Archive for June 12th, 2017

Not merely costume: the power and seduction of the Queen’s hats

June 12, 2017

Fascinating piece by Oliver Watts Honorary associate, Sydney College of Arts, University of Sydney.

He points how the England Queen’s hats are so much more than mere costumes:


India takes the spice out of Masala bonds??

June 12, 2017

One just posted about RBI trying to spice up the housing market despite it being really heated already.

There was another measure in recent policy on the so called masala bonds (bonds which allow to raise money in Indian rupees in foreign countries). The idea was to make them similar to External Commercial Borrowings (borrow abroad in foreign currencies).

However, it seems this measure has taken the spice from the masala bonds:

New guidelines on offshore rupee bonds will put the brakes on the growth of the Masala bond market, according to debt bankers.

The Reserve Bank of India last Wednesday brought the Masala bond market in line with existing rules on external commercial borrowings in other currencies. As a result, Masala bonds must have a minimum original maturity of three years, rising to at least five years for deals over $50 million, and coupon rates must be no more than 300 basis points over the government curve.

The changes temper earlier efforts to stimulate the growth of the offshore rupee market, which allows Indian companies to borrow overseas without taking currency risk, and have not gone down well with market participants.

“The central bank is clipping the wings when the market was just starting to take off,” said a fixed income trader from a foreign bank.

In the past three months, Housing Development Finance Corporation, National Highways Authority of India and power generation company NTPC have all sold Masala bonds, raising interest in the format.

While NHAI and NTPC sold five-year debt, the three-year tenor has been popular for non-banking finance companies such as HDFC, Shriram Transport Finance and Indiabulls Housing Finance.

“The new guidelines will affect the plans for housing finance companies which were keen on raising Masala bonds above $50 million for three years,” said another DCM banker.

Most bankers feel the move will stall a market that was already struggling to gain traction.

“It is a retrograde step for sure; it will kill the Masala market further,” said an executive director from a foreign bank. “It will de facto rule out credit (corporate) borrowers, non-sovereign and non-quasi-sovereign issuers.”

However there are others who are not as pessimistic:

However, not all agree that the new RBI guidelines will have a negative impact on the Masala market.

“There has been a decent appetite, and good issuers will continue to tap the market,” said Ajay Manglunia, head of fixed income at Edelweiss Capital. “Masala bonds will be well received for the five-year maturity as well.” 


Reflecting on RBI’s history, the move is not surprising. The central bank is seen as conservative on these matters and usually tries to curb any excessive activity (though the recent housing bit is surprising given the evidence). Thus, it is criticised when things are spicing up and when there is a crisis, it is praised.

Book Review: A Little History of Economics

June 12, 2017

Prof Donald Frey of Wake Forest University reviews a book by Niall Kishtainy titled as A Little History of Economics. Looks like an interesting buy…

Although I think this book might have been improved, I still give it high marks. After all, the author of a short book is forced to make choices that not everyone will favor. And Kishtainy’s choices could be defended.  The purpose is to give a brief, historical perspective to readers who are laypersons in the subject of economics. Kishtainy has written a book that should hold the interest of his audience and leave them the better for having read it. Hopefully, this book will encourage some to read at greater depth.

Anything brief and yet comprehensive is the order of the day..

What is pre-owned market? Second hand market!

June 12, 2017

I was reading this interesting news about how Hero Motors is planning to increase the chain of its second hand vehicles. It  said the second hand market remains strong despite demonetisation. Infact, the first hand slowed but not the second hand.

Towards the end of the article, one realised a new kind of market is being mentioned:

It said even macro-economic setbacks, such as demonetization, didn’t seem to have much impact on the second-hand bike market.

“Interestingly in 2017 when new two wheelers industry faced challenges like demonetization and transition from BS-III to BS-IV which lead to a stunted single digit growth, there was a significant boost in demand for pre-owned two wheelers.”

“Our experience shows that pre-owned industry is evolving at a very fast pace and the replacement cycle for two-wheeler has come down to 4-5 years,” said Yadvinder Singh Guleria, Senior Vice President – Sales & Marketing.

“We see good future potential in pre-owned two-wheeler business and has advanced its expansion horizon to 200 Best Deal Outlets by the end of this fiscal itself.”

Pre-owned? Haha. That is a nice way to call a second hand market which has this low status attached to it. Call it pre-owned instead.  What all jargons we all keep coming out with…

Jargons aside, what is behind rise of this seconds market?

