An interesting chronology of evolution of US Dollar

May 23, 2017

Nice bit from Visual Capitalist Blog. True to its name, it has superb pictures showing how US Dollar came into being…

Will Indian Railways charge more for lower berths?

May 23, 2017

Missed this news which came  a few days ago.

Apparently, the Indian Railways is mulling charging an extra Rs 50 for the lower berths:

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Why any modern banking system is necessarily uncompetitive?

May 23, 2017

Interesting post by Cameron Murray, a professional economist on Naked Capitalism blog.

He argues why banks are uncompetitive in today’s system.

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Empire and the Economist: Analysis of 19th century economic writings in Maharashtra

May 22, 2017

This is a brilliant paper by a brilliant economist – Prof Neeraj Hatkar of Mumbai University.  I just stumbled on the paper written in 2003 .

It reviews history of economic thought of scholars from Maharashtra region in the 19th century.

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Why India needs another statistical revolution..

May 22, 2017

Recently a trio of economists had deplored the decline in Indian statistical system.

Pramit Bhattacharya in this superb piece writes more on the issue:

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Time for passive investing in India is coming…

May 22, 2017

I have always wondered this aspect of mutual funds in India. If Indian equity markets have indeed become more efficient over the years, why is it that active mutual funds continue to do better than passive funds? Why are active funds preferred over passive funds? After all if markets are getting efficient, then information asymmetry is becoming lesser. The fund managers should be knowing as much as entire markets and no advantage can be drawn from any analysis.

Dhirendra Kumar of Valuresearch feels time for passive funds is coming in India:

So should you invest in index funds? So far, the answer has been no. However, I can see symptoms that tell us the time for passive investing is well on its way. So far, index investing has not succeeded because the market was not heavily institutionalised and large chunks of companies were not owned by professional fund management. This is now changing.

Another huge factor which points towards the impending rise of passive investing–the main one, I feel–is rising costs. Fund management costs have now gone through the roof. Actively managed funds charge up to three per cent of total assets. This is something that will now start impacting returns in a way that is noticeable to investors.

The next factor is the size of the funds. Indian equity funds have been seasonal and small. A small fund can opportunistically try many investments in midcap and smallcap companies that can yield returns that have a big impact on the portfolio. This is not possible for large funds. The Indian equity fund universe is now dominated by big funds. There are now more than fifteen funds that have more than Rs 10,000 crores. Seven-eight funds are close to Rs 20,000 crore. Such funds have no choice but to be large cap funds. They’re finding it hard to beat the index consistently. They have a compelling performance track record over a long period and they have beaten the indices by a big margin. However I visualise that going forward, because of their size, because of the expenses they charge, and because of the growing institutionalisation of the market, they won’t find it easy to outperform.

So does that mean that if you are starting an SIP for ten years, you should do so in an index fund? Well, the case is not that strong yet. Over the last five years, the top five actively managed funds would have earned you one and a half times more than a Nifty fund and that’s a big difference.

However, it’s something that an investor should keep a watch on. At some point in the coming five years, there will likely be a time when it will make sense to stop your SIP in an actively managed fund and turn to an index fund. We’re heading in that direction, slowly but surely.

Hmm..

Will be interesting to watch this space. Another interesting aticle says we need more broad based indices before passive funds can kickoff in India..

Who should create jobs in India? Government or private sector?

May 22, 2017

I am quite amazed by recent debates on 3 year anniversary of the Indian government. On one hand ,our experts want Government to get out of most economic activities. But on the other hand, they hold government responsible for every economic activity under the sun.

The Government has got a thumbs up for most such economic activities barring one: jobs. Lack of job creation is seen as a major deficiency of the current government. So much so, the experts say this one deficiency does away with whatever good work the current government has done.

This leaves one to question: How is it that Government can create jobs?

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Bundesbank joins Bank of England in saying banks are not financial intermediaries but creators of money…

May 19, 2017

We usually understand banks as financial intermediaries which first collect deposits from surplus units and then pass them as loans  towards deficit units.

