Résumé of a legendary engineer...!!

Sir Mokshagundam Visveswaraiah

Educational QualificationS
	1879–1881                                                                                                 Madras University Bachelor of Arts
	1881-1885                                                                                     College of Engineering, Pune     Bachelor of Engineering (Civil)
Work experience
	·         Engineer at Public Works Department (PWD) in Mumbai ·          Implemented an extremely intricate system of irrigation in the Deccan area ·         Designed and patented a system of automatic weir water floodgates that were first installed in 1903 at the Khadakvasla Reservoir near Pune ·                  Implemented similar system at the Tigra Dam in Gwalior and the Krishnaraja Sagara (KRS) Dam in Mandya/ Mysore,Karnataka ·                  Designed and implemented a flood protection system for the city of Hyderabad ·                  Developed and implemented a system to protect Visakhapatnam port from sea erosion ·                  Supervised the construction of the KRS Dam across the Cauvery River from concept to inauguration ·                   Responsible for the founding of, (under the Patronage of Mysore Government), the Mysore Soap Factory, the Parasitoide Laboratory, the Mysore Iron & Steel Works (now known as Visvesvaraya Iron and Steel Limited) in Bhadravathi, the Sri Jayachamarajendra Polytechnic Institute, the Bangalore Agricultural University, the State Bank of Mysore, The Century Club, Mysore Chambers of Commerce  ·                  Worked as Diwan of Mysore for 7 years ·                   Instrumental in the founding of the Government Engineering College at Bangalore in 1917, one of the first engineering institutes in India ·                  Commissioned several new railway lines in Mysore states
achievements and awards
	·         Awarded Bharat Ratna by the government of India - India's highest honour in 1955 ·         Appointed as a Companion of the Order of the Indian Empire (CIE) in 1911 ·          Knighted as a Knight Commander of the Order of the Indian Empire (KCIE) by the British in 1915 ·                   Honorary membership of the International Institution of Civil Engineers ·                  Fellowship of Indian Institute of Science (IISc), Bangalore ·                   Awarded several honorary doctoral degrees likeD.Sc., LL.D., D.Litt. from eight universities in India ·                  Awarded honorary Membership of London Institution of Civil Engineers for an unbroken 50 years ·                   College of Engineering, Pune, his alma mater, has erected a statue in his honor ·                  The Visvesvaraya Industrial and Technological Museum, a museum in Bangalore is named in his honor

PPP, this and that

When it comes to exchange rates, we have one, spot exchange rate and two, forward exchange rate. 

It would be obvious that forward exchange rates are used to hedge the risk arising from foreign exchange rate fluctuations.

Hedging to safe guard from exchange rate risks can be done in three ways . As told above, forward market is one. The rest are Money markets and Options markets.

Suppose you are a US citizen dealing with a british company. Well, the british company has to pay you 10 million british pounds after one year. Obviously, there is a risk involved. Because, after one year, you may get less, equal or more dollars per pound due to fluctuations in exchange rate.

1. Better you fix the future rate (called forward rate) to be paid after an year. 

2. You take pound loan, convert and invest in dollars and repay in pounds (money market hedging)

3. Do similar thing as above, but use Option.(Options gives right to buy or sell but not obligation)

Let us see about how japanese wives made millions by Peso trade in some other post

Cross exchange rate helps in finding exchange rates of those currencies which are not commonly traded. 

Example, E(chinese yuan/malaysian ringgit) = E(Chinese yuan/ $) x E($/Malaysian ringgit) 

It is imp to note that cross exchange rate sometimes gives rise to arbitrage opportunities, which however are short lived because of shrewd arbitrageurs waiting for such opportunities. 

Covered interest parity(CIP) and Uncovered Interest Parity (UIP)

Chetan says

CIP refers to situation when the exchange rate risk (henceforth called risk) is hedged by trading in forward market that we have discussed earlier

UIP is when no hedging is done to mitigate the risk

Let us suppose, you want to invest 1$ in US. Let i$ be the interest rate in US. So after one year, you will get (1+i$) dollars.

Now, in another case, if you want invest this 1$ in europe (say) where interest rate is iE. You will first convert it into Euro and invest for an year for which you will get interest. This euro sum after an year will have to be converted in to dollars for your consumption. 

One of the key cornerstone in international macro economics at this point of time, as Chetan says, is that both returns (either you invest in US itself or you convert your dollars into Euros, invest and then convert back to dollars) are equal. This is because, if they are unequal, there is arbitrage opportunity which will be exploited soon and hence short lived. 

