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: 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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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 http://www.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
<![CDATA[Re: It is not money but credit that makes the world go round]]> Comment relating to It is not money but credit that makes the world go round (posted Wed, 09 Nov 2016 11:24:00 +0530)
Mitul SJ wrote on Wed, 09 Nov 2016 17:14

Prof. quite a timely write-up!!!

To add more I guess laborers and other folks who have cash and need to get things or pay will have to line up in quite inconvenient way. What the creditors will take undue advantage no one knows of people in coming time??? Also Govt wants to imbibe or instill cashless mode of payment for most of us, in a sense, as a habit, with the move made.

About the credit as you mentioned, Telecom carriers and other companies have already started sending messages to install their e-payment systems/apps, guess we all can see where things are heading or will be. Poor citizens like farmers, laborers are stuck in the mess unless things are sorted out for them in smooth manner. As only 12% of money which is circulated in the system (excl 500 and 1000 notes)

Banks would have liquidity for sure, for an ordinary citizen they will line up day in day out for the deposits. As well-to-do people they have credit cards, debit cards, EFTs at their quick disposal. They won't be that much affected.

Also to further add for the credit argument it also affects pricing of commodities and other regular items. Also some say ease of inflation will be there with black economy fading away. Plus it was the black economy which somewhat helped India during the crisis else we all would have ended up like Western countries. So I agree with what you wrote: "that this too runs more on credit than on cash." Perhaps that might have set the ball somewhat rolling back then. As currently people would be running out of high denominated cash notes which counts to 88% buying things would be cumbersome in times ahead esp large sum ones. And if people have cash crunch then buying on credit increases prices (for the money inflow foregone today for future basic TVM concept) so inflation cooling down that's questionable.

Grocery stores selling FMCG, Durables and other products...how people will co-operate??? they only know. Perhaps there is more to see beyond credit. Faith in people & in system and how people behave and how they all interact in general.

Today itself, a taxi driver would not accept high denominated cash note (which still can be deposited by him given the time frame) from passengers how can the credit puzzle be answered in that case for the ride service taken & suppose you pay that person in other denominations the credibility shoots up or is normal? That's kind of something weird if given a thought.. As people's behavior cannot be ascertained just like that or from looking into the history on the basis credibility or otherwise, even though you might be person who maintains a good credit to others.

Thanks for the article and the links!!!

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Wed, 09 Nov 2016 17:14:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit.discuss#0
<![CDATA[Re: Re: It is not money but credit that makes the world go round]]> Comment relating to It is not money but credit that makes the world go round (posted Wed, 09 Nov 2016 11:24:00 +0530)
Sangeeta wrote on Tue, 15 Nov 2016 14:16

Sir, yours appears a very politically correct stand. Expected an in-dept analysis (esepcially information asymmetry, role of rumours etc.) of how the demonetisation might affect the economy in the short, medium and long term.

Safely assuming that you will write another post on the matter in near future, while I think this post was a reaction, I am looking forward to your response.

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Tue, 15 Nov 2016 14:16:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit.discuss#0-0
<![CDATA[Re: It is not money but credit that makes the world go round]]> Comment relating to It is not money but credit that makes the world go round (posted Wed, 09 Nov 2016 11:24:00 +0530)
Pratik Maru wrote on Thu, 17 Nov 2016 20:14

Hello Sir,

I got redirected to your post from Twitter, and honestly I was thinking that I would be able to read some real insightful analysis among all this noise.

I couldn't help but notice that article is too short on depth and has conveniently ignored various other aspects. One thing, which I found completely missing is details/analysis on credit cycle. I will try to explain my point below with the help of an example.

You are certainly right, when you say lot of day to day trade happens over credit, but what I think you have completely ignored is that credit keeps on rolling, only if you are in capacity to pay earlier dues. No small shopkeeper or big raw material supplier will provide you goods on credit, if you are in no position to pay earlier debts.

So for example, if I am suppose to buy a packet of detergent from nearby grocery store worth 100 INR, this guy won't be credit of new 100, if I am not clearing my old debt. Since this grocery store owner won't have any cash in hand, he won't be able to pay to manufacturer of detergent, and in turn manufacturer won't be able to pay to raw material supplier, and hence put brakes to complete business/consumption cycle.

Would like to know your view points on this.

