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Wed, 22nd February 2017

Anirudh Sethi Report

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Archives of “Federal government of the United States” Tag

Moody’s raises outlook on Russia rating to ‘stable’

Moody’s on Friday became the latest ratings agency to lift its outlook on Russia’s credit rating, upgrading it from ‘negative’ to ‘stable’, citing both a fiscal strategy — that is expected to lower the country’s dependence on energy and replenish its savings — and the gradual economic recovery.

The ratings agency had confirmed Russia’s Ba1 rating, which is one notch below investment grade, in April 2016, but assigned it a negative outlook at the time to reflect an erosion of the government’s fiscal savings amid a downturn in crude prices. But on Friday, it said the recovery in the country’s economy following a nearly two-year long recession, alongside the fiscal consolidation strategy, have eased the risks that it had identified last year.

Russia’s deficit-to-GDP ratio is now forecast to narrow by roughly one percentage point per year between 2017 and 2019 and Moody’s said this new target was “achievable” because the government’s “oil price and revenue assumptions are sufficiently conservative”.

Moody’s now believes that the downside risks identified in April 2016 have diminished to a level consistent with a stable outlook. The stabilization of the rating outlook partly reflects external events, and in particular the increase in oil prices to a level consistent with the government’s budget assumptions. The stable outlook also reflects the plans the government has put in place to consolidate its finances over the medium term, and the slow recovery in the economy following almost two years of recession.

Rival raters S&P and Fitch have also boosted their outlook on the country in recent months, as external risks to the oil-producing nation ease.

US Government’s 2016 Net Loss “More Than Doubled” To $1 Trillion

Just like Apple or Exxon, the government’s annual report contains several important financial statements and detailed commentary about their finances and operations.

But unlike Apple, Exxon, the government can’t manage to turn a profit. Ever.

According to this year’s report, the government’s net loss “more than doubled, increasing $533.2 billion (103.7%) during [Fiscal Year] 2016 to $1.0 trillion.”

It’s extraordinary that they lost $533 billion in 2015, let alone a full trillion in 2016.

Bear in mind, there was no major wars, recessions, or crises to fight.

What did you really receive in exchange for that trillion-dollar loss?

Brand new highway system? Giant tax rebate?

Nope. None of the above.

The sad reality is that it now costs the government so much to run itself, along with paying massive interest on the debt and supporting all of its entitlement obligations, that they lose $1 trillion even in a “normal” year.

What will happen in a bad year?

Then there’s the issue of the government’s “net worth”.

After adding up all of its assets (like tanks, aircraft carriers, government buildings, etc.) and subtracting liabilities (the national debt), the government’s “net worth” was MINUS $19.3 trillion at the close of the 2016 fiscal year.

That’s worse than 2015’s NEGATIVE $18.2 trillion, which was worse than 2014’s NEGATIVE $17.7 trillion, which was worse than 2013’s NEGATIVE $16.9 trillion.

The US federal government is insolvent, plain and simple.

This isn’t some wild conspiracy theory. It is a statement of fact based on publicly available data published by the US government itself.

It’s concerning that the government of the largest economy in the world is bankrupt.

But it’s even more concerning that more people aren’t concerned.

Naturally most of us have been programmed to believe for decades that the US government is rich and always pays its obligations.

This is a dangerous fantasy.

Yes, the government has been able to continually destroy its finances for years without consequence.

And for that accomplishment they should be awarded some special Nobel Prize in Ponzi Schemes.

But history is packed with examples of once-dominant empires who eventually declined under the weight of their unsustainable finances, from the French monarchy to ancient Rome.

Are we really supposed to believe that this time is any different?

Are we really supposed to believe that the US government can continue to indefinitely lose $1 trillion dollars per year without consequence?

Sure, it’s great to hope for the best. And maybe, just maybe, they manage to fix everything.

But it would be dangerous to bet everything you’ve ever earned or plan to achieve on such an unreasonable expectation.

When nations go broke, there are consequences. Simple.

Overnight US Market :Dow closed -6 points.

Stocks closed mixed Thursday as investors shied away from riskier assets amid renewed concerns over U.S. President Donald Trump’s policies and didn’t find much to get excited about in the latest batch of earnings reports from U.S. companies.

