Got a cold? How and why Indonesians trust coin rubbing on their bodies..

November 17, 2017

Traditions vs. medicine. Who wins?

Prof Johanna of Universitas Indonesia has a piece on how traditions win in Indonesia. People prefer to rub coins on their bodies to the extent it leaves red marks on their bodies:

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Why the worst humans are able to rise to power? (cues from Hayek’s Road to Serfdom…)

November 17, 2017

As debates rage over the Mugabe era and whether Zimbabwe will see democracy or dictatorship.

Recent scholarship finds that while “democratization coups” have become more frequent worldwide, their most common outcome is to replace an incumbent dictatorship with a “different group of autocrats.”

Signals in Zimbabwe are mixed so far. Experts generally describe the latest developments as “an internecine fight” among inner-circle elites and ask two key questions: Which side will prevail, and will violence break out?

In my assessment, the answers hinge on Mnangagwa, a hard-nosed realist and survivor who was critical in securing Mugabe’s four-decade rule. Mnangagwa has an appalling human rights record. Many consider him responsible for overseeing a series of massacres between 1982 and 1986 known as the “Gukurahundi,” in which an estimated 20,000 civilians from the Ndebele ethnic group perished.

More recently, in 2008, civil society groups accused Mnangagwa of orchestrating electoral violence against the political opposition and rigging polls in Mugabe’s favor.

It is also true that Mnangagwa is massively invested in ensuring his continued and unfettered access to power, which has proven highly lucrative for him. The vice president is “reputed” to be one of Zimbabwe’s richest people. All of this suggests he might become yet another dictator.

The big question is how do these people come to power at all? Brittany Hunter picks cues from Hayek’s Road to Serfdom:

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Lucknow Bank of Montreal celebrates 200th birth anniversary?

November 16, 2017

For a moment I was totally surprised to come across this news. Lucknow Bank of Montreal? How come one knows nothing about this bank>

It took me time to understand that Bank of Montreal recently completed 200 years of existence. And there is a place in Canada named Lucknow which was named after the Indian counterpart:

The village was named after Lucknow, India where, the Indian Rebellion of 1857 took place between the Indian rebels and the East India Company army. Lucknow takes the name of “Sepoy” which refers to the Indian foot soldiers who fought on the British side in the Relief of Lucknow. There are two theories about the origin of the name of Campbell Street-one is that the main street was named after Sir Colin Campbell, leader of the relief forces. The other is that the street is named after Malcolm Campbell, the community’s first merchant. Several Lucknow streets bear the names of some of the British generals involved in the Relief of Lucknow: Campbell, Ross, Outram, Havelock, Willoughby, Rose and Canning.

Eli Stauffer first settled the unnamed land that was to become Lucknow in 1856 where he constructed a dam and built a sawmill. In 1858, Ralph Miller purchased a parcel of Stauffer’s land and built “Balaclava House”, a log tavern. James Somerville purchased the Stauffer mill and land rights in 1858 and had village lots surveyed, earning Somerville the title of the “Father of Lucknow”. With the “Gravel Road” open into Kinloss in 1866, the village continued to grow and had a population of 430 in 1868.

Wow! Imagine how Lucknow inspired naming a village in Canada in 1857!

So, it is the Lucknow branch of the Bank of Montreal which celebrated 200 years of the bank’s anniversary…

A closer look at history of small denomination coins…

November 16, 2017

Nice post by Hillery York. It also has a picture of the Lydia coin, the first ever coin produced.

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How Iceland persuaded teens to give up drink and drugs…

November 16, 2017

Interesting short film by Richard Kenny on how Iceland collectively worked to address teen problems in their country. One hears that this drinking and drugs  =is already a big problem in some of the regions in India as well…Some lessons here..

