Archive for September, 2016

Singapore as a model for economic transformation – case of state planning or markets?

September 22, 2016

Recently Govt of India invited Singapore PM Tharman Shanmugaratnam for the inaugaral Niti Aayog’s transformation lecture. As expected, much of discussion which followed was around we could use Singapore’s market driven model to drive economic growth.

Prof. Pulapre Balakrishnan disagrees with the narrative.  He says it is Singapore’s history of development is as close to socialistic planning as it can get. This is even more ironic as the lecture was held at Niti Aayog which recently replaced Planning Commission:



Why the father of modern statistics (Ronald Fisher) didn’t believe smoking caused cancer…

September 22, 2016

Ben Christopher has a superb piece on history of statistics and the age old debate in statistics – does smoking cause cancer?


Indian financial media continues to spin stories on Indian central bank….

September 21, 2016

One does not like writing such posts but just can’t help it. There is only so much one can ignore.

The positive spinning of news on Indian central bank continues to be a big issue.  Despite central banking exposed widely across the world, we are continuously made to believe of godly powers of people at helm of Indian central bank.

Came across this recent piece which  again tries to spin a story. It argues how the new chief  has had the best start this century as far as bond markets are concerned.


The Trade of the Century: When George Soros Broke the British Pound

September 21, 2016

Rohin Dhar has a nice piece narrating the trade of the last century:

In 1992, George Soros brought the Bank of England to its knees. In the process, he pocketed over a billion dollars. Making a billion dollars is by all accounts pretty cool. But demolishing the monetary system of Great Britain in a single day with an elegantly constructed bet against its currency? That’s the stuff of legends.

Though it occurred just two decades ago, Soros made his nation-shaking bet in a very different time. Back then, hedge funds hadn’t yet entered the public consciousness, restrictions on capital flowing from one country to another were just lifted, and the era of the 24-hour news cycle had just begun. 

To appreciate how Soros made a fortune betting against the British pound requires some knowledge of how exchange rates between countries work, the macroeconomic tools governments use to stimulate economies, and how hedge funds make money. Our readers are invited to correct us if we stumble in explaining any of these concepts. 

And so onwards with the story of how George Soros led a group of traders to break the entire foreign currency system of Great Britain—and profit handsomely at the expense of British taxpayers and others who were on the wrong side of the greatest financial bet of the 20th century.

Read the whole thing..

The civic drama of Socrates trial

September 21, 2016

Prof Josiah Ober Stanford University (majoring in political science and classics) has an interesting piece on trial of Socrates. He says the Conventional wisdom sees Socrates as a martyr for free speech, but he accepted his death sentence for a different cause.

The trial and sentence show Socrates was not above the law:


Facelift defacing 1,250-year-old Ulsoor temple…

September 21, 2016

There is nothing more irritating to see a shoddy cement job on historic sites. It just looks ugly and spoils all the beauty. We  just can’t get our acts together on preserving history.

Bangalore’s centuries old Ulsoor temple is another victim of such a job:


How Beethoven was one of the first investors in stock of Austrian Central Bank…

September 20, 2016

The Oesterreichische Nationalbank or Austrian Central Bank is celebrating its 200 year history.

Its chief Dr Ewald Nowotny gives this interesting speech through the 200 year journey:

Milestone birthdays not only provide an occasion to gather family and friends. They also afford an opportunity to pause for a moment and reflect on one’s past as well as one’s plans and hopes for the future. The 200-year history of our institution has been eventful, to put it mildly. In its first 100 years, the Nationalbank was the central bank of a major power; in its second 100 years, that of a small open economy in the middle of Europe. The fate of the Nationalbank has always been closely entwined with the fate of Austria, for better and for worse.

Central banks never operate in isolation. The most important lesson to be drawn from our 200-year history is that the greatest threat to financial and monetary stability has been, and still is, war.

In fact, it was the twenty odd years of the Napoleonic wars which stood at the origin of the Nationalbank in 1816, as Austria strove to stabilize a currency which had undergone strong inflation and depreciation.

So the “privileged Austrian central bank” was founded as an independent institution with private shareholders. One of the first shareholders was Ludwig van Beethoven – and just for the record: this turned out to have been a very good investment for him.

🙂 How good was it? Given state of central banks, one wouldn’t be surprised if Beethoven would call the investment as profitable but of bad taste…

Rest of the speech is the usual bit on World Wars,  European integration and so on. Useful to read..


Italian Banking woes update..

September 20, 2016

One is really sick of pointing to banking woes and upcoming crisis but they keep coming.

Italy is hardly a new player and its fiscal/banking woes have been talked for a while. The concerns have increased recently following Brexit. Infact, all this is happening in a country which apparently gave birth to idea of banking in Europe. Bankers from Italy migrated elsewhere to shape banking in other parts of Europe. And now they have just forgotten their own history lessons.

Caroline Gray of Focus Economics has an update on Italian banking:


Karnataka government shelves Aiyya canteen initiative

September 20, 2016

Currently Tamil Nadu and Karnataka governments are at loggerheads with each other.  However, it is not as bad as one is still taking ideas from each other.

Any success at political level leads to many copy cat versions. Amma canteens started by Tamil Nadu Govt is one such measure. Keeping economics aside, it is seen as a huge political success.

Taking a cue, Karnataka govt also planned to launch its version of Aiyya canteens. The plan is shelved as of now:


Trade globalisation in the last two centuries..

