Truly ‘Being Sattva’

Conscious Business

My friends Subba and Renuka Vaidyanathan have created an outstanding yoga and retreat center called BeingSattvaa in Ubud, Bali. I have conducted retreats there myself twice and it’s been fantastic in every way.

Yesterday Subba was telling me the situation there with Covid 19. Even though Bali has almost no cases, tourism has pretty much completely stopped. This has badly hurt the island where almost 80% of the economy is tourism based.

Since Beingsattvaa is making no revenue, they had a difficult decision to make regarding retaining staff or letting them go at this time. Instead of getting trapped by this dichotomy, Renuka and he decided to do something they don’t teach you at Business School: they made a determination to not let anyone go and asked each of their staff to write their own paycheck!

I found this decision so wise, brave and compassionate. So trusting. The result is that the staff is treating the property like their own. Everything is super well kept. They are aware of the economic situation and are voluntarily taking as much of a pay cut as they can. I was moved to hear about this. It seemed like an amazing example of conscious business.

Subba is an expert in the Yoga Sutras of Patanjali. I asked him what advice the Yoga Sutras have for the present times. He said it would have to be the most oft repeated phrase of the sutras: Ishwara Pranidhana. Which roughly translates to surrender to the larger intelligence of life. I could see that he is doing this so beautifully. Instead of worrying about his business, he using this time to serve others with his knowledge through online meditation classes and other creative initiatives.

I felt like sharing this as it moved me. Next time you are planning on going to Bali, be sure to check out BeingSattvaa – one of the finest eco-tourism resorts in the island.

May all of us learn something from this example and lead with compassion, trust and vision. All will turn out for the best.

– Nithya Shanti [Link]

It is our small good fortune that we know the couple and the spiritual teacher who posted the above story.

The husband-wife team of Subba and Renuka, the promoters of ‘Being Sattva’ a holistic resort in Bali, live in Singapore. We know them. They are both alumni of the IIM ecosystem in India. One is from B and one is from A, I think.

The gentleman who posted the FB post below is Nithya Shanti, ex-Buddhist monk and spiritual teacher. A cheerful young man. I know him quite well too.

The story above is relevant not just for businesses but for all employers.

Enjoy the weekend!

The lever America has

China’s banks do much of their international business, mostly conducted in U.S. dollars, from Hong Kong. With Shanghai inside China’s walled garden of capital controls, there is no obvious replacement.

While the U.S. doesn’t directly control Hong Kong’s status as a financial center, Washington has demonstrated its extensive reach over the dollar system, with penalties against Korean, French and Lebanese financiers for dealing with sanctioned parties.

The U.S. recently threatened Iraq’s access to the New York Federal Reserve, demonstrating a growing willingness to use financial infrastructure as a tool of foreign policy.Even though the U.S. can’t legislate Hong Kong’s ability to support Chinese banks out of existence, the role of an international funding hub is greatly reduced if your counterparties are too fearful to do business with you. [Link]

This follow-up piece in WSJ provides facts and figures that reinforce the argument made in the earlier article, cited above.

Surreal global debt issuance data

Some of the eight U.S. investment-grade companies that brought bond sales Thursday helped tip year-to-date supply past $1 trillion at the fastest rate ever. European borrowers passed 900 billion euros ($991 billion) on Wednesday, two months earlier than in 2019, and got up to 921.5 billion euros with Thursday’s haul.

Issuance has been rampant since the Federal Reserve and European Central Bank each announced programs to buy corporate bonds in March, enticing borrowers to tap the market at a frantic pace. Credit risk has eased with additional fiscal stimulus, especially from the European Union Wednesday.That’s helped encourage riskier debt sales, including those from hotel chain Marriott International Inc., borrowing in the U.S. market for the second time Thursday in as many months.

Several European banks including Commerzbank AG and Credit Agricole SA sold so-called Tier 2 bonds, a kind of lower-grade debt issued by financial firms.

In Asia, dollar bond sales for the month are at $23.5 billion, putting the region on track for the busiest May ever, even amid mounting geopolitical tensions with China. [Link]

Is the 2020 slowdown in America similar to 1979-82?

In his interview with Noah Smith for Bloomberg, Paul Krugman (PK) says:

My take is that the Covid slump is more like 1979-82 than 2007-09: it wasn’t caused by imbalances that will take years to correct. So that would suggest fast recovery once the virus is contained. [Link]

That was the interesting part of the discussion (of course, there are two useful links) and one that is worthy of discussion.If the standard macro framework  – AD and AS – is not useful as per PK, then is it equally true that viewing imbalances only through macro economic framework is limiting?

Were there not imbalances heading into 2020, compared to 2008-09? Did the IMF Global Financial Stability Report of Oct. 2019 not catalogue them and discuss them enough?

