•  
Sat, 27th May 2017

Anirudh Sethi Report

  •  

Archives of “Economy” Category

The Economist Warns “The World Must Prepare For Trouble” Under Trump

If the scenes of anarchy in Berkeley last week were not enough to strike fear into the hearts of free-speech-supporting average Americans, then The Economist just turned the fearmongery amplifier to ’11’ in its latest op-ed describing the ‘insurgency in The White House’.

Washington is in the grip of a revolution, The Economist begins…

 The bleak cadence of last month’s inauguration was still in the air when Donald Trump lobbed the first Molotov cocktail of policies and executive orders against the capital’s brilliant-white porticos. He has not stopped…

…In politics chaos normally leads to failure. With Mr Trump, chaos seems to be part of the plan. Promises that sounded like hyperbole in the campaign now amount to a deadly serious revolt aimed at shaking up Washington and the world.

To understand Mr Trump’s insurgency, start with the uses of outrage. In a divided America, where the other side is not just mistaken but malign, conflict is a political asset. The more Mr Trump used his stump speeches to offend polite opinion, the more his supporters were convinced that he really would evict the treacherous, greedy elite from their Washington salons.

His grenade-chuckers-in-chief, Stephen Bannon and Stephen Miller, have now carried that logic into government.

Americans who reject Mr Trump will, naturally, fear most for what he could do to their own country. They are right to worry, but they gain some protection from their institutions and the law. In the world at large, however, checks on Mr Trump are few. The consequences could be grave.

 

Without active American support and participation, the machinery of global co-operation could well fail…

 

If Mr Trump truly wants to put America First, his priority should be strengthening ties, not treating allies with contempt…

 

America’s allies must strive to preserve multilateral institutions for the day after Mr Trump, by bolstering their finances and limiting the strife within them. And they must plan for a world without American leadership.

 

A web of bilateralism and a jerry-rigged regionalism are palpably worse for America than the world Mr Trump inherited. It is not too late for him to conclude how much worse, to ditch his bomb-throwers and switch course. The world should hope for that outcome. But it must prepare for trouble.

 

Read more here (if you dare)…

Scared yet? You should be… except President Trump is seemingly enacting exactly what the American people want and voted for – which is an awkwardly democratic thorn stuck in the paw of the establishment lion, who is salivating stubbornly hoping his drool can eviscerate the painful insurgent. Three words are what they must truly come to comprehend – four more years.

Eurozone IFO Q1 business climate sentiment 17.2 vs 8.2 prev

Eurozone IFO Q1 business climate sentiment report 6 Feb

Says IFO:

“Economic sentiment in the euro area continued to firm this quarter. The Ifo Economic Climate improved to 17.2 balance points in the first quarter from 8.2 balance points previously. Expectations are far more positive than last quarter. The experts surveyed also assessed their current economic situation more favourably. The economic recovery is gathering impetus.

The best economic climate currently prevails in Lithuania, Ireland, The Netherlands, Slovenia and Germany. In Austria, Finland and Spain climate balances improved markedly and turned positive; in France and Latvia improvements were also positive, but to a lesser extent. Greece, Italy and Portugal are the only euro area countries in which the economic climate remains unfavourable.”

Global Inflation ‘Surprise’ Index Spikes To Highest Since 2011

The specter of global stagflation is looming ever larger as inflation across the world is beating analysts’ forecasts (even before the potential effect from Donald Trump’s economic policies) but economic growth expectations remain stagnant.

As Bloomberg notes, the global Citi Inflation Surprise Index, which measures price surprises relative to market expectations, is at the highest in more than five years.

The reading turned positive in December — meaning inflation data were higher than expected — for the first time since 2012.

However, in its Keynesian-Krushing way, economic growth expectations are not tracking higher – flashing red warnings signs for global stagflation.

Pressure on Greece Mounts, New Crisis Looms

The problem is uncomfortably familiar.  Greece has a chunky payment due to its official creditors.  Reports suggest that Greece has not completed much more than a third of the measures that had been agreed upon free up the next aid tranche from the 86 bln euro package.   

Time is working against Greece.  The elections in France and Germany do not provide a conducive backdrop for concessions, and public support for the Greek government is sliding.  Given the political context, it is important that Greece’s measures are implemented ahead of the February 20 Eurogroup meeting.  

If this window of opportunity is not met, the situation could deteriorate quickly.  The more Prime Minister Tsipras enacts the reforms demanded by thecreditors, the less the public supports him.  Many still suspect Greece is headed toward an election this year.  Since in some respects, Tsipras speaks the language of populism, a change in governments would likely be in the direction of the center, such as the New Democracy.  

