Never take a loan if you can help it

We recently signed the deal to buy a house. This has been a major topic of argument in our house for many years now, and I thought this would put an end to the disagreements.

Little did I know.

The raging issue in our house now is - how big a loan should we take?

I prefer to pay as much down as we can - while my wife and her father disagree with me. I have always felt uncomfortable owing someone money - to the extent that it's one of the principles of my life - never owe money if you can help it. My wife's father thinks I'm being "old-fashioned". Our discussions typically end with a sermon from him on how his grandfather also did not believe in loans (his family had many businesses) but things have changed over the years. He says, everybody takes a loan now, to run their businesses. Just today, my wife's brother was mentioning how a Harvard MBA grad in their family was dead against paying down more than the minimum on a loan.

And it especially seems to make sense in the USA, where we don't have to pay tax on the interest.

So let's pay closer attention to my principle: Never take a loan if you can help it. If you don't have the money - sure, you should take the loan. But you should pay down as much as you can. Here's why:

When you take a loan from someone (and you had the money in the bank anyway) - you are betting that you will make more money with your savings than the interest payment. However, the guy giving you money is also betting the same thing - that his loan to you will give him more returns than he would have gotten otherwise. This is a win/lose transaction. One of you is going to lose. Each party in the transaction believes the other person will lose. How sure are you that you will be the winner?

To which my wife's father would probably reply: banks are not making such an evaluation. They are virtually handing out the money because the federal reserve has lowered interest rates.

To which my response is as follows: There is always a lender at the end of the chain. When you borrow money from Bank of America, Bank of America borrows money from the Federal Reserve. The Fed borrows money from the Treasury. The Treasury borrows from the Chinese Government.

So really, you're borrowing money from the Chinese Government. And you can bet that the Chinese Government is not a fool. The Chinese Government is a big player is these markets.

How sure are you now that you'll make money on the market with your savings?

Am I a Democrat?

I am East Indian, a community that reliably votes for Democrats. So I was surprised when some east indian friends of ours mentioned that they are Republican. I almost recoiled, wondering how this could be. In one moment, I fit them into the Republican stereotype that I have in my head. That night I was thinking about why I considered myself a Democrat. I have many anti-Democratic positions - I believe that Social Security and Medicare have expanded way beyond their original intent, and are bloated, inefficient government programs. I lean towards a pro-life position (although I don't believe in making abortion illegal because I don't feel I have a right to impose my views on others). Pretty much the only thing that puts me in the Democrat camp is that I cannot agree with the Republican party's support of corporations. I feel that corporations have too much power in our society. So, I really am not a Democrat as much as I am anti-Republican! I now wonder what Republicans think of me when I say I am a Democrat (even though I share many positions with them).

I think that's a problem with having a two-party system. Each voter ends up choosing a party based on some hot-button issue that decides their affiliation. That then stereotypes them - I wonder now what people think when I say I am a Democrat. I certainly don't advocate a multi-party system for the US (I've seen the instability in India where there are numerous political parties) - but I do find myself wishing for a third party which represented the political center of the US.

Why I can't bring myself to support Obama

He's run a mostly clean campaign, rejecting the urge to come down to mudslinging his opponents. He has inspired the youth of this country to get involved in politics. He looks presidential. And yet, I can't bring myself to support Obama.

I think this exchange in the New Hampshire debate brought into focus all my concerns about Obama. Hillary Clinton asked him:

"...words are not actions. And as beautifully presented and passionately felt as they are, they are not action...."

I happen to agree with Hillary. This is also a general perception (which I agree with) about Obama that he talks inspiringly, yet vaguely of overarching change. I was hoping that Obama would rebut Hillary by talking decisively about his actions - how his past legislative accomplisments stood up to his words - but no, that was not to be. Obama instead replied:

"...and you know, so, the truth is, actually, words do inspire, words do help people get involved, words do help members of Congress get into power so that they can be part of a coalition to deliver health-care reform, to deliver a bold energy policy..."

Say what? Is that what Obama is offering? Does Obama actually think that "words" will help members of Congress and health-industry interests form a coalition for the greater good? He's either being naive or duplicitous.

He talks inspiringly about overarching change, but his past legislative history suggests a record of incremental progress. For instance, while he was in the Illinois senate, it was reported that a nuclear power plant had not disclosed a radioactive leak. Obama tried to introduce legislation to force nuclear power plant operators to disclose even small leaks. The legislation was strongly opposed by industry interests, and Obama compromised by watering down the original proposal to the point that it was fatally weakened.

