Archive for April 16th, 2018

Chasing The Machine: India’s first computers and the Cold War

April 16, 2018

Fascinating account of  history of computers in India by Prof Nikhil Menon of Notre Dame University.

Prof Menon starts with this story of Morton Nadler who escaped from Prague to Calcutta for setting up a computer at Indian Statistical Institute at the behest of PC Mahalonobis. The entire tale is woven with ongoing Cold War and geo-political affairs. It was several events and conspiracies which led to computers coming to India.

What caught my eye was how computers were needed to “mine big data” to usher planning:

An encounter with Prasanta Chandra Mahalanobis—founder of the Indian Statistical Institute, and the driving force behind India’s Second Five Year Plan (1956-61)—presented Nadler with an escape route. Mahalanobis made Nadler an offer to work for the institute in Calcutta as a computer scientist. Czechoslovakia could not object to Nadler leaving for India (given India’s friendly relations with the Soviet Union), and in American eyes spending time in a democracy that was formally non-aligned in the Cold War helped rub off the stain of communism. Nadler signed a two-year contract to join the ISI “to work on electronic computers.” At the time, the institute was home to the only two electronic computers in India.

The first time he saw an electronic computer at Harvard in 1947, Mahalanobis was mesmerised. Stunned by its ability and convinced of its indispensability to economic planning, he believed that computers would solve one of centralised planning’s largest problems: big data. They could help with complex calculations and develop mathematical models of the economy. Mahalanobis believed that they could be vital for assessing trends for the extensive National Sample Survey that he was integral in launching. Unlike most countries that used computers in the mid twentieth century, in India their earliest use was for development—not in the military. The computer’s potential for planning was how Mahalanobis and the Indian government justified their pursuit and enormous expenses.

How this big data talk is seen differently today. But in reality the objectives are the same.

Highly recommended….



Women in Marathons: From being objected to becoming key for marketers..

April 16, 2018

Superb piece by Carly Drake PhD Candidate in Marketing, University of Calgary.

She tells the story of a Kathrine Switzer whose participation in the 1967 Boston Marathon was objected:

On an April morning in 1967, Kathrine Switzer ate a late breakfast of bacon, eggs, pancakes and toast. The Boston Marathon wasn’t due to begin until noon, so she had plenty of time to get to the starting line.

When the time came, she pinned the number 261 to her chest and started running through the Boston streets with her boyfriend, coach and friend in tow. Then, in a surprising contrast to the crowd’s cheers, she was attacked by a race official who’d noticed her ponytail and lipstick.

At this time, the Boston Marathon was a men’s-only race, and Switzer wasn’t exactly welcome in the field. After Switzer’s boyfriend warded off the race official by tackling him, Kathrine (registered as K. V. Switzer) crossed the finish line. Her efforts helped make the sport of endurance running more welcoming to women in the decades that followed.

“I wasn’t running Boston to prove anything,” she later wrote. “I was just a kid who wanted to run her first marathon.”

This month — 51 years after Switzer’s run — more than 10,000 women from around the world will compete in the Boston Marathon. The 42.2 kilometre (26.2 mile) run requires competitors to meet strict entry requirements, which means these women are some of endurance running’s fastest professional and recreational athletes.

As a marketing scholar, I study how gender and the body are represented in contemporary advertising. So, while the athletic world shifts its attention to Boston’s runners, I’m thinking about what those runners see in their social media newsfeeds or in the pages of the running magazines piled upon their nightstands.

She pores through advertising campaigns to encourage women to run:

In my research, I’m examining a sample of nearly 60 advertisements taken from the January/February 2017 issues of Runner’s World, Women’s Running and Canadian Running. So far, I’ve learned that Switzer’s run has left a complicated legacy in advertisements targeting female endurance runners.

Specifically, the advertisements celebrate women’s physical and mental strength and, in so doing, support women’s participation in the endurance running subculture. Yet these advertisements can also share a negative sentiment when they tell women exactly how they should look and behave.

Many of the advertisements glorify chasing the “ideal” running body — tall, lean and muscular — through unhealthy diet and exercise habits.

In the end, despite 50 years of Switzer, nothing much has changed:

Interpreted alongside the story of Switzer’s run, these advertisements are reminders that bodies are a part of history. Situated within an endurance running subculture that initially wasn’t quite sure how it would deal with the “woman problem,” these advertisements are evidence that female endurance runners are still bound by regulations.

While they are free to enter competitive races, the advertisements communicate that women’s success and value are tied to a certain training regime, body type and style of gender expression.

This focus on the body is a hallmark of the neoliberal ideology that colours Western public life more broadly. In neoliberal thinking, a “good” consumer makes the autonomous, rational choices that lead to physical fitness. Not only is fitness assumed to be more attractive, it benefits the state by saving on the economic costs of obesity.

Studying these advertisements, then, is an important task because advertisements tend to shape — and are shaped by — social norms, giving them a place of power in consumers’ lives.

What runners are seeing in the media can tell us a lot about what it means to be a runner today. If we know nothing else about these runners, we know that there are a lot of them. A year ago, Switzer ran the Boston Marathon on the 50th anniversary of her debut run. At 70 years old, she was the 9,856th woman to cross the finish line.

