Thursday, November 24, 2016

Tool and blunder

As an economist, Manmohan Singh could have said, "Demonetisation is an effective monetary tool and it is a blunder that it was not used by UPA" instead of mixing up loot and plunder.

Loot and plunder

Former Prime Minister Manmohan Singh spoke in the Rajya Sabha today and lambasted the government for indulging in 'organised loot and legalised plunder'. He was referring to demonetisation of high denomination notes. Of course, he knows what loot and plunder are. Did he not preside over the largest illegitimate plunder ever perpetrated by any government in India?

Monday, November 21, 2016

Larry Summers on Indian demonetisation

Larry Summers, a former US Treasury Secretary who missed a possible chairmanship of the Fed because of his politically incorrect statements on female professors, has thought it fit to comment on ongoing demonetisation of Rs.500 and Rs.1,000. [Summers had earlier infamously found "the basic, slightly lead-eyed premise of [Mr. Rajan's] paper to be misguided" with reference to Raghuram Rajan's unique prediction of global downturn. According to Summers, Rajan was a Luddite.]

Larry Summers is patronising enough to call the demonetisation move 'the most sweeping change in currency policy in the world in decades.' When the European Central Bank put an end to Euro 500 Bank notes in May, 2016 , it was widely welcomed by many economists including Summers. Euro 500 note was nicknamed 'Bin Laden' since it was the currency denomination of choice for terrorists and drug peddlers. The modus operandi adopted by ECB was different from what RBI is doing now. Euro 500 will be phased out by the end of 2018. In the meanwhile, whatever notes come back to banks will get withdrawn from circulation. A similar approach by RBI would only have ensured planned failure of its move. Summers is now seeking an end to US$ 100 notes.

Since India is deeply troubled by terrorism and black money accumulators, a long time window for conversion would have been imprudent. Naxalites and terrorists from across the border would have welcomed such a tolerant move.

Summers adds, "We recognize that many of those who hold large quantities of cash in India have come by their wealth in corrupt or illegal ways.  So, the temptation to expropriate is understandable.  After all, as the argument goes, anyone who came by their wealth legally has nothing to fear from coming forward and exchanging old notes for new ones." 
However, he also insists, "Most free societies would rather let several criminals go free than convict an innocent man.  In the same way, for the government to expropriate from even a few innocent victims who, for one reason or another, do not manage to convert their money is highly problematic.  Moreover, the definition of what is illegal or corrupt is open to debate given commercial practices that have prevailed in India for a long time." This is an argument for 'live and let live' policy very pleasing to the ears of the guilty.

It is surprising that Summers assumes that despite a two-month window for exchange of notes (lengthened by a further 3-month period for exchange directly at RBI), some 'innocent' people will lose their money. Ten days of chaotic queues in India are enough to enable the noted economist to conclude:  "We were not enthusiastic previously about the idea of withdrawing existing notes from circulation because we judged the costs to exceed the benefits. The ongoing chaos in India and the resulting loss of trust in government fortify us in this judgement."

Demonetisation is not a narrow economic measure. It has social and ethical underpinnings. If it helps in undermining the anti-social forces, be they terrorists, Maoists or black moneyed politicians and businessmen, withdrawal of high-denomination notes becomes imperative. Hopefully, the government will follow up with more measures to penalise the criminals.

Friday, November 11, 2016

Ratan Tata - Cyrus Mistry confrontation

Ratan Tata would scarcely have expected Cyrus Mistry to be of such stern stuff which the latter has exhibited in the ongoing confrontation. Mistry has dug his heels in and may go the long haul to disprove the 'Tata Magic'.

Longer the fight festers, more will be the loss to Tata's credibility. Some independent directors have started shamelessly exhibiting their loyalty to and dependency on Tatas. O.P.Bhatt and Mallika Srinivasan belong to this 'dependent independent' category. Tatas have started maligning independent directors like Nusli Wadia and Vibha Paul Rishi who are insistent on calling a spade a spade. Wadia had earlier fought against Dhirubhai Ambani (Bombay Dyeing vs Reliance) and of course lost heavily. He may lose yet again. Between Dhirubhai and Ratan, the former was more transparent about his deviousness. Wadia may be feeling the heat of nemesis visiting him. He had earlier supported Ratan Tata to unscrupulously oust Russi Mody and other stalwarts from Tata companies. What goes around comes around.

