There is no such thing as randomness

2012-01-08T01:27:00.001-08:00

Some people say most of the people are fooled by randomness.However, I do not agree to that, because there is no randomness in world. Thereis only information insufficiency. Let me explain this with one example.

This one has been taken from the book, “fooled by randomness”.In it he explains the world’s random events with Russian roulette. He says we donot know where the bullet is, so survival from that game is just one randomevent. However, where the bullet is can be known if we know where the bullet isplaced in its first place, how many times we rotated the bullet chamber (I knowit is very difficult to find). The initial position of bullet can be known byjust watching, no. of rotations can be known by torque applied, moment ofinertia of chamber, friction. The force (torque/radius) can also be known fromtype of person, his muscle strength, his mood at that time, et cetera. The moodcan be known from previous moments in his life, and so on……

So we found that the outcome of this event is decided by somany events that happened before this event. This can also be described with anartificial intelligence network, where one node’s output is decided by largenumber of inflows to the node from large number of nodes, having differentweightages (here weight means different events have different level of influenceson outcome. For example, the output shown by a calculator has high weightage oninputs, function we used, but has low weightage on programming of calculator, workingcondition of calculator, power levels of battery). This does not mean the leastweightage inputs do not influence output. The weightages are nothing butprobabilities.

So there is nothing that is random in nature. Every event’soutcome is decided by infinite events occurred before it. The outcome from thisnode will also affect large number of events. The initial node to network is BigBang.

The problem is human’s mind cannot find all the input nodesfrom which this node is connected, and in most cases it also cannot predict theweights. So we call the output of some node whose input nodes are high asrandom.

Indian Economy, Rupee depreciation

2012-01-07T21:20:00.000-08:00

Future of rupee:

If RBI takes some action like decreasing interest rates (if inflation comes down to 5-6% hopefully in 3-4 months.) then there is chance that exchange rate may come to original position because of increase in inflows. Otherwise, i.e. if RBI cannot control inflation, then it cannot decrease interest rate, and rupee continuous to be in depreciating position.

If RBI cannot change monetary policy as explained above, the Govt. can try changing fiscal or trade policy. The Govt. can loosen trade policy in two ways. It can incentivize exports by removing some regulations on exports or impose restrictions on imports and decrease it. Any action to increase exports would not have any effect because there are already enough margins now available but exports are not increasing. Cut in imports would further complex this situation, since other countries may not cooperate to this decision.

The major import India has is oil. The price of oil also is very volatile. Any increase in oil in first quarter of 2012 would make oil costlier, and raise core inflation. This further complexes the situation. If India tries to decrease oil consumption by increasing prices, there will be social unrest, which diverts the Govt. concentration towards inflation, making policy implementation longer. This decreases investment coming to India in different types (equity, ECBs etc.). All these effects are negative to rupee appreciation.

The other thing to control is fiscal policy (capital flows), and other things like ECBs, NRI money transfers etc. any increase in inflows would appreciate rupee. NRI transfers are out of control of RBI. ECBs are not that much attractive to both lenders, borrowers in this situation because, lenders will not lend to Indian companies because of poor economic conditions, borrowers will not take loans because, they will become costlier if rupee further depreciates.

The capital flows in terms of investment would increase only if economic factors are improved in India. The main factors are stable govt. (Anna Hajare, 3g scam etc. are making country unrest). Fast policy making, implementation, RBI’s decrease in interest rate, controlled inflation etc.

Since there is high chance of rupee at its current state or further depreciate, the Indian industry has high impact for exchange rate, the growth rate may also decline for first quarter of 2012.

Effects:

Very bad times for automobile industry since most of their parts are imported ones. Their sales also fall because, of high interest rate, car loans will become expensive. Petrol rates will also makes a large hit to this industry.

Agriculture will also gets affected by this because some of chemicals used are exports, which will become costlier. The agricultural loans will also become costlier.

The Govt. debt out of the country will decreases nominally, this causes the foreign investors to sell Indian G-sec’s massively, pushing real interest rate higher.

Services industry in India is mostly export based. Therefore, this is the industry, which will enjoy a bit these times. The decrease in rupee will make the exports cheaper (mostly IT , banking industries) and make them wealthier.

Sucks my English, really

There is no such thing as randomness

Indian Economy, Rupee depreciation