He has a record of working and compromising with industry interests - which I am perfectly fine with. It is legitimate, even perhaps desirable, to try to find common ground with all interested parties, in a bipartisan manner, even including industry interests in the conversation. But it is equally clear to me that such an approach results in compromise and incremental change. What bothers me is the hypocrisy - of promising overarching change, when his past legislative record suggests incremental progress. Hillary Clinton promises the same type of incremental change and at least she is more honest about it.

But more worrying, I see all this as just a symptom of a broader problem with the political discourse in this country. Neil Postman said it best in his book "Amusing Ourselves to Death" - in this Age of Television, the image is more important than substance. Let's elect Barack Obama because he looks presidential, and his words are inspiring. Hillary Clinton sheds a tear and that is actually a factor in her winning the New Hampshire primary. John Edwards "sounds phony". Does anyone care about the actual policy proposals of these candidates? This is a far cry from the early days of the American democracy - the first fifteen presidents could have walked the streets without being noticed, but the average citizen would recognize them from their writings and their policy proposals. During Lincoln's presidential campaign, the candidates traveled the country holding eight hour live debates, and these events were enthusiastically attended by common citizens. Instead, today, we have sound-bites.

So how about we look at the policy proposals? Obama's health-care proposal, for example, is the weakest - due to the lack of a mandate for health-care insurance, under his plan, health insurance will be more expensive for those who choose to buy it. And worse, Obama has actually tried to defend his proposal by saying that mandates don't work. He states the example of how states mandate auto-insurance, and yet not all drivers buy auto-insurance. That is a patently false argument - if the mandate didn't exist, even more drivers would not buy auto-insurance, and auto-insurance would be even more expensive for those who choose to buy it. Just because law-enforcement is imperfect is not a reason to get rid of the law altogether.

And that reliance on words, backed by proposals which are weaker than his opponents', a legislative record that suggests more of the status quo - that's the reason for me being wary of Obama.

The Indian Judicial System - Part 2

In previous posts, I've bemoaned the state of the Indian judicial system. Bribery is widespread, cases languish for decades, and the backlog of cases is so huge that it would take 350 years to clear the backlog at the current rate, even if no new cases entered the system. While there are many problems with the system itself, I can't help feeling that the quality of the judicial system depends primarily on the quality of judges.

And the quality of judges, especially in the lower judiciary, leaves much to be desired.

The problem is in the selection process for Indian judges. The selection of all judges is overseen by the state government bureaucracies (as opposed to bureaucrats in India who are selected through a tough, unbiased process that is overseen by the federal government). This is also in contrast to the US federal judicial system, where every judge must be approved by the legislative branch of the federal government.

There are two ways of becoming a judge in India - neither very fair. Any practicing lawyer in a state can become a judge if he or she is selected by a committee of the state's supreme court justices. That, needless to say, is rife with favoritism.

The other process is to clear an examination overseen by the state government bureaucracy. The examination process looks rigorous - candidates must first clear a preliminary written examination, followed by a more thorough written examination (called the "mains") followed by an in-person interview with a panel of interviewers. This is similar to the process used to select bureaucrats in India. The difference is that the examination for bureacrats is administered by the federal government, and is widely considered unbiased. The examination for judges, on the other hand, is administered by the state government, and is very corrupt.

It is not uncommon for the interview-panel to ask for money in the interview stage (In the northern state of Punjab, such a bribery scandal was unmasked in 2002 and judicial appointments for the preceding two years were annulled). The candidate's score on the interview is often based on the amount of the bribe, or the amount of influence the candidate has. It is not unheard of for children of judges to obtain a law degree from a third-rate law-school and then clear the judicial examination with ease.

The quality of judges has a ripple effect on the legal system. Meritoriously selected judges would hold themselves and those around themselves to a higher standard. For example, the success of attorneys in India is largely dependent on their personal relationship with judges - a practice that flourishes because incompetent and unprofessional judges promote it. Meritoriously selected judges would discourage such practices.

India needs to raise the quality of judges entering the judiciary - Indians deserve a better deal than the bribery, corruption and delay the current judicial system dishes out.

