10 ms·

Believe the Hype About India and China

75 points by sunkan 16y ago

" If you thought the rate of change was fast thanks to the garage innovators of Silicon Valley, wait until the garages of Delhi, Mumbai and Bangalore get fully up to speed. I sure hope we’re ready. " -- Quote from the article. I sure hope this turns to reality and the tide rises the rate of innovation that has meaningful social impacts on problems like poverty and disease plaguing the developing nations.

sagarun 16y ago
Yes it is an achievement. Even a beggar owns a mobile phone. As an Indian what really bothers me is, you can get free sim card but to get a decent meal you have to spend 50-90 Rs (1-2$). Again most of the worker's daily wage is (3-4 $). The food prices are keep on increasing. Are we missing something?
- train_robber 16y ago
  Just wondering, were do you live in India? A 'decent' vegetarian meal (the kind I have everyday) costs Rs 25 from a restaurant. And possibly Rs 10-15 ($0.2) if I cook myself.
  - copper 16y ago
    His numbers are a bit on the high side (I'd probably spend that much for a meal in the food courts at some SEZ), but the basic point is valid: I believe we still see a >10% inflation rate here. For basic food commodities, the rate may be even higher.
    - thomas11 16y ago
      The Times of India reported food inflation last week to be at 15%. That's clearly not sustainable as worker's wages rise significantly slower.
      - copper 16y ago
        The IMF predictions are pretty amusing[1] too, if you like that kind of thing. [1]: http://www.tradingeconomics.com/india/inflation-average-imf-data.html http://www.tradingeconomics.com/india/inflation-average-imf-...
      - eitally 16y ago
        Not in the IT sector. For the last several years we've seen 20-30% salary increases annually. I would argue it's more due to market conditions and the hiring practices of the big consultancies than inflation, but probably a third to half of that is an inflationary response.
        thomas11 16y ago
        Sure, but the vast majority of Indians are not in the IT sector. These salary increases in IT are great for engineers, but they also work against India as an offshoring destination because of the rising costs.
        eitally 16y ago
        Yes, exactly. It will be interesting to see what happens in the next 3-5yrs if salary inflation doesn't slow down or reverse and external investment is similarly reduced.
    - silverlake 16y ago
      The Bank of India is raising rates to combat inflation, though they have been slow to adjust. Also, commodity prices are rising all over the world. Food is more expensive everywhere.
      - copper 16y ago
        Agreed. RBI's large response time is a good thing: it was one of the factors that allowed some insulation from the '08 crisis. It's not so much fun when it comes to deposit rates though :)
  - sundarurfriend 16y ago
    I live in Bangalore and I've never been able to find a decent meal less than Rs.50 here. Even in my hometown (a relatively small town) a meal at a restaurant is Rs.30. If you don't mind, where do you live in India? Edit: To clarify, I'm not doubting your statement, especially since I've been hearing it frequently these days. I'm genuinely curious.
    - train_robber 16y ago
      Presently in Trivandrum, Kerala. And I used to live in Bangalore till last March. You'll get a nice veg meal for Rs 30 even there - Kairali Restaurant, 80ft Road, Koramangala
      - sundarurfriend 16y ago
        Ok, thanks a lot for replying. I used to live near Kairali, but never tried it, will do.
itsnotvalid 16y ago
Besides the line regarding Mt. Everest may relate to China, the rest of the post is about India. What is really the truth is that the wealthy nations are unheard of the situations in poorer countries. What is obvious in our community (banks, credit cards) is not at all in some areas in the world. It's rare to see the problems when the problems are not in front of us. The good thing about cheaper technologies is that, they are more accessible, could improve the conditions of people faster and have more impact.
- namityadav 16y ago
  Mt. Everest is in Nepal, which is a country between India and China. Although IMO, it's more like India than China.
  - itsnotvalid 16y ago
    It would be a political debate whether how to account for that. To me it is too hard to say so, as the border is actually cutting the mountain in half. However technically the peak of the mountain is within the border of China.
benzheren 16y ago
China has its own problem now. The inflation is really which drives the living cost and labor higher. Lots of companies are trying to seek cheaper labors in countries like Vietnam. But one thing is true that mobile is really big in Asia. With great infrastructure, you can have signals anywhere including in the subways which drives mobile consumption.
- pdelgallego 16y ago
  The company I used to work has closed their "software factory" in ShenZhen, and expand the other one they have in Manila, because of the higher cost in China.
moultano 16y ago
To me India seems as precarious as it is promising. Against all this entrepreneurial spirit is the possibility that northern India will drain its aquifers and its rivers dry, and that climate change will make refugees of the entire nation of Bangladesh.
sushi 16y ago
