Archive for October 20th, 2017

Prof Sunil Amrith: Recipient of a Macarthur fellowship for digitizing historical data on Indian economy!

October 20, 2017

Just learnt about this interesting development..

Hope more and more Indian economy historical data is digitized and put up in public space.

Also, should read up Prof Amrith’s work….

Axis Bank woes…

October 20, 2017

Andy Mukherjee hits and hits hard:

Axis Bank’s credit costs have surged, mainly as a result of the nine accounts the lender has had to reclassify as nonperforming assets.

Whichever way you look at it, the failure of governance at Axis is now absolute. That other banks will also be admitting to having similarly lied about their nonperforming loans can’t be an excuse.

If the non-executive directors of Axis, including the former bureaucrat who chairs it, feel even a modicum of responsibility toward shareholders, they should quit, and leave it to a new board to deal with management and its fibs.

Governance has become such an issue…

Can Bitcoin Replace the Dollar? The technologists view…

October 20, 2017

Perry Mehrling in this post:

Proposals for monetary reform, whether mild or radical, are always and everywhere informed by some underlying theory of money.  A week ago I spent two days talking with a group of technologists and lawyers–perhaps I should say digital coders and legal coders–and pressed them on this point.  Chatham House rules prevent me from associating views with actual people, but the views themselves are the important thing.

So far as I understand, and it is important to emphasize that there was not consensus on the details, the technologists see themselves as creating a form of money more trustworthy than that issued by sovereign states, more trustworthy because the rules of money creation (whether proof-of-work or proof-of-stake or whatever) limit issue to a fixed and finite quantity.  Scarcity of the tokens today, and confidence that scarcity will be maintained in years to come, are supposed to support the value of the tokens today.  Importantly, no such confidence can be attached to state-issued money; quite the contrary states are seen as reliable abusers of money issue for their own purposes.  Cryptocurrency is digital gold while fiat currency is just paper, subject to overissue and hence depreciation.


One of the most fascinating things about the technologist view of the world is their deep suspicion (even fear) of credit of any kind.  They appreciate all too well the extent to which modern society is constructed as a web of interconnected and overlapping promises to pay, and they don’t like it one bit.  (One of my interests these days is “Financialization and its Discontents”, and I dare say that the discontent of the technologists is as deep as that of the most committed Polanyian, but of a completely opposite sort.)  Fiat money is untrustworthy enough, promises to pay fiat money are doubly untrustworthy.  One way around the problem would be to require full collateralization of all such promises, maybe even using so-called “smart contract” technology to ensure that promised payments are made automatically, basically an equity-based rather than debt-based system.  In effect, we have here a version of Henry Simons’ Good Financial Society, but with peer-to-peer cryptocurrency taking the place of his 100% reserve money.  Simons was of course responding to the global credit collapse of the Great Depression; the cryptos are responding instead to the more recent global financial crisis.

I view all of this through the lens of the money view, which places banking at the center of attention, views banking as fundamentally a swap of IOUs, and views money as nothing more than the highest form of credit.  It is view developed not so much around a philosophical ideal but rather as a way of making sense of the operation of the world as it actually exists, outside the window as it were.  In that world, the payment system is essentially a credit system, in which offsetting promises to pay clear with only very minimal use of money.  And prices arise from the activity of profit-seeking dealers who absorb fluctuations in demand and supply by standing ready to take any excess onto their own balance sheet, relying on credit markets to fund the resulting inventory fluctuations.  One can imagine automating a lot of that activity–and blockchain technology may well be useful for that task–but one cannot imagine eliminating the credit element.  Credit is not a bug, but a feature.


Was agriculture the greatest blunder in human history?

October 20, 2017

Prof Darren Curnoe of Univ of New South Wales:

Twelve thousand years ago everybody lived as hunters and gatherers. But by 5,000 years ago most people lived as farmers.

This brief period marked the biggest shift ever in human history with unparalleled changes in diet, culture and technology, as well as social, economic and political organisation, and even the patterns of disease people suffered.

While there were upsides and downsides to the invention of agriculture, was it the greatest blunder in human history? Three decades ago Jarred Diamond thought so, but was he right?

Prof argues that Diamond was indeed right but we can do nothing about it:


What is lawful money? How is it different from legal tender?

October 20, 2017

In Federal Reserve FAQs (via JP Koning):

“Lawful money” is a term used in the Federal Reserve Act, the act that authorizes the Board of Governors of the Federal Reserve System to issue Federal Reserve notes. The Act states that Federal Reserve notes “shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.” The Act did not, however, define the term “lawful money,” but up until 1913, the only currency issued by the United States that was legally recognized as “lawful money” was various issues of “demand notes” (subsequently known as “old demand notes”) and “United States notes” authorized by Congress during the Civil War.

At the time, some currency was not considered legal tender, although it could be used by national banking associations as “lawful money reserves.” Thus, the term “lawful money” had a broader meaning than the term “legal tender.” 

In 1933, Congress changed the law so that all U.S. coins and currency (including Federal Reserve notes), regardless of when issued, constitutes “legal tender” for all purposes. Federal and state courts since then have repeatedly held that Federal Reserve notes are also “lawful money.” Milam v. U.S., 524 F.2d 629 (9th Cir. 1974), is typical of the federal and state court cases holding that Federal Reserve notes are “lawful money.” In Milam, the United States Court of Appeals for the Ninth Circuit reviewed a judgment denying relief to an individual who sought to redeem a $50 Federal Reserve Bank Note in “lawful money.” The United States tendered Milam $50 in Federal Reserve notes, but Milam refused the notes, asserting that “lawful money” must be gold or silver. The Ninth Circuit, noting that this matter had been put to rest by the U.S. Supreme Court nearly a century before in the Legal Tender Cases (Juilliard v. Greenman), 110 U.S. 421 (1884), rejected this assertion as frivolous and affirmed the judgment.

Lots of legal history here…

Russia’s New Bank Note design hurts sentiments in Ukraine…

October 20, 2017

Last week Central Bank of Russia introduced new 200 and 2,000 ruble banknotes, which use the images of Crimea and the Far East respectively.

Central Bank of Ukraine has passed orders not to accept any such notes:

Ukraine has banned a new Russian banknote that includes images from the annexed Ukrainian region of Crimea. 

The National Bank of Ukraine announced on October 13 that the new Russian 200 ruble ($3.50) bill showing a memorial in Sevastopol, a ruin in Chersonesus, and a map of Crimea would be illegal in Ukraine beginning on October 17. Banks and exchanges will not accept them.

The bank’s statement said the ban covers any Russian currencies depicting “maps, symbols, buildings, monuments” or other objects “based in Ukrainian territories occupied by Russia.”

Russia presented the new banknote on October 12. 

Ukraine and Russia have been locked in a standoff since Russia illegally annexed Crimea in 2014 and began offering military, economic, and political support to separatists in parts of eastern Ukraine. Although Russia denies military involvement in the conflict, the International Criminal Court (ICC) in November 2016 determined the conflict to be “an international armed conflict between Ukraine and the Russian Federation.”

More than 10,000 people have been killed, at least 23,900 have been injured, and some 1.6 million people have been displaced by the conflict in eastern Ukraine since the spring of 2014.

The official press release is here.

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