Thus, (i+i$) = (1/E($/Euro))*(1+iE) x F ($/Euro) .................. In CIP------------- (1)

This F($/Euro) is the forward rate that you use to hedge the exchange rate risk.

Similarily , we have  (i+i$) = (1/E($/Euro))*(1+iE) x Ee($/Euro)............. In UIP---------(2)

This Ee($/Euro) is the expected future spot market rate.

It follows from (1) and (2) that ... F($/Euro) = Ee($/Euro)

This shows that forward exchange rate is a good indicator of expected future spot market rate. If they are not equal at any point of time, there is an arbitrage opportunity.

Broadly and intuitionally......... Domestic interest rate = Foreign interest rate + Expected depreciation of domestic currency.

It is interesting to note that, there are huge capital inflows into china. One of the major reasons is because its currency is highly undervalued and investors expect it to rise in the future. On contrary note, we frequently hear news that capital has gone out of India because its currency is valued high and is expected fall in the future. ( To 100 INR??!! I wonder :) )

It is surprising to know that it is estimated that all prices converge to a single price in the long run. This is called Law of One Price (LOOP) . And the speed of convergence is about 15% per annum. Note that we are talking about a single individual good here. However, if this logic is extended to a BASKET of goods, it is called Purchasing Power Parity (popularly pronounced PPP ). And this is in absence of transaction frictions (perfect world.. ha ha ..!!) and perfectly free capital flows exist between countries.

So, in our relative prices formula that we discussed in other post, if LOOP is to hold good, relative prices equal to Q(E/US) = 1 (since all prices converge to the same price)

All this is fine. HOW DO YOU FIND EXCHANGE RATE ?

PPP is simply LOOP extended to basket of goods. Therefore if PPP (absolute) is to hold good,

Q(E/US) = 1 => E($/Euro) x Prices in Europe = Prices in US

So, here we are....!!! Exchange rate = Prices in US/ Prices in Europe . It is simply ratio of prices.

This PPP exchange rate is good estimation in the long run. Why?!!!

This is because PPP is based on LOOP, LOOP is based on Price convergence (which essentially means transportation costs and trade barriers slowly vanish) and this price convergence happens ONLY IN THE LONG RUN. 

In the above calculation we have used absolute price levels. However, if we use Change of price levels instead of absolute price levels, we arrive at something called Relative PPP. 

Mathematically Relative Change in Exchange rate at any given time between two countries  = Inflation differential between those countries.

Fore example, suppose inflation in US is 10% and in Europe is 9%. Now exchange rate between US and Europe changes at 10%-9% = 1%. 

The Big Mac Index : Got to see The Economist for more info on this index.

India, China and Forex Game

Chetan Subramaniam is a god level professor at IIM B. With his phenomenal passion towards macroeconomics, he takes you by surprise. He gives simple examples and  makes you think about the complexity of several nation level economic problems. And I just love macro economics and Chetan's class and had to bid high to secure his course in term 5.

I plan to share as many thing taught by him in and out of the class on economics. As I've already mentioned, this is much for my reflection and will be glad if it helps some one else too. 

Currency Devaluation - India - 1991

Well, I was surprised to know that Greece in present shape (2011-12) is in many ways similar to what India was in 1990-91. Back then, India was facing huge debts. Actually, huge foreign debts. Just like for any human being who he is in debt, any nation has only two options left. One, generate steady immediate source of income and two, cut back personal spending on unnecessary stuff (national expenses on unproductive activities). 

Now, there is a glitch here. As i said, the debts that India had are not internal. They are huge FOREIGN debts which have to be paid back in FOREIGN currency. HOW DO WE DO THAT? For this we shall use some simple numbers and ratios:

E(Re/$) . Let us call this thing as exchange rate(of how many rupees is a dollar worth of). Currently it is around 57 INR . Back then on 1990s it was around 30-35 INR. I shall state a simple ratio now: 

Relative Prices = Price of US Good *  E(Re/$)/ Price of Indian good

Now, if I have to increase income and thereby increase my foreign currency levels, I need to EXPORT more good. How do I do that? I can increase my exports by reducing my price drastically in comparison with similar goods abroad. This is done by devaluing our indian currency(By rising exchange rate E(Re/$)). Now when I  increase E(Re/$),  RELATIVE PRICE of indian good over US is decreasing as per the ratio above. 

So, whenever, our  exchange rates rise(which means our price of good become cheaper relatively), it is evident that the value of indian rupee falls in comparison with relative country.