Regards Pratik

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Thu, 17 Nov 2016 20:14:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit.discuss#1
<![CDATA[Money is the essential lifeblood]]> Comment relating to It is not money but credit that makes the world go round (posted Wed, 09 Nov 2016 11:24:00 +0530)
Rajat Sud wrote on Sat, 19 Nov 2016 11:11

That explains why the pinch is not being felt immediately. Let me use an analogy - If black money is a cancer then Dr. Modi has prescribed a complete transfusion of blood (leaving some 13%). As of 9th Nov all the blood has been taken out of the Indian Economy and by all counts new blood is flowing in at the rate of 15-20% per month. There are some reports of the cancer ridden cells being thrown in drains. The cancer has found its way into Jan Dhan A/cs or cornered all the remaining 13% as it cannot survive on the remaining 87%.

Several parts of the body have shut down as a result of lack of blood supply. Even where the new blood has come it is not effective as it needs the remaining 17% to function (Rs. 2000 notes are unable to transact if there are not 100s or 500s).

Your post explains why a lot of parts are still functioning. Let me call this inertial blood. Credit needs settlement and trust depletes when there is no closure. Normal credit cycle is 30 days, can this be stretched perhaps these circumstances could pull this to 60 or 90 days.

People familiar with the money situation claim that 1/5th of the new supply has been put in place and it will take 5 months big notes to be replaced. The question is if the small notes are sucked out would the system revive? Will through on virtual blood analogy based on comments to this post.

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Sat, 19 Nov 2016 11:11:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/cash-n-credit.discuss#1-0
<![CDATA[Re: How to make the banks paranoid about security?]]> Comment relating to How to make the banks paranoid about security? (posted Sun, 30 Oct 2016 17:46:00 +0530)
Pratik Datta wrote on Tue, 01 Nov 2016 00:15

Interesting suggestion! So section 100 of IFC says that monetary penalty could be 3 times the loss or 3 times the gain made, which ever is higher. For negligence, its 1.5 times.

But "benefit" has to be from that particular act. It will not cover "one year’s cyclically adjusted profits of the entire banking system". Wondering how to draft it into the law?

And if it is drafted like that, may be the law's constitutionality itself could be challenged saying that it has no nexus with the violation committed and therefore is arbitrary, a breach of Article 14 of the Constitution.

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Tue, 01 Nov 2016 00:15:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/banks-paranoia.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/banks-paranoia.discuss#0
<![CDATA[Re: SEBI's Social-Media Regulatory Overreach]]> Comment relating to SEBI's Social-Media Regulatory Overreach (posted Mon, 10 Oct 2016 13:06:00 +0530)
Mitul SJ wrote on Wed, 12 Oct 2016 15:21

Thanks for the article prof.!

Also in an online media where are i found this http://www.bloombergquint.com/markets/2016/10/12/how-to-value-the-bombay-stock-exchange

even a media organization is coming with "valuation" which is pricing actually for their readers. IB jobs are definitely going to be affected! just adding to what you wrote.

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Wed, 12 Oct 2016 15:21:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/sebi-social-media-overreach.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/sebi-social-media-overreach.discuss#0
<![CDATA[Re: Re: SEBI's Social-Media Regulatory Overreach]]> Comment relating to SEBI's Social-Media Regulatory Overreach (posted Mon, 10 Oct 2016 13:06:00 +0530)
Ajay Shah wrote on Sat, 15 Oct 2016 12:57

Bhargavi Zaveri and I wrote in continuation of this: https://ajayshahblog.blogspot.in/2016/10/sebis-proposal-to-regulate-social-media.html

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Sat, 15 Oct 2016 12:57:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/sebi-social-media-overreach.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/sebi-social-media-overreach.discuss#0-0
<![CDATA[Re: Re: Re: SEBI's Social-Media Regulatory Overreach]]> Comment relating to SEBI's Social-Media Regulatory Overreach (posted Mon, 10 Oct 2016 13:06:00 +0530)
Prof. Jayanth R Varma wrote on Tue, 18 Oct 2016 11:04

Yes, I read your blog post. I am more paranoid than you are about regulatory overreach, but I am not a lawyer.

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Tue, 18 Oct 2016 11:04:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/sebi-social-media-overreach.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/sebi-social-media-overreach.discuss#0-0-0
<![CDATA[Re: Are bonds the new equities, and equities the new bonds?]]> Comment relating to Are bonds the new equities, and equities the new bonds? (posted Fri, 12 Aug 2016 17:15:00 +0530)
Ramesh Chander wrote on Wed, 17 Aug 2016 15:10

Un-conventional, indeed. Its time to rewrite the theory.

