1. Ruchir Sharma makes an important point about the norm in the financial markets and central banking today.
If you remember a couple of weeks ago, there was a big stock market correction around the world, and it was incredible to see what the reaction was. Everybody was going on television saying ‘the Fed needs to cut interest rates’. Now the market has been going up for such a long period, it falls for just one day, and all of a sudden it’s like ‘monetary policy is too tight! We need to cut interest rates! Let’s rush out the cavalry!’. That just tells you about what the thought process has become. And I think one of the unfortunate things which has developed is this asymmetry which has crept up in markets, which is that on the upside we have capitalism, but on the downside it’s socialism. The moment there’s too much of a downside, there’s rising clamour for a rescue... easy money is a suite of government habits, and it’s not just about central banks. The habits include the tendency to bail out private sector companies at the slightest hint of trouble, the zealousness to micromanage business cycles, etc... the analogy I use in the book is of pain management in America, which is that for the slightest hint of trouble, you give people opiates, and so the whole system becomes addicted to opiates...
One of the fundamental concepts of capitalism in the market is mean reversion, which is that eventually excess profits should get competed away and you should keep getting churn, which is that new winners emerge and the old players keep dying. But this whole concept has been undermined now because of this extensive government involvement, whether it’s too easy money, bailouts or regulations which benefit the big businesses enormously. I think that’s what’s become a real problem today, that the concept of mean reversion has been distorted.
2. Vivek Kaul points to how a generation of young Indian stock market investors have piled on to create the ongoing stock market boom in the country.
The number of individuals carrying out intraday trading has jumped from 1.5 million in 2018-19 to 6.9 million in 2022-23, with these figures being limited to the top ten stock brokers...On average, 71 out of 100 intraday traders in stocks lose money. It stood at 65 out of 100 in 2018-19... Also, a bulk of those carrying out intraday trading are youngsters. In fact, in 2018-19, only 18% of those carrying out intraday trading were under 30 years of age. In 2022-23, this had jumped to 48%. Which means that a bulk of the newer intraday traders are under 30 years of age... In fact, data released by the National Stock Exchange in early August tells us that in March 2018, the unique registered investors under the age of 30 formed around 22.9% of the total unique registered investors. In July 2024, it stood at 39.9%, implying that nearly two in every five investors in the stock market are under thirty years of age. In fact, the share of those in the 30-39 age group has remained stable, whereas the share of those over 40 has come down.
3. US public debt fact of the day
The US debt to gross domestic product ratio is heading far above 100 per cent, debt servicing costs are already 12 per cent of total government outlays and a third ($9tn) of government bonds must be refinanced in the next year alone.
4. The Government of President Patrice Talon in Benin is following in the footsteps of Paul Kagame in Rwanda and is trying to transform the country's economy by establishing manufacturing facilities.
Benin, a nation of 13mn people, is trying to achieve what few African countries have managed: systematically transform raw materials — not just cotton, but also raw cashew nuts, soya, shea and even human hair for wigs — into finished goods. Until now, like many poor countries, Benin has been trapped in a trading pattern in which it sells cheap raw commodities and imports expensive finished goods... Virtually its entire cotton crop, of about 300,000 tonnes of lint cotton, is exported raw, mostly to Bangladesh, where it is transformed into clothing for the world’s $1.5tn fast-fashion industry. In selling raw cotton, Benin, Africa’s biggest producer, is missing out on more than 90 per cent of the value, according to industry experts... In the Glo-Djigbé industrial park north of Cotonou, Benin’s commercial capital, where 12,000 workers are already employed, the vast air-conditioned integrated textile factory — at 160,000 sq metres equivalent to about 22 football pitches — is filled with rows of whirring machines from Switzerland, Germany and Japan. More than a thousand new recruits are cutting and sewing fabric that is being produced at the rate of 50,000 kilos a day...
According to the World Bank, the percentage of manufacturing value added in GDP for sub-Saharan African states, excluding high-income countries, has fallen from 18 per cent in 1981 to 11 per cent in 2023. Benin, with a GDP per capita of about $1,400 at market prices, is only at 10 per cent... The textile and apparel factory north of Cotonou, which will also produce bed linen, towels and garments such as polo shirts and leggings, is part of a national industrialisation strategy intended to quintuple the country’s manufacturing capacity by 2030. The finance ministry estimates that manufacturing contributes 9.8 per cent to GDP, but says that more than two-thirds of this is artisanal manufacturing. The formal industrial sector, restricted to a few activities such as cotton ginning, contributes only 3 per cent to GDP. If the entire cotton crop were processed into apparel, it would at a stroke add $12bn to Benin’s $17bn economy, say industry experts... To meet Benin’s goal of manufacturing its entire cotton crop at home would mean attracting investments in around 25 new factories... In just 18 months, five factories have been built to transform the country’s entire crop of cashew nuts into packaged goods. Previously they were all sent to Vietnam for processing and packaging, but this change increases their value to Benin’s economy 10-fold, he says.
