Snoop to conquer

The following two articles should scare anyone using smart phones and want to stick to land lines.

One is about the Alexa and other smart devices that respond to voice commands by listening. Yes, they listen to stuff you don’t want them to listen to.

The other article is about location services that supposedly are the ones that make the apps and the phone smarter in ‘helping’ us find what we want, based on where we are. Well, the smarter ones are not the ones who hold the phone but who sell the services/devices to us. Check out this New York Times article.

Rana Foroohar offers the answer:

Only prohibiting the tracking and microtargeting of individuals will do that. I used to think such a prohibition was extreme. It may, at this stage, be impossible. But I’m also beginning to wonder whether it might be crucial, not only to restoring competition in the US, but to saving trust in liberal democracy throughout the world. [Link]

All this is leading to nice income and stock grants for employees of technology companies whose source of profits, income and wealth is our stupidity in relying far too much on smart phones and becoming addicted to it.

As if this was not enough, look at how Wall Street veterans looked the other way and showered Wework’s Adam Neumann with money.

It is just that we are the losers in the incestous game that the East and the West Coast cities of America play together and against us. The outcome is decided well in advance.

Pillars of financialisation

In my column for Mint on Tuesday (my last column for the year), I wrote that two important and promising developments – although small – have happened recently. One is that the International Monetary Fund has a serious rethink on capital controls and its usefulness. It used to look down upon capital controls. No longer, it seems. See here.

Then, there was the OECD draft proposal on taxation of international companies. One hopes that the developed world would adopt it. It would vastly discourage companies from doing ‘taxation shopping’. I had written on it in a column for Mint.

The pillar that is still holding up financialisation (asset bubbles, executive compensation, stock buybacks, etc.) is central bank policy. The recourse to Quantitative Easing and Negative interest rates without any shred of evidence that it has been beneficial, on balance, is what continues to fan social, political and economic imbalances. The major central banks continue to embrace QE/Negative interest rates without any audit or honest appraisal of the costs and benefits. See this article and the second chart embedded.

In that sense, it is good that Swedish Riksbank, thanks to public pressure is turning its back on negative interest rates.

If 2020 sees a rethink on the part of major central banks, if they return to normalcy, the world can avert a bigger replay of 2008. Or, is it already too late?

Paul Volcker: 1927-2019

The legendary chairman of the Federal Reserve (1979-87) passed away few days ago on 8th December 2019. He was 92. I had read his book, ‘Keeping at it’ this year and blogged on it here, posting some extracts from it. It was a good book but not a very exciting one. I read few of the tributes posted for him. The Financial Times stuck to the theme of using the occasion to bash the curent American President. John Taylor was conventional too. I found Greg Ip’s tribute somewhat interesting.

While praising Volcker, he held out the possibility that Volcker was not as austere nor dogmatic/rigid/doctrinaire as often made out to be. Therefore, he would have taken the same decisions that his successors like Greenspan Bernanke and Yellen took in their years at the helm of the Federal Reserve Board. That is quite tongue-in-cheek. He cites this observation once made by Mr. Volcker as support for his conjecture:

In 1989, two years after stepping down from the Fed, Mr. Volcker attended a conference of economists in Cambridge, Mass., on financial crises. Mr. Volcker warned the attendees that policy makers, by repeatedly intervening, could be “reinforcing the behavior patterns that aggravate the risk in the first place.” Then, revealing how he felt torn between the urgency to act and the avoidance of moral hazard, he related that as head of the Fed’s New York district back in the 1970s, “I often said to myself, ‘What this country needs to shake us up and give us a little discipline is a good bank failure. But please, God, not in my district.’”

This episode does not prove that Mr. Volcker would have succumbed to the moral hazard and would not have allowed a shake-up to happen, discipline to be instilled through a bank failure, even if he wished that it would not, happen in his District. That is par for the course for human nature. We are capable of holding two contradictory thoughts in our heads.

Paul Volcker clearly did not mind engineering two recessions – nearly back-to-back to quell inflation. As we have learnt over the years, taming inflation is easier than stoking it, for there is no ceiling to raising the interest rate but there is a floor and that is 0.0%. Of course, breaching this floor has brought with it unintended and often unpleasant consequences. We have not seen the end of them yet.

