish a dominant position and attract the attention of antitrust regulators. What IBM did in the mainframe era, and Microsoft did in the PC era, one of the new challengers may succeed in doing in the cloud.

Regulators are already acting to head off incipient problems. They are signalling worries about, for instance, overlapping board members at Apple and Google, or the indefinite retention of search histories by search engines. So far none of these skirmishes has led to a big court battle—something technology firms, which are keenly aware of the industry’s history, are anxious to avoid. But there are three areas where users of cloud services should be vigilant, and providers must be responsive, or regulators may yet step in.

A storm brewing?

First is the familiar risk of technological lock-in, as rival companies promote their own, mutually incompatible, standards and formats, as they have done in the past. Moving data from one cloud-based storage system to another, for example, is not always easy. Buyers of cloud services must take account of the dangers of lock-in, and favour service providers who allow them to switch between services without too much hassle.

Second, storing so much personal information, and using it to target advertising, has privacy implications. Consumers who are unwilling to pay for cloud-based services will have to put up with some advertising based on their online activities, since it pays the bills. Most users will be happy to trade some privacy for free services, but they should have control over their personal data, and be able to amend the profiles which service-providers compile and use to target advertising.

Third, data stored in the cloud may not be safe. This month tens of thousands of people with Sidekick smart-phones, for example, lost their address books, calendars, photo albums and other personal data, all of which were being stored in the cloud by Danger, an aptly named subsidiary of Microsoft. But a disaster on this scale is unusual: occasional outages are more common. Ensuring that cloud-based systems become more reliable is in the best interests of the firms that provide them, if they want to attract and retain customers.

Prodded by users and regulators, providers of cloud services are gradually moving towards new standards and greater transparency and reliability. If they do not move fast enough, regulators may yet have to intervene more forcefully. But cloud computing’s advantages already outweigh its drawbacks for many consumers and business users. In contrast with previous computer-industry battles, a single victor seems unlikely this time around. May the best clouds win.

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“If it’s never our fault, we can’t take responsibility for it. If we can’t take responsibility for it, we’ll always be its victim.”
Richard Bach

“Self-pity is easily the most destructive of the nonpharmaceutical narcotics; it is addictive, gives momentary pleasure and separates the victim from reality.”
John W. Gardner

One big problem a lot of people have is that they slip into thinking of themselves as victims that have little or no control over their lives. In this headspace you feel sorry for yourself, the world seems to be against you and you get stuck. Little to no action is taken and you get lost in a funk of sadness and self-pity.

So how can you move out of that mindset? In this article I’d like to share a few things that have helped me.

1. Know the benefits of a victim mentality.

There are a few benefits of the victim mentality:

• Attention and validation. You can always get good feelings from other people as they are concerned about you and try to help you out. On the other hand, it may not last for that long as people get tired of it.
• You don’t have to take risks. When you feel like a victim you tend to not take action and then you don’t have to risk for example rejection or failure.
• Don’t have to take the sometimes heavy responsibility. Taking responsibility for you own life can be hard work, you have to make difficult decisions and it is just heavy sometimes. In the short term it can feel like the easier choice to not take personal responsibility.
• It makes you feel right. When you feel like the victim and like everyone else – or just someone else – is wrong and you are right then that can lead to pleasurable feelings.

In my experience, by just being aware of the benefits I can derive from victim thinking it becomes easier to say no to that and to choose to take a different path.

It also makes it easier to make rational decisions about what to do. Yes, I know that I can avoid risk and the hard work of taking action by feeling like a victim. But I also know that there are even more positive results if I choose to take the other route, if I make the better choice to take a chance and start moving forward.

2. Be ok with not being the victim.

So to break out of that mentality you have to give up the benefits above. You might also experience a sort of emptiness within when you let go of victim thinking. You may have spent hours each week with thinking and talking about how wrong things have gone for you in life. Or how people have wronged you and how you could get some revenge or triumph over them.

