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Tue, 21st November 2017

Anirudh Sethi Report

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Archives of “February 10, 2017” Day

Fitch: The Trump Administration Poses Risks to Global Sovereigns -Full Text

The Trump Administration represents a risk to international economic conditions and global sovereign credit fundamentals, Fitch Ratings says. US policy predictability has diminished, with established international communication channels and relationship norms being set aside and raising the prospect of sudden, unanticipated changes in US policies with potential global implications.

The primary risks to sovereign credits include the possibility of disruptive changes to trade relations, diminished international capital flows, limits on migration that affect remittances and confrontational exchanges between policymakers that contribute to heightened or prolonged currency and other financial market volatility. The materialisation of these risks would provide an unfavourable backdrop for economic growth, putting pressure on public finances that may have rating implications for some sovereigns. Increases in the cost or reductions in the availability of external financing, particularly if accompanied by currency depreciation, could also affect ratings.

In assessing the global sovereign credit implications of policies enacted by the new US Administration, Fitch will focus on changes in growth trajectories, public finance positions and balance of payments performances, with particular emphasis on medium-term export prospects and possible pressures on external liquidity and sustainable funding. US positions on some countries may change quickly, at least initially, but any potential rating adjustments will depend on consequent changes to sovereign credit fundamentals, which will almost certainly be slower to materialise.

Fitch: The Trump Administration Poses Risks to Global Sovereigns -Full Text

The Trump Administration represents a risk to international economic conditions and global sovereign credit fundamentals, Fitch Ratings says. US policy predictability has diminished, with established international communication channels and relationship norms being set aside and raising the prospect of sudden, unanticipated changes in US policies with potential global implications.

The primary risks to sovereign credits include the possibility of disruptive changes to trade relations, diminished international capital flows, limits on migration that affect remittances and confrontational exchanges between policymakers that contribute to heightened or prolonged currency and other financial market volatility. The materialisation of these risks would provide an unfavourable backdrop for economic growth, putting pressure on public finances that may have rating implications for some sovereigns. Increases in the cost or reductions in the availability of external financing, particularly if accompanied by currency depreciation, could also affect ratings.

In assessing the global sovereign credit implications of policies enacted by the new US Administration, Fitch will focus on changes in growth trajectories, public finance positions and balance of payments performances, with particular emphasis on medium-term export prospects and possible pressures on external liquidity and sustainable funding. US positions on some countries may change quickly, at least initially, but any potential rating adjustments will depend on consequent changes to sovereign credit fundamentals, which will almost certainly be slower to materialise.

Japan government debt hits record-high 1,066tn yen ($9.4 trillion) at end of December

Japan’s government debt stood at a record 1,066.42 trillion yen ($9.4 trillion) as of Dec. 31, highlighting the difficulty of restoring the country’s fiscal health, data by the Finance Ministry showed Friday.

Per capita debt, the amount owed per person, came to around 8.40 million yen, based on the country’s total population estimated at around 126.86 million as of Jan. 1.

 The central government’s debt marked an increase of 3.85 trillion yen compared with the end of September, due to the issuance of “zaito” debt to finance projects such as the construction of a magnetically levitated high-speed train line in central Japan as well as ballooning social security costs.

By the end of the current fiscal year through March, the government’s debt is projected to grow further to 1,116.4 trillion yen.

According to the ministry, the debt total as of December consisted of a record-high 928.91 trillion yen in government bonds, 54.26 trillion yen in borrowing mainly from financial institutions and 83.25 trillion yen in financing bills or short-term government notes of up to one year.

Cash No Longer King: Europe Accelerates Move To Begin Elimination Of Paper Money

In the shadow of Donald Trump’s spree of controversial actions, the European commission has quietly launched the next offensive in the war on cash. These unelected bureaucrats have boldly asserted their intention to crack down on paper transactions across the E.U. and solidify a trend that has been gaining momentum for years.

The financial uncertainty amplified by Brexit has incentivized governments throughout Europe to seize further control over their banking systems. France and Spain have already criminalized cash transactions above a certain limit, but now the commission has unilaterally established new regulations that will affect the entire union. The fear of physical money flowing out of the trade bloc has manifested a draconian response from the State.

The European Action Plan doesn’t mention a specific dollar amount for restrictions, but as expected, their reasoning for the move is to thwart money laundering and the financing of terrorism. Border checks between countries have already been bolstered to help implement these new standards on hard assets. Although these end goals are plausible, there are other clear motivations for governments to target paper money that aren’t as noble.

