Rahul Deodhar's Blog, page 30

Pseudo Keynesianism

As a solution to the crisis, I am more inclined with Hayek approach of taking the pain quickly and all up front rather than prolonging it as Keynes recommends. However, I dispute the interpretation of Keynes by modern media and experts. Michael Pento has an interesting article about Keynesian approach. He uses the metaphor of an obese man getting opinion from Hayek and Keynes. While Hayek advises cutting down on food, Keynes advises opposite. And there in lies my problem with interpreting...

The truth behind Encouraging home ownership

Here is a link I got today through Yves Smith at nakedcapitalism.com. Feds rethink policies that encourage home ownership - USATODAY.com. With the amount hubris exposed in recent months I doubt if home ownership was promoted for the sake of citizens.

Asset backed paper vs. Casino's deck of cards

A casino has as many decks of cards as it needs. The real world casino "the financial markets" do not have such access. They need each card to be backed by an "asset". Asset could be wide variety...

Comments on Microsoft

John Hempton, who fabulously broke the banking solvency talked about Microsoft recently. In the third post in the series titled Microsoft – an accounting geek's summarizes his purpose and lessons. I wanted to add some comments to this since the first post. So here it is:Bundled software in India:
India still sells laptops without the operating system. The proportion has gone down but it still exists where dominant volumes are.
Ubuntu and Linux overall has not caught on because it is not user...

Pensions are complicated

The Economist has a nice blogpost about Jobs, pensions and markets: Required reading | The Economist. Here is one important quotation:

Public sector pension funds have just followed the pattern of private sector schemes. Step one, promise employees better pension benefits in lieu of higher pay. Step two, allow older employees to retire early as a "cost-saving" measure. Both employ the economics of the never-never.

And this,

Pension funds are classic Ponzi schemes in which the benefits of...

Who is Rich?

The philosophical answer to the question "those who have more than they need" was always disconcerting. I never related with it. But looking at the situation of developed markets today, I have rediscovered the wisdom in the words. 

An indebted rich nation is not richBy all counts, average American household is indebted. Those with high income but still indebted to the hilt cannot be considered rich. These households need to scale down their spending. To add to their woes, these households...

QE-2?

Here is an awesome cartoon. Concept by yours truely and illustrated by Martin Whitmore.

Will Japanese Investment Overseas decline?

A consistent overseas investment by Japan was a critical phenomenon since the early 90s. Thanks to low interest rates at home and relatively benign economic growth outlook, Japanese were (to an extent) forced to invest overseas. 

Over the 90s Annaul Japanese overseas investment averaged $20 billion. In the first half of this decade, it inched up to about $ 30 billion. However, over the past five years it has accelerated from $50 billion to $ 100 billion in 2008. The net overseas investment r...

Elizabeth Warren - Election vs. Selection

There is a huge debate about what prevents US president Obama from nominating Dr. Elizabeth Warren, the Harvard Law professor to head the Bureau of Consumer Financial Protection Agency. Recently Fortune asks the question in an article titled Why not Elizabeth Warren for BCFP? The Warren episode exposes a fundamental political problem of election vs. selection. Political parties prefer voters and population in general to "select" one candidate.

Difference between Selection and Electiondiv

The crisis of middle-class America

FT, more often than not, does a better job of reporting than many other newspapers. Here is FT talking about middle class America - FT.com / Reportage - The crisis of middle-class America. The examples are well chosen. People with income twice the national median, working four jobs (between two adults) are not able to reliably meet their obligations. Some are stretched by healthcare expenses others while others are fighting through job losses. One can only imagine what happens at...

Small and ineffective stimulus in 2007-2009

Paul Krugman has an blog post titled How Did We Know The Stimulus Was Too Small? He discusses three points. First shortfall was about $2 Trillion. Second, the stimulus was designed at $780 billion. Third, the multiplier that was expected to magnify the impact was not properly enabled. 

There are few points and other reasons that I have highlighted over the days:

First part of stimulus went to mending the financial system. This part is basically used in wetting the system rather than actual ...