Higher sovereign leverages, excess liquidity, and negative interest rates are the cues inspiring and inducing academicians of Professor J R Verma's repute to test and reformulate the existing theory.

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Wed, 17 Aug 2016 15:10:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/loss-aversion-negative-rates-redux.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/loss-aversion-negative-rates-redux.discuss#0
<![CDATA[Re: Are bonds the new equities, and equities the new bonds?]]> Comment relating to Are bonds the new equities, and equities the new bonds? (posted Fri, 12 Aug 2016 17:15:00 +0530)
KR wrote on Fri, 19 Aug 2016 12:15

Prof,

Check out how pension funds are piling on additional risk to hit their stated returns, rather than curb expectations. Wonderful WSJ article.

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Fri, 19 Aug 2016 12:15:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/loss-aversion-negative-rates-redux.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/loss-aversion-negative-rates-redux.discuss#1
<![CDATA[Re: 200 pages on why they let Lehman fail]]> Comment relating to 200 pages on why they let Lehman fail (posted Wed, 27 Jul 2016 21:13:00 +0530)
M H Trivedi wrote on Wed, 17 Aug 2016 23:54

The effects of government shying away from taking tough stance is evident from Iceland's case (Landsbanki, Kaupthing, Glitnir ). So irrespective of legal dilemma fed did the right thing. Not always can the banks get away with the explanation: it's not solvency problem but liquidity problem. Moreover, it would have set a wrong precedent for " if you'd give us the money to tide us over, we'll survive this little hiccup."

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Wed, 17 Aug 2016 23:54:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/why-they-let-Lehman-fail.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/why-they-let-Lehman-fail.discuss#0
<![CDATA[Re: Is US Treasury becoming a hot money playground?]]> Comment relating to Is US Treasury becoming a hot money playground? (posted Sat, 02 Jul 2016 19:39:00 +0530)
Pradeep Hegde wrote on Thu, 07 Jul 2016 19:29

Great insight. Thank you Sir.

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Thu, 07 Jul 2016 19:29:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/UST-private-v-official.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/UST-private-v-official.discuss#0
<![CDATA[Re: Would the Swiss someday demonitize the 1000 franc note?]]> Comment relating to Would the Swiss someday demonitize the 1000 franc note? (posted Wed, 15 Jun 2016 15:47:00 +0530)
Gopal Balakrishn wrote on Wed, 15 Jun 2016 16:16

Are retail banks in Switzerland currently required by law to tender notes of high denominations if requested? I am curious to understand how the CHF 1000 note got so widely distributed to begin with

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Wed, 15 Jun 2016 16:16:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/1000CHF.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/1000CHF.discuss#0
<![CDATA[Re: Re: Would the Swiss someday demonitize the 1000 franc note?]]> Comment relating to Would the Swiss someday demonitize the 1000 franc note? (posted Wed, 15 Jun 2016 15:47:00 +0530)
Prof. Jayanth R Varma wrote on Thu, 16 Jun 2016 12:02

I am not aware of any such law, but I am confident that a wealthy client would be able to find a bank that would provide this service.

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Thu, 16 Jun 2016 12:02:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/1000CHF.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2016-17/1000CHF.discuss#0-0
<![CDATA[Re: Regulatory priority: punish, deter or protect?]]> Comment relating to Regulatory priority: punish, deter or protect? (posted Mon, 28 Mar 2016 19:01:00 +0530)
Pratik Datta wrote on Tue, 29 Mar 2016 19:35

Sir, without going into whether nationalisation is the appropriate remedy or not in this case, I would argue that SEBI does not have the legal power to do what you are suggesting.

First, section 11B can be used to debar a person from accessing the capital markets. But taking over a company by SEBI is clearly not within the scope of this section. If you see nationalisation statutes, they are clearly worded to empower the appropriate authority to take over enterprises. The wording of section 11B is not the same. Therefore, any such attempted takeover would be struck down as ultra vires (beyond the scope of) the SEBI Act.

Second, s. 242 powers can be used by the Tribunal only after an application under s. 241 has been filed. A s. 241 application can be filed only by a member of the company. SEBI is not a "member" of Sharepo.

Therefore, your suggestion is legally untenable.

