The Reserve Bank of India needs to engage with history

My debut piece in Moneycontrol. I argue that where other central banks look so much at their history, RBI is largely ahistorical in whatever it does.

 

 

Niranjan’s contribution to Mint newspaper and financial media should be appreciated

This post is a farewell to Niranjan Rajadhyaksha, the executive editor of Mint who writes an amazing column named Café Economics. Niranjan is quitting Mint and moving onto IDFC Institute. This is quite a catch for IDFC Institute and an absolute loss for Mint.

Should Federal Reserve provide accounts to all?

JP Koning in his new piece points to a new research which suggests to open a FedAccount, a bank account for the excluded:

What if you and I could bank at the Federal Reserve? This is the premise behind a new paper by Morgan Ricks, John Crawford, and Lev Menand titled “A Public Option for Bank Accounts (or Central Banking for All).” Under the authors’ plan, the Fed would provide the public with FedAccounts, interest-paying no-fee accounts that could use the Fed’s underlying payments platform to effect free transfers to other accounts and enable point-of-sale purchases via a Fed-provided debit card. The Fed would not provide account holders with loans. 

While the authors provide a number of motivations for providing FedAccounts, a key one is financial inclusion. Around 7 percent of American households, or 9 million households, are currently unbanked, which means no individual in the household has bank-account access. Not only would the welfare of each individual who gains financial access improve, according to the authors, but society would enjoy significant positive externalities as those on the other side of the equation, say employers or businesses, could use a more efficient payments option.

The authors present central banking for all as a plan targeted at the United States rather than a universal one, and for good reason. Bank penetration is at 99 percent in the United States’ northern neighbor Canada, illustrating that banking is quite capable of filtering into most of society’s nooks and crannies.

Canada provides a natural foil for the United States because it shares many characteristics including geography, culture, and history. Why would bank penetration rates suddenly rise dramatically just a few meters north of the 49th parallel? If we can answer this question, the United States might simply copy whatever Canada is doing rather than experimenting. 

It is amazing how Canada almost has everything better compared to US in monetary matters. But its achievements are barely discussed…

 

 

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The historical meaning of the Reserve Bank of New Zealand’s Armistice Day coin

Brilliant article by Matthew Wright of RBNZ. You seldom see researchers in a central bank write history of World War-I.

This year the Reserve Bank is releasing a coloured circulating fifty cent coin to mark Armistice Day, the effective end of the First World War. This follows a similar coin issued in 2015 to mark the Gallipoli campaign. Both coins feature new-technology minting processes, and both were especially commissioned to mark these events as the Reserve Bank of New Zealand’s contribution to the government First World War centenary celebrations.²

This article outlines the historical meaning of the armistice and gives a particular context for the Armistice Day coin. It also describes the special design of the coin, which is one of only two coloured circulating coins issued in New Zealand.

Lessons learned from 10 years of quantitative easing

American Enterprise Institute conducted this interesting panel discussion on the 10 years of QE.

On Thursday, AEI’s Desmond Lachman and Brookings Institution’s Ben Bernanke discussed whether quantitative easing (QE) programs have successfully stimulated the US economy in the 10 years since the Federal Reserve launched its first program. Mr. Bernanke argued that QE has blurred the distinction between monetary and fiscal policy tools. Mr. Bernanke and Mr. Lachman evaluated the merits of tools the Federal Reserve and other central banks can use to stimulate growth and examined the possibilities and risks of innovative economic policy tools.

Following their conversation, a panel of economic policy experts discussed the success of economic policy reforms in recent years. The Hoover Institution’s Kevin Warsh argued that the first round of QE was successful and the second round may have positively affected employment and output to a minor extent. Yale University’s Stephen Roach pointed out that, though the first round of QE was successful, successive rounds were less successful, which suggests their marginal diminishing returns for economic recovery. Joseph E. Gagnon of the Peterson Institute for International Economics argued that QE effects mirror conventional monetary policy effects and that the program has benefited the economy so far. 

There is both transcript and videos.

Lots of different views. The one by Alex Pollock at the end is quite interesting..

