Archive for the ‘Discussion’ Category

How the term Anglo-Saxon became French’s alter-ego and most feared enemy…

September 20, 2017

Emile Chabal (chancellor’s fellow in history at Univ of Edinburgh) has a piece on the Anglo Saxon identity and the French relationship with the term:

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How a rare murder case is changing a nation’s attitudes towards law and order: Case of Iceland

September 19, 2017

Fiona Weber-Steinhaus has a moving piece on how a rare  murder in Iceland is changing so many attitudes in the country.

Iceland mourned Brjansdottir’s loss. Many people used the slogan “I am Birna” while posting on social media about her death. Around 10,000 people marched in a vigil in her honour—a staggering number, given that Iceland’s population is less than 350,000. Both the country’s president and prime minister went to her funeral, which was held in Reykjavik’s main church. In the service, which I attended, a group of Brjansdottir’s friends carried her white coffin. A cameraman of the public broadcaster RUV cried while filming them.

The case of Brjansdottir’s killing has convulsed Iceland so intensely, in part, because of how rare such events are in the country. According to national police statistics, on average, 1.8 murders were committed annually in Iceland between 2000 and 2014—with some years, such as 2008, having none recorded at all. The nation is also one of the least martial in the world, with no standing army, and police officers who largely patrol unarmed. In response to Brjansdottir’s case, however, a wave of anxiety has swept Iceland, starting a public debate about, and perhaps even changing, the small country’s attitudes towards public safety.

One of the first issues up for debate was that of the safety of young women. In general, in Iceland, it is not considered dangerous for women to walk home alone in the early hours. It is even common for them to hitch rides with strangers via Skutlarar, an open Facebook group through which people offer rides in their cars to strangers travelling in the same direction as them. After Brjansdottir’s body was found, some women started a female-only Skutlarar group. When I visited Reykjavik in early February, many women told me that they would refrain from using the conventional Skutlarar in the future.

I met Gudrun Kristinsdottir, a 27-year-old engineering student, in the cafeteria of Reykjavik University. “This case is such a reality check,” she said. “We always thought, nothing happens here.” She now carries pepper spray in her handbag and said she would avoid walking home alone.

Seventeen-year-old Birta Mjöll works as a waitress in an upmarket restaurant. “My mother wants me to call her as soon as I sit in the car after work,” she told me, while polishing cutlery during her shift. “Everyone in Iceland knows the Geirfinnur case,” she added, referring to the mysterious disappearances of two men in Iceland, in 1974. “And now everyone knows Birna’s case.”

The second aspect of public debate focussed on the issue of CCTV surveillance. The footage of Brjansdottir had been too blurry to identify the car, and some argued that this indicated the need for a technical upgrade. In the January press conference, a journalist had asked Chief Superintendent Ásgeirsson: “Isn’t it clear that this security system downtown and here on Laugarvegur would have come to better use if it were in order? Don’t we need a better system?” Ásgeirsson affirmed the journalist’s point: “I can say that I would have liked clearer footage to work with.”

 

Italy, France say ‘we don’t want Jens Weidmann to become ECB president’…

September 18, 2017

In many ways ECB is an ironical central bank.

The central bank is based in Germany and was designed as a replica of Bundesbank. Why? Because no other central bank had a reputation as the formidable German entity. So, if the European countries wanted to give up their mon policy to ECB, they said it better be like Bundesbank. Otherwise again we have a non-credible central bank creating all sorts of problems. Apart from the design, even the location was chosen as German as one always worried over political influence elsewhere. So much so both the central banks are located in Frankfurt within a 4 km distance.

Now, here comes the twist. Given strong German resemblance, one would impagine it is best to let German head the central bank. But no German has headed the central bank until today. Yes, one German has always been on the board but that is just about it. Earlier the German was a chief economist (Otmar Issing, Jurgen Stark). But even that is not the case today as Sabine Lautenschläger, who is a law person is on the board. Infact Axel Weber head of Bundesbank came close to being ECB chief but resigned from Bundesbank amidst lots of controversy.

