Thought of the Day 4.0

Misprision of the primacy of processes maintains the couplet of transcendental form and empirical content; this failure realizes the material autopoiesis of representation. If this were the case, and hitherto, it has been the case, representation seeks asylum in the transcendental illusion. Collapse of the binaries never takes shape, even if, material monism is assumed. Representation lives on….

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Empty Geometry : Absolute Nothingness

For the Russian cosmologist, Alex Vilenkin, the multiple universes are separated and disconnected from one another. Each arises out of nothing by a process called quantum tunneling, spontaneously crossing the boundary between existence and non-existence with no expenditure of energy. Universes spring into action with precisely zero total energy, the positive energy of matter being opposite and equal to the negative energy of gravitation. Mass comes free, because energy is zero.

As Alan Guth says,

Putting [general relativity and quantum mechanics] together, one can imagine that the universe started in the total empty geometry – absolute nothingness – and then made a quantum tunneling transition to a nonempty state. Calculations show that a universe created this way would typically be subatomic in size, but that is no problem . . . Vilenkin was able to invoke inflation to enlarge the universe to its current size.

and Vilenkin explains,

[T]he state of “nothing” cannot be identified with absolute nothingness. The tunneling is described by the laws of quantum mechanics, and thus “nothing” should be subject to these laws. The laws of physics must have existed, even though there was no universe.

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Classical theory dictates that the system can break apart only when it is excited with energy beyond the barrier height. In quantum theory there is a certain probability to tunnel out under the barrier.

Helicopter Money Drop, or QE for the People or some other Unconventional Macroeconomic Tool…? Hoping the Government of India isn’t Looking to Buy into and Sell this Rhetoric in Defense of Demonetisation.

Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.

This famous quote from Milton Friedman’s “The Optimum Quantity of Money” is the underlying principle behind what is termed Helicopter Money, where the basic tenet is if the Central Bank wants to raise inflation and output in the economy, that is below par, potential, the most effective tool would be simply to give everyone direct money transfers. In theory, people would see this as a permanent one-off expansion of the amount of money in circulation and would then start to spend more freely, increasing broader economic activity and pushing inflation back up to the central bank’s target. The notion was taken to a different level thanks to Ben Bernanke, former Chairman of FED, when he said,

A broad-based tax cut, for example, accommodated by a programme of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead rebalanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.

The last sentence of the quote obviously draws out the resemblances between the positions held by MF and BB, or helicopter money and quantitative easing, respectively. But, there is a difference that majorly lies in asset swaps for the latter, where the government bond gets exchanged for bank reserves. But, what about QE for the People, a dish dished out by two major ingredients in the form of financial excesses and communist manifesto!!! Thats a nice ring to it, and as Bloomberg talked of it almost a couple of years back, if the central bank were to start sending cheques to each and every household (read citizen), then most of this money would be spent, boosting demand and thus echoing MF. But, the downside would be central banks creating liabilities without corresponding assets thus depleting equity. Well, thats for QE for the People, the mix of financial excesses and communist manifesto. This differentiates with QE, as in the process of QE, no doubt liabilities are created but central banks get assets in the form of securities it buys in return. While this alleviates reserve constraints in the banking sector (one possible reason for them to cut back lending) and lowers government borrowing costs, its transmission to the real economy could at best be indirect and underwhelming. As such, it does not provide much bang for your buck. Direct transfers into people’s accounts, or monetary-financed tax breaks or government spending, would offer one way to increase the effectiveness of the policy by directly influencing aggregate demand rather than hoping for a trickle-down effect from financial markets.

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Assuming Helicopter Money is getting materialized in India. What this in effect brings to the core is a mix of confusion fusion between who enacts the fiscal and who the monetary policies. If the Government of India sends Rs. 15 lac to households, it is termed fiscal policy and of the RBI does the same, then it is termed monetary policy and the macroeconomic mix confusions galore from here on. But, is this QE for the People or Helicopter drop really part of the fiscal policy? It can’t be, unless it starts to be taken notice of the fact that RBI starts carrying out reverse repurchase operations (reverse repo), and plans to expand its multiple fold when it raises its interest rate target in order to put a floor on how far the funds rate could fall. And thats precisely what the RBI undertook in the wake, or rather during the peak of demonetisation. So, here the difference between such drops/QE for the People and QE becomes all the more stark, for if the RBI were to undertake such drops or QE for the People, then it would end up selling securities thus self-driving the rates down, or even reach where it has yet to, ZIRP. Thus, what would happen if the Government does the drops? It’d appear they spend money and sell securities, too. But in that case, people would say the security sales are financing the spending. And in their minds this is the fiscal policy, while the RBI’s helicopter money is monetary policy. If the confusions are still murky, the result is probably due to the fact that it is hybrid in nature, or taxonomically deviant.

