Wednesday, November 26, 2008

Whether Free Banking Have life?

Professor Deepak Lal writes in BS “many classical liberals have favoured free banking. Banks combining the payment and investment functions and issuing their own notes would be monitored by their depositors, who would stand to lose if their banks undertook imprudent lending. But with the near universality of deposits as a means of payment, there is little likelihood of this monitoring function being effectively exercised. Whilst Demos precludes any government being able to resist pressures to bail out imprudent banks to protect their depositors. This makes deposit insurance inevitable. 

The near universal calls for greater regulation and state intervention is astounding. Public agents, not private ones— who reacted rationally to the implicit or explicit 'rules of the game' promoted— are to blame for the crisis. It would be foolish to blame the puppets for the failings of the puppeteer”.

Monday, November 24, 2008

What his country needed?

RAMACHANDRA GUHA writes in The Hindu In his years as Prime Minister, Nehru followed Tagore in seeking a synthesis of tradition and modernity, in taking from the West what his country needed while upholding and even avowing the civilisational antiquity of India”. 

I have two things to ask here: “what his country needed” nobody asked him to import socialism to kill the common people who otherwise would have managed their problems themselves- producing of what they want and if they have more would share with other who doesn’t have things like that. 

Second thing is why Nehru has not published his letters sent to Edwina Mountbatten?

Is there any one?

Nandan says that (he) “I was keenly aware that we have always responded best in crisis. Indian economists and policy analysts remarked to me time and again, of our lethargy unless we are faced with economic disaster”. 

I don’t think any one warned as strongly as Professor B R Shenoy about the credibility of planning in India and what Government can do and can’t do. 

It is quite interesting to know who are those economists and policy analysts remarked as boldly as professor BR?

Murthy Antidote

N.R. Narayana Murthy says “The only way society can solve the problem of poverty is through entrepreneurship because entrepreneurs create jobs, entrepreneurs create wealth.”

Ideas and policy is like “where access is easier.”

Nandan Nilekani interview in the Indian Express make fair comment; the following are drawn from his interview:

  • Learn the right lessons, not the wrong ones, like in Sonia Gandhi’s speech yesterday….. 
  • ..our labour system is dysfunctional. We’ve created a monster. 93 per cent disorganised, 2 per cent unionised. It helps every interest group, and shafts the common worker. 
  • …haven’t presented reform as a matter of access for the common worker. It’s about opportunities opening up, about destroying vested interests. This is a failure of communication.  

Governments are small and money is sound 2108!

It is an excellent musings about the Austrian School of Economics  

S.J. Masty writes "Thanksgiving Friday, 2108 – Will America survive economic meltdown? To find out, we took our time machine 100 years into the future to Auburn, Alabama, home of The Ludwig von Mises Institute and the new national shrine. 

Lew Rockwell founded his institute 126 years ago in 1982. Brought back to life by cloning, he pointed at Friedrich Hayekstruggling to light the barbeque. The Nobel laureate looked surprisingly spry at 209, but that’s science for you. 

In 2042, government-issued money was replaced by Hayek’s idea of competing private currencies. "It ended financial manipulation and crooked tricks by which government spent money it did not have," Rockwell explained".

War may be backed, peace is not… but State are stuck!

Murray N. Rothbard writesThe libertarian movement has been chided by William F. Buckley, Jr., for failing to use its "strategic intelligence" in facing the major problems of our time.

If nuclear warfare is totally illegitimate even for individuals defending themselves against criminal assault, how much more so is nuclear or even "conventional" warfare between States!

It is time now to bring the State into our discussion. The State is a group of people who have managed to acquire a virtual monopoly of the use of violence throughout a given territorial area. In particular, it has acquired a monopoly of aggressive violence, for States generally recognize the right of individuals to use violence (though not against States, of course) in self-defense. (Professor Robert L. Cunningham has defined the State as the institution with "a monopoly on initiating open physical coercion.")”

Tyler Cowen Defend Welfare State!

Profesor Cowen says, “The good New Deal policies, like constructing a basic social safety net, made sense on their own terms and would have been desirable in the boom years of the 1920s as well. The bad policies made things worse. Today, that means we should restrict extraordinary measures to the financial sector as much as possible and resist the temptation to “do something” for its own sake”.


Read more here 

Saturday, November 22, 2008

No End Reagan

Smith writes in TimeThe Age of Reagan didn't begin on Jan. 20, 1981, when he famously declared, "Government is not the solution to our problem; government is the problem."  

Amartya Sen’s dumb and rhetoric reasons

Here is what nagged economist Amartya Sen says in Time about the US elect-Obama Victory “The economic crisis has been caused by doctrinaire economic policies, and the solution calls for remedial actions that are reasoned — and seen to be reasoned, to generate confidence. In politics, the alienation of the world is not only because the U.S. has been so unilateral but also because the unilateral choices often have been so dumb”. 

The Outliers

The Outliers book review by Lev Gossman in Time is an excellent piece. 

Gladwell writes. "It is only by asking where they are from that we can unravel the logic behind who succeeds and who doesn't." 

Gladwell also writes, "and no one — not rock stars, not professional athletes, not software billionaires, and not even geniuses — ever makes it alone."

Gold is the Free-Market Monetary System

F A Hayek’s 1977 lecture proved to be relevant even today he says “I threw out, almost as a sort of bitter joke, that there was no hope of ever again having decent money, unless we took from government the monopoly of issuing money and handed it over to private industry, I took it only half seriously. But the suggestion proved extraordinarily fertile. Following it up I discovered that I had opened a possibility which in two thousand years no single economist had ever studied. There were quite a number of people who have since taken it up and we have devoted a great deal of study and analysis to this possibility.

