The Economist endorses Obama on the grounds that he has run his presidential campaign well, is a good speaker and has maintained an admirable message discipline. I agree – he makes a very good choice for the Chief Legislator of the United States.
More, Stronger, Effective
VK wants to know if I meant more, stronger or more effective regulations in the previous post.
If it is more, well how much more? Which country has escaped a crisis by having more regulations? Of course, India can avoid the crisis that comes about when growth rate drops from 9% to 7%, if we are willing to accept a steady growth rate of 3%. The point is to manage crises without accepting stagnation in return. Now, I don’t accept that the US is a libertarian Mecca, but obviously, many of you think that it is close to one. But it also so happens that the US is one of the most prosperous countries in the world. It has experienced fewer and shallower crises than the rest, and has recovered from them faster than others. If you think that having few regulations is bad, then how do you account for this result? If you think that having more regulations is the answer, then how do you account for every other country in the world?
If it is stronger, well “stronger” presumably means having stricter punishments for the same crime. But you can’t punish an action if it is not a crime in the first place. It was not a crime for companies to borrow from abroad, so unless you make it illegal, you can’t increase the punishment.
If it is effective, is it something like what libertarians and communists supposedly say when their preferred systems supposedly fail? Just as a libertarian system has not yet failed because a truly libertarian system has not yet been tried, regulations have not yet failed because truly effective regulations have not yet been tried. What is an effective regulation? Whatever, in retrospect, could have prevented the last crisis. If a regulation fails to prevent a crisis, then, by definition, it is not effective, which means that effective regulations have not yet been tried.
The challenge is to be able to predict in advance which regulations will be effective and to put in place a political system that has the will to impose only those regulations and not the other. So far, no one has figured this out.
Thatz Why We Need Strong Regulations
Okay, so why are Indian companies in trouble in spite of Palaniappan Chidambaram’s ironclad assurances that Indian markets are so well-regulated that we are insulated from the crisis?
It is because our financial sector is so well-regulated that we do not have a decent corporate bond market. So, Indian companies that wish to borrow end up borrowing in foreign currency from global markets. In other words, we have regulated our financial markets so well that we are more tightly coupled with the evil deregulated financial markets than we should have been.
The solution, of course, is more regulation. It always is.
The Country of the Blind
I had started this post in May this year and it had remained in a draft state ever since. The topic I intended to cover has been covered in the post I made in reply to Ritwik today, so there is no reason to complete this one. But I liked the start I had made. Here it is, broken links, outdated information and all.
The saying goes that “In the kingdom of the blind, the one-eyed man is king”. To contest the saying, H G Wells wrote a short story titled “The Country of the Blind“. It describes the travails of a sighted man who stumbles into a valley of blind men and tries to use the advantage his eyes give him. He fails because the country has been organized in such a way that his eyes give him no advantage at all.
Ayyo!
Ritwik Priya, having decided that he is not going to nitpicky wars with me, has decided to write a series of posts summarizing his text books. But he finds himself unable to avoid taking a swipe at me:
Thus, when Ravikiran asserts here and here that retail investors in India are stupid and hence the EMH may not hold for India, it makes me wonder if he understands the EMH at all. As long as the idiot retail investors in India (or elsewhere) are idiotic in their own randomly distributed ways, the EMH would still hold. The argument is simple – the overestimations of the positive idiots will cancel out the underestimations of the negative idiots. The only problem arises when idiocy is systemic – when idiots make mistakes that are very similar to each other.
The problem with Ritwik is that he balances his undoubtedly sound knowledge of theory with an utter lack of common sense.
More Technical Analyst Zen
In the current market scenario, it is best to trade what you see and not what you have forecasted or predicted, says Prakash Gaba, technical analyst, on CNBC Awaaz. Do not try to find a bottom and stop using supports, he suggests. When the market moves up, you buy and then sell, but when it is moving down, you sell and then buy, he says (source)
WTF?
[Raj] Thackeray’s successes evidently left an impression on 1,900 employees of Jet Airways, who were fired last week thanks to the global financial crisis. They rushed to Thackeray’s office. He thundered that no Jet Airways flight would leave Mumbai until the employees were rehired.
If an Indian politician said that a generation ago, it might have been empty bluster. Today, the threat was taken seriously enough that the airline’s chairman, Naresh Goyal, held telephone discussions with Thackeray. After Thackeray’s and others’ lobbying, the employees were rehired the next day. (Anand Giridharadhas/IHT)
What is it about these Indian journalists joining foreign publications? Are lobotomies compulsory?
Get in Line Along With Everyone Else
OK, Aravind Adiga, author of The White Tiger, which, to go by common consensus, seems to have won an undeserved Booker, has said:
So, where’s this Shining India everyone’s talking about? It was time someone broke the myth…
The last time I checked, there is a huge queue of people waiting to bust the myth of Shining India and collect their publisher’s advance. Why does every single one of them feel the need to pretend that he is the first one to bust the myth?
The Technical Analysts
These days, one of the great joys of my life is watching the stock markets fall. I don’t get much time to watch TV, but I follow the collapse of the market through the Rediff stocks page. The advantage of this page over other choices is that I get to read the prognostications of the “technical analysts”. Their statements have a zen-like quality to them. For example, at 9:33 AM today, Prakash Gaba, technical analyst has said:
“If the market falls any further, a bounce can be expected”.
How profound!
Also, going by the evidence on this page, Ashwani Gujral, technical analyst is on CNBC Awaaz all the time. I wonder if he gets time to do his job.
Defending Modi’s Honour is Unnecessary
Ritwik’s lament is that all his arguments with me devolve into nitpicking. My response is, he starts it. For example, in my post about terrorism, I model Narendra Modi as being interested only in votes, not in combating terrorism. Ritwik’s response to that is that while is interested in both fighting terrorism and winning elections, and when there is a conflict between the two, winning elections takes precedence. In FitW’s formulation of the same point, Modi considers winning elections his patriotic duty to keep the evil Congress at bay, and therefore considers short term setbacks in the fight against terrorism as acceptable collateral damage.
This is an astonishingly subtle distinction, and I took some time to grasp it. The trouble is, this distinction has very little to do with my actual argument.
Did You Know
Today was world hand-washing day.