The Dow Jones industrial average fell 6.03, or less than 0.1%, to 19,884.91. The Standard & Poor’s 500 index rose 1.30, or 0.1%, to 2280.85 and the Nasdaq composite index fell 6.45 points , or 0.1% to 5636.20.

Investors were rattled by the latest news from the Trump administration, including a phone call in which he warned Mexico’s president he might send in troops and another about a tense exchange with Australia’s leader over refugees. Following the Trump rally in the wake of his election victory last November, stock gains appear to be petering out with investors getting jittery in light of Trump’s dramatic policy announcements since taking office.

Investors are also looking to Friday’s closely watched jobs report, the first that will be under the tenure of President Trump. Economists expect employers created 175,000 jobs in January, and the unemployment rate remained at 4.7%.

India : Limited room to reduce fiscal deficit to 3% in FY18: Moody’s

The government is likely to achieve its fiscal deficit target of 3.5 per cent of GDP in the current fiscal but higher infrastructure spending will limit the room to reduce it further to 3 per cent in 2017-18, Moody’s said today.

The credit rating agency expects the government to renew its commitment to increase capital spending and address the short-term disruptive impact of demonetisation in the Budget to be unveiled on February 1, 2017.

“On the fiscal front, the government will likely remain committed to achieving its fiscal deficit target of 3.5 per cent of GDP for the fiscal year ending March 2017. However, room to reduce the deficit further to the target of 3 per cent of GDP in the following year will be limited, due to the need for increased infrastructure spending and higher government salaries,” Moody’s Investors Service said in a statement.

It said that in an environment of lacklustre global trade and with economies globally facing the increasing risk of protectionism, India’s very large domestic markets provide a relative competitive advantage when compared to smaller and more trade-reliant economies.

The implementation of the pending GST and other measures aimed at enhancing income declarations and tax collection will help widen India’s tax base and boost revenues, it said, adding that such a boost will however only materialise over time, with the magnitude uncertain at this point.

India : Note ban gains ‘highly uncertain’, says Fitch

Benefits of demonetisation are “highly uncertain” and the potential positives are unlikely to be strong or last long enough to make a significant difference to government finances or medium-term growth prospects, global ratings agency Fitch said today. Taking into account the short-term disruptions, it also revised down the GDP growth estimate for the current fiscal to 6.9 per cent from the earlier 7.4 per cent.

“The note ban move has some potential benefits, but the positive effects are unlikely to be strong or last long enough to make a significant difference to government finances or medium-term growth prospects…benefits of demonetisation are highly uncertain,” the ratings agency said in a note.

“The intentions behind demonetisation are positive and in keeping with the broader reform efforts, but the short-term pains may outweigh the uncertain long-term gains,” it said.

Terming the note ban as a “one-off event” as people will still be able to use the new high denomination bills and other options like gold to store their wealth, it warned that “there are no new incentives for people to avoid cash transactions. The informal sector could soon go back to business as usual.”

Overnight US Market :Dow closed -43 points.

Stocks ended mixed Thursday as retailers dominated the news with Macy’s and Kohl’s both plunging following weak holiday-season reports that led the chains to cut their profit forecasts.

Still, the Nasdaq composite’s modest gain of 11 points, or 0.2%, was enough to notch a new all-time high. Settling at at 5487.94, it topped the old record by half a point.

The Dow Jones industrial average finished down 43 points, a 0.2% decline to 19,899.29. Losing 0.1% was the S&P 500, which settled at 2269 even.

nvestors were also focusing on upcoming U.S. jobs data following the publication of the minutes to the Federal Reserve’s last board meeting.

Private U.S. companies added 153,000 jobs in December, according to payroll processor ADP. That total was a bit lower than analysts expected and slightly slower than the pace of hiring for the rest of 2016. The government will issue its own hiring report on Friday.

Overnight US Market :Dow closed -23 points.

U.S. stocks ended lower Thursday as health care companies took more losses and investors’ Dow 20,000 watch goes on.

The Dow Jones industrial average finished 0.1% lower, down 23 points to 19,918.88, and 81 short of the never-reached 20,000 level. The S&P 500 and Nasdaq composite lost 0.2 % and 0.4%, respectively.

Alibaba (BABA) fell 2.8% after the U.S. government put the Chinese e-commerce company back on a list of marketplaces that sell large amounts of counterfeit goods and is slow to respond when companies complain about knockoffs. Chinese regulators have made similar criticisms.

