EP 115: QUAD talks around Covid. US fast tracks AFG talks; No foreign visitors for Tokyo Olympics

Sree Iyer: Hello and welcome to PGurus Channel. I am your host Sree Iyer. Today is the 10th of March. It’s episode 115 and I’m with Sridhar Chityalaji as we bring you as always Daily Global Insight. Sridharji, welcome to the channel and I would like to share with you some of the main points of today’s news, sir.

Sridhar Chityala: Go ahead. Good morning and welcome to everybody for the March 10th edition of the DGI.

Sree Iyer: The United States fast-track stalled the Afghan peace process.

Share power Taliban or bear cost Blinken tells Ashraf Ghani the president of Afghanistan.

Suga Modi commits to open Indo-pacific ahead of quad talks on Friday.

Tokyo Olympics to ban foreign spectators as a covid precaution.

And the NASDAQ roars back 3.6% for its best day in four months, S&P 500 adds more than 1%.

In the United States news, Biden takes the US National Security Strategy to the left with nods to Trump.

The United States should rethink Taiwan strategic ambiguity according to the Indo-pacific chief.

Our greatest strategic threat the US Commander seeks an additional 4.7 billion in funding to confront China.

The US plans to deploy long-range missiles in Asia to deter our greatest strategic threat. So, this action in the Indochina area suddenly, now is heating up, isn’t it sir?

Sridhar Chityala: Well, I think that probably the Biden Administration is being educated and enlightened contrary to the Obama-one and Obama-two. The Strategic roadmap has changed in the Indo-Pacific and the South China Sea and the East China Sea in a very dramatic manner. When Obama-Biden left Hong Kong was just about to simmer, Hong Kong simmered over, now, Hong Kong is almost done as far as the rest of the world is concerned. There has been a number of skirmishes in the Indo-Pacific and the South-China Sea, but Trump Administration has put a deterrent around it. So, clearly, I think the general, Phil Davidson. Phil Davidson is the Indo-pacific rear admiral, not the Rear Admiral. He has basically made a very strong plea that he needs, you know close to five billion dollars. Guam is very important and the entire South-China Sea is a very very critical asset and the United States future is in Southeast Asia and South Asia. So, deterrence is required and you cannot kind of stay the course with present resources and an integrated approach need to be developed in terms of the military capabilities. I think we covered this in the first chain that they were planning to build the first chain. Guam is the second chain.

Sree Iyer: Now, the United States fast track stalled the Afghan peace process. It says to share power with the Taliban or bear the cost of managing the US troops in Afghanistan. Sridharji, for our viewer’s sake, can you please walk us through the history of this and also there is going to be a six-country meeting perhaps in Turkey. I don’t know if all the countries have accepted to participate there or not. So what are your thoughts about this whole Afghan problem, sir?

Sridhar Chityala: Afghan problem is a problem that everybody thinks should go away because there’s no solution to the problem. Perhaps that is the solution, no solution to the problem is the solution to the Afghan problem. I think Trump recognized in his four years that his local Ambassador, I think Zalmay Khalilzad, who has been there for quite some time. He was initially in Iraq post the Iraq war and he has been advising the White House and so on. And what they realized is that it has only caused more lives and it’s a kind of an elephant that seems to be draining more and more money and resource commitments and then the lives of the US soldiers. Then, there never is an agreement between the Taliban, you know, who do rule quite a large chunk of Afghanistan who is allied with the Pakistanis.

So, basically, Trump began to say we are going to pull everybody out. Let this guy sort out that mess by themselves. Obviously, to some extent that got delayed with elections and other things. And in fact, Trump went on to say the last troops would be coming out then the elections occurred and then you have clearly again, their Ambassadors seem to have won the minds of the people. So there was what you call an impasse and now the strategy has come up and the strategy says that effectively that the Taliban wants to share power with the present regime. So the proposal on the table is that you share power and you spend money because this is the only way that you rule this part that follows rules that part and then you guys can get along with each other. It sounds very simple but it’s not going to work. So, then, to maintain Harmony we need some strategic stakeholders, so, who do you bring? Pakistan says I am a strategic stakeholder. Iran says, I am the border, so, I’m a strategic stakeholder. Russia says I have a long history, I’m a strategic stakeholder.

