The Political Economy of Demonetising High Value Notes Jayati Ghosh

The Modi government is extremely adept at optics, at policy measures presented in a blaze of publicity that dazzles the public, rather than with the required attention to detail that might ensure their success. The latest announcement of the demonetisation of high value bank notes is of the “shock and awe” variety of measures. While presented as evidence of the government’s supposedly firm resolve to root out black money, in reality it will barely touch the problem of generation of black money, even as it is being implemented in a way that causes immense economic harm to ordinary people and…

Demonetization of Currency Notes Prabhat Patnaik

Narendra Modi went on national television at 8 p.m. on November 8 to announce that from midnight of that very date, i.e. in a mere four hours’ time, 500 and 1000 rupee notes would cease to be legal-tender. The justification advanced for this bizarre move was that it would strike at “black money”. An additional argument was thrown in, to the effect that fake currency notes used by “terrorists” would now cease to be effective; and some particularly enthusiastic supporters of the government even went to the extent of calling it a “surgical strike against terrorism”. I shall come to…

The Hegemony of Finance C. P. Chandrasekhar

Three parallel developments that caught media attention over the last month point to the restoration of the hegemony of Finance Capital in the years since the 2008 crisis. They also reveal the likely consequences of the neoconservative backlash, led by Finance, against post-crisis financial sector reform in the US and other developed countries. One was the decision of the Financial Sector Protection Bureau (FSPB) of the US, an institution created after the 2008 crisis, to arrive at a settlement with Wells Fargo (WF) in an investigation relating to a rather shocking discovery. More than 5000 employees of the bank had,…

An Overburdened Instrument C. P. Chandrasekhar

On August 9, RBI Governor Raghuram Rajan released the last bi-monthly monetary policy statement that would be drafted under his leadership. No changes were made: the benchmark ‘repo’ rate was kept at 6.5 per cent, the cash reserve ratio at 4 per cent and the Statutory Liquidity Ratio at 21.5 per cent. According to the RBI, growth in this fiscal is projected at 7.6 per cent because of the beneficial effects of the good monsoon and the expansionary effects of the implementation of the 7th Pay Commissions recommendations. So growth is not an immediate problem. But, in the view of…

Revised Version of India’s New Model Bilateral Investment Treaty Andrew Cornford

Introduction The initial 2015 draft of a new model Indian bilateral investment treaty contained stringent provisions concerning the definition of investment covered, non-applicability, the obligations of the two parties in the case of claims, and exceptions. [The initial draft was reviewed in SUNS 8094, 17 September and SUNS 8095, 18 September]. These provisions were criticised at the time as likely to hinder foreign direct investment and thus as counterproductive. Revisions of the model in a new draft have introduced greater flexibility under some but not all of these headings and have also included some extensions of rules in the initial…

Money Laundering and Financial Risk Management in Latin America, with Special Reference to Mexico Willy Zapata Sagastume, Juan Carlos Moreno-Brid and Stefanie Garry

This paper reviews the current status of the struggle against money laundering and the financing of terrorism in Latin America and the Caribbean and highlights the importance of its prevention. Money_Laundering (Download the full text in PDF format)

And Now, Price Deflation in India and China? C. P. Chandrasekhar and Jayati Ghosh

Ever since the Global Financial Crisis, advanced economies have been grappling with the spectre of deflation. While this was very clearly a reflection of the downswing in economic activity in the aftermath of the crisis, such price deflation has proved remarkably impervious to the most expansionary monetary policies and liquidity expansion that the world economy has yet seen. This has had adverse consequences in terms of producers’ expectations, which in turn have kept investment low. It has not benefited working people because wages have stayed low or continued to fall. And it has generated tendencies of the debt deflation-type that…

Avinash Persaud’s Reinvention of Financial Regulation Andrew Cornford

The work on financial regulation of governments and intergovernmental organisation rolls on with final outcomes promised but seemingly always just over the horizon. Overviews are few owing no doubt both to the complexity of the agenda’s components and to the difficulty of analysing a target still subject to continuous revision. So the new book of Avinash Persaud (Persaud, 2015), which attempts such an overview, is a particularly welcome event, though his assessment is inevitably provisional. Persaud’s career has spanned executive positions at a number of major banks, teaching and managerial positions in academe, and analysis and proposals concerning the financial…

The Phenomenon of Negative Interest Rates Prabhat Patnaik

One is witnessing the emergence of a strange and unprecedented phenomenon in the advanced capitalist world, namely the charging of negative interest rates. The European Central Bank reduced its deposit rate to -0.1 percent in June 2014, and since then it has reduced this rate further, to-0.2 percent in September 2014, -0.3 percent in December 2015, and to -0.4 percent in March 2016. And apart from the ECB, four other national central banks, those of Switzerland, Japan, Denmark, and Sweden, have also reduced interest rates on certain parts of their deposits to negative levels. In addition the ECB has also…

Banks and the New Asian Tigers C.P. Chandrasekhar

In the immediate aftermath of the 2008 financial crisis and the Great Recession that followed, two countries that were seen as crucial to propping up global economic growth and even ensuring a recovery were China and India. Prior to the crisis these two countries were among those that had registered the highest growth rates in the world economy. Though they were both affected by the 2008 crisis, countercyclical measures adopted by their governments were seen as having returned them to growth. This strengthened the argument that these giants serve as the locomotives for the world economy. Much has changed since…