Stopping the Flailing State

‘India Today’ had carried an article recently on how the present government in India had improved the culture of selecting bureaucrats and how it had been careful to go for meritocratic appointments, even appointing non-IAS officers, etc. All heartwarming stuff. The same tale with a slightly more personal angle is here.

A thought arose as I decided to provide a link to this piece in my blog post, ‘Weekend links – 28.11.2015’. Are we cherrypicking on the positive pieces that the English-language media in India writes, while calling it biased? So, is the English-language media in India biased when they criticise the government and that they speak the truth, when they write the occasional positive story on it? If they are untrustworthy and unreliable, they must be uniformly so. So, is this biased selection on my part?

I found the answer. No, it is not that this reflects a bias on my part. This reflects the higher information content or information value of a piece that is not routinely done. Hence, its enhanced significance and importance. If a teacher routinely criticises a student often and then rarely praises him one day, that praise is and will be taken seriously and a higher credibility and sincerity is attached to that praise, simply because it is out of the ordinary and not ‘normal’.

Karthik Shashidhar had brought out this point well in his piece in MINT on the information content of the bombings in Paris versus in other places in the Arab world.

Siddharth Zings

Some quick internet search tells me that the word, ‘zing’ is associated with vitality, excitement and enthusiasm. It is in that sense, I used that word in the header. Siddharth Singh is a good friend. He used to be at MINT until recently. He edited the Edits page and hence had oversight over my columns for the last several years.

Now, he writes for ‘Open’. His piece titled, ‘Intolerance Myth’ is worth a read, although I could not quite figure out the statements on Romila Thapar’s book. It was unclear to me. The rest of the piece was not, however, unclear at all.

In particular, I liked these sentences:

A reading of the Statement of Objects and Reasons to the 42nd amendment—that inserted these words in the Preamble—and the voices raised by intellectuals today are virtually indistinguishable in their objectives: furthering the high ideals of secularism and socialism. The only, rather inconvenient, difference being that Indian democracy is far more robust today, cheerfully accepting even the most outrageous arguments about the spread of intolerance in the country…… [Emphasis mine]

….. There is no doubt that intellectuals serve ideological purposes everywhere, but in India this is the sole task handed to them. This has been accepted without question in a fashion that puts even colonial obsequiousness to shame…..

…. Twitter cannot match careful intellectual deliberation. The emphasis has to be distributed over all three words of the last expression. But that is not something that can be dictated by politicians. The gauntlet has to be picked up by intellectuals themselves. There is reason to doubt if that will happen. [Emphasis mine]

You can read the full piece here.

Dr. Pratap (Ballistic) Mehta

I had no intention of commenting on the Aamir Khan remarks. But, when I saw Dr. PBM go ballistic again, I concluded that he could not go unchallenged. I watched the video of Mr. Khan’ interview. At a simple (and not intellectual) level, these are my thoughts:

For the most part, Aamir Khan’s comments were unfair, unintelligent and superficial and unnecessary.

In India, the public go overboard in praise or in condemnation of celebrities. It applies to cricketers and film stars. What they say or do is scrutinised excessively always. Nothing new there.

Second, the reaction to Aamir – not by those in the government – was also quite emotional because he could not have gotten away with his film PK in many countries around the world, if he had done it for other religions. Yet he chose to say that he was alarmed and that his wife even thought of leaving the country. That was rather unfair.

Third, the issue had been beaten to death. For him to rake it up all over again, was unnecessary. The government should be allowed to govern. These debates are needlessly distracting. Hence, the reaction to his comments was far more spontaneous and emotional than was the case for the remarks of SRK. The country has other priorities. He was playing his part in keeping the issue alive and divert minds and brains towards this non-issue.

