Money

Gautam's questions and Anil's analysis in my previous post is definitely worth a fresh post. I thought; why not bring it on the stage so that all of us can have a healthy discussion.

Why is money measured as wealth?
Why do we need money?
Why is there an unequal distribution of wealth?

I might not touch upon all, I might deviate or just cut short; but these ones are worth a discussion. In earlier times; in our land; temples served as secure area to store people's assets. Their role in those times were one of the roles of present day banks - safe haven to store assets; which were not in cash but in kind. Cut to present day banks; they operate in an interesting concept. They charge interest on money borrowed which feeds as interest credited to the money saved + other investments. Was this a practice in then banks/temples in our land? I do not know.

I cant help but think about the banks bailout in USA. The President passed bills to accommodate bank bailouts which funded the Congress for the campaign and other activities; only to downgrade their credit ratings. What an irony!

Anyway, why we need money and why are people selfish to accumulate wealth is obvious. I dont want to discuss these. But why is GDP the chief economic indicator? Is owning money/wealth a sign of happiness? Is our happiness linked to possession of material wealth? Progress is defined as a mere increase in commercial transaction in our conventional model which stresses on economic growth; which is limited as the measures are quantitative.

Gross Happiness Index is been around for a while - countries like Bhutan and Denmark had realized quite early that the ultimate aim of most people is not be rich, but be happy and healthy. So we find, India more happy and healthy than the USA, Bangladesh more happier than India and Costa Ricans lead a very peaceful and healthy life than most of us only next to Vanuatu and Columbia. Gross national happiness has more insights.

Coming back to do we need money? The answer would depend on if we want to go back to barter system? The devastation in Greek's economy has enabled her citizens to make use of time bank. Its a reciprocal service exchange that uses units of time in currency. In simple terms, services are bartered in cashless transactions. The "time" one spends in providing some service earns "time" that one can spend to receive services. For e.g. a teacher can spend her time teaching piano in exchange for a legal assistance.

This has emerged has a creative solution to a crisis called Greece. This exchange network has not only eased people's crisis but also is bringing people together and building solidarity when any economic upheaval can divide people. What about tax, deficits, credits and all such factors in a given economy? Are these relevant? Can such a priceless commodity be adopted; how will this be accepted among world economy?

Add On

May I take your order ma'am?
Cappucci.....
(even before mentioning it)...With cream or chocolate syrup ma'am?

All these with a plastic smile. I definitely am sure that these folks are trained in etiquette and behavior to woo customers and how to sell a product in 5 seconds. Its so void and its obvious.

Such mundane activity like ordering a coffee has become such a big task these days. Most times its an unpleasant experience to the customer. Not to forget the extra expense incurred. You may ask whats the extra expense here in just ordering a cappuccino.Well, the cream or the chocolate syrup is not for free. They are ADD-ONS and they carry a price.

The customer is bombarded with assortment of options, he is, at the end of it all, confused!! All I want was a coffee, now why does it have to be so complicated? I dont want coffee anymore!!

Not only coffee shops, pizza corners -  extra cheese and toppings, beauty saloons - pedicure, facials?, our banks as well!! Add-on credit card! As if its for FREE FREE FREE!! Even hospitals are offering add-ons!! Take that :-)

The way these options are presented to the customer makes one believe that these are included as part of the package, without realizing that it could as well dent the wallet. And if you dont specify the small, medium, large...you have bigger hole in your pocket, as the billing is done for the largest portion.

You would go to a coffee shop for a leisure and to de-stress. Well, at the end of your order, you wished you never went in there. Its irritating when you exactly know what you want and yet have to listen to the systematic order in which they present the products.

At one point, the marketing is so aggressive; trying to sell a product so hard that you forgot your primary intention!!
Tell a NO, and you are a mockery.

"No extra cheese for your burger, ma'am?"

"Dont want any drinks along with your pizza, Sir?"

"No facial? Your skin looks so tired"......

Cannot then stop feeling positively depressed!! And we get a nice HEADACHE as an Add-On :-P

Credit Card Nuisances and Non-acceptance

I got my first Credit card 3 months after I started working. It was a Gold card. I was very happy with it, flaunted it to my friends. Was proud about it. Alas! as everyone else, I learnt it the hard way.

I have 2 issues which I think is not unique to me alone.

Nuisance

I always believe that its all in your hands to handle stuff. One cant really blame anyone else but you. I have had more than 1 credit card; its never been a problem for me to use them prudentially. I am a spendthrift, yet I have always paid my bills on time. You know; the bills - i.e. exact amount that you swiped for; which is negligible but other exorbitant fee like interest, service charge, hidden charges and all other blah..blah...blah...

One particular Indian bank really does this well. Today morning, I get an alert on my cell phone

"Dear Customer, effective 06 May 2009, the cash limit on your XXXXX Bank Credit Card xxxx007 will be Rs 0 and the total credit limit will be Rs.. XXXXX/-"

I did not care as I cut the card into 4 pieces and threw it away long time ago. The account was still active though. This particular bank has been doing dubious stuffs; and I have always taken it. They would charge extra amount and quote it as defaulter fine and so on.

One more instance2 years ago - I received 2 credit cards from the bank at different intervals. It was attached with a Congratulatory message - "As you are our privileged customer....blah..blah..blah....we are offering you an extra card....."

