An inspiration to begin the new decade


Plagued by arthritic pain and diabetic complications, MS would often complain bitterly to Sadasivam about her cruel fate. Sadasivam would then quietly tell her to think about Mahema and Manohar—and MS would quickly fall silent, and prayerful.

That was in recollection of a 1972 lorry-car collision that left Mahema, at thirty-three, paralyzed below the neck. In the hospital, as Manohar wrote in a book on their love affair, ‘her head was shaven, her scalp slit at two places above her ear lobes, and two holes drilled in her skull to suspend a traction weight’. She lost control over all bodily functions, faced the constant threat of infection and spasms, needed twenty-four-hour attention: somebody had to hold the glass to her lips when she wanted a drink of water.

Progressively, Manohar’s ability to help disappeared as he fought a prolonged battle of his own against retinitis pigmentosa, a degenerative condition that leads eventually to total blindness. When I met him in early 2002, he could not see me. He could not make out the front and back of a book, so he inscribed his book to me on the back flyleaf upside down. In the midst of such appalling tragedy, this couple sustained a cheerfulness and optimism and zest for life that astonished those who met them.

Dr S. S. Badrinath of Shankara Netralaya, Madras, gave Manohar a pair of specially made Australian glasses. They allowed him a narrow, if rather dim, beam of sight over a tiny dot of space if the paper was held close to his eyes. But he had to remove the glasses every other minute to let the moisture from the eyes evaporate. Putting on and taking off the glasses hundreds of times, taking the paper right up to his eyes for every stroke of the pen, seeing only three or four square millimetres at a time, he accomplished this portrait of his ‘MS Amma’ (see above). The labour of love was one more reason to be joyful about life. This man and his wife deserve every award there is for grit and courage.

Source: George, T. J. S.. M. S. Subbulakshmi: The Definitive Biography. Aleph Book Company. Kindle Edition.

STCMA – 24th November 2019 edition

CNN has a long article on the travails of the pension system in The Netherlands in a world of zero to negative interest rates [Link]

Indonesia supposedly has an advantage in a world where fashions are disappearing fast (or changing fast?). I am not sure I understand this world, however:

The journey of an Adidas or Nike garment produced by Tuntex in Indonesia, for instance, can begin almost 4,000 km away in the company’s textile plant in Taiwan. The fabrics can take nearly a week to reach the sewing factories. The model worked well enough when retail stores dictated trends and operated in clearly delineated seasons. But when clothing retailers need to react to a sudden trend driven by Instagram, it creates a daunting barrier. [Link]

Simon Kuper lists eight things we could learn from beautiful minds. I like the list [Link]. Good read.

Brilliant article in ‘The Guardian’ (ht: my former student Arjun) on what home delivery mean to the world and what ‘last mile’ really means:

Progress today consists of having our food and materials wing their way to each of us individually; it is indexed to our immobility. ….

Implicit in this fixation with time is the thesis that the opportunity cost of regular shopping is too high – that the hours spent driving to the better bookstore in the next town can be spent doing something more valuable. …..

Of course, the principle of opportunity cost assumes that we will earn the value of that fee back in some way in those 12 minutes – whereas the truth is that we are most likely to squander them on Instagram. The internet promises us time, then takes it right back….

…. Online, each of us functions as a one-dimensional identity: as consumer or vendor, to consume or sell in our own bubbles, unaware of the other except as a clump of anonymised data. Even with free shipping, that is the transaction cost. …

The final triumph of home delivery will be when we forget that anything is being delivered at all. [Link]

This is similar to an article in New York Times that I had blogged on earlier, I think. The NYT article appeared in October. The story in ‘The Guardian’ appeared few days ago. My feeling is that the piece in ‘The Guardian’ is more effective. It forces reflection.

Good article in New York Times on whether reducing travel via airplanes does good things for the environment or not. I love such articles because they point out the flaws of lazy activism partly also based on ‘holier than thou’ attitudes. Remember Melisa Kwasny’s beautiful piece blogged here.

The relationship between the Czech Republic and China – good to see the changes happening. [Link]

Some very interesting recommendations for reading here.

What does the record high for S&P 500 stock index mean?

The day after the S&P 500 scaled new heights (it did so on Oct. 28), it is a coincidence that I stumbled up on a review of three new books on Capitalism and Inequality by Edward Luce for FT.