I can list a few:

  • Concentration of index values in FAANG stocks (include Microsoft)
  • Non-financial corporate debt funding stock buybacks
  • Proportion of covenant-lite bonds in new bond issuance
  • The divergence between NIA measure of corporate profits and S&P 500 measure of corporate profits (as in 2000 but bigger)
  • Divergence between S&P 500 Aggregate Corporate Profits vs. S&P 500 EPS – the former had flat-lined since 2014; the latter boosted by the extinguishing of shares through buybacks
  • Disproportionate skew towards low IG and sub-IG bond issuance 2018 onwards

If, as PK says, “In particular, we know enough to understand why conventional responses like stimulus or tax cuts are inappropriate, and why we should be focusing on safety-net issues.”, then do not the conventional Fed, ECB and BoE policy responses (including bailouts of airlines) create imbalances of their own, even if none existed, as per PK, going into the pandemic?

By the same token then – i.e., going by PK’s logic,- does a fiscal support package of 1.2% of GDP combined with medium-term structural reforms come across as a saner approach (relatively speaking) than what Western nations have done?

Pl. note that the above statement is being made only with respect to the nature of the fiscal and monetary policy response. There can be other valid reservations on the 1.2-1.3% of GDP fiscal support of India – for example, 

  • Does it have enough safety net coverage?
  • More specifically, does it leave enough cash in the hands of those who need it the most for at least six months?
  • Does it take into account pre-existing financial sector strains?

How to Fix Globalisation – for Detroit, Not Davos

If we just restored the IRS to its previous size, judged relatively to the economy; if we moved past the massive injustice represented by the fact that you’re more likely to get audited if you receive the earned income tax credit (EITC) than if you earn $300,000 a year or more; if we made plausible use of information technology and the IRS got to where the credit card companies were 20 years ago, in terms of information technology-matching; and if we required of those who make shelter investments the kind of regular reporting that we require of cleaning women, we would raise, by my estimate, over a trillion dollars. Former IRS Commissioner Charles Rossotti, who knows more about it than I do, thinks the figure is closer to $2 trillion. That’s where we should start. [Link]

The para above is from an interview of Larry Summers conducted by ‘The American Interest’ magazine. Title of the interview is the title of the blog post.

I wonder if tax officials, globally, have a common manual.

Lack of cohesion in Europe

Italy’s lurch towards full-blown Euroscepticism threatens the bloc’s stability [Link]

In my view, Wolfgang Muenchau has written a thoughtful article, as he more often does, than does not. The attitudes of many Italians and the German youth towards China is bewildering.

He is also pointing out that Merkels’ ‘Hamilton moment’ – the joint Franco-German proposal to issue EU debt of EUR500.0bn to provide grants to some Southern European nations may not quite make a dent in their situations.

That said, at the margin, it is a step forward. Interesting that Bloomberg and FT have a different ‘take’ on the response of the four frugal states – Austria, Denmark, Sweden and the Netherlands. See here for Bloomberg’s coverage and here for FT’s reporting on the paper that the ‘Frugal Four’ put out over the weekend.

The issue of home-bound labour

Veteran journalist and good friend TCA Srinivasa Raghavan shared this important piece.

My personal thoughts upon reading it.

Many parts of it appear to make sense and some don’t.

(1) The ones that make sense to me:

(a) “Last week the major unions held countrywide demonstrations, billed to be in solidarity with these circular migrants. But there was no mention of the migrants in their demands, which focused on the withdrawal of changes in labour laws, and opposed privatisation of public sector enterprises. The red flag protests got no coverage at all except on Left-liberal websites.”

If the labour unions did not recognise the issue of their fellow labourers, then the rest of the society is somewhat less guilty of omission. Of course, it proves the belief that labour unions are nothing but clubs acting in the interests of their members (more so in India?) and not for the labour class as such.

(b) Lack of data

(c) Interstate migrant act – too many onerous requirements and hence was not complied with and hence no data with the officialdom

(2) The one that appeared to me, to be an exaggeration:

“P. Raman, describes the “universal, permanent list of pariahs” in the newsrooms of the leading English dailies of the 1980s: “trade unions, Left parties, the Bahujan Samaj Party and rural issues — in that order”. He writes that if there was an all-India bandh, the chief sub on the night edition was expected to know better than to put it on Page 1.”

I don’t think that it is true. Not yet.

For example, ‘BusinessLine’ did not put the labour law amendments made by some States on its front page. However, the opposition to those amendments by labour unions and their planned ‘bandh’ appeared on the front page of the paper as the top news.

(3) A point that she could have and should have made but did not.

The fact that we had Inter-State Migrant Workmen Act and the fact that we had so many labour protection laws and yet, tens of millions of them were outside the pale of them could be precisely because there are so many laws and so little compliance and that the so-little compliance is because of so many laws.

A flailing State makes up for lack of implementation with superfluous legislation.

(4) Lastly, in a way, and I admit that this is not the ideal way for it to happen (but I honestly wonder if it would happen in any other way), an unintended consequence of the lockdown has been the awareness at the societal level of the numbers and the plight of migrant labour. 

The hope is that it sustains long enough for it to bring about some meaningful, qualitative and permanent improvement in their living and working conditions.