Monetary policy as a study of nocturnal activity

Jerome Powell gave this recent speech at Jackson Hole Symposium.

In conventional models of the economy, major economic quantities such as inflation, unemployment, and the growth rate of gross domestic product (GDP) fluctuate around values that are considered “normal,” or “natural,” or “desired.” The FOMC has chosen a 2 percent inflation objective as one of these desired values. The other values are not directly observed, nor can they be chosen by anyone. Instead, these values result from myriad interactions throughout the economy. In the FOMC’s quarterly Summary of Economic Projections (SEP), participants state their individual views on the longer-run normal values for the growth rate of GDP, the unemployment rate, and the federal funds rate.

These fundamental structural features of the economy are also known by more familiar names such as the “natural rate of unemployment” and “potential output growth.” The longer-run federal funds rate minus long-run inflation is the “neutral real interest rate.” At the Fed and elsewhere, analysts talk about these values so often that they have acquired shorthand names. For example, u* (pronounced “u star”) is the natural rate of unemployment, r* (“r star”) is the neutral real rate of interest, and Π* (“pi star”) is the inflation objective. According to the conventional thinking, policymakers should navigate by these stars. In that sense, they are very much akin to celestial stars.

For example, the famous Taylor rule calls for setting the federal funds rate based on where inflation and unemployment stand in relation to the stars. If inflation is higher than Π*, raise the real federal funds rate relative to r*. The higher real interest rate will, through various channels, tend to moderate spending by businesses and households, which will reduce upward pressure on prices and wages as the economy cools off. In contrast, if the unemployment rate is above u*, lower the real federal funds rate relative to r*, which will stimulate spending and raise employment.

Navigating by the stars can sound straightforward. Guiding policy by the stars in practice, however, has been quite challenging of late because our best assessments of the location of the stars have been changing significantly.

Hmm.. Nice way to show what mon policy does..:-)

He points how policy in previous years has erred in estimating the positions of these stars:

Around 1965, the United States entered a period of high and volatile inflation that ended with inflation in double digits in the early 1980s. Multiple factors, including monetary policy errors, contributed to the Great Inflation. Many researchers have concluded that a key mistake was that monetary policymakers placed too much emphasis on imprecise–and, as it turns out, overly optimistic–real-time estimates of the natural rate of unemployment.⁶

Figure 3 compares the CBO’s current view of the natural rate of unemployment in that era with an estimate by Athanasios Orphanides and John Williams of the rate as policymakers perceived it in real time. From 1965 to the early 1980s, this real-time estimate of u* was well below where hindsight now places it. The unemployment rate over this period was generally well above the real-time natural rate, and contemporary documents reveal that policymakers were wary of pushing the unemployment rate even further above u* (figure 4, top panel).⁷ With the benefit of hindsight, we now think that, except for a few years in the mid-1970s, the labor market was tight and contributing to inflation’s rise (figure 4, lower panel).

It is now clear that the FOMC had placed too much emphasis on its imprecise estimates of u* and too little emphasis on evidence of rising inflation expectations. The Great Inflation did, however, prompt an “expectations revolution” in macroeconomic thinking, with one overwhelmingly important lesson for monetary policymakers: Anchoring longer-term inflation expectations is a vital precondition for reaching all other monetary policy goals.⁸

Hmm… In 1990s they avoided similar mistake:

The second half of the 1990s confronted policymakers with a situation that was in some ways the flipside of that in the Great Inflation. In mid-1996, the unemployment rate was below the natural rate as perceived in real time, and many FOMC participants and others were forecasting growth above the economy’s potential. Sentiment was building on the FOMC to raise the federal funds rate to head off the risk of rising inflation.⁹ But Chairman Greenspan had a hunch that the United States was experiencing the wonders of a “new economy” in which improved productivity growth would allow faster output growth and lower unemployment, without serious inflation risks. Greenspan argued that the FOMC should hold off on rate increases.