So, in other words, initial stakeholders stuff India was not included notwithstanding the fact that India has been investing both on the human resources side as well as on the healthcare side as well as some of the other projects. So, the US somehow got India into this tango and so you have these six nations and basically, it is a five-point plan which Blinken has come up with. The first meeting is yet to occur, but the plan has been laid out which effectively says these four or five things that we outlined whether it’ll come to any conclusion remains a mystery and whether the rest of the troops will stay or we get out because the plan has got delayed but the plan has not been cancelled. So in other words the 3,500 people they said let’s just wait for this plan to be formalized before you guys leave. So, in other words, they are saying that they will be no US troops on Afghan soil. In summary, is one of the biggest unmitigated disasters that the United States got itself entangled in costing anything between a trillion to 3 trillion dollars.

Sree Iyer: On illegal immigration and this has been in front and centre of the United States news. Now, there is an observation that illegal immigration should not be included in the Congressional count. Sir, I am assuming what you mean by this is that when the redistricting happens for various congressional districts that they should not take into account the illegal population in that particular District. To me it seems black and white if you are a green Holder, you cannot vote. If you’re illegal, you cannot vote in the United States. Therefore, why should they be counted when it comes to redistricting, sir?

Sridhar Chityala: Well, this is the great reorganization of the United States and the United States Constitution. The United States Constitution, very specifically points out the people of the land, the people who are the citizens of the country make decisions around how the law of the land is established and governed within the United States, but it seems to be more a political ploy which is to say legal or illegal, you are here. So, you have a voice, it seems to legitimize. It seems like a process whereby you legitimize these guys existence and basically saying there’s nothing called illegal. It’s only a matter of time before you get legalized or before you get your formal documents those who have entered the country can stay in the country. You can come in as a tourist and you can stay back and say, look, I don’t want to go anywhere. I want to stay here. Then, there’s no rule for the new Biden Administration policy. There is no rule formally or informally re-entered the country you stay in. So, they are saying because of this position that we have taken through the executive order. It’s important that these people are counted in the redistricting that is happening.  And therefore based on the population you decide the number of votes.

Sree Iyer: Well, this is going to hit the proverbial rotating mechanism on the ceiling. I can tell you what happening around the country illegal border crossings have hit more than 101500 in February, Arizona Montana are taking legal action against the Biden Administration regarding the new Immigration and Customs regulations. Florida attorney general is going to take legal action against Biden Administration for releasing dangerous criminal aliens. I’m going to put all these things together, sir, then, you can comment on this. And the Department of Homeland Security nominee Alejandro Mayorkas is going to testify before Congress amidst all this border surge. So, this is uncontrolled going on right now, sir. What are your thoughts and why is this Administration in such a hurry?

Sridhar Chtiyala: Yes. Sorry just to correct and I said a number of votes in the last one. It’s actually a number of seats. I stand corrected.

So, now this whole grouping is around illegal immigration. So we have sporadic incidents. So we decriminalize the borders. We allowed people to come in. And in fact, they were the tents where they said, they’re all waiting for Mr. Biden to come. And Mr. Biden has already extended invitations for all the people to come. So, we decriminalized, we moved from Detain and Deport to Retain and Release, therefore, the flood gates opened. The floodgates have opened and basically what was supposed to be an initial trickle has now moved into a flood. So, it is now spreading around the border and we were talking about 4000, 5000, 6000 a week or even a day or on a peak day. It’s now February 102,000 people have come in.