And our govt along with RBI, managed to (How? we shall come to that next) increase exchange rate (it rose to above 40 INR) level, thereby making indian goods cheaper and globally competitive. This rapidly increased indian exports and indian treasury started getting filled with foreign currency with which foreign debts could be repaid. Thus devaluing currency helped generate income and save our day. 

However, now Greece is part of Eurozone and it doesnot have monetary independence to devalue its currency (which is Euro and is managed by ECB) . So, only option left for its govt is to cut back on spendings on unproductive activities. These are typically, penison benefits, welfare programs etc. This is definitely against popular sentiment and will not go well with public. Hence so many protests and changes of govt heads. In short, all hands of Greece are tied up to come out of foreign debts. One solution would be to come out of Eurozone and have independent monetary policy. Time has to tell how things would evolve. 

China and US

China is known for keeping its currency artificially undervalued. This makes chinese goods very cheap and US imports very costly in China. Hence there is huge flow of dollars from US to China (by selling chinese goods in large numbers to US). China is now sitting on a huge pile of US dollars. US asks China to appreciate its currency(why? :) Simple: When Yuan appreciates, US expects its exports to look cheaper and hence increase its exports to China. This expectation has caveats seemingly ) (by lowering the exchange rate: E(yuan/$)), which china doesn't heed to. 

Now, let us see how this appreciation and depreciation of currency is made possible. This is done by and Open market operations Committe sitting with RBI(central bank of a country in other countries). They buy/sell (suck/push) a currency in exchange of another currency. We shall see the financial dynamics sometime later in other post. 

If I am to appreciate my currency (ie to lower my exchange rate), I will have to make my currency scarce or/and make dollars abundant. So, if I have to make my currency scarce, I will have to suck out liquidity from my economy. However when you suck out liquidity, your prices go down . (MV=PY is the basis for this statement). This lowers inflation too. Bottom line is prices would go down, even in this case. But domestic growth rate would be impacted. When prices would anyway fall , either you depreciate or appreciate currency and will impact growth in the latter case, why would China heed to US requests to appreciate currency.

NEVER NEVER NEVER GIVE UP

This gem of a sentence thunders and strikes like a lightning bolt. The easiest thing to do when we face a problem or tough situation is , yes, to give up. To quit and feel self-pitied. This, I believe, is a disgrace to human potential. An insult to tremendous capability that a human mind can exhibit under stress or when facing adverse situations. Ego makes one justify the act of quitting.

On contrary, how about turning every stone thrown at one into a mile stone. How about proving to the world that one is not inferior to anyone on the planet of earth. This spirit of defying the destiny and exhibiting undaunted human excellence when seemingly indomitable problems encircle , amuses me. Every action involves resources and constraints. Just as the resources which are limited in number, constraints also should be limited in number. At times, the situation at hand makes us feel resources to be limited while constraints are infinite. Any reasoning mind will easily see through it and make way. And that is how the world as we see today must have been built.

Anything that we see around us would have followed the following sequence.Started as an idea in someone's mind, mixed with action towards it, gaining momentum as the collective action rakes in more people into the action pool. In the meanwhile, the pool of action would be facing constraints, enhancing resources. But definitely moving forward. This hope and faith of moving forward at some or other level could well be the reason behind the world as it is now. While the world around us seem to be static, this static vista must be because of tremendous dynamism underneath. And underneath this dynamism, there must be some faith, some hope, some desire. Desire, hope and faith , thus are the starting points. Other qualities add to them.

It is quite natural that in this dynamic world, at times, we feel down and disturbed. Luckily, the world is full of people, who with their words can dispel these tough moments and instill in us renewed energy.

Sirivennela Sitaramsastri is one such amazing person who has unbelievable ability of mixing strong, powerful emotions with appropriate words to cast a magic spell on listener. No wonder, one would become good fan of him, almost immediately.

One of his song which goes like "Eppudu Oppukovaddura Otami" is my all time favourite, which leaves me teary eyed every time I listen, while filling me with renewed energy and desire. I thank Sri Sirivennela for penning such an awesome song. Do listen whenever you feel a bit down and I'm sure you would be rearing to achieve soon after. For those who cannot understand telugu, I am providing english translation as well. Read.Live life. To the fullest.

Quotes...Quotes...Quotes.....

A Quote, once dad said to me when i was very young, is the life of a person in short. It actually takes a LIFE TIME to be able to tell or write a well said proverb/quote. This is something amazing to me. It all means then that we have the gist of some thousands of people who having experienced the joys, the pains of life expressed the lessons of their lives through their quotes.