Over the next two years, thanks to his considerable fortitude, Greenspan prevailed, and the FOMC raised the federal funds rate only once from mid-1996 through late 1998.¹⁰ Starting in 1996, the economy boomed and the unemployment rate fell, but, contrary to conventional wisdom at the time, inflation fell.¹¹

Once again, shifting stars help explain the performance of inflation, which many had seen as a puzzle. Whereas during the Great Inflation period the real-time natural rate of unemployment had been well below our current-day assessment, in the new-economy period, this relation was reversed (figure 3). The labor market looked to be tight and getting tighter in real time, but in retrospect, we estimate that there was slack in the labor market in 1996 and early 1997, and the labor market only tightened appreciably through 1998 (figure 4). Greenspan was also right that the potential growth rate had shifted up. With hindsight, we recognize today that higher potential growth could accommodate the very strong growth that actually materialized, let alone the moderate growth policymakers were forecasting.¹²

The FOMC thus avoided the Great-Inflation-era mistake of overemphasizing imprecise estimates of the stars. Under Chairman Greenspan’s leadership, the Committee converged on a risk-management strategy that can be distilled into a simple request: Let’s wait one more meeting; if there are clearer signs of inflation, we will commence tightening.¹³ Meeting after meeting, the Committee held off on rate increases while believing that signs of rising inflation would soon appear. And meeting after meeting, inflation gradually declined.

This wait and watch approach is also called the Brainard principle as Powell tells us later in the speech.

Here is Anantha Nageshwaran calling the speech as Hole in Jackson Hole, where he says Powell is basically contradicting himself.

 

 

World War I, Gold, and the Great Depression

Nice post by Hu Mcculloch. He revisits the Great Depression and says it was Gold Standard which was primarily responsible for the deep crisis we had back then.

My own view, after pondering the problem for many decades, is that indeed the Depression was monetary in origin, but that the ultimate blame lies not with U.S. domestic monetary and financial policy during the 1920s and 30s. Rather, the massive deflation was an inevitable consequence of Europe’s departure from the gold standard during World War I —  and its bungled and abrupt attempt to return to gold in the late 1920s.

In brief, the departure of the European belligerents from gold in 1914 massively reduced the global demand for gold, leading to the inflation of prices in terms of gold — and, therefore, in terms of currencies like the U.S. dollar which were convertible to gold at a fixed parity. After the war, Europe initially postponed its return to gold, leading to a plateau of high prices during the 1920s that came to be perceived as the new normal. In the late 1920s, there was a scramble to return to the pre-war gold standard, with the inevitable consequence that commodity prices — in terms of gold, and therefore in terms of the dollar — had to return to something approaching their 1914 level.

The deflation was thus inevitable, but was made much more harmful by its postponement and then abruptness. In retrospect, the UK could have returned to its pre-war parity with far less pain by emulating the U.S. post-Civil War policy of freezing the monetary base until the price level gradually fell to its pre-war level. France should not have over-devalued the franc, and then should have monetized its gold influx rather than acting as a global gold sink. Gold reserve ratios were unnecessarily high, especially in France.

And as there was no Gold Standard during 2008 crisis, the policies should not have reacted asif we are about to face another Great Depression:

Thinking about interactions between monetary and macroprudential policy: Learning from zebras and wildebeest

Nice speech by Jens Weidmann of Bundesbank.

He starts with

The Bundesbank is honoured to have organised this evening’s dinner. And for me, it’s a great pleasure to be here with you at the Annual Meeting of the Central Bank Research Association, or CEBRA for short.

CEBRA is a fine example of the art of the acronym. If you think about central bankers, I dare say creativity won’t exactly be the first quality that springs to mind. But coining new acronyms does appear to be one discipline that really gets central bankers’ creative juices flowing. We also came up with CAMELS, which stands for capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. However, our acronyms are not just confined to hoofed animals. There is TARGET, of course. And we have ART, for alternative risk transfer; CAR, for capital adequacy ratio; and CEIOPS, which is short for Committee of European Insurance and Occupational Pensions Supervisors and has a certain pyramid ring to it.

