Archive for August 27th, 2013

Why none of the experts saw India’s crisis coming??

August 27, 2013

Jayati Ghosh asks this question and answer really is “This time is different” (though she does not mention the four word deadly phrase).

She points India had this thing coming for a while now and is a surprise why experts missed it:

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Why does capital flow from poor to rich countries?

August 27, 2013

This was the question posed by Prof Robert Lucas decades ago.

Daniel Gros says we need to reframe the question:

Why does capital flow from poor to rich countries? This column argues that the direction of capital flows makes economic sense given savings behaviour. But the real puzzle is why savings rates are high in poor countries and low in rich ones.

The real puzzle is thus not where the investment goes, but the savings rates which are much higher in emerging economies, allowing them to finance their own development out of their own resources.

When Lucas wrote his seminal paper in 1990 the investment rate in emerging economies was much lower than today and they were running consistent current-account deficits – i.e. their investment rates exceeded their savings rates.

At the time puzzle was why there was not more investment in the capital-poor countries. Today the investment rate is more than 10 percentage points of GDP higher in emerging economies than in advanced economies. If their savings rate had remained unchanged emerging countries would be running very large current-account deficits and would thus be importing a lot of capital. However, their savings rates have increased even more than their investment rates and the real puzzle has become: “Why do poor countries save so much?”

 Some research shows that they save as there are no adequate social security systems, lack of financial products and so on…

Congress completes 100 days in Karnataka..

August 27, 2013

Well, media clearly has picked up fancy things to continue its media hype. 100 days of new government is like a joke. Interestingly political parties have also taken the bait on this media hype.

So y’day, Congress completed its 100 days in Karnataka and  the party has splashed its 100 day achievements across papers:

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