Fourth, it was unintelligent because he failed to see that the media narrative creates and nurtures perceptions. One must watch Barkha Dutt’s ‘confession’ in the video link above (ht: Sudhir Kumar). It is around the time-mark of ’23m and 50s’. It is very important.Ms. Dutt’s confession is extraordinary since it violates the basic principle of journalistic ethics and integrity. That rule is: retraction or apologies should be proportionate in importance and intensity accorded the original coverage. Incidentally, that is the point that Ms. Smriti Irani makes in her recent brilliant interview with Ms. Dutt. Pl. see that from the 49th minute.

Also, in the case of the Dadri murder, there is a news-report that the murder could be motivated by personal issues and a communal colour might have been given by the perpetrator, with the connivance of the police, to escape scrutiny and prosecution. This angle should be pursued.

PBM makes two points that are eminently contestable:

what we get is a grudging odd sentence from the prime minister that talks at people, rather than to them; mendacious evasions from the finance minister, who seems more concerned about our image and lawyerly complications than articulating basic moral truths; and an army of party spokesmen and trolls that accuses critics of treason.

Cannot quite understand why the PM and the entire Cabinet should have reassured Aamir Khan when, going by his experience with PK, he needed no reassurance. Also, did the country need reassurance for the phobia whipped up by people choosing to stay inside an echo chamber and hence finding the decibel level rising? It was not the problem but the perception and the chatter that have gotten into a self-reinforcing loop and hence becoming too much of a burden to bear.

The second point he makes that is contestable is this:

The norms are being set by people with small minds, resentful hearts, constricted souls and hateful speech. Every patriot should be worried about this and, yes, be ashamed.

He paints with a too broad a brush here. It is deeply disappointing and worrying that, lately, he has taken to this practice. All patriotic Indians must be concerned.

Meanness, small minds and resentful hearts have never been in short supply in India in the sixty odd years of domination of the discourse by the Congress Party and its acolytes – ‘secular’ or otherwise. Their brand of pettiness, resentment and hate has been much more systematic, persistent, pervasive, ruthless and insidious.

This government is not reacting, officially, to a phoney agenda or discourse that is being set by others and it is correct in not doing so because that agenda is paranoia feeding on itself. That does not reflect ‘norms are being set by people with small minds, resentful hearts, constricted souls and hateful speech’. It is disappointing that PBM did not find space in his column to praise a Ms. Irani’s (a Government minister) dignified reaction to Aamir Khan’s remarks. Check it out from 45th minute.

Here is a compilation of (some) outrageous remarks made by  people with small minds, resentful hearts, constricted souls and hateful speech, just in recent times. PBM and other patriotic Indians can be ashamed of them even now (Modi’s comments cited in this link appear tame in comparison to others’).

I have a few more reasons for him to feel ashamed or  concerned about small minds and constricted souls.

(1) Mani Shankar Aiyar’s remarks in Pakistan

(2) Salman Khurshid’s remarks herehere and here.

(3) Crowd’s reaction to the release of Salman Khan by the Mumbai High Court in May 2015

(4) Remarks by the Chief Secretary of Kerala, no less, on evangelism!

In case PBM had not read Vamsee Juluri’s piece in  THE HINDU, he should do so. Here are two pointed ‘questions’ that Vamsee poses to public intellectuals like PBM:

Even with many regional parties, caste-based parties, and all the politics of its diversity, India seldom showed polarisation on the fundamental definitions of reality on such a scale ever before perhaps. Whether this polarisation is real, or the symptom of an age when the pervasiveness of the media, and the power of the media environment to turn into an echo chamber and feed a contrived public panic, as much of the U.S. media did before the Iraq war, is a question that needs honest debate, and often sadly missing in the war of clichés and slogans that TV debates dominated by party spokesmen rather than independent observers get reduced to.

No one can presume to instruct a fellow citizen on how much of a sense of belonging he ought to feel for the nation. But those citizens who have assumed a public role and who have become, either through desire or clever commercial craftsmanship, or both, conscience-figures for the nation, cannot shy away from the need to be responsible in their public pronouncements. [Link]

Weekend Links – 28.11.2015

Exporting Arizona water to the Arab desert by stealth.