Nothing Natural About the Natural Rate of Unemployment

November 16, 2017

Edmund Phelps debunks some macro myths. In a short piece, there is fair bit if history of macro thought as well:

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Story of Thomas Cook: How an Alcohol-Hating English Preacher Founded Global Tourism

November 15, 2017

Quite unbelievable to read this piece:

…when the Industrial Revolution dawned in the late 18th century, England—and then much of the rest of Western Europe and the U.S.—suddenly had a middle class with some disposable income. They, too, wanted to see the world, but their limited means meant they had to vacation close to home. That’s where they might have remained had an ambitious young cabinetmaker from central England not spotted this glaring gap in the market—and moved to expertly exploit it.

Cook’s venture was rooted not in a tourist’s desire to kick back a pint and visit a few historic sights, but in his fervor to keep would-be globetrotters from drinking in the first place. Convinced from an early age of the evils of alcohol, he spent much of the 1820s and ’30s walking the English countryside, spreading his religious message to all who’d listen and distributing pamphlets extolling the dangers of beer to those who wouldn’t. It was a desperately inefficient means of advancing his cause.

And so when the world’s first railway network began to open right on his doorstep, Cook was quick to recognize its value. By arranging free or discounted train trips, he could ferry large cohorts of temperance supporters to rallies across the country. With the development of telegram wires, 2,000 miles of which were laid in Britain by the early 1850s, he was soon even able to direct his temperance tourists’ itineraries from afar.

It didn’t take Cook much longer to grasp that these cash-churning expeditions might earn him more than heavenly favor. Putting his missionary work on hold, he started organizing and then guiding sightseers on trips around Britain. In 1855, he ventured over the English Channel to France, then to Switzerland a few years later. No sooner had the American Civil War ended than he shepherded a tour across the Atlantic to New York.

Really!

Great Depression research remains the holy grail..

November 15, 2017

Bernanke called Great Depression the holy grail of macroeconomics.  It is perhaps one of those few events despite being historical continues to inspire so much research after all these years. Books continue to be written and debated vigorously on the crisis .

Came across two recent posts in this regard:

  • David Glasner argues how Friedman was not the first to argue about France’s role in gold standard which eventually was one of the key reasons for the Depression to become global. Lots of history of monetary thought in the post.
  • In another post, Robert Murphy says Gold Standard was not responsible for Depression.

Phew…Keep breaking heads over it…

From tea to chai: a slideshow..

November 15, 2017

Sreedeep of Shiv Nadar Univ has a slideshow of the tea to chai journey:

This is what goes into every sip: centuries of colonial plantation history, hours of labour withstanding the sun and the rain, meticulous plucking of the freshest leaves, series of mechanised crushing, rolling, packing; and most importantly — a passion for tea. Only the fresh leaves on top make it to the factory. Labourers are paid a paltry amount of ₹300 for a day that includes nine hours of hard labour.

While the finest leaves are hand plucked, a tea processing machine chops the rest of the leaves to produce regular tea. Leaves are gathered and transported to the factory at the end of the day. At the factory, the leaves are spread on withering troughs, after which a mixture of hot and cold air is passed through them for 12 hours. This removes the moisture from the leaves, before they are thrown into the crushing machine. Roughly 4,000 kg of leaves produce 1,000 kg of packaged tea dust.

 

‘Portuguese architecture’ in Goa has little to do with the Portuguese and everything to do with Goans..

November 14, 2017

Vivek Menezes who earlier had written a piece on Goa cuisine, now has another one on  Goan architecture.

He says that these days brokers are selling some houses as “Portuguese houses” is wrong. These houses are basically Goan:

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How the Orient Express became the world’s most glamorous train

November 14, 2017

Nice story by Erin Blakermore on how the idea of Orient Express took shape. History of trains and technology around it remains as fascinating as ever:

As rail travel expanded, luxury hotels began to pop up to cater to travelers’ needs. But it took an entrepreneur named Georges Nagelmackers to combine trains and hotels in Europe. Nagelmackers was a member of a prominent Belgian banking family and had investments in European railroads. After the Civil War, his family sent him to the United States in an effort to help him get over a failed romance with his cousin—and while on an extended vacation, he fell in love.