September 20, 2016

Usually accounts suggest first round of globalisation started in 1870. Though, these are just the European and US accounts which ignore historic trading ties in Asia and Middle East much before trading picked up in Europe.

Anyways, Michel Fouquin and Jules Hugot take the 1870 date a little backward. They say globalisation started in 1840:


How and why lender of last resort function differs across the countries?

September 19, 2016

Charles Calomiris , Marc Flandreau and Luc Laeven have a really interesting paper on the topic.

Reading through Indian economic/monetary history using coins..

September 19, 2016

Prof. Pankaj Tandon who accidentally got into numismatics, now has quite an interesting story to tell.


India and Pakistan: A tale of two economies

September 19, 2016

Ankit Mittal has a nice article comparing India and Pakistan economies historically. The younger lot may not know but there was a time when Pakistan had better economic and social indicators. Infact as Mittal shows, there is very little to seperate between the two countries.

In the end it all boiled down to institutions in the two countries. In India, they were bent but did not break down. Though in Pakistan this was not the case:


Used car market growing and becoming organised in India..

September 19, 2016

Used car market in India seems to be following a similar trajectory as seen elsewhere.

Unlike the new car market, which has traversed some rough patches of late, India’s used car market has had a relatively stable growth. From 1.6 million units (worth Rs 38,500 crore) in 2011, it is today pegged at 3.3 million units (Rs 96,000 crore). According to Nagendra Palle, MD, Mahindra First Choice Wheels Ltd, the used car or pre-owned car market will continue to grow at a steady pace of 15% to touch Rs 2,50,000 crore or 6.6 million units by 2021.

Initially, the market was small and mostly like an unorganised market. There were few brands available and even fewer financing options. People bought cars and kept them for near life time. The scope for development of used market was too narrow.

Then  number of car brands increase and they bombard people with repeated offers and financing options. This leads people to begin changing cars more often. As the used cars are relatively new, they begin to go into the used market. Seeing an opportunity, both existing car players and new unused players get into the used market. Earlier ads highlighted why buy second hand vehicle as these things shoukd be first hand.  But now second hand ones become are no more seen as a pariah and become easily accepted..


Rupee devaluation by Commerce Ministry! Give me a break…

September 16, 2016

Financial markets work a lot on rumors and market gossip.  Infact, it is difficult to distinguish information from market noise. This is what makes markets exciting and frustrating at the same time.

Yesterday was one such day. A leading business channel flashed that Commerce Ministry is mulling devaluation of Rupee.

Rupee depreciated against the dollar with a news report emerging today that the commerce ministry is pushing for devaluation of the rupee. The currency unit thus reversed its initial gains. Reports on a TV news channel suggested that theFinance Ministry and Commerce Ministry would discuss calibrated devaluation of the rupee on September 20 to boost exports. 

The reports were later denied by both the ministries, which led to trimming of the depreciation. 

Rupee resumed higher today at 66.88 per dollar as against the closing level of 66.89 per dollar in the Forex market and firmed up further to 66.82 per dollar on initial dollar selling from banks and exporters. 

However, reports led to the weakening of the rupee by 0.28% to 67.0750 to the dollar before the denial to the reports came. The denial caused the rupee to recover and it was trading at 67.0550 at 1.01 pm.  There was no truth to reports of a rupee devaluation, economic affairs secretary Shaktikanta Das said. Das said the rupee’s value was determined by the market and that there was no plan to change policy on the currency’s valuation.

Minister of state (independent) for commerce and  industry Nirmala Sitharaman  also  tweeted that “I had no conversation on devaluation of any currency with any news correspondent. Any quotes/mentions referring to me on this topic baseless.

I mean it was even fine to suggest Finance Ministry planning such a move after all it can devalue the currency by mere fiat. But Commerce Ministry can’t really do any such thing.

We have hardly done these things since currency started to broadly float since 1991. It has been a managed float where central bank has intervened off and on but govt has largely stayed away from any such fiat.

The media should check what it is publishing/streaming. You can’t be as random as this…

The trouble with macroeconomics ( a scathing critique by Paul Romer)

September 16, 2016

Finally a central banker admitted the truth. On being asked how monetary policy decisions are taken with all the data and science, Bank of Israel chief replied: “This is art, not science”. Moreover, it is all about how much the central banker can credibly hoodwink the media/experts into accepting that the policy is right. As long as this can be done, nothing else actually matters.

Anyways this post is more about this scathing criticism be Paul Romer on state of macro. There has been a lot of it already but this one will be one of the top most criiticism as it comes from a person who has seen and done it all:


India’s Business schools or Hogwarts school of money?

September 16, 2016

Anuvaub Paul (a comedian), reflects on his experiences of interacting with an Indian B-school based at Pune.

Being an MBA himself he is really surprised to see students having similar career choices as they had during his time. He is also disappointed how clueless students are and are just chasing these jobs for salaries so that edu loan can be repaid:


What are Kangaroo bonds?

September 15, 2016

Michelle Bergmann and Anna Nitschke of Reserve Bank of Australia (who else) has a note on this.

These are bonds issues by foreign companies to raise Australian Dollars. Interestingly, they are useful for cross-currency swap purposes:


River Cauvery dispute: By putting government in charge of a river, we get shortages of water

September 15, 2016

Jairaj Devadiga at FEE has an age old solution for the ongoing water dispute between states of Karnataka and Tamil Nadu – private property rights:


Short history of how Central Park in New York was built..

September 15, 2016

David Shulyer has a nice short history of the project that led to iconic Central Park.

He says it was one of the best investment NY has ever made:


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