China selling US Treasuries is tightening enough says Barry Eichengreen, if China buying Treasuries was easing monetary conditions early in the 2000s. Sad and flawed logic. Context has changed.

​China matters and if it slows, it will hurt the world. Amen to that. China services growth, even if true, is little solace to the RoW.

Only myth it explodes is the credibility of the author.

​Thomas Fazi in Roubini Economonitor writes a good note on why QE in Europe has failed. Wants helicopter drop.​

Public Sector Net Borrowing in the UK raises in October. UK economy, in more ways than one, is an unsustainable bubble. Cameron got lucky in May.

Cult of shareholder value cannibalising corporations in North America.

CALPERS lowers its expected investment return to 6.5%. Still too high.

A Saudi Rial de-peg is a ‘Black Swan’ bet for 2016. Fair enough.

Rafael Behr’s reaction to James Corbyn’s reactions to Paris shootings is worth reading.

A brief history lesson on the roots of Islamic terror by David McWilliams.

Wall Street Journal on the buyback boom in US stocks. Some good statistics for 2015.

This story says Dadri (India) was personal killing converted into a communal incident.

Portugal government rejects demand for more guarantees by the President.

German member of ECB Executive Board rejects the case for more QE by ECB in December, publicly.

“India is the only country trying to become a global economic power with an uneducated and unhealthy labour force” – Amartya Sen. Curious minds want to know what he did about the problem for ten years when he had unrivalled access to the government from 2004 to 2014.

How Citigroup overlooked money laundering for years in its Mexico operations. A long ‘Bloomberg Markets’ story.

Professor William Lazonick wrote this open letter to Tim Cook of Apple in October 2014. Still worth reading. Apple’ Share Buyback since then suggests that Tim Cook took Carl Icahn more seriously than he did William Lazonick.

Volkswagen admitted a second illegal device in about 85000 Audi engines.

China could suffer from a banking crisis, argues Andrew Colliers of Orient Capital Research.

Raymond Zhong writes a good review of Kaushik Basu’s book

I liked the last bit about the label of ‘responsible power’ in this review of Bharat Karnad’ book by Shiv Shankar Menon, India’s former National Security Advisor. Clearly, China has not fallen into the trap of being a ‘responsible power’.

Turkey downs a Russian fighter plane – this could be big.

2016 could be an unforgettably long year for investors – my MINT column on Tuesday (24th November)

The Central Board of Direct Taxes (CBDT) in India is fixing long-standing transfer pricing issues.

Swiss Canton Ticino bans burqas in public places

Super Traffic cop at Sholinganallur junction in Chennai

Ridham Desai of Morgan Stanley very upbeat on India. Probably, too upbeat.

Clive Crooks’ review of John Kay’s book, ‘Other people’s money’. In the process, commends Alan Blinder’s book.

Corporate fraud in India compared to other EM nations. Not looking good.

David Keohane at FT Alphaville has a great post on China GDP growth statistics with Goldman Sachs putting its number at 5%.

David Keohane has another good post on the prospect of a maxi China devaluation in 2016. Rates it low, with caveats.

A delightful article on how an idealist compromises with the State in China.

Monetary Authority of Singapore (MAS) visualisation on Asian corporate leverage as it changed from 1995 to 2014. Bubble size being bigger for India than China is not credible.

What is missing in AirBnB investor presentations? Any mention of bottom-line. Revenue multiple of more than 30 times! Unlikely to end well for investors.

President of India gives his assent to Madhya Pradesh Labour Reforms. More important than the intolerance debate.

Izabella Kaminska says yuan inclusion in the SDR basket (decision due on Nov. 30) does not make it a global reserve currency. Quite so. It is a step and it is a hoped-for step. Reality could be different.

Mozambique’s transformation halted in its tracks by the slump in commodity prices. Sad.

In India, 263 million people in the farm sector and 600 million people, in total, depend on it still. Not going to be easy to pull them out of it. Check with Raymond Zhong of Wall Street Journal.