So, the chief of ECB was first a Dutch, then a French and currently an Italian. They have kept Germany out as the fear remains that with a German not even little political maneuvering will be  possible. With the non-German as a head, one can expect some sympathies in case of a slowdown.

This was tested during the current crisis. Both Weber and Stark did not favor any monetary stimulus by ECB and had runs with the ECB leadership leading to resignations. Post Stark, it became easy for Draghi to take control and convince others for monetary stimulus. However, Bundesbank under the new chief Weidmann continued to oppose the policies.

As Draghi’s term is ending in 2019, the speculations have started early. The Italians and French are again opposed to having Weidmann as President:

In its new edition, Germany’s Der Spiegel magazine reported Friday that Italy and France would object to installing Bundesbank chief Jens Weidmann as head of the European Central Bank after the end of Mario Draghi’s term in 2019.

It said government representatives from both nations had told German Finance Minister Wolfgang Schäuble that they had nothing against a German at the helm of the ECB, “but it must not be Jens Weidmann.”

The report elaborated that southern eurozone nations feared current pragmatic and flexible crisis management measures such as the ECB’s huge bond-buying program as carried out under Draghi would no longer be possible under Weidmann.

While Schäuble said in May he would not take part in any debate about Draghi’s successor, numerous media reports had highlighted his and German Chancellor Angela Merkel’s likely push for Weidmann to become the fourth guardian of the euro currency, after a representative from the Netherlands, France and Italy.

But there may be a whole bunch of contenders for the job of ECB president, among them Bank of France Governor Francois Villeroy de Galhau.

It cannot be taken for granted, though, that the fight for the post will include Jens Weidmann at all. A spokesman for the Bundesbank on Friday quoted him as saying he enjoyed his current job and would certainly stand ready for another term beginning May 2019, should he be asked to do so.

Weidmann has headed the German central bank since 2011.

Even if it is premature speculation, the European leaders will try hard to keep a German central banker heading the Board.

So much so for the ironies…

Does caste discrimination lead to lower rural lending?

September 18, 2017

Interesting paper by  Sunil Mitra Kumar  (King’s College London) and Ragupathy Venkatachalam  of University of London.

They say caste discrimination does not play as big a role in bank lending (based on their data set):

In recent research, we examine the role of caste in rural bank lending (Kumar and Venkatachalam 2016). We are especially interested in examining whether banks discriminate on the basis of caste, and in understanding potential mechanisms behind any caste-based patterns in access to loans. Through these questions, we indirectly address a larger question concerning the effectiveness of affirmative action policies in the financial sector. In a departure from the literature on this issue, we study both the decision to apply for a bank loan, as well as whether that application is subsequently approved by the bank. In brief, we find that access to bank loans is stratified by caste, but that the major proportion of these differences is due to differences in loan application rates. However, we do find evidence of some discrimination against borrowers belonging to Scheduled Tribes (ST) when it comes to loan approvals.

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Our finding that there is little discrimination – and none against SCs – is quite positive, even though the 5-7% lower approval rates for STs likely due to taste-based discrimination are a cause for some concern. But our finding that loan application rates differ significantly across caste groups in a way that mirrors their disadvantage is less positive. While we cannot say for sure, it suggests that historical disadvantage and possibly discrimination are still at play in shaping people’s expectations. It is possible that farmers who do not apply to banks find their credit from informal sources, but this is not encouraging either because such sources offer credit at very high rates. That said, a further set of results in the paper confirm that small farmers – those who own less than five acres of land and whom the RBI encourages lending to – have smaller inter-caste differences in application rates. This too is a positive finding because it suggests that this encouragement has trickled down to the level of expectations too, and has muted caste-based differences in application rates as a result. Caste and credit is not such a woeful tale per se, but more remains to be done. 

These studies can hardly be generalized. An experiment in a different setting could show the opposite results..