As a result I am more convinced than ever that if we ever again are going to have a decent money, it will not come from government: it will be issued by private enterprise, because providing the public with good money which it can trust and use can not only be an extremely profitable business; it imposes on the issuer a discipline to which the government has never been and cannot be subject.

The gold standard is the only method we have yet found to place a discipline on government, and government will behave reasonably only if it is forced to do so”.

Friday, November 21, 2008

India's Richest N.R. Narayana Murthy

#29 N.R. Narayana Murthy Net Worth: $965 million

Where is Indian City in the world?

May be Barun Roy answer not now but in future, but is there any hope for that?

Minuscule number of!!!!!!!!!!!!!!!!!!!!!!

Anant G Nadkarni writes in ET meaning of just right in companies. The following are paragraphs are from his article which is worthy remembering at least for some reasons. 

  • “… the turn of the century 51 out of the hundred highest revenue-generating institutions in the world were business corporations not nation states! 
  • In the next three years 51 became seventy-four!    
  •  that the world’s three richest people had personal wealth more than the combined GDP of over 30 poor nations! 
  • How can one believe now that capitalism can ever become ‘compassionate’, ‘natural’ or ‘transformational’?  
  • First of all some stunning figures: 20,000 companies in Japan are more than a hundred years old, 1,200 of them more than 200 years, 600 over 300 years, 30 companies 500 and more, five more than a thousand years and one is fourteen hundred years!  
  • let us not lose sight of the basic purpose of business, service to create well-being, now confronting right in the face of our unchanging ‘self-interest for insatiable personal gain’!

Vibrant democratic order don’t make new Moon

NCERT Director Krishna Kumar writes in TOI “Creativity and imagination are neglected because these require sophisticated training for the teacher”. That is true but before going to debate that question let’s ask where is the competition, choice, and autonomy to build creativity and imagination? Only big looting is imagined in the Indian school education system.

Politician fools liberals in India

The Economist says (If) “JOHN STUART MILL…..dismissed the British Conservative Party as the stupid party..”. it is appropriate to say in India also where the so called elected politician fools liberals for everything and the same is the judiciary.

Thursday, November 20, 2008

Man is born naked into the world

One of the important articles that I read a few years back was the Murray N. Rothbards “The Anatomy of the State”.

Wednesday, November 19, 2008

India lost over four decades experimenting with a system that has lost all credibility

Sharad Joshi has important article in the Business Line and it may be noted the following paragraphs which is dead crucial to understand the notion of freed enterprises or the market.  

“Markets are live organisms and not mechanical contraptions. They work like birds. The birds have to move their wings up and down in order to gain height. Even the strongest of the birds has to come down and take rest on a branch from time to time. That does not make the birds inferior to insects and reptiles.

 ….expressing their doubts whether Nehruvian socialism was not a better option than Dr Manmohan Singh’s liberalisation and globalisation. It’s funny how so many economists who spent a lifetime building socialist theories and institutions switched over to economic reforms soon after 1991. 

Politicians, as a species, view retrenchment as a certain vote-snatcher. At the very first signs of economic recession and retrenchment, politicians and economists appear flabbergasted enough to beat a hasty retreat towards the illusion of a safer and more comfortable welfare/socialist regime. These neo-socialists appear to lose sight of the fact that India faced large-scale secular unemployment during the epoch of socialism. 

The governments of the era concealed the massive unemployment by giving figures of employment created in the public sector rather than publishing the figures of those who remained unemployed. 

Let no one forget that the socialist welfare state spelt secular stagnation for all the years since Independence. A market-oriented system might have its ups and downs. That is inevitable in any free moving body — economic, social or aerodynamic.

It would be most unfortunate if the economists tried to frighten the people back to the days of the license-permit-quota-inspector raj, where no one was allowed to do anything; but nothing was disallowed to those with the necessary political pull. 

All living organisms have their ups and downs. A mother would not exchange her baby for a doll simply because the doll does not fall ill”.

The latest buzz word may the Point-to-Point Protocol (PPP)

ET news says the PPP is the best model for higher edcuation but don’t forget the blunder will follow again may be the route is double gig.

Blunder that is….Keynes

Swaminathan S Anklesaria Aiyar says nothing blunder in Keynes Theory in Building infrastructure.

Count yourself how many blunders:

When we all realised that the demand has fallen and nothing is in saving the depression. Then where is the guy called “Keynes realised that a recession was caused by excess saving, which drove down demand and GDP in a vicious downward spiral”.   

When the spiral is dead in economics? “To escape the spiral, Keynes proposed government action to boost consumption and end over-saving. The government could boost its own spending through public works. Or else it could cut taxes to boost private consumption”. 

Except printing paper money nothing is spend by government “own spending” the rest is a theft from the people’s pocket.

It is not only irony but big blunder to say “governments should run large fiscal deficits during a recession to pump more demand into the economy”.  

Nothing is balance under the rope of state. Of course there are many…..

The so called infrastructure projects will no turn up to boost for at least another six months.

The silent Women revolution in India is they?

Mani Shankar Aiyar says “Over 40% women in local self government reflects a silent revolution in India

Then what is striking was “As many as 58 percent of the women representatives are now taking their own decisions to contest elections. 60% of the women respondents said they faced no gender discrimination in their work. 60-64% said their interaction with local officials had significantly increased since their election. And as many as 94% said they found no restrictions on their raising issues and making their comments in meetings of the local bodies and the Parliament of the People”.