Dharminder Kumar’s article on Punjab is worth a read despite its leaps of logic and conclusions. While on Punjab, perhaps, this should be read too.

S.S. Tarapore warns against lowering interest rates too much in India. He has a point.

‘India Today’ writes that the NDA Government in India has ended the transfer posting regime. Nice and heart-warming read. Necessary but not sufficient condition for improving State capability.

There’s a direct connection between the sectors highlighted in China’s five-year plans and the businesses that suffer security breaches in the US.

Louis Vuitton closing several stores in China – 20% less stores by mid-2016.

China’s ‘national team’ owns 6% of the national stock market. Note the comment about corporate earnings at the end of the article.

The moral hazard of Chinese bond bailouts characterised as China having thousands of mini central banks! Related post on the ‘nuttiness in Chinese corporate bond market’.

What Shanxi – China’s ‘coal kingdom’ – symbolises now. ‘Economist’ takes a despondent view of the situation. China made it in ‘manufacturing’ unlike India. But, at what cost? Can it transition to services? Similarly, can India transition back to manufacturing? A step it missed. Both have very long odds. Hence, worth a small bet each?

Bibek Debroy exposes Manmohan Singh’s inconsistencies on the usefulness of the Planning Commission. Perhaps, Arun Maira’s book is worth a read. That said, it is hard to feel sympathy for Manmohan Singh’s vaunted integrity or admiration for his competence. Both appear to have been vastly overrated.

Brahma Chellaney presents a very cogent evidence on the Western complicity in the rise of Islamic terror. Is it changing? No evidence yet.

Mayankote Kelath vs. Madhu Purnima

This is what the former National Security Advisor M.K. Narayanan wrote in THE HINDU:

Radicalisation rather than militancy and alienation should thus be seen as the new threat in Kashmir.The danger is real. Far more than ceasefire violations, actions of the Pakistani Deep State, terrorist incursions, and the separatists in Jammu & Kashmir, the looming threat that can no longer be ignored is the inexorable move towards extreme radicalisation.

On the current alliance in the State of J&K between the BJP and PDP, he wrote the following:

New Delhi must, first and foremost, shed its pet illusion that the so-called alienation of the Kashmiri people can be overcome by providing larger and larger tranches of funds at every opportunity, on the plea of economic development. Another idea that has to be dispelled is that by building alliances and coalitions, it is possible to paper over fundamental differences in viewpoints, as also difficulties in implementing policies.

This piece follows an earlier piece he wrote in THE HINDU:

The rest of the world may also not mind a diversion of attention to Kashmir, to take the pressure off the current migrants’ crisis’ that threatens to undermine the fragile unity that underpins the European Union (EU). A Kashmir crisis at this juncture – which has the potential to spark a nuclear conflict — is just the kind of remedy that many European strategists could be looking for, to divert attention from a collapse of the Schengen system and dreams of a borderless Europe.

It was incredible stuff from a former NSA to write something like that openly.

In his more recent piece, he added the following:

Rawalpindi, hence, feels emboldened to raise the stakes in Jammu and Kashmir. There are other factors as well such as the China-Pakistan Economic — as also military — Partnership, which has added to Pakistan’s confidence to meddle in Jammu and Kashmir.

He thinks that Ms. Mehbooba, the daughter of Mr. Mufti Mohammad Sayeed, the current CM of J&K State, is a problem:

The latter’s sympathy for anti-India forces — including militants like the HuM — is well known, and her elevation would add yet another disturbing element to the current chain of developments.

He also points to the Chief Minister’s remarks when the PM visited the State on 7 November:

Mufti, unwittingly or otherwise, is also playing to this gallery, and incidentally making common cause with the separatist forces in the Valley (including both the Hurriyat factions). The fact that Mufti chose to raise this while on a common platform with the Prime Minister during the latter’s November visit is hardly a coincidence, and must not be brushed under the carpet.