Now you have to fill your life with new thinking that may feel uncomfortable because it is not so intimately familiar as the victim thinking your have been engaging in for years.

3. Take responsibility for your life.

Why do people often have self-esteem problems? I’d say that one of the big reasons is that they don’t take responsibility for their lives. Instead someone else is blamed for the bad things that happen and a victim mentality is created and empowered.

This damages many vital parts in your life. Stuff like relationships, ambitions and achievements.

That hurt will not stop until you wise up and take responsibility for your life. There is really no way around it.

And the difference is really remarkable. Just try it out. You feel so much better about yourself even if you only take personal responsibility for your own life for a day.

This is also a way to stop relying on external validation like praise from other people to feel good about yourself. Instead you start building a stability within and a sort of inner spring that fuels your life with positive emotions no matter what other people say or do around you.

4. Gratitude.

When I feel that I am putting myself in victim role I like to ask myself this question:

“Does someone have it worse on the planet?”

The answer may not result in positive thoughts, but it can sure snap you of a somewhat childish “poor, poor me…” attitude pretty quickly. I understand that I have much to be grateful for in my life.

This question changes my perspective from a narrow, self-centred one into a much wider one. It helps me to lighten up about my situation.

After I have changed my perspective I usually ask another question like:

“What is the hidden opportunity within this situation?”

That is very helpful to keep your focus on how to solve a problem or get something good out a current situation. Rather than asking yourself “why?” over and over and thereby focusing on making yourself feel worse and worse.

5. Forgive.

It’s easy to get wrapped up in thinking that forgiveness is just about something you “should do”. But forgiving can in a practical way be extremely beneficial for you.

One of the best reasons to forgive can be found in this quote by Catherine Ponder:

“When you hold resentment toward another, you are bound to that person or condition by an emotional link that is stronger than steel. Forgiveness is the only way to dissolve that link and get free.”

As long as you don’t forgive someone you are linked to that person. Your thoughts will return to the person who wronged you and what s/he did over and over again. The emotional link between the two of you is so strong and inflicts much suffering in you and – as a result of your inner turmoil – most often in other people around you too.

When you forgive you do not only release the other person. You set yourself free too from all of that agony.

6. Turn your focus outward and help someone out.

The questions in tip #4 are useful. Another question I use when I get into the victim headspace is simply:

“How can I give value right now?”

Asking that question and making that shift in what you focus on really helps, even if you may not feel totally like doing it.

So I figure out how I can give someone else value, how I can help someone out.

And thing is that the way you behave and think towards others seems to have a big, big effect on how you behave towards yourself and think about yourself. For example, judge people more and you tend to judge yourself more. Be more kind to other people and help them and you tend to be more kind and helpful to yourself.

A bit counter intuitive perhaps, but that has been my experience. The more you love other people, the more your love yourself.

7. Give yourself a break.

Getting out of a victim mentality can be hard. Some days you will slip. That’s ok. Be ok with that.

And be nice to yourself. If you have to be perfect then one little slip is made into a big problem and may cause you to spiral down into a very negative place for many days.

It is more helpful to just give yourself a break and use the tips above to move yourself into a positive and empowered headspace once again.

Shubhra Gupta

The results of Hindi cinema’s ventures into the global mart have been mixed. The only real successes in this sphere have been the Chopra-Johar rom-coms which are more about extended large-hearted Punjabi families showing their love than about two individuals getting it together. The rest have come and gone, dreaming of those elusive dollars and pounds. And, doubtless, yen and dirham, as well.

But more than anything else, Blue is being seen as the film which will take Bollywood to the next level in foreign markets. So, what is it about Blue that could make it capable of spreading the new Bollywood gospel in markets hitherto untapped?

