"Man's
role is uncertain, undefined, and perhaps unnecessary."
—Margaret Mead (American, 1901-1978)
Word
for the day
Lucida (n)
The brightest star in a constellation.
Malice
towards none
In
a democracy, why an elected representative helping a citizen should be a NEWS?
Ain't
that a total failure of our democracy?
Would
someone mind informing this to the paean singers and cheer leaders at Raisina
Hills and Ashok Road!
First random thought this morning
BJP has reportedly decided to go with PM Modi as its mascot in UP
elections.
It's a pity. This state gave the party more than one fourth of its
MPs in 2014 elections, and still the party does not have a local face to show
to the people.
Show me a miracle!
The intense debate that has been
going on in the world about according the status of science to Economics is no
less than the process of canonization of a catholic saint.
The proponents claim the economics
to be the youngest discipline of science, but a science nonetheless. Whereas,
the opponents seek the evidence (read miracle), that has been elusive so far.
I am writing this because, the
events of past one decade make me firmly believe that at best Economics is
witchery used by politicians to impress upon their respective constituencies
the need and urgency to afford them the power to run the state. The students
and practitioners of Economics take side of the politician they like best.
The abject failure of so called
"non-conventional" monetary policies used in past one decade in
stimulating economic growth, challenges the claims of the ability to predict
the likely behavior of consumers and markets on the basis of past data and
trends. In hindsight it looks a farce. It's like a person riding on tiger's
back claiming a victory over the tiger.
The conduct of central bankers,
economists and governments, in past one decade in particular, makes it palpably
evident that the concept like objectivity, data dependency, predictability,
etc. have nothing to do with the economics.
US Federal Reserve is a classic
case in this point.
The fact is that the market driven
rate (LIBOR, etc.) have diverged too much from the policy rate. This may have
created unusual arbitrage opportunities distorting the normal operations of the
global financial market. This is an anomalous situation and needs to be
corrected at earliest. The FOMC of the Federal Reserve is seeking a political
correct reason and timing to bridge this chasm.
The effort to make this simple decision
look like a major economic event driven by arduous study and analysis of data
and evidence seem ludicrous. In the process, not only the US Federal Reserve
but central bankers as an institution, are losing credibility.
Instead of bringing a higher degree
of predictability to the markets, the conduct of central bankers may be causing
just the opposite. The traders are naturally roiled. Many investors may also
not like the avoidable volatility in the economic environment.
Insofar as I am concerned, I am
not planning to stay awake till midnight on 22 September, to hear what Yellen
has to say. Status quo or 25bps hike makes no change to my investment thesis.
For, I am convinced that the global cost of capital needs to rise to rational
levels to stimulate the virtuous cycle of economic growth.