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Tue, 29 Mar 2016 19:35:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss#0
<![CDATA[Re: Re: Regulatory priority: punish, deter or protect?]]> Comment relating to Regulatory priority: punish, deter or protect? (posted Mon, 28 Mar 2016 19:01:00 +0530)
Prof. Jayanth R Varma wrote on Wed, 30 Mar 2016 11:08

1. The government can make an application under S241 of Co Act 2013.

2. Changing management is not the same as nationalization. 11B can certainly be used to debar existing management from holding office in any regulated entity; Sharepro would then need to find new management. Putting a SEBI nominee in charge of management is harder, but one should not underestimate the regulator's powers to do such things even without formal powers. My favourite example is what the Douglas SEC did to the NYSE in the late 1930 when the New Deal was already in full retreat.

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Wed, 30 Mar 2016 11:08:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss#0-0
<![CDATA[Re: Re: Re: Regulatory priority: punish, deter or protect?]]> Comment relating to Regulatory priority: punish, deter or protect? (posted Mon, 28 Mar 2016 19:01:00 +0530)
Pratik Datta wrote on Wed, 30 Mar 2016 15:40

1. Your blog reads: "the key _regulatory_ priority must be to take operational control of Sharepro and thereby protect the interests of investors who might have been harmed." I thought by "regulatory" you meant SEBI (the regulator) should take over operational control - not the Government (Ministry of Finance). Therefore, I argued why SEBI can't take over operational control.

2. Sharepro finding new management is not the same as regulator or government taking over operational control in the formal sense. This is very different from your original suggestion as I quoted earlier. But this now seems more reasonable and practical.

3. Thanks for sharing the Douglas SEC anecdote. Will look that up. I am guessing you are referring to the McKesson & Robbins case.

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Wed, 30 Mar 2016 15:40:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss#0-0-0
<![CDATA[Re: Re: Re: Re: Regulatory priority: punish, deter or protect?]]> Comment relating to Regulatory priority: punish, deter or protect? (posted Mon, 28 Mar 2016 19:01:00 +0530)
Prof. Jayanth R Varma wrote on Thu, 31 Mar 2016 17:00

1. First, government for S241 is not MOF but MCA which is a regulator (of all companies). Second, regulators can and do take help from arms of the government (police for example) in pursuit of regulatory priorities. Third, the last sentence of my post was in fact a call for government action.

2. Once regulators have forced out existing management, it is hard to imagine any new management willing to step forward without the regulators' blessing. In practice, regulators would have operational control.

Another (more recent than Douglas) episode is of Salomon Brothers treasury auction scandal in the early 1990s. When the regulators threatened cancellation of Salomon's primary dealer licence, Warren Buffet took over as Chairman and did whatever the regulators wanted.

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Thu, 31 Mar 2016 17:00:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss#0-0-0-0
<![CDATA[Re: Re: Re: Re: Re: Regulatory priority: punish, deter or protect?]]> Comment relating to Regulatory priority: punish, deter or protect? (posted Mon, 28 Mar 2016 19:01:00 +0530)
wrote on Thu, 31 Mar 2016 21:55

1. You are right on MCA. My mistake.

2. Still I would request you to be clear on usage of terms like regulator and government. They are very different entities when you are talking policy.

2. Using s. 11B for replacing existing management is an interesting proposition. Can't recollect any precedent. Usually it is used to bar access to capital markets.

3. Thanks again for sharing this scandal story. Will look it up. Financial laws seem to have been shaped more by scandals and scams than by rational policy thinking. I have always felt the lack of any one single book or article that explains how different scams in the Indian financial market have shaped Indian laws. Eg. The SEBI Amendment Act of 1995, the FMC-SEBI merger etc. May be you should take sometime out and write on this. It would help us lawyers understand the laws better! :-)

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Thu, 31 Mar 2016 21:55:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/ensure-market-integrity.discuss#0-0-0-0-0
<![CDATA[Re: Random Justice]]> Comment relating to Random Justice (posted Fri, 18 Mar 2016 14:50:00 +0530)
Gopal Balakrishnan wrote on Mon, 21 Mar 2016 00:27

Would this also mean that the judges sould be chosen in a random manner fro all eligible candidates like sortition democracy?

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Mon, 21 Mar 2016 00:27:00 +0530 http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/random-justice.discuss http://www.iima.ac.in/~jrvarma/blog/index.cgi/Y2015-16/random-justice.discuss#0