Public school systems and Local communities

In some parts of rural India, there's apparently a saying that goes: "Send a boy to school for five years, and he'll leave farming - send a boy to school for ten years, and he'll leave the village". Some communities actually feel that schools and education alienate young people from their communities.

In a country like India, where there are numerous local languages, myriad cultures and customs - the idea of one rigid educational curriculum does not fly. Teachers and educational curriculums must be sensitive to local communities and their needs. In India, there are actually grassroot movements looking to address this tension - Vikramshila is one such effort in eastern India.

This may seem obvious in the context of India, but I think many of the same themes play out in the US too. The struggle to have religious prayer in US schools is an aspect of exactly this theme. Local communities want to have a say in how schools educate their children. When the public school system refuses to acknowledge this - there is a conflict.

The only way to resolve this tension is to give schools more autonomy in certain dimensions, and also provide them with the tools and training to allow them to adapt correctly to local communities.

In Defense of a Public School System

I attended a fund-raiser for an Indian charity organization today, and heard two shocking statistics:

• 19% of all children in India work as domestic help.
• Somewhere between 17 million and 100 million children in India work for a living (depending on whose statistics you believe)

There's something drastically wrong in a society which denies so many children a chance for an education, refusing them a chance of upward mobility. How do we fix this?

In India, children are preferred as domestic help. Since domestic help often lives in the employer's household around the clock, children are preferred because they are less likely to commit crime, and it's safer to employ them. I know many people in India who employ children as domestic help - and they indeed treat them well. They argue that they're giving a child a better life - the child would have possibly starved otherwise, or turned towards more dangerous ways of earning a living. Even the parents of the children would agree with this assessment.

But there's a vicious circle at work here. By denying that child an education, this child will grow up with limited earning potential, at the bottom rung of society. When that child ends up having children of his own - he will be faced with the same cruel choice - to force his children to work so that they can survive.

I see this as a failure of the state to provide a low-cost, high-quality education system. This was not always so. India had a decent government school system a few decades back. But then, there was an explosion of private schools (possibly because the government did not expand the number of public schools fast enough to cope with increased demand). Students from middle-class and affluent families who could afford these schools moved to the private schools. Since these were also the students who did well - the pool of students in government schools detiorated - and that led to a flight of good teachers from government schools.

India still has a government-run school system - but no one cares about it anymore. The middle-class sends its children to the private schools. The poor cannot afford these private schools - and yet, the government schools do not prepare their children to move up in the world. The government in turn, does not have the will to fix the crumbling infrastructure and lack of resources in public schools - after all, a significant portion of the voting public doesn't even care about these schools.

And that's one reason why the poor are stuck in a vicious circle, generation after generation.

The US public school system seems to be a better model. There are many problems with it, and I'll address them in subsequent blog entries - but completely deregulating the education sector is not the answer.

Darfur, Sierra Leone, Conflict in Africa

I watched the movie "Blood Diamond" today. The movie is set against the backdrop of the conflict in Sierra Leone where the rebel army (RUF) drafted chidren as soldiers in the war. And as I saw scene after scene of how mere boys were drafted as soldiers into a mindless war - I thought the same thing that I think everytime I read about the crisis in Darfur - why doesn't anyone blame the corporations who supply the weapons?

Every society has conflict. Pick any large enough society, and there will exist groups in conflict. But without modern weapons, what's the worst they'd do to each other? They might fight - even kill - each other, but there will not be able to cause carnage on such a large scale. The fight might be bloody, but one man will not wield the power to kill hundreds of his enemies. The fight will likely require physical strength, and will be fought by men, not boys.

But introduce missile launchers, automatic weapons and helicopter gunships - and the imbalance of power shifts drastically. In Darfur, these modern weapons have been a force multiplier that have allowed well-equipped troops to ruthlessly decimate defenseless populations. Yes, the conflict would still have existed in the absence of these weapons - but it would not have had such a lopsided result.

The diamond industry has taken steps to identify and block the flow of "blood diamonds" out of conflict-torn areas - because the trade of such diamonds funds atrocities in places like Sierra Leone. So why hasn't the weapons industry done the same? Why don't we hear the weapons industry agreeing to track and block the flow of weapons into Darfur? The New York Times commentator Nicholas Kristof has done wonders to raise awareness about Darfur - but I'm baffled why he hasn't tried to identify the corporations supplying the weapons?

U.N sanctions, more international aid for refugees - these are all band-aids; we need to staunch the flow of weapons into conflict-torn areas.