The three major problems covid-19, many of them are not being tested they have been released into the community. Two, criminals as was the case in Florida, you know, there is no mechanism to deport them and three is there is no detailed analysis of who these types of people are and so they are being led into the kind of community quite a few of them are children and these children shelter issue came up as a result of the migration. So, the border patrol is unable to deal with this whole volume of traffic that is coming in. So, you are now beginning to see, it started with Texas. We covered that yesterday. Now, it is Arizona and Montana then we are also having Florida. In Florida, they have a different problem people who are illegal aliens with a criminal record who are supposed to be in jail. They are now being released rather than being deported. So Florida has a problem which is different slightly different from the rest of the other people. The rest of the people you have the floodgates coming in, so, Alejandro Mayorkas has been asked to come and present to the Senate. What the hell are you doing? He is the Department of Homeland Security. What the hell is he going? Is he going to say? Well, you know we have formalised, this is the law now, through executive order unless it is altered. So, we have a problem which is a major problem for the National Security of the country as a result of these fellows trickling in.

Remember the social burden in the latest stimulus, the Illegal aliens also get pay. So are these going to are these guys going to get a payout, as a result? Well, human compassion says having come in. You should give them money. You should give them Healthcare. You should put them into school, you get them into accommodation. So, more stimulus has to come as the number of these illegals grow.

Sree Iyer: Now, there is also a question regarding President Biden’s health, isn’t it? He’s yet to address a full press conference. They’ve had some instances where the access got cut off when he was about to answer a question and so on and now on Friday, there’s going to be a meeting even if it’s a teleconference between the quad heads. So, all this, you know kind of gives rise to the question is the president alright, and to make things more interesting Biden is now adding two prominent big tech critics into the administration Lina Khan to head Federal Trade Commission. She is an anti-big Tech person and Tim Wu you who coined the term net neutrality will be joining the National Economic Council. Sir, who’s running the show now?

Sridhar Chityala: Who is running this show? It is an interesting question, let me kind of add one more piece to it, which I’ll do shortly. Who is running the show remains a question mark as you correctly pointed out that Biden has not yet given a press release. Everything is a virtual meeting very similar to the G7 meeting that was held a couple of weeks ago hosted by Boris Johnson that was just a virtual address. This will also be a virtual address and it will be a bilateral or you know, meeting between two leaders. It’s not a joint conference or something. This is you know, the QUAD leaders talking to each other besides the QUAD meeting. So, therefore, there’s no press conference. It is just a virtual meet where they plan to cover three-four issues. So, to answer your question, yes, he seems to be a problem, whatever the health reasons they have just not allowed him to come and speak to the Press. While this is looming, they’ve done a survey that points out almost 50% to less than 50% of the people feel that Biden is unfit to rule the United States. This is within 60 days of assuming power which also raises some questions around what’s happening in Washington DC?

So now you add another piece of item that has come out is, where is Janet Yellen? Is she in the treasury or she’s working remotely because we don’t see her? She attended some of the important meetings and also the Biden meetings, but we don’t see her in the Treasury Department. This is being soft button given treasury secretary is more powerful than the president of the United States. The two people who are very powerful is the treasury secretary and in fact, the FED chairman is the most powerful man, and then the treasury secretary is not too far because they effectively control everything that’s going on around the world. So to give you a roundabout answer on Biden, Biden is missing Yellen is missing. Who runs the government? It looks like some of the critical members of the previous Obama-Biden administration seems to be In control of the strategic agenda.

Sree Iyer: In other news, the stimulus bill is expected to be signed on Wednesday and an increased child tax credit paves way for Universal basic income and this is a goal to expand entitlements. Just one explanation here, Universal basic income is a concept that was floated during the Democratic presidential primaries two or three candidates were for it we’re in they said that a $1000 a month for everybody regardless of whether they are employed or not. That was the premise of that. But this made sense if the United States could control the immigration coming into the borders not when there is uncontrolled immigration because then to become like a magnet. This is my opinion, sir. I don’t know what you think about it. Please take it away; Stimulus Bill and Universal basic income.