The object of his affections wasn’t a woman; it was a train. While European travelers chugged along in sooty, jostling trains, Americans were beginning to travel in Pullman cars. These train cars, invented by George Pullman, were specially designed for long-distance travel. The hotel-like cars were clean and staffed by friendly workers who catered to passengers’ comfort. And they contained something European trains did not: beds.

Nagelmackers became fascinated by this comfortable mode of travel and even approached Pullman with a proposal to become his partner and spread his cars through Europe. When Pullman rejected him, Nagelmackers returned to Europe with a plan: copy Pullman and make his own, even more luxurious, train.

He was briefly thwarted by the Franco-Prussian War, but by 1873 he had formed his own company, the Compagnie Internationale des Wagons-Lits. Nagelmackers wasn’t content with the idea of mere sleeper cars. He wanted to create something entirely new: a luxury travel experience that swept passengers from Paris to Istanbul (then Constantinople)  without stopping at borders. To do so, he recruited a powerful ally: King Leopold II of Belgium. The king was a notorious railroad enthusiast with family ties to some of Europe’s most powerful monarchs, and he helped Nagelmackers get permission to run his trains across international borders without interference.

In 1883, the opulent train the press dubbed the “Orient Express” made its maiden voyage. (It only went part of the eventual route due to infrastructure challenges.) It was unlike any other train Europe had ever seen. Instead of soot and bad service, it had gleaming wood surfaces, plush seats, and beds with silk sheets that rivaled those found in hotels. Inside was a restaurant that served fancy dishes like oysters and caviar, and musicians serenaded the passengers as they sped over borders.

Interesting how politics and business have always mixed at the top level.

There is more in the story…

Why study and research numismatics?

November 14, 2017

Nice post by Hillery York, Jennifer Gloede, and Emily Pearce Seigerman:

Whenever we tell friends and family where we work, their first response is typically, “What is Numismatics?” Of course, they pronounce it anywhere from “numismatic” to “gnomimatic!” The National Numismatic Collection (NNC) is the Smithsonian’s collection of monetary and transactional objects. It houses approximately 1.6 million objects spanning thousands of years and a great variety of materials. One of the best parts of our jobs is getting to share the collection with the world! Numismatics is a far-reaching field, and we’ve found connections to military history, facial hair, woman suffrage, and even Game of Thrones! We often share things about our favorite objects, but here are a few large, notable collections that you may not know are housed within the NNC. We’re making these available online, and researchers are welcome to contact us regarding their research in these areas.

Greco-Roman Collection

Ancient coins have long been collected because of their beauty, age, history, and sometimes rarity. Even dating back to the Renaissance, aristocrats and royals sought to add ancient coins to their collections. It makes sense then that the NNC would also have an extensive collection of these fascinating coins donated by various collectors over the years. Scholars recently dove into the collection to assess its strengths as compared to other notable museum collections. In doing so, they created a detailed listingof the holdings and discovered the collection contains approximately 26,900 Greek and Roman coins! These coins offer a great opportunity to study economics, art history, ancient coin production, classics, and more.

Numismatics is simply fascinating . It should be part of teaching monetary economics as it tells you so much about the monetary history and even politics around it…

We should move beyond just assembling these coins and put them in a museum. The idea should be to research and figure why certain coins were changed/modified, introduction of new coins and so on. Central banks should sponsor research on numismatics as there is much more to research than the usual “download data and run models”…

New Zealand should try build a central bank which has an open culture (applies to other central banks too..)

November 14, 2017

The earlier speculation of including employment in RBNZ’s inflation targeting mandate has gained steam as the new government has come to power.

Michael Reddell who has been educating us about NZ economy via his super blog says best way is to build a central bank which focuses on building an open culture environment. It is really nice when we hear things like culture etc in central banking and banking contexts where until not very long ago only models mattered. NY Fed has also been talking a lot about culture these days.

