Archive for January, 2015

History of Greece’s Syriza Party and whether it can change Europe?

January 30, 2015

Yanis Varoufakis, Greece’s new Finance Minister has this interesting article on his party.

SYRIZA, a growing political party in Greece, is an acronym that stands for “Coalition of the Radical Left.” For Americans, the idea that a party on the radical left could gain power is unthinkable, and it was for Greeks, too—until very recently. But the harsh austerity measures that the European Union imposed on Greece after its economic collapse have created extreme conditions in Greece: six in ten young people are unemployed, wages and pensions have been cut, national income has fallen by one quarter.

Europe is currently caught in a negative feedback loop, from which the established political process is unable to escape. For three years now, an endless stream of spending cuts and tax hikes has dominated the Greek Parliament’s agenda. A SYRIZA win may be the jolt that Europe needs: a victory by a pro-European party committed to keeping the country both in the Eurozone and in the European Union, but a party that, importantly, because of its radical disposition, is prepared to open up the conversation at the level of the European Council so that, at long last, European leaders address the problems they have been ignoring over the past five years. Back in June, in a New York Times op-ed, James K. Galbraith and I alleged that “SYRIZA may be Europe’s best hope,” and six months later this still holds true.

Though SYRIZA has existed in some form since the early nineties, its popularity has exploded amidst the Euro Crisis, now polling somewhere between 20 and 30 percent. Since June, it has begun to take a lead in opinion polls, as the governing coalition’s promises of ‘Greek-covery’ are turning sour. Elections are not due until June 2016, but the present government has a wafer-thin majority that may dissolve after a likely electoral defeat in the May 2014 European Parliament elections. If a general election is called, SYRIZA could become the largest party in Greek Parliament.

The question then arises: what effect would such a victory have on SYRIZA itself? Can a radical party of the left maintain its cohesion in the face of neoliberal central bankers and their conservative counterparts in Germany, the Netherlands, Finland, France, and Spain? Under such circumstances, any government of the left would be short-lived. If European officials and political leaders anticipate the power SYRIZA might have, SYRIZA’s capacity to bargain, to forge new alliances, and to shatter the eerie silence in the European Union’s Brussels headquarters will be severely circumscribed.

He explains some history of the party and compares the task to Odysseus’s:

SYRIZA may have the opportunity to transform Greece and change the course of European history, but this is a task that makes Odysseus’s journey look like a walk in the park. It will not be easy to take power while remaining faithful to its radical agenda and maintaining its cohesion on the ground. It remains to be seen whether SYRIZA’s leaders can pull off this miracle. I think they can, as long as they do not issue silly promises before the next election, and maintain a truly radical agenda aimed at changing Europe by steadfastly standing their ground, proposing to German, Spanish, Dutch citizens a European agenda that restores the dream of a shared European prosperity. 

What times..


Technology continues to make banking easier..

January 30, 2015

Increasingly, banking is becoming all about technology.

India’s low profile but highly valued HDFC Bank comes out with this interesting mobile app for remitting money:


Would Keynes Have Been Fired as a Money Manager Today?

January 30, 2015

Interesting post by Ben Carlson.

Keynes managed an average return of 13.2% in the period 1928-45. The markets gave a return of -0.5% in the same period. This was an exceptional performance albeit came with much higher volatility. So would he have been fired for this performance?


Adam Smith on the financial crisis..

January 29, 2015

Well, what will the great Scottish say on the recent financial crisis?

He will not be one bit happy:

Tired of lightweights bickering over the financial crisis and its aftermath? Of economic upheaval becoming merely fodder for intellectually dishonest political campaigns? Wonder what biggest thinkers might have to say? Our efforts to consult the giants of economics have been hampered by an unfortunate fact: many of the most important ones are not only dead, but they died long before governments and central banks began to concoct such unconventional policy tools such as quantitative easing. That explains their absence from the argument—so far.

In an attempt to cross this divide, notwithstanding the obstacles, your correspondent attended a lecture at the Harvard Club of New York on January 21st by James Otteson, a professor of political economy at Wake Forest University and the editor of a new book, “What Adam Smith Knew, Moral Lessons on Capitalism from its Greatest Champions and Fiercest Opponents”. And he asked what the great Scottish economist might have to say about the most recent crisis.

Mr Otteson was kind enough to channel Mr Smith in response by citing a string of illuminating passages. It is no surprise that the man who coined the term “invisible hand” would be no fan of overt government intervention. His dissent could be split into three intertwined categories: the temptation of governments to meddle at long-term cost to society; the dangers of paper money; and how the issues of debt and money shift wealth from the future to the present. That, he thought, constitutes a form of generational theft.