I'm glad to see EKO (http://eko.co.in/index.php http://eko.co.in/index.php) making some solid progress as this post tells. It's nice they have started to make a profit. I should tell that they have been trying this since last few years and one of the reason why the idea worked is that this startup reached out to people personally. The same is the story of Red Bus (http://techcrunch.com/2010/03/24/yes-you-can-build-a-web-company-in-india-here%E2%80%99s-how/ http://techcrunch.com/2010/03/24/yes-you-can-build-a-web-com...) which reached out to the bus companies. The trend I am seeing is that IT companies in India have bigger challenge in making people adopt the technology than marketing or anything else.
- known 16y ago
  http://www.obopay.in/mobile_obopay.html http://www.obopay.in/mobile_obopay.html and http://www.yesbank.in/mobilebankingpayments.htm http://www.yesbank.in/mobilebankingpayments.htm have a pretty straight forward solution.
  - sushi 16y ago
    It's not about better solutions. It's about getting customers by reaching out to them even if the solutions are not perfect. There are many companies in this niche but they won't succeed until they reach out to these people who are not literate to begin with.
known 16y ago
China prospered without India's dummy democracy and casteism. Indians are brainwashed to believe that (voting in elections == democracy) and a solution to all problems.
- lobo_tuerto 16y ago
  You wouldn't believe it does only happen in India, would you?
known 16y ago
India has a 5000 years old hidden dark side viz http://goo.gl/K8Pg http://goo.gl/K8Pg There are 17,000 cults aka castes in India. They're destroying India because they literally hate each other. To strengthen India, it is better to give autonomy to FC/BC/SC/ST/Minority regions with a single passport and currency across these regions viz http://goo.gl/A8F6 http://goo.gl/A8F6
- shabda 16y ago
  > They're destroying India because they literally hate each other. I am from India, and I assure you I dont hate anyone based on their caste.
  - guelo 16y ago
    You've never heard of a generalization?
  - known 16y ago
    http://goo.gl/iYXKw http://goo.gl/iYXKw
  - FraaJad 16y ago
    Shabda, don't bother to feed the troll next time. If you go back and look at this "known" person's history, he repeats same asinine sentences over and over again.
  - rick_2047 16y ago
    http://en.wikipedia.org/wiki/Category:Riots_in_India http://en.wikipedia.org/wiki/Category:Riots_in_India, This is a list of communal riots in india. Go figure who hates whom
    - known 16y ago
      If Caste == Religion, then there is no Hinduism.
  - Untitled 16y ago
known 16y ago
India is a dummy democracy. Only 84,000 Indians out of 1,173,108,018 have the courage to vote their conscience. http://goo.gl/jNi1r http://goo.gl/jNi1r
varjag 16y ago
You see, it's very easy to turn this story around, just alter the caption. "It takes an American executive to disrupt cumbersome Indian banking", "With globalization, Americans go on to innovate overseas", "U.S. education is the driving force of innovation in modern India" and so on. Note: they could probably do just fine with local education and an Indian COO. Point is you should be cautious with extrapolations from a single story.
- FraaJad 16y ago
  The COO is italian, not American. They all used to work in America, that's all.
known 16y ago
836 million Indians survive on less than Rs. 20 (less than half-a-dollar) a day. http://goo.gl/OUJ5F http://goo.gl/OUJ5F
- desigooner 16y ago
  Is there a way to flag users? This is the umpteenth time that this user (known) has literally copy pasted the same responses every time any article with India as a focus comes up on HN .. caste this, less than $1 that, etc etc. Wish there was a way to ban trolls ..
adriand 16y ago
I think the hype is real, at least the hype about the upcoming wave of major and disruptive technology companies based in India and China. I think American startups and established technology firms will compete effectively against these companies, but the effect on other countries with a less-established startup and technology investment culture is more worrisome. I'm particularly referring to Canada (which I'm most familiar with since I'm Canadian). Canada continues to fall behind the US in terms of productivity and technology investment. Apart from a few of the major population centres and Kitchener-Waterloo we have little in the way of a startup culture. We do have a strong tradition of entrepreneurship but it appears to me that this is mainly focused on traditional and particularly service-based businesses. Technology firms here will also tell you that Canadian companies are slower to adopt new technologies than companies in the US, India and China. Countries like Canada that have let innovation stagnate because they currently enjoy a high standard of living may be in for a harsh wakeup call as Indian and Chinese companies start to really come into their own.
- rasmus4200 16y ago
  As a Canadian developer I agree 100% and this very thought is what keeps me up at night. We are soft. Our duvet's are too fluffy. And we can't rely on our natural resources forever.
  - ajaxian 16y ago
    It's not all bad: The California proposition to legalize marijuana was defeated in yesterday's election, which should help maintain demand for BC Gold dope.
  - fiveo 16y ago
    Not too long ago I heard stories from my friends that China started to buy natural resources based company around the world. Some target: Mining companies in Australia, Wood/Lumbers companies in BC. etc However, I couldn't find the stories.
