Prof. Jayanth R. Varma's Financial Markets Blog (comments) http://www.iima.ac.in/~jrvarma/blog/index.cgi A Blog on Financial Markets and Their Regulation en Copyright Prof. Jayanth R. Varma blosxom simplerss20 modified http://blogs.law.harvard.edu/tech/rss <![CDATA[Re: Should Equifax be shut down?]]> Comment relating to Should Equifax be shut down? (posted Wed, 13 Sep 2017 21:33:00 +0530)
Maries wrote on Thu, 14 Sep 2017 13:57

They consider fine as fees. Dan Ariely in his Predictably irrational tells the difference between fine and fees.

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Thu, 14 Sep 2017 13:57:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/equifax.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/equifax.discuss#0
<![CDATA[Re: Re: Should Equifax be shut down?]]> Comment relating to Should Equifax be shut down? (posted Wed, 13 Sep 2017 21:33:00 +0530)
Krishna iyer wrote on Tue, 03 Oct 2017 06:37

Wow, that's a radical way to see things. Strikes right at the heart of the Joint Stock Company. I wonder what 'shut down' would imply. Is it a sale to someone else? In that case it would be BAU under new management Is it change of management? Ditto Is it forced winding down of the company? Now that would shake the ground under capitalism. Imagine of there is a probability however small of a company being wound down and sold for its parts, the knock to the cumulative stock market valuation would be terrible.. Plus, the investors would have done nothing to deserve it. The management needs to pay a price and investors a fine to insist on better manager behavior I future.

Thus in fitness of things I imagine shutting down would be too drastic a step...

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Tue, 03 Oct 2017 06:37:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/equifax.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/equifax.discuss#0-0
<![CDATA[Re: In the sister blog and on Twitter during January-July 2017]]> Comment relating to In the sister blog and on Twitter during January-July 2017 (posted Wed, 02 Aug 2017 14:16:00 +0530)
Prof. Jayanth R Varma wrote on Thu, 03 Aug 2017 17:50

Comments were not working for some time. Have been restored now.

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Thu, 03 Aug 2017 17:50:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/sister-blog-n-twitter-2017-01-to-07.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/sister-blog-n-twitter-2017-01-to-07.discuss#0
<![CDATA[Re: Re: In the sister blog and on Twitter during January-July 2017]]> Comment relating to In the sister blog and on Twitter during January-July 2017 (posted Wed, 02 Aug 2017 14:16:00 +0530)
Prof. Jayanth R Varma wrote on Thu, 03 Aug 2017 18:15

Testing whether reply works

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Thu, 03 Aug 2017 18:15:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/sister-blog-n-twitter-2017-01-to-07.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/sister-blog-n-twitter-2017-01-to-07.discuss#0-0
<![CDATA[Re: Equity Derivatives versus Cash Equities in India]]> Comment relating to Equity Derivatives versus Cash Equities in India (posted Mon, 31 Jul 2017 21:23:00 +0530)
Dilip Kumar Agrawal wrote on Mon, 07 Aug 2017 21:25

I have gone through the whole article and found it to be so good and to the point , that I am thinking why such people are not consulted by the regulators which are headed by IAS burocrats who don't have true knowledge of the subject . They don't know that a vibrant capital market is a must for the growth of an economy . And what ever the author has said if followed will lead to a vibrant capital market .

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Mon, 07 Aug 2017 21:25:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/derivatives-v-cash.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/derivatives-v-cash.discuss#0
<![CDATA[Re: Why Aadhaar transaction authentication is like signing a blank paper]]> Comment relating to Why Aadhaar transaction authentication is like signing a blank paper (posted Wed, 19 Jul 2017 21:36:00 +0530)
Nirmesh Mehta wrote on Thu, 03 Aug 2017 08:41

With reference to your article, I have a fundamental doubt here - is there a difference between verifying identity and authenticating a transaction?

I think the real question involved is

If X is verifying identity of A, is it the same as saying that X has proof that it has verified the identity?

If I understand correctly, there are systems where X can verify identity but cannot prove the same - for instance, if

1. There is key that is shared only between X and A

2. X has a message signed with that key

3. X knows that it did not sign the message

Then X can be sure that A signed it but not prove the same to a third party.

However, the problem is that X needs to be a consistent, internally reliable person and cannot be a system - as far as I understand there is, currently, no way to prove that X did not do something.

Hence, my conclusion is that if a system claims to have verified the identity of a user U, it must claim that the user U has authenticated the transaction of the said verification. Alternatively, the only claim that the system may make is that there is an agent A who claims that he has verified the identity of U.