Australian Sex Party

Australian got a new political party called Sex Party

Tuesday, November 18, 2008

Threat of sending Buffett to jail

Eric Englund writesTo be sure, I adhere to what Murray Rothbard stated in his magnificent book The Ethics of Liberty:

If, then, taxation is compulsory, and is therefore indistinguishable from theft, it follows that the State, which subsists on taxation, is a vast criminal organization far more formidable and successful than any "private" Mafia in history. Furthermore, it should be considered criminal not only according to the theory of crime and property rights as set forth in this book, but even according to the common apprehension of mankind, which always considers theft to be a crime”. 

Saturday, November 15, 2008

Jawaharlal Nehru and the Mountbattens, of course Edwina!

K. Natwar Singh writes in The Hindu I once asked Vijaya Lakshmi Pandit, Nehru’s sister, if the rumours about her brother having an affair with Edwina Mountbatten were true. She was herself a diva and uninhibited in her conversation. She said to me: “Of course he did. And good for him.”

SO it means Nehru enjoyed Edwina!  

John Nash Equilibrium & G 20 Meeting

T. C. A. Srinivasa-Raghavan has article in the Business Line, as usual his writings are interesting and informative except few other times. 

For a young economics learns like me is really fascinating to read this article simple and to the point but of course much has been said other side also. Particularly the notable are: 

“The most important of these men is John Nash, a mathematician, whose work was first adopted and then extensively adapted by economists. In 1951, extending work done earlier, Nash made what now seems like a simple point — but which required some heavy-duty maths. 

This was that when several people (or nations), who intrinsically believe that they gain only at each other’s expense, chose to cooperate their cooperation will continue only for as long as one of them does not begin to think that he or it will gain more by not cooperating. This came to be known as the Nash Equilibrium, for which he received the economics ‘Nobel’ in 1994. 

It consists of being able to devise a strategy or set of strategies where no one player has the incentive to unilaterally change his own strategy. Also, a key requirement for cooperation is that everyone must know the other participants’ strategy or strategies.

But this knowledge, which is so essential for cooperation, also leads to another question which each player would eventually ask himself: Now that I know what the others will and will not do, will I gain by breaking the rules? If the answer is yes for even the most miniscule change in a player’s strategy, that player will change his or her strategy. We see this happening everyday, everywhere. The key point about this was not that there will never be any cooperation but that it would break down very soon. 

What’s worse, such abandonment would necessarily take place because, by definition, cooperation yields less than the maximum possible payoffs for each individual player. So even if they maximise the collective payoff, individually there is always an incentive to break ranks, either singly or in a sub-group. We see this happening all the time, as well. Constituents of ruling coalitions nearing an election provide an excellent example.

There is another reason that militates against long-duration cooperation: For the system to work, cooperation has to be voluntary and self-enforcing. The practical problem begins with the obverse of this, namely, that for continued cooperation there must be an external enforcer. 

But now that even that system is close to breaking point, the trillion-dollar question before the world now is whether the US can (should) continue to be the enforcer or does it need to be replaced? All the talk about ‘democratising’ the Bretton Woods institutions is just this: How to replace the US or at least reduce its power. 

But even if it is desirable to do so — and I don’t think it is because the US remains the country with the most power, both militarily and in terms of knowledge and the two will combine to produce economic power — who will take over? China? Japan? India? Korea? Haiti? Since the others can’t agree on who they want to be the enforcer, they are canvassing collective decision-making. But that, as we all know, is as good as having no enforcer”.  

At last the Novel

Ajit Balakrishnan says in BSif the famous Greenspan ‘put’ is at the heart of the crisis, blame it on the faith in unbridled free enterprise he inherited from Ayn Rand”.

But one has to go long way to understand what he says further that the “Atlas Shrugged epitomised Ayn Rand’s faith in an unbridled free enterprise system; the belief that the clear separation of the economy and state was as central to human progress as the separation of the church and the state had been in an earlier era. And the belief that any form of state intervention in society is fatally flawed and would lead to stagnation”.


Brave new questions but not as Brave!

Ajit Balakrishnan writes in BS “Greenspan never saw how derivatives would make the housing crisis a global one”. 

But other questions are equally important but not so plausible;

 Why did, then, Warren Buffett, whose financial acumen is legendary, describe them recently as “weapons of mass destruction”? Where did they come from and how did they become such objects of veneration as well as hate? 

The mathematical model they came up with, the Black-Scholes model, did its job of pricing options so well that Gladstein made tons of money using it, Merton and Scholes won the Nobel Prize in Economics for it, and started the rush of mathematicians to the stock market. 

Derivatives are a way to “hedge” against these risks. For example, a housing loan to a borrower in, say, Cochin can be combined with a housing loan in Mumbai and another one in Bangalore under one common instrument and this combined “derivative” can be sold to an investor. This combination reduces the risk of disparate housing markets such as Cochin, Mumbai and Bangalore all suffering downturns at the same time. The investor in this derivative rightly believes that the instrument he holds has a balanced risk.    

If derivatives can diversify risk, as just described, what can go wrong? 

When Greenspan, who was Chairman of the US Federal Reserve Board, was told about similar issues developing in the US mortgage securities market he believed that such problems in the housing sector would be restricted to a city and could never become a national, let alone an international problem.” 

Surjit S Bhalla expansion

Surjit S Bhalla asks few questions in BS that the starter has to think and do home works to get answer so consider some of them; 

“…..when everyone has been proven wrong, let us assess what some of the maestros have said, and done. Internationally, the clever people were baying for Bernanke's blood, stating that it was a huge mistake to not let Bear Stearns fail; a mistake because of the principle of moral hazard (didn't you know that Wall Street does not learn a lesson when 95 percent of its wealth is wiped out?)

