Archive for June 28th, 2018

Low-cost Bengaluru-Kochi flights threaten bus monopoly..

June 28, 2018

Always nice to read stories on competition in transport sector.

There has always been this competition between railways and bus while travelling between Karnataka and Kerala. Apparently, the flight operators have entered the act too by offering cheap tickets from Bangalore to Kozhhikode and then using buses to travel to parts of Kerala.

This is fine but the article minimises the headache of reaching Bangalore airport. Some thought should be given to it too…



COBOL: The antique code that runs the financial system

June 28, 2018

As we talk so much about digital and high end technology in finance, here is a crude reminder: The ancient COBOL still runs the financial system.

The last time you used an ATM, chances are the transaction was powered by a nearly 60-year-old computer programming language.

Common Business-Oriented Language—the ancient computer code better known as COBOL—was developed in 1959 as a business-focused standard programming language, and is still relied upon by banks around the world. It’s responsible for $3 trillion in commerce in the US every day. As of 2014, 92 of the top 100 banks, as well as 71% of the companies in the Fortune 500, were still running COBOL programs on mainframe computers.

And if it’s not broke, why fix it? Well, with COBOL, when something does break, there soon may not be anyone left who can. The baby boomers who know the language best are either retired or close to it, and those who would replace them just do not find COBOL very sexy.

So what happens next?

Back to physical world?

Preparing for a world without Libor

June 28, 2018

William Dudley, Former President of NY Fed in this important speech says how we need to prepare for a world without Libor.

The reference rates are important but Libor has serious defects:


Has inflation targeting become less credible?

June 28, 2018

New paper by by  Nathan Sussman and Osnat Zohar of BIS.

BIS has also adopted a new way to summarise its research papers:


Since the 2008 financial crisis, oil prices have become highly correlated with inflation expectations for the medium term. This occurred in several countries, implying a global phenomenon. To trace its origins, we decompose oil prices into two factors: one capturing global aggregate demand and the second capturing oil-specific elements. Our measure of global demand is based on the strong co-movement of commodity prices. The oil-specific elements include OPEC’s strategic behavior and shocks to oil demand caused by the weather. We use this decomposition to explain changes in global inflation expectations.


Central bankers were concerned that the increased correlation between inflation expectations and oil prices might indicate an un-anchoring of expectations. If this were the case, the credibility of inflation targeting might be declining. We test for un-anchoring using a framework based on a global Phillips curve. This framework allows us to trace the origins of the change that occurred after the global crisis.


We find that global aggregate demand has affected inflation expectations more since the crisis than it did in the past. Meanwhile, the effect of oil-specific factors remained low and stable. Since oil prices convey information about aggregate demand, their correlation with expectations has increased. Does this change indicate that expectations became un-anchored? Our model for global expectations suggests otherwise. We find that, after the crisis, inflation itself was perceived to react more strongly to aggregate demand. Rational agents thus adjusted their expectations more strongly when aggregate conditions changed. It appears that inflation targeting has remained credible.

Hmm.. Much simpler to figure research this way..

The Dhoti: From Indus Valley to the Ramp

June 28, 2018

Another superb piece from Madras Courier tracking history of the mighty Dhoti. What a journey for centuries old garment and how it has been used by Indian politicians for years…

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