It said a decision to speed up the opening of such shops was taken after seeing strong demand for pre-owned motorcycles in India.

“In financial year 2016-17 (ended March), sales of Honda’s pre-owned business grew by 23% which is three times that of the ‘new two-wheeler’ industry growth of only 7%,” the company said.

Honda’s Best Deal are the first such retail set-up by any two-wheeler manufacturer in India solely for the purpose of dealing in pre-owned vehicles.

The chain today comprises 150 outlets in 117 cities across 21 states of India.

The shops serve two sets of customers: Those who want to exchange their existing two-wheeler of any make for a brand new Honda two-wheeler, and those customers who want to buy a refurbished and certified pre-owned Honda two-wheeler and seek the Best Deal in the market. All brands of bikes are exchanged at the shops.

The two-wheeler maker gives two free services and six months of warranty and after-sales support on pre-owned bikes purchased from its stores. They also help the customers change the ownership in the records at RT office.

I am told the second mobile market is pretty active as well. People prefer to buy these as it costs less and ine can keep changing models just to show-off to the society as well.

But does this apply to bikes? Not strictly. Most likely, the seconds motorcycle market just enables those people who may not have money for first hand but can buy a second hand one. It is a step towards mobility..

Ibn Khaldun: The amazing Arab scholar who beat Adam Smith by half a millennium

June 12, 2017

Fascinating article by Daniel Olah who is with Hungary’s Ministry for National Economy, Forecasting and Modelling Unit.

He says we have ignored contribution of Ibn Khaldun’s contribution to economics. His ideas preceded those of Adam Smith by nearly half a millennium. Thus, Neoclassical economists have created a false narrative of the history of economics:


La Decimas: Vamos Rafa..

June 12, 2017

What a comeback from Rafa and gives me goose pimples as I blog about this. What a player. No words are enough. How he has survived all odds to emerge as a top player is just one story.

Here is a tribute from the top players and this one from Jim Courier sums it up:

“One of Nadal’s strengths is that he’s so humble, that he’s surprised at what he has achieved, and that he has never bought into his own greatness. He’s always felt as though he has to earn everything, on a match-to-match, and point-to-point, basis. That’s one of the marks of his genius, that he’s convinced himself that he can’t rest on his laurels. He’s only ever lost one best-of-five-set match on red clay. And that’s because he makes things so physical. It’s already a big enough challenge to beat Nadal over three sets on clay, but trying to do it over five sets is the biggest challenge in the history of men’s tennis.”
– JIM COURIER, winner of four Grand Slams including Roland-Garros 1991 and 1992
 The respect he has for his opposition and always underplaying himself makes him look so human and real..

China’s evolving monetary policy rule: from inflation accommodating to anti inflation policy

June 12, 2017

Eric Girardin, Sandrine Lunven and Guonan Ma have this interesting paper.

This paper aims to enhance the understanding of China’s monetary policy rule since the mid-1990s, focusing on the role of inflation. It investigates the rule followed by the People’s Bank of China (PBoC) by considering both the structural economic transformation of China and its evolving monetary policy framework.

Our newly constructed monthly composite discrete monetary policy index (MPI), which combines price, quantity and administrative instruments, shows a change in style towards smoother but more contractionary policy moves from 2002 onwards. The estimation of a dynamic discrete-choice model à la Monokroussos (2011) implies that, from this point onwards, the conduct of monetary policy has been characterised by implicit inflation targeting.

While the PBoC’s behaviour up to 2001 was reminiscent of that in the inflation-accommodating G3 economies of the United States, euro area and Japan up to 1979, it has been characterized since 2002 by a policy rule similar to the post-1979 anti-inflation (forward-looking) policy of the G3. An accurate estimation of the monetary policy rule from 2002 needs to consider China as an open economy, as a result of its rapid liberalisation of trade and finance after its WTO accession. As such, the influence of US interest rates has become increasingly significant for Chinese monetary policy.


Indian residential property price rise since 2007 highest in world…

June 12, 2017

Whenever there are news reports about affordable housing in India, one cannot help but laugh at sheer ignorance of the report. Moreover, most such news are written in the metro cities and the reporters should know how all this is just hogwash.

So, am not really surprised reading this Mint piece which says home prices in India have risen the fastest since 2007. It quotes from this BIS quarterly report (pg 11 of the report and 17 of pdf):


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