In practice, I dont think this second assertion is useful. For instance, Why would a business use Aadhaar to perform KYC if it couldn't later prove to law enforcement agency that the Aadhaar number of the customer is, in fact, what they claim it to be and not some random number created from the figment of imagination of one of their employees? If there is court case at some point, would the employee who carried out the authentication really be able to testify that he actually did it?

Just as an aside, I know of a few paranoid people who are very careful about self attesting PAN cards (or other identity cards) - they write on the photocopy what purpose they are attesting it for. The reason is the same that you had mentioned - the self attested identity document is sufficient for purchasing a SIM card.

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Thu, 03 Aug 2017 08:41:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/adhaar.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/adhaar.discuss#0
<![CDATA[Re: Re: Why Aadhaar transaction authentication is like signing a blank paper]]> Comment relating to Why Aadhaar transaction authentication is like signing a blank paper (posted Wed, 19 Jul 2017 21:36:00 +0530)
Prof. Jayanth R Varma wrote on Tue, 29 Aug 2017 21:10

I agree with much of what you say. In cryptography, we draw two distinctions:

(1) between Entity Authentication and Message Authentication

(2) between Message Authentication and Non-repudiation

My blog post focused on the first while you have focused on the second. In practice, both distinctions are important.

An identity card for example provides an entity authentication

Suppose (a) I know you well and (b) you come to my office and (c) tell me something orally, message authentication has been accomplished. I am sure that you told me this, but you can repudiate it because I have no proof.

Now assume (b) and (c) but not (a). Instead, you use (a') an identity card to convince me that it was Nirmesh told me this. (a'+b+c) gives message authentication without non repudiation.

Now assume (a) or (a') and (b) and (c') instead of (c) where (c') is that you write everything down on a piece of paper, sign it it my presence and give it to me. This gives message authentication with non repudiation. Without (a) or (a') I do not know that the signature on the paper is that of Nirmesh.

Aaadhar can serve as (a').

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Tue, 29 Aug 2017 21:10:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/adhaar.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2017-18/adhaar.discuss#0-0
<![CDATA[Re: The blockchain as an ERP for a whole industry]]> Comment relating to The blockchain as an ERP for a whole industry (posted Fri, 20 Jan 2017 17:34:00 +0530)
Manas Agrawal wrote on Fri, 18 Aug 2017 22:37

Great read sir. I strongly believe in the blockchain technology. I agree with the ERP solution as well, something that I had not contemplated. Do you see the possibility of impact in P2P foreign exchange? It is something that I wish to work on and would be great to have your views on the matter.

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Fri, 18 Aug 2017 22:37:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/blockchain-as-ERP.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/blockchain-as-ERP.discuss#0
<![CDATA[Re: Euro Introduction as Demonetization]]> Comment relating to Euro Introduction as Demonetization (posted Mon, 19 Dec 2016 17:32:00 +0530)
Ronit Singh wrote on Tue, 20 Dec 2016 02:21

Hi Professor, I don't fully agree with your rationale provided: 1)http://www.iimahd.ernet.in/~jrvarma/blog/index.cgi/Y2013/bitcoin.html 2)http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2013/eWallet-or-bank-account.discuss as in #2 , you mentioned about Day dreaming, In a world that struggles to ensure that systemically important settlement systems like clearing corporations settle in central bank money, we would have a system in which every individual could settle in central bank money. It is even possible that eRupees would find international adoption in the absence of any competition. Thank You..!!

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Tue, 20 Dec 2016 02:21:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/euro-as-demonetization.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/euro-as-demonetization.discuss#0
<![CDATA[Re: Euro Introduction as Demonetization]]> Comment relating to Euro Introduction as Demonetization (posted Mon, 19 Dec 2016 17:32:00 +0530)
Ronit Singh wrote on Tue, 20 Dec 2016 18:25

Dear Professor, I do know you have limited time but there was an article published in journal of economics perspectives. https://www.aeaweb.org/articles?id=10.1257/jep.29.2.213 , I would like to know your views in context with India as wrt to cryptocurrencies. As I believe you are especially qualified to answer. Thank you very much for your time. Sincerely, Ronit Singh.