Mr. Narayanan’s solution, alas, is all too vague:

What has to be achieved is to prevent such radicalisation from attaining a far larger dimension, by taking steps to limit the attraction of such radicalist and extremist ideas among the local youth.

Now, let us move over to Ms. Madhu Kishwar’s article in ‘Swarajya’. She is with Shri. M.K. Narayanan on the radicalisation:

The state and Central governments do not seem to be working in a coordinated manner to deal with the fast-growing Islamist radicalization of Kashmiri youth that makes even a hardliner like Geelani appear a moderate in comparison. The radicalized section of the youth, though minuscule at this time, does not hide its fascination for outfits like the Islamic State of Iraq and Syria (ISIS).

Unlike the old generation of secessionists, the neo-militants are not just anti-India—they are also anti-democracy, which they openly condemn as being un-Islamic. This process of virulent rejection of democracy and adoption of a jihadi ideology has been brewing for over two decades now. Although it was conceived and nurtured in the womb of the Pakistan-backed secessionist movement, the current phase of radicalization has gone far beyond the demand for a plebiscite to a desire for establishing the global supremacy of Islam through total annihilation of all that stands in its way. Democracy is seen as an inimical distraction in this project.

Unlike Shri. M.K. Narayanan who does not offer a clear-cut answer, she is clear that the answer has to be found in making the political alliance in J&K work. From a purely practical standpoint, what she wrote makes sense. There is a government in J&K and it is essential that it works.

Her specific points:

While the separatists want to keep the youth on the boil and forever traumatized, Mehbooba approaches them as a caring sister qua mother figure and acts as a healer and hope giver. In the process of marginalizing the separatists, she has to often steal the wind from their sails by protesting louder than them against occasional cases of human rights abuses even when her party is in power.

That often gets interpreted as Mehbooba and PDP being indistinguishable from separatists. This misunderstanding is a major cause of tensions between BJP cadres and PDP.

The importance of Mehbooba can be better understood if we take into account the politicians challenging her. Pitched against her are the likes of Yasin Malik, Masarat Alam, Asiya Andrabi, and Syed Ali Shah Geelani. All these separatists are brazenly acting at the behest of Pakistani agencies and are on the payroll of ISI.

This is an important point. Behavioural types will understand the point she makes. One may be unhappy with status quo but one has to be practical. The alternatives are worse. It is a subtle game of ‘be trustful and be watchful, yet’ stance that the BJP has to adopt with its partner in J&K. Is it up to the challenge?

The following points that she makes of Ms. Mehbooba are worth keeping in mind:

She appeals to Kashmiri pride as opposed to Islamic separatism. She challenges the Wahhabi version of Islam by her own example. She and her family are Sufi by conviction. They even visit and owe allegiance to Hindu spiritual gurus. Her two daughters have all the freedom that youngsters in other parts of India have. They don’t even cover their heads, leave alone wear burqa or hijab.

This is the first time Kashmir has thrown up a genuine grassroots-based woman leader—that too at a time when the state is tilting towards Salafism that denies women basic human rights. She is the only self-made woman leader in the entire Islamic world who is triumphantly challenging the Salafi version of Islam. Even as a symbol, the rise of Mehbooba Mufti in a Muslim-majority state under siege by Pakistani terror brigades is a tribute to Indian democracy and traditional Kashmiri culture.

Further, Madhu Kishwar makes a very important but verifiable point. IF this is true, then it is a powerful argument for the BJP ‘hotheads’ to give the ‘benefit of doubt’ to their coalition partner, PDP:

The BJP hotheads would also do well to remember that PDP is the only force that has never internationalized the Kashmir issue—something even the supposedly mainstream NC is guilty of doing. Neither Mehbooba nor any other PDP leader has ever gone breast beating to America or Europe demonizing India as the separatists routinely do. If they have grievances or complaints, they insist on a hearing within India.

