Trade globalisation in the last two centuries..

September 20, 2016

Usually accounts suggest first round of globalisation started in 1870. Though, these are just the European and US accounts which ignore historic trading ties in Asia and Middle East much before trading picked up in Europe.

Anyways, Michel Fouquin and Jules Hugot take the 1870 date a little backward. They say globalisation started in 1840:

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How and why lender of last resort function differs across the countries?

September 19, 2016

Charles Calomiris , Marc Flandreau and Luc Laeven have a really interesting paper on the topic.

Reading through Indian economic/monetary history using coins..

September 19, 2016

Prof. Pankaj Tandon who accidentally got into numismatics, now has quite an interesting story to tell.

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India and Pakistan: A tale of two economies

September 19, 2016

Ankit Mittal has a nice article comparing India and Pakistan economies historically. The younger lot may not know but there was a time when Pakistan had better economic and social indicators. Infact as Mittal shows, there is very little to seperate between the two countries.

In the end it all boiled down to institutions in the two countries. In India, they were bent but did not break down. Though in Pakistan this was not the case:

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Used car market growing and becoming organised in India..

September 19, 2016

Used car market in India seems to be following a similar trajectory as seen elsewhere.

Unlike the new car market, which has traversed some rough patches of late, India’s used car market has had a relatively stable growth. From 1.6 million units (worth Rs 38,500 crore) in 2011, it is today pegged at 3.3 million units (Rs 96,000 crore). According to Nagendra Palle, MD, Mahindra First Choice Wheels Ltd, the used car or pre-owned car market will continue to grow at a steady pace of 15% to touch Rs 2,50,000 crore or 6.6 million units by 2021.

Initially, the market was small and mostly like an unorganised market. There were few brands available and even fewer financing options. People bought cars and kept them for near life time. The scope for development of used market was too narrow.

Then  number of car brands increase and they bombard people with repeated offers and financing options. This leads people to begin changing cars more often. As the used cars are relatively new, they begin to go into the used market. Seeing an opportunity, both existing car players and new unused players get into the used market. Earlier ads highlighted why buy second hand vehicle as these things shoukd be first hand.  But now second hand ones become are no more seen as a pariah and become easily accepted..


Rupee devaluation by Commerce Ministry! Give me a break…

September 16, 2016

Financial markets work a lot on rumors and market gossip.  Infact, it is difficult to distinguish information from market noise. This is what makes markets exciting and frustrating at the same time.

Yesterday was one such day. A leading business channel flashed that Commerce Ministry is mulling devaluation of Rupee.

Rupee depreciated against the dollar with a news report emerging today that the commerce ministry is pushing for devaluation of the rupee. The currency unit thus reversed its initial gains. Reports on a TV news channel suggested that theFinance Ministry and Commerce Ministry would discuss calibrated devaluation of the rupee on September 20 to boost exports. 

The reports were later denied by both the ministries, which led to trimming of the depreciation. 

Rupee resumed higher today at 66.88 per dollar as against the closing level of 66.89 per dollar in the Forex market and firmed up further to 66.82 per dollar on initial dollar selling from banks and exporters. 

However, reports led to the weakening of the rupee by 0.28% to 67.0750 to the dollar before the denial to the reports came. The denial caused the rupee to recover and it was trading at 67.0550 at 1.01 pm.  There was no truth to reports of a rupee devaluation, economic affairs secretary Shaktikanta Das said. Das said the rupee’s value was determined by the market and that there was no plan to change policy on the currency’s valuation.

Minister of state (independent) for commerce and  industry Nirmala Sitharaman  also  tweeted that “I had no conversation on devaluation of any currency with any news correspondent. Any quotes/mentions referring to me on this topic baseless.

I mean it was even fine to suggest Finance Ministry planning such a move after all it can devalue the currency by mere fiat. But Commerce Ministry can’t really do any such thing.

We have hardly done these things since currency started to broadly float since 1991. It has been a managed float where central bank has intervened off and on but govt has largely stayed away from any such fiat.

The media should check what it is publishing/streaming. You can’t be as random as this…

The trouble with macroeconomics ( a scathing critique by Paul Romer)

September 16, 2016

Finally a central banker admitted the truth. On being asked how monetary policy decisions are taken with all the data and science, Bank of Israel chief replied: “This is art, not science”. Moreover, it is all about how much the central banker can credibly hoodwink the media/experts into accepting that the policy is right. As long as this can be done, nothing else actually matters.

Anyways this post is more about this scathing criticism be Paul Romer on state of macro. There has been a lot of it already but this one will be one of the top most criiticism as it comes from a person who has seen and done it all:

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India’s Business schools or Hogwarts school of money?

September 16, 2016

Anuvaub Paul (a comedian), reflects on his experiences of interacting with an Indian B-school based at Pune.

Being an MBA himself he is really surprised to see students having similar career choices as they had during his time. He is also disappointed how clueless students are and are just chasing these jobs for salaries so that edu loan can be repaid:

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What are Kangaroo bonds?

September 15, 2016

Michelle Bergmann and Anna Nitschke of Reserve Bank of Australia (who else) has a note on this.

These are bonds issues by foreign companies to raise Australian Dollars. Interestingly, they are useful for cross-currency swap purposes:

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River Cauvery dispute: By putting government in charge of a river, we get shortages of water

September 15, 2016

Jairaj Devadiga at FEE has an age old solution for the ongoing water dispute between states of Karnataka and Tamil Nadu – private property rights:

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Short history of how Central Park in New York was built..

September 15, 2016

David Shulyer has a nice short history of the project that led to iconic Central Park.