How Netherlands has become an agricultural giant by showing what the future of farming could look like.

September 18, 2017

Interesting piece and stunning pictures in Nat Geo’s Sep edition:

In a potato field near the Netherlands’ border with Belgium, Dutch farmer Jacob van den Borne is seated in the cabin of an immense harvester before an instrument panel worthy of the starship Enterprise.

From his perch 10 feet above the ground, he’s monitoring two drones—a driverless tractor roaming the fields and a quadcopter in the air—that provide detailed readings on soil chemistry, water content, nutrients, and growth, measuring the progress of every plant down to the individual potato. Van den Borne’s production numbers testify to the power of this “precision farming,” as it’s known. The global average yield of potatoes per acre is about nine tons. Van den Borne’s fields reliably produce more than 20.

That copious output is made all the more remarkable by the other side of the balance sheet: inputs. Almost two decades ago, the Dutch made a national commitment to sustainable agriculture under the rallying cry “Twice as much food using half as many resources.” Since 2000, van den Borne and many of his fellow farmers have reduced dependence on water for key crops by as much as 90 percent. They’ve almost completely eliminated the use of chemical pesticides on plants in greenhouses, and since 2009 Dutch poultry and livestock producers have cut their use of antibiotics by as much as 60 percent.

 

The seven sins of economists..

September 18, 2017

Pramit Bhattacharya on the 10th anniversary of sub-prime crisis points to 7 sins of economists:

 

  • Sin 1: Alice in Wonderland assumptions
  • Sin 2: Abuse of modelling
  • Sin 3: Intellectual capture
  • Sin 4: The science obsession
  • Sin 5: Perpetuating the myth of ‘the textbook’ and Econ 101
  • Sin 6: Ignoring society
  • Sin 7: Ignoring history

Given the number of omissions and assumptions, one wonders what does the subject include?

Role of media in shaping people’s voting patterns in elections: Case of Fox News..

September 15, 2017

There are broad trends happening in media these days. One, lives of journalists reporting on sensitive political matters is in danger and two, how so called independent media is increasing taking sides with one political party and presenting its news always favoring the same political party.

Two economists have studied the second trend and shows how FOx News is influencing voting behaviour in US elections towards Republicans.

Vox reports the summary:

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75th anniversary of Bank of China branch in Sydney and some interesting history…

September 15, 2017

Philip Lowe, chief of Reserve Bank of Australia shares some history from the Archives at the 75th anniversary.

Back in 1940s it was much easier to open a bank branch in Australia and tougher for people to travel to the country. How global banks and finance is built over the years is a tale of many a struggle:

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Should Indian equity markets extend trading hours?

September 15, 2017

The talks have started again. In 2007 or so at the peak of the global financial cycle there were suggestions to extend market hours as one needed to keep upto global finance.

Once again stock exchanges have asked to extend trading hours till 7.30 PM:

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This old Catholic ritual is giving Brazil’s economy a small boost…

September 14, 2017

Economics and religion is always interesting to read.

Bernardo Figueiredo of RMIT University and Daiane Scaraboto of Universidad Católica de Chile have a fascinating piece. They point how an old Catholic ritual of circulating small sanctuaries containing a Virgin Mary statuette among households creates its own small economy:

Brazilians are moving away from Catholicism. Today, fewer than 50 percent of Brazilians identify as Roman Catholic, down from 92 percent in 1970. But after 500 years in South America, the Catholic Church remains deeply enmeshed Brazil’s economy and society.

Among its many footholds is a little-known tradition called the Movimento das Capelinhas, or “small chapel movement.” This phenomenon, which takes place in hundreds of cities and towns across Brazil, centers on the circulation among Catholic households of small sanctuaries containing a Virgin Mary statuette.

The Movimento das Capelinhas is an example of a circulation-based collaborative network, a kind of hyper-local economy that is popping up across the globe, from one London district’s alternative currency to the time banks of New Zealand.

