My personal encounter with Raghuram Rajan

Yes, it’s a fascinating story. I will be telling it at the end of this post, saving the best for last. Till then, I beg you to resist the temptation to scroll down. Instead let us consider this:

Do monkeys understand physics? Let us do an experiment. Take 9 bananas and a permanent marker. On the first banana write

E=mc^2

On the second, write E=2mc^2, on the third write E=3mc^2  and so on until you write E=9mc^2 on the ninth banana.

Now shuffle these 9 bananas and throw them to a monkey. Ask the monkey to pick out the correct formula. See which banana the monkey picks first.

Here is a bold prediction of mine: approximately 11% of all monkeys know Einstein’s famous formula. Go check it.

Anyways, let us come back to the case of the great Raghuram Rajan, immortalized by his famous prediction:

In the last 27 years, the world has seen three great economic crises: the S&L crisis of the early 90s, the dotcom bust and then the 2008 crisis. This means about one crisis every 9 years. But please note that I am by no means saying that randomly picking one year out of any 9 years gives a reasonable chance of picking a correct recession year….

I am only saying that perhaps we should also consider whether this year’s winner of Euromillions jackpot lottery could be our next RBI governor. After all, the jackpot winner managed to pick the correct winning ticket out of literally lakhs of ticket numbers, whereas the great Raghuram Rajan had a much better 1 in 9 chance of succeeding.

The jackpot winner’s feat seems even greater when I looked up Rajan’s famous paper : “Has financial development made the world riskier”?

https://www.gwu.edu/~gefri/PDF/Rajan%20Fin%20Devt%20and%20Risk.pdf

If you consider the fact that Rajan didn’t actually predict the year of the recession, just that one would happen eventually, you begin to see just how amazing the Euromillions jackpot winner’s predictions are… Let me make another bold prediction about those monkeys and the 9 bananas. EVENTUALLY,  nearly 100% of monkeys will pick the correct formula E=mc^2 . 

Raghuram Rajan ended his historic paper by making three brilliant recommendations:

Untitled

Market participants have a success rate <100% ? Amazing! Rajan’s presentation must have been quite a sensation considering that everyone else at the meeting was proposing “Dumb regulation” instead of “Smart regulation” and was batting heavily in favor of lesser innovation….

No no, I am in no way saying that we should ask ourselves if we are getting carried away because some person may or may not have hinted at a  crisis coming at an unknown point in the future and presented platitudes such as “more innovation” to get out of it…

By the way, you guys should check out my latest plan to cure cancer through “more innovation”… I am awesome that way, I know…

Also, I am by no means saying that we should try to have a meaningful dialogue about the tenure of Raghuram Rajan as RBI Governor and try to compare and contrast his tenure with those of his predecessors while debating whether he deserves a job renewal.

I am by no means saying that instead of focusing on the success of one prediction, we should try to look at the entire  track record of predictions and look at the success rate. Predictions are magical thing actually, because people tend to forgive and forget when bad things are predicted but don’t come true. However, when bad stuff is predicted and sh*t actually happens, we tend to remember. As such, the optimal strategy is to keep predicting that bad stuff is gonna happen, and since bad stuff always happens eventually, you can eventually always be a hero. In between, people will tend to forget all the times when your doomsday predictions didn’t come true. Better still, they might come to respect you even more as a well wisher who was just sounding a note of caution.

Try this, from Sept 2013:

Untitled.png

(qz.com/126875/the-economist-who-predicted-the-financial-crisis-just-sounded-another-alarm-it-would-be-wise-to-listen-this-time/)

Or this, about 11 months after the Sept, 2013 prediction:

Untitled

(http://www.thehindu.com/business/Economy/raghuram-rajan-warns-of-another-global-financial-crisis/article6292494.ece)

Or this, a further  approx 11 months after the Aug 2014 prediction:

Untitled

(http://www.ibtimes.co.uk/raghuram-rajan-global-economy-may-be-heading-towards-another-great-depression-1508219)

Since its already June 2016, going by his past schedule, it seems the great man is a little behind on his announcement for this year. Here’s another prediction: any day now, Mr. Rajan will be announcing a warning that a Great Depression is coming.

Ok, I promised you that I had saved the best for last. Here’s my personal encounter with Raghuram Rajan. In early 2016, I was on a hospital bed suffering from the last stages of cancer, likely to die within 3 days. Doctors gave up all hope and asked my family to pray …to Raghuram Rajan of course. Raghuram Rajan appeared in a dream, looked directly into my eyes and said : “There’s going to be a financial crisis”. The thrill of that moment healed me instantly. I got up from my bed, walked out of the hospital a healthy recovered man… Thanks, Raghuram…!

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17 thoughts on “My personal encounter with Raghuram Rajan

  1. CW you nailed maan…..’prediction man’!!

    Perfectly analyzed ….he even healed you in your dream with his prediction!!LOL LOL LOL!

