Archive for March 3rd, 2017

Banks avoiding/penalising cash is like bakery avoiding/penalising wheat….

March 3, 2017

The leading Indian private banks have decided to penalise cash deposits and withdrawals after a limit. On home branches the limit is 4 and on non-home branches it is 1. There are several other charges making it more and more difficult to conduct transactions in cash. The war against cash is up and running. Perhaps sprinting in India.

All this reads so ironical though. To say banks becoming averse to cash and penalising it is like saying bakery doing the same to wheat (any better example?). People started relying on banks as over time people needed a seperate player/service where their savings could be parked safely. These parkings were earlier made at home but were no more safe.

Banks owe their existence  and riches to the very idea of cash, deposits and credit. Earlier the more cash you brought into a bank, the branch manager could not be happier. But all this is changing quickly.

Why is it that banks have joined this cashless bandwagon? Simple. Banks have to run a large infrastructure to serve your cash needs. With lower cash, they could just minimise their branches/ATM and also close them. This will save so much costs for the banking system and even more profits.

As explained by Brett Scott:

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With each additional linkage of Aadhaar card to a service, are we moving closer to an Orwellian world?

March 3, 2017

Good friend Prabhat alerted me to this development:

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Do you go to a cardiac surgeon only if has undergone a cardiac transplant?

March 3, 2017

This was the response Mr. GV Ramakrishna (GVR) gave to the reporter who asked him whether he traded in shares. The occasion was GVR being appointed SEBI chair in 1990. On seeing his IAS bacakground, a journalist thought of making a point by asking the share question. The journalist was obviously taken back by the response of GVR and relation with the media changed.

This and several other anecdotes are there in GVR’s autobiography – Two Score and  Ten: My Experiences in Government. It is interesting not much has changed ever since. SEBI continues to be run primarily by IAS officers who do not seem to have much of a background of financial markets.  They do seem to have had a tenure in Finance Ministry’s capital markets which is not valued much by markets and media. They surely know how to answer the question based on GVR’s response! 

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Internship at Department of Expenditure (Ministry of Finance ) – 2017..

March 3, 2017

It is time for summers and struggle to get internship for college students.

Department of Expenditure invites applications for doing internship. There is more flexibility on time and students can apply during the year. However, those interested in April-May period need to submit before 15 March 2017.

Pass the word to those interested…

Mumbai’s Dhobigaat in pictures and facts/numbers…

March 3, 2017

Fascinating slide show in ET.

Dhobi Ghat, touted as the biggest open air laundry in the world located near Mahalaxmi railway station, was built during the British Raj in 1890.

The Dhobi Kalyan & Audhyogik Vikas Cooperative Society, the apex body that represents washermen, estimates the annual turnover of the Mahalaxmi Dhobi Ghat at around Rs 100 crore.

Nice bit..

US share of World GDP declining, but share of US Dollar keeps rising

March 3, 2017

Carmen Reinhart has a piece explaining this dilemma:

Since the end of World War II, the United States’ share in world GDP has fallen from nearly 30% to about 18%. Other advanced economies have also experienced sustained declines in their respective slices of the global pie. But you wouldn’t know it from looking at the international monetary system.

Over the same period, China’s share of world GDP almost quadrupled, to around 16% (just behind the US), and emerging markets now account for about 60% of global output, up from about 40% in the immediate post-war years. Given that advanced-economies’ growth prospects remain subdued, these trends are likely to continue – even with the evident slowing in China and other emerging markets.

And yet global finance has not mirrored this shift in balance from the advanced to the emerging. The post-war Bretton Woods arrangements institutionalized the role of the US dollar as the main reserve currency, and until the 1970s, about two-thirds of global GDP was anchored to the greenback. The remainder was largely split between the British pound and the Soviet ruble.

In a recent study that I undertook with Ethan Ilzetzki and Kenneth Rogoff, we document that the US dollar has retained its dominant position as the world’s reserve currency – and by a significant margin. Over 60% of all countries (accounting for more than 70% of world GDP) use the US dollar as their anchor currency. Other metrics, which include the proportion of trade invoiced in dollars and the share of US assets (notably Treasuries) in central banks’ foreign exchange reserves, suggest a similar degree of “dollar dominance.”

The euro is a distant second. From the early 1980s until the introduction of the euro in 1999, the Deutsche Mark’s (DM) influence expanded first in Western Europe and later in Eastern Europe. But the rise of the euro, which consolidated the DM and French franc (Africa) zones, appears to have stalled. By some measures (given the shrinking share of Europe in world output), its global importance has declined.

No other major established international currencies currently compete for global leadership.

This is nothing but the modern Triffin dilemma. The US can continue its existing ways but there are other possibilities as well:

Now as then, the US could meet the rest of the world’s appetite for dollars by issuing more dollar debt. This would require the US to run sustained current-account deficits, mirrored in fiscal deficits. Of course, while the link to gold is passé, any domestic fiscal objective to curb US debt growth would be at odds with the international role as sole provider of the reserve currency.

One way or another, China will figure prominently in the resolution of this modern “Triffin dilemma.” One possibility is that the inevitable reduction of US current-account deficits (whenever that comes) may result from sustained dollar depreciation (as in the 1970s), implying a capital loss for China and other major holders of US Treasuries. Alternatively, China could eventually become a new supplier of reserve assets. In this scenario, the supply of the reserve asset would align with the world’s fast-growing regions.

This connection could be direct, if the renminbi acquires reserve-currency status; or indirect, if the International Monetary Fund’s unit of account, special drawing rights, becomes a favored asset of reserve managers, as the renminbi is now in the SDR currency basket. Reserve status for the SDR is a long-held IMF ambition, though the idea has never gotten much traction.

But there is a third possibility: global demand for US reserve assets may subside. While China’s ongoing capital flight is fueling an immediate and substantial decline in demand for US Treasuries, a more sustainable scenario would entail China’s transition to a managed floating exchange-rate regime with a deeper domestic financial market – and less emphasis on maintaining a credible war chest of foreign reserves.

One doubts whether the transition would be as easy.

Lachit Borphukan: A new Hindu icon to rewrite Assam history…

March 3, 2017

An interesting piece by Anupam Bordoloi in HT.

How political parties search for new icons to rewrite history:

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Remembering Martin Crowe on his first death anniversary

March 3, 2017

One thought it was not too long ago that we got the news of Martin Crowe passing away after his long battle with cancer. But it has been one year. How time flies.

Sambit Bal in this piece pays a tribute to the iconic cricketer from NZ. It is as poignant as any such tribute can be.

Where would you find a man who accepted cancer as his teacher, as the path to enlightenment? An intense, complex, conflicted and emotional person for a large part of his life, he finally found lasting peace in simplicity. Illness cured him, he often said, because it made him grasp the futility of the battles that raged inside. His playing career had been a struggle to win love and respect with runs and hundreds, and it had brought torment, bitterness and loneliness. As he battled for life, all of that seemed trivial.

He came to cherish friendship, companionship and love. He repaired his frayed relationship with his brother Jeff, sought out a few of his old team-mates, built a stronger bond with his daughter Emma, his only biological child, but most of all, he found his greatest love, Lorraine. And he discovered that, unlike with cricket, pain wasn’t part of the package. The process renewed him and healed him.

Marty could now look at his younger self with remarkable objectivity and detachment. “He was not a man you’d have liked,” he would often say. “I don’t like him.” But it was part of the healing process that he was able to forgive, including that man he didn’t like. It liberated him.

I will forever count among my great blessings that this is a man I was friends with.

It is full of anecdotes and memories. Must read for Cricket fans..