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Tue, 20 Dec 2016 18:25:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/euro-as-demonetization.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/euro-as-demonetization.discuss#1
<![CDATA[Re: A digital device for every Indian]]> Comment relating to A digital device for every Indian (posted Fri, 09 Dec 2016 11:34:00 +0530)
Maries wrote on Fri, 09 Dec 2016 13:18

We can use raspberrypi zero and some other pi equivalent to reduce this cost from 50 - 75%

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Fri, 09 Dec 2016 13:18:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/digital-device-for-everybody.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/digital-device-for-everybody.discuss#0
<![CDATA[Re: A digital device for every Indian]]> Comment relating to A digital device for every Indian (posted Fri, 09 Dec 2016 11:34:00 +0530)
Pankaj Gupta wrote on Thu, 15 Dec 2016 11:22

Sir, in my opinion, the fundamental challenge towards any measure is making the people aware about such a measure and encouraging them to adopt something new. Generally, people(specially seniors and rural ones) are averse to anything new. Even if a phone or any device is given to them, it would remain idle because the people are not enthusiastic towards anything which disturbs their notion of "normal".

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Thu, 15 Dec 2016 11:22:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/digital-device-for-everybody.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/digital-device-for-everybody.discuss#1
<![CDATA[Re: A digital device for every Indian]]> Comment relating to A digital device for every Indian (posted Fri, 09 Dec 2016 11:34:00 +0530)
Atul V wrote on Sat, 17 Dec 2016 02:38

I would've agreed with the idea of a digital device if the assumption that "India wants to replace cash with digital payments" were true. As stated by Arun Jaitley, India wants to be a less cash society not a cashless one.

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Sat, 17 Dec 2016 02:38:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/digital-device-for-everybody.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/digital-device-for-everybody.discuss#2
<![CDATA[Re: More on cash alternatives]]> Comment relating to More on cash alternatives (posted Tue, 29 Nov 2016 16:31:00 +0530)
Rohan wrote on Mon, 05 Dec 2016 23:06

Sir, Another article in similar vein: http://economictimes.indiatimes.com/industry/banking/finance/banking/mumbais-kalbadevi-now-trades-with-a-new-currency/articleshow/55760714.cms

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Mon, 05 Dec 2016 23:06:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-alternatives.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-alternatives.discuss#0
<![CDATA[Re: Cash and credit redux]]> Comment relating to Cash and credit redux (posted Fri, 18 Nov 2016 13:11:00 +0530)
Dushyant Mahadik wrote on Tue, 22 Nov 2016 07:22

Sir, IOUs or account payee bearer cheques in 500 denomination can possibly help us tide over the currency crunch and revive the economic activity on the ground. How would one assess credit risk from an IOU or cheque issued by individuals? At the point of first exchange, the seller may know the buyer and accept it. But the seller may not be able to pass it on further, unless its a reputed name in the locality.

During normal times, a bunch of cheques does go for factoring at a discount rate. This rate would not remain the same considering the increased credit risk.

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Tue, 22 Nov 2016 07:22:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit-redux.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit-redux.discuss#0
<![CDATA[Re: Cash and credit redux]]> Comment relating to Cash and credit redux (posted Fri, 18 Nov 2016 13:11:00 +0530)
Sonali Jain wrote on Tue, 22 Nov 2016 14:56

Something similar attempted in Telangana http://indianexpress.com/article/india/india-news-india/demonetisation-telangana-vegetable-markets-new-currency-4388565/

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Tue, 22 Nov 2016 14:56:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit-redux.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit-redux.discuss#1
<![CDATA[Re: Why not a helicopter drop of new rupee notes?]]> Comment relating to Why not a helicopter drop of new rupee notes? (posted Wed, 16 Nov 2016 11:31:00 +0530)
Tarang Mehta wrote on Wed, 16 Nov 2016 14:41

Great Idea Sir!!! I hope someone from the govt is paying attention.

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Wed, 16 Nov 2016 14:41:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss#0
<![CDATA[Re: Why not a helicopter drop of new rupee notes?]]> Comment relating to Why not a helicopter drop of new rupee notes? (posted Wed, 16 Nov 2016 11:31:00 +0530)
shamanth bhargav wrote on Wed, 16 Nov 2016 21:32

Sir, as quoted by you "If a bill were to be moved in parliament to provide statutory basis for a helicopter drop, I am confident that almost all MPs who want to be reelected in 2019 will support the bill and it would be passed by an overwhelming majority". Will this concept be efficient as this way of distribution cannot make sure of proper money distribution, even though it is for a temporary basis.

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Wed, 16 Nov 2016 21:32:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss#1
<![CDATA[Re: Re: Why not a helicopter drop of new rupee notes?]]> Comment relating to Why not a helicopter drop of new rupee notes? (posted Wed, 16 Nov 2016 11:31:00 +0530)
Amit wrote on Thu, 17 Nov 2016 14:24

Pretty imaginative, i thought, after initial few lines..but then I read this was seriously suggested by Ben Bernanke. How do they make sure 1. Everybody gets it 2. Everybody gets equal 3. Where to drop 4. Will people not fight. How about children, old and women who cannot run around catching these wads of notes..