Till the early 1990s, the general perception of Bollywood was that it consisted of shrill socials or florid melodramas. And then, in 1995, Aditya Chopra placed teenage heartthrobs Kajol and Shah Rukh Khan in the middle of London, got them to do a Europe-darshan on Eurail, and changed that perception forever: post Dilwale Dulhaniya Le Jayenge, being Indian was cool, and young people espousing traditional Indian values were even cooler.

Then came Karan Johar and his brand of designer desi cool: his young leads flaunted American brands like DKNY and GAP, but were unafraid to go to the temple, and do an aarti. His lovers lived in New York and New Jersey, were as swish as any ‘foreign’ actor, and as comfortable in the colour of their skins as the cut of their couture.

Between these two directors, and their made-for-NRI movies, the whole outlook of Indians living abroad changed — not only towards their movies but also what those movies told them about themselves. But even these films did not really charm the non-traditional audiences, which continued to be derisive about the costume changes and the songs-and-dances and the high-pitch of the dialogue delivery. A Monsoon Wedding here, and The Namesake there, did manage more of a crossover, but it can be argued that they were not really the real Bollywood thing — the film with songs and dances and heroes and villains and extravagant tale-telling.

And that’s precisely why Blue, and its potential, is so interesting. It’s both completely unlike the traditional Bollywood film, and yet very firmly a traditional Bollywood film with all its trappings. Will it, in the hyperbolic terms used by marketing mavens, really conquer the world?

by Michael Ervolini

Like all primates we over-value the things we possess. It's called the ''endowment effect'' and it can ruin your portfolio.

Monkeys do it. Chimpanzees do it. Even educated investors do it. But don't you do it, don't fall in love--at least not with assets in your portfolio. Following nature's lead may be, as Cole Porter urges, the right recipe for matters of the heart. Effective investing, however, often requires that you fend off natural impulses and act in ways that reflect more analytic reasoning and less emotion. One impulse to be wary of is the tendency to hype the value of an item merely because it is in your possession. It's termed The Endowment Effect.

The Endowment Effect was first discussed by Professor Richard Thaler of the University of Chicago back in 1980. He noted that people often assign greater values to items when they are owned vs. just prior to ownership. It is as if things suddenly become worth more simply because they are yours--part of your endowment. This extra appreciation for items owned makes it tougher to sell them.

Selling is generally experienced as a loss, even if the sale price is more than was originally paid. Something deep within the brain interprets the sale as your now being deprived--no longer having access or use of whatever is gone. Some theories suggest that before organized markets existed, early man learned to horde. Trading was risky back then and something to be avoided. Remnants from this store-to-survive strategy today drives endowment in humans and other animals.

Your RX for dealing with an endowment …

Sorry Cole, but the best advice for falling in love with investments is don't do it … or at least try to avoid doing it. A strategy that helps is to periodically review your portfolio holdings to make sure they still support your investment plan. Carefully reassess the winners while doing so, and if they have given their best then consider selling them. Much like the old political saw, it's not what the investment has done for the portfolio in the past its what will it do to help returns today and tomorrow.

Compare your actions with your personal values. It doesn’t matter what we say is important to us — the things that are priorities in our lives are the things we actually do. How does what you do mesh with what you believe? If you say that getting out of debt is important to you, are you actually doing the things that will lead you to get out of debt?

The truth is that the things that are priorities in our lives are the things we actually do. It’s one thing to say something is a priority, but it’s another thing to do it.

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by Satyajit Das

New paper economies emerged directly from the demise of the gold standard that removed restrictions on the ability to create money, especially debt. Finance inexorably displaced industry with trading and speculation becoming major activities as financial engineering replaced real engineering. In an earlier age, Heinrich Heine, the German poet, too had identified the change: “Money is the God of our time….” The rise of financiers is intimately linked to this financialisation of the global economy.

Financial innovations such as securitisation (the packaging up and sale of loans) and derivatives (effectively risk insurance) enabled banks to extend more credit. Banks could literally by increasing throughput, making more loans and selling them off to eager investors, magically increase returns to their investors. Bankers had invented a ‘money machine’.