The review was written on 9th October 2019. So, it has not become irrelevant.

The following observations from ‘Bloomberg Opinion Today’ dated October 24, 2019 is particularly relevant in the current context:

WeWork: What Have We Learned?

There is really no more 2019 story than the story of WeWork.

This one has everything: A corporate leader in the mold of L. Ron Hubbard vaporizes piles of a billionaire’s dollars and still walks away a billionaire himself, while thousands of his former employees angrily wait to be fired, just as soon as the company can scrape the cash together to give them severance — though it did manage to prepare severance packages for the CEOs. And people wonder why socialism is in these days.

WeWork, now formally The We Co., yesterday took a bailout offer from its top investor SoftBank, the vehicle of that first billionaire, Masayoshi Son. Softbank has kept throwing money at We even as the commercial real estate startup’s imaginary valuation shrank from $47 billion to $8 billion. Now it owns the bonfire. But through the magic of accounting, SoftBank gets to control WeWork without technically “controlling” it, meaning it keeps the bonfire from lighting up the rest of its balance sheet, write Tim Culpan and Shuli Ren. 

Son will probably be fine. And aside from the WeWork employees about to lose their jobs, it’s easy to laugh at this wild story because it won’t have much impact on the rest of us. We could even, as Matt Levine does, call We founder Adam Neumann basically a financial hero for spotting a market imbalance, located somewhere in the nexus between Masayoshi Son’s brain and wallet, and profiting from it.

But there’s a broader and somewhat scarier lesson to take from this too, writes Mohamed El-Erian, one about how a decade of easy money and a desperate need for yield keeps pushing investors to take ever-bigger risks. The longer this goes on, the more inclined we become to ignore stuff like a company founder locking up control for 300 years. We have met the enemy, and We is us. [Link]

Edward Luce in his review (attached) wrote: “No system, whether liberal or illiberal, can tolerate plutocracy indefinitely.” [Link]

But, plutocracy is now planning space trips for the summer!. Check out the article in FT on Virgin Galactic’s USD2.3bn valuation at public launch. Do not fail to read the comments under the article.

Incentivising malpractice

The mind-bending complexities of the new financial technology combined with the modern practice of incentive payments that reward employees for particular deals practically invites malpractice, whatever the pious institutional statements about the priority placed on client relationships and an ethical culture. In fact, rewards for successful proprietary transactions, inherently speculative and often in conflict with client interests, will tend eventually to color the overall atmosphere and the reward systems in banks, even beyond the trading rooms.

Volcker, Paul. Keeping At It: The Quest for Sound Money and Good Government (p. 216). Public Affairs. Kindle Edition.

The emphasis was mine and that is the key part of that comment.

Wake up, gentlemen. I can only say that your response is inadequate. I wish that somebody would give me some shred of neutral evidence about the relationship between financial innovation recently and the growth of the economy, just one shred of information.”

Volcker, Paul. Keeping At It: The Quest for Sound Money and Good Government (pp. 216-217). Public Affairs. Kindle Edition.

… concerns about regulatory complexity are common and not limited to financial regulation. Pictures of the thousands and thousands of pages of federal regulation are grist for election campaign mills. I cringe, like others. But then I also cringe a bit when I receive, each year, the eighty or so pages explaining precisely my rights and the policy limitations in my “simple” household insurance policy.

Volcker, Paul. Keeping At It: The Quest for Sound Money and Good Government (p. 218). Public Affairs. Kindle Edition.

Volcker-William Sharpe conversation

I found myself sitting in the audience next to William Sharpe, a 1990 Nobel laureate in economics whose “Sharpe ratio” has become a widely accepted measure of risk-adjusted returns for fund managers. I nudged him and asked how much this new financial engineering contributed to economic growth, measured by GNP. “Nothing,” he whispered back to me. It was not the answer I anticipated. “So what does it do?” was my response. “It just moves around the [economic] rents* in the financial system. Besides it’s a lot of fun.” (Later, at dinner, he suggested the possibility of small ways in which economic welfare could be advanced, but I felt I had already gotten the gist of his thinking.) 

Source: Volcker, Paul. Keeping At It: The Quest for Sound Money and Good Government (p. 206). Public Affairs. Kindle Edition.

Here we are, a decade after the crisis, and the scurrying lobbyist chipmunks are nibbling away in the name of efficiency and simplification (good, in itself), but with the ultimate aim of weakening the new safeguards.