So I am forced to ask, seriously ??

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Thu, 17 Nov 2016 14:24:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss#1-0
<![CDATA[Re: Why not a helicopter drop of new rupee notes?]]> Comment relating to Why not a helicopter drop of new rupee notes? (posted Wed, 16 Nov 2016 11:31:00 +0530)
Mitul SJ wrote on Thu, 17 Nov 2016 12:46

The thing is they had already placed the Jan dhan yojana earlier they would have thought of it, those who have accounts will be paid cash (assuming most of the rural folks opened accounts for that), but it seems they don't have that plan of action. As they want to see the funds coming in instead of going out. The steps taken are clearly visible what the intentions are of the Govt. and highly doubting that if that approach taken, will create another storm from Opposition that Govt. gave cash-for-vote. That would raise the eyebrows as "openly giving cash" and can be misunderstood.

Will it affect the rupee? yes! the rupee is down so are the bonds and equity indices, VIX is increasing....even without giving cash. Also, that strategy is applied when growth is low and interest rates are also low compared to history they have gone down with. I do not think that would be possible to undertake. And if it happens I am not sure of the aftereffects of it on India, as a basket case, given how politics work like a boiling pot. The countries which have taken that approach are countries which are moving ahead slower than snail! So yeah that's the case. There are excess notes in the market more than printed so that's the case for fake currency in the market they want all in. If it ever showed up!!

The reasons are justified and are good considering, "if" there are/is "pure intentions" of the involved powers to do the task and other people involved in completing the process from the bank/post teller to the senior person in the bank/post and others who are in charged/responsible. As investors are not only watching the poor but everything given how things are unfolding. Everything is valued afterall. From speeches to agonies! when it comes to financial markets

Thanks for the article, Prof!

....there are no solutions only trade-offs ~ Thomas Sowell, American Economist

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Thu, 17 Nov 2016 12:46:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss#2
<![CDATA[Why not a helicopter drop of new rupee notes?]]> Comment relating to Why not a helicopter drop of new rupee notes? (posted Wed, 16 Nov 2016 11:31:00 +0530)
sangeeta wrote on Fri, 18 Nov 2016 14:05

Thanks for the post and the post after this one.

Underwhelming in the beginning given my reaction to your last post, as I kept reading I was quite quite overwhelmed. I started making some calculations.

I took calculated urban are for top 500 cities population(over 1 million) cities based on avg population density, made some apprximations of remaining urban population. Caculated population density of inhabited village assuming a village is 2 sq km. Thus calculated how many square kms needed to be covered by a sortie. I also assumed that the drop will have 2 notes per person, all notes being new 2K notes. A chopper sortie with fuel etc is lets say Rs 40K. With some more calculations the final cost of dropping as well as the value of currency notes is coming to roughly 20 lakh Crore and 100 choppers need to work for about 25 days. `

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Fri, 18 Nov 2016 14:05:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss#2-0
<![CDATA[Re: Why not a helicopter drop of new rupee notes?]]> Comment relating to Why not a helicopter drop of new rupee notes? (posted Wed, 16 Nov 2016 11:31:00 +0530)
Prof. Jayanth R Varma wrote on Fri, 18 Nov 2016 15:19

I am impressed by the very detailed calculations that you emailed me. couple of corrections and clarifications:

1. The logistic costs (the chopper trips) according to you is only Rs 25 crore which is a trivial amount. Even if your estimates have to be inflated by a factor of 10, the cost would be only Rs 250 crore which is quite low for such a massive exercise!

2. On the value of the notes, I think you got one zero wrong (dividing by 1,000,000 instead of 10,000,000 to convert into crores). So it is not 20 lakh crore, but only 2 lakh crore. But you included only the rural notes instead of the total, so it is actually 5 lakh crore.

3. The value of the notes is not really a cost, but a redistribution. This is money that the government saved by not having to repay the black money cash.

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Fri, 18 Nov 2016 15:19:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss#2-0-0
<![CDATA[Re: Re: Why not a helicopter drop of new rupee notes?]]> Comment relating to Why not a helicopter drop of new rupee notes? (posted Wed, 16 Nov 2016 11:31:00 +0530)
sangeeta wrote on Fri, 18 Nov 2016 15:23

Tahnk you....Indeed Sir. Its really a very small cost for such a great public service. The cost of sorties will go up or down owing to various factors such as fuel efficiency, refuelling costs, human errors etc....but end of day the cost of the whole exercise might not be more than a few hundred crores Indian rupees.

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Fri, 18 Nov 2016 15:23:00 +0530 https://faculty.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/helicopter-drop.discuss#2-0-0-0