Tuesday, March 31, 2015

How Inflation Routinely Kills People

The first way is by making many people poor enough that their life expectancy falls because of degraded living conditions. Besides poor people have a lot less access to the kind of medical options that richer people have. For example because he had a Gulfstream V Steve Jobs was able to seek a liver over a much bigger distance -- wherever his plane could take him in 6 hours -- than someone without a jet.

Inflation is also a key driver of inequality. Especially that we now know that the inflation of the poor is about 3% higher than the headline number. Inequality will bring people to the streets -- like in the Arab Spring and elsewhere -- and clashes may cause loss of lives.

Of course if inflation is very high things can get very ugly. And that too on a horrendous scale. Like in 1930s Germany where hyperinflation helped put a little guy with a moustache in power. And the world eventually went to war: between 50 and 85 million people died in WWII.

No wonder then that Central Banks have been setting inflation targets for more than 25 years now -- roughly the period of time Lutchmeenaraidoo was not Finance Minister. With the blessings of their governments. As inflation is a major reason why politicians lose power. In fact we owe it to Governor Basant Roi for one of the best descriptions of inflation so far -- he likened it to radioactivity. Which makes it all the more interesting to check his inflation record. And compare it to Manou Bheenick's.

Monday, March 23, 2015

First Vishnu Budget in 25 Years Now Available

Given that it was supposed to be a 75-minute budget I listened to most of it. It's a lot more pleasant than those that were presented between 2005 and 2010. There are a number of interesting things like gaming houses leaving city centres and the ban of plastic bags. Which has been in force for over nine months in Rodrigues. And they have increased their lead having recently announced the sorting of garbage like some countries do. Promising to implement the report which looked at making banking practices fairer is also not a bad idea.

Of course it's not a no-tax budget. Government has already quietly depreciated our rupee -- 12.8% as of today's speech -- and kept petrol prices higher than they ought to have been. The steady depreciation will make sure that Mauritius doesn't benefit from the collapse in oil prices. Again.

There are also other problems with this budget. Like inequality is likely to persist. More on this later.

What did you think?

LKY Dead At 91 As Singapore Turns 50

Thursday, March 19, 2015

How To Build A Plutocracy in 2 Steps

  1. Reduce top tax rates -- rates paid by the richer segments of our population -- to get more political contributions. This may require more and larger safes to stash the cash away. It's even better to flatten the tax structure. This will provide even more enticing incentives for useful idiots to make the wishes of their financial masters come true. But will require even bigger safes.

  2. Screw up our excellent constitution with an electoral galimatia to include party lists so that the link between voters and MPs is severed. Party lists will also allow political donors to enter parliament and cabinet -- to enact their own dangerous laws -- without voters really choosing them.
Top tax rates were reduced in 2006 before the tax structure was flattened. And then a wicked electoral reform was proposed with the blessing of Navin Ramgoolam at the start of 2012. But that was massively rejected last December. Now Mr. Lutchmeenaraidoo has an opportunity to strengthen our democracy on Monday.

Wednesday, March 18, 2015

Vishnu is Lucky, Again

To be Finance Minister these days. After almost a quarter of a century. Because that's after almost 10 years of the worst economic management -- Paglanomics -- our country has seen and started by Rama Sithanen with the help of Bretton Woods Ali. And of course with the blessing of Andrew Scott and one crypto-socialist, Navin Ramgoolam. So improving things should not be that difficult. For example increasing pensions has helped compensate the lack of reasonable progress that the weakest groups of our fellow countrypersons have registered with the toxic bean-counters. And there are many more low-hanging fruits to pick.

But monetary policy was definitely not one of them. So it was quite surprising that Manou Bheenick was asked to leave. And replaced by depreciation-obsessed Basant Roi. Who unsurprisingly since returning to the BoM less than 80 days ago has presided over a double-digit depreciation -- 12% as of today -- of our national currency against the USD. After our central bank had issued a communique on January 30 informing the nation that there would be no MPC meeting in February because Lutchmeenraidoo's budget was due March 16. Or 45 days later.

Hopefully the Minister of Finance who keeps on insisting that he will deliver a 'second miracle' understands how to assess the quality of economic policies. Computing our real GDP growth in USD for the current quarter might be quite enlightening.

Monday, March 9, 2015

Chinese Economy World's Largest, For 50 Years

After which it could be India's turn to grab the top spot. If we extrapolate the assumptions used in one article which appeared some four years ago. Of course forecasting over such long periods is usually fraught with errors. But that doesn't look too outlandish when we remember the size of the economy of 1960 China. Besides India had the world's largest economy for 1,700 of the past 2,000 years. And Lonely Planet reminds us that Pataliputra with a circumference of 33.8km was spaceship Earth's biggest city of the Mauryan empire. 2,500 years ago.

One bet looks safer than others. It's going to be Chindia for a long time. Which makes it all the more necessary for the two giants to sort out the problems on their 2,100-mile border.

Sunday, March 1, 2015

Lawyers Unhappy DPP Attached To AG's Office

As per a cabinet decision on Friday. Unhappy enough that an urgent meeting of the Bar Council has been called for Monday 16h. Essentially some members of the legal profession don't think that such a major change is a step forward because the framers of our excellent Constitution had thought it through and recommended that the process of prosecution be isolated from political influences. For obvious reasons. Like it doesn't make sense that the AG and the DPP share staff and budget. Besides healthy debate is essential when the spirit of our Constitution is challenged.

Incidentally, one of the framers of the supreme law of our land was none other than Stanley de Smith who is remembered as a scholar and legal writer of exceptional quality. So I guess it wasn't a big surprise when the beautiful people of Mauritius chose our current set up over the constitutional equivalent of a badia mal frir.