Independent directors in IHCL and Tata Chemicals were able to put their foot down on the egoistic machinations of Tatas. Independent directors in Tata Steel , some of them, lack nerves of steel. The director representing workmen sided with Ratan Tata and expectedly so.

Media observations which were initially against the unfair treatment meted out to Mistry have started softening. Ratan Tata, according to some reports, has activated his association with Niira Radia. With friends like Siva and Radia, Ratan Tata's judgment cannot but be clouded.

Thursday, November 10, 2016

Tatas: an update

Ratan Tata has accused Cyrus Mistry of deviousness. Is Mistry devious because he has refused to be bullied?

Link for the 9-page letter of Tata Sons decrying Cyrus Mistry is

It is surprising that Ratan Tata has found fault with SEBI, Stock Exchanges and shareholders for seeking clarifications on Cyrus Mistry's 'disclosure' from the companies instead of from Mistry. This misplaced blame is another proof of Ratan Tata's hollowness. What a fall!

Wednesday, November 09, 2016

Brexit plus, plus

Donald Trump has achieved an unexpected victory over Hillary Clinton to become the 45th POTUS. This proves the media predictions totally wrong and is a jolt to stock markets.

How did this come about? Media's constant belligerence towards him has earned him public sympathy. People are vexed with political culture and have voted for a rank outsider. Paranoia among workers is very strong and they have caused what Trump calls a Brexit plus, plus.

Trump as President is likely to be different from the cantankerous candidate that he has been. Republican majority in both Houses will make it unnecessary for him to be bellicose. His deputy, Mike Pence is said to be a seasoned politician and therefore there may not be too many faux pas. Given Trump's freakish behaviour, it is also possible that he may voluntarily step down after a couple of years and enable Pence to be President.

His election was unpredictable. His possible contribution as President as of now may also be unpredictable. It is unlikely though that he will fare worse than his predecessors.

Added on November 10th: It is noteworthy that markets recovered fast after a brief crash. People have realised that President Trump is a different animal from candidate Trump. Competition sometimes vulgarises and degenerates a person whereas a position of authority may ennoble a person. Power may corrupt, but it may also elevate one. 'Crooked Hillary' must be feeling terribly let down. Domestic differences with Bill Clinton are likely to manifest.

Saturday, November 05, 2016

Pathetic Ratan Tata

Santanu Chowdhury says in The Wall Street Journal: Our comments are in red:                                          

In his second letter emailed to the around 600,000 employees at India’s largest conglomerate following the news of Mr. Cyrus’s departure, Mr. Tata said “this difficult decision, made after careful and thoughtful deliberation, is one the board believes was absolutely necessary for the future success of the Tata Group.”
This is an admission that the past performance was not adversely affected by Cyrus Mistry. Future is anybody's guess. It is easy to demonise anyone by quoting future possibilities. Ratan Tata has taken on an astrologer's role. Pathetic!
“As a group, we are steadfast in our resolve to maintain the Tata culture and value system that all of us have worked so hard to nurture over the decades,” Mr. Tata’s letter said. What is this cliched term 'Tata culture'? Does it include sacking a person sans objective reasons? Does it only mean subservience to Ratan Tata?The focus has to be on ‘leading’ rather than ‘following’,” he said. And only Ratan Tata can lead?
In the letter, Mr. Tata said he was excited by the opportunity to “maintain stability and continuity of leadership,” while also “looking forward with equal excitement to the finalization by the selection committee of a world-class leader to be the new chairman of the group.” Stability of leadership and whimsical dismissal of Chairman do not go together.

Wednesday, November 02, 2016

Trump stages a comeback

Donald Trump is not a sure loser anymore. He may even win though it continues to be unlikely. What was considered impossible has now become only improbable. Hillary Clinton must be worried. She deserves to be.

Media and Markets are overwhelmingly against Trump. The former do not want their prediction to go wrong. The latter do not want to face the uncertainty of a new ideological face at the White House. There is near unanimity among the voters that whoever wins, the loser is the American voter.

In the unlikely event of neither candidate winning 270 electoral votes (because there are two independent candidates also in the fray), the electoral process may be repeated offering an opportunity to wash more dirty linen in public. It is also possible that voters may utilise the additional time to come to a better decision.

Global allergy towards Trump is misplaced given that the alternative is equally or more corrupt and immoral. Bill Clinton in the last one year of his presidency is said to have exhibited bizarre behaviour. Hillary Clinton may do it sooner. Americans do not deserve this fate. ISIS should be happy.