Archive for February, 2011

Measurement of growth

February 14, 2011

I read my friend Ajith Zacharias’ article on SSRN on Hicksian measures of income today, for the third time, and I was not altogether satisfied. His conclusion is purely negative. Hicks’ definition will not work.

Hicks’ definition is the SNA definition of income: roughly what one can consume over a period without depleting ones period initial net worth. The maximum one can consume. Without diminishing wealth. I.e the wealth at the end of the period is equal to the wealth at the beginning. This definition is tenable only over suitably short periods of personal lifetime, typically when the individual is in the labour force (18 to 60, 65). The bursts of growth at the beginning of life, and the years of doddering senility, are in the interests of decency, passed over.

J. L Hanson, A Textbook of Economics; I quote

To the economist wealth is a stock of goods existing at a particular time that conform to certain requirements. Such goods must possess four qualities. In the first place, they must possess utility-that is, they must be capable of yielding satisfaction, and so they must be desirable. Secondly, before goods can be considered wealth they must have a money value, even though they may be considered to be invaluable.[…]Thirdly, they must be limited in supply. Fourthly, the ownership of such goods must be capable of being transferred from one person to another. This fourth condition carries with it the assumption that all wealth is owned by someone-an individual or a public body. This definition of wealth is more precise than the meaning often attached to the word in ordinary speech, and would exclude intangible things such as acquired skills. An independent craftsman-as, for example, a carpenter, could count his tools as part of his stock of wealth but not his skill in using them, since skills are not transferable. In speaking of a country’s wealth, however, some people might include the quality of its labour, especially if there was a high standard of education and training. For clarity of thinking it is essential to attach precise meanings to terms, and it is therefore better to regard only tangible things as wealth.

Zacharias mentions human capital in his paper, but from the foregoing we can see that there is no such thing.  Positing some such idea is ideological and unscientific.  Every human being is capable of what he is capable off.  And training can be imparted to anyone.  What a man can consume is what he can seize for himself in this battle of each against all.  Human capital is about enjoying the spoils of war, not something that you  can alienate from yourself.  That is the problem I have with the negative conclusion in the paper.  Wealth is very definite.  The accretion is also a definite quantity of goods.  Behind services of all manner, lie bundles of goods-advanced and productively consumed.  The accretion to the stock of goods is a definite datum.  My portion of world product (as is Ajith’s) is a definite datum.  So income is indeed welldefined by Hicks and SNA.



February 10, 2011

A breakup or breakdown of investment into sub categories. Booze shops, restaurants, hotels, manufacturing etc. For US, UK, Europe, Japan, India, China. New investment as well as reinvested earnings.


February 9, 2011

Sacrum means rite, sacrifice.

From NY Fed: List of Reporting Dealers

February 7, 2011
Reporting Dealers

Bank of America
Bank of Montreal
The Bank of New York
Bank of Tokyo-Mitsubishi
Barclays Capital
BNP Paribas
Canadian Imperial Bank of Commerce
Deutsche Bank AG
Goldman Sachs & Co.
JP Morgan Chase Bank
Mizuho Corporate Bank
Morgan Stanley
Royal Bank of Canada
Royal Bank of Scotland
Skandinaviska Enskilda Bank
Société Générale
Standard Chartered
State Street Corporation
Sumitomo Mitsui Banking Corporation
UBS Bank
Wells Fargo Bank N.A.

From RBI website: List of Authorised Dealers

February 6, 2011

Annexure : List of authorised dealers in foreign exchange May 30, 2005 : Annexure : List of authorised dealers in foreign exchange

List of banks and other institutions to whom licences have been issued to deal in foreign exchange
(paragraph 1.4)
A. Banks and others holding full-fledged licences
Abu Dhabi Commercial Bank Ltd.
Allahabad Bank
American Express Bank Ltd.
Andhra Bank
ANZ Grindlays Bank Ltd.
Arab Bangladesh Bank Ltd.
Bank Internasional Indonesia
Bank of America National Trust and Savings Association
Bank of Bahrain and Kuwait B.S.C.
Bank of Baroda
Bank of Ceylon
Bank of India
Bank of Madura Ltd.
Bank of Maharashtra
Bank Muscat International S.A.O.G.
Bank of Nova Scotia
Bank of Punjab Ltd.
Bank of Rajasthan Ltd.
Bank of Tokyo-Mitsubishi Ltd.
Banque Nationale De Paris
Barclays Bank p.l.c.
Benares State Bank Ltd.
Bharat Overseas Bank Ltd.
Bombay Mercantile Co-operative Bank Ltd.
The British Bank of the Middle East
Canara Bank
Catholic Syrian Bank Ltd.
Central Bank of India
Centurion Bank Ltd.
The Chase Manhattan Bank
Chinatrust Commercial Bank
Cho Hung Bank
Citibank N.A.
City Union Bank Ltd.
Commerzbank A.G.
Corporation Bank
Credit Agricole Indosuez
Credit Lyonnais
Dena Bank
Deutsche Bank Aktiengesellschaft
The Development Bank of Singapore Ltd.
Development Credit Bank Ltd.
Dhanalakshmi Bank Ltd.
Dresdner Bank A.G.
Federal Bank Ltd.
The Fuji Bank Ltd.
Global Trust Bank Ltd.
HDFC Bank Ltd.
The Hongkong and Shanghai Banking Corporation Ltd.
ICICI Banking Corporation Ltd.
IDBI Bank Ltd.
Indian Bank
Indian Overseas Bank
IndusInd Bank Ltd.
Internationale Nederlanden Bank (ING Bank)
Jammu and Kashmir Bank Ltd.
KBC Bank N.V.
Karnataka Bank Ltd.
Karur Vysya Bank Ltd.
Krung Thai Bank Public Company Ltd.
Lakshmi Vilas Bank Ltd.
Maharashtra State Co-operative Bank Ltd.
Mashreq Bank p.s.c.
Morgan Guaranty Trust Co. of New York
Nedungadi Bank Ltd.
Oman International Bank S.A.O.G.
Oriental Bank of Commerce
Oversea-Chinese Banking Corporation Ltd.
Punjab National Bank
Punjab and Sind Bank
The Sakura Bank Ltd.
Sangli Bank Ltd.
Sanwa Bank Ltd.
Saraswat Co-operative Bank Ltd.
SBI Commercial and International Bank Ltd.
The Siam Commercial Bank Ltd.
Societe Generale
Sonali Bank
South Indian Bank Ltd.
Standard Chartered Bank
State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of India
State Bank of Indore
State Bank of Mauritius Ltd.
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore
The Sumitomo Bank Ltd.
Syndicate Bank
Tamilnad Mercantile Bank Ltd.
Thomas Cook (India) Ltd.
The Toronto Dominion Bank
UCO Bank
Union Bank of India
United Bank of India
United Western Bank Ltd.
UTI Bank Ltd.
Vijaya Bank
Vysya Bank Ltd.
A.D.(M.A. Series) Circular No.45

