Archive for August 30th, 2017

Result of Demonetisation 2016: Vindicates stance of CD Deshmukh and IG Patel who said no to demonetisation as RBI chiefs in 1946 and 1978..

August 30, 2017

We usually say in monetary economics (and even in other branches of economics), read history carefully. More often than not what was said previously remains true until today.

So when Government in accordance with RBI Board announced to demonetise the Rs 500 and Rs 1000 notes, this blog just dug some history. In this post it pointed to statements of RBI Governors who refused to demonetise currencies during their regime in 1946  and 1978. This led Governments then to use the ordinance route.

CD Deshmukh in 1946 said:


How inequality became the big issue troubling the world’s top economists

August 30, 2017

Steve Schifferes (Professor of Financial Journalism at  University of London (what a position!)) has a piece.  The piece is based on the recent Nobel meeting at Lindau where inequality was one of the central issues of discussion.

Every three years, all Nobel Prize winners in economics are invited to gather in the tranquil setting of the German island of Lindau to meet a selection of bright young economists and discuss the state of their profession. But this year such tranquility was challenged by worrying political developments across the globe. Perhaps unexpectedly, one of the central themes of the meeting became what to do about inequality.

While not all laureates would go as far as Jean Tirole, the 2014 Nobel Prize winner, who said that economic inequality itself is a form of “market failure”, it is clear that the political and social effects of growing inequality are drawing increasing attention from those at the top of the economics profession.

In a panel discussion on inequality, James Heckman, the 2000 Nobel laureate, pointed out that inequality had grown faster in the US and the UK than other Western democracies. Heckman said that changes to the tax system that favoured the rich had to be a key part of the explanation. He was also worried about the decline in social mobility, particularly for those on low pay.

Heckman also pointed out that the low income of many single-parent families, whose numbers have increased sharply over the last few decades, had also increased inequality. He argued strongly for wage subsidies to boost the income of the working poor, and increased subsidies for childcare to help more single parents enter the labour market.

Hmm…Much more there..

Year 2017 is the 10th anniversary of Report on Making Mumbai as International Financial Centre : What a cruel reality check…

August 30, 2017

As Mumbai goes through another deluge and crisis, you begin to wonder how superficial nature of our urban development. The maximum city does not even have minimum facilities in place.

It is not just Mumbai but we have had this water logging problem in most cities this season. We had floods this year in Ahmedabad, Bangalore and many more regions. And of course there was Chennai too in 2015 (though Chennai went to another extreme of water shortage soon thereafter). More summary here.

One sticks to Mumbai in this post given the coverage.

It is a really cruelty check as this year of 2017 marks the 10th anniversary of much hyped and debated Report on Making Mumbai as International Financial Centre. There was this whole feeling around 2005-07 just before the crisis, that India is not doing enough to attract global finance. This led to multiple reports around the time each one asking India to be more open on global finance from its own angle.

This specific report looked at how Mumbai could become an international financial centre and compete with others in the business like New York, London etc.  After all the committee was formed as then Finance Minister in his 2005-06 budget speech said:


Due to diplomatic crisis, Qatar currency not a legal tender in international airports…

August 30, 2017

Spotted this notice in Bangalore airport on Monday morning:









How Qatar’s diplomacy crisis effects the legal tender aspect of Qatar currency. Suddenly, the currency is not acceptable for exchange at international airports. I am not sure whether all countries follow this and who decides whether the currency will be legal tender or not at international markets.

The mind went back to this Terminal movie where Tom Hanks lands in US only to realise his passport is invalid. This is because US no longer recognizes his country Krakozhia as a sovereign nation after the outbreak of a civil war. Thus, he is not permitted to either enter the country or return home as he is now stateless.

This currency crisis could have impacted travellers/immigrants from Qatar carrying the currency only to realise it is worthless in international markets.  Thus, even though they have come to safer shores will have to figure ways to make a living.

How eventually monetary systems get impacted by even things like diplomatic crises…

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