Examples of contrived acronyms abound: they have been intentionally designed to convey a positive connotation or double meaning. In the case of CEBRA, one naturally thinks of those wild animals that are closely related to horses and populate Africa’s grasslands and savannahs. With their distinctive black and white stripes, zebra are a snappy image for the academic dialogue and discourse which we cherish at conferences such as this. But zebra are also known for forming large herds and intermingling with other mammals, especially with wildebeest, which are also known as gnus. Both species subsist on grasses, and you might think that they compete for food. So how come they graze peacefully in mixed herds? What’s behind their special relationship?

This was a long run-up, but it does lead to one of the key issues addressed at this year’s meeting: What’s behind the special relationship between monetary and macroprudential policies? What are the linkages between monetary policy and financial stability, and what follows from there?

In this context he draws insights from the animal kingdom on how macropru and mon policy should co-exist:

Taking on financial stability as an additional objective for monetary policy would likely do more harm than good. Nevertheless, central banks can play a productive role in safeguarding financial stability. It certainly makes sense to harness central banks’ high level of expertise with regard to financial stability risks. However, the “weapon of choice” for combatting these risks is not monetary policy – it is macroprudential policy. In his first speech as a Governor at the Federal Reserve Board, Ben Bernanke demanded: “Use the right tool for the job.”⁸

To stretch the analogy with the African fauna further, this is something we could compare to the feeding habits of zebra and wildebeest. They graze alongside each other, of course, but they actually feed from different grass heights, with zebra preferring taller grass and wildebeest focusing on short grass. Researchers have attributed this selection to anatomic differences in mouth dimensions.⁹

In a similar vein, macroprudential instruments can be used in a far more targeted way than monetary policy. They cut the grass at a different level, so to speak. This is of particular use with respect to the euro area. Macroprudential tools can be employed at the level of member countries to combat problematic developments in national financial systems – developments that cannot be counteracted by the single monetary policy.

Superb..

The global financial crisis of 1825 foreshadowed the problems of emerging markets today

Superb piece by Gwynn Guilford.

He revisits the economic situation in 1820s and how it fuelled the global bubble then leading to an eventual crash:

Indeed, nearly two centuries later, not a lot has changed. In his review of the 1825 disaster and the dozens more that followed, Pettis draws an important distinction between two types of global financial crises.

On one hand are those that hit in the middle of a globalization cycle, when international financial centers are still in the process of whipping up liquidity. These types of financial crises can certainly be disruptive and dramatic—think the 1994 Mexican Tequila crisis and the Asian financial crisis of 1997. But they’re seldom catastrophic. Thanks to the steady global demand for big debt issues, financing strains tend to be temporary and markets recover swiftly.

Then there are those that break out at the end of a globalization cycle, exemplified on a tiny scale by the events of the 1820s. Triggered by a sudden scarcity of capital, these long-term liquidity contractions are the ones that wind up devastating local economies for years to come, crippling global growth in the process.

The current moment looks more like the latter: the twilight of an era of easy money and frenzied financial globalization. Already Argentina is already in financial shambles, with Turkey hot on its heels. Will the crisis spread from there? Maybe not: The slow-building threat of US tightening has given emerging-market leaders plenty of time to build reserves, limit reliance of dollar-denominated sovereign debt, and rein in budget deficits.

But if the lessons of history are anything to go by, the deeper their ties to global financial centers, the less control smaller countries have over their own monetary systems—which means there may be more shakeups ahead.

Lot more in the piece..

Amravati 2018 bonds listed on BSE…

Indore Municipality recently raised bonds on NSE.

There has been talk of Government of Andhra Pradesh raising money for building its proposed capital of Amravati via bonds. The bonds were issued on 14 August and got listed on BSE today:

Andhra Pradesh CM Nara Chandrababu Naidu on Monday rang the opening bell to mark the listing ceremony of ‘Amaravati Bond 2018’ at Bombay Stock Exchange (BSE). The bond was issued by Andhra Pradesh Capital Region Development Authority (APCRDA) for the construction of the state capital, Amaravati. 