In 2014, Bank of England turned this wisdom upside down with their research. They said banks first give loans and then put deposits as liabilities to balance the balance sheet. This had massive implications on the way we thought about banking, monetary transmission and so on. The most important being we need to pay more attention on quality of loans than just mobilising deposits. More on this here.

Now it seems other central banks are catching up to this view.

Bundesbank in its monthly report reviews this literature:

The accommodative non-standard monetary policy measures taken by the Eurosystem in response to the financial and sovereign debt crisis caused the reserves of (commercial) banks in the euro area to increase sharply. In spite of this, the annual growth rate of the monetary aggregate M3 has remained at a moderate level over the past two years, reigniting interest in the connection between the creation of reserves and growth in the broader monetary aggregate.

It suffices to look at the creation of (book) money as a set of straightforward accounting entries to grasp that money and credit are created as the result of complex interactions between banks, non-banks and the central bank. And a bank’s ability to grant loans and create money has nothing to do with whether it already has excess reserves or deposits at its disposal. Instead, various economic and regulatory factors constrain the process of money creation. From the perspective of banks, the creation of money is limited by the need for individual banks to lend profitably and also by micro and macroprudential regulations.

Non-banks’ demand for credit and portfolio behaviour likewise act to curtail the creation of money. The central bank influences the money and credit creation process in normal times through its interest rate policy, which affects the financing and portfolio decisions of banks and non-banks through various transmission channels. Non-standard monetary policy measures, too, have effects on the creation of money and credit. One such unconventional measure, the Eurosystem’s asset purchase programme, differs from interest rate policy in that it directly boosts the supply of reserves. Moreover, purchase programmes structured in this manner have an immediate expansionary impact (originating directly from the asset purchase) on the stock of money held by non-banks, though this effect is dampened in the euro area by the fact that the Eurosystem does not only purchase the assets from domestic non-banks.

There are also indirect effects resulting from the transmission of the purchase programme and its impact on lending and portfolio allocation. Critics point to the banking system’s capacity to create money as one of the main culprits behind destabilising financial cycles and financial crises, hence the long-standing debate about proposals to fully back deposits with central bank money, a move intended to restrict the extent to which the banking sector can create credit. It is not evident, however, that these constraints do indeed make for a financial system that is more stable overall than might in any case be achieved through targeted regulatory action. At the same time, that kind of transition to a new system would risk impairing important functions which the banking system performs for the economy and are crucial for keeping real economic growth on a steady path.

Lots of other details in the publication..

Being realisitic about cash vs digital payments debate

May 19, 2017

Interesting speech by Bank Negara Malaysia’s Deputy Governor – ncik Abdul Rasheed Ghaffour. He speaks on the burning issue of cash vs digital payments.

He says there are three aspects to this debate:

 

As a policy maker, I would think that there are three elements, or the ‘3S’, that we should consider in determining an optimal balance of paper and digital, cash and cashless.

Security
The first consideration is security. Counterfeiting is as old as money itself. However, cash has become more secure in recent years. In Malaysia, the amount of counterfeits discovered reduced by 25% in the past year. The currency industry is continuing to make good progress in enhancing security features. I am particularly pleased to note the recent efforts to make such features intuitive – so that the man on the street is likely to notice when something is amiss

The security challenge will not disappear by going cashless. The latest being the recent Ransomware attack. Cyber risk remains a real threat that must be managed. Significant efforts have been made to strengthen resilience against cyberattacks. The banking and payments systems industry has made this a key priority in recent years. However, cybersecurity is ultimately a shared responsibility between the provider and the consumer. Even the most robust systems can be breached if consumers do not exercise adequate caution or are deceived by fraudsters. In this regard, consumer education plays an important role in keeping cashless payments secure.

In addition, cash is also a choice payment instrument for illicit activities. Unlike digital transactions which almost always leave a trail to the parties, payments in cash are anonymous. In his recent book, The Curse of Cash, Kenneth Rogoff points out a very sobering reality – the amount of US Dollars in circulation outside of banks suggests that each American should have around USD4,200 in their wallet. This is not the case. According to him, most of this money is used to hide transactions.