- fiveo 16y ago
  I second to you. In Vancouver, I've seen many companies who have probably live as long as 3-5 years before they crashed and closed down permanently. Most of the issues are related to their inability to innovate and their use of old technology (and methodology). I don't mean to be rude but sometime I viewed Canadian technology companies as the western-but-India-in-the-past kind of company. Many companies in Vancouver is looking for 7-10 years experienced (enterprise) Java developers. Gone is the need of fresh-grad/junior developers position. Guess what the fresh-grads do? 1) Go back to Asia (most immigrants came from Asia) 2) Go south of the border to Google, Microsoft, or Amazon. The cycle breaks down there. Tough really. I've been here for almost 10 years since college and I'm starting to plan my move to south of the border or to Asia.
known 16y ago
Truth != Hope != Hype
badmash69 16y ago
May I suggest reading "Fortune at The Bottom of the Pyramid" by C.K. Prahlad " This is an excellent guide for innovation for India and much of developing world. Companies like EKO etc. have taken these lessons and are building upon those ideas.
Hoff 16y ago
Hype aside, one of the key pieces of American technology development is a very simple one. Bankruptcy. The legal ability for an individual or a business to fail. Seriously. If I don't get buried in a mountain of business debt from a (legitimate) business failure, then I am free to try again with a different business idea or different business model, and to pivot and to hone my business skills, and to see what else might work with the customers and with the investors. Countries and regions with punitive laws around business failures and particularly around the legal exposures and debt incurred by legitimate businesses will inherently operate at a competitive disadvantage. Carefully balancing the societal benefits and costs of non-putative bankruptcies (and of non-putative layoffs, for that matter) is critical in encouraging new business ventures.
- jbarham 16y ago
  This is a great point. The difference in bankruptcy law between the US and e.g. France or Germany creates an incentive for US entrepreneurs to take more risk since if things don't work out (and they usually don't) they can dust themselves off and try, try again without crippling long-term debts or too much of a social stigma. On the other hand, relaxed bankruptcy laws can be taken too far as in the housing crisis since homeowners took in huge profits by flipping houses during the housing bubble but can just walk away from their mortgages if they're underwater which means the loss is eaten by the banks/taxpayer.
  - Hoff 16y ago
    It's certainly a balance. Think too about the "crippling long-term debt" on the other side of the contract, too. Loans are built on standard contract law. There are penalty clauses and associated costs with exiting the contract, and you (from whichever end of the deal you're on) have to expect that those exit clauses might be exercised. When thinking about these "strategic defaults", consider the responsibilities of and the systemic risks that occur on the origination. If you're originating or are repackaging what may be questionable loans or derivatives, or are incurring excessive leverage, isn't that also a systemic risk? It's a balance. The folks that are severely upside-down (and staying that way) won't be consumers, they'll approach indentured status. They'll be paying for the losses they've taken by not walking away, and (given that these folks are taxpayers, and if they have any money left) in taxes, and (indirectly, economically) by not being able to buy the products and services that businesses are looking to sell (meaning a slower recovery). If this topic is interesting, here is some "light" reading out of the University of Arizona: "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis": http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467 And playing devil's advocate here, if you're +not+ exercising what you're entitled to within a contract (and from either end of the deal), then what does that say about the sustainability and efficiency and equality of the business system? And yes, this sort of legal and contractual mire can bury a country and an economy. As we're seeing.
jerf 16y ago
Uh, exhortations to "believe the hype", phrased in exactly those words, are usually a sign of late-stage evolution of the hype, shortly before the collapse of the hype. I remember them from the dot-com bubble, I remember them from the housing bubble... (I believe that India and China have a relatively bright future. I do not believe in the narrative whereby the United States faces problems, because we live here and can see them, but China and India must inevitably be on a smooth trajectory upwards with no bumps, because we don't live there to see the bumps and in China's case we are probably having the bumps deliberately and systematically hidden from us. Just as Japan's inevitable triumph over the entire world turned out not to be bump-free either. In fact, doesn't anyone learn from history...?)
silverlake 16y ago
Don't believe the hype. I sincerely hope the BRIC countries do well, but you can't assume they will grow at the same rate for the next 20 years. There are Earth shattering events every few years which could derail any of these countries. Politics, war, natural disaster, tech revolutions, etc. The US can adjust to change faster than anyone.