5. This is such an important but hardly discussed fact amidst the debates on climate change - the main perpetrators of the stock and flow of carbon emissions are those economically well-off, both among nations and people, and unless they dramatically mend their ways there's no meaningful path to address the problem.
Amidst the controversy over Starbucks, a self-declared ESG leader, recruiting a CEO who'll travel to work daily over a 1600 km flight, this report raises some important points.
The richest 1 per cent of humanity is responsible for more carbon emissions than the poorest 66 per cent, according to a 2023 joint investigation by The Guardian, Oxfam, the Stockholm Environment Institute and other experts. “[T]his elite group, made up of 77 million people including billionaires, millionaires and those paid more than $140,000 (£112,500) a year, accounted for 16 per cent of all CO2 emissions in 2019 — enough to cause more than a million excess deaths due to heat,” the investigation revealed.
6. Important point about aid transfers
In the two and a half years since the Russian invasion, Ukraine has received more aid and debt relief than any African country in the past few decades. Unlike most other aid flows, this money has made history. It has allowed Ukraine to fight Russia to a standstill while stabilising its war-battered economy. In the “global south” it rankles that bloodier conflicts in Ethiopia and Sudan barely register in western commentary. European and US support for Ukraine shows in stark relief what is missing with regard to the “global south”: the sense of shared destiny and common purpose, necessary to unlock aid on a world-changing scale.
7. The paddy production costs and externalities
Paddy requires a minimum of 20-25 irrigations compared to less than four irrigations for pulses, oilseeds and millets. A 2023 study by the Central Ground Water Board on water tables reveals that 87 per cent of Punjab’s 153 blocks are categorised as over-exploited, critical, or semi-critical. With GHG emissions of 5 tonnes CO2 eq per hectare, paddy cultivation here is also driving climate change. Rice stubble burning is a major contributor to pollution. The successful implementation of this scheme will have a positive impact on the agriculture sustainability of the states, and the country at large.
8. Fascinating long read about Prospera Inc., a charter city incorporated in Delaware and located in Roatan Island of Honduras in 2017.
In 2021, Xiomara Castro, the wife of the ousted President Zelaya, made repealing the ZEDEs a central promise of her election campaign. The zones became associated with the corruption of Juan Orlando Hernández, the president at the time, whom many Hondurans now revile. Castro won with a clear majority. In 2022, Honduras’s Congress unanimously repealed the law and passed a constitutional reform that would abolish the three existing ZEDEs... There was one problem, however: Congress, mired in competing legislative priorities, failed to ratify the reform. Furthermore, the original ZEDE law guaranteed the companies 50 years of legal stability — no matter what changes were made after a zone was founded. The net result is that Próspera is in a state of legal limbo...But in seeking to sidestep politics, Próspera instead ran straight into them. The endemic corruption in Honduras, the sort of thing Próspera was supposed to combat, was also what enabled its creation and has plagued its pursuit of legitimacy. For Hondurans, the prospect of American capitalists promising prosperity may instead resurrect fears of exploitation and dispossession. Despite Próspera’s fantasy of exit, it uses roads, hospitals and ports built by the municipal government, and it shares an economy and ecosystem with its neighbors in Crawfish Rock. The national government that granted its right to exist, meanwhile, may still take it away.In 2022, the government began stripping Próspera of some of the special privileges it was granted under its predecessors. It halted the company’s tax-exempt customs service, allowing the zone to continue to import goods only if it paid the same duties as the rest of Honduras. Colindres said that the National Banking and Insurance Commission also pressured Honduran banks to shut down accounts of Próspera businesses and bar lenders from financing its projects... At the end of 2022, Honduras Próspera Inc. and its affiliates filed an astronomical $10.775 billion lawsuit against the state in a World Bank tribunal called the International Center for Settlement of Investment Disputes (ICSID). Próspera is thought to have a good chance of prevailing in part, critics say, because the court is biased toward corporations, which can bring suit against nation-states but cannot be sued by them.
9. Another rare earth mineral where China dominates, antimony.
Antimony’s flame and heat resistant properties make it crucial in the production of batteries, especially lead-acid storage batteries and those used in cars. It is also used to make other car parts including brake pads. In recent years, the global shift to green energy has created new demand for antimony. The material is able to improve transparency for the cover glass on solar cells. This super-clear glass helps the performance of solar cells and is also used in the screens of smartphones. More crucially, a long-term shortage of antimony could pose a security risk. It is a critical material in the defence supply chain, and is used in everything from nuclear weapons production to making night vision goggles, ammunition and infrared sensors. The export restrictions have yet to go into effect. But antimony prices have already hit a record high. Spot prices in Europe and China have surpassed $25,000 per tonne, more than double prices at the end of last year.