This "intellectual" non-market pressure was an important component in the US Fed making its first mistake through this financial crisis which started in August 2007 — and what a mistake it has been. It has brought not only the US but the international banking system down. Jobs, and not necessarily of those belonging to Wall Street, are being lost by the millions, and growth is negative. What price moral hazard? I can't help thinking, and believing, that a market participant would never have advocated the arrogant bureaucratic/academic demand for letting Lehman fail. 

It was less than two months ago that several non-market experts were claiming that the RBI was way behind the curve; eg Ajay Shah argued for more monetary tightening, in September, because the highest interest rates in the world were too low to combat imported inflation! (Wall Street Journal Online, Sept 2, 2008). Others echoed with similar sentiments. This was near universal conventional wisdom of leading investment firms, policy makers, pink paper experts, business TV anchor, academics — is there anyone left? If these gentlepersons were in the market, they would readily admit that they were horribly wrong.  

As of October ’08, the consensus was that India would have a double digit fiscal deficit, and that the oil deficit would account for 2 to 3 percent of GDP. But all of the fundamentalists (the moral hazard, monetary and fiscal, RBI/MoF and the IMF types!) were also forecasting a global growth slowdown of historic proportions. The fundamentalists forgot to note that low world growth, and WTI oil price below $65 for the Oct ’08-March ’09 period would mean an off-budget contribution of the oil deficit to be close to zero percent of GDP”.

How to win the Nobel prize by a whisker

Tim Harford writes in FT few fascinating analytics see some of those below: 

“The Nobel memorial prize in economics is typically awarded to researchers who have jointly advanced some important method or idea. When the 2008 prize was awarded to Paul Krugman alone, for his contributions to trade theory and economic geography, other candidates who might have shared the prize – but didn’t – must have counted themselves one small step further away from receiving the call from Stockholm.    

Among them are Jagdish Bhagwati, Krugman’s teacher and champion, and a giant in the field of international trade; and Elhanan Helpman, who wrote an influential book with Krugman on the new trade theory. 

Economies of scale push towards larger and larger companies. Logically, a monopolist should be the lower-cost provider. The tension between economies of scale and competition is obvious. 

Yet while obvious, it is hard to model mathematically in a useful way. Dixit and Stiglitz resolved the problem by observing that consumers have a taste for variety as well as a taste for low prices. In the market for cars, for instance, Volvos compete with Fords and Ferraris. It would be cheaper if there was only one model of car; it would be nicer if there was an infinite variety. Somewhere in the middle is the equilibrium where economies of scale are balanced by customers’ desire for variety. 

The elegant mathematics of the Dixit-Stiglitz model was new, even if the tension it described was as old as Smith’s Wealth of Nations. Krugman described it is as “beautiful”. It quickly became a workhorse, pulling economists to new frontiers of trade theory, growth theory and economic geography. Dixit later said he and Stiglitz had not realised the model would have so many uses – “obviously, otherwise we would have written all those subsequent papers ourselves!” 

That is typically generous of a man who has often praised others, especially Krugman. He once told young economists that a good place to have ideas was in front of the shaving mirror. Krugman has a beard. Imagine, quipped Dixit, how much he could have achieved if he shaved!” 

Friday, November 14, 2008

Revisit your changed mind

The Mint column Mr Niranjan Rajadhyaksha writes “The second old-new issue that may be discussed this weekend is how to rebalance the world economy. Economists had noted the dichotomy at least six years ago—and warned that it is a threat to global economic stability. In short, the US spends too much and saves too little while China spends too little and saves too much. This fault line was papered over by capital flows. China ran up a huge trade surplus with the US—thanks to an undervalued exchange rate—then sent the dollars thus earned back into the US, which kept interest rates there low and allowed American consumers to borrow further to buy from China”.

He would have written three years ago about the thread not after the dog comes to eat away the meal. And how far the decisive mind allows him to say nations should ‘rebalance’ it must be noted here that the individual only can balance their plan not the nation!

Subir Roy orthodoxy mind

Mr Roy writes in the BS “The Indian central bank was never totally independent and should not be. In ordinary times monetary and fiscal authorities have to maintain macro-economic stability and, in exceptional times, have to break as many rules as they need to in order to maintain social stability”.

Of course there are many more anomalies in his analysis about India and the world economy

The Rich get Poorer is any one talking about it?

Robert J. Samuelson says some important discussion about how rich get poorer and instead the poor get poorer. Consider the following arguments;

“By and large, the poor aren't poor because the rich are rich. They're usually poor for their own reasons: family breakdown, low skills, destructive personal habits and plain bad luck.

The presumption implicit in the criticism of growing economic inequality is that society's income is a given and, if the rich have less, others will have more. Up to a point, that's true.

The government already redistributes much income, often for the good. During the boom years, companies might have been less lavish with top executives and slightly more generous to other workers or shareholders. Some new fortunes stem from self-dealing and financial razzle-dazzle, not the creation of real economic value. It's just deserts that some of this wealth has evaporated.

But the redistributionist argument is at best a half-truth. The larger truth is that much of the income of the rich and well-to-do comes from what they do. If they stop doing it, then the income and wealth vanish. No one gets it. It can't be redistributed because it doesn't exist. Everyone's poorer.

Scapegoating and punishing all of the rich won't do us any good if the resulting taxes dull investment and risk-taking, discouraging economic growth that benefits everyone”.

It is a tail that wags the entire subcontinent

This teases out the canine tales — of mythical Sarama, telegenic pugs and more

Mr Nehru Beautiful kids have great Minds don’t ruin them!

Today is the Children’s Day as the usual climes are not new Mr Jawaharlal Nehru Birthday and the birth of Central Planning Commission to Ruin in Stroke!