Sridhar Chityala: Stimulus bill is done. I think that it will be released today. We covered extensively the pieces of what comprises of this stimulus bill. As far as the universe is concerned if you have four children, you’re guaranteed you will get tax credits to the extent of $1200 – $1000 depending on what age group they are in, so the number that you are talking about is accomplished. So the general theory is that the socialization of the country is well underway and the tax relief simply implies that it’s a payout. It’s a monthly check that gives a payout. What’s the consequences of that to the debt? And what’s the consequences of that to the overall budget remains to be seen and remains to be quantified. But the fact is that this becomes the second most compelling or second most expensive social entitlement programs in US history. Entitlements is a killer in the United States as you know from a bunch of point of view. So this will become the second-largest expansion program in US history to be incorporated.

Sree Iyer: Now, India related news. India has vaccinated two million people in just one day. That’s very impressive considering that now they are also on 24/7 in some areas. In fact, some of my family members have also been vaccinated. They said it was a very very easy and quick process. So, I will tip my to Modi Administration for having pulled this off.

Suga – Modi commit to open Indo-Pacific ahead of the Friday QUAD Summit. India and Pakistan’s latest peace deal sparks, hope and doubt. Sir, what is the doubt part of this? There is no hope. It’s always a doubt. Pakistan never stays to its word.

Sridhar Chityala: I have no idea. I mean, what exactly is the Strategic intent that is coming out of this which is to say we you know, we do a ceasefire, we stop firing at each other. But we maybe we’ll send a little more, few more terrorists into the country and then we rake-up the issues in the United States on CAA, Article 370, we rake-up the human rights issues in Europe. We get the British Parliament to speak. This is the game. I mean everybody knows that Pakistan and India are never going to sit across from each other and have a resolution. And as one prime minister mentioned it is, it’s part of the problem because it is a part of the border. So, therefore, we have a border and we have a problem. And so, therefore, I think that to me the doubt is around what exactly is peace. There is no peace because there are a vast number of people who don’t believe in having peace, who believe that this country should not be what it is. It should be what Pakistan is. There is a term that they are given for that. So to me, it’s just a mirage and will soon clear and the clarity around the conflicts will continue to loom.

Sree Iyer: Huawei is trying to make an entry again into India and there is a lot of opposition to that. The fact that it is being even considered is questionable considering that the United States has banned them outright.  In fact, they have been trying to get Huawei CFO, the daughter of Huawei CEO  will see you into the United States to stand trial and this criminality is of big magnitudes. So why is this latest foray again by Huawei into India, is it just numbers?

Sridhar Chityala: Well, first and foremost, I think that the objective of the Chinese is to dominate technology and use technology to control many countries where they do business with. EU, India, and the United States represent three of the largest clusters for them where this can be deployed. Remember, 5G technology has got remote monitoring and remote management capabilities that used 5G in conjunction with AI in Uyghur to monitor their prisoners and remotely manage them? So, therefore, I think the proposition is like this, negotiators keep coming back. By the way, they have reached out to the United States and they’ve also reached out to India at the same time. With regard to India, they say, we have been doing business with you for 12 years, you blocked us. Now, you have got a spectrum auction and you release parts of the spectrum, why not give us also your piece of the spectrum so we can deploy a technology. Remember, India had a gap when they decided to not use Huawei 5G capabilities and Japan came in and filled the gap. We covered that as well in our program. So I think that it is another way to say let’s get back and let’s start doing business. This is again a disengagement process like just as you said Pakistan. So we are disengaging because the reason is we are slowing the tensions, stopping the rhetoric and we want to do business again. So this 5G is that attempt.

Sree Iyer: In other Asian news, Tokyo Olympics is not going to have any foreign spectators because of the covid and they want to be very cautious about it. Japan and the United States are going to single out China at their 2 plus 2 meetings. In the Myanmar coup, the United States calls for maximum restraint by the Junta. So what is the latest update on Myanmar, sir? And what are your thoughts about the US-Japan 2 plus 2?

