BC ECONOMY
Saved by @Alex1Powell

Lot of comment on RBI becoming Pro Growth & keeping Inflation in back ground. Few Points to ponder.
- Inflation is being pushed on back burner globally. ECB moved from Inflation to Growth long back. US Fed has publicly stated to tolerate higher Inflation.

 RBI pre Inflation targeting framework was managing Growth, Inflation, Govt Borrowing, Rupee and Financial stability remarkably well. Nobel Laurate Joseph Stiglitz complemented RBI stating that US Sub prime crisis would have been averted if Dr Reddy was US Fed Governor.
Despite stupendous success of the RBI in managing conflicting needs of Indian Economy, Inflation Targetting Framework was established without proper definition/measurement of Inflation.
This was like attributing credit of Mahabharat Victory to Single minded focus of Arjun (could only see Bird's eye while shooting arrow) than all round guidance of Shree Krishna.
Oddly Central Banks around the world are now following RBI in managing conflicting objectives as per the need of economy.
There are several omissions in calculating Inflation in India
- Globally feature improvements is considered for Inflation. Feature enhanced product will be non inflationary despite price increases. We look at TV price irrespective of its transition from B & W to LCD.
Globally Central Banks focus on Inflation excluding Food and Fuel. They accept the limitation that monetary policy can't influence OPEC or Rain God. We focus on Inflation where major part comes from Food & Fuel. Strangely Gold is part of Inflation calculation.
Calculation of Inflation is a different issue due to limitation on data capturing / price variation across India. For e.g WPI Inflation was 1.48 % in Oct 20 & 1.32 % in Sept 20. CPI Inflation was 7.61 % in Oct 20 & 7.34 % in Sept 20.
If we measure effectiveness of monetary policy from WPI it is excessively tight as Inflation is below RBI's target range.
From CPI angle it is excessively soft as Inflation is above RBI's target range.
Argument of High liquidity keeping CPI elevated doesn't make sense as YTD Bank credit growth is Rs 5.55 Lac crore (PY Rs 7.15 Lac crore). Bank Credit Growth is down Rs 1.60 Lac crore YTD. How can liquidity push inflation higher If it remains trapped between RBI & Banks ?
Higher Inflation impacting poor people also doesn't take into account concessional food grains given under PDS & other welfare schemes. Actual Food Inflation is much lower than reported food inflation if we take into account those data.
India Inc is running at much lower capacities as reflected in 7 % sales degrowth in NIFTY cos for Sept 20 quarter. Lack of demand is witnessed across sectors as reflected in negative GDP growth in FY 21. Supply chain disruptions are probably a bigger contributor to Inflation
Interest cost indirectly contributes to Inflation. Most MSME borrows money at high single digit / low double digit real interest rates. The depositors don't benefit from those rates as intermediarion cost remains high due to non resolutions of NPAs.
Raising Interest rates restricts creation of supply and increases cost of product & services. This creates a vicious cycle of higher Inflation, higher interest rates & lower Growth. Arguments of tight monetary policy for controlling Inflation overlooks this crucial aspect.
Our peers have brought inflation under control by lowering rates, pumping liquidity, supporting entrepreneurship and creating supply more than the demand. Our focus should be to create supply rather than curtail demand over long term to control Inflation.
Glad that the RBI has got the Shakti to come back to its original Krishna Avatar of managing conflicting objectives of Growth, Inflation, Rupee, Financial Stability and Govts Borrowing Program.
ECB & US Fed can ignore Inflation but India can't argument, doesn't take into account that they are growing at lower single digit & we need to grow at lower double digit. Negative real interest rates has been a catalyst for faster growth by encouraging investments in many places

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The 6yo doesnt cycle in a complete straight line yet so one of us cycles abreast of him just in case. Lots of drivers waited patiently for a long time before overtaking slowly and safely. Thank you for this. Sudden accelerating engines make the 6yo less likely to stay straight.