But for many children this day is also death day as the first Prime Minister of India damaged the Indian Children’s Plan by creating socialist pattern of society and the Central Planning Commission of India.

The below is my song to the Great Children’s Community. This song is added from borrowing the first lines from Usha Jesudasan in the HINDU Young World.

There are beautiful expressions in this Young World but muddled idea of Nehru finds room in fact Sauvik has already done good job!

On Children’s Day, let’s think about what you can do to help other children in India; because the Planning Commission of India can not plan for your future!

On your way to school, you may see lots of little children who do not go to school; because the Planning Commission of India can neither plan nor provide sufficiently!

Do you turn your face away from them? Don’t do that; because the Planning Commission of India will never take care of those children’s!

Remember that these children are just like you, but poor; because the Planning Commission of India planned and ruined for more than sixty years and still does what they think and whom to distribute instead leave to you and me to plan for out life!

And on this special day we need to think about them too; because the Planning Commission of India will never think even after sixty years of central planning!

Perhaps as children you feel that you are too young to do anything; because the Planning Commission of India made your parents to think they are too old to fight for second revolution of individual freedom!

That is not true; because the Planning Commission of India is deep sleep let’s awake yourself with the help of your fellow students!

As a child you have a well of goodness and kindness inside you; because the Planning Commission of India does not have and you know that when you grow up to face the difficulty being created by this Planning Commission of India!

Rabari, a small shepherd boy, used to take his family’s goats up the mountain for food; because the Planning Commission of India does not know how to distribute the food!

His mother would pack him a few dry rotis, some pickle and if he was lucky, some vegetable or dhal.

As he walked through the streets with his goats, he saw hungry children working on building sites; because the Planning Commission of India planned for their own children’s and multiplied by six decades!

He felt sad for them as they never had enough food; because the Planning Commission of India eaten the big folly of AID from Foreign Countries!

So, he would come down from the mountain at lunch time and share his food with them; because the Planning Commission of India will never give single rupee to live but whatever they have will ruin by taxes!

He wished he could have done more for them; because the Planning Commission of India will never think of a small share for these children’s!

But he did what his heart told him to do; because the Planning Commission of India can never plan to teach people know how!

If you listen to your heart and do what it tells you to do, your well of goodness too will never dry up; because the Planning Commission of India will never tell these things that individual people know what is good for you!

Perhaps this year, you and your family can make a collection of sweets and give them to street children and talk to them about Children’s Day? Because the Planning Commission of India will never do any good things to people no matter you pays the taxes!

What does Barack Obama's election mean to you?

Raina Kelley in Newsweek wrote “A Letter to My Son On Election Night” perhaps one has to think especially the parents when they give advice to their children not only during the election time but always.

I enjoyed the article especially these lines “I can mean it when I tell you that the world is available to you……. you have to work and work hard” . I have posted the same article below for the future use.

“What does Barack Obama's election mean to you? It means many things. When you are older, we will talk about how African-American children, like their parents and grandparents, have struggled to overcome the feeling that no matter how hard they study and work and try, there are barriers—some visible, others hidden but still there—that block their way. The feeling that we can rise, but only so far. I did not want you to grow up believing that bitter remnants of the past could hold power over your future. I wanted to be able tell you that it wasn't true—that you could be anything you wanted to be. But I couldn't quite believe it myself. Now I do.

With Obama's election, I can mean it when I tell you that the world is available to you. Yes, I am waxing a bit emotional, so let me temper my exuberance. No election can wipe away racism, and bigotry will show itself to you in ways subtle and not. But it is easier today than it was yesterday to see that racism, once a barrier, is now more like a hurdle. What a fine new addition I have to my mother's arsenal of aphorisms: Son, I can (and probably will) say to you, Barack Obama faced hurdles but succeeded, and you can, too. You are only 4 months old, but already I dream of what a great rocket scientist you'd be. But if you want to be a cattle wrangler, that's OK, too. And if you want to be president? Well, we'll talk.

If you do become president, it won't be just because you won the votes of people who look like you. This election was such a triumph because it tested our nation's fundamental promise of equality—and we as a nation passed. Black Americans did not elect Obama. Americans did. Even if every African-American in the country had voted for him, it would not have been enough. He will enter the White House with the support and good wishes of millions of people of all races, colors and creeds.

Yet this break from the hold of the past, this hope of greater expectations for ourselves, comes with greater expectations on ourselves. We can no longer look to blame outside forces for our failures or rest our shortcomings in the cold comfort of bigotry. If you want to be like Obama, you have to work and work hard. He went to Columbia University and Harvard Law School. He traveled the world and opened his mind. He did not simply dream of being president; he summoned the discipline to get there.

If you could understand any of this, you'd be rolling your eyes at me right now. Hey, I was a kid, too, and it's easy to skip out on homework when no one is looking. But I speak from experience. In eighth grade, I made a contract with myself: I was going to Yale. I drew up a list of everything I would need to do to get in. It wasn't easy; I got C's in chemistry and physics and nearly failed gym (don't laugh—you inherited my genes). But the acceptance letter came.
I worked hard in college and graduated. Along the way, there were plenty of people who doubted me and said unkind things, and not all of them were white. Your black classmates might see you reading a book at recess or raising your hand in class and call you "too white" or "Uncle Tom." Ignore them. Don't let them mess with your mind or steer you from your goals. All of us have to defy stereotypes. Don't be afraid to let go of any part of our color that holds you back. As your grandfather says, "be proud and the black will take care of itself." Too many African-Americans are obsessed with rickety notions of what "real" black people do or don't do. I've been guilty of it myself, and I've been accused of being too white most of my life. Your dad is white, which means technically you are biracial—but that's black in America. I leave that for you to figure out. For now just understand that your race is part of who you are, but it isn't all of who you are. If anyone doubts your "authenticity," you can tell them that you want to be as black as the man behind the desk in the Oval Office”.