75 points by sunkan 16y ago

sagarun 16y ago

Yes it is an achievement. Even a beggar owns a mobile phone. As an Indian what really bothers me is, you can get free sim card but to get a decent meal you have to spend 50-90 Rs (1-2$). Again most of the worker's daily wage is (3-4 $). The food prices are keep on increasing. Are we missing something?

train_robber 16y ago
Just wondering, were do you live in India? A 'decent' vegetarian meal (the kind I have everyday) costs Rs 25 from a restaurant. And possibly Rs 10-15 ($0.2) if I cook myself.
- copper 16y ago
  His numbers are a bit on the high side (I'd probably spend that much for a meal in the food courts at some SEZ), but the basic point is valid: I believe we still see a >10% inflation rate here. For basic food commodities, the rate may be even higher.
  - thomas11 16y ago
    The Times of India reported food inflation last week to be at 15%. That's clearly not sustainable as worker's wages rise significantly slower.
    - copper 16y ago
      The IMF predictions are pretty amusing[1] too, if you like that kind of thing. [1]: http://www.tradingeconomics.com/india/inflation-average-imf-data.html http://www.tradingeconomics.com/india/inflation-average-imf-...
    - eitally 16y ago
      Not in the IT sector. For the last several years we've seen 20-30% salary increases annually. I would argue it's more due to market conditions and the hiring practices of the big consultancies than inflation, but probably a third to half of that is an inflationary response.
      - thomas11 16y ago
        Sure, but the vast majority of Indians are not in the IT sector. These salary increases in IT are great for engineers, but they also work against India as an offshoring destination because of the rising costs.
        eitally 16y ago
        Yes, exactly. It will be interesting to see what happens in the next 3-5yrs if salary inflation doesn't slow down or reverse and external investment is similarly reduced.
  - silverlake 16y ago
    The Bank of India is raising rates to combat inflation, though they have been slow to adjust. Also, commodity prices are rising all over the world. Food is more expensive everywhere.
    - copper 16y ago
      Agreed. RBI's large response time is a good thing: it was one of the factors that allowed some insulation from the '08 crisis. It's not so much fun when it comes to deposit rates though :)
- sundarurfriend 16y ago
  I live in Bangalore and I've never been able to find a decent meal less than Rs.50 here. Even in my hometown (a relatively small town) a meal at a restaurant is Rs.30. If you don't mind, where do you live in India? Edit: To clarify, I'm not doubting your statement, especially since I've been hearing it frequently these days. I'm genuinely curious.
  - train_robber 16y ago
    Presently in Trivandrum, Kerala. And I used to live in Bangalore till last March. You'll get a nice veg meal for Rs 30 even there - Kairali Restaurant, 80ft Road, Koramangala
    - sundarurfriend 16y ago
      Ok, thanks a lot for replying. I used to live near Kairali, but never tried it, will do.