Bank also began to trade more actively with their shareholders money, following the advice of Fear of Flying author Erica Jong: “If you don’t risk anything then you risk even more”.

All of this, of course, meant increased earnings for the bank and its star performers. As people who work in financial institutions know, it is primarily an enterprise that is run for the employees with an afterthought for shareholders.

The ability to earn high rewards only becomes a problem where the promise of a share of profits encourages excessive risk taking and a focus on short-term earnings. It also becomes a problem where the basic measure of performance is ambiguous and can be systematically manipulated. Unfortunately, ‘earnings’ proved to be the result of wildly inaccurate models, accounting tricks and risks that had not been accurately captured.

The golden age seemed to come to an end with the GFC. Initially, the world viewed the destruction of storied financial institutions in Global Financial Crisis as an entertaining blood sport.

Commentators briefly dared hope that the power and influences of finance and financiers would be reduced. Finance would revert to being a facilitator rather than the central driver of the economy.

Unfortunately, those hopes are misplaced. Low or zero interest rates, heavily managed markets, reduced competition and state underwriting of solvency has helped surviving banks prosper.

Bank risk levels have increased to and in some cases beyond pre-crisis levels. The higher levels of risk taking reflect increasing comfort in central bank support of financial institution’s liquidity and their ability and willingness to intervene to limit price risks.

Over the last 30 years, talent has increasingly been lured from productive profession into finance and the speculative economy. The rewards available mean that the brain drain into these professions is unlikely to stop. The excesses of the financial economy are also unlikely to be easily tamed.

The Masters of the Universe that survived the carnage are back to their old tricks. The ‘fight for talent’ means that bonuses and remuneration guarantees for new employees are all back in vogue.

A year after the collapse of Lehman, the near collapse of AIG and the grande mal seizure in financial markets, the Masters of the Universe are still firmly in charge. As Giuseppe di Lampedusa, author of The Leopard knew: “everything must change so that everything can stay the same.”

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Motivating people is an extremely difficult and delicate task as anyone who’s ever taught, managed, collaborated with or given birth to someone knows. In business, as opposed to say, child-rearing, the debate is slightly less daunting, though not always much clearer. For instance, offering incentives to employees for improved performance is a fairly common approach to encouraging higher sales —though surprisingly unproven by data.

For the most part, the effectiveness of incentives is supported by intuition and some anecdotal evidence. Wouldn’t everyone work at least a little harder for a $100 bill on top of their usual paycheck? Certainly it can’t hurt. But one important open question is whether monetary or tangible (spa retreat, ipod, dinner for two, etc) rewards more efficacious motivators?

Those who advocate for monetary incentives claim they have the greatest appeal given that the winners can do anything with them; what if someone needs an ipod like they need another hole in their head? On the other side, those in favor of tangible incentives argued that money lacks the emotional appeal of, say, a weekend for two at a romantic country inn or swank hotel. But either way, there was nothing to back up either camp.

Thankfully, there is some data on this debate. A few years ago Goodyear Tire & Rubber Company decided to test which method was more successful in an effort to improve sales of a new line of Aquatred tires. Their plan was simple and elegant: first they ranked their 60 retail districts according to previous sales, then divided them into two groups of equal performance and assigned one group to receive monetary incentives and the other to receive tangible incentives of equal value to the first group.

The results were very interesting; it turned out that the tangible-reward group increased sales by 46% more than the monetary-reward group. They also improved in terms of the mix of products sold by 37%. One explanation, and it seems to me a fairly good one, is that we can visualize tangible rewards (imagine yourself on a Hawaiian beach), which creates an emotional response. Money, on the other hand, is not accompanied by images as often (aside from maybe Scrooge McDuck swimming in piles of it), and lacks the emotional pull that tangible rewards have, so they’re less effective in motivating employees. I guess it’s called “cold, hard cash” rather than “future beach vacation cash” for a reason.