Way forward is OK Show me the Route

JNU Professor Manoj Pant asks in ET probably GOOG questions yet still in Keynes ilk dynasty. Consider his questions;
“Are we in for four to five years of bad times as in the ‘thirties and how important is the US to the solution?
Second, what role can India and China play in any recovery?”
Any one heard the following joke at least as of now.
“The usual argument is that the US was living beyond its means as reflected in its huge and growing trade deficits. (One has been hearing this at least since 2000!)

The main problem in unilateral trade protectionism is that it is then extremely irrational for any one country to reverse protectionism: only multilateralism works.

The Great Depression shifted focus from the Commonwealth countries to the US. Will the next shift be to Asia? Is India ready? Only time will tell”.

However the last two paragraphs may not be a joke but debatable one.

“Raffle and Skills Contest”- A solution to present US Financial Crisis

Steven Kurutz observed a good solution to the present financial crisis in US and other countries. The following two important observations need to be noted:

“Desperate, Crawford came up with a novel strategy: she would hold a raffle. Tickets would go for $100 each, and one lucky person would win the farmhouse. If they could sell enough tickets, they could walk away debt-free”.

Last December, the couple teamed up with a real estate agent and a local charity, and set about publicising the raffle, posting flyers and calling news outlets. By the time the draw was held at a local country club this March, they had sold almost 6,500 tickets, raising enough money to cover the cost of the house along with a surplus of more than $200,000 that went to the charity. Having already moved back to the log house, they counted themselves lucky to still have a place to live. "We were so happy, because we’d gone on this horrific two-year journey," Crawford said.

Others, though, are finding creative ways around the rules. Julie Sigwart, a Web designer, is holding what she calls a "skills contest" to give away her six-bedroom, four-bathroom house with ocean views in Maui, Hawaii, which she has been trying to sell since last October.

As in the raffle for Crawford and Kelly’s home, she will charge a $100 entry fee, but participants will have to write an essay—the theme is "Aloha, what does it mean to you?"—which will be judged by a group of "prominent members of the community," she said. (The judges have yet to be finalised.) Because the contest isn’t a game of chance, state approval is not required, and teaming with a non-profit organisation isn’t necessary”.

The Loss Of Individual Liberty

Peter Robinson writes in ForbesAll that the nation's founders understood two centuries ago about the imperative of limited government, all that we learned from the long struggle between collectivism and free markets during our own time--all this could soon simply evanesce”.

Before this conclusion he also wrote “Academia as a whole may have continued its long, sorry wobble to the left, I continued, but the economics profession had proved an exception, moving the other way. Departments of economics across the country now grasped the importance of free markets. "Mises, Hayek, Stigler and you," I told Friedman. "You've transformed the intellectual climate. You've won."

Friedman shook his head. "We may have won the intellectual battle," he replied, "but in practical politics, it's difficult to see that we've had any effect at all."

Wednesday, November 12, 2008

Shameful legacy

Kaushik Basu writes in the Outlook (Why) “ the rich more and subsidise the poor” if that is the case, the revive of government created slavery which is a government funded death penalty will amount to cascade rather to enrich the ‘poor’. Best example is the malfunctioning India’s subsidy system. It is sad that Mr Basu has paid little attention to this big issue. And in once sense it is not surprise to see because he is also student of Mr Sen. 

However, he concludes that “that Obama spoke about redistributing wealth. I do not think he will be able to do much in this area, but if such a call from an American president causes a shift in public opinion, that could well clear the way for a more equitable and better world.      

Lack of belief in freedom= lack of life, liberty and property.

As Milton Friedman put it, "A major source of objection to a free economy is precisely that it ... gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself. "

Is from the Corner Nationalreview


Why couldn’t the theories predict the current crisis?

Manas Chakravarty writes in the Mint “Is something seriously wrong with economics? After being cold-shouldered by the model-building, regression-fitting economist fraternity for long, Keynesian and other less orthodox economists are getting a bit of their own back”.

Not surprisingly what I find from his following paragraph was loathingly fallacy that is he writes “In an interview to The New York Times, economist James Galbraith, who has steadfastly stayed loyal to the liberal theories of his celebrated father John Kenneth Galbraith, said that the failure to foresee the mortgage crisis was “an enormous blot on the reputation of the profession”. He went on to say: “There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.”

He also says that “he policies currently being implemented by Federal Reserve chairman Ben Bernanke and his ilk. In a speech in 2002 at a conference to honour economist Milton Friedman’s 90th birthday, Bernanke said: “Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” He was referring to a famous book on the Great Depression by Friedman and Anna Schwartz which essentially said that the depression was the result of mistakes committed by the monetary authorities of the time. Said Bernanke, “Because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn…” Bernanke has been a scholar of the Great Depression and his present policy of throwing vast amounts of liquidity at banks and recapitalizing them is based on the premise that not doing so in time is what allowed the crash of 1929 to morph into the Great Depression”.

Manas not only report misleadingly but make reader confused. Of course, I ma not but let’s grasp the An Open Letter to my Friends on the Left by Professor Steven Horwitz.

Tuesday, November 11, 2008

Who spend how much?

"Democrats are indeed big spenders. Second only to the Republicans" says Veronique de Rugy in Reason.

India and the G-20 Washington summit

Yele University Professor T.N. Srinivasan suggests some of the following ideas that India may consider in the forthcoming Group of 20 Countries meeting on the issues of present financial crisis.

