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Procyonm
India
Constant Reader, Writer, Social Thinker, Manufacturing Leader
Recent Activity
Dear Mark, As usual you are always the best; while I agree with what you say, there could be all the good reasons to ruminate when monetary policy limits (including the unconventional ones) prolong the persistence of the output gap to stay, are there other levers or is that monetary policy is the do all and end all there is? Procyon Mukherjee
Toggle Commented Jun 15, 2014 on Links for 6-13-14 at Economist's View
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But my question is valid, why don't you try to answer it?
Toggle Commented Jun 13, 2014 on Links for 6-13-14 at Economist's View
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@ Mark, I have a question on fiscal actions, as there is now this hot topic being debated that fiscal actions need to be boosted when not enough investments are forthcoming from the corporate sector. But is it not true that the stock of savings is fixed, if the government wants to make infrastructure investments, it must issue debt that would make savers divert part of their savings to these instruments thus drawing down on the savings that would have otherwise moved to other investments and consumption. So effectively government fiscal actions actually crowds out private investments or consumption by drawing down on existing savings that are earmarked for these. Am I right?
Toggle Commented Jun 13, 2014 on Links for 6-13-14 at Economist's View
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The sectors where the hours are growing are hospitality & Leisure and Healthcare, so if productivity has to be improved, it has to be in these sectors; in the rest neither the hours are growing nor is the economic impact out of them, so this is a better way of understanding the nuances around productivity growth.
Toggle Commented Jun 12, 2014 on The productivity slump at Stumbling and Mumbling
The question should be directed more towards the direction in which we want to move and whether the current direction needs a course correction. The alarming pace with which the top 1% income is rising in the next ten years it could well be 40% of the total income. In some sectors like the financial sector, the top 1% take away already 30% of the total income in that sector. Under the garb and the veil of ignorance that an average household income is advertised and the GDP growth, even for per capita the way it is programmed, we obscure ourselves from the true reality that growth in the lower 50% has become a matter of academic discussions, drawn away from the realities it should have been subjected to.
Toggle Commented Feb 6, 2014 on 'The One Percent' at Economist's View
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My humble submission would be that we cannot ignore the problem of collinearity, something which would make high R square values completely meaningless. This is all the more reason why regression has very limited application in many of the areas that we use them.
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There is one simple test on the rationality question: Take a fortune 500 company and ask insiders to rate its stock performance (not board members) and repeat it with outsiders who are either traders and equity-holders in the stock without anyone knowing that such an exercise is being conducted. The results could be very interesting as the insiders have far better information and their estimates are more likely to be rational, whereas those of the external agents could be based on things that go beyond information alone. This is where Ernst Fehr's rational versus emotional connection comes together, which is what we see in markets.
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The interest rates have augured well for the supply side, its impact on demand has been temporal and indirect; the tuning of the demand side with interest rates going forward will be very interesting to watch for levels of growth from now on.
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The seminal paper on Price Rigidity of Nickel Coke http://mpra.ub.uni-muenchen.de/1046/1/MPRA_paper_1046.pdf bears testimony to the view that seventy years of single price did precious little to the assumption that sticky prices make adjustments far more difficult, on the contrary Coke made all the best of adjustments. In fact there were two world wars in this period between 1886 to 1959, while Coke prices remained same at 5 cents! Surely there could not have been more reasons for volatility to subsume all that Coke stood for, but could not do much, while prices remained rock-rigid.
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I was always fascinated by the Campbell Shiller regressions that essentially proved that stock market indices are not random walk or a product of efficient market hypothesis, but there are reasons to have doubts at least that there exists a strong negative correlation between the ratio of the real Standard and Poor Index ten years later to the real index today (on the y axis) versus a certain price–earnings ratio: the ratio of the real Standard and Poor Composite Index for the first year of the ten year interval, divided by a lagged thirty year moving average of real earnings corresponding to the Standard and Poor Index. Which essentially brings us to the understanding that the decline in the future stock market indices could be a result of much higher expected utility from the current dollar invested in the stock market and therefore the current expectation is mired in an altogether immensely reducing expectation function for the future, which is otherwise posed as massive shifts in the curvature of the representative investor's von Neumann-Morgenstern utility function. Competing assets and the release of large dosage of central bank money going into the specific stocks makes current ratios go awry, without reason. Rationality is meaningless when large chunks of money move into assets and regardless of their intrinsic potential they subsume the common available information into making gyrations that has no connection with either efficiency or rationality.