The platform was launched on July 1, 2016, to facilitate online bidding for private placement of debt securities. Since then, 120 issuers have garnered Rs 4.86 lakh crore through the exchange mechanism, reports PTI.

“On August 14, 2018, APCRDA successfully raised Rs 2,000 crore by issuing bonds on private placement basis using BSE BOND platform,” the exchange said in a statement.

“Amaravati Bond 2018 has created history by over-subscription raising Rs 2,000 crore and is the testimony of investors’ confidence in Andhra Pradesh and Amaravati. This will help in developing Amaravati as smart, sustainable and happy city and as a global destination of people, jobs and investments,” Andhra Pradesh CM Chandrababu Naidu said.

Interesting developments in history of bond finance in India. It also tells us that old-age competitive rivalry between BSE and NSE could move from equity to debt space as well. NSE has been the clear winner in equity space and it will be interesting whether BSE can create some competition in the debt space…

Update:

This piece raises concerns on the bonds – 10.32%-  being on the higher side

The long road to building an Indian banking union: Learning history backwards from European Banking Union

My new piece in Mint.

One usually does historical research by going into past and try figure evolution and make sense of the world today. There is another way where we look at evolution in current terms in some economy and try & figure whether and how we could apply these ideas to some economy in the past.

The case of ongoing developments in European Banking Union belongs to the second category. As the members of Europe try and build a banking union, it gives us this rare opportunity to look at banking union in other countries as well.

This piece in Mint looks briefly at how banking union gradually developed in India as well. The comparisons are fascinating and striking…

 

White men’s privilege in emerging economies isn’t measured. It should be

Prof. Melissa Tandiwe Myambo of University of Johannesburg has this interesting piece:

RBI’s monetary policy has been circumscribed by CPI inflation targeting…

Worldwide central banks are getting criticised for their narrow inflation targeting mandates. Latest is this piece which has asked BoE to include growth in its target. NZ has already widened its mandate by including employment.

The how can India which has just recently moved to inflation targeting be left behind?

EPW’s recent editpiece argues to revisit the mandate. They say RBI recent rate hike is a Pavlovian response (:-)):

The Reserve Bank of India (RBI) has indulged in one more Pavlovian response to the self-propagated inflationary expectations by increasing the policy (repo) rate for the second time in succession—first from 6% to 6.25% and further to 6.50%—along with similar quarter percentage point increases in the reverse repo rate, the marginal standing facility rate, and the bank rate. The objective is to push up the cost of liquid funds supplied by the RBI to the banks and consequently make bank loans more expensive for the borrowers; potentially to contain retail inflation within the mandated range.

It is indeed disconcerting that in the management of the national economy the two potent instruments of public policies—fiscal and monetary—have been pigeonholed into a narrow groove of the liberal economic framework, barring them from serving the wider objectives of higher growth, more employment opportunities, and diminishing social inequalities. The path of fiscal consolidation has led to inadequate allocation of public funds for social sectors, where India’s progress stands behind many peer countries. The incidence of such a phenomenon has further widened inequalities in the system.

In the case of the monetary policy, the RBI’s sole responsi­bility has been narrowed to a legislative mandate of inflation targeting within a range of 4%, +/–2% in the medium term, subject to a single interest rate policy vis-à-vis the liquidity adjustment for banks. Almost all retired RBI governors have objected to such circumscription of monetary policy, broadly on the grounds that exclusive attention to inflation is defocusing the central bank of its larger developmental objectives. Much of the inflationary processes in India are driven by supply-side issues over which the RBI has little control. Thus, the monetary policy transmission mechanism remains a weak spot. Various independent studies have questioned the RBI’s claim that movements in CPI inflation rates have been achieved by its repo rate changes.

Also, there are multiple measures of inflation—consumer price index (CPI), wholesale price index, and the gross domestic product (GDP) deflators—with each having different relevance for different players, namely, consumers and producers. A classic example is the successful dairy movement in Gujarat, which had proved that price increases in a developing economy serve as incentives for producers to increase production. Considering the relative price behaviour of various commodities and services, the 4% CPI target may be unduly low. Within inflation, there are subsets such as headline and core inflation. But, as the RBI governor admitted at the latest press conference, “The legislated target is on CPI headline and our policy is oriented to keep that at 4%.”