Benchmark U.S. crude gained about 0.9% to $52.95 a barrel in New York. Energy companies made modest gains.

Bond prices fell. The yield on the 10-year Treasury note climbed to 2.56% from 2.54%.

The dollar dipped to 117.43 yen from 117.54 yen. The euro rose to $1.0455 from $1.0427.

Stocks in Europe were also quiet. The DAX in Germany lost 0.2% and France’s CAC-40 fell less than 0.2%. In Britain, the FTSE 100 got a 0.1% lift. Japan’s Nikkei 225 index edged 0.1% lower and the Hang Seng in Hong Kong lost 0.8%. The South Korean Kospi fell 0.1%.

Rouhani: Extension of US Sanctions Against Iran Violates Nuclear Deal

Iranian President Hassan Rouhani speaks at a news conference near the United Nations General Assembly in the Manhattan borough of New York, U.S., September 22, 2016The US decision to extend 1979 sanctions against Iran for another 10 years violates the nuclear deal struck by Iran with international powers, Iran’s President Hassan Rouhani said on Sunday.

“The path that the US has taken in regard to Iran will lead to a considerable drop in international trust in the American government,” Rouhani was quoted as saying at a meeting with International Atomic Energy Agency (IAEA) Director General Yukiya Amano by Mehr news agency.

He stressed that it was highly significant for all parties to the deal to comply with their commitments, arguing that the US recent decision to prolong Iran Sanctions Act (ISA) for another 10 years clearly violated the Iran nuclear deal.

On July 14, 2015, Iran and the P5+1 group of countries — the United States, Russia, China, France and the United Kingdom plus Germany — signed the Joint Comprehensive Plan of Action (JCPOA), ensuring the peaceful nature of Tehran’s nuclear program in return for the gradual sanctions relief. The US sanctions introduced against Tehran in 1979, however, were not mentioned in the document.

‘Reveal who attended RBI’s Nov 8 meet’ -P Chidambram

Former finance minister P Chidambram on Tuesday demanded the Reserve Bank of India should make public minutes of its November 8 meeting whose outcome empowered government to scrap specified notes of Rs 500 and Rs 1,000 denominations.

On November 8, the Narendra Modi government in a televised address announced it was abolishing the legal tender status of Rs 1,000 and Rs 5,00 currency notes.

These high value notes comprised a huge 86 per cent of total currency in circulation and the decision has led to severe cash crunch in country causing inconvenience to the citizens.

“RBI should publish the minutes of meeting on Nov 8, let country know who were the directors who attended the meeting,” Chidambaram demands.

The government had banned these specified notes through an executive order instead of passing a legislation in parliament as part of its drive to curb black money and prevent recurrence of fake currency incidents.

According to the RBI Act, 1934, the Central Board of the apex bank takes a call on legal tender, its validity or invaldity, in circulation in country and proposes government accordingly.

Trump Says He Will Issue Executive Order On First Day In Office Withdrawing U.S. From TPP

In a video message released moments ago by Donald Trump, the President-Elect announced that he has asked his team to develop a list of executive actions for his first day as president and announced that he would issue an executive order on his first day of office, withdrawing the US from the Trans Pacific Partnership, and would issue a notification of intent to withdraw from the TPP, voiding Obama’s “free-trade legacy.”

Trump stated that his agenda “will be based on a simple core principle, putting America first… whether it’s producing steel, building cars, or curing disease, I want the next generation of production and innovation to happen right her on our great homeland.”

 He added that he would issue a rule, along the lines of what he proposed during his Gettysburg address, that for every new government regulation, two existing regulations must be eliminated, and said that he will direct the labor department to investigate abuses of visa programs.
  • TRADE – Withdraw from TPP and negotiate bilateral trade deals in America’s favor
  • ENERGY – Cancel job-killing restrictions on American energy industry (including shale energy and clean coal)
  • REGULATION – For each new regulation, 2 old rules must be eliminated
  • NATIONAL SECURITY – Develop a plan to protect America’s vital infrastructure from cyber-attacks and all other forms of attack
  • IMMIGRATION – Direct Department of Labor to investigate all abuses of visa programs
  • ETHICS REFORM – Drain the swamp by imposing a 5-year ban on executive officials becoming lobbyist after they leave the administration (and a lifetime ban on lobbying for foreign governments)

The full clip is below.