Archive for February, 2010

Bank rate, repo rate

February 19, 2010

The bank rate is the rate the central bank pays on reserves.  Reserves are the deposits the banking system (commercial banks) have at the central bank.  This rate thus effectively sets a floor to the interest rate structure-if a bank can earn bank rate on its reserves, why should it lend for less? (Note: this is the bank rate of the Bank of England.  RBI has a different definition.)

The repo rate (and the reverse repo rate) are rates at which the central bank intervenes on the interbank money market to either inject or subtract reserves into and from the banking system.  “Repos are in the form of sale of dated securities by the [central bank] for very short periods with a confirmed buy back provision” RBI Functions and Working.  So the first leg of the repo consists of an absorption of reserves from the banking system.  RBI sells T-bills to the commercial banking system.  Reserves (deposit balances of banks with the central bank) move from banks to the central bank.

Advertisements

Consumption

February 17, 2010

Let us not pun on the word, it would be most indelicate (Keats comes to mind).  Consumption is mainly a matter of habit.  We live in the same place for runs of time.  We have the same shopping baskets.  Consumption is stable and readily forthcoming.  Hunger gnaws.  Hence production.  But production is limited by technology, by techne.  By knowledge, which is inherently accretive and cumulative.

So Consumption pulls the productive process in its direction, calls for newer products and utilities.  Incremental tweaking of the production process.  But this is preconditioned by a given income distribution.  Which in turn determines consumption.  Ouroboros.

Which is why we have to liberate the consumption desires of the billions on this planet who do not have enough.  Believe me, it would be a thing to behold.

Residential construction has a lot to do with this.  Or am I wrong?

One of many questions I have

February 10, 2010

Why does Google have different URLs for different geographies?  Why are the search results different for Google.co.in and Google.co.uk?  I always thought the net was going to be the great leveller but apparently not so.  At least this written communication subtracts the differential due to accents, but we can’t seem to get away from the curse of geography.  Please correct me if I am wrong.

Prices from Oasis Mall, Koramangala

February 6, 2010

Pork cocktail sausages  Rs 250/kg

Ajinomoto 50gms Rs 15

Chicken Broiler Whole Skin on Rs 115/kg

Fun Foods Mayonnaise 300g  Rs 69

Streamline Pure Natural Honey 390g  Rs 145

Spanish Mortadella with Olives (Salami) Rs 860/kg

US style Rindless bacon  Rs 1150/kg

Ginger fresh Rs 59.90/kg

Garlic china  Rs 179.90/kg

Sugar

February 3, 2010

Parrys sugar 1 kg   Rs 46.00

Pillsbury atta 1 kg Rs 33.00

A typical forex transaction

February 3, 2010

There would, in Singapore, be these money changers.  They would have a board behind them, with the buying and selling prices for various currencies listed in electronic red.  But you wouldn’t get those rates!

Typically the transaction would go like this:

Q: What is the rate for USD today?

A: You want to buy or you want to sell?

Q: Buy

A: How much?

And then the quote.

This is how markets function.  Frustrating isn’t it?

Question for discussion

February 2, 2010

If the labour type jobs can be outsourced on a cost saving argument, why can’t the CXO level jobs be similarly outsourced?

I asked my wife (could I ever do better?) and she said: it’s because they play golf together.

My response was: outsource both buyer and seller of services.  Imagine an Indian CEO of XYZ playing carrom with an Indian CEO of ABC.  Don’t see why it shouldn’t work.