Currently, the official creditors expect Greece to hit its fiscal targets this year.  The problem is 2018.   The key target is the primary surplus (budget balance before debt servicing).  The primary surplus in 2016 was estimated at 2.3% (of GDP).  Starting in 2018, the agreement calls for a goal of a 3.5% primary surplus.  The IMF has been insisting that considerably more dramatic action by Greece is necessary if the other official creditors refuse to reduce the debt burden, which the multilateral lender says is unsustainable.  

India :Eight core industries grow by 5.6% in December

Eight core industries register a growth of 5.6% in December 2016 on the back of healthy output recorded by refinery products and steel.

The growth rate of eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — was 2.9% in December 2015.

It stood at 4.9% in November 2016.

The core sectors, which contribute 38% to the total industrial production, expanded 5% in April – December 2016 compared to 2.6% growth in the same period last financial year, according to data released by the commerce and industry ministry today.

Refinery products and steel production jumped 6.4% and 14.9%, respectively during the month under review. However, crude oil, fertliser, natural gas and cement output reported contraction.

Coal output declined by 4.4% in December 2016 from 5.3% in the same month previous year. Similarly, electricity generation too dipped by 6% as compared to 8.8% in December 2015.

India : Economic Survey advocates reforms to unleash economic dynamism and social justice -Full Text

India needs an evolution in the underlying economic vision across the political spectrum and further reforms are not just a matter of overcoming vested interests that obstruct them. This was stated in the Economic Survey 2016-17 presented in the Parliament today by the Union Finance Minister Shri Arun Jaitley.

The Survey lists the some of the challenges that might impede India’s progress. These challenges are classified by the Survey as follows: ambivalence about property rights and the private sector, deficiencies in State capacity, especially in delivering essential services and inefficient redistribution.

The Survey highlights difficulties in privatizing public enterprises, even for firms where economists have made strong arguments that they belong in the private sector. In this context, the Survey points towards the need to further privatize the Civil Aviation, Banking and Fertilizer sectors.

The Survey points out that the capacity of the State in delivering essential services such as health and education is weak due to low capacity, with high levels of corruption, clientelism, rules and red tape. At the level of the states, competitive populism is more in evidence than competitive service delivery, the Survey adds. Constraints to policy making due to strict adherence to rules and abundant caution in bureaucratic decision-making favours status quo, the Survey cautions.

According to the Survey, redistribution by the government is far from efficient in targeting the poor. This is intrinsic to current programs because spending is likely to be greatest in states with better institutions and which will therefore have fewer poor.

The Survey notes that over the past two years, the government has made considerable progress toward reducing subsidies, especially related to petroleum products. Technology has been the main instrument for addressing the leakage problem and the pilots for direct benefit transfer in fertilizer represent a very important new direction in this regard, the Survey adds.

Noting that India has come a lo¬¬ng way in terms of economic performance and reforms, Economic Survey 2016-17 says that there is still a journey ahead to achieve dynamism and social justice. Completing this journey will require broader societal shifts in the underlying vision, the Survey adds.

BOJ announce: Maintains policy

Bank of Japan monetary policy meeting concludes – policy unchanged

Keeps monetary policy steady

Maintains short-term interest rate target at -0.1 pct

Maintains 10-year jgb yield target around zero pct

Leaves unchanged pledge to buy jgbs more or less at current pace so its holdings increase at annual pace of around 80 trln yen

Extends deadline for loan programme aimed at boosting lending, supporting industries with growth potential

Debt buying for loan programme extended by 1 year

Bank of Japan seen bullish on GDP after eventful 2016

The Bank of Japan is poised to upgrade its three-year economic growth outlook in the final days of January in light of strong recent indicators, though stronger inflation forecasts will be a harder sell.

The central bank will compile its quarterly outlook on economic activity and prices at a two-day policy meeting beginning Monday. The report will outline the BOJ’s forecast for each of the three years through fiscal 2018,

 The last report, released in November, pegged gross-domestic product growth at 1% for fiscal 2016, 1.3% for fiscal 2017 and a slim 0.9% for fiscal 2018. Discussions this time are expected to center on the first two years, with the fiscal 2017 growth forecast thought to be headed for the mid-1% range.

Signs for an upgrade are strong. The BOJ in December boosted its outlook for Japan’s economy as a whole for the first time in 19 months. Such goods as smartphone parts and automobiles are driving up exports and industrial production, while consumer spending on durable goods such as cars is on the rebound as well. Changes made late last year to the GDP calculation method will also give the figure a boost: companies’ research and development spending, which has shown consistent growth over the years, now counts as investment.

BOJ Gov. Haruhiko Kuroda said at a World Economic Forum panel discussion Jan. 20 that he expects Japan’s economy to grow by around 1.5% in fiscal 2016 and fiscal 2017, significantly exceeding the country’s potential growth rate.