Sridhar Chityala: The situation with regard to Myanmar is as-is. In the fight between the political on one side and the military on the other side, the military is trying to consolidate. They may even conduct an election in due course and hoist a government which is the Junta hoisted government. So I think that’s where Myanmar is. Everybody is making a strategic restraint not too kind of polarizing the situation.

Well, China has interesting investments. Japan has an interest in investments. Korea has an interest in investments. Vietnam has an interest in investments. ASEAN, it is part of, they don’t want destability amongst one of its own countries. So I think they’re going to play it very carefully. Well, India has a strategic interest because India and Junta have operated in, especially around the border skirmishes and some of these rebels from Myanmar coming in. Also, you have the Rohingya issue from Bangladesh, India etc. So, I would say it’s a potpourri and people are not going to stir the pot. So they just going to be very careful as they move things forward. All US is saying is don’t polarize the situation and treat everything with caution so that there is a solution at the end of the day.

Sridhar Chityala: In Europe, the EU banking regulator has been hit by suspected Chinese hackers. The EU aims to be an independent chip power with a 20% Global share. At least 20 killed in a suicide car bomb near a restaurant in Somalia capital and dynamite explosions at the army base in Equatorial Guinea kills at least 15 people. These are the news around Europe, the Middle East, and Africa.

Now the markets. The NASDAQ yesterday rolled back by 3.6% for its best day in four months. What is the reason for this enthusiasm, sir?

Sridhar Chityala: The reason for the enthusiasm is two things. One is, the bond rates have stabilized. It came down by, it hit a peak of 1.62, came down to about 1.56, even 1.52 before it stabilized around that 1.52 mark. So that’s both the short term and long term 10-year and 30-years so that I think that’s the first situation. There seems to be also a kind of resolution around the energy. So the energy prices came down again by a couple of dollars both the WTI and the Brent Crude. The third reason is the stimulus. So these three things are restored. I told you we have a linear correlation between the bond rates and the tech stocks. So the tech stocks came roaring back and that’s why you saw a big swing in the NASDAQ relative to Dow or S&P. S&P has Tech stock, so S&P saw an uptick and DOW had a very small blip. So let’s finish the markets. I want to come back and respond to one question that I didn’t respond to that you had asked.

Sree Iyer: Disney claims that it has crossed 100+ million subscribers and Tesla has bounced back rather nicely, 19% uptick in its price. Sir, over to you. You can answer the unfinished question.

Sridhar Chityala: So the unfinished question is you asked about what is the US-Japan two plus two. US-Japan two plus two is very strategic. Suga and Mr Biden share a relationship going back when he was a vice president and Suga was the foreign minister. So, I think first and foremost is the relationship. Suga has been upfront that Taiwan is a red flag, which is to say anything that happens around Taiwan is a red flag. So, therefore, I think the discussion is going to be focused on Taiwan. The last one is, Suga has also raised the issue on Senkaku, whether there is going to be silence or whether Japan should act in concert with the other players because there’s been a number of skirmishes and intrusions and violations in the Senkaku Island. So that is the third part of it. The fourth is covid and climate. Japan supports a broader covid and climate accord and Japan is going to make its play, for 40 years we have been working on this green stuff, but we haven’t seen any positive impact on the GDP rather than you blip. But we still support the green movement and but you justify to me as to what is the overall benefit that’s going to come out. That’s the scope of the discussions. And also I think this 5G, AI, electronic batteries, then, of course, the light vehicles all these things that were originally part of the Quad extension will come into discussions. So Japan can say okay, you know in or should we do something by ourselves because the Japanese are long-term planners. They plan for 10 years and 20 years and 30 years. They just don’t sit and do knee-jerk tactical responses. This is the scope of the Japan-US 2 plus 2 discussion.

Sree Iyer: That brings us to a close of today’s DGI. We look forward to seeing you again tomorrow.