The following is an interesting point in which her angle is different from that of Shri. M.K. Narayanan:

PM Modi’s open snub to CM Mufti Sayeed at the joint rally they addressed in Srinagar on November 7 has created a furious wave against the alliance with separatists on the offensive. Even if Modi did not like Mufti’s advice regarding reopening the dialogue with Pakistan, there was no need to humiliate the CM in front of his people. If nothing else, Modi should have respected Mufti’s age and experience and handled the matter more deftly. Apart from damaging the prospects of the alliance, Modi damaged his own image by coming across as arrogant and disdainful of his party’s most vulnerable but valuable alliance partner.

Very similar diagnosis and yet very different conclusions. Purely from the point of facilitating a constructive and cogent discussion or a counter-response, Madhu Kishwar’s (whom I know well personally) article is better than that of Shri. M.K. Narayanan’s article.

Apart from that, her article makes some specific arguments and they seem to have a compelling logic behind them. I have highlighted them above. If she is wrong and if PDP is not to be trusted, what is the alternative? End the alliance, impose Presidential rule and call for fresh elections? What will be the outcome? Will elections be allowed to conduct? Will it be fair? Will it not lead to more inimical forces coming to office directly or through proxies? What has been the previous record of governments ruled directly from Delhi with the Indian army in charge of law and order in the State?

Doesn’t it make more sense for both the BJP and PDP leadership to realise how crucial and important their government is, for the whole country and hence, display extra understanding and maturity? That should result in more regular and frequent communication that develops trust and understanding of each other’s public positions and compulsions and private beliefs.

It is not easy being a leader of a country like India. It calls for superhuman abilities and attitudes, extraordinarily high levels of personal judgement and loads and loads of luck. Some bets have to be made. They may go wrong. But, choice are made under uncertainty only. Having decided to form the alliance, calling it off in acrimony would be a huge political setback for the parties concerned, for the leaders, for the State and for the country now. That may very well pave the way for the very radicalisation that both writers see as the biggest growing challenge in J&K today.

(Well, the more I think about it, the more I am convinced that ‘to lead India’ is almost an impossible task)

Was Euro really needed?

About nine days ago, I left the following comment on the excellent analysis by Matthew Klein on the non-inevitability of the Euro. Some reader said that I was wrong and that Germany was flag-marched into the Euro. I need to do some more work on it.

A very good summary. Great summary of the IMF research and the contrarian examples will be stimulating to students of optimal currency areas. – why currency union is neither necessary nor sufficient for economic integration.

The fact that these examples would have been known when the currency union in Europe was being contemplated lends further credence to the hypotheses as to why it was pursued. It was, as correctly noted, about Germanisation of Europe so that Germany would not have to contend with currency debasement of its neighbours as a competitive threat. For others, it was about binding Germany more closely with their economic fates so that history of political conflicts was not repeated. The threat might not be eliminated with economic integration but many fondly believe that it reduces the risk of political conflicts.

So, the project was always as much about economic interests of specific countries blended with political goals.

Towards the end of this detailed post, Matthew Klein had pasted a paragraph from the IMF report on how the Select Peripheral countries “attracted a greater share of portfolio and cross-border banking flows,”

In contrast, despite volatile exchange rates, the CE4 countries received FDI. The answer lies in interest rates.

These countries had volatile exchange rates vs. Euro. That would have led to their interest rates being much higher than SP countries. Now, the interest rates are not much different between SP and CE4 countries.

But, in the first flush of the single currency launch, the SP countries saw their borrowing costs plunge. They had begun to come down from 1995 onwards. When interest rates drop too low and too rapidly, they usually lead to speculative end-use rather than productive capital investment end-use. That has been the empirical reality.

Yet, academics cling to their belief – theory is right and data are wrong! – that lower rates lead to higher investment. They forget that ‘everything else is not equal’. Larry Summers should take note.

Weekend Links – 14.11.2015

This time, due to lack of time, I have not sorted it and there is no particular theme either. Will do better next time.

Ricardo Hausmann says that the best way to attack evil is to attack the lies on which they are based.

