Book review – Exorbitant Privelege

September 1, 2014

I just finished reading this book – Exorbitant  Privelege – by Prof Barry Eichengreen, leading econ historian.

The book is really good as it goes into history of American Dollar and what makes it the most preferred currency across the world. As it talks about US Dollar one gets a flavor of history of international monetary system and the politics behind it. I mean hardly anything matters more than politics.

The book is simply written for a layman and explains many important concepts and trivia. For instance I learnt that Dollar got its name from Joachimsthaler (see this as well), a coin used in much of Europe. The Brits on colonising used this coin as not enough Pounds were minted. Hence, these thalers circulated which later came to be called as Dollars.

The book is full of these characters which led to the role Dollar plays in world economy today. Exorbitant Privilege was a term given by French Finance Minister Valéry Giscard d’Estaing to the status of Dollar.

The book discusses many aspects of US economy which led to the Dollar becoming the reserve currency of the world. he also discusses what countries like China need to do to unsettle US from its position. There is this discussion on Euro and how it has squandered the chance (atleast for sometime now) to replace the Dollar or atleast compete with it.

Highly recommended.

KBC 8th edition and Nudging

September 1, 2014

Kaun Banega Crorepati or KBC (a serial based on Who will become a millionaire) is currently in its 8th edition.

In each edition there are these new lifelines which make the serial really interesting. This blog is a huge fan of the way these lifelines are framed and how people choose them. Given a choice one would love to look at the data and see at what stage do people opt for what kind of lifelines, which lifelines work (on this I am quite sure that phone a friend fails most of the time) etc etc.

So, what does KBC 8 offer? Instead of one ask the guest we have ask the three guests (called triguni), Power Paplu is gone from this edition and so on.

However, what interested me most is this new idea which reminded me of the Nudge literature.

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Eliminating open defecation in India…

September 1, 2014

Not sure how many people saw this really interesting series of 38 maps that explained world economy albeit in a limited way. Map no. 35 just hits you given scale of open defecation in India. The new govt has made some noise on ending this really gross practice in India and time will tell whether they succeed or not.

This post by Dean Spears says just building toilets will not be enough. People have to be pushed into using them. There are cases where there are toilets but people still prefer the open lands. One of those posts which makes your stomach churn while reading..

In a way Joan Robisnon’s quote of each and its opposite being true in India remains as true as ever. On one hand we are looking at creating all kinds of smart cities and on the other we struggle to even fix something as basic as this.

From Abe’s three arrows to Draghi’s three arrows…

September 1, 2014

Nouriel Roubini monikered as Dr Doom suggests that like Japan’s three arrows, Europe also needs its three arrows.

There is one crucial difference though which Dr Roubuini misses. In Japan this was done by PM Abe who could ask both his govt and central bank to participate in the bow and arrow strategy. However, in Europe’s case Roubini credits this shooting to Draghi who can hardly do anything to improve structural growth, take productivity reforms etc. It is the role of govt and not central bank. Moreoever, how does Draghi shoot all these three arrows across its 18 members?

Draghi can just shoot one arrow of more monetary stimulus. Rest it has no say.

It is also interesting to note how little criticism Draghi (% ECB) is getting vs how much criticism Bernanke (& Fed) got for all this QE business.

Argentina’s use and abuse of Keynes

September 1, 2014

Andres Velasco in Proj Synd piece says how Arg has got the message from Keynes wrong. Well, it is rare that a country gets anything right in economics.

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RIP Prof Bipan Chandra

August 31, 2014

A sad day for Indian history. Prof Bipan Chandra passed away.

One can disagree with Prof Bipan Chandra’s interpretation of history but one can only be awed by seeing his contribution to Indian history. An amazing scholar.

Washington Recaptured…

August 29, 2014

It is quite remarkable to see how Prof. Simon Johnson has stuck to the cause of crony financialism (crony capitalism is a little broader) and doing away with it.

Here he compares how Washington was captured by the Brits in 1814. And after 200 years it is being captured by Wall Street and Big Banks.

38 maps that explain the global economy..

August 29, 2014

Superb visual post on world economy by Matt Yglesias. Amazing maps on world economy each one showing a different story. It is still incomplete bit nevertheless.

It is so fascinating to learn economics this way. But most of our textbooks are so dry. The only pictures we have are those dreaded graphs.

Good show.

Should we call this Great Financial Crisis a Greater Depression instead?

August 29, 2014

Brad Delong certainly thinks so.

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How Starbucks was restored to its old-self

August 28, 2014

Interesting case-study on the coffee giant. It discusses how Howard Schultz brought back Starbucks from a plain coffee shop to a coffee shop with the Starbucks experience. The giant had lost some mojo in the middle and was just trying to please Wall Street at the cost of losing out its original self.