    The “Davos crowd” outside the country and its supporters within India have gone nuts,and are predicting doomsday for India if this guys term is not extended!!

    Suddenly the support generated for this guy by MSM outside the country and within the country is unbelievable!

    Jargons used to reinstate this guy…global credibility,reputation of RBI,will severely hamper inflow of funds,Exodus of foreign investors,Billions will flow out of India,and on on….

    Liked by 2 people

  2. I think he is a mole planted by Congress to destabilize the economy once it begins to get traction as expected under Modi. Swami has rightfully ring the bell of caution.

    Like

  3. I am really at a loss as to why this is even a media issue. Every government has the choice to pick the RBI governor it wants. It does not take rocket science to understand that the RBI, though an independent body, can drive economic growth if its policies are aligned with the economic policies of the center. The Modi government may decide to go with somebody else simply because that person might be more aligned to how his government thinks – it does not necessarily mean a referendum or judgement on Rajan’s tenure. Rajan has actually done a decent job and I would hardly grudge him if he is re-elected – but making it sound as if without him we are doomed is downright silly. And the reason he has international backing is partly thanks to our “secular” brigade that has tentacles in international media and partly because he is a professor at one of America’s most prestigious b-schools.

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    1. Absolutely. I myself wouldn’t really mind if he gets a second term. I am only chafing at the idea that he is being projected as the only man who stands between India and doomsday. Appointing RBI Governor is a government prerogative, but this is typical of how BJP is never seen as “legitimate ruler”. BJP governments are required to rule by consensus and Congress govts by fiat.

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      1. His real area of research is theory of bankruptcy. And there he has published good papers. Rest is all netagiri.
        Please note, there can be only so much topics of macroeconomics where real research is possible. So a lot of researchers scramble on to ‘discussion papers’.

        His sharia banking is a very very bad step. It is just another mark of Islamic colonialism. Any investment in India should be done on India’s terms.

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  4. Grrr… I held of jumping to the end and … 🙂

    Btw, I read somewhere that “Rajan predicted the 2008 crisis” is actually a myth.
    ToI blew it by saying 2009 – but may be Rajan was indeed predicting a 2009
    crisis? LoL.

    As an economist, you can keep predicting it every few years and of course, the monkey
    will type the right words at some point.

    There is this fascination in the English media to prop up such figures as RR, Amartya
    Sen et al, no matter what their track record is – bcos the West seems to be fascinated by them.

    Of course, his ability to predict or not does not mean anything as long as he is a
    good economist and his moves are valuable to the country. That is what should
    be debated. But the peanut gallery is more interested in – he predicts well, he
    looks good (ala Shobha De), and the new prediction that India’s economy will
    collapse if RR goes.

    Similar behavior was shown with MMS – what a great economist, honest man etc
    – even as he watched the Gandhi family and others loot the nation and did
    nothing (something that I never understood – if you watch crooks operate and
    you turn a blind eye, aren’t you equally, if not more, guilty?)

    Now – the BJP is sorta playing it smart – by not committing to anything officially
    while letting SS ruffle the feathers.

    So, I do hope he is evaluated on his past performance and expected ability to
    handle the future, based on what he has done and plans to do – in real economic
    terms – and a decision is taken.

    We have nothing against the man. We just need the right guy to help the economy
    along. And India’s economy cannot be said to be tied to one man’s abilities alone.

    Like

  5. Fantastic piece CW. I salute you. Now don’t forget Greece and Brazil were pretty much shouting from the roof top about world recession. So prediction was not some rocket science. And when RR did not come true for India under Narendra Modi, he gave India as “Aundho Mai Kaniyo” credit.

    Like

    1. Exactly. A good economist is one who has correctly predicted 5 of the last 2 recessions. As I explained, the optimal strategy is to keep predicting doom. If the prediction sticks, you become a hero. If it doesn’t, people will never hold a grudge against you, because people tend to forgive and forget in good times.

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  6. Three things that must go against RR’s extension by BJP govt,1)he is green card holder and as such his interests may lie elsewhere,2)He sang in chorus with the award wapsi gang of the ‘intolerance song’.3) he was picked up for the post by the corrupt UPA.

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    1. Personally I dont even know how I feel about a second term for him and I honestly dont even feel I am qualified to comment meaningfully on that. The real aim of this post is to ridicule spurious arguments being made in his favor by fans who are desperate to give credit to anyone but Modi.

      Like

    1. Believe me my intent is not to ridicule the RBI governor. Rajan is a brilliant man, waaay smarter than I could ever imagine myself achieving. What I am mocking is the lack of criticial thinking that is being shown in certain sections of the media in evaluating his tenure. All I am asking for is a critical evaluation of his work. I myself do not know if he should be given another term and I do not even consider myself qualified to comment on that. But what I can do is spot obviously spurious arguments being made in his favor by fans who are desperate to give credit to anyone except Modi.

      Like

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