However, this alone does not warrant moving away from cash entirely. Rogoff himself acknowledges this, and proposes the solution of eliminating large denomination notes – such as the United States’ hundred dollar bill. The logic is simple. With the next largest bill being USD50, such a move would immediately make it twice as cumbersome to hoard and pass around suitcases of cash. This is in fact a policy call which Malaysia has made, when we phased out the RM1000 and RM500 notes in 1999. At the same time, the case for removing large denominations becomes weaker as each year goes by. This is because the effect of inflation plays a similar role in making cash transactions more difficult for illegal activities.

Social cost
The second element for consideration is the social cost imposed by the form of currency chosen. On the surface, cash may appear to be costless. Consumers do not have to worry about subscription fees and exorbitant interest rates lying in wait. Retailers are not required to pay fees to accept cash, and so need not pass on any servicing charges to the consumer. There is no need for banks and merchants to invest in and maintain sophisticated software and hardware to support digital payments.

However, cash does not come cheap. Money needs to be printed and minted, and then transported, counted and guarded – several times over. Each step here poses a significant cost to various actors within the economy. Central banks have to deal with the rising cost of producing secure and durable money. Storing and moving money around under tight security can be expensive for both commercial banks and retail businesses. This does not yet account for the losses relating to under-reported taxes which is directly enabled by a cash economy – a cost borne by society as a whole. A 2005 study estimated this figure to be USD100 billion annually in the United States alone

The task of calculating the relative total cost of cash and cashless payments is a difficult one. Apart from the methodological challenges, the findings for each study are also likely to differ according to the nuances of each country. Nonetheless it is a worthwhile endeavour. Policy makers around the world have made positive progress in this area, and I believe we will see more efforts on this front in the coming years.

This leads to another dimension of the social cost consideration, which is the impact on financial inclusion. Millions of people live in rural areas globally, with little or no access to the modern infrastructures necessary to facilitate cashless solutions. The availability of cash is therefore paramount in ensuring that they continue to be seamlessly included in the financial system. At the same time, the success of mobile payments operator M-Pesa in rural Kenya has demonstrated that cashless alternatives can in fact be a means to promote financial inclusion for the unbanked. Here in Malaysia, where mobile banking transactions have tripled in the past year, there is potential to leverage the high mobile penetration rate to improve financial inclusion.

Stability
The third element is stability. The ability to make retail payments reliable is crucial for the effectiveness of the financial system. As discussed earlier, we have come a long way in developing a reliable way of transacting electronically – through solutions such as credit cards, mobile transfers and prepaid balances. Central banks are now carefully monitoring newer developments, particularly digital currencies based on the use of a distributed ledger. Digital currencies have tended to be volatile and subject to speculative hoarding. This raises the potential for runs on the digital currency, triggered for instance by a loss of confidence in the currency itself or a third party provider like an exchange. This risk is likely to be augmented where the digital currency is not backed by an issuer, and where there is no lender of last resort function. If digital currencies are widely used, such a shock could have systemic repercussions. At the same time, some of these concerns may be addressed if the digital currencies used are issued by a central bank. Many policymakers are studying this option.

In addition to facilitating payments, cash has been a powerful instrument for central banks to build trust and credibility with the public. The notes issued by central banks provide us with a direct and tangible link to the people – making it a key branding tool. Trust and confidence in the central bank are crucial for us to effectively deliver our mandate. This dynamic is augmented in jurisdictions like Malaysia, where the central bank is responsible for promoting both monetary and financial stability. If we were to go completely cashless, central banks might lose this traditional means of maintaining a strong brand.

Hmm..

Despite all the criticism, RBI Board still remains empty..

May 18, 2017

It is really puzzling. Despite much criticism on role of RBI Board in recent demonetisation, the board still remains empty.