itsnotvalid 16y ago

Besides the line regarding Mt. Everest may relate to China, the rest of the post is about India. What is really the truth is that the wealthy nations are unheard of the situations in poorer countries. What is obvious in our community (banks, credit cards) is not at all in some areas in the world. It's rare to see the problems when the problems are not in front of us. The good thing about cheaper technologies is that, they are more accessible, could improve the conditions of people faster and have more impact.

namityadav 16y ago
Mt. Everest is in Nepal, which is a country between India and China. Although IMO, it's more like India than China.
- itsnotvalid 16y ago
  It would be a political debate whether how to account for that. To me it is too hard to say so, as the border is actually cutting the mountain in half. However technically the peak of the mountain is within the border of China.

benzheren 16y ago

China has its own problem now. The inflation is really which drives the living cost and labor higher. Lots of companies are trying to seek cheaper labors in countries like Vietnam. But one thing is true that mobile is really big in Asia. With great infrastructure, you can have signals anywhere including in the subways which drives mobile consumption.

pdelgallego 16y ago
The company I used to work has closed their "software factory" in ShenZhen, and expand the other one they have in Manila, because of the higher cost in China.

moultano 16y ago

To me India seems as precarious as it is promising. Against all this entrepreneurial spirit is the possibility that northern India will drain its aquifers and its rivers dry, and that climate change will make refugees of the entire nation of Bangladesh.

sushi 16y ago

I'm glad to see EKO (http://eko.co.in/index.php http://eko.co.in/index.php) making some solid progress as this post tells. It's nice they have started to make a profit. I should tell that they have been trying this since last few years and one of the reason why the idea worked is that this startup reached out to people personally. The same is the story of Red Bus (http://techcrunch.com/2010/03/24/yes-you-can-build-a-web-company-in-india-here%E2%80%99s-how/ http://techcrunch.com/2010/03/24/yes-you-can-build-a-web-com...) which reached out to the bus companies. The trend I am seeing is that IT companies in India have bigger challenge in making people adopt the technology than marketing or anything else.

known 16y ago
http://www.obopay.in/mobile_obopay.html http://www.obopay.in/mobile_obopay.html and http://www.yesbank.in/mobilebankingpayments.htm http://www.yesbank.in/mobilebankingpayments.htm have a pretty straight forward solution.
- sushi 16y ago
  It's not about better solutions. It's about getting customers by reaching out to them even if the solutions are not perfect. There are many companies in this niche but they won't succeed until they reach out to these people who are not literate to begin with.

known 16y ago

China prospered without India's dummy democracy and casteism. Indians are brainwashed to believe that (voting in elections == democracy) and a solution to all problems.

lobo_tuerto 16y ago
You wouldn't believe it does only happen in India, would you?