I called them to enquire why they sent the card as it was nothing special. As such, the account and the credit limit is still the same. This was something like an Add-on card. Whats the hoopla about it? I asked them why didn't they intimate me before sending and why didn't they have the courtesy to ask me if I would require it?

Phat comes the reply from the customer service executive - "We called you ma'am. You approved it and hence we sent it".
I asked when was the call date and to which number I was contacted.

He mentioned "21st August 2006, Ph number 91xxxxxxxxxx". (My cell phone)

The truth was that I was not in India at the mentioned date and I had got my phone service suspended during my absence in India.

I thought enough of this and never really used those 2 cards. Recently I got a mail from the credit card department that as my card was inactive, they are going to suspend it. What big deal! Go do it!

Yeah, so after all these nasty experiences, I decided to confront them today after I received this message. The executive told me that they review the payment history regularly and it is bank's policy. They have decided to nullify my cash limit but my credit limit remains the same. He also added that this would get affected only if I used the card to withdraw cash.

Even though I did not use the card anymore, I wanted to know the solid motive behind it. I persisted and said "I might want to withdraw cash during emergency. And moreover, I have been holding the card for almost 4 years now. Was there any payment delay from my side? Whats exactly the reason? You guys did not even intimate before deciding on this. Do you only review credit and payment history to strip off privileges? You have never increased my credit limit while other banks have done it"

Having said this, I asked them to cancel my account and the card. Anyways, I learnt the hard way of having these cards and their nuisances. They charge huge interest and all other nonsensical changes.

The executive has sent my case for review and to see if my cash limit will be revoked - in spite of me being adamant to cancel the card.

Non-acceptance

Due to the recent market downturn, lay-offs and in these times of credit crunch, everyone prefers hard cash. If you are someone who prefer plastic when it comes to spending; it might leave you fuming when you figure out that the restaurants, lounge bars, malls, don't accept credit cards anymore; flashing your card would rather leave you embarrassed.

Otherwise also, there are these so called technical glitches, power failures, phone lines down and so on. Aren't they supposed to intimate as soon the patrons walk in rather than put them in an awkward position later?

Talking about one such experience, when it was time to pay the bill at a coffee shop, the waiter came back with my card and said "Its barred madam". It was so embarrassing. He said it loud enough for everyone to hear. I immediately called the card's customer care and they assured me that the card was fine from my end. It ought to be that the swiping machine was probably malfunctioning

I had to pay through cash later.

Maybe, these new rules and updates are due to recession!! They want to save themselves from paying tax as much as possible as card transactions mean that the money is routed through bank, making if accountable for tax.

PS : My ethical sense has restricted me from quoting the bank's name but I am very disappointed with them.

Calvin & Hobbes Lemonade Stand's business perspective

I got this as a forward few days ago.

This cartoon strip was created about 15 years ago. But the explanation of the business perspective has a resonance to the American Auto industry's position in the economy even today!

Women are more beautiful during recession!!!!

I read an article in Times of India yesterday. The commercial tax-department of India registered a surge in cumulative VAT collection by 13% from the cosmetic industry. The same department saw a negative collection figure from others namely the construction, mining, software, gems and the textile industry. We have read them, heard them , watched them all....

Slump is steel production.....
Real estates prices slump......
Reduction in % of sale of cars......

But Lo! COSMETIC SECTOR SHINES DESPITE MELTDOWN


The report further says that a daily care product company has paid Rs 100.31 crore this year towards VAT as against 81.69 crore last year.

Well, women try to cheer themselves more by indulging themselves in "look good" products in times of recession. That is because they tend to cut back on other luxuries. Well, its proven that shopping is therapeutic; unless you are a shopaholic and you shop till you drop. The thought of owning diamonds and designer dresses are a luxury in times of economic slump. People tend to substitute their shopping lists with "affordable luxuries" such as these. While the diamonds and the clothes remain left out on the rack; you can see cosmetics and other personal grooming products clear off shelf at a faster rate.

It basically drills down to the feel good factor. Its the thing to do with masking your unpleasantness of life, drowning your sorrows in alcohol(Does one need a reason to guzzle onto alcohol? You are happy, celebrate with a beer, you are sad, agonize with a beer!). No wonder the sale of lifestyle products, alcohol and pharmaceuticals remain high even during recession.

One might have heard about "Lipstick Effect". It was a term coined during the 2001 recession by Leonard Lauder, retired chairman and heir to the personal products giant, Estee Lauder. The lipstick sale in USA increased by 11% during 2001 recession. This effect was noticed also during the Great Depression between 1929 and 1933 when the industrial production decreased by half whereas the cosmetic production rose; and the cosmetic sale was up by 25%. It was also noted that the number of people working in the cosmetic industry in the US increased during the recessions of 1990 and 2001. Similar effects have been seen through out the UK, Germany and Japan.

This is similar to men picking up gadgets and other accessories than a brand new car!
Do we have a "Gadget effect" here? No survey yet on this.

With India's economy growing and People's purchasing power getting better each day; no wonder we are seeing the so-called "Lipstick effect" here as well...Way to go! I doubt if there were any indexes to measure the cosmetics sale in India during any economic gloom; prior to this.