Just to reiterate, the decision to demonetise the notes was taken by RBI Board. RBI Board comprises 21 members but just 10 were appointed on the eve of demonetisation. Out of the 10, only 8 were present to take a decision as momentous as this one. Imagine any Corporate Board taking a decision at that kind of magnitude with around 40% Board members being present.

So, on 8-Nov-2016 table looked like this:

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How the cold war led CIA to promote government financed human capital theory..

May 18, 2017

Fascinating piece by Prof. Peter Fleming of Cass Business School.

We in economics rarely figure how the guys at the top push certain ideas onto us. He says human capital is one such idea. The idea emerged as Profs. Theodore ‘Teddy’ Schultz and Milton Friedman debated how to beat USSR in the ideas battle during Cold War.

USSR announced how it will smash capitalist system by pushing state driven growth in agri and industry. The question was how should US respond?

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When silver ended as a unit of account…

May 18, 2017

Superb note by Ricardo Fernholz, Kris Mitchener, Marc Weidenmier. It is based on a bigger paper here.

They show how silver declined and ended as a unit of account. Moreover, it had sharp mpact on agricultural commodities:

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Meet David Pearce: The 15 year old boy who designed the New 1 Pound Coin

May 17, 2017

I had blogged about the new 1 Pound coin which is being touted as the safest coin the world.

Here is interview of David Pearce who was merely 15 years old when he sent in his deign and won the contest.

In the last few weeks many of us will have noticed a significant change to our ‘change’ – a new £1 coin. Although it’s entering circulation now, in 2017, the journey of the new £1 coin actually began in 2014, when the new 12-sided coin was first announced. And, in 2014, the public were given a rare opportunity to play a part in bringing the coin into the nation’s pockets with an invitation to submit designs that represented Britain. Heraldic designs, regional landmarks and cultural interpretations of the UK such as fish and chips and cups of tea were among over 6,000 entries submitted by the public, and in the end David Pearce’s design was chosen to symbolise the United Kingdom on the new one pound coin.

David, of Queen Mary’s Grammar School, was just 15 years old when he won the competition. His winning design features the floral emblems of the nations of the United Kingdom – the English rose, the Welsh leek, the Scottish thistle and the Northern Irish shamrock – emerging from one stem within a royal coronet. Now, as the #newpoundcoin starts to appear in our change, we speak to David to find out a little more about his design.

How did the thing come up?

How did your journey with The Royal Mint begin?

Well, my Design Technology teacher in school found out about the public design competition for the new one pound coin and recommended that I entered the competition to widen my portfolio for university admissions. 

What inspired you to enter?

I thought it would be a good opportunity to widen my portfolio, I didn’t really expect to win so I just took my teacher’s advice that it would be a good thing to do; I didn’t expect anything to come from it.

How did you find the process of designing the coin?

OK, I guess. I started with the template, and used the internet to research previous one pound coin designs to see what had been and gone. Because the brief was to design something that represented the UK, I researched symbols of the UK to find elements of heraldry that people would easily recognise as part of the United Kingdom. From there I came up with a few rough ideas and emerged with the one I liked the most. I compiled a few images into a mood-board, which had things such as royal crests, things that were synonymous with the UK, things that tourists would associate with the UK (which were very London-centric) and then flora – it was very diverse but very obvious at the same time. The main idea behind it, because it was the United Kingdom, was to unite the individual nations with a common element, the crown; so the four individual nations are represented by the flora and then united by the crown.

🙂

FBI History: With great power comes great scandal.

May 17, 2017

It is fascinating to know that Prof Douglas M. Charles of Penn State University is a FBI historian.

In this piece, he looks at brief history and key people behind the institution:

Drama at the FBI is nothing new. Given its 109-year history, the FBI has seen many scandals and numerous directors come and go.

Its directors, in fact, have always been the face and driving force of the FBI. Most have retired or moved on to other work, four were forced to offer resignations, but only two, including most recently James Comey, have been fired outright.