B. Institutions holding restricted authorisation to deal in foreign exchange
Export-Import Bank of India
Industrial Credit & Investment Corporation of India Ltd.
Industrial Development Bank of India
Industrial Finance Corporation of India
SBI Factors and Commercial Services Pvt. Ltd.
Small Industries Development Bank of India

The Commercial Bank of Korea Ltd. and Hanil Bank have ceased to be authorised dealers in foreign exchange. Accordingly, their names have been deleted from the list of authorised dealers in foreign exchange.

In dreams

February 4, 2011

Snakes seen in dreams are usually beautiful and fascinating, not to mention repellent.

Why do we need the broker?

February 4, 2011

A wants to sell a given quantity of shares of Reliance to B. Or to anybody. Surely a network computer could do that? Match buyers and sellers. Why do we need the intermediary?

Same goes for banks. I can lend directly to the ultimate borrower. Why do I need the aggregator?


February 3, 2011

High definition.

Money as a unit of account

February 1, 2011

What if I took credit from everyone? My debts would be tallied in various books or ledgers. My creditors debts would be tallied in books or ledgers. Their creditors would have other debts tallied in electronic ledgers. Money would move between accounts. We would be in a pure credit economy.

The illegal transactions would be hard to make.


February 1, 2011

Interest is the price paid for the use of money. Money is defined, narrowly, as cash (notes, coins) and demand deposits. Demand deposits form by far the larger of the two components. Create a list of industries and map them each to a payment pattern. Retail is cash and credit driven. Credit because of the use of credit cards. We take on debt for a month or so until we pay our credit card bills. I know one thing about payment patterns for sure. I get my paycheck every month. That gives me liquidity enough (just enough) to see me through the expenditures of the month. And there are many more like me. We spend what we get. There is an interest rate here also. For consumption loans in Bangalore the rate is Rs 100 per month on every Rs 1000 borrowed. (This rate I will check tomorrow with my informant.) The credit card can go into debt. Companies can be debt ridden and debt free. The retail sector is cash and carry. Thus compartment the industry list into retail and non retail. From the tills of the shop to the bank. From the tills of the shops to the wholesalers. From the wholesalers to the producers. From the producers to their factors. Their landlords, their workers, their raw materials suppliers (other shops),their financiers.. This is the industrial circulation. Incomes come in a distribution with a very long right tail. The top 1% gets a lot of the income. They have savings. (The flow into the capital markets) (There can be inflows from the industrial circulation as well, as provident funds and pension funds cumulate). And they get a substantial chunk of what we spend.

And what do the financiers provide? They provide the services of liquidity. So how much liquidity I need, depends on who will take cash and who will take credit. If none of my creditors asked for settlement (because they were getting credit for whatever thay needed) I would need no liquidity. If I had no creditors, and I was spending whatever I earned in a month, then I would turn my whole bank deposit into cash (notes and coin) by the end of the month. But I maintain a minimum balance in the bank account. And I have some nominal savings. So there is some lending my me to the bank. And since money is a means of final settlement of debt, and there are some people who wont give me credit, I need liquidity, or money. So I work and earn.
We spend what we get, and they get what we spend (Kaldor).

So the HNIs and pension funds supply savings at a varying rate into the capital market, and entrepreneurs borrow that in the hope of making profits. (Here analyze borrowing: C&I LOC, Credit card, Mortgage, School loans). This is the financial circuit. We deposit our salaries in the bank, thus giving the bank a certain pool of cash, and the banks lend it out to investing industry. The industry being expanded fulfils welfare needs of the populace. Us and them.

A part of profits is conspicuously consumed. The rest is returned to savings. Why don’t schools take payment for the education they have delivered, after the graduates have proved its value in the outside world?

Someone gave me fellowship to study economics at NYU grad school. Who was it? How did they evaluate the grant? Did I study for free? It was from Prof. Todaro’s grant I think I heard. Or was it UN money? It was financial aid, but whose money was it?