….All these points suggest that the financial crisis might better be thought of in two pieces, the initial tumult and the response, whose pernicious consequences lay ahead. Beyond the vast amount of public debt created during the crisis, the mere act of bailing out the institutions involved undermined the fear that Smith said was essential to prevent future fraud and negligence. What then is the alternative, if ever greater reliance on Mr Smith’s “man of system” and his flaws is to be avoided? In seeing what has unfolded, Smith would be forgiven if he were to ask an obvious question: how could his ideas and his name continue to be so widely circulated while their meaning is ignored? It is left to the reader to decide whether Smith can provide all the answers for the modern world.

Well to appreciate what Smith would have said, students have to be taught what he really wrote and thought about. As this is known by only a handful few, one cannot even debate these ideas..

Is wikipedia more biased than encyclopædia Britannica?

January 29, 2015

Apparently yes it is.  Interesting research by Feng Zhu of HBS and Shane Greenstein of Kellogg School of Management.

To test this theory, Zhu and Greenstein took a database of terms developed by University of Chicago economists Matthew Gentzkow and Jesse Shapiro to examine newspaper bias. Gentzkow and Shapiro studied speeches in the 2005 Congressional Record to scientifically identify the top 500 unique phrases used by Democrats (e.g., tax breaks, minimum wage, fuel efficiency) and Republicans (e.g., death tax, border security, war on terror), rating each according to political slant.

Zhu and Greenstein then identified some 4,000 articles that appeared in both Encyclopædia Britannica and Wikipedia, and determined how many of each of these code words were included, in an effort to determine overall bias and direction.

They found that in general, Wikipedia articles were more biased—with 73 percent of them containing code words, compared to just 34 percent inBritannica.

In almost all cases, Wikipedia was more left-leaning than Britannica. Dividing articles into categories, the researchers found, for example, that stories on corporations were 11 percent more slanted toward Democrats, while observing similar leanings on topics such as government (9 percent), education (4 percent), immigration (4 percent), and civil rights (3 percent). Other categories did not have enough data to significantly identify bias.

Of course, those findings don’t say which of the two sources is correct in its viewpoint—only how they compare to one another. “We can only say [that]Wikipedia is more left,” says Zhu. “We can’t say which is reflecting true reality.”

What’s more, much of Wikipedia’s bias seems to be due to the longer article length of the online publication, where word count is less of an issue than the historically printed Britannica. When compared word to word, most (though not all) of Wikipedia’s left-leaning proclivities come out in the wash. In other words, for articles of the same length, Wikipedia is as middle-of-the-road as Britannica.

“If you read 100 words of a Wikipedia article, and 100 words of aBritannica [article], you will find no significant difference in bias,” says Zhu. “Longer articles are much more likely to include these code words.”


Further, they show that as an article is edited more in Wiki, it gets less biased:

Perhaps the most interesting finding of Zhu and Greenstein’s research is that the more times an article is revised on Wikipedia, the less bias it is likely to show—directly contradicting the theory that ideological groups might self-select over time into increasingly biased camps.

“The data suggests that people are engaging in conversation with each other online, even though they have different points of view,” says Zhu. “The crowd does exhibit some wisdom, so to speak, to self-correct bias.”

The number of revisions required to start showing this effect, however, is quite large—at least 2,000 edits—and the articles most read by users aren’t necessarily those most revised by editors. “To some extent, we are not seeing the scenario where too many cooks spoil the broth, we are mostly seeing an insufficient number of cooks,” says Zhu.

If Wikipedia would like to improve its objectivity, Zhu recommends that it encourage editors to revise the most-read stories first, as well as encouraging people with different political leanings to edit the same article.

“Wikipedia can easily do this,” he says. “It has all the information about how many times people are reading and editing articles. They could easily direct the attention of editors in order to have the most impact.”

So be careful while taking info from Wikipedia. This is difficult. Wikipedia has become to information as Google has become for search…

Financial inclusion experiences from some countries..

January 29, 2015

IMF econs have released a paper on the same.

Findings are summarised here:


The Fall and Rise of Economic History..

January 28, 2015

Brilliant and thought provoking essay by Jeremy Adelman and Jonathan Levy.

I mean this is as good as it gets. Most articles are around rise and decline of economic history. But with the recent crisis, lack of history know-how has come to haunt most econs. This is leading to a surge in interest in the subject. But how does this new love for historic economic history shape itself for future?

So the authors discuss both qs . Why the subject declined and what lies for its future..

Does Microcredit work? it depends…

January 28, 2015

There are a series of papers evaluating impact of microcredit in 6 countries.

Justin Sandefur of CGDEV sums them further:


Next Jan Dhan Yojana to target Mutual Funds/Equity markets?

January 28, 2015

I was actually thinking that the Jan Dhan Yojana should have also linked to equity market. Just like the bank account under the scheme provides insurance and overdraft facility, it could have provided a demat or a mutual fund account as well. Given the huge surge in equity markets, it could have made some people wealthier (or atleast perceive themselves). The government could have pumped itself saying we have created so much wealth for the excluded poor.

