Archive for February 8th, 2019

20 years of Indo-Pak classic at Chennai

February 8, 2019

This column by Siddhartha Vaidyanathan takes one back to the classic test match between India and Pakistan at Chennai (28-31 Jan 1999). What a match it was and what quality of players on both sides.

Siddharth manages to get views of few special people who watched the test match.

Absolutely fascinating walk down the memory lane….

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Distributed ledger technology and large value payments: a global game approach

February 8, 2019

Interesting lecture by Hyun Song Shin of BIS. Fairly technical as well.

Payment systems built around distributed ledger technology (DLT) operate by maintaining identical copies of the history of payments among the participant nodes in the payment system. Cryptocurrencies are perhaps the best-known example of the application of DLT, but the applicability of the technology is much broader. Payment systems based on DLT are compatible with oversight by the central bank, and several central banks have conducted successful trials of interbank payments. In these trials, payment system participants transfer digital tokens that are redeemable at the central bank and use DLT to transfer them to other system participants. Decentralised consensus is achieved through agreement of a supermajority of the participants (typically 75-80%) who collectively validate payments. 

Nevertheless, the technology by itself does not overcome the credit needs of the payment system to maintain settlement liquidity. In conventional real-time gross settlement (RTGS) payment systems, the value of daily payments can be over 100 times the deposit balance maintained by the system participant at the central bank. As such, incoming payments are recycled into outgoing payments, and credit provided by the central bank supplements private credit from outside the payment system for the smooth functioning of the system as a whole. 

We examine the liquidity properties of decentralised payment systems in an economic model of payments, in which the cost of credit to finance payments enters explicitly. 

First, in a two-bank example, we illustrate the conceptual distinction between consensus as distributed knowledge and consensus strong enough to sustain a cooperative outcome. In this example, when the cost of credit exceeds a modest threshold, no amount of exchange of messages can elicit the coordination of payments between the two banks. The example focuses attention on the coordination motives of system participants. The cost of credit turns out to be a key determinant of the equilibrium outcome of the game. 

We then proceed to examine a general N-bank game and cast the payment problem as a public good contribution game between N banks in a large-value payment system. The public good has two aspects. The first aspect of the public good is the availability of a clean, reconciled ledger that commands agreement from system participants. This part is where the technological innovation can contribute most. 

The second aspect of the public good is the provision of credit to clients which allows high volume of outgoing payments that sustains the coordination outcome with high flows. We solve for the unique, dominance-solvable equilibrium using global game techniques and provide an exact characterisation of the states of the world at which the coordination outcome is feasible. 

The solution shows that successful coordination is possible in a decentralised setting, but only within a narrow range of fundamentals. The solution is highly sensitive to the cost of credit, and the decentralised equilibrium outcome often fails to reproduce the high-volume payment outcomes that are more normal with central bank balance sheet backing.

Hmm..

India’s Business leaders need to speak out on political issues

February 8, 2019

Sundeep Khanna of Mint in this piece rebukes India’s business leaders for cheering everything the government says: (more…)

Inconvenient truth: How Gujarat forgot Gandhi

February 8, 2019

Mint will be running a series of articles on the 150th birth anniversary of Gandhi.

Tridip Suhrud, a Gandhian scholar in this piece writes how Gujarat and city of Ahmedabad forgot Gandhi:

One of the great gifts of Gandhi to the city was the imagination of the public sphere. The primary imperative for such a space is that it has to be a space of equality. The public sphere, by its very nature, has to be an equal space, an ethical space, a just space. And Gandhi would add two more imperatives—it has to be a virtuous space and a non-violent space.

But the public sphere is not just a well-defined, bounded space, with or without structures. Public sphere is also an imagination, a possibility, and an aspiration. Thus any space, literally any space, including a prison, could become a public sphere. Public sphere is composed of individuals as political subjects, and it is this human subjectivity that informs the nature of the public sphere. Hence, cultivation of a public sphere is, in essence, a cultivation of our subjectivities. Gandhi’s Ashrams were founded in the belief and hope that it is possible to create and foster human subjectivity that recognizes the fundamental equality of all human beings and, possibly, all life forms. The public sphere, if it wishes to be equal, has to be non-rapacious, non-injurious, and opposed to the vivisection of humans and other life forms.

What we hold dear in the city, the institutions that we are proud of, are all creations of an idea of trusteeship that is fundamental to the creation of the public sphere, as public institutions are fundamental to any idea of citizenship. The CEPT, the NID, the Ahmedabad Education Society, the L D Institute of Indology, the IIM, ATIRA and even Sabarmati Ashram and the Gujarat Vidyapith are creations of an idea and practice of trusteeship that is unique to this city, as no other city in modern India has created such a diverse range of institutions based on the simple commitment of public institutions.

In a year which marks the 150th year of Gandhi’s birth, many of the institutions that he established are also celebrating—or will do soon—their centenaries. Between ritualized remembrance and memorialization, these institutions search—not vigorously—for a new purpose. They perhaps know that khadi—the livery of freedom—has also become an instrument of exclusion and insult; that self-volition is subject to subsidy. Ahmedabad remains a city which has a great capacity to laugh and forget, perhaps best illustrated by autorickshaw drivers who faithfully take a young legal scholar, wanting to visit Bapu’s ashram, to Asaram Bapu’s ashram.

The concept of an ashram, with all its limitations and quirks (do not forget that Gandhi’s personal secretary Mahadev Desai called it a menagerie), was one of modern India’s greatest experiments in fostering equality. In principle and in practice, it excluded no one; recognized no boundaries of caste, religion, and gender; all residents eschewed private wealth and personal inheritance; and each person performed bodily labour. Gandhi’s ashram was a microcosm of the public sphere he desired. Yet, the ashram and related institutions had a calling that was different from that of the city, and this autonomy was crucial to fulfilling its purpose without being mired in the everydayness of the industrial city.

Hmm.

Lot more will be written on several aspects of Gandhi…

RBI resumes putting audio recording of Teleconference with Researchers and Analysts on its website..

February 8, 2019

In Feb 2010, RBI started this interesting initiative of a teleconference with researchers and analysts. During that time, RBI used to announce monetary policy every quarter. This was interesting as one saw very specific questions from the researchers/analysts over monetary policy.

However, from Oct-2016 policy, for some unknown reason RBI stopped putting the proceedings of the teleconference on its website. The teleconference was held but never put up on the website.

Under the new Governor, this practice has started again. RBI has put up the audio recording (mp3 format) of the telecon held yesterday. This is a welcome development and RBI should continue putting these telecon (audio and transcripts) on their website.


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