Volcker, Paul. Keeping At It: The Quest for Sound Money and Good Government (p. 209). Public Affairs. Kindle Edition.

I am sure Tim Geithner and Larry Summers would have been content if I disappeared. The potential for conflict in policy approaches was real.

Volcker, Paul. Keeping At It: The Quest for Sound Money and Good Government (p. 212). Public Affairs. Kindle Edition.

In my view, ‘Keeping at it’ was a good book but not a great book. He is a master of understatement. Mr. Volcker’s transparent sincerity, simplicity, impeccable integrity came through. But, he was not going to make scathing statements or judgements on any one. That is a testimony to the man’s character but that also makes the book somewhat duller. One has to pierce through his statements to understand what he left it for readers to figure out. One example is the comment on Geithner-Summers above.

We rent digital books and don’t buy them

Katharina Pistor rightly raises the alarm on Facebook’s cryptocurrency. Central bankers’ silence is, one hopes, a sign that they are studying it deeply.

Yanis Varoufakis (May 2019) writes that the stellar returns achieved by Greece’ stocks and bonds since 2012 are part of the problem. He is right. There is a gap between economic reality and financial returns. Greece is not the only place it is happening. But, it could be one of the more extreme examples. He forgot to zero in on the principal source of the problem: reckless monetary policy pursued by the developed world.

Wall Street Journal comment on the appointment of Christine Lagarde is a very good read. It is politicisation of the European Central Bank. Not that Draghi was much different. The comment notes that markets are cheering her appointment but that markets would regret it. Well said. The cheer is because it means continuation of reckless monetary policies.

Adam Tooze’ review of the book, ‘1931’ by Tobias Straumann made for very interesting reading. My friend Ajit Ranade suggested that I read a blog post by his friend on the book. I did so. It is well written. The post makes a good point about how Jews were made the scapegoats by the Nazi party when they were actually in the forefront of defending Germany’s interests in the peace conference and that the German foreign minister was Jewish, etc.

As to the take-aways from the book, I am not sure that there are neat answers to avoid a certain march of history, except in hindsight. Colour me sceptical on humans’ ability to solve the problems they create. They are good at creating problems but not that good at solving them. Most of the time they solve themselves or plain luck and humans take credit.

It is hard to quarrel with the motherhood statement made by the blogger here:

Economic orthodoxy must always take second place to the need to make sure individuals, communities and businesses are able to work and earn a decent return on their investment (labour in the case of individuals, capital in the case of businesses).  [Link]

One important take-away from Adam Tooze’ review is that democratic politics (local politics) can come in the way of doing the right thing in terms of global obligations. This is but a variant of Dani Rodrik’s ‘Inescapable Trilemma’. The review also reminded me of what I had not read yet: John Kenneth Galbraith’s account of the Great Depression.

This FT Edit made for very disturbing reading, especially for someone like me who has gotten used to reading stuff on the Kindle App in my iPad. I did not know that I am renting books and not buying them outright. As the Edit says, this is duplicitous. The Edit says that, in this regard, the revival of paper-based books is a good thing. I have to agree.

Sucheta Dalal in Moneylife has a good article on the corporate cleanup underway in India. She thinks it has been overdue. I hope she is right that it is being pursued with earnestness.

The importance of knowing history

Again, a brilliant episode from Paul Volcker’s ‘Keeping at it’:

That evening, I learned something more about the power of Connally’s political instincts. After a formal dinner in a grand palazzo at the top of one of Rome’s seven hills, he stood and, seemingly extemporaneously, extolled the triumphant achievements of ancient Rome, of Italy, of modern European civilization.

We ministers of finance bore responsibility for bringing the world’s monetary affairs, and indeed humanity itself, into greater harmony. The impact was electric.

Once viewed as a crude Texas bully insensitive to the need for international cooperation, Connally seemed to reveal himself as an erudite, if forceful, global statesman. Within four weeks, an agreement was reached.

Connally was the guy famous for telling Europeans that dollar was America’s currency but Europe’s problem. The episode that Volcker refers to was in the early Seventies just after 15th August 1971 when America suspended the gold window and wanted to devalue the dollar.

The Bretton Woods agreement was still in force and Europeans were reluctant to accept a revaluation of their currencies. It was in that context that this incident took place. 

The importance of knowing history, for men and women in public affairs, cannot be overstated.