14.10.2008

• Paul Krugman wins Economics Nobel
• Why does this news occupy such a top place in our blog? Not just because Economics and Finance are the subjects of our close scrutiny. Equally because he is one of those columnists whom we follow quite regularly. His pieces appear regularly in The Hindu.
• The Princeton University scholar and The New York Times columnist, won the Nobel economics prize on Monday for his analysis of how economies of scale can affect trade patterns and the location of economic activity. Besides his work as an economist at Princeton University in New Jersey, where he has been since 2000, Krugman also writes about politics and inequality in the US and other topics for The New York Times. He has also written for Foreign Affairs, the Harvard Business Review and Scientific American. He is credited with having predicted the East Asian crisis of 1997-98.
  
• The award, known as the Nobel Memorial Prize in Economic Sciences, is the last of the six Nobel prizes announced this year and is not one of the original Nobel. It was created in 1968 by the Swedish central bank in Alfred Nobel’s memory.
• Remember the other Nobel prizes for this year? They are here.
• Finance Minister's assurances on infusing liquidity seem to have been well received by the markets
  
• The reduction of CRR by the RBI coupled with some quick developments like the meeting of the Arun Ramanathan panel, reports about RBI Governor's meeting with the PM and an assurance from the FM that more measures will be taken to infuse liquidity into the system seem to have been well received by the markets. They calmed and made quick gains. Though the undertone remains one of cautious optimism, the markets will be calmed only when they perceive that there are no more surprises in store for them from the global financial crisis front. When will they draw that comfort is anybody's guess as of now.
• Even as this news is comforting, the IMF has estimated that the World economy will continue to shrink till 2010. Look at the projections made by it here.
• Look at one reason that is being cited for the market crash: super-leveraging.
• It is not just Lehman Brothers that was highly leveraged in waging its bets before it imploded.
• Players in our local market also are reportedly super-leveraged. What is meant by this? Look at this for an excellent explanation. Put simply it means that for every rupee of investment you are making, you are also raising about two rupees of debt to take positions in the market. If you are super-leveraged in a bearish market, it will work as long as it remains bearish and similarly, if you are super-leveraged in a bullish market, it will be to your advantage as long as it remains bullish. But once the market changes trend, it becomes very difficult for you to suddenly change your leverage. That is when you feel you are left in a cleft stick.
  
• PM's Economic Advisory Council
• It is headed by Suresh Tendulkar.
• We have been so accustomed to seeing Dr. Rangarajan's name attached with this post that it is easy for us to miss the present Chairman.
  
• Jet & Kingfisher announce an operational alliance!!
• Two of the fiercest rivals in the aviation sector have announced an unheard of operational alliance in a bid to cut costs and take advantage of synergies.
• The alliance includes sharing of codes on domestic and international flights, leveraging the joint network, joint fuel management, common ground handling, cross selling of flight inventories, network rationalisation, cross utilisation of crew, reciprocity in Jet Privilege and King Club programmes.
• Remember about code sharing? It is an agreement whereby airlines permit the use of their CRS code in the flight schedule displays of other airlines. Then what is a CRS code? It stands for Computer Reservation System code; and I think you can fairly guess what purpose it serves. CRS codes are one way of identifying places, usually stations. They were created to enable the booking of seat reservations by (station-based) computers.
  
• I guess all of you use mobile phones.
• There is something that you all should know about IMEI numbers. It is a unique number which identifies the handset that you are using. It comprises 14 digits plus a check digit in the format AABBBBBB-CCCCCC-D. Type *#06# on your mobile to know its IMEI number. If it has all zeroes or no zero it is invalid. That means it could be either a stolen set or a hacked set. In all probability your phone will not function now because DoT is mandating that every phone should necessarily have a genuine IMEI number.
  
• In case you lose your handset you can approach the network provider and inform him that you have lost your mobile phone and give him the IMEI number. He in turn is supposed to enlist this IMEI number in a registry called the EIR. It is a database of the IMEI numbers of blacklisted handsets.
  
• But I have recently been at the receiving end of the sloppy service given by AirTel. Their 121 service asked me to approach the nearest AirTel care centre. When I approached them, they said they don't know what is this IMEI number and didn't care less. Instead they proffered an advice that I should approach the handset manufacturer. When I approached the service station of the handset manufacturer he asked me to get in touch with the network service provider. Having thus been shunted from pillar to post, I just prayed and hoped that my daughter's stolen phone did not fall into the hands of some terrorist.
  
• Try approaching the police to lodge a complaint; suggested somebody. Knowing what would be the response of the police people; I just prayed and prayed. And still keep praying :-) The moral of the story? Don't ever lose your mobile. Better still, don't use a mobile.
  
• A very good article on the global asset bubble
  
• "Art of managing global asset bubble" by MK Venu in today's ET is a very good piece. It gives you quite a few snippets on the current financial crisis.
• Today's Perspectives column is a recommended read. One interesting straight forward answer about the pros and cons of liquidity is excerpted for you:
• Liquidity can have both favourable and unfavourable impact on the real economy. Excess liquidity can lead to higher money supply which can put pressure on inflation by creating excess demand. It can also lead to higher asset prices and might eventually lead to an asset bubble.
  
• Liquidity crunch, however, can deprive manufacturing, financial companies and other corporates the much-needed credit to meet expansion plans, working capital needs and regulatory requirements, which, in turn, might affect growth and lead to overall slowdown in the economy. Tight liquidity can also lead to higher shortterm rates and this can lead to a slowdown of growth. The latest soft IIP reading is attributed to some extent to higher interest rates, which is driven by tight liquidity.
  
• Thus, liquidity has to be adequate in the system, supporting growth without fueling inflation.