He says it was one of the best investment NY has ever made:

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The Scandinavian fantasy: The sources of intergenerational mobility in Denmark and the US

September 15, 2016

Rasmus Landersø and James Heckman poke holes at the Scandinavian economic model:

Could you pass O-level economics in Pakistan?

September 15, 2016

Francis Woolley posts content of the economics textbook used in Pakistan for teaching economics at O level.

Interesting bit…

Similarities in Wells Fargo’s fake bank account opening and Indian Banks’ Jan Dhan 1 Rupee deposits…

September 14, 2016

Banking and its crazy targets have similar stories across the world.

Wells Fargo employees got caught in a fake account opening case. Soon thereafter Indian Express reported how Indian bankers contributed Re 1 to several Jan Dhan accounts which had zero balances till date. Post Wells Fargo and before IE break out, Dhirendra Kumar of Valueresearch anyways said how these events are quite common to Indian banking.

Much of this is due to crazy pressure to meet quarterly/annual targets…It is amazing how all the banks/other firms keep revising their target upwards each year. Ask any sales person and he will tell you how difficult it was to meet previous year’s targets only to see management revise it upwards next year!

Growth at the cost of anything is the bottomline for most companies/banks..The model had to break down someday…

Bank of England trying to draw parallels between finance and cricket..

September 14, 2016

Wow! Bank of England’s One Bank Seminar series has invited former West Indian ace Michael Holding to give a talk.

Michael Holding, former West Indies cricketer and current Sky Sports commentator, will join us for the next One Bank Flagship seminar on 14 September.  

The Bank’s Chief Economist, Andy Haldane, will join Michael to draw parallels between the world of cricket and finance – discussing issues of leadership, diversity and team-building.

Michael, nicknamed Whispering Death due to his silent yet fast bowling prowess, starred on the West Indies team from 1975-1987. During this time he earned 249 wickets in 60 tests, and played a further 102 one day internationals. Michael was named Wisden Cricketer of the Year in 1977, and is also credited with bowling “the greatest over in Test history”, against English batsman Geoff Boycott in 1981. 

Since retiring from his sterling international career, Michael has released two books ‘Whispering Death’ and ‘No Holding Back’ and has moved on to become a popular TV commentator, working with Sky Sports in the UK since 1995.

The seminar starts in a little above 1 hr from the time of posting.

Will be interesting to see this for sure..

Where Do Monetary Rules Come From and How Do They Work?

September 14, 2016

David Glasner has an interesting post on thinking about mon policy rules.

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Why do business channels ask former/working executives about economics/ economic policy?

September 14, 2016

Bill Mcbride just says it and nails it:

A short rant – I always find this irritating. If I interviewed Jack Welch (former GE CEO), I’d ask about company finance, marketing, manufacturing, product development, hiring and training and more. That would be a wonderful learning experience. But I wouldn’t ask if he could solve a three dimensional differential equation in real time on TV!

However business channel talking heads always ask about the economy and economic policy. Welch would give a more coherent answer if you asked about 3-D differential equation than economics: he would probably just say “I don’t know”. That should be his answer to economic questions.

Today’s example is former Home Depot CEO Bernie Marcus. I’d enjoy asking Mr. Marcus about subjects he knows – how he financed the growth of Home Depot, marketing, customer service, and hiring and training. That would be fascinating.  I wouldn’t ask Mr. Marcus about differential equations or economic policy. 

I think CNBC and Fox News are doing a disservice to their viewers and to the interviewee. They have business experts on their shows and then ask them about topics they know nothing about. Frustrating.

Tell one about it. It is fashionable to ask and answer about economic issues, no matter the expertise..

This is common thing on Indian business channels when executives are asked about macro issues and what not. And very proudly they give their views on everything and it is widely covered in print media the next day.

Surely, one is free to give views . But it is far better if one is asked questions about the business history, prospects etc. It makes for far better viewing and learning…

World’s most elite bond trading club (Fed and US Primary Dealers) is losing its sheen

September 14, 2016

All elite things are either going through a backlash or losing their sheen on their own.

One such is the most elite bond trading system –  Fed and Primary Dealers. There was a time when firms would compete/fight to be a part of the system. Now they are just giving up:

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Mises vs Hayek – Who was more clear in thought?

September 13, 2016

Hans-Hermann Hoppe votes for Mises.


I could go on and on, citing Hayek’s muddled and contradictory definitions of freedom and coercion, but that shall suffice to make my point. I am simply asking: what socialist and what green could have any difficulties with all this? Following Hayek, they can all proudly call themselves liberals.

In distinct contrast, how refreshingly clear — and very different — is Mises! For him, the definition of liberalism can be condensed into a single term: private property. The state, for Mises, is legalized force, and its only function is to defend life and property by beating antisocial elements into submission. As for the rest, government is “the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisonment. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.”

Most of us, can hardly differentiate between the two as history of economic thought has never been taught. Mises would not even be known to most as he was not given the prize. Hayek is far far popular that Mises.

It is not about which school you come from. It is knowing what each school and within each school the key actors have to say. This helps understanding where the key ideas are coming from and where they matter and where they do not.

All this reading (of whichever school) is really fascinating. The kind of debates and arguments help one get so many perspectives.  It is a pity that  most economics students of today have no idea about any of these issues.

How can the Bank of England serve society and maintain stability in times of change?

September 13, 2016

After years of hubris and nonchalance, Central banks of advanced economies are running for cover. They are increasingly trying to show how they remain relevant and important for the  society.

This release from Bank of England says it all:

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