While FBI directors always served at the pleasure of presidents, they differed in their closeness to the chief executive. Most notably, FBI Director J. Edgar Hoover (1924-1972) worked to satisfy the political interests of some presidents and secretly undermine others. Since his death in 1972 and revelations of abuses, the federal government has treated the FBI director as independent from the White House.

As a historian who has long studied the FBI and its work, I believe knowing the agency’s past is crucial to understanding the firing of FBI Director James Comey and what may come of it.

Interesting stuff..

What we can learn from tweets which predict movement of euro-dollar currency pair?

May 17, 2017

Interesting paper. As traders share their predictions across asset classes on social media, it leads to research opportunities.

Vahid Gholampour and Eric van Wincoop analyse tweets that predict Euro-Dollar rates. They find that Tweets get the direction right but not the magnitude:

We focus on opinions posted on Twitter, because Twitter is widely used to express opinions about asset prices. Several anecdotal stories suggest that this information can be important. For example, on 13 August 2013, Carl Icahn, an activist investor, tweeted about his large position in Apple. As a result, Apple shares increased in value by more than 4% in a few seconds. We investigate what can be learned from Twitter by considering two and a half years of tweets that expressed opinions about the euro-dollar exchange rate.

…..

We find that the direction of exchange rate changes is predicted by tweets in a way that is statistically significant. This suggests that there was information content in the tweets. But we also find that Twitter sentiment does not predict the magnitude of future exchange rate changes in a statistically significant way. Such predictability would be needed to develop trading strategies from this data. This absence of predictability based on a data-only approach is not surprising, because exchange rates are notoriously hard to predict. Twitter sentiment is only directional, and the data sample covers only two and a half years.

Also, Sharpe ratio for Tweet based trades is high indicating one could make money:

The large Sharpe ratios that we find suggest that there are significant gains from trading strategies based on Twitter sentiment. We can compare the Sharpe ratio from the TSI trading strategy to that of the popular currency carry-trade strategy based on interest differentials. Burnside et al. (2010) reported an average annualized Sharpe ratio of 0.44 for 20 currencies against the dollar based on a carry-trade strategy. A Sharpe ratio in the range [1.59, 1.78] is clearly very high by any reasonable standard. The methodology developed here could easily be applied to other currencies or portfolios of currencies, as well as other financial markets such as the stock market.

Hmm..

Denmark issues a tender to outsource printing of banknotes…

May 17, 2017

This blog had earlier pointed how Denmark has outsourced minting of its coins to Finland. The post also mentioned that Denmark will also be outsourcing printing of banknotes.

No agreement has yet been concluded with a supplier of banknotes. Danmarks Nationalbank has just published a timeline for the forthcoming tender for banknotes, and a supplier is expected to be found in early 2018.

Now Denmark Central Bank has issued a tender and a timeline for the same:

Danmarks Nationalbank has decided to discontinue internal printing/production of banknotes by the end of 2016. Like a number of other central banks, Danmarks Nationalbank will outsource this function to an external supplier. Danmarks Nationalbank will still be the issuing authority of banknotes in Denmark and will retain its expertise within banknote design and quality.

It is with great pleasure to announce that today, Monday 15 May 2017, Danmarks Nationalbank has initiated a competitive procedure with negotiation by sending a Contract Notice to the Tenders Electronics Daily (TED).

Danmarks Nationalbank expects the Contract Notice providing access to the procurement documents to be published within the next few days.  

Expected timeframe:

Dispatch of contract notice:                                                                                15 May 2017
Timelimit for request for participation:                                                              15 June 2017
Invitation to tender:                                                                                             1 September 2017
Timelimit for first indicative offer:                                                                       3 October 2017
Timelimit for best and final offer:                                                                        8 January 2018
Signing of contract:                                                                                            16 February 2018
Expected delivery of the first final batch of banknotes (one denomination): mid-2019

Interested banknote suppliers are invited to sign up for Danmarks Nationalbank’s news service for further news.

Will be interesting to see who gets the tender..

Should Walmart be allowed to get into banking?

