Weekend reading links

1. Peter Thiel is Exhibit A on several things which are bad with our world. Foremost, he represents one of the totemic examples of elite capture of political power. He's also an exemplar for human cognitive failing in terms of expecting expertise and success in one field to be sufficient to make them successful in another field, especially on public issues. 

And he's backed by libertarian ideologues like Tyler Cowen at Marginal Revolution blog and George Mason University's Mercatus Centre, who has serious conflicts of interests involving Thiel, considers him one of the foremost public intellectuals alive. Sample this fawning introduction,

It’s been my view for years now that Peter Thiel is one of the greatest and most important public intellectuals of our entire time. Throughout the course of history, he will be recognized as such... Peter himself doesn’t need an introduction; he has a best-selling book. His role in PayPal, Facebook, Palantir, many other companies, is well known. Peter is a dynamo. There is no one like Peter.

2. India's Nifty stock index has comfortably outperformed its peers, including developed markets, in dollar returns over the last decade. 

In the 10 years to mid-October this year, Nifty returns stand at 124% against 54.5% for the Dax and 33.8% for China’s Shanghai Composite Index. The UK’s FTSE and Hang Seng generated negative returns of 8.4% and 12.8%, respectively... The Nifty outperformed its peers despite the Indian currency being the worst performer against the dollar in the 10-year period. The rupee depreciated 60% versus the dollar, against the euro’s 23% depreciation and the pound’s 27% decline. The yuan was pegged at 6-7 to a dollar while the Hong Kong dollar moved in a narrow 7.75 -7.87 during the period.

3. The recoveries from the IBC process have been declining

However, it's still superior to the other recovery mechanisms.

For the four years until 2020-21, the recovery from IBC averaged 43.5 per cent, compared to 26.4 per cent for ARCs, 4.5 per cent for debt recovery tribunals and 4.8 per cent for Lok Adalats... By March 2022, the IBC recovery rate had declined compared to previous years. The time taken for resolution had increased to 700 days, as against the envisaged time of 330 days.

4. As European countries grapple with high energy prices every country has some market intervention in place to cushion people. Martin Sandbu examines the most incentive compatible approach in this regard. He points to the need to retain the price signal incentive that can reduce gas consumption, and therefore prefers means-tested cash compensation. He writes about the likely German approach,

It seems an amount of gas — in general, 80 per cent of consumption — will be subsidised so as to cost no more than €120/MWh. A particularly nice feature of the German proposal is that you get to keep the whole rebate that secures the guaranteed price even if you manage to bring consumption down to less than 80 per cent (the full allocation). In theory, you could come out in profit if you reduced your energy use enough as explained here. The market incentive to economise never disappears... The German reference to past consumption is far from ideal, for example, because it favours those who could afford to be profligate with their energy use — a flat allowance based on household characteristics rather than past behaviour would be better.

See this explainer by Sebastian Dullien. 

5. Bank of Japan is the undisputed leader in pioneering new frontiers in monetary policy. The latest example is its unrelenting pursuit of monetary accommodation which was initiated in 2013 by Haruhiko Kuroda and Shinzo Abe. This is despite rising inflation, the Yen plunging to a 32-year low against the dollar, and reversals across the world. And the BoJ's policy has broad consensus within the country and unstinting support from the government of Fumio Kishida. 

There is an important nuance to BoJ's policy,

Japan wants good inflation — the kind created by lively consumer demand. But it has gotten bad inflation — the kind created by a strong dollar and supply shortfalls related to the pandemic and the war in Ukraine — and that is why the bank should stay the course... In Japan, however, there is broad agreement that — at least for now — a rate rise would do more harm than good. The Japanese economy, the world’s third largest, has barely returned to its prepandemic levels, and wages have stagnated despite a labor market so tight that unemployment remained below 3 percent during the pandemic’s worst months... While inflation pressures in the United States have been broadly distributed, in Japan they have primarily hit essentials like food and energy, for which demand is satisfied largely through imports. Inflation in Japan (excluding volatile fresh food prices) has reached 3 percent, the government reported on Friday, the highest since 1991, excluding a brief spike related to a 2014 tax increase. But stripped of food and energy, Japanese prices in September were just 1.8 percent higher over the last year. In the United States, that number was 6.6 percent...

Perhaps the largest contributor, however, is a public grown used to stable prices. Producer prices — a measure of inflation for companies’ goods and services — have climbed nearly 10 percent over the last year. But Japanese companies, unlike their American counterparts, have been reluctant to pass on those additional costs to consumers. That means much of the current inflation pressure is coming from the strong dollar and supply issues affecting imports — factors outside Japan and therefore outside the Bank of Japan’s control. Under those circumstances, bank officials “know full well that driving up interest rates is not going to attenuate those price pressures — it’s just going to push up business costs,” said Bill Mitchell, a professor of economics at the University of Newcastle in Australia.