Money is important. The real economy cannot function without a stable and predictable currency. Money serves as a numéraire, which the wiki defines as “a basic standard by which value is computed . . . the numéraire is one of the functions of money, to serve as a unit of account: to provide a common benchmark relative to which the worth of various goods and services are measured.”
These days, nearly all money is fiat money issued by the central bank of an economy which is controlled (indirectly perhaps) by the government. The quantity, and therefore the “price” of money (which is the interest rate), is controlled by the central bank. Continue reading →
Celebrated economist Thomas Schelling died today at the age of 95. He was the recipient of the 2005 Nobel Memorial Prize in Economic Sciences for “having enhanced our understanding of conflict and cooperation through game-theory analysis”. I note his passing because he was instrumental in my recognizing that I belonged to his tribe — that I was at heart an economist. Mere accident led me to pick up his book Micromotives and Macrobehavior (1978) at the Sunnyvale Public Library sometime back in the early 1990s. He received his bachelors degree in economics in 1944 from UC Berkeley, my alma mater. Continue reading →
The Centre for Civil Society convened a day-long conference on Dec 20th at The Claridges Hotel, New Delhi, to honor the memory of S V Raju. I attended and had the opportunity to meet with many friends and also some people I had heard about but never met before.
Two shocks rocked the world: Donald Trump’s upset victory in the US presidential elections, and the demonetization of high-denomination currency in India. Both can be expected to have profound repercussions. I will pass commenting on the tears of Hillary Clinton — delicious though they are to yours truly — except to say that to me the result was as unexpected as it was delightful.
The Indian economy experienced a massive shock with the announcement that Rs 500 and Rs 1000 currency notes will no longer be legal tender starting from just a few hours after the announcement. An astounding 86 percent of all currency was rendered worthless for transactions, and only the remaining 14 percent was expected to serve for a short term (hopefully) the myriad purposes that money usually serves in an economy. A monetary shock of that magnitude cannot but have complex intended and unintended consequences. Continue reading →
I am convinced that freedom is an acquired taste, somewhat like dietary preferences. People brought up in a vegetarian households are likely to prefer vegetarian food. People brought up free tend to prefer freedom and those brought up under command structures, prefer that. Muslims apparently prefer the stifling, humanity-denying strictures of Islam that non-Muslims generally find horrifying. Continue reading →