Archive for January 18th, 2017

A dynamic world map showing emigration to the United States from different countries since 1820

January 18, 2017

Superb pointer from Utopia Blog:

Advertisements

Local Currency is Like a Car That Can’t Leave Town

January 18, 2017

Superb article by Prof George Selgin.

He comes from the free banking school which advocates banks issuing their own currency and managing their affairs with no central banks in picture. In such a case, one would imagine him advocating local currencies. But it is not the case as local currency does not help much if it does not enable trading beyond the local area:

Though the shortcomings of local currency are serious ones, they are far from being inherent shortcomings of all substitutes for official (national) currencies. On the contrary: far from being inherent, the shortcomings of local currencies are ones which have been purposely built into those currencies by persons seeking to make them serve an end quite at odds with that of making it as easy as possible for people to exploit potential gains from exchange.

There is, in fact, nothing to prevent other kinds of unofficial currency from commanding a national market. The key to having them do so is that, like modern bank deposits, they must be fully compatible with the existing monetary standard, and readily useful throughout the national economy, if not beyond it.

Historically, private banknotes have possessed these qualities wherever legal restrictions haven’t prevented banks from establishing branch networks or taking other measures to make their notes current beyond the banks’ headquarters; and it is conceivable that other forms of private currency, including privately-issued token coins, could also take the place of government-supplied alternatives, if only the government would let them.

So, while I applaud the effort of local currency proponents to break the Federal Reserve’s currency monopoly, I regret that they’ve chosen to sabotage this merit-worthy mission by linking it to the much less worthy one of keeping people from trading with “outsiders.”

As the ever-sensible Bastiat once observed, “The worst fate that can befall a good cause is not to be skillfully attacked, but to be ineptly defended.”

Hmm.

The Bastiat quote is quite apt to for the ongoing currency situation in Indian economy as well..

Case of Palava: Creating a ‘smart city’ from the ground up in India

January 18, 2017

Interesting interview of Abhishek Lodha of Lodha Group which is building a greenfield city outside Mumbai – Palava

He says smart city is not just about technology:

McKinsey: What is a “smart city”?

Abhishek Lodha: A smart city is not just about technology. This misinterpretation has often led cities to make investments that are doomed to fail. Cities can be governed using technology but have to be designed with vision. I like to say that to make a place good to live, you need “CCTV” to work—citizens, community, technology, and vision. Probably because technology is more tangible than “community” or “vision,” people tend to grab it when they define a smart city.

When we started building Palava, we began with the classical definition. We used the notion of 5-10-15, which means everything you require daily should be within 5 minutes of walking, what you need every three to four days should be within a 10-minute walk, and things you use within a week to a month should be within a 15- to 20-minute walk.

When you start designing an entire city with this in mind, there are multiple benefits. Given our population, India can never build enough roads to solve our traffic problems. What we can do is design cities so you don’t need so many cars. It is also much healthier for people to walk more.

Interesting insights throughout the talk.

Thinking about appropriate size of currency notes…

January 18, 2017

Wow. There is so much to learn and figure about monetary economics other than just inflation rates.

The Moneyness blog which has been a great source of education post 8 Nov 2016 has another post to think about. This one is on size of currency note. The blog says that India reducing size of the new Rs 500 and Rs 2000 note is in line with what practices elsewhere. He also points to this wonderful note which discusses various aspects of note design:

(more…)

Reemergence of barter system in select locations in 5 Indian States..

January 18, 2017

Though politics is important but one wants to keep it away given how polarised economics discussions have become nowadays. Given the huge event one is just interested in learning about alternate monetary arrangements taking shape in different societies/regions across India. These are the kind of developments which are kept distant from any monetary economics textbook, but are so important to understanding evolution of money.

This article by GS Radhakrishna tells you about how people are going back to barter system in a few places due to no cash:

In the days following the demonetisation of high-value banknotes on November 9, the Adivasis and rural poor of Andhra Pradesh and Telangana have fallen back on bartering to tide over the cash crunch. They exchange their goats, chicken, pigs, calves, buffalo, honey, tamarind, forest millets, jackfruit and gum for essential goods.

The immediate aftermath of the cash withdrawal caused a quandary for poor people in the border districts of Srikakulam, Vizianagaram and Visakhapatnam in Andhra Pradesh and Bhadrachalam, Khammam, Warangal, Adilabad, Bhoopalapalli, Kothagudem and Karimnagar in Telangana. Their employers continued to pay them in old notes, which the markets refused to accept, and new currency notes were not easy to come by.

Farmers and contractors said they had good sreason to pay wages in demonetised Rs 500 notes. “We did not get smaller notes ourselves and had only old notes,” said G Mallikarjuna Reddy, a landlord in Chintur in East Godavari district of Andhra Pradesh.

In this situation, help came from the Annalu, or elder brothers, as members of the Communist Party of India (Maoists) are known in these parts. The Annalu put pressure on traders to adopt the barter system, and used muscle power wherever they met with resistance.

This became explicit on November 22, a fortnight after demonetisation, when a poster on the wall of a residential school in Bayyaram, in Kothagudem district of Telangana, asked traders and farmers to accept forest produce from the people in exchange for essential goods. It was signed by Sagar, the spokesman for the North Telangana Special Committee of the Communist Party of India (Maoists).

The switch to a barter system was not limited to just the two southern states. In Chhattisgarh, for instance, petrol pumps on the highway from Bastar to Jabalpur are accepting payments in kind for fuel. Sahadev Ikshu, a farmer, said he had used tamarind to pay for petrol for his scooter. Other communities in the state are reportedly using honey, tamarind, Mahua liquor and forest fodder as currency.

All this is fascinating to read.

In some regions we are seeing digital payments rising in lieu of cash and in others we see reemergence of barter systems..

What are US economists going to do in Trump era?

January 18, 2017

The world of US economists post Trump can be summed in two words – reality check.

Justin Fox has a nice piece summarising the key thoughts and sessions at the annual American Economic Association meeting:

(more…)


%d bloggers like this: