Archive for the ‘Discussion’ Category

Course on detection of academic bullshit..

April 19, 2019

Ananth Nageswaran in this post tells us about this course which helps detect academic bullshit.

The world is awash in bullshit. Politicians are unconstrained by facts. Science is conducted by press release. Higher education rewards bullshit over analytic thought. Startup culture elevates bullshit to high art. Advertisers wink conspiratorially and invite us to join them in seeing through all the bullshit — and take advantage of our lowered guard to bombard us with bullshit of the second order. The majority of administrative activity, whether in private business or the public sphere, seems to be little more than a sophisticated exercise in the combinatorial reassembly of bullshit.

We’re sick of it. It’s time to do something, and as educators, one constructive thing we know how to do is to teach people. So, the aim of this course is to help students navigate the bullshit-rich modern environment by identifying bullshit, seeing through it, and combating it with effective analysis and argument.

What do we mean, exactly, by bullshit and calling bullshit? As a first approximation:

Bullshit involves language, statistical figures, data graphics, and other forms of presentation intended to persuade by impressing and overwhelming a reader or listener, with a blatant disregard for truth and logical coherence.

Calling bullshit is a performative utterance, a speech act in which one publicly repudiates something objectionable. The scope of targets is broader than bullshit alone. You can call bullshit on bullshit, but you can also call bullshit on lies, treachery, trickery, or injustice.

In this course we will teach you how to spot the former and effectively perform the latter.

While bullshit may reach its apogee in the political domain, this is not a course on political bullshit. Instead, we will focus on bullshit that comes clad in the trappings of scholarly discourse. Traditionally, such highbrow nonsense has come couched in big words and fancy rhetoric, but more and more we see it presented instead in the guise of big data and fancy algorithms — and these quantitative, statistical, and computational forms of bullshit are those that we will be addressing in the present course.

Of course an advertisement is trying to sell you something, but do you know whether the TED talk you watched last night is also bullshit — and if so, can you explain why? Can you see the problem with the latest New York Times or Washington Post article fawning over some startup’s big data analytics? Can you tell when a clinical trial reported in the New England Journal or JAMA is trustworthy, and when it is just a veiled press release for some big pharma company?

Our aim in this course is to teach you how to think critically about the data and models that constitute evidence in the social and natural sciences.

Carl T. Bergstrom and Jevin West
Seattle, WA.



What explains India’s farm distress? Demand or Supply?

April 19, 2019

Hrish Damodaran had earlier written a piece on how India was suffering from an oversupply in case of food supplies leading to decline in prices. This was used to explain the current distress in farm not just by Harish but several others.

Rosan Kishore in HT provides a rebuttal to the narrative. He says it is not a case of oversupply but of decline in demand. This is just like Keynes arguing his case for Great Depression as well!:

In an article published in The Indian Express on 18 April, Harish Damodaran has argued that “production glut, not dearth of cold storage and processing infrastructure, is the real cause of farm distress (in India) today”. The argument, if true, has serious ramifications for Indian agriculture. This is because it suggests that the only way to deal with farm distress is to reduce agricultural production in the country.

This is an interesting argument, but does it have a macroeconomic justification? The article cites problems of potato and sugar cane farmers in some districts of Uttar Pradesh, but such anecdotal evidence may not warrant the radical inference. Indeed, such an argument focuses almost entirely on supply side factors without looking at demand side issues. And two, it does not recognise the fundamental asymmetry which characterizes global agricultural markets.

Whether or not a particular commodity is in excess supply in a market also depends on the level of demand for it, which is a function of many things including purchasing power and preferences. For example, if all billionaires were to vanish from the world tomorrow, we would suddenly have a glut of private jets. Similarly, if the number of billionaires suddenly doubled in six months, there would be a severe scarcity for these jets. Both of these situations can arise without any change in the supply of private jets in the world.

What many commentators do not realise is that demand for food also varies drastically among countries. This becomes clear by a comparison using the data published by the Food and Agricultural Organisation (FAO). The relevant category to look at in the FAO database is per capita supply of food items.

India is nowhere close to reaching peak food consumption levels in the world. This (price crash for food items) could have happened if mass purchasing powers have come under squeeze in the recent period. Unfortunately, there is no consumption expenditure data to accept or reject this claim. The recently leaked findings of the National Sample Survey Office (NSSO) employment survey did suggest that the Indian economy has fared badly on the employment front. If these findings are true, there is bound to have been a negative impact on mass purchasing powers. To be sure, farm incomes have also suffered in India due to the adverse turn in international food prices, which have brought down export opportunities and earnings and also created problems for crops such as sugar cane.

Also, agrarian distress is not something which has suddenly appeared in India in the past couple of years. Viability of the average Indian farmer has been in crisis for a long time now. What many people do not realise is that this is not a problem which is unique to India. Even in a country like the US, where farming is extremely mechanised and practiced on very large farms, prices cannot cover the cost of production for important crops such as wheat and cotton. Statistics from the United States Department of Agriculture show that the difference between value of output and total costs has been continuously negative in the US.


Evolution of Fed’s inflation target from 1.5% to 2%..

April 19, 2019

Adam Shapiro and Daniel J. Wilson of San Francisco Fed in this research trace the numerical value of Fed’s inflation target:

A narrative analysis of the historical FOMC meeting transcripts indicates that FOMC participants generally expressed a preference for an inflation target around 1½% from 2000 to around 2007. By the end of the Great Recession in 2009, however, the consensus had clearly shifted to 2%. This became the official target announced to the public in 2012. One plausible explanation for this shift is that hitting the zero lower bound in a low inflation environment brought the potential benefits of a higher inflation target to the forefront. As many academic studies and even FOMC participants have discussed, a higher inflation target could potentially lower the risk of hitting the zero lower bound in future recessions.

We also found that actual inflation from 2000 to 2007 was considerably above the 1½% consensus preferred target. Does this imply the FOMC failed in meeting its objectives during this period? Not necessarily. First, while FOMC participants may explicitly state in private their preferred rate of inflation, the committee’s monetary policy actions may be consistent with a different target. Second, the FOMC’s objectives may have included higher economic growth in addition to having inflation near its target, as found in Shapiro and Wilson (2019). With such multiple objectives, achieving higher growth over a given period could involve some trade-off with inflation being above target.

When and who mentioned inflation target first?

Discussions of explicit inflation targeting did not begin to appear in the FOMC meetings until around 1994. Before then, FOMC participants occasionally mentioned an objective of “price stability” without relating that to an explicit inflation target. One illuminating exception was a statement by Federal Reserve Board Governor David Mullins in the November 1993 meeting that suggested an implicit target moving below 3% by that time: “I think there’s a real payoff not just from stabilizing inflation in the 3–4% range but in moving lower.”

The first serious consideration of an explicit inflation target we could find comes from St. Louis Fed President Thomas Meltzer in 1994. At the July meeting that year, he said, “If we don’t make an explicit statement in this FOMC testimony with respect to our long-run expectations on inflation that goes beyond ‘we think price stability is good,’ and get more specific in terms of a target range, then at the very least I think we have to make it clear that we consider 3% inflation to be unacceptable.” A few meetings later, in November 1994, he stated: “I feel that it may be time for us to consider setting a specific inflation target that looks out into the future. I think, and this point was made as well, that it could make our job considerably easier in circumstances like the present—with upward cyclical inflationary pressures—if people were willing to look out to a longer-range target and that added to credibility.”


Argentina’s high inflation leads people to bitcoins ….

April 18, 2019

Interesting bit of news:

Argentina’s economy suffers from chronic inflation to such an extent that no monetary measure seems to work. According to the Financial Times,

Argentina is trapped in a vicious circle. Demand of just a few million dollars in an illiquid market can weaken the peso, as has been the case since early March. Exchange rate depreciation leads quickly to increases in inflation, portfolio dollarization, and higher interest rates — now the central bank’s only means of defending the currency.

The fact that Bitcoin is inflation-resistant makes it particularly attractive in this environment.
Consequently, many see Bitcoin as a potential alternative. They are advocating, even to the government, greater integration of the cryptocurrency into Argentina’s economy.

Bitcoin has already become integrated into many business activities. For instance, in 37 cities, public transportation users are indirectly using Bitcoin to pay for their rides, while Bitcoin ATMs are becoming more conspicuous in Buenos Aires.

Most relevant, President Mauricio Macri’s administration has already shown interest in Bitcoin and, its underlying technology, blockchain. For example, in March 2019, the government announced a partnership with Binance Labs, the blockchain technology incubator of Bitcoin exchange giant Binance. At the announcement, the government promised to match 1:1 Binance investment.

This would surely please Satoshi Nakamoto!

Will Vijaya Bank merger sway electoral results in Dakshin Kannada?

April 18, 2019

The Central government ignored the protests of people of Dakshin Kannada over merger of “their Vijaya Bank” with Bank of Baroda.

Vikram Gopal reports that the ruling party will face ire of the Bunt community of the region, which formed Vijaya Bank :

In the village of Machina, about 50km from the city, a fresh coat of plaster on the board outside a Vijaya Bank branch announces that it will henceforth be called Bank of Baroda. Resident H Subbayya Shetty says it is hard to digest the fact that the bank he worked in for 34 years is losing its identity. Shetty began his career as a clerk and retired as the managing director of the bank’s housing finance department. He was also leader of Vijaya Bank employees’ union.

Over its 88-year history, the bank came to symbolise the pride of the Bunt community, starting from the pre-Independence days. In the 1970s, when the community’s lands were redistributed to tillers as part of land reforms, the bank helped the Bunts transition out of the agrarian economy.

The government mandated a merger of the public sector Vijaya Bank and Dena Bank with Bank of Baroda on April 1, to create a more competitive financial institution. It has now turned into an emotive community pride issue in coastal Karnataka — where five of India’s prominent banks were founded in the first half of the 20th century, a fact acknowledged by Prime Minister Narendra Modi at a recent rally here.

Protests were held in the region condemning the merger. The Congress is trying to cash in on the issue in Dakshina Kannada, a seat that has been the stronghold of the Bharatiya Janata Party since 1991 and which will go to the polls on Thursday, along with 13 other Lok Sabha constituencies in the state. Congress candidate, Mithun Rai, is a member of the Bunt community as is the sitting BJP MP Nalin Kumar Kateel.

Rai says the issue is important because the community feels a sense of loss. Kateel, in turn, argues that the merger was initiated by the previous United Progressive Alliance (UPA) government led by the Congress.

A major chunk of the community has supported the BJP over the past three decades, said Vijay Prasad Alva, secretary of the Federation of Bunts Associations. However, this time around there was disenchantment against two-time winner Kateel, because of his failure on this front. “Kateel should have tried to put forward the community’s concerns on the matter,” Alva said. This though would not automatically translate into support for the Congress, Alva said, because the disenchantment was against the political class as a whole.


The merger has been challenged legally with petitions pending before the Supreme Court. Dinesh Hegde Ulepady, a lawyer involved in the case, said the merger felt cruel “because the Bank of Baroda and Dena Bank were making losses and Vijaya Bank was turning in a profit”.

However, the real letdown, according to Ulepady, was the apathetic attitude of the major political parties. “It is not enough to hold symbolic protests,” he said, adding that there are two petitions before the SC, one challenging the failure to nominate bank employees on the board, which predated the merger. “The other is a petition challenging the merger itself,” he said.

This is Dakshin Kannada region for you. As the late Dr Thingalaya explained to me, there is enormous pride in the region over their banks. There is a reason why people are so effected by this merger and loss of identity as the region’s 5 banks are their identity.

It will be interesting to see the election results in this region. After all it is perhaps a unique moment in banking history that it could influence election results too…


The financial sector must be at the heart of tackling climate change..

April 17, 2019

Climate change is again becoming central to policy.

Central  bank Governors of France and England have written an open letter along with Frank Elderson (Chair of the Network for Greening the Financial System):


A walk tracing the history of Kozhikode..

April 17, 2019

On World Heritage day tomorrow, a group of people are doing a walk to take through heritage of Kozhikode:

To mark World Heritage Day on Thursday, a group of heritage enthusiasts will trace the trail covering Tali, Palayam, S.M. Street and Mananchira in the city that offers an insight into the most vibrant chapters of the chequered history of Kozhikode.
Captain Ramesh Babu, project manager of the National Institute for Research and Development in Defence Shipbuilding (Nirdesh), who is leading the heritage walk, from 6.30 a.m. to 9 a.m., said that Kozhikode had a history dating back to the 8th Century, making it one of the oldest port cities on the West Coast of India.
“The city is a treasure trove of history, left behind by Porlathiri and Samoothiri kings, maritime traders from Arabia, Africa, Greece, Turkey and China; conquerors from Mysore, colonisers from Europe and many trading communities from other parts of India,” he said.
Should be fascinating. Pass on the word to those in the historic city..

Why are we so moved by the plight of the Notre Dame?

April 17, 2019

Marrakesh milestone: 25th anniversary of the WTO’s founding agreements

April 16, 2019

From WTO (an institution which is barely discussed):

Twenty-five years ago, on 15 April 1994, representatives from more than 120 nations gathered in Marrakesh, Morocco, to sign what was described at the time as the “greatest trade agreement in history”, one which led to the establishment of the WTO and created a new global framework for liberalizing trade in goods and services, protecting intellectual property rights, and easing trade tensions through a new dispute resolution mechanism.

The texts signed in Marrakesh on that day were the result of the 1986-94 Uruguay Round negotiations, an unprecedented endeavour in international trade which produced more than 60 agreements and decisions totalling 550 pages – making it one of the largest treaties ever signed. The signing took place at a meeting of trade ministers to the General Agreement on Tariffs and Trade (GATT) and led to the transformation of the GATT into the WTO.

The WTO’s creation on 1 January 1995 marked the biggest reform of international trade since after the Second World War. It also brought to reality — in an updated form — the failed attempt in 1948 to create an International Trade Organization.  Today the WTO has 164 members accounting for 98% of world trade.

“The agreements you will sign here this week mean opportunities to expand trade, economic growth and employment,” declared Peter Sutherland, the last GATT Director-General and the WTO’s first Director-General, at the opening of the Marrakesh meeting. “They mean opportunities to promote sustainable development.  And they also mean an opportunity – the most significant one we have had for fifty years – to build a new basis for global economic cooperation.” His full speech is available here.

Good to note this…

Monetary Policy Transmission in Financial Markets: Evidence from India

April 16, 2019

Edwin Prabu (of RBI) and Prof Partha Ray  in this EPW paper:

In the Indian context, a key question is addressed: What has been the influence of monetary policy on different segments of the financial markets? Constructing a structural vector autoregressive model with the monetary policy rate, the pattern of monetary transmission to financial markets is examined over three distinct periods of regime changes in the Indian monetary policy and liquidity management framework. The empirical evidence indicates that there is sufficient period-specific transmission of monetary policy across the different segments of the financial markets. While the transmission of monetary policy to the money and bond markets is found to be fast and efficient, the impact of the policy rates on the forex and stock markets is limited.

Policy implications:

Monetary transmission is often implicitly seen to be a two-stage process whereby in the first stage monetary policy affects the different segments of the financial markets, and in the second stage, the impact of the financial markets gets transmitted to the real sector of the economy. The present paper looks into the first stage of this process.

Our results indicate that the impact not only varies across different segments of the financial markets, but it is also sensitive to the operating procedure of the monetary policy. Expectedly, our results find the primacy of the call rate in the money markets and are in consonance with the official RBI stance of treating the weighted average of overnight call money rate as the operating target of monetary policy. In particular, there is differentiation in the monetary policy transmission to the financial markets in India, being faster and persistent for the call and bond markets, to the least impactful for the forex and stock markets.

As far as the periodicity the transmission is concerned, in the first period (April 2005 to April 2011), the positive shock to the repo rate did not have any impact on the call money, while in both the second (May 2011 to June 2016, when the liquidity framework was fine-tuned with a clear operating target and introduction of term repo) and the third (July 2016 to December 2018, following the introduction of flexible inflation targeting) periods it was found to be quite high.

As already indicated, these impacts are the first stage impacts of monetary policy on financial markets. As is well known, monetary policy works through the Wall Street but wants to influence the Main Street ultimately. How can we link this story of financial markets to the real sector? This question remains unanswered in this paper and constitutes the agenda for further research.


History of Federal Reserve: Interviews of former policymakers and senior staff

April 16, 2019

Amazing initiative by Federal Reserve:

The Federal Reserve Board on Friday published transcripts of more than 50 interviews with former policymakers and former senior staff that chronicle nearly half a century of Federal Reserve history.

The interviews, including with former chairs Paul A. Volcker, Alan Greenspan, and Janet L. Yellen, provide personal recollections of important economic, monetary policy, and regulatory developments. They also provide impressions of life and culture at the Federal Reserve Board.

Read the interviews here. One could do a macro course on these interviews..

Indian Fiscal Federalism: A Few Empirical Questions (Review of Dr YV Reddy’s book)…

April 11, 2019

Prof Lekha Chakrabarty reviews Dr Reddy’s new book on Indian fiscal federalism.

The book titled “Indian Fiscal Federalism” co-authored by Y V Reddy and G R Reddy is written from a “practioner’s perspective”. The simplicity of this book is appealing, especially when the content of the book is about a very complex set of rules and games between the Centre and the States. I have identified a few “empirical questions” in the book. Let me confine my discussion to these empirical aspects.
One aspect that received less adequate recognition in the context of “what holds India together” is the role of Finance Commissions1. The book rightly highlights the significance of the existing institutional mechanisms for providing “predictability in the federal fiscal relations” along with the smooth transition of political regimes through peaceful elections, State Re-organization mechanisms and the other institutions of economic management.  The book throws light into these aspects of “asymmetric” and “co-operative” federalism in India.  There was “continuity”. There was “change”. The effectiveness of such processes in creating “convergence” is an empirical question. Such empirical questions have gained significance globally.
In Brooking Papers (2017)2 there was a similar analysis of “economic convergence” about whether “Europe as a political project too ambitious?” They have found that there is a great extent of “economic convergence” within the European Union, despite widening cultural and institutional heterogeneities within an “economically integrated” Europe. However, the “cultural divergence” – “nationalism” – is the stumbling block. Such issues have started appearing even in the well-functioning federations like the US, with “protectionist” policies.

UK Labour Party considering house price target for Bank of England

April 11, 2019

Howard Davies in a speech on the 20th anniversary of the Financial Stability Institute (conference here) said the following:

The Financial Stability industry has expanded greatly in the last decade. As well as the Institute there is of course a Board. The IMF publishes a six-monthly Global Financial Stability Report. Every self respecting central bank publishes one, and some regulators do too.

I have never sought to claim personal responsibility for this industry, but perhaps I can immodestly mention my part in it today. I am as certain as I can be that the first Financial Stability Review to be published was the one I launched at the Bank of England in 1996 (ref 1). (Slide 2). In a review of FSRs Martin Cihak et al (ref 2) credit it as the first edition. The first editorial was signed ‘Prudence’, which was an in-joke: Prudence was the name of my wife. Indeed it still is.

The Bank’s FSR was both successful and unsuccessful. It has inspired a huge number of followers, over 50 of them by 2012 according to Cihak. But at the time our objective was to show that the Bank was concerned about financial risks. In 1996 we knew there was a chance that an incoming Labour government would strip the Bank of responsibility for banking supervision. It had not covered itself with glory in the Baring’s debacle. So we thought it a smart  move to publish a new report, in partnership with the Securities and Investment Board, then the UK’s principal securities regulator, to show that we could do joined up analysis of markets. In that sense it was a failure. The Labour government did move supervision out of the Bank in 1997. Of course it has since returned there, but  that is another story.

So essentially, the Bank of England started Fin Stability Report to try and persuade the new incoming Labour Government to keep banking supervision with the central bank. But the government still took it away to FSA only for the powers to come back to Bank of England after the 2008 crisis.

Having said that, Labour Party did reform the central bank and gave it inflation target.

Once again, UK’s Labour party is thinking of trying to give a new target to the central bank:


“What is the future of cash in the UK? Less cash but not cashless

April 11, 2019

Sarah John, Chief Cashier of Bank of England (one who signs the banknotes) in this speech looks at this question most central bankers are asking: What is the future of cash?


Foreign banks in Central and Eastern Europe becoming easy prey for the populists…

April 10, 2019

Erik Berglöf, a former chief economist of EBRD in this Proj Syndicate piece:

After socialism collapsed, a small number of banks based in the European Union invested heavily in retail networks, helping to build these countries’ financial systems from scratch and massively increasing citizens’ financial access. And these strategic retail banks stayed put during the crisis when other capital flows dried up.

They stayed thanks to the Vienna Initiative, an ambitious coordination effort involving home- and host-country regulators and supervisors, finance ministries, international financial institutions, and, most importantly, the strategic banks. On March 27, veterans of the crisis gathered in the Austrian capital to mark the initiative’s ten-year anniversary. There is much to celebrate: it saved Europe from a devastating banking collapse, and helped to manage risks during the eurozone crisis.

But the Western European banks that the initiative saved now face an uncertain future in Central and Eastern Europe. Their investments in the region have become stranded assets ready to be picked off by local populists. And, unsurprisingly, Hungarian Prime Minister Viktor Orbán has led the attack.

Foreign banks in Hungary and elsewhere became objects of hate and loathing during the financial crisis. Urged on by the banks’ over-eager financial advisers, citizens rushed to take out loans in euros, dollars, and even yen, and suddenly found themselves with crushing debts when the crisis caused domestic currencies to tumble. When repayments lagged, banks were quick to foreclose on homes, cars, and companies. Taxing the banks, as Orbán did, seemed only fair.

Furthermore, Orbán’s taxes allowed OTP, Hungary’s own cross-border bank, to rebuild its balance sheet and strengthen its domestic franchise after it had itself become overextended before the crisis. Foreign banks in Hungary had to redefine their strategies radically, and in some cases seek support from international financial institutions. Many simply pulled up stakes and left.

This is part of a broader pattern across emerging markets. Most foreign banks intend to continue withdrawing, and those that stay increasingly fund themselves through local deposits. Although there are fewer foreign banks, some – especially Russian and Chinese banks – have increased their presence through acquisitions and growth, resulting in greater market concentration. (And Russian banks would have had a much greater presence were it not for international sanctions.)

Foreign banks’ ongoing retreat from emerging Europe is all the more remarkable given that the regulatory framework within the EU has improved massively over the past decade. Although the EU’s banking union is certainly not perfect, cross-border banking is now supported by institutions and instruments that those leading the Vienna Initiative could only have dreamed about.

Income transfers meet Gandhian and Rawlsian ideals

April 9, 2019

Ajit Ranade in this article reflects on Congress Party’s NYAY scheme:

The idea of guaranteeing a certain basic income (or more generally “capabilities”) to every citizen is implicit in the classic treatise of John Rawls, A Theory Of Justice. Coincidentally, it was published in 1971, the same year that Indira Gandhi launched her “Garibi Hatao” (eradicate poverty) plan, which of course did not succeed.

Rawls’ theory is based on two principles: first, equal rights and maximum liberties for all (of opportunity, speech and other freedoms), but only so long as one person’s liberty does not diminish another person’s liberty; and second, allowing worsening inequality only so long as the worst-off person’s prospects are not made any worse.

This second principle says tha tthe well-being of society at large is judged by looking at the worst-off person. The one who is last in line. This resonates with Mahatma Gandhi, who wrote five decades before Rawls, “Recall the face of poorest and the weakest …and ask yourself, is your (policy) going to be of any use to him?…”

The focus on enhancing the welfare of the poorest and the weakest is often called the “Rawlsian” notion of justice and fairness. The Rawlsian idea of bettering the prospects of the worst off stands in contrast to the utilitarian notion of raising society’s average (in terms of income growth or per-capita income). Most democracies and capitalist societies have embraced the Rawlsian idea.

In a more practical sense, Joseph Stiglitz has pointed out that a dollar given to the poor ends up being spent as consumption, whereas a dollar given to the rich ends up as savings. Hence on the margin, to some extent, redistribution can be growth-enhancing. Thus, whether we take recourse to the philosophy of Rawls or Gandhi, or talk of growth maximization, the logic of cash transfers to the poor cannot be refuted. The debate is only about how and how much.

2019 marks 75 years of IMF and 50 years of SDR: time for a truly global currency?

April 8, 2019

José Antonio Ocampo (board member of Banco de la República, Colombia’s central bank) writes in Project Syndicate.

He points how  apart from 75 years of BW institutions such as World Bank and IMF, 2019 also marks 50 years of IMF’s currency Special Drawing Rights.  This makes it good to revamp both SDR and how IMF has been using SDR:


How banking regulatory environments are differing after the crisis?

April 8, 2019

Howard Davies in this Project Syndicate piece says that the crisis impacted banks similarly across developed world. However, the regulatory responses have been different which reflects in their share prices as well:

What is noteworthy in this cycle, however, is that while the impact of the crisis was fairly similar in most developed countries (with some idiosyncratic features in each case), the regulatory pendulum is not swinging back in the same way outside the United States.

In the United Kingdom, banks are only this year implementing new ring-fencing rules enforcing a separation of their investment banking activities from their retail and commercial activities, at a time when the analogous Volcker Rule in the US (which in any case is far less constraining) is being watered down. A new senior managers regime is being introduced in London for banks and insurance companies, tightening up the requirements on directors. In the eurozone, the banking union similarly remains in a re-regulation phase, both centrally and country by country. And earlier this month, the French authorities imposed a new countercyclical buffer – a capital surcharge – at a time when the economy is slowing sharply (if it is not already in recession).

In Europe, there is evidently little or no political appetite for deregulation of the financial sector. European right-wing populists are as hostile to bankers as their left-wing counterparts. In this area, the Trump agenda finds no takers at all.

The markets have noticed this transatlantic difference in regulatory cycles. Most European banks are trading at well below their book value, in some cases below 50%, while US bank valuations have recovered. That no doubt partly reflects the US and European economies’ relative growth rates, and their different interest-rate curves, but expectations of future regulatory requirements are also part of the mix.

And yet this misalignment of regulatory cycles matters less than one might think, because US and European retail and commercial banks do not compete very directly. Global banks – those beasts with a presence in all major markets – are as out of fashion as flared trousers. But there is head-to-head competition in investment banking, with US banks’ market share in Europe rising in the last decade.

Perhaps different societal choices are implicitly being made. European governments have seemingly concluded that hosting large, risky, and volatile financial firms and markets is not worth it, while the US administration still regards the financial sector as a comparative advantage for New York. We will not know for a while yet which side has made the wiser choice.


Pakistan launches regulations for Electronic Money Institutions and looking to issue digital currency by 2025…

April 8, 2019

State Bank of Pakistan launched regulations for Electronic Money Institutions:

The State Bank of Pakistan (SBP) held today the launching ceremony of regulations of Electronic Money Institutions (EMIs) in Islamabad. Federal Minister for Finance, Revenue and Economic Affairs, Mr. Asad Umar was the chief guest. EMIs are non-bank entities that will be licensed by the SBP to issue e-money for the purpose of digital payments.

Addressing the meeting, the Finance Minister appreciated the launching of this new category of institutions which will complement the efforts of Government of Pakistan in creating an enabling environment to empower stakeholders in trade and commerce. This will help businesses in improving their productivity and contributing towards positioning the nation for global competition.

The Finance Minister said that the Government was determined to transform the country into a knowledge economy by making IT one of the top contributors in Pakistan’s economy and job creation besides producing world-class knowledge workers in sync with international market trends. “It is our government’s policy to encourage the use of e-commerce amongst public through awareness campaigns to promote a culture of e-commerce in the country, which
supports electronic business transactions at national, regional and international levels,” he elaborated. He also highlighted the importance of cyber security which is a growing threat for the financial institutions.

The Finance Minister termed the launching of electronic money institutions as a game changer for promoting e-commerce and digital economy in the country.

Further, the Finance Minister spoke on issuing digital currency:

The State Bank of Pakistan (SBP), the country’s central bank, is considering the launch of a digital currency by 2025.

According to a report from news source Dawn on Tuesday, SBP deputy governor Jameel Ahmad said that the central bank is currently working on the digital currency concept in order to “promote financial inclusion and reduce inefficiency and corruption.”

The central bank is also reportedly planning to make its services “fully digitized and technology equipped” by the year 2030.

In light of the proposed digitization efforts, Pakistan’s finance minister Asad Umar asked the central bank and the country’s Federal Investigation Agency (FIA) to ensure cybersecurity in the banking system, the report adds, as a failure here could cause damage to confidence in the system and the economy.


This city bans cars every Sunday—and people love it: Case of Bogota

April 8, 2019

Interesting article in Nat Geo with amazing pictures:

It’s like falling in love all over again; every Sunday without fail, and holidays too, the inhabitants of the car-choked, noise-filled, stressed-out city of Bogotá, 8,660 feet up in the thin air of the Andes, get to feel that the city belongs to them, and not to the 1,600,000 suicidal private cars, 50,000 homicidal taxis, nine thousand gasping buses, and some half-million demented motorcycles that otherwise pack into the buzzing capital of Colombia.

The weekly miracle occurs at an event you could call the Peaceful Community Gathering on Wheels, but is actually named the Ciclovía, or Bicycle Way. Starting at seven in the morning and until two in the afternoon, vast stretches of the city’s principal avenues and highways are turned over to everyone looking to enjoy a bit of fresh air. All kinds of transportation are welcome—bicycles, roller skates, scooters, wheelchairs, skateboards—as long as they are not motor-driven.

Nice bit..

Ironically, in India we continue to measure cities by width of roads and lengths of cars…

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