All about Abe: Trump’s schedule for today

What’s on the President’s agenda

Not much time for Tweeting today:

9:00 am ET Receives his daily intelligence briefing
9:30 am ET Tapes weekly address
10:00 am ET Meets with Sen. Mitch McConnelll
Noon ET Meets with Japanese Prime Minister Abe
1:00 ET Joint press conference with Abe
1:35 pm ET Has a working lunch with Abe; State Dining Room
3:00 pm ET Departs White House
5:45 pm ET Arrives West Palm Beach, Florida
8:00 pm ET Has dinner with First Lady Melania Trump, Japanese Prime Minister Shinzō Abe, and Mrs. Abe

Trump Reportedly Redrafting Immigration Ban After “Disgraceful” Court Decision

After losing last night in a not so shocking 3-0 decision, courtesy of the 9th Circuit Court of Appeals, the White House is rumored to be redrafting its travel ban executive order this morning with more specific language to address concerns raised by the court.  The report of a redraft comes from Joe Scarborough of MSNBC, who cited unnamed sources, so, as always, the information must be taken with a grain of salt.  Here is what Scarborough told viewers earlier this morning:

 “I’ve heard from several sources that the White House is right now working on redrafting an executive order but want to make sure that it is tight enough to pass.”

Meanwhile, Trump once again blasted the 9th Circuit’s “disgraceful decision” over Twitter early this morning:

The President’s tweet references the following excerpt from a blog post on Lawfare which criticizes the 9th Circuit’s 29-page opinion that didn’t even bother to cite the statute granting the President fairly broad and unilateral authority to restrict immigration at his own discretion.

  This case is about two big questions, only one of which the panel’s per curiam today even mentions. The first question is how broad the president’s authority is to limit admissions from the relevant seven countries—and to what extent that authority is limited by constitutional law—under a statute that gives him the sweeping power to do this:

(f) Suspension of entry or imposition of restrictions by President

Whenever the President finds that the entry of any aliens or of any class of aliens into the United States would be detrimental to the interests of the United States, he may by proclamation, and for such period as he shall deem necessary, suspend the entry of all aliens or any class of aliens as immigrants or nonimmigrants, or impose on the entry of aliens any restrictions he may deem to be appropriate.

Remarkably, in the entire opinion, the panel did not bother even to cite this statute, which forms the principal statutory basis for the executive order (see Sections 3(c), 5(c), and 5(d) of the order). That’s a pretty big omission over 29 pages, including several pages devoted to determining the government’s likelihood of success on the merits of the case.

Infosys row seen as a Narayana Murthy vs Vishal Sikka personality clash

The trouble at Infosys Ltd is the result of a personality clash between founder N.R. Narayana Murthy and chief executive officer Vishal Sikka that is damaging to both its shareholders and employees.

Investors may believe Murthy’s tirade against alleged corporate governance issues at the company is directed against the board; some have described the trouble as reflective of challenges faced by a company shifting from a founder-run firm to one managed by professional managers; a few have dubbed it a cultural clash between the old and new.

Employees who have worked with both Murthy, 70, and Sikka, 49, and experts say that although the current spat may be between some of the founders and the board, the eventual aim of this faceoff is to make Sikka abide by Murthy’s decisions.

“Vishal is making the company embrace newer technologies, changing the mindset from a staffing-run company to one that can offer newer solutions,” said a senior executive at Infosys on condition of anonymity. “If he succeeds, he will be forever remembered and celebrated. But some founders just cannot see to it that this transformation is a success because their own legacy is at risk of being eroded”.

Indirect tax revenue jumps 24% in April-January; direct tax up 10.79%

Government’s revenue collection from indirect tax grew by an impressive 23.9 per cent during the April-January period, while that from direct tax rose by 10.79 per cent.

Total direct and indirect tax collections at the end of January stood at Rs 12.85 lakh crore, 76 per cent of the Rs 16.99 lakh crore target, according to revised estimate for 2016-17.

Belying fears of slowdown due to demonetisation, indirect tax collection grew at a decent 16.9 per cent in January buoyed mainly by excise, reflecting an uptick in manufacturing.
At the end of January, the total direct tax collection stood at Rs 5.82 lakh crore and indirect tax-mop up was Rs 7.03 lakh crore led by robust collections in personal income tax and excise duty, respectively.

Direct tax revenue includes corporate and personal income tax. Indirect tax takes into account mobilisation from excise, service tax and Customs duty.