May 17, 2017

Prof Lawrence White of Stern School has a piece on Walmart entry into banking. He says we should actually ask the following question: Why shouldn’t Walmart get into banking?

By the way I also learnt from the article that the retail giant entered banking in Canada and Mexico. In Mexico it sold off its banking business in 2014. The one in Canada continues. The issue is whether it should be allowed in America as well.

Prof White says:

One question to ask might be, “Why should Walmart be allowed to enter banking?” But a more relevant question would be, “Why shouldn’t Walmart be allowed to enter banking?” 

After all, the U.S. economy is generally market-oriented, and entry is generally recognized as potentially beneficial for consumers, as entrants can bring new ideas, innovations, and efficiencies to the market. Of course, incumbents usually don’t like the idea of entrants’ disrupting the status quo; and often those incumbents lobby for regulation and/or legislation that creates barriers to entry. But, for most markets, the presumption in broad U.S. economic policy is that entry should be encouraged—or at least, that policy should be neutral between incumbents and entrants—so that the benefits of entry can be enjoyed by consumers.

Of course, banking is special—as the regular readers of this blog are well aware. And how the specialness of banking and the presence of Walmart in banking can be reconciled must be addressed, and will be addressed below.

But first, consider what the entry of Walmart into banking might well achieve: Walmart is well known for providing reasonably priced goods to low- and moderate-income households. Its position as the largest company in the United States—as measured by sales and by employment—is a testament to that reputation.

But it is exactly this demographic group—low- and moderate-income households—that is most in need of reasonably priced financial services. The percentage of U.S. households that are unbanked (i.e., do not have a bank account) or underbanked (i.e., have an account but rely on non-bank providers for some financial services and products) has been a longstanding policy concern. The most recent data (from a FDIC report that covers 2015) in this regard—based on a survey of more than 36,000 households nationwide—show that 7% of all households were unbanked and an additional 20% of all households were underbanked. Unsurprisingly, the percentages are substantially larger for low- and moderate-income households (see table)

Hmmm.

The post also has a interesting discussion on the complex financial regulation setup in US:

So, how would the entry of Walmart—and, presumably, other non-financial companies that are interested in entering banking—fit into that system of prudential regulation?

The crucial concept is that the “Walmart Bank” that would provide banking services to the public would be organized as a separate subsidiary of the parent Walmart company. In essence, the parent Walmart company would be a bank holding company (BHC), which is a common ownership structure for U.S. banks. The Walmart Bank subsidiary would be expected to abide by all prudential regulations—including adequate net worth (capital) requirements—that apply to banks.

…..

However, because it is relatively easy for the owners (including BHCs) of a bank to drain the bank of its assets—for example, by paying excessive dividends to its owners, or by making loans to the owners that are not repaid, or even by paying excessive prices for any materials that it buys from the owners—it is essential that any transactions between the bank and its owners be on arm’s-length terms. U.S. bank regulators have long been aware of this danger of the draining of a bank by its owners and have rules in place (which are embodied in Sections 23A and 23B of the Federal Reserve Act) that insist on this arm’s-length standard.

Current U.S. banking policy has much of this story right.  But where policy has gone “off the rails” is the insistence that a BHC cannot be engaged in commerce—that is, in non-financial services activities. This restriction on scope was embodied in the Bank Holding Company Acts of 1956 and 1970 and remains established policy for banks and banking in 2017. Its persistence as policy is more a testament to the lobbying strength of the incumbent bankers (who clearly prefer less competition) rather than to a concern about the economic welfare of consumers. It also yields the economically absurd result that it is okay for a local car dealer to own a bank (so long as the dealer doesn’t form a BHC that involves the car dealership); but it is not okay for AutoNation (a publicly traded company that operates hundreds of car dealerships) to own a bank.

Until 1999 there was a potential way around this no-commerce restriction on the activities of a holding company: the holding company of a savings and loan (S&L or thrift) institution faced no such restriction, and at various times companies such as the Ford Motor Company, Fuqua Industries, Weyerhaeuser, ITT, Gulf & Western, Household International, and Sears, Roebuck have owned S&Ls via the formation of thrift holding companies.