Dani Rodrik on the mirage of structural reform. He says more progress comes from tactical interventions and small steps.

Link to the full text of TPP Agreement

Chennai December 2015 music season link

Brazil is cleaning up its corruption; Turkey is covering it up. Markets penalize former, reward latter. But hey, markets are efficient. [Link]

Clive Crooks’ thoughtful review of Dani Rodrik’s book (‘Economics Rules’)

IMF conference on unconventional monetary and exchange rate policies. Links to papers inside the link!

FT reviews Garry Kasparov’s book, ‘Winter is coming’

Saudi Arabia will keep pumping and expect prices to recover as demand recovers. Realistic?

Goldman shuts its BRICS fund. Symbolic. Not bad timing.

Writing on China’s sea of troubles, Gideon Rachman notes, In all this jostling for influence, China’s strongest card remains the power of its economy. It is probably a bit dated.

OECD cuts global growth forecast. Why do they project a growth pick-up in 2016 over 2015? Triumph of will or wishful thinking over intellect. Conference Board in the USA is even more pessimistic.

John Plender says that China’s fiscal pump-priming is equivalent to one-quarter of 2008 stimulus:

Corporate leverage in the US underestimated.

After Greece, it could be the turn of Portugal. Anti-austerity parties to form the government shortly.

10 charts from Macquarie Research that shows America is doing great. Bring on the rate hikes! I do not believe it though.

This must be very familiar to Indians. Liberals are above scrutiny and judgement:

Bloomberg article traces higher incidence of forest fires in Indonesia since 2004, when local elections began to be hotly contested:

Andy Mukherjee is positive about the liberalised FDI norms that Government of India announced on Tuesday.

India’s Business Standard has lunch with historian Yuval Harari who wrote a brief history of humankind:

China Shanshui Cements misses bond payment; defaults:

“Since World War II, I have never seen one economy in the world that could depend on domestic consumption and manage to have 6% GDP growth. It’s the nature of consumption,” said Dong Tao, the Swiss bank’s managing director and chief economist for Asia excluding Japan. [Link].

Amen to that.

The construction boom — with capital costs estimated by Greenpeace at $74 billion — is a clear sign that China remains entrenched in investment-driven growth, despite promises by leaders to transform the economic model to one based on consumer spending.

It also raises questions about whether China is weaning itself from coal as quickly as it can and whether officials are sufficiently supporting non-fossil fuel sources over coal, which is championed by some state-owned enterprises. China is the biggest emitter of greenhouse gases in the world and the main driver of climate change, and it has some of the worst air pollution. [Link]

Chinese banks given nine years to reach 16% Total Loss Absorbing Capacity.

PBoC is really not interested in RMB internationalisation, says Chris Balding. I am not so sure. Perhaps, they want to have the cake and eat it too.

China will continue to support the economy (oh, well, is that news?)

No visa for Miss world to compete in China because they did not like her views:

Four Hong Kong publishers known for their racy texts critical of communist leaders in mainland China have apparently disappeared.

Chinese energy consumption may shrink in 2015 on industrial adjustment, said Zhou Dadi, a senior researcher with Energy Research Institute under the National Development and Reform Commission. [Link]

But, growth rate is 7%, alright.

Shockingly inept logic from Larry Summers because of its brazen and ill-concealed shilling for China:

Jet lag remedies do not work for all and not for you all the time. I concur.

Sites other than TED for good talks.

El Niño phenomenon worst in 65 years. I feel it in Singapore.

Lighthouses in disputed islands, off South China Sea [Link]

Oppenheimer does not make waves

Chief Global Equities Strategist at Goldman Sachs has a strange piece out in the FT on the slowdown in Emerging Economies. He calls it the third and last wave of the crisis. His persuasion falls short. My comment on his article is as follows:

In a clever play of words, Mr. Oppenheimer writes the following:

“while the buying back of equity is a justified response to the mismatch between cheap debt and expensive equity.”