Rana Faroohar links to commodities price speculation being a contributor to price increases.
As a recent Unctad report laid out, it is “unregulated activity within the commodities sector” that was responsible for the bulk of “speculative price increases and market instability” since the pandemic.
Île-de-Bréhat, a French island off the coast of Brittany with just 400 residents, recently imposed a limit of 4,700 visitors per day... Last year, the ancient site of Acropolis introduced a ticketing system to manage visitor numbers, with a cap of 20,000 per day... Santorini, famous for its whitewashed buildings and sunsets, was one of the most overtouristed destinations in Europe last year, drawing nearly 3.5 million visitors to an island of 15,500. Cruise ships — 800 vessels brought in 1.3 million visitors — were a major source of foot traffic... the mayor, Nikolaos Zorzos, said the island would reinstate a cap of 8,000 passengers per day, down from what would have been 17,000 starting in 2025... The Barcelona city government said it would eliminate short-term rentals by the end of 2028 and announced a tourism tax increase that will go into effect in October... In April, Venice, a city of 50,000 that received 20 million travelers last year, introduced a 5 euro entrance fee (about $5.60) aimed at dissuading daytrippers from visiting at peak times... Last month, the Lisbon City Council announced that it would limit the number of licenses and parking spaces issued to tuk-tuk drivers to help ease congestion... After the pandemic, Amsterdam introduced a series of stringent measures, including a 20 million cap on annual visitors. Over the past year, tourism taxes have been raised; the number of cruise ships, which are now barred from docking in the city center, has been limited; new hotel construction has been outlawed; and vacation rentals have been restricted.
12. Russian crude exports to India surges post the Ukraine-war.
13. Important facts about government wages in India.
In India, the ratio of the average wage of a general government employee to per capita gross domestic product (GDP) is around 4—among the highest in the world. In most of Asia, that ratio lies between 1 (Vietnam, China) and 2.5 (Indonesia, Sri Lanka, the Philippines). Even South Korea, Thailand and Malaysia have a ratio of general government wage to per capita GDP of around 3-4. In the Arab world and Türkiye, that ratio is around 2-3. India’s government, contrary to popular belief, is small relative to its needs but extremely expensive relative to its income. It is also highly interventionist without the personnel or the capability to deliver effectively... The 7th Pay Commission identified the compression ratio as 3.12 for entry-level employees at Grade A compared to Grade C, and 3.74 for the highest paid at Grade A compared to Grade C. The upper end of the civil service has seen its real wages fall well below that of the private sector, whereas at the lower end, salaries (including benefits) can be more secure and are even higher than in the private sector. This has meant that the pay, and as a result the quality, of the inductees at the higher end, with discretionary decision-making authority, has declined, whereas those at the lower end, who make up more than 90 per cent of the government labour force, end up earning a much higher wage than in the private sector. No wonder many people want a government job.
14. Two graphics on India's poor sporting record. One, on Olympic medals.
15. The Economist has a good summary of why Thailand is the poster child for healthcare.
The average Thai can expect to live to 80, much longer than their regional counterpart... Last year a whopping 99.5% of the population of 72m was covered by health insurance. Remarkably, Thailand has achieved this as a developing country: its income per person was roughly $7,000 in 2023... in the 1970s, Thai policymakers focused on rural development. Public health became a priority, so a wave of spending was unleashed on infrastructure. By 1990 all 928 districts had a hospital. Investment in people also helped. In 1972 the government launched a programme that required medical graduates to spend the first three years of their careers in villages. This led to a “golden generation” of doctors, says Eduardo Banzon of the Asian Development Bank.Subsequent Thai governments made health care more affordable. The first big initiative was an insurance scheme targeting the poor. This was followed by state-sponsored schemes for those working in the informal and private sectors. But the big boost came in 2002 when the government rolled out a universal health-coverage programme, which offered free health care to the poor and a nominal 30-baht ($1) fee for others... its coverage has expanded. Today it covers treatments for conditions ranging from hiv to kidney diseases. But an equally important feature of the programme is the focus on preventive health care, says Piya Hanvoravongchai of the National Health Foundation, a non-profit. A network of grassroots workers helps provide health advice.
Particularly striking is the fact that universal health coverage is not only affordable for beneficiaries, but also for the government. The programme is funded through tax revenues, but spending is controlled. Every year district hospitals are provided with a fixed amount of money per patient in their catchment area, regardless of the treatment they get. This “capitation” model ensures efficiency and predictability in funding. Thailand’s spending on health had remained largely steady at around 3-4% of gdp until the pandemic, even as its programmes expanded.
16. Finally, on the beneficial effects of sleep.
One study found that in America an extra hour of sleep a week raised average earnings by 5 per cent, which the authors said was about as much as half an extra year of education. Another found that in Germany half an hour more sleep each week was associated with around 2 per cent higher earnings among full-time workers, with the largest effects for mothers.
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