Because advertisers have no shortage of female endurance runners with which to communicate, it behooves them not to take another 50 years to change the conversation.


It is really nice to learn about different types of research people are doing…

For home price trends in London, check the Tokyo listings…

April 16, 2018

The key reason behind sub-prime crisis spreading across US was how home price trends became similar across the country.

In its new research, IMF points how the home price trends are becoming similar across the world:

If house prices are rising in Tokyo, are they also going up in London? Increasingly, the answer is yes.

In recent decades, house prices around the world have shown a growing tendency to move in the same direction at the same time. What accounts for this phenomenon, and what are the implications for the world economy? These are questions that IMF economists explore in Chapter 3 of the latest Global Financial Stability Report.

Our study of 44 cities and 40 advanced and emerging-market economies shows that the growing integration of financial markets plays an important role. As a result, housing markets in one country are more sensitive to swings in another. Policy makers should pay attention, because the heightened tendency for house prices to move in tandem may signal greater odds of an economic slowdown.  An economic shock in one part of the world is more likely to affect housing markets elsewhere.

Why is this happening?

  • Interest rates: The world’s major central banks have kept interest rates unusually low for a long time in a bid to stimulate growth. That has produced a ripple effect of low borrowing costs, including cheap mortgages, across the globe, which has helped push up prices.
  • Institutional investors, private equity firms, and Real Estate Investment Trusts have been increasingly active in major cities such as Amsterdam, Sydney, and Vancouver as they seek out higher returns.
  • Wealthy individuals have also snapped up properties in major financial centers in search of safe places to invest their money (and perhaps to live). One result: because the wealthy prefer high-end properties, their investments push up prices in expensive neighborhoods in places like New York and London at the same time.
  • Economic growth: In addition to financial factors, coordinated movements in the real economy contribute to the phenomenon. In 2017, growth picked up in 120 economies, accounting for three-quarters of world GDP. It was the broadest synchronized growth surge since 2010. Economic growth is a major driver of demand for homes, and hence prices.

All of this suggests that house prices are starting to behave more like the prices of financial assets, such as stocks and bonds, which are influenced by investors elsewhere in the world. In countries that are more open to global capital flows, prices of both homes and equities tend to be more synchronized with global markets.


Pakistan’s three major banks are up for sale: Why and who are the probable bidders?

April 16, 2018

The talks to buy large private banks are not just exclusive to India (whether Kotak Bank will buy Axis Bank?) but reach across to Pakistan as well.

There is this interesting piece by Farooq Tirmizi on Pakistan’s major banks up for sale. Interestingly, the bidders are those who have  never ran banks:

For the first time in Pakistani history, three perfectly healthy and viable banks are simultaneously up for sale. None of them is a distressed asset being sold by sponsors who had hastily gotten into the banking business and made too many bad loans that they did not have the capital nor the stomach to be able to cover. And none of them is a bloated, nationalized bank filled with a balance sheet of politically motivated bad loans and an employee roster of people who want a paycheck for doing very little. No, these are all banks in rude health, and worthy targets of any financial institution that wants a strong beachhead on their way to conquering the Pakistani financial market.

The problem? Nobody who knows banking wants to buy them, and (most of) the people who want to buy them have little to no experience in banking.

The three banks up for sale are Bank Alfalah (BAFL), Meezan Bank (MEBL), and Faysal Bank (FABL), which are the sixth, eighth and thirteenth largest banks in the country respectively, as measured by total assets. All three are up for sale for more or less the same reasons: the Gulf Arab investors who initially put up the capital to create these banks have held their positions profitably for decades and are now looking for a suitable exit opportunity.

So far Pakistan’s banks were up for sale for three reasons: Badly managed Nationalised bank, small private bank running losses or a foreign bank with lack of growth strategy. But none of these three apply to the three banks:

None of these three situations apply to any of these banks. Meezan Bank is the fastest growing bank in Pakistan and has never had a single year of losses in its entire history. Bank Alfalah grew from almost nothing to become the sixth largest bank in the country and remains an exceptional bank when it comes to its focus on consumer lending. And Faysal Bank has relationships with most major corporations in Pakistan and has been a solid middle-market player.

So why are these institutions up for sale? Each has its own story, though those stories have a few elements in common. How closely those past trajectories will be a consideration for their prospective buyers is not yet known, though if they are prudent, the potential investors would do well to understand just how these banks got to be where they are today.

Read the long story for more details.

Nice to know all this.

Is India a currency manipulator?

April 16, 2018

The US Treasury in its semi-annual currency report to the Congress has added India on the watchlist of currency manipulators:

Treasury has established a Monitoring List of major trading partners that merit close attention to their currency practices and macroeconomic policies. An economy meeting two of the three criteria in the 2015 Act is placed on the Monitoring List. Once on the Monitoring List, an economy will remain there for at least two consecutive Reports to help ensure that any improvement in performance versus the criteria is durable and is not due to temporary factors. As a further measure, this Administration will add and retain on the Monitoring List any major trading partner that accounts for a large and disproportionate share of the overall U.S. trade deficit even if that economy has not met two of the three criteria from the 2015 Act. In this Report, the Monitoring List comprises China, Japan, Korea, Germany, Switzerland, and India, the latter being added to the Monitoring List in this Report.