  • The most important reforms in my view would be first to restrict the mandate by the IMF to maintaining the stability of the global financial system with the definition of the financial broadened to include the fiscal, monetary and exchange policies as well as global markets for trading financial claims. The involvement of the IMF in the largely domestic policies of its developing country members which have no cross-border externalities through its insistence of the Poverty Reduction Strategy Papers from those seeking its assistance should be stopped forthwith. India should strongly advocate both these reforms. 
  • It is likely that the summiteers may not be able to resist pressures to discuss regulatory reform and, in particular, the boundary between regulation and markets. Such a discussion can be meaningful only after we have an adequate analysis and understanding of the relative contribution of failures of each to the current crisis. In its absence, I would urge India not to take an ideological posture on the issue but to simply emphasise that it would be counterproductive to suggest a “one size fits all approach.” Instead, the search should be for a solution that leaves adequate and appropriate room for markets and regulation. Another reform issue that should be postponed for a later occasion is the reform of the World Bank. It certainly is in need of a significant downsizing and restriction of its engagement through its lending and free policy advice only to those countries for which external resource and policy making capacity are serious constraints on development. There is no rationale any longer for the Bank to be lending, for example, to Brazil, China or India. All three should be charged a fee for the Bank’s advice if they seek it.

Opportunity for true leadership

V S Mahesh writes quite interestingly in BS: the below paragraphs are really notable;  

  • In the event of bankruptcy, the president will forfeit all his private assets to the creditors of the company. In his book, Hasegawa cites the case of the President of Kojin, whose palatial residence in Denenchofu was handed over to the creditors of the company when Kojin went bankrupt. 
  • the top management earn much more than the lowest wage earner in a company in good times, they are the ones who take the first blows when the times go bad. Top management will normally cut their salaries, followed by the next layers in strict sequence and only finally, will the lowest wage earners be asked if they too would volunteer to reduce their salaries. 
  • The secret behind their success was that they had done what the Japanese would have done. First, their top management cut down their salaries by 50 per cent, then the administrative officials responsible for the production division cut down their salaries by 35 to 40 per cent, and only then was the income of the hourly staff cut down by 20 to 25 per cent. Not a single employee was retrenched. That the entire organization had jointly tightened their belt and seen the crisis through as a cohesive team should be obvious to anyone. This was in California and not Japan! (For more on this, readers can refer to my book, Thresholds of Motivation, Tata McGraw-Hill, 1993)
  • In the Taj Group, we knew that we were in for a bad year. Rather than taking the axe out to cut employee force, we did something quite different. We ran “cost-reduction” workshops in all hotels, where employees were asked to come up with suggestions on how to cut waste and unnecessary costs. We assured them that in the best traditions of the Tatas, we would try our very best to jointly cope with the crisis and did not threaten them with mass retrenchment. Employees responded with literally thousands of suggestions and we rode the storm jointly and came out much stronger as a team when the crisis ended. In one hotel, we cut food costs by 10 per cent, largely because of suggestions that came from the lowest rungs of the kitchen staff.

Best minds gravitated

Best minds yet to come in new India!

According to B S RaghavanA census taken in the late 1990s revealed that of the 468 law colleges existing in the country then, teacher per institution average was 2.38 which is less than half of even the feeble five full-time teacher per institution prescribed by the Bar Council. As regards the quality of teaching, the less said the better”.


While reviewing the Jagdish Bhagwati’s new book (SUSTAININGINDIA’S GROWTH MIRACLE) Bibek Debroy writes in Indian Expresst is a tragedy that this year’s Nobel Prize wasn’t shared by Paul Krugman with his former teacher Jagdish Bhagwati. Krugman’s work on strategic trade theory has sometimes been interpreted as justification for state intervention in free trade flows. In contrast, Bhagwati’s work is for unabashed free trade and against protectionism. How does one ensure free trade and removal of barriers?” 

However “Bhagwati’s book only prescribes part of the medicine. But on the prescription given, there is no better popular book I can think of.

See my other post on the same book review here  

B.R. Shenoy: stature and impact

Bauer, Peter Bauer had written this great work and published by Cato Institute Journal in 1998

B.R. Shenoy: stature and impact

Article Abstract:

Indian economist B.R. Shenoy gained his greatest distinction from his paper 'Note of Dissent' and the book 'Problems of Indian Economic Development. The former was attached to Second Five Year Economic Plan submitted to Prime Minister Jawaharlal Nehru in 1956. It demonstrated the extent of his moral courage in that he dared to declare a dissenting view on the traditional Western economic perceptions and beliefs held by Nehru at the height of the latter's powers. He pointed out the weakness of an economic forecast that bases its growth on the productivity of people living on subsistence levels.

Book Review

C.T. KURIEN reviewed the new book on SUSTAINING INDIA’S GROWTH MIRACLE Edited by Jagdish N. Bhagwati, Charles W. Calomiris

The following are the key ideas suggested by authors:

Arvind Panagariy: Comparing the growth profiles of China and India, Panagariya points out that in the former, capital flow was into unskilled/labour-intensive industries which helped the country to become a major supplier of light industry goods to the rest of the world. 

…..suggests that if foreign capital is to move into unskilled/labour-intensive industrial segments in India, now dominated by the informal sector, some drastic changes in labour legislation favouring foreign capital are called for.

T.N.Srinivasan: The first is to create a Fiscal Review Council, partly to replace the periodic Finance Commission, but mainly to provide a forum for the Centre and the states to discuss each other’s fiscal policies in a common forum.

…..the second, to convert the Planning Commission into a Fund for Public Investment is questionable as it perceives the role of the Planning Commission solely as a funding body.