Such systems appeal because they exchange a narrow focus on economic value (only money matters) for a broader definition of what has value to people. By circulating dear objects in a certain pattern, these collaborative networks distribute their benefits to all involved, and the “profit” goes well beyond the small economic bump communities may see.

The small chapel movement forms part of a long history of Roman Catholic rituals involving sacred relics and statues sent out to tour the world’s parishes.

Protected by their wooden homes, Brazil’s moving Marys pay one-day “visits” to various parishioners’ homes in a semi-formal process determined by neighbors, parishes and lay volunteers. Most chapel groups include about 30 families, such that each family receives one visit a month. Local clergy oversee the Marys’ progress around town.

In doing their rounds, our research found, these peripatetic chapels do more than just physically circulate – their travels actually create profit and value for participants. The end result is a de facto local Catholic “economy,” one based on shared values rather than money.

Read the whole thing for their research  results…

Slovenia’s Central Bank Governor: Institutions Are the People Who Govern Them

September 14, 2017

IMF is running a series of interviews of policymakers from Eastern Europe. First one was of Moldova and the second from Slovenia.

Slovenia Central Bank Governor says something which sums up all there is to development:

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Methods for pricing options in the 19th century..

September 14, 2017

Prof George Dotsis of University of Athens has a piece on how options were priced in 19th century.He builds his research from a book by an option trader: Higgins, L (1906), The put-and-call, Aberdeen: Aberdeen University Press.

As expected, traders back then had figured a way to price options without much jazz as today:

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Game Theory (and Political studies) lessons from Ram Gopal Varma’s movie – Company

September 13, 2017

Housefull Economics continues to entertain but this time it is more grimy and tense as well.

The latest edition features Avinash Tripathi chipping with learning lessons about Game Theory from Ram Gopal Varma’s movie – Company.

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How journalists are under threat across the world…

September 13, 2017

Hannah Storm (Director of the International News Safety Institute) has a piece on rising threats to journalists across most parts of the world:

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Case of Rakuten: When a Japanese company started learning English in order to become global…

September 13, 2017

Fascinating to read this interview of Prof Tesdal Neeley. She has written a book: The Language of Global Success. It talks about how Rakuten which was a Japanese company gradually moved to English in order to become a global company.

This is how Rakuten moved to English:

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Core-econ: A new way to learn economics..

September 13, 2017

I had blogged about the Core-econ textbook – “The Economy” – a few days ago.

John Cassidy adds that it is not about textbook alone but a new approach to teaching economics:

With the new school year starting, there is good news for incoming students of economics—and anybody else who wants to learn about issues like inequality, globalization, and the most efficient ways to tackle climate change. A group of economists from both sides of the Atlantic, part of a project called core Econ, has put together a new introductory economics curriculum, one that is modern, comprehensive, and freely available online.

In this country, many colleges encourage Econ 101 students to buy (or rent) expensive textbooks, which can cost up to three hundred dollars, or even morefor some hardcover editions. The core curriculum includes a lengthy e-book titled “The Economy,” lecture slides, and quizzes to test understanding. Some of the material has already been used successfully at colleges like University College London and Sciences Po, in Paris.

The project is a collaborative effort that emerged after the world financial crisis of 2008–9, and the ensuing Great Recession, when many students (and teachers) complained that existing textbooks didn’t do a good job of explaining what was happening. In many countries, groups of students demanded an overhaul in how economics was taught, with less emphasis on free-market doctrines and more emphasis on real-world problems.

Traditional, wallet-busting introductory textbooks do cover topics like pollution, rising inequality, and speculative busts. But in many cases this material comes after lengthy explanations of more traditional topics: supply-and-demand curves, consumer preferences, the theory of the firm, gains from trade, and the efficiency properties of atomized, competitive markets. In his highly popular “Principles of Economics,” Harvard’s N. Gregory Mankiw begins by listing a set of ten basic principles, which include “Rational people think at the margin,” “Trade can make everybody better off,” and “Markets are usually a good way to organize economic activity.”

