Great Depression impacted India as well

Christina Romer in a superb paper on Great Depression summarises the causes, recovery of Great Depression. She also provides information on how Great Depression in US spilled to other economies.

This table which shows when depression began quarter-wise in each economy and recovery began is quite interesting:

	Depression began	Recovery began
United States	1929:3	1933:2
Great Britain	1930:1	1932:4
Germany	1928:1	1932:3
France	1930:2	1932:3
Canada	1929:2	1933:2
Switzerland	1929:4	1933:1
Czechoslovakia	1929:4	1933:2
Italy	1929:3	1933:1
Belgium	1929:3	1932:4
Netherlands	1929:4	1933:2
Sweden	1930:2	1932:3
Denmark	1930:4	1933:2
Poland	1929:1	1933:2
Argentina	1929:2	1932:1
Brazil	1928:3	1931:4
Japan	1930:1	1932:3
India	1929:4	1931:4
South Africa	1930:1	1933:1

So, in US it started in Q3 1929 and recovery began in Q2 1933, in UK it started in Q1 1930 and recovery started in Q4 1932. Surprisingly, In Canada and Germany (in Germany it started in Q1 1928) the economy worsened before it did in US. In Italy, Belgium, Argentina, Poland, Brazil it started with US in Q3 1929.

As far as recovery is concerned, US is the last to start recovery in Q2 1933 along with Canada, Czechoslovakia, Denmark, Poland.

What was even more interesting is India is in the list as well. The Depression started in India around Q4 1929 (one quarter after US). The recovery started in Q4 1931 implying India came out quickest in the list.

This is quite interesting – India was impacted by the Great Depression as well. I don’t have statistics to see what was the impact like on growth (did GDP decline by 30%  like in US) , inflation (did India face deflation too) etc.

What I am also interested in finding is how the Great Depression that impacted India? What were the channels?  India was a British colony then so one channel could be that Depression in UK impacted India (a comparison with other UK colonies during this time would also be very interesting). Other channel could be that US originated Depression impacted India directly as Indian economy was open to trade and financial flows.

Interesting avenues for further research and makes a good PHD thesis topic. If readers come across any papers on the topic, please send me a copy.

Robert Aumann Interview

Vivek Hirpara, a reader of this blog points this interview of Robert Aumann, Economics Nobel Laureate 2005. He says it is a very useful resource on Aumann and his work.

I have never read Aumann as always found it tough. This interview should help.

Thanks Vivek for the pointer and keep sending such useful stuff.

Citi gets TARPED

Going to this previous weekend the main concern was the problems with Citibank. In the weekend, there were numerous talks and views on how to save Citi.

And on Sunday night, Citi finally got TARPed. Fed, US Treasury and FDIC have issued a joint press release and the deal details. The details of the deal are here. In sum:

As part of the agreement, Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.

In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program.

So, a bit of both for Citi- Guarantees for Assets and Capital infusion. (For a detail on TARP, see this) .

Trying to read the detailed statement, again leads to confusions and need for clarifications. All these US govt institutions have number of economists and I still don;t understand why can;t they be asked to draft a clearer way to explain the deal. They could use pictures/graphs and show the balance-sheet to show what goes in and out. The press release repeats what it says on each intervention:

With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy.

Unfortunately, the taxpayers can never really understand what is going on. As I have said in numerous posts (see this for an example)- private sector financial engineering and complex statements are being replaced by public sector. The former used shareholders money and latter are using taxpayer’s money and both not explaining what is really going on.

James Kwak (of the superb Baseline Scenario Blog) tries to explain the deal and says – Citigroup Bailout: Weak, Arbitrary, Incomprehensible.

Addendum

FT Alphaville as usual has a great post on the deal and why it will not work

Assorted Links

1. ASB pointsto a new book on India’s fin sector reforms

2. TTR points never express opinions on an email

3. ACB points to a new asset class- Somali pirates

4. MR points TARP after all

5. WSJ Blog points  Tim Geithner to be the next Treasury Head. It has a profile of Geithner

6. CMB points to Goldman’s recent forecasts (and double standards)

7. Mankiw points to US eco outlook

8. FIn Prof points to views from 2 fin professors

9. Fin Rounds Blog points to Stern School Blog

10. CTB points to a speech on crisis and emerging markets