Changed or he changed

M K Venu says in ETa closer examination of the situation might reveal that facts may not be changing as quickly as being projected. The universe of market players, analysts and economists just see what they want to see”. In this case John Maynard Keynes famous quip will permanently dead in the long run. But we live, not surely with that mind change!


Stiglitz is No Mockery!

Joseph E Stiglitz says America exported its deregulatory free market philosophy”.

It is blunder to accept anything and everything without the minding of the business of the business in our life from other persons or from other countries in the world. It is the same in the Stiglitz case too.

Ten Blunders in Communism

Robert Higgs writesthe list of ten measures that Karl Marx and Friedrich Engels presented in the Manifesto of the Communist Party as "pretty generally applicable" for the establishment of communism "in the most advanced countries."

 I reproduce the same ten blunders below:

  1.  Abolition of property in land and application of all rents of land to public purposes.
  2. A heavy progressive or graduated income tax.
  3. Abolition of all right of inheritance.
  4. Confiscation of the property of all emigrants and rebels.
  5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.
  6. Centralization of the means of communication and transport in the hands of the state.
  7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.
  8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.
  9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between towns and country, by a more equable distribution of the population over the country.
  10. Free education for all children in public schools. Abolition of child factory labor in its present form. Combination of education with industrial production, etc.

Economist Ajay Shah is back on firing RBI Actions

How to control the Inflation Tiger? Ajay Shah gives many interesting suggestion. The below are the few which are really need of the hour. If fact, I would expect a 15-20 percent rupee appreciation. So that I can able bye things which I wanted to buy from foreign countries. Of course millions of people would buy things like that and this. 

  •  The way forward lies in breaking the rupee/dollar peg, as was done in early 2007, and having a 10% rupee appreciation. 
  • We are suffering from these problems because of the blunders of monetary policy. The possibility of such blunders needs to be eliminated by rewriting the RBI Act. The text of this Act is completely wrong in the light of the monetary economics that we know today. With a sound monetary policy framework, inflation would be stabilised, inflation crises like this would not periodically hijack the government, and distortionary short-sighted initiatives such as banning exports of certain goods would not arise.
  • The right combination of policy for the short term involves (a) an appreciation to Rs 36 per dollar with (b) a reduction in the short rate to 4%. 
  • A 10% rupee appreciation would yield a nice dent on inflation, as happened in March 2007. 
But finally I got the Adam Smith famous Book of “Wealth of Nations” from US through my friend. 

Monday, November 10, 2008

Of Obama & Martin Luther King

Of Obama & Martin Luther King

The above poem is written in Tamil and Translated into English!

Demise of liberals in India....

I have been reading about the so called Indian liberals writings (both as individuals and organizations). What was quite interesting was that many of them were moved beyond the belief of the ‘liberal idea’ particularly with the victory of US elect President Obama election.

But it is not surprise but happy to note what Sauvik Chakraverti writes in the Indefenceofliberty that the “….. this year's Nobel prize in Economics, awarded to Paul Krugman, whom I consider to be a dangerous Keynesian. And there are others like me. If we did not have the freedom to criticize this award, if the Nobel prize was awarded by a "ministry of truth," all dissenting voices would be stifled”. 

Obama's most protectionist rhetoric

Barack Obama's victory with many war words but the prophet of "Yes, we can" is a one which is now matter than the before US election at least for India.

See Swaminathan S A Aiyar article in ET it may sound you against Obama’s future promise but we have to think the root causes keeping in mind the below some of key paragraphs:

“Now that the US is slumping into the worst recession since 1979, can Obama take measures to reduce the outsourcing of software and business services to India, and reduce visas to Indian software engineers? Yes, he can. 

Can he take measures to reduce the flow of direct and portfolio investment to India? Yes he can. He wants to raise the capital gains tax from 15% to 20%. That worsens the risk-reward ratio for US investors, and will make them more reluctant to invest in emerging markets like India, which are considered riskier than the US. 

Can Obama devise tax and other measures that will penalise US companies that invest abroad, in countries like India, rather than in the US? Yes, he can. 

Can Obama come out with protectionist measures to shift jobs from poor countries to the US? He not only can, he has promised to do so. 

Can he increase subsidies for and compulsory use of corn-based ethanol, measures that have caused a big spike in world food and fertiliser crisis? Yes, he can. 

Can he kill the Doha Round of the World Trade Organisation by taking a much tougher line than Bush on keeping US farm subsidies high? Yes, he can. 

Can he act against
India for building up its forex reserves, and hence keeping the rupee weaker than it would otherwise have been? Yes, he can. He has in the past voted to penalise China for doing just this. In the current financial crisis it is wise for Third World countries to keep high forex reserves, but this is not recognised by protectionists in the US. 

He has said that if only the Kashmir issue is settled, Pakistan can better concentrate on al-Qaida and the Taliban. The Indo-US nuclear deal is through. But can Obama come up with hurdles on details, like licences for dual-purpose technology? We hope not, but yes, he can. His supporters include non-proliferators who still want to punish India. 

Can he insist that India should enact a law limiting the liability of US nuclear suppliers in the event of an accident at an Indian nuclear power plant? Can he urge India to sign an international convention shifting liability from equipment suppliers to the company running a nuclear plant? Yes, he can. 

Here again, we must not exaggerate the risks. In practice,
US policy may not change much. But history shows that Indo-US relations have usually been better under Republican than Democratic presidents. Democrats are more protectionist, and tougher on nuclear non-proliferation. 

Bill Clinton was personally popular in
India, but never did anything for us except impose sanctions after Pokharan II. Bush was personally unpopular in India, yet did us yeoman service by pushing through the nuclear deal. Can Obama do anything to match that? Yes, he can, but I rather doubt that he will”.