A quote at times can actually stir you to the core and bring in fresh surge of hope, energy and optimism. For those who watched a telugu film called "SYE" (in S S Rajamouli's direction), do you remember the opening scene which starts with a Vince Lombardi's quote:

    Any man's finest hour, the greatest fulfillment of all that he holds dear, is that moment when he has worked his heart out in a good cause and lies exhausted on the field of battle - victorious.

While this has been my all time favorite, there are many many such quotes/proverbs which I hold close to my heart and save. I strongly believe that any quote which makes you clench your fist and jaw; which makes you stand and fill you with 10000 Watts of Power,  in fact has the potential to change the course of history. Forever.

My close pals who knew my love for stirring quotes, constantly make sure that they send one when they encounter one. I wholeheartedly thank each one of them now.

Napolean Hill is an awesome personality to me. For those who don't know about his uniqueness, you would be surprised to know that he studied for over a decade about only one topic - " Why successful people are successful ?" . Notice the word - DECADE. WTH?!!


He was commissioned by the then business tycoon Mr. Andrew Carnegie who gave him opportunity to meet most successful people on the planet in the early 1900s. Napolean Hill , having interviewed and extensively researched the topic called success, came out with blockbuster books Think and Grow Rich and The Laws of success. And in the process, firmly established a genre called Personal Success Literature. I personally believe that , yes, they might not have just lied in the quotes. C'mon Dude, they've lived researching on it for decades.

At this point, I want to make it clear( to me and otherwise), my interest not lies in becoming either the richest  person or the most powerful man. But , my interest lies in exploring the true potential. The maximum that a whole heartedly committed human being can actually imagine, believe and achieve in a life time. How big can it be or how small. How gigantic it could be or how fruitless. I don't know. But I am determined to explore.

One Ambani did it in thirty years, what some established business families took a century to do. When the world thought that his life is over, Lance Armstrong came back and won seven times back to back the most gruelling sports event - Tour De france. With a simple principle backed by unlimited faith and courage, an ordinary person became the father of our nation. Born in the most humble environs, a lad from rameshwaram gave the missile power to this nation and went on to become the President of India.    



This power of doing something big , coming from nothing, is what amazes me. I adore all those who have given their fullest in doing what they love, loving what they do and stand as a symbol of excellence. And in the process, showed to others, what a powerful desire coupled with unflinching commitment to achieve can do.

              

Some of my most favorite quotes by Brian Tracy and Napolean Hill (Source: www.thinkexist.com) :

1.  “It doesn't matter where you are coming from. All that matters is where you are going.”
2. “Move out of your comfort zone. You can only grow if you are willing to feel awkward and uncomfortable when you try something new.”
3. “Whatever you believe with feeling becomes your reality.”
4. “Goals allow you to control the direction of change in your favor.”
5. “Whatever we expect with confidence becomes our own self-fulfilling prophecy.”
6. “You have within you right now, everything you need to deal with whatever the world can throw at you.”
7. “Only by contending with challenges that seem to be beyond your strength to handle at the moment you can grow more surely toward the stars.”
8. “You have to put in many, many, many tiny efforts that nobody sees or appreciates before you achieve anything worthwhile.”
9. “Don't wait. The time will never be just right.”
10. “The world has the habit of making room for the man whose actions show that he knows where he is going.”
11. “Patience, persistence and perspiration make an unbeatable combination for success”
12. “Strength and growth come only through continuous effort and struggle...”
13. “The starting point of all achievement is desire”
14.  “First comes thought; then organization of that thought, into ideas and plans; then transformation of those plans into reality. The beginning, as you will observe, is in your imagination.”
15. “Every person who wins in any undertaking must be willing to cut all sources of retreat. Only by doing so can one be sure of maintaining that state of mind known as a burning desire to win / essential to success.”
16. “Do not wait; the time will never be ''just right.'' Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.”
17.  “The starting point of all achievement is desire. Keep this constantly in mind. Weak desires bring weak results, just as a small amount of fire makes a small amount of heat.”

The Journey... Happy Journey

In my journey called life, there are a whole lot of changes. Changes in thinking, with new (in)sights growing , being grown, changing, being changed, challenging, being challenged, moulding, being moulded. Day . Every Day. This blog, I intend to be a platform to record ever growing insights of mine in this big big world where I'm in fierce pursuit. Fierce pursuit of excellence. Explore and test the limits of human spirit. While the road is long. I'm there. Committed. Determined to make a way for me. Leave a mark on the sands of time. Happy Journey... To Me...!!! :)