Home Market What I read this week: Cons of US growth and why cashless...

What I read this week: Cons of US growth and why cashless society is not in your interest


While going through “The seven things of Ethical Collapse” by Jennings, I realised how relevant it in todays time, and what is common in companies which experience financial frauds. When payment companies and banks “nudged” customers towards cashless economy they never asked their choice because it was too profitable an opportunity for them. The next article is on a survey conducted by Indiaspend on preference for political leadership by voters and the answer is worrying. I thought we had moved on to development plank, but most voters prefer political leaders from their own Religion-Caste- Tribe. The last article on what a strong growth for US means for everybody else including India. Spoiler alert .. it is not good for us.

I reiterate that this is only a sampling of some of the best content I read through the week, with a dash of my own thoughts. Until next week…

7 signs of ethical collapse of a company

Organizations often start out making good, ethical decisions, but the line separating right from wrong can be easy to cross, particularly when people are under pressure to achieve results.

When this happens, unethical behaviour and decision-making can become widespread. This can lead to the downfall of everyone involved or can threaten the organization itself.

In 2006, Marianne Jennings published a book called “The Seven Things of Ethical Collapse.” In it, she describes the characteristics that will make you able to identify potential weaknesses of the company and the existence of the threat of ethical collapse. Here they are:

1. Pressure to maintain numbers

2. Fear and silence.

3. Young “uns” and a larger than life CEO

4. A Weak Board

5. Conflicts of interest.

6. Innovation like no other

7. Goodness in some areas atoning for evil in others.

In her studies of ethical failure, she noticed these common failings in a variety of companies that suffered financial frauds. Read More

Cashless society is not in your interest

I have always believed the choice should lie with consumer but the blatant push by banks and payments companies has gone too far. Their Job is to make you believe that it is in your interest too, and they are succeeding in doing that, and they have a buy in of governments and Financial institutions.

In behavioural economics this is referred to us as Nudging. If a powerful institution wants to make people choose a certain thing, the best strategy is to make it difficult to choose the alternative. The true motive is corporate profit.

Payments companies such as Visa and Mastercard want to increase the volume of digital payments services they sell, while banks want to cut costs. The nudge requires two parts. First, they must increase the inconvenience of cash, ATMs and branches. Second, they must vigorously promote the alternative. They seek to make people “learn” that they want digital, and then “choose” it. On top of that government wants to keep a track of all cash payments used in the system in the name of helping the society from illegal activities. The choice dear taxpayer lies with you. Read More

Indians prefer leaders from their own caste-religion-tribe

Most Indians prefer political leaders from their own caste, tribe or religion, according to a 2018 study, indicating how identity politics plays a significant role in state and general elections.

This was especially so among non-literates across caste and religious groups While 55% of all respondents expressed a bias for a political leader from the same caste and religion, these results varied between states. More than two-thirds of those surveyed in Madhya Pradesh revealed a desire for a leader from the same caste (65%) and religion (64%)–highest among all states included in the study; states expressing the lowest such desire were Andhra Pradesh (43% for caste, 38% for religion), and Telangana (48% for caste, 46% for religion).

“The upper castes in general express the lowest trust in leaders from outside their own.”

“There is a distrust of leaders from outside the community across all classes, and all caste-class intersections,” the study, accessed by IndiaSpend, said. I was hoping for voters to give preference for development over caste politics but going into 2019 elections this study does not bode well for Indias future. Read More

Higher growth in US mean problem for everybody else

Macquarie and Russell Napier both say that the financial markets are flashing a warning to the Fed; the global economy cannot withstand its monetary tightening, and will, in the coming months, force a halt to the campaign.

The problem is the Federal Reserve right now is destroying money through its quantitative tightening.

“They will be forced at some point in time over the next 3 to 6 months to stop reducing the size of their balance sheet”. It says that “it is clear from the market, flow is far more significant than the size of overall accommodation”.

With the dollar as world currency, the tightening is global. This means the pressure to cease tightening could easily come from outside the US Russell Napier makes, suggesting the emerging markets, who have piled on debt in recent years, will not be able to withstand the strengthening dollar. The scale of the tightening is best seen by the dollar value of world money supply, which is now down an annualised 14.3% over the last 3 months and -1.7% over the last 6 months.

As Macquarie says however, it is the flow or incremental move that will be important, and with QT now at USD40bn a month, the tightening will likely accelerate. There is also the importance of a tipping point when the destruction of money means the level of risk can no longer be carried, forcing an unwind and a feedback loop. Read More (The writer is a trend watcher, global macro investor and blogger at worldoutofwhack.com. He has over 20 years of experience in financial markets, bonds, equities, gold, and derivatives. He muses about global macro investment opportunities, economics, business, and financial issues)

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