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I have always found this fascinating that Ronald Coase appears so abundantly in the ambit of a firm’s activities deep inside India, specially where acquisition of land is involved around a factory, or an expansion entails larger use of common water resource which has scarcity in summer, or the setting... Continue reading
Posted Sep 30, 2013 at ProcyonMukherjee's blog
The Dutch Auction or its variant has been extensively used where the value of the offering is not easily discernible to the bidder or the information asymmetry is acute. For example for an ‘used’ car which is on offer and there are prospective bidders, the range of bids would be... Continue reading
Posted Aug 28, 2013 at ProcyonMukherjee's blog
“The only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant.”------John Stewart Mill The power of a Union stems from its ability to... Continue reading
Posted Aug 17, 2013 at ProcyonMukherjee's blog
Left tail and Right tail distributions Decision making under uncertainty has been the core subject of Kahnemann and Tversky; their thirty years of work in the formulation of the Prospect Theory and later Kahnemann’s book, “Thinking Fast and Slow” have brought new insights in the area of what constitutes the... Continue reading
Posted Aug 12, 2013 at ProcyonMukherjee's blog
The unemployment rate fell by 0.2% to 3.9% in June'13 the lowest level since 2009 and the jobs to applicant ratio now touches 0.92%, which is also the highest. These numbers need to be looked at from the point of view of a population that is ageing, not growing but actually declining, which means that the labor force participation rates cannot go up. The total number of jobs added this year so far has been 290,000. Of course this would bring in moderate to high inflation as a result, it does not require any great inquiry into 'today's short-run short-term rate and the long-run future's short-term rates', but how does that matter as the polity must survive bringing back jobs first; the secondary question of the capacity to pay back debt is not for this polity to answer.
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Wonder why $1.8 Trillion (liquid assets of U.S. Firms) plus $1 Trillion (Excess Reserves of Commercial Banks parked in Fed liability side of the balance sheet) is not good enough reason to slow down QE.
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Bandwagon behavior, and coupled to it the 'free-rider' problem has wide scale ramifications from equity and derivatives trading to public accountability in capital raising and deployment and in many other areas including the simple experiment of finding the best candidate for a job amongst a large number of applicants. The... Continue reading
Posted Jul 25, 2013 at ProcyonMukherjee's blog
I am sorry that I am caught between the urge to understand and to respond as I go through the motions of reflecting on what I gather as one of the least cultivated subjects of our time, while being the most visible one in the blogosphere. I have this nagging... Continue reading
Posted Jun 24, 2013 at ProcyonMukherjee's blog
The financial markets seem to be disliking a strong recovery that would stop the bong buying program and allow a faster unwinding, otherwise how do we explain the 'jittery' reaction of the market whenever any whisper of unwinding happens. The monetary transmission itself is rather muted going by the bloated liability side of the Fed Balance sheet which has $1.9 Trillion appearing as excess reserves of the Commercial Banks which they have parked. This rising liability has costs to the tax-payers and so far only lip-service has been paid to this element in terms of lowering interest rates on these reserves. This money although it creates an illusion of increasing the monetary base, does precious little to goods and services.
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Since the start of Quantitative Easing, which was better described by Bernanke in his famous Oct.8, 2009 speech as ‘Credit Easing’, we have seen the Federal Reserve balance sheet grow to $3.42 Trillion last week in the assets side of the balance sheet. This growth in assets from the inception... Continue reading
Posted May 29, 2013 at ProcyonMukherjee's blog
With current tendencies towards discount rates (the way they create expectations for the future versus now) our current thinking is more guided by the willingness to postpone policy decisions for making corrections into the distant future than now, what else do we expect in terms of announcements? The appearance of a change, not change itself, the way it ruffles the edges of volatility, one wonders what would happen when change would actually happen. 'Even lower numbers on inflation', would further postpone change to happen as wage-price stickiness would have more profound influence.
Toggle Commented May 17, 2013 on Fed Watch: Busy Data Day at Economist's View
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Social justice is the culmination of the principle of social equity when advancement to the living conditions are based on mutual cooperation where the least advantaged by virtue of their being so is not the reason why they should continue to be belittled when opportunities for making progress is being meted out; a sacrifice by some if it is needed should not be left to those who are already least advantaged.
Toggle Commented May 17, 2013 on 'What about Marx?' at Economist's View
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The recent example is bizarre that QE3 is pumping into the economy $85 Billion of newly created liquidity / credit and the job addition per month average is less than 200,000, which translates to a whopping $500000 per job. This leads us to reconstruct the debate that wealth effects on... Continue reading
Posted May 6, 2013 at ProcyonMukherjee's blog
Why don't we speak of government debt versus the government revenue, if that is not on strong wicket, what is the point in lamenting against austerity?
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I have been intrigued for quite some time to find the basis of a theory or law or simply a hypothesis, as in today’s world of information explosion, every event or information associated with it brings in a two sided view, almost diametrically opposing each other and if that becomes... Continue reading
Posted Apr 22, 2013 at ProcyonMukherjee's blog