Reddell points how each central bank has a different culture:

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How Newton learned about financial gravity the hard way…

November 13, 2017

Interesting post by Jason Zweig (HT. V. A. Nageshwaran).

Zweig picks this paper by Andrew Odlyzko of  University of Minnesota which looks at Newton’s investments and eventual losses in South Sea Bubble :

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The deeply held religious convictions that kickstarted capitalism

November 13, 2017

A video which explains how Calvinism led to capitalism:

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What is money? A sociological perspective..

November 13, 2017

An interesting piece (written in Jun-2017) dealing with many aspects of money (HT: EconomicSociology blog).

The article is based from a book edited by Nina Bandelj, Frederick F. Wherry & Viviana A. Zelizer.

Zelizer writes this piece:

If all money is the same, why do we call some dollars “dirty” — or even “blood money” — and others “honest”? Why is the money we earn as a salary often spent differently from a lottery winning? Why did we invent gift certificates rather than offer straight cash? Why do organizations construct elaborate compensation systems marking differences between salaries, bonuses, and perks? Why is it that a wife’s money is often spent differently from her husband’s?

Some of these questions are getting unexpected answers. In the past few decades, novel approaches to money have challenged conventional wisdom: money is not one thing but many things. It turns out that how the money is earned, by whom, what it is spent on, when, and for whom often matters as much as — or more than — how much money is involved in the transaction. At stake is not just the quantity of money, but its quality; and that quality is variable. Consider, for instance, the powerful democratic symbolism of the small sums of money donated to Bernie Sanders’s presidential campaign in 2016. Surely, not all dollars are equal.

What explains money’s multiplicity? Behavioral economics tells us that people keep track of their finances by creating discrete mental compartments for their various moneys: rent money is thus set apart from entertainment money, investment money, or charity money. Unexpected funds occupy a different cognitive space from a salary or other forms of routine income, even when the sums involved are identical. People are likely to spend such windfalls less cautiously and more rapidly.

But these intriguing psychological partitions only explain part of money’s variability. Sociologists go further by showing how all of us dispense different “kinds” of money to mark distinctions among our social relations: we tip a waiter but not our spouse, we may give our child a weekly allowance but rarely our grandfather, we pay our employee with a salary not a gift certificate (unless it’s Christmas). We all care deeply about such monetary distinctions: the wrong kind of money might sometimes amuse us but will more often shock or offend. Why? Because mistakes violate our expectations of how social relations should work. Imagine my (and the administration’s) shock if one of my students offered me a bonus as an incentive to teach a better class.

Always interesting to go beyond economics view of money…

What Keynes, Sraffa and Hayek knew about bitcoin….

November 10, 2017

Andy Mukherjee in this piece:

While preparing antidotes for the widespread unemployment of his time and imagining a future age of leisure and abundance, John Maynard Keynes also worked out the interest rate on bitcoin. 

Amend that. Since cryptocurrencies weren’t around in the 1930s, the famous British economist worked out the price at which bitcoin should be lent and borrowed, were it to be invented.

 That interest rate is 57 percent. Before we get to the how and wherefore of that astonishing number, another qualifier. The original insight wasn’t Keynes’s. As part of his takedown of Friedrich Hayek’s idea of a uniquely important interest rate for the economy, Italian academic Piero Sraffa posited that every commodity has its own borrowing cost. For example, there’s such a thing as a cotton rate of interest. Keynes borrowed the concept for The General Theory of Employment, Interest and Money.
While nobody I know tries to work out how many bales or barrels it would cost to borrow some cotton or oil today, currency traders deal with implied interest rates all the time. Here’s how it works. Suppose you’re marooned on an island with some Singapore dollars but the bank there can give you a deposit facility only in U.S. dollars. What the island does have, however, are foreign-exchange spot and forward markets. So on Nov. 9, you take 100 Singapore dollars, sell it for about 73 U.S. dollars, deposit the money in your greenback account for 50 days through Dec. 29, and simultaneously buy Singapore dollars in a forward contract for Dec. 29, using up all your principal and interest. 
Come to think of it. We have just given bitcoin etc a cryptic name like cryptocurrency. But the broad fundamentals still apply..