Mr. Volcker did not give an exalted place to financial innovations. He called the ATM the best financial innovation ever. That said, ironically, his taming of inflation and allowing the long-term bond yield to commence a secular decline paved the way for financialisation. As interest rates declined, so-called financial innovations deploying leverage flourished.

All that being said, the world is poorer for his demise. One upright man – a man who combined integrity with competence – less in this world.

'Delightful' prioritisation

Writing about the Australian bushfires, Bloomberg Opinion email today carried this paragraph:

You’d think this sort of thing would be a topic of political conversation, but David writes there is bipartisan silence on the issue in Australia, and media there have taken an oath of omertà as well. The reason for this is coal: Australia exports a lot of it, and nobody wants to kill that carbon goose laying golden eggs. It’s a reminder of how hard it will be for the rest of the world to set aside short-term concerns and make any real dent in climate change.

Indians would be ‘pleased’ to see that they are not topping this chart, that Bloomberg carried along with the story.

For me, the interesting point in the ‘quote’ above is how human behaviour is enduring, regardless of technological advancement, a fact that few grasp and even fewer accept.

Investment and not consumption

It is interesting that TCA Srinivasa Raghavan has followed up his column on Dec. 5 in which he advises India’s Finance Minister to focus on reviving investment rather than consumption with another column on Dec. 7 in which he questions the usefulness of ‘backseat drivers’.

But, this delightful irony apart, his column on Dec. 5 is a useful read because it highlights how India’s growth experience has always been a case of ‘stop-and-go’.

STCMA 8th December 2019

It has been two weeks since I blogged here. I have not lived off suitcases before but that has happened since late October or at least since mid-November. While I have been reading reasonably widely, I have not been able to translate them into posts. I did finish reading ‘The road less travelled’ by Scott M. Peck. A very good book. A good recommendation by my friend Balaji Ethirajan, Head of Human Resources at TVS Supply Chain Solutions. I have been wanting to post some key extracts from the book. But, have not found sit-down time to do so.

Anyway, here goes some key readings:

This long story in Nikkei Asia Review about Softbank’s investments in India and their mixed performance is a good reminder of how chasing growth at all costs always comes a cropper and yet investors keep repeating the same mistakes.

Raghuram Rajan’s long article in ‘India Today’ on the prescriptions for the Indian economy is about as objective and as balanced as he could be, considering his recent presentations and op.-eds., on this matter.

The story about how the keyword, ‘Mike’ in Bloomberg Terminals took terminal users to the campaign page of Michael Bloomberg is delightful.

A tongue-in-cheek story about riots boosting GDP in France is short and useful too because the riots caused France to increase public spending and the country’s Purchasing Managers’ index is doing better than that of the rest of the Eurozone.

On November 22, China’s National Bureau of Statistics quietly revised the GDP for 2018 upward by 2.1%. That it makes it easier for the country to achieve its goal of doubling GDP in a decade from 2010 to 2010 is incidental, I suppose.

Blackstone’s Private Wealth Management Division calls negative yields on sovereign debt the mother of all bubbles. Quite.

Amundi Asset Management’s Survey of pension managers on the impact of QE on their pension assets is featured in FT here. For those who want the full story, it is available in Amundi website. A few keystrokes would help you find it.

On California Forest Fires and risks of flooding in the US, check this link. The article also says that the Netherlands has addressed flooding risks well. The FT story on Sydney bushfires is worth a read. Delhi feels like a anti-haze haven! Actually, when I landed in Delhi on 3rd December evening, I was very pleasantly surprised to see how clear Delhi was from the sky. I had not experienced such a sight in several years.

If you want to see photos of the damage wrought by Australian bushfires, click this link. Apparently, Australia is experiencing one of its worst droughts in decades.

The White House has opposed a USD1 bn bank loan to China. Should not be surprised.

Martin Sandbu’s long read on how the Euro is taking on the US dollar is more a story of hope than promise or substantive reality. American Treasury officials would not spend sleepless night after reading this story.

I must learn this practice of how not to have to read books in full.