It is high time for both the RBI and the government to make a choice between legislative mandates of inflation rate targeting and a holistic approach for development management. The RBI should aim at promoting financial savings in the economy, which is a crying need; ensure a positive real rate of return to depositors on their bank deposits, which still remains a major and easy instrument of making savings for the vast masses; and customise fiscal incentives for small savers who, despite predominating the saving community, are usually bypassed by fiscal interventions. While it is not the intention to revert to the erstwhile rigorous interest rate control regime, one single prescription, namely bank deposits with a one-year maturity should get a minimum of +2% real rate of return on the previous year’s CPI inflation rate. The other prevalent savings rates, including the savings deposit rate, the postal rates, etc, will get adjusted over time. The additional cost of funds so imposed on the banks will be taken care of in the marginal cost of funds based lending rate (MCLR) which has been prescribed for banks to follow.

On the matters relating to the deployment of bank credit for development purposes, one gets a distinct impression that the authorities are overwhelmed by the twin balance sheet problems of corporates and banks due to non-performing assets (NPAs). On the other hand, there is an overwhelming dominance of the informal sectors in the Indian economic structure which are neglected by the banking system. Since the Indian banking system has not tapped the millions of unincorporated enterprises operating in different sectors of the economy, India’s private bank credit to GDP ratio is as low as 52% in comparison to the 110% or more in many comparable economies. Substantial thinking should go into the organisational and instrumental needs of banks for tapping these potentially large numbers for productive credit dispensation. Also, the industrialisation process has suffered due to the closure of large development finance institutions, and the new proposal made by the RBI almost a year and a half ago has not taken off. But, no attempt has been made to find out why. A plausible ideological weakness of this proposal is its exclusive emphasis on the private sector–led non-banking finance companies. These can never mobilise the required resources for rendering long-term finance for industry unless there is public sector support.

Considering, thus, the vast sets of developmental issues awaiting the attention of the RBI and the government at this stage of development, it is time that a high-powered commission is appointed to undertake detailed probing of the issues involved and come out with appropriate recommendations.

These arguements are barely new. Infact as it was felt that RBI has been unable to do so many functions leading to ignorance of inflation. leading to regime of inflation targeting. The whole idea that RBI should play a role in development of the country is as old as the institution itself.

But then we are living in such times that old arguments keep coming back given the dissatisfaction with the overall state of economy. Just that they have come a bit too soon in case of RBI…

 

How trade led to growth during Iron Age..

Lots of econ history in this research.

Jan Bakker, Stephan Maurer, Jörn-Steffen Pischke and Ferdinand Rauch in this paper look at really old evidence of trade leading to growth:

Economists often point out the benefits of trade, yet empirical evidence for these benefits has been hard to come by and tends to be recent. This column goes back to the first millennium BC to analyse the growth effects of one of the first major trade expansions in human history: the systematic crossing of the open sea in the Mediterranean by the Phoenicians. A strong positive relationship between connectedness and archaeological sites suggests a large role for geography and trade in development even at such an early juncture in history.

Hmm…Fascinating stuff.

Full paper is here

 

How governments bank with their central bank: Case of Australia

One of the least known aspect of central bank operations is how the governments bank with them. After all central bank is banker to the government and plays a crucial role in government policies. But both the government and central banks are usually silent about these operations.

This is a rare speech from Lindsay Boulton Assistant Governor of Reserve Bank of Australia. He gives us some insights into how Australian government banks with their central bank.

There are two banking services RBA provides to the government:

Pope’s Army Gets Help From Ex-Central Banker for Vatican Revamp

Popery has long benefited from wisdom of top bankers of their times. Earlier Rothschilds would advise the Vatican over their mismanaged finances.

Catherine Bosley writes how the Vatican continues to take services of bankers. Just that it is a central banker this time and the services sought is not just financial:

Pope Francis’s guards need a new barracks and they’re getting help from a different kind of power — a central banker.