It seems much clearer to simply say that (a) the act of creating a deficit—raising the net financial wealth of the non-government sector is fiscal policy, and (b) the act of announcing and then supporting an interest rate target with security sales (or purchases, or interest on reserves), which has no effect on the net financial wealth of the non-government sector is monetary policy. In the case of (a), whether the RBI cuts the cheques, it’s fiscal policy, and with (b), whether the RBI sells securities, it’s monetary policy. In other words, fiscal policy is about managing the net financial assets of the non-government sector relative to the state of the economy, and monetary policy is about managing interest rates (and through it, to the best of its abilities, bank lending and deposit creation) relative to the state of the economy.

So, how does this helicopter drop pan with India’s DBT, Direct Benefit Transfers or getting back the back money to be put into accounts of every Indian? What rhetoric to begin and end with? Let us go back to the words of Raghuram Rajan, when he was the Governor of the RBI. “It is not absolutely clear that throwing the money out of the window, or targeted cheques to beneficiaries… will be politically feasible in many countries, or produce economically the desired effect,” he said because the fiscal spending hasn’t achieved much elevated growth. So, bury the hatchet here, or the government might get this, import this rhetoric to defend its botched-up move on demonetisation. Gear up, figure out.

A Rejoinder to Public Sector Banks Lending, Demonetisation and RBI Norms: an adumbration

The country’s central bank said 405,000 counterfeit 500- and 1,000-rupee notes were found in the banking system in the year that ended in March, representing around $4 million. But researchers at the Indian Statistical Institute estimated this year that the total value of fake bills in circulation, including those that go undetected by banks, may be as high as $60 million. Now, this is a major discrepancy considering the fact that ISI is invested with data collection, and if one were to go extrapolating this discrepancy, the breach is already broken even without the government stepping in to play its complicit part. 

India is a cash-rich economy, in that most of the transactions are effected in hard cash. This predominance leads to huge stacks in store leading to culmination of corrupt-practices that multiply. One way to emaciate the flow is through narrowing the spigot, which is precisely what is expected out of this exercise, though a caveat of it leading a full circle to corruption cannot be belittled as you have wonderfully explained. But, this spigot narrowing could at least streamline the cash flows of abundance in terms of higher-denomination for the time being. But, how would this cause any lowering in corrupt practices? Probably, it might only for the time being with increased liquidity in banks seize up economy by making it difficult for large volumes of transactions, especially in sectors allied with infrastructure. 

How is the gold sector impacted? Negatively to begin with as no one is investing in gold bullion but rather placing orders to capitalise once the system smoothens. The RBI might go slow on open market operations (OMOs) till there is clarity on how much money will flow into bank deposits by December 30. Moreover, this adverse wealth impact will likely hurt higher-end discretionary demand temporarily. At the same time, lower rates should provide a buffer. A combination of two would result in RBI recouping forex reserves if the adverse wealth effect cuts down gold import demand, a teleological consequence.

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Embedding Complexity within Accelerationism: drunken risibility

I am yet to use Deleuzean ideas in activism, but I do use him in building up discursive notes that find difficulty in manifesting and/or realizing within the vocabulary of/on field of activism. That is the reason for my ‘yet to use’ his ideas. There is no doubting the alignment to be effected between theory and practice, but working towards such coming together is what my intention has always been. To be honest, I have always had this difficulty of retaining the alignment, since practice takes precedence sublating theory in the process. Deleuzean ontology is emancipatory for thought from commonsense thinking, but the loss is incurred many a times when practice is seemingly cohesive with commonsense thinking. This aporia should be the launch pad for the project , for the intention is to smash whatever traces of postmodern thinking/thought are still tangible, and replace them with the trajectory of being within ‘capitalism’ as a structure continuously in flux. The complexity is therefore heightened when one stops to take a synchronic snapshot only to find oneself totally overwhelmed by the diachronicity in which embeddedness takes place. And here, if one makes the ontological situatedness of being coplanar with ‘capitalism’, a take on accelerationism should have critical/constructive applications in ‘nouveau’ capitalism. Enough drinking for now!!!

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