In the middle of the 1990s, Walmart decided to try to enter banking by becoming a thrift holding company. However, before Walmart was able to become a thrift holding company, the Gramm-Leach-Bliley Act of 1999 (which was primarily focused on allowing commercial banks—via BHCs—to enter investment banking) forbade the creation of any new thrift holding companies that could engage in commerce. It also restricted the sale of an existing thrift holding company to a non-financial company, such as Walmart.

There was a second, more limited way around the “no commercial owner” restriction: a few states—most notably Utah—offered “industrial loan company” (ILC) charters that allowed a commercial firm to own a financial institution that could issue deposits and make loans and thus could function as a bank. But in order to operate, the ILC would need to obtain deposit insurance from the FDIC.

Walmart duly obtained a Utah ILC charter and in 2005 applied for FDIC deposit insurance. In 2007 Walmart withdrew its application after it was clear that the FDIC would not grant it deposit insurance. Further, the Dodd-Frank Act of 2010 placed a three-year moratorium on the granting of deposit insurance to any new (or newly acquired) ILC. Although the moratorium expired in 2013, bank regulators appear to have “gotten the message” that the commerce-finance barrier should remain intact.

Another example of how despite best intentions, regulations leave many gaps to be filled.

But overall a good discussion about many aspects of economics and finance..

The Economic School you’ve barely heard of : Austrian School

May 16, 2017

The author of this article titles it as “The Economic School You’ve Never Heard Of”. I have been kinder and replaced never with barely. But yes the author could be just right. It is highly unlikely that today’s economists have never heard about the Austrian School of Economic thought. I just wrote about reading dead economists but we have case for many important things being just dead in economic teaching.

Valentin Schmid of Epoch times writes a nice piece about the forgotten yet highly important teachings from Austrian School (HT: Cafe Hayek blog).

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Reading and Listening to Dead Economists…

May 16, 2017

Good friend Niranjan once told me how at a conference on so called new economics. To his shock and amusement,  none of what they were saying was new but old economics!

In the same spirit, Jeff Deist of Mises Institute says we should read and listen to dead economists:

We don’t revere dead economists to maintain their place in some academic hierarchy, or to satisfy an atavistic desire for an unchanging intellectual order. We revere them because their ideas still have purchase, because their work yields knowledge that is sorely needed today. We read them and promote them in order to understand the world as it is, filled with billions of purposeful but often irrational human actors. We need dead economists to save us from ourselves and to refute the stubborn myths of collectivism. We need them most of all because their work and their insights are far superior to those of most economists alive today. There is no “New Economics,” only new academic work that painstakingly advances the the knowledge bequeathed to us.

Totally agree!

Why does it cost more to cross platforms in railway stations compared to crossing the city by taxi?

May 16, 2017

There have been some appreciable changes in Indian railways especially its immediate responses to complaints sent via twitter while traveling. However, somethings have not changed at all.

One of them is the luggage transportation system within the station. It is highly ironical that one pays more to just cross a few meters of platforms compared to a taxi which travels many a kilometres within the city.

This is all because there is just no alternate to the porter/coolie system which charges all kinds of prices. The services are hopelessly monopolised with no other alternate but to pay crazy fares. One can only negotiate so much. There is also a kind of cartel which means if you reject someone’s services, other will not pick it up. So you have little choice.

It is even more ironical that you pay more to hire those trolleys which are available for free at airports (though in west they charge you for trolleys as well). I remember how one asked for hefty price just to cross one platform on Mumbai Central Station saying after all we are moving your luggage on the trolley.

Compare this to the taxi system. There was a time when taxis would cost as much well as it was all unionised. But thanks to introduction of competition and multiple players, inter-city taxi prices have come down. One is now travelling from and to various places at a fraction of a price compared to a few years. If one is lucky and there is less traffic, the fare could be less than half of what one paid when there was no competition. With many discount etc offers, the trip could be free as well.

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