known 16y ago

India has a 5000 years old hidden dark side viz http://goo.gl/K8Pg http://goo.gl/K8Pg There are 17,000 cults aka castes in India. They're destroying India because they literally hate each other. To strengthen India, it is better to give autonomy to FC/BC/SC/ST/Minority regions with a single passport and currency across these regions viz http://goo.gl/A8F6 http://goo.gl/A8F6

shabda 16y ago
> They're destroying India because they literally hate each other. I am from India, and I assure you I dont hate anyone based on their caste.
- guelo 16y ago
  You've never heard of a generalization?
- known 16y ago
  http://goo.gl/iYXKw http://goo.gl/iYXKw
- FraaJad 16y ago
  Shabda, don't bother to feed the troll next time. If you go back and look at this "known" person's history, he repeats same asinine sentences over and over again.
- rick_2047 16y ago
  http://en.wikipedia.org/wiki/Category:Riots_in_India http://en.wikipedia.org/wiki/Category:Riots_in_India, This is a list of communal riots in india. Go figure who hates whom
  - known 16y ago
    If Caste == Religion, then there is no Hinduism.
- Untitled 16y ago

known 16y ago

India is a dummy democracy. Only 84,000 Indians out of 1,173,108,018 have the courage to vote their conscience. http://goo.gl/jNi1r http://goo.gl/jNi1r

varjag 16y ago

You see, it's very easy to turn this story around, just alter the caption. "It takes an American executive to disrupt cumbersome Indian banking", "With globalization, Americans go on to innovate overseas", "U.S. education is the driving force of innovation in modern India" and so on. Note: they could probably do just fine with local education and an Indian COO. Point is you should be cautious with extrapolations from a single story.

FraaJad 16y ago
The COO is italian, not American. They all used to work in America, that's all.

known 16y ago

836 million Indians survive on less than Rs. 20 (less than half-a-dollar) a day. http://goo.gl/OUJ5F http://goo.gl/OUJ5F

desigooner 16y ago
Is there a way to flag users? This is the umpteenth time that this user (known) has literally copy pasted the same responses every time any article with India as a focus comes up on HN .. caste this, less than $1 that, etc etc. Wish there was a way to ban trolls ..

adriand 16y ago

I think the hype is real, at least the hype about the upcoming wave of major and disruptive technology companies based in India and China. I think American startups and established technology firms will compete effectively against these companies, but the effect on other countries with a less-established startup and technology investment culture is more worrisome. I'm particularly referring to Canada (which I'm most familiar with since I'm Canadian). Canada continues to fall behind the US in terms of productivity and technology investment. Apart from a few of the major population centres and Kitchener-Waterloo we have little in the way of a startup culture. We do have a strong tradition of entrepreneurship but it appears to me that this is mainly focused on traditional and particularly service-based businesses. Technology firms here will also tell you that Canadian companies are slower to adopt new technologies than companies in the US, India and China. Countries like Canada that have let innovation stagnate because they currently enjoy a high standard of living may be in for a harsh wakeup call as Indian and Chinese companies start to really come into their own.

rasmus4200 16y ago
As a Canadian developer I agree 100% and this very thought is what keeps me up at night. We are soft. Our duvet's are too fluffy. And we can't rely on our natural resources forever.
- ajaxian 16y ago
  It's not all bad: The California proposition to legalize marijuana was defeated in yesterday's election, which should help maintain demand for BC Gold dope.
- fiveo 16y ago
  Not too long ago I heard stories from my friends that China started to buy natural resources based company around the world. Some target: Mining companies in Australia, Wood/Lumbers companies in BC. etc However, I couldn't find the stories.
fiveo 16y ago
I second to you. In Vancouver, I've seen many companies who have probably live as long as 3-5 years before they crashed and closed down permanently. Most of the issues are related to their inability to innovate and their use of old technology (and methodology). I don't mean to be rude but sometime I viewed Canadian technology companies as the western-but-India-in-the-past kind of company. Many companies in Vancouver is looking for 7-10 years experienced (enterprise) Java developers. Gone is the need of fresh-grad/junior developers position. Guess what the fresh-grads do? 1) Go back to Asia (most immigrants came from Asia) 2) Go south of the border to Google, Microsoft, or Amazon. The cycle breaks down there. Tough really. I've been here for almost 10 years since college and I'm starting to plan my move to south of the border or to Asia.

