STCMA – 19th April 2019

Atman Trivedi on the India-China reset that was much touted in 2018. He calls for a rethink and he is right, in my view. [Link]

Yanis Varoufakis carefully walks on razor’s edge defending Julian Assange and protesting his possible extradition to the USA and succeeds in doing so. [Link]

Robert Blackwill writes in a new report dealing with Trump’s foreign policy that what matters most is the effectiveness of U.S. policy over time and its consistency with U.S. national interests, not the personal qualities of its leaders. [Link]

The question that crops up in one’s head after reading Anjuli Bhargava’s article on Jet Airways and India’s aviation policy decisions over the years is whether elections do matter or should matter. [Link] – subscription required.

Ashoka Modi raises very sensible questions on IMF’s optimism and ‘don’t ask-don’t tell’ attitude to risks. Cannot blame the IMF. Financial markets and the Fund feed off each others’ attitudes. [Link]

If China has the right to police ‘terrorism’ as it sees it in Xinjiang, does India not have the right to police terrorism on its soil?. Brahma Chellaney writes on the deafening silence in the Muslim world on China’s oppression in Xinjiang. [Link]

‘Has Asian dominance arrived’ and other links

This Bloomberg story tells us that global debt rose ‘only’ USD3.3trn in 2018 to around USD243trn, about three times the global GDP. If you want to know the background to this news, the link is there in the Bloomberg news-story. It is a research note by the Institute of International Finance.

Despite that, President Trump is not happy with Fed Chairman Jerome Powell. He says he is ‘stuck’ with Powell. This is quite wrong and dangerous. I am surprised at US dollar’s resilience in the face of such gibberish.

According to ‘What we are seeing’ (Edition: 22.03.2019), for the first time, globally, the number of 65-year olds has exceeded the number of 5-year olds.

One has to do more detailed work on the claim that Asia has become the world’s largest economic bloc and that its GDP now exceeds the combined GDP of the rest of the world, in PPP $. My simple response is ‘So, what?’. Of course, I could be very wrong here but the obituatry of Western dominance is being written too prematurely. Asia is at very high risk of internecine warfare and the West has a good track record of ‘divide and rule’. I would like to recall my MINT column from nearly four years ago that the 21st century would belong to the West or to nobody.

This blog post from ‘Bank Underground’ (Bank of England blog) says that rising interest rates increase labour share of GDP because productivity might fall faster than wages do. Or, we can add that capital’s share declines faster in an environment of rising rates due to correction in asset prices. Very interesting and important empirical evidence in this. It shows that a reflexive opposition to higher interest rates by the likes of, say, the Economic Policy Institute is wrong.

STCMA – 15th March 2019

Study Links Eggs to Higher Cholesterol and Risk of Heart Disease [Link]

Across the globe, a question of air safety becomes a question of American leadership [Link]. I agree. America dithered a bit and damaged itself a lot in the process. Some pilot friends explained the nasty ‘penny pinching’ that Boeing did. Sad and condemnable. Chalk one more entry in the journal of ‘how capitalism is destroying itself’

Elbridge Colby urges America to take India’s side [Link]

Disturbing story of the treatment of Kazakh Muslims by China [Link]

This is from February 14. A fascinating long read on China’s mistreatment or harassment of young Marxists [Link]

Aarati Krishnan provides some good statistics on aggregate wage growth and breaks it down well. She explains why the economy is lacking the spark it needs. Well written. [Link]

On Thursday, 108 economists and statisticians put out a note urging that agencies associated with the collection and dissemination of economic statistics should not be subject to any political interference. [Link].

Some question the timing but the appeal has gained in legitimacy in recent months. The government’s many moves on different statistical data have raised more queries than answered them.