How it was brought back is what this piece discusses..

The other side of Aadhaar card..

August 28, 2014

The positive side is all we know. It will create this unique identity for Indians across and enable financial inclusion etc etc.

Gopal Krishna in MoneyLife gives one the other side (dark one) of Aadhaar card network. He points how in US/UK the new Govt actually scrapped their biometric identification schemes. Before elections, the current Indian govt promised to scrap it too but has gone back on its promises making Aadhaar as the base for its manifold programs.

So what is the story here? The author says biometric card is like a modern say enslavment where govt gets to intrude in one’s life. Moreover, there are lots of conspiracy theory over this biometric info being shared for international (read US) security purposes and India being party to it.

The issue is not whether we should have ID cards. The real problem is whether Aadhaar should be a biometric ID card?

Again, we just don’t know or even reflect on the other side of any public policy project. I mean even if all this is just myth, one should be aware of it.

World economic history and IMF in cartoon format…

August 28, 2014

Joe Procopio and Nick Galifianakis of IMF have this interesting cartoon strip on the topic. 

They should have also shown the colossal mistakes the institution has made in its history..

 

How Beatles saved UK from its foreign exchange crisis in 1960s..(Some lessons for India too…)

August 28, 2014

A superb article in IMF’s F&D Sep-14 edition by Simon Wilson.

He points how Beatles helped UK tide off its forex crisis for some years in 1960s. Via its concerts it got foreign exchange to UK. It also became a case for live music being exported and recognised as a BOP earning perhaps for the first time:

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The other side of financial globalization of football

August 27, 2014

Usually we celebrate how globalisation and finance has transformed football across the world.

Akash Bhattacharya provides the other side of this development:

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When a hamburger becomes a doughnut and other lessons about globalization…

August 27, 2014

There are two views on US economy. One it is on a perennial decline and other it shall recover given its strong institutions etc.

Daniel Inkenson belongs to the first kind and shows how US is on a perennial decline. Companies are quitting US and locating elsewhere. Reason – taxation issues, infra issues and so on.

He points how Burger King wishes to buy a Candian doughnut maker Tim Hortons and move to Canada:

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How reliable are companies’ credit ratings?

August 27, 2014

Krishna Kant  of BS points to an internal study which looks at rating agencies of some 250 odd companies.

The ratings are same for companies which appear to be different on fin ratios:

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Competition Commission of India slaps fine om 14 car makers..

August 27, 2014

One day old news but an important one. Competition Commission of India slapped fine of Rs 2500 cr on 14 automakers for not allowing competition in the auto components market. CCI gradually gaining teeth and understanding what is going on in Indian economy. This is a body which should have been formed long back as we have had all kinds of practices in the name of competition and private ownership.

I mean how do 14 players prevent competition? We are told in textbooks that large number of players ensure there is competition. But it is not the case here. These 14 car players have sort of formed a cartel and not allowed other players to sell auto components/parts of their brands:

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Ricardo on Orissa-West Bengal potato/vegetable trade..

August 27, 2014

India and its politics is interesting and bizarre at most times.

I am not sure how many of us are following the Orisaa/West Bengal crisis on trading of potatoes and vegetables.

Apparently. Orissa supplies veggies to WB and latter supplies potatoes to Orisaa. Just like Ricardo’s example, it seems WB has comparative adv over potatoes and Orissa over veggies. The two states specialise in their comp adv and trade with each other. Win win for both as our text-books suggest.

Alas, the reality is not as simple. There are lot of other considerations which influence trade and it is not just economics.

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Shouldn’t our Hon’ble President/SC (or someone more important) explain the sacking/transfer of so many State Governors?

August 26, 2014

This is getting really really nasty. I am no political expert but all this random sacking/transfering of so many State governors is just preposterous.

It is true that ruling party is paying back to Congress as latter did the same in 2004 or so. Infact, it is like tit for tat. But after the 2004 sacking Hon’ble Supreme Court said such sacking should not be allowed. Or we don’t believe in SC anymore? The crazy amount of politicisation of everything in this country is reaching an alarming level. The executive is becoming way too powerful.

It is also true that all these State Governors are just used by Centre to sent their cronies/ministers. But then with ruling party replacing these State Governors with their own people instead of looking at capabilities/expertise does not take us anywhere. It is one party spokesperson replacing the other. The transfer of some Governors to NE States and they resigning on the pretense that NE States are not important speaks volumes about our so called focus on development of NE region.

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Is fiscal stimulus any useful ? Some evidence from US States spending on roads..

August 26, 2014

Sylvain Leduc and Dan Wilson get into one of the oldest debates on importance of fiscal stimulus.

They look at the evidence of whether and how US states used the fiscal stimulus given to them by the Federal Govt:

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