known 16y ago

Truth != Hope != Hype

badmash69 16y ago

May I suggest reading "Fortune at The Bottom of the Pyramid" by C.K. Prahlad " This is an excellent guide for innovation for India and much of developing world. Companies like EKO etc. have taken these lessons and are building upon those ideas.

Hoff 16y ago

Hype aside, one of the key pieces of American technology development is a very simple one. Bankruptcy. The legal ability for an individual or a business to fail. Seriously. If I don't get buried in a mountain of business debt from a (legitimate) business failure, then I am free to try again with a different business idea or different business model, and to pivot and to hone my business skills, and to see what else might work with the customers and with the investors. Countries and regions with punitive laws around business failures and particularly around the legal exposures and debt incurred by legitimate businesses will inherently operate at a competitive disadvantage. Carefully balancing the societal benefits and costs of non-putative bankruptcies (and of non-putative layoffs, for that matter) is critical in encouraging new business ventures.

jbarham 16y ago
This is a great point. The difference in bankruptcy law between the US and e.g. France or Germany creates an incentive for US entrepreneurs to take more risk since if things don't work out (and they usually don't) they can dust themselves off and try, try again without crippling long-term debts or too much of a social stigma. On the other hand, relaxed bankruptcy laws can be taken too far as in the housing crisis since homeowners took in huge profits by flipping houses during the housing bubble but can just walk away from their mortgages if they're underwater which means the loss is eaten by the banks/taxpayer.
- Hoff 16y ago
  It's certainly a balance. Think too about the "crippling long-term debt" on the other side of the contract, too. Loans are built on standard contract law. There are penalty clauses and associated costs with exiting the contract, and you (from whichever end of the deal you're on) have to expect that those exit clauses might be exercised. When thinking about these "strategic defaults", consider the responsibilities of and the systemic risks that occur on the origination. If you're originating or are repackaging what may be questionable loans or derivatives, or are incurring excessive leverage, isn't that also a systemic risk? It's a balance. The folks that are severely upside-down (and staying that way) won't be consumers, they'll approach indentured status. They'll be paying for the losses they've taken by not walking away, and (given that these folks are taxpayers, and if they have any money left) in taxes, and (indirectly, economically) by not being able to buy the products and services that businesses are looking to sell (meaning a slower recovery). If this topic is interesting, here is some "light" reading out of the University of Arizona: "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis": http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467 And playing devil's advocate here, if you're +not+ exercising what you're entitled to within a contract (and from either end of the deal), then what does that say about the sustainability and efficiency and equality of the business system? And yes, this sort of legal and contractual mire can bury a country and an economy. As we're seeing.

jerf 16y ago

Uh, exhortations to "believe the hype", phrased in exactly those words, are usually a sign of late-stage evolution of the hype, shortly before the collapse of the hype. I remember them from the dot-com bubble, I remember them from the housing bubble... (I believe that India and China have a relatively bright future. I do not believe in the narrative whereby the United States faces problems, because we live here and can see them, but China and India must inevitably be on a smooth trajectory upwards with no bumps, because we don't live there to see the bumps and in China's case we are probably having the bumps deliberately and systematically hidden from us. Just as Japan's inevitable triumph over the entire world turned out not to be bump-free either. In fact, doesn't anyone learn from history...?)

silverlake 16y ago

Don't believe the hype. I sincerely hope the BRIC countries do well, but you can't assume they will grow at the same rate for the next 20 years. There are Earth shattering events every few years which could derail any of these countries. Politics, war, natural disaster, tech revolutions, etc. The US can adjust to change faster than anyone.