Former Swiss National Bank President Jean-Pierre Roth, who oversaw the 2008 bailout of UBS, is now chairman of a foundation working to refurbish the quarters of the Vatican-based unit famous for its Renaissance-style uniforms, including striped pantaloons and helmets festooned with feathers.

His advocacy for the Swiss Guards isn’t the path usually chosen by central bankers. Many have tended to go for think tanks and academia — such as former Federal Reserve Chair Janet Yellen and ex-Bank of England chief Mervyn King. Finance attracted Roth’s SNB successor Philipp Hildebrand, who is now vice chairman of BlackRock. Roth, who retired from the SNB in late 2009, also serves on the boards of both Nestle and Swatch Group.

The Pontifical corps, whose recruits even today must be unmarried Swiss Catholic men under the age of 30 and have “irreproachable reputations,” have served the Papacy since 1506 and look after the pontiff’s safety. But their accommodation is no longer fit for purpose and needs to be rebuilt.

“It’s not only that the buildings need an overhaul, but there’s also the need for more space,” Roth said in a telephone interview. “The number of guards will be expanded somewhat in coming years, and the rules on marriage were made more flexible. The 19th-century layout doesn’t work any more.”

Hmm..

The Digital Freedom Pass: Emancipation from digital slavery

We will soon need all kinds of treatment from digital slavery which is spreading thick and fast.

Dennis Snower President of Kiel Institute for World Economics gives a suggestion to emancipate from the slavery:

Digital identity management is currently undertaken by central identity providers, with users providing their data free to digital networks that own their digital identities. If users leave their digital networks, they must leave all their digital possessions, including their digital identities, behind. This system is analogous to slavery. It is neither efficient nor equitable. Users have no assurance that the value of the free data they provide bears any relation to the value of the free services they receive. The digital networks have overwhelming market power relative to their users. 

This column argues for reform in the form of a Digital Freedom Pass, – the digital equivalent of a wallet containing verified pieces of an individual’s digital identity. The person can then choose which identification to share, with whom, and when, allowing emancipation from our current digital slavery. 

This also will not work as most of us are clueless.

What is instead needed is limitation of digital processes and products in our lives. There are places where we could do away with digital technology but we are just imposing it on people.

The last glassmakers of Kapadwanj (Gujarat)

I had written about a lone bell maker left in a Greece town which boasted of few hundreds at one point of time.

We have a similar story of a glassmaker in town of Kapadwanj in Gujarat:

The problem with historical illustrations of Free-Banking Systems: We should welcome banking failures…

Jesús Huerta de Soto, professor of economics at King Juan Carlos University has a nice piece.

He says most of the discussions on free banking are around the fact that there were less banking failures and thus were safer compared to non-free banking era. But that is a wrong way to put things. Bank failures show that the cycle is continuing and should be welcome, The regulated banking systems prevent banking failures which is actually a sign of weakness and not strength:

Venezuela’s currency and inflation troubles: New Sovereign Bolivar replaces Strong Bolivar

The currency name Bolivar is dedicated to hero of Latin American independence Simón Bolívar. I am sure he would not be one bit happy with the association given the repeated currency troubles in the country.

President Maduro has introduced a new currency named New Sovereign Bolivar to replace the old one named Strong Bolivar. This will knock off 5 zeroes from the older currency:

Caracas will begin issuing new banknotes after slashing five zeroes off the crippled bolivar.

The new sovereign bolivar, named as such to distinguish it from the current strong bolivar (which has proven to be anything but), will be anchored to Venezuela’s widely discredited cryptocurrency, the petro.

Each petro will be worth around $60 (£47), based on the price of a barrel of the country’s oil.

That will be 3,600 sovereign bolivars in the new currency, which signals a massive devaluation.

In addition, the minimum wage will be fixed at half a petro (1,800 sovereign bolivars) from Monday.

This is about $28 (£22), more than 34 times the previous level of less than a dollar at the prevailing black market rate.

Some more discussion here.