Cheap debt means overpriced bonds. So, if issuing debt when rates are low (bond prices are high) makes sense, then, symmetry requires that stock be not bought back when its is expensive. Companies sell shares when it is expensive and not the other way around.

Recent work by Research Affiliates featured in a Barry Ritholtz comment on Bloomberg Views tells us the reasons behind share buybacks. Mr. Oppenheimer would do well to read them.

If “The weakness in EM economies is a required adjustment to force the deleveraging”, then why are policymakers in advanced economies resisting weakness in their economies? They should be welcoming it, no?

Well, despite his inconsistencies and strange explanations, he may well be right on this:

“The EM wave is likely to be the final phase of the crisis, and will pass without dragging the global economy into a downturn.”

It could well be the ultra-loose monetary policies pursued for too long in advanced economies, the bubbles and the imbalances that they have spawned that would drag the global economy into a (prolonged) downturn.

If it is over, then Goldman Sachs should be trying to keep its BRICS Fund going, market it aggressively to the world again (if we are at the bottom) and not ‘walking away’ from it.

Two thoughtful messages for PM Modi

From Nilanjan Mukhopadhyay in ET blogs

Among electoral campaigns that he has led after graduating from being a regional satrap, Modi has succeeded in only one type of campaign: destroying an already discredited incumbent. While he excels in twisting the knife inside a perforated regime — as he did to the Manmohan Singh government and later led the charge against governments in Maharashtra, Jharkhand and Haryana — Modi has not once, but twice, failed to humble an opponent not hamstrung either by anti-incumbency or a negative image. [Link]

From Ashok Malik in ET blogs

“Successful governors who get elected to the presidency have responded to Washington in different ways,” he explained, “let me give you two examples. Jimmy Carter came with a rich record from Georgia. He thought he would reject Washington and just keep doing what he had done in Georgia, surrounding himself with a familiar team. He ended up a failure.

Ronald Reagan had been governor of California and had clear economic and foreign policy ideas. But he realised he couldn’t ignore the instinctual political culture of Washington and needed to work with it. So he brought in people from outside, as well as picked and chose those in Washington, from the existing system, who could be useful. He is remembered as a pioneering president. Which one will Mr Modi be: Carter or Reagan?” [Link]

How to deflate overvalued egos?

When a Swiss former colleague asked me about the Bihar election outcome, he had sent me the link to a news-item in BBC that appeared. I wrote to him the following:

It is a setback, no doubt. But, I think it might energise him to do the right thing. In fact, I had argued with friends that if they won (which they did not), they might become more cocky and arrogant.

So, it is a State election which they lost. They have to regroup. Nothing teaches humility and compels someone to do stock-taking like a defeat. This is now the second election that his party had lost heavily. First one was for Delhi in February.

Of course, defeat, setback and disappointment are necessary conditions for reflection and introspection but not both necessary and sufficient. I had posted Dhruva Jaishankar’s FB comment earlier. Clearly, there is need for reflection all around in India. So, India has one more deficit. Introspection deficit. A rupee depreciation will not solve it.

There seems to be something in common between global central bankers and India’s intellectuals: they think they have or that they are the answers to all the problems that they come across. Is the arrogance of the intellectual worse than or more dangerous than the intolerance of the bigot? I would think so.

How to deflate overvalued egos? Even depreciating overvalued exchange rates is not that easy. Only policy incompetence succeeds in doing so and not deliberate policy measures. I doubt if there are easy answers to deflating overvalued egos. That is why I wrote in my MINT column that India’s journey to perdition might have resumed.

The Prime Minister receives unsolicited advice from members of the public and the media. Some of them want him to pursue the cases of corruption against some members of the Opposition and some of them want him to work with the Opposition to pass crucial legislation. Sometimes, the same person suggests both. I think he can do one of the two and not both.

On another note, I am pleased to note that both Ashok Malik and Minhaz Merchant have suggested in their opinion pieces that the Prime Minister should act as though he has only one term and that incrementalism would not do, respectively. I had made these points here and here much earlier.