Apparently, SEBI did think about the idea and actually asked MF industry to replicate the bank account scheme in MF space.


Richest queue in India (world perhaps) and cronyism at its best..

January 28, 2015

This picture is quite an interesting one. It shows India’s richest businessmen queuing to wait to meet US President Barack Obama patiently. It is ironical in many ways to see the rich and mighty queue like school children waiting for their score card or something. In many ways it is a score card of future where the chosen guys would either get to invest in US or be a partner of US money into India.

It clearly shows the power of politics. Those who keep talking of free markets and so on should see how politics dominates the game. At the end of the day, you have to get closer to the politique to see your empire grow.

But this is also an example of cronyism where business and politics get real close. Deals are signed amidst favorites and it is dubbed as competition. Most of cronyism happens behind the scenes and this is all in your face. Take it or leave it.

The way Indian business are rallying behind the recent polity and latter reciprocating greatly, is interesting to see. Heavens are falling for India as of now and these things will be praised and shown as responsible for growth. When heavens lift themselves, same things will be criticised for the downfall..

Tale of Two Commissions ..Planning and FInance

January 27, 2015

Dr YV Reddy has a nice speech on the topic. It is a comprehensive review of how the two commissions have evolved over the years.

PC is obviously no more but FC is here to stay:


Is bancassurance model horribly anti-consumer?

January 27, 2015

Debashish Basu reflects on the recent policy on bancassurance model. He says banks anyway fleece customers for all kinds of fin products including insurance. The new guidelines give them a bigger licence to continue doing the same:


Has the manager in information age become like a zamindar (landowner) of industrial age?

January 27, 2015

Nice food for thought piece by Ajit Balakrishnan.

He says how the developments in IT era are leading managers role to become redundant. This is far cry from the earlier world where manager ruled the world:


Central Bank talking…from too much to too little?

January 27, 2015

Economists continue to remain silent about the many theories/ideas they had created in the 1990s and won a lot of admiration/tenures in the process. Most of these ideas are being questioned now but the hype over what econs can do continues. One such idea was importance of central bank talking which was euphemistically called central bank communications. The  notion was that central banks should communicated as much as possible to markets, communications are a potent tool as open mouth operations as important as open market ones and so on. Be more and more transparent. These talks were to guide market expectations, anchor inflation expectations and what not. From a non-entity, central bankers became a highly followed figure with each word being tracked and analysed.

Cometh the crisis and things like forward guidance were seen as a highly important tool. Central bank after central bank came with new ways to guide markets. Some indicated a date, some indicated amounts and some both.  We are all seeing these ideas failing badly now. Central banks have become victims of their own perceived success. All these things like communications and transparency have just made markets highly reliant on central banks. This has created huge uncertainty as we have seen in the last 4-5 years.

Satyajit Das has a piece on the same:


Placements, statistics and damned lies..

January 23, 2015

Nice to see an article ridiculing hype over placements in India’s management schools. That too in a pink paper which only focuses on the bottomline. After all that is what matters whether it is companies or students.


History of India’s Premier Padmini (Fiat) car..

January 23, 2015

BS has these series of columns on history of key business firms/products/brands and so on.

This piece by Swaraj Baggonkar on Premier Padmini (popularly called as Fiat which was actually an older model) is a superb one as well. After all it was India’s own i-Pad (Pad for Padmini):


What if Utah breaks from American Monetary Union and introduces its own currency?

January 22, 2015

The Swiss shock has again led free banking scholars to come out and attack the hallowed world of central banking. The free banking scholars prefer to abandon central banks and let banks introduce their own currencspeaks oaies.

Ryan Mcmacen has this interesting column on the topic. He mentions Utah which did introduce its own currency albeit in a limited way in 2011:


Growing disconnect between Indian economy and its stock market..

January 22, 2015

Markets keep zooming as if economy is on fire. Mere mention of our economy “expected” to grow faster than China is enough to send bulls on a rampage. And that too by agencies whose predictions are as good as neighborhood pan store person.

Rahul Jacob of BS has a nice article in this regard:


How small Mutual Funds are innovating and striving to stay relevant in an industry dominated by large players..

January 22, 2015

Nice story on how certain small mutual funds in India are trying to survive in a market owned by few large players.

All these stories are really ironical in a way. You hear any MF manager and he will talk of the need for introducing competition in the sector and having more players and so on. But their own sector is concentrated:


Book review: Exchange rate policy and modelling in India

January 21, 2015

This is a book which should be read by people interested in Indian economy and its exchange rate policy.

Written by Prof. Pami Dua of DSE and Rajiv Ranjan of RBI, the book gives a good and detailed account of how our exchange rate policy has evolved over the years.


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