Robert Frost on Accounting…

November 10, 2017

Oleg Komlik points to the lines:

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Learning mental accounting from Salman Khan and a 5 year old!

November 10, 2017

On 7 nov 2017, Prof Betsey Stevenson tweeted:

Then on 8 Nov 2017, Archit Puri picks a Salman Khan movie to give us similar lessons:

Salman, as usual, has some economics lessons for us. In a scene from the movie (see image below), he separates his money into different accounts. He does this by putting his cash in multiple earthen pots which are labeled with a spending objective. You can see that there is one for his sister’s marriage and another for his grandmother’s medical expenses.

Hosuefull economics….amazing as always….

Digitial push is leading banks to turn away senior citizens and differently-abled persons? Also missed lessons from Syndicate Bank…

November 10, 2017

In October 2017, RBI in its Statement on development and regulatory policy noted (released along with monetary policy):

8. Banking Facility for Senior Citizens and Differently abled Persons

It has been reported that banks are discouraging or turning away senior citizens and differently abled persons from availing banking facilities in branches. Notwithstanding the need to push digital transactions and use of ATMs, it is imperative to be sensitive to the requirements of senior citizens and differently abled persons. It has been decided to instruct banks to put in place explicit mechanisms for meeting the needs of such persons so that they do not feel marginalised. Ombudsmen will also be advised to pay heed to complaints in this context. Necessary instructions in this regard will be issued by end-October 2017.

So, in this digital madness suiting the young and efficient, banks are making these choices. Amazing how every person in this country is seen as dishonest till he is totally digitalised.

Having said this, one is really surprised to see some banks actually doing this. But trust humanity to do anything these days. I mean one still can’t figure why should a regulator have to step in for such basic things. Have Indian banks totally lost it?

Anyways, based on above RBI released a notice asking banks to take steps to reach out to senior citizens and differently abled people. It includes measures like accepting forms physically, cheque book facility, dedicated counters for senior citizens and soon. The last step is:

(g) Door Step Banking

We have issued instructions on Doorstep Banking vide circular DBOD.No.BL.BC.59/22.01.010/2006-2007 dated February 21, 2007 under Section 23 of Banking Regulation Act, 1949. However, in view of the difficulties faced by senior citizens of more than 70 years of age and differently abled or infirm persons (having medically certified chronic illness or disability) including those who are visually impaired, banks are advised to make concerted effort to provide basic banking facilities, such as pick up of cash and instruments against receipt, delivery of cash against withdrawal from account, delivery of demand drafts, submission of Know Your Customer (KYC) documents and Life certificate at the premises/ residence of such customers.

Amazing again. How little we learn from lessons of past practices in banking! This is perhaps unique to India where despite a rich financial and banking history, we just pay no heed to the lessons. Syndicate Bank had in late 1920s showed the utility of door to door banking but it seems nothing was learnt. The scheme was mainly for mobilizing pigmy desposits but showed how banks could connect with customers in a big way.

Infact door to door banking goes a long way here but earlier it was manly to give credit and collect the proceeds. These were all called as loan sharks and quite a few Hindi and regional movies show them. But Syndicate Bank turned it towards deposits which was seen as really positive as it “nudged” people towards savings and then borrowing against the same.

Infact, I learnt from series of circulars mentioned in the 2017 circular that RBI restricted door step banking in 1983. So, instead of taking positives from the scheme one just limited it. Then in 2005, RBI lifted some restrictions for government departments and the further guidelines were issued to streamline the process in 2007.

All in all, as we keep digitally pushing people and glorify tech leaders who are just destroying jobs, there is realization that age old practices still have relevance. Earlier door step banking was used for one and all and now RBI is suggesting banks to use it to serve the old and differently-abled people..


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