Why India has been added?

India increased its purchases of foreign exchange over the first three quarters of 2017. Despite a sharp drop-off in purchases in the fourth quarter, net annual purchases of foreign exchange reached $56 billion in 2017, equivalent to 2.2 percent of GDP. The pick-up in purchases came amidst relatively strong foreign inflows, both of foreign direct investment and portfolio investment. Notwithstanding the increase in intervention, the rupee appreciated by more than 6 percent against the dollar and by more than 3 percent on a real effective basis in 2017. India has a significant bilateral goods trade surplus with the United States, totaling $23 billion in 2017, but India’s current account is in deficit at 1.5 percent of GDP and the exchange rate is not deemed to be undervalued by the IMF. Given that Indian foreign exchange reserves are ample by common metrics, and that India maintains some controls on both inbound and outbound flows of private capital, further reserve accumulation does not appear necessary.


In the earlier report, Treasury had said it is watching India:

Over the first half of 2017, there has been a notable increase in the scale and persistence of India’s net foreign exchange purchases, which have risen to around $42 billion (1.8 percent of GDP) over the four quarters through June 2017. India has a significant bilateral goods trade surplus with the United States, totaling $23 billion over the four quarters through June 2017. Treasury will be closely monitoring India’s foreign exchange and macroeconomic policies.

Mint edit says India is not a currency manipulator:

How are countries accused of currency manipulation by the US Treasury actually identified? There are three parameters that are used, sometimes unthinkingly. First, a country has to run a significant trade surplus of over $20 billion with the US. Second, it is judged not by the amount of currency intervention but whether such an operation is a one-sided attempt to keep the exchange rate down, measured in terms of additional foreign exchange reserves as a percentage of gross domestic product (GDP). Third, a country should have a large current account surplus with the rest of the world. How does India fare on these three fronts?

India does have a $23 billion trade surplus with the US, though that is dwarfed by the $375 billion trade surplus that China runs with the US. Mexico, Japan and Germany have far bigger bilateral trade surpluses. The net foreign exchange purchases by the RBI in 2017 amounted to 2.2% of GDP, which is close to what Thailand, Taiwan and Switzerland have done. And India is the only one of the countries on the US Treasury list that has a current account deficit with the rest of the world. Countries such as Thailand or Mexico were considered far more likely than India to be identified as potential currency manipulators.

Do Indian policymakers have to worry? They should not in normal times. The mechanical way in which the US Treasury interprets its three main parameters for identifying currency manipulation is almost scandalous. Also remember that the US has not yet formally accused China — with its notorious mercantilism — as a currency manipulator. US President Donald Trump had promised during his election campaign to treat China like a currency manipulator. If a country such as China with a massive bilateral trade surplus with the US, a large current account surplus with the rest of the world, and historically unprecedented management of its exchange rate is still only on the watch list, then the chances of India being actually termed a currency manipulator are slim.

The problem is that these are not normal times. Trump is merrily charging into a trade war that has much of the world on tenterhooks. He believes American workers are getting pushed into a corner because of trade partners who get preferential treatment in free trade agreements, or who strategically use trade barriers, or who keep their exchange rates artificially low to promote exports to the US. The new list released by the US Treasury needs to be seen against this background.

Indian policymakers have to be sensitive, without actually overreacting, to the risk that Trump may move from rattling the sabres to actually using them. India has traditionally tried to balance between preventing excess currency appreciation on the one hand and protecting domestic financial stability on the other. Much now depends on how the Indian government and the Indian central bank respond to the implicit US threat — but the two most obvious consequences could be an appreciating rupee as well as excess liquidity that messes with the interest rate policy of the RBI.

Ira Dugal discusses on BQ:

While there is no doubt, that India is now comfortable on forex reserves, the Treasury Department’s own data shows that its reserve accretion in 2017 and level of reserves is comparable to the other trading partners of the U.S.

The report also looks at adequacy of reserves slightly differently from the RBI by measuring it mostly against short-term debt. However, in a 2015 paper, RBI staffers had pointed out that India may need to consider factors other than the traditional metrics of forex reserve adequacy. One such factor is potential volatility of foreign portfolio inflows, since such flows are a significant source of financing India’s current account deficit.

Finally, while supporting the employment generating export sector is not the RBI’s mandate, it would be justified in keeping an eye out on that aspect too. As a flexible inflation targeting central bank, growth is still broadly part of the RBI’s mandate. To the extent that the currency impacts exports, which in turn impacts growth and employment, the Indian central bank would be justified in ensuring that the value of the currency is not wildly out of line with fundamentals just because of a surge in capital flows.

The geo-politics of currency markets…

Evolution and experiences with inflation targeting in different countries..

April 16, 2018

Interesting conference and set of papers at recently concluded conference by Reserve Bank of Australia .

Reading keeps piling up.

The paper on New Zealand Inflation Targeting is important given NZ has added employment to its price stability mandate.

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