The core approach isn’t particularly radical. (Students looking for expositions of Marxian economics or Modern Monetary Theory will have to look elsewhere.) But it treats perfectly competitive markets as special cases rather than the norm, trying to incorporate from the very beginning the progress economists have made during the past forty years or so in analyzing more complex situations: when firms have some monopoly power; people aren’t fully rational; a lot of key information is privately held; and the gains generated by trade, innovation, and finance are distributed very unevenly. The corecurriculum also takes economic history seriously.

Hmm..Thumbs up to taking economic history seriously. I did see the online course which is quite promising.

In another related post, The Gold Standard Blog reflects on Stan Fischer resignation from Federal Reserve and also writes about his disappointing book:

I am not too disappinted by his departure. He has a formidable reputation but he is not a central banker who disturbs the cozy consensus on monetary policy that has prevailed since the crisis of 2008. To me, that is disappointing. In a piece written in October 2016, Howard Davies points to the limits of Central Banking independence and correctly notes that independence goes hand in hand with accountability.

Professor Fischer’s text book co-authored with Dornbusch and Startz is something that I have been using for the macro-economics course I have been teaching at the Singapore Management University for the last four years. I find it somewhat disappointing. It is too ‘consensual’ and does not challenge the students to think for themselves. Its loyalty towards monetary policy – which is set by unaccountable (largely) and unelected technocrats – over fiscal policy which is set by democratically elected and accountable politicians is too obvious and glaring and disappointing too.

Recently, Larry White wrote on why economists have favored and rarely criticised central banks/monetary policy: it gives them jobs!

Mankiw has dominated the microeconomics/general economics textbook and Dornbusch & Fischer (and later  Sytartz) has done the same in macro courses. It is interesting how the crisis has challenged and rightly so, the dominance of these very textbooks. It is all these standardised idy..eas in these books which have led to this decline of thinking the very discipline. All so ironical really…

Equifax hackers are demanding ransom in Bitcoins but not dollars or Euros..Why?

September 12, 2017

The usual logic to the question is that bitcoins are anonymous and thus cannot be tracked, so it is a currency for the criminal class.

Jeffrey A. Tucker gives another perspective:

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Britannia, Jane Austen and the surprising tale of why money has long had a female face in England…

September 12, 2017

We usually are made to think/believe that finance is mainly “a men thing” and women are best kept out of the picture. However, this is not entirely true. This blog has written about women stock brokers  in early history of finance in NY. There must be evidence of their presence in other finance industries as well (for an unrelated area see women’s contribution in computer programming).

Following 2008 crisis, it was suggested that if there were more women in bank boards, may be banks would have been more stable. A recent paper does show this to be the case.

Now, Prof. Claudine van Hensbergen (Eighteenth-Century English Literature, Northumbria University, Newcastle) takes us further back in time. She reflects on the recent decision of Bank of England to print Jane Austin notes and says money has always had a female face in England:

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When Marco Polo saw the paper currency for the first time…

September 12, 2017

Dave Birch has a piece in Medium. 

History of paper money started in  China and via Marco Polo tales the world came to learn of it.

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Importance of understanding legal aspects of central banks: Case of appointment at Reserve Bank of New Zealand…

September 11, 2017

The role of economics and law especially in central banking is becoming an increasingly an important topic. But as economic students, we hardly study law and whatever little is mostly for contracts etc.

Given how central banks are basically a legal entity and what is broadly does is defined under law, there should be much more attention on central bank act, its governance and highly crucial appointment rules.  Things like appointment rules immediately raise the question of how and why central bank statutes differ across countries? The answers lie in political economy and other aspects which we just miss.

Croaking Cassandra blog has been writing on how the appointments of chief of New Zealand are not as per law. The crux of the matter is the currenct Gpvernor term is getting over and NZ is facing elections. The Government has decided to appoint an interim Governor and appoint a full-term one only after elections. But the central bank law does not allow this.

In its recent post, Cassandra again raises the issue:

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