India Insight

God and the central banker

Subhadip Sircar

Oct 4, 2011 07:44 EDT

Can central bankers play god to the markets? India’s central bank chief Duvvuri Subbarao does not believe so. In doing so, the Reserve Bank of India governor, a physics student, has taken refuge in quantum mechanics.

Subbarao takes the example of Einstein, who could not reconcile to the probabilistic nature of quantum mechanics all through his life.

Einstein famously said – “God does not play dice”. Less known perhaps is the retort of his friend and mentor Niels Bohr who said – “Albert, stop telling God what he can or cannot do”.

Subbarao draws this parallel in arguing that a central bank cannot tell markets what to do. “We have to take market signals as given,” Subbarao said in New York at a recent IMF meeting.

In fact, he went on to say that central bank decisions get more validity if the market endorses them.

Central bankers have always enjoyed an elevated status in the financial world, possibly because of the wide-ranging powers they have enjoyed.  True, the sheen has come off at times.

Liaquat Ahamed referred to this in Lords of Finance when he wrote about central bankers ruling the financial world in the late 1920s — Benjamin Strong Jr of the New York Federal Reserve, Montagu Norman of the Bank of England, Émile Moreau of the Banque de France, and Hjalmar Schacht of the Reichsbank. The Wall Street crash of 1929 and the depression that ensued crippled an entire generation and set the stage for the second World War. The orthodoxy of the central bankers of the day in trying to adhere to the gold standard was a prime cause.

Can India’s love for cricket move stock markets?

It’s widely acknowledged that cricket is something of a religion in India but could it be a market-mover too?

According to research by two Australian economists, India’s performance in one-day cricket matches can have a significant impact on the fortunes of the country’s stock market, the Indian Express reports.

Moreover, the researchers concluded that a win — expected by the millions of die-hard fans — has no impact on market returns but a loss “generates a significant downward movement in the stock market.”

And, if the pressure on the team to carry the hopes of 1.2 billion people on their shoulders every time they take the field wasn’t enough, research reportedly proves that if Sachin Tendulkar, India’s shining star and recently-crowned ICC Player of the Year, is playing when the team loses, the stock market loss is almost 20 percent more.

Now that’s real pressure.

It’s not the first time that academics have claimed a link between economics and sport. In February, a U.S. stock market advisory firm claimed that the elation after Super Bowl weekend invariably results in a stock market bounce.

Indians have always claimed that cricket is more than just a game. Perhaps they’re right.

Surviving as a woman in urban India

As I stood waiting for an auto rickshaw near India Gate in New Delhi last December, three big cars slowed down within a quarter of an hour to check me out. They waited for a few minutes and then drove away without anyone getting out.Many of my friends have experienced much the same thing — especially in India’s capital, a woman walking in the street is too often seen as fair game if a man isn’t with her.When I came home, I checked myself in the mirror to see what it was about my appearance that caught their eye.Bespectacled, with no make-up, dressed in loose fitting jeans and a baggy sweater, I could not figure out why. I asked my husband, “Who do I look like?”He laughed and said, “In Delhi you just have to be a woman, how you look doesn’t matter”.I have been traveling by myself on Delhi’s public transport since my college days. Bus conductors have tried to brush against my fingers while giving me a ticket, and well-dressed, middle-aged men have whispered in my ear to ask for my phone number.These experiences have changed the way I behave on the streets of a city I otherwise love. I avoid looking auto rickshaw drivers in the eye just in case they get the wrong idea and I’m always on my guard against gropers while walking, especially in markets.I avoid driving alone after eight-thirty to avoid male drivers following me, or worse. A media colleague working at one of India’s national TV channels was killed last year while driving by herself late at night. At the time, the chief minister of Delhi, Sheila Dikshit, said the girl should not have been so adventurous as to travel at three in the morning. She later said her remark had been blown out of proportion.A friend told me she complained to police when someone tried to snatch her bag in the market. Instead of investigating the case, the duty officer started questioning her about just what exactly she thought she was doing out at eight-thirty in the evening.When I look back at the families I knew growing up, I can begin to see why some men seem to think the way they do. As an only child, I had a pampered upbringing. But when I was invited to other families for lunch or dinner, if the dining room was too small to fit all the guests, the men would always be served first and given the best portion of the food.If a family could not afford to send all their children to private schools, it was invariably the girls who gave way and went to a government school instead. One of my friends, when he was a teenage boy, could go on dates without having to explain himself. But all hell would break loose if his sister had a similar adventure.When the friend of mine was looking for a suitable husband, her parents introduced her to a lot of people. She told me about one conversation she remembers: the first thing the man asked her was, “do you smoke, do you drink?”When she asked why, he said “you can’t take such girls to your mother.” He himself did enjoy a tipple, and needless to say she didn’t marry him.ALSO READ: Domestic abuse plagues India’s upper crust

Less profit is not loss

The times they are a changin’, and indeed they have. For better or for worse, I am not sure, but what has changed is the way we look at making money from money.

Call it what you may — credit crisis, crisis of confidence, financial tsunami, meltdown — erosion of wealth is never good news. And rattled markets often lead to political turmoil and even shift in power.

So what is happening in the markets, economy, and banks; well, with anything to do with the art and science of making money?

Global markets have turned schizophrenic, banks are not lending and investor over-confidence has turned to no-confidence.

Play safe, stay away from stocks

Madhu Soman

Oct 16, 2008 03:43 EDT

The world of equities seems to have opted for a bargain-basement sale. The BSE Sensex which scaled the dizzy heights of 21,000 points in January 2008 is today testing 10,000 and nobody is sure if the bottom has been found.

“Nowhere in the world are we close to a bottom. Put your money in a safe bank at 9 pct and forget about the stock market for the next two years,” Shankar Sharma, Joint Managing Director of First Global, told Reuters.

If that’s the case, one wonders if the response pattern will change to the Reuters Money question – Where do you see the Sensex by Diwali??

High-profile equities investor Rakesh Jhunjhunwala who had advised Indian investors to keep away from the stock markets as early as November 2007 declined comment on the current situation.

The Indian stock markets have been on a downward spiral for the past 8 months and more and bellwether stocks like Reliance Industries, ICICI, Infosys have taken a serious hammering at the bourses. Some equities analysts do see this as a good opportunity to buy and build a good portfolio for the future.

British economist John Maynard Keynes who said “in the long run, we’re all dead” be damned.

But, there again, some of the “experts” were advising investors to buy at every level of the tumble – 18,000, 16,000, 14,000, 12,000 and now near 10,000.