Honestly, this requires much more than a cursory mention. The article on how we need to save our ignorance from artificial intelligence is rich with philosophical implications and questions too. [Link]

Why the China shock may never come

Arvind Subramanian and Josh Felman think that China’s economy is in trouble; that it might sharply depreciate its currency; other Asian countries would follow suit resulting in a deflationary shock for the West. We can buy that framework because most of us have been saying it for years. No one knows when it would happen. Or, precisely because the West knows the pain of China’s economic pain would visit it eventually, it goes out of its way to prevent China’s economy from melting down. In other words, the West has lost its capacity to bear pain to score a permanent geopolitical and geoeconomic victory over its rival. Make no mistake. China will not be so magnanimous, even for selfish reasons.

For the West, China is ‘too big to fail’ or the West is ‘too timid to act’. America, on its part, is trying to impeach one man who had gone, by far, the farthest against China.

Well, even if not impeached, he might settle for less, as Greg Ip fears, because he has other things to worry about or that he is impatient for deals just as his predecessors were too hesitant to provoke a conflict with China. As Scott Kennedy says, in different words, that would be a pity. It would amount to much ado about nothing.

China would return to its old ways even as America would turn socialist. Not a great prospect for the world. That would leave the United States more vulnerable and clear the way for China.

Quick reads and thoughts

(1) India lost the second T-20 match to Australia, after scoring 190. Rishab Pant and Shikhar Dhawan scored 15 runs in 30 balls – that is 3.0 runs per over. For Australia, Stoinis and Finch scored 15 runs in 18 balls – that is 5.0 runs per over. That explains the difference. The chain is only as strong as its weakest link. The weakest links for Australia were stronger than the weakest links for India. Period.

(2) Ashley Tellis’ piece makes a lot of sense. Just brace for it and be prepared for it, is the message. But, for all the patriotic talk by Indian politicians, this should rankle:

truth be told, the Indian defense forces, including the army units manning the Line of Control (LoC) and those internal security components deployed in Jammu and Kashmir, are woefully underequipped and often lack even the most rudimentary technologies now available to combat terrorism.

The failure of Indian policymakers to invest in these capabilities is indeed unconscionable. [Link]

He is also right about the opportunity that the United States missed (from the Indian angle, that is) and the naivety of expecting China to ride to India’s support:

After 9/11, Washington blew the one opportunity it had to compel Pakistan towards genuine reform. Instead it ended up turning a Nelson’s eye towards Pakistan’s preservation of its anti-India proxies as the price of its cooperation against Al Qaeda. An opportunity of this sort has never materialized again. 

Expecting China to enjoin Pakistan to eschew terrorism against India is laughable. Whatever the Wuhan spirit may be, it does not extend to squeezing all-weather friends against strategic rivals. [Link]

(3) Dhruva Jaishankar says why India always abhors international mediation in dealing with Pakistan. See here.

(4) Aravindan Neelakantan on the significance of PM Modi washing the feet of sanitation workers.

(5) John Authers on why the bull market in stocks in China feels fake

(6) Will Michael Cohen facilitate the arrival of socialism in America? Or, in other words, will he be the man to slay the demon of financialisation and replce it with another? Read his testimony and decide for yourself.

Consistently inefficient

When I read the following in FT, I could hardly suppress a smile:

Chinese economy gets a shot China’s central bank injected a record Rmb570bn ($84bn) into the country’s banking system on Wednesday in the latest effort to boost liquidity and promote increased lending. Global markets responded favourably. (FT)

Stock markets react positively whenever major economies boost liquidity. It is not that stock markets reacted negatively much when the bad news out of China was pouring out. Perhaps, other central banks were pushing liquidity then!

But, they are into lazy investing. Low interest rates and liquidity are what they care about. If you are in doubt, read this interesting article published in New York Times on 10th January and download the original paper too. Investors just do not read annual reports even if they contain information (hints) of bad or good tidings to come. They react only when the actual news breaks out months later. So much for the market’s informational efficiency. 

It is breathtaking that someone got a Nobel Prize for calling the stock markets efficient populated as they are by humans who are anything but. May be, the efficiency of the Swedish Riksbank’s selection committee has to be questioned!