Archive for July 7th, 2017

How did usury stop being a sin and become respectable finance?

July 7, 2017

This is just a superb article  by Alex Mayyasi who is a freelance writer. He looks at one of the most fundamental questions of finance: How did usury stop being a sin and become respectable finance?

There is never one answer to such questions but several plausible ones. He brings the contribution of Scholastics to making finance respectable:


How Governments protect their Lutyens Bungalows but remain ignorant about historic monuments…

July 7, 2017

Prof Nayanjot Lahiri of Ashoka University alerts to this new Amendment of the Ancient Monuments and Archaeological Sites and Remains Act, 1958.

The amendment allows construction of public works in area of protected monuments which was prohibited till now:


When big corporates avoid taxes it is called cleverness/arbitrage, when small companies avoid taxes it is called fraud..

July 7, 2017

Nothing is more ironical than seeing big corporate honchos talk about how we should be paying taxes. Their constant ire is at the small businesses who is always blamed for not paying taxes.

However, if one looks at history of global corporates in general, one thing is constant : their figuring ways to avoid paying taxes. Just that most of these ways are termed as clever, arbitrage and so on. Whereas any similar effort by smaller entities is called as fraud. Thus the irony.

One continuously heard these cries during demonetisation and the same is going on in GST as well. Both the big corporates and political class are continuously emphasizing how GST will lead to people paying more taxes. Some others even say those who oppose GST are the ones who don’t want to pay taxes. Really?

The media too is to be blamed here for continuously streaming these messages making the small business player appear as a thief of sorts. The small business player hardly has the time or the graft to defend his case and media does not even care for them barring a few pieces here and there.

The reality is very different of course. The big companies have an army of soldiers with a nice job title as “tax consultants” who try and identify best ways to avoid paying taxes. They create all kinds of mechanisms to hide revenues and profits by creating multiple shell companies . Some others just open a standalone registered office in so called tax-free countries from where they operate all around the world.

Until recently, both big corporates joined hands with small ones to look at ways to protect their earnings against the ever tax hungry government. But now the large corporates have increasingly joined hands with government to shift all problems on to the smaller brother.

To see a government whose base is (or forgotten past) was that of small business/trader make all these claims, makes the Indian case even more ironical.


Pakistan Rupee devalues by 3.5% in a single day leading to war of words…

July 7, 2017

In its recent State of economy report released on 30 June 2017, State Bank of Pakistan reported that its current account deficit was highest since Q2 2009.

Pakistan’s overall external balance recorded a deficit of US$ 1.6 billion in Jul-Mar FY17, against a surplus of US$ 1.1 billion in the same period last year. This was mainly caused by a large trade deficit on the back of high imports– without a matching performance by exports. The imports of fuel, machinery and food items (mainly palm oil and pulses), all increased sharply due to robust domestic demand and ongoing power and infrastructure development activity. This dynamic pushed the current account deficit (CAD) to US$ 2.6 billion in Q3 – the highest since Q2-FY09. The higher CAD was recorded despite the receipt of US$ 550 million inflow under Coalition Support Fund in the third quarter. For Jul-Mar FY17, the current account gap amounted to US$ 6.1 billion, over twice the level recorded in the same period last year.

Just a few months ago, on 2 May 2017 the government appointed an interim chief of the central bank for 3 months till a new appointment:

It is informed that the Federal Government vide its Notification No. 3(4)-Bkg-I/2013 dated 1st May, 2017 has appointed Mr. Riaz Riazuddin, presently serving as Deputy Governor State Bank of Pakistan, as Acting Governor State Bank of Pakistan with immediate effect, for a period not exceeding three months or till appointment of a regular Governor, State Bank of Pakistan whichever is earlier, in terms of sub-section (3A) of Section 10 of the State Bank of Pakistan Act, 1956.
Thus, a new Governor was to be appointed by Aug 2.
However. on July 5 2017, the currency depreciated by 3.1% in a single day. SBP termed it as adjustment against the high CAD:


When a journalist warns other journalists of being sycophantic to Governments at power…

July 7, 2017

Sidin Vadukut picks books which glorify Emergency and Sanjay Gandhi like no other.


Was Neoliberal Overreach Inevitable?

July 7, 2017

Prof Simon Wren-Lewis has a post  on neoliberal overreach:

I’m not going to speculate whether and by how much this neoliberal overreach will prove fatal: whether Corbyn’s ‘glorious defeat’ marks the ‘death throes of neoliberalism’ or something more modest. Instead I want to ask whether overreach was inevitable, and if so why. Many in the centre ground of politics would argue that it would have been perfectly feasible, after the financial crisis, to change neoliberalism in some areas but maintain it in others. It is conceivable that this is where we will end up. But when you add up what ‘some areas’ would amount to, it becomes clear that it would be hard to label the subsequent regime neoliberal.
I think it is quite possible to imagine reforming finance in a way that allows neoliberalism to function elsewhere. Whether it is politically possible without additional reforms I will come to. If we think about populism, one key economic force behind its rise has been globalisation (see Dani Rodrik here for example). If we want to retain the benefits of globalisation, then counteracting its negative impact on some groups or communities becomes essential. Whether that involves the state directly, or indirectly through an industrial strategy, neither of those solutions is neoliberal.
Then consider inequality. I would argue that inequality, and more specifically the extreme wealth of a small number of individuals, has played an important role in both neoliberal overreach (in the US, the obsession within the Republican party with tax cuts for the wealthy) and populism (the financing of the Brexit campaign, Trump himself). More generally, extreme wealth disparities fuel political corruption. Yet ‘freeing’ ‘wealth creators’ of the ‘burden’ of taxation is central to neoliberalism: just look at how the loaded language in this sentence has become commonplace.
Indeed it could well be that gross inequality at the very top is an important dynamic created by neoliberalism. Piketty, Saez and Stantcheva have shown (paper) how reductions in top rates of tax – a hallmark of neoliberalism in the 1980s – may itself have encouraged rent seeking by CEOs which makes inequality even worse. Rent extractors naturally seek political defences to preserve their wealth, and the mechanisms that sets in place may not embody any sense of morality, leading to the grotesque spectacle of Republican lawmakers depriving huge numbers of health insurance to be able to cut taxes for those at the top. It may also explain why the controls on finance actually implemented have been so modest, and in the US so fragile.
The other key dynamic in neoliberal overreach has to be the ideology itself. In the UK surveys suggest that fewer than 10% of the population favour cutting taxes and government spending to achieve a smaller state (see my next post). There is equally no appetite to privatise key state functions: indeed renationalisation of some industries is quite popular. Yet the need to reduce the size and scope of the state has become embedded in the political right. Given that, it is not hard to understand the motivation behind the twin deceits of austerity and immigration control by Conservative led governments.
The dynamic consequences of extreme inequality and an unpopular ideology both suggest that neoliberal overreach may not be a bug but a feature.


11th Statistics Day Conference: New Frontiers on Statistical Methods and Information Base

July 7, 2017

RBI celebrated 11th Statistics Day Conference.

There are some interesting presentations especially this one by Prof. N. Balakrishna of Cochin University. It is a primer on time-series with some empirical results on Indian financial time-series.