Some drivers, sadly not an insignificant number, decided they needed to get past more quickly and more slowly than was safe. Where were they all going to and why the need to be so impatient? It's not like there is anything to get to quickly at the moment.

Drivers coming the other way were generally the biggest threat. The roads were double parked with people using the park (worst I have have ever seen) resulting in narrow road space. Drivers did not slow down to adjust to this or to us cycling alongside the 6yo.

One driver overtaking a parked car had to encroach on to our side of the road. Instead of waiting he pushed out and shook his head at us. Did he think we shouldn't be on the road with a small child or did he just think he had priority? Either way he was wrong.
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$600/wk Unemployment Insurance cannot deliver the benefits of a $600/wk Job Guarantee. From the outset, I should say JG is not a replacement for UI, no matter what you may have heard. I’ll get to this later, but read this long 🧶 w/ that in mind.


Automatic stabilization: Both $600/wk UI and JG will provide counter cyclical spending. But UI will be weaker. Counter-cyclical stabilization is not just about the absence of income. It is also about the transmission and structure of economy

Firms don't like to hire the unemployed. Mass and long-term unemployment make the problem worse. JG would recover labor markets much faster than a UI of the same amount, both b/c of the higher direct, induced & tertiary employment effects & b/c of private firm hiring preferences.

JG stabilizes spending patterns better. Uncertain job prospects may mean more cautious spending from the unemployed compared to those w/ guaranteed jobs.
UI is temporary, which makes matters worse. Even if it were permanent, it still won't resolve the problem of job scarcity.

Nations who once achieved tight full employment through active labor market policies demonstrate that unemployment does NOT fluctuate the same way it does w/o them. Direct employment, ELR type policies diminish drastically/even eliminate these amplitudes (eg postwar Japan/Sweden)
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@AwBlessYerHeart @Gus_802 Keynesian/demand side economics is what made the Middle Class better off but it was applied at a time when it wasn’t always equitable toward PoC or women. We need to bring back Keynesian policies but that means having Dem Mandates in Congress & WH for more than two short years.

@Gus_802 Ultimately we need to stop having arguments about “capitalism vs socialism” because they are both loaded words and imprecise descriptors of how our economy functions. Capitalism and socialism describe systems which, in their purist forms, don’t exist anywhere in the world

@Gus_802 The developed world and even most of the developing world have mixed economies where elements of what is regarded as socialism and capitalism exist. But the real ISM the drives our economy is consumerism as 2/3 of all economic activity is based on consumer/demand side spending

@Gus_802 When we couch these forces as “socialism” or “capitalism”, we automatically created a conflict and a polarizing zero sum argument which often derails honest discussions about our economic system which stifles discussions on ways to improve it

@Gus_802 We should instead call these forces “public funding” and “private funding” as they are more precise and less heated descriptors. We then make the cogent argument that, to support a consumer based economy, we need both public and private funding to do so effectively
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In the UK, so much of our political troubles come from the growth in the landlord class, who if nothing else, wield disproportionate power relative to their social worth: at one and the same time claim to be martyrs to the risk of investment, and demand these risks be minimised.

Of course, it's possible to make claims like this: e.g., nurses have every right to claim that they shoulder not merely more risk than most, but far more risk than is strictly necessary. The pandemic has made this brutally obvious to anyone who has been paying attention.

However one chooses to tally up compensation for this social role, be it financial, social, or some other privilege, it's pretty obvious that every last 'essential worker' is shouldering more societal risk than most non-essential workers compensated far better than they.

The way this trade off gets (implicitly) articulated as 'pay vs. purpose' is one of the enduring insights of @davidgraeber's Bullshit Jobs. Yet there are many essential workers who don't even get the illusion of purpose in compensation for personal risk (e.g., warehouse staff).
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What a year: 203 essays about degrowth in English since the beginning of March. Here is a selection of some of my favourites. Thank you @fem_degrowth, @beth_stratford, @thedownshifters, @corbinkbarthold, @degrowth_info for these brilliant texts.

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https://t.co/1lFaJM52RX

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