The main points to today’s news:
- Amid the border surge, confusion prevails over Biden policies.
- White House shuts down Putin invitation to a live video chat with Biden after sparring.
- Made in India Landing Craft Utility (LCU) commissioned into Indian Navy at Port Blair: Can carry Battle Tanks and Trucks
- Chinese Military bans Tesla Cars in its complexes
- US India AI initiative launched to boost bilateral cooperation.
Sree Iyer: Namaskar, Hello and welcome to P.Gurus Channel. This is Sree Iyer your host and I am with Sridhar Chityalaji. Sridharji, welcome to episode number 123. Today is the 22nd of March 2021, sir.
Sridhar Chityala: Namaskar and good morning. We have had a wonderful very eventful weekend and I am sure that we’re going to have an excellent week coming up as well.
Sree Iyer: Yes, and we have a lot of news to share with your viewers. So we’ll start off with the main points.
In United States news, Biden stumbles and falls climbing stairs to Air Force One.
Amid border surge confusion prevails over Biden policies.
Republicans call for a hearing on how the border crisis may threaten National Security and the safety of Americans.
Former ICE Chief says the whole nation is a sanctuary for illegal immigrants.
Trump is returning to social media with his own platform.
And Republicans voted to lift caucus ban on earmarks following Democratic Party revival. So, a lot of stuff happening, sir, what are your thoughts?
Sridhar Chityala: I think my thoughts are there are three specific items that have dominated the headlines over the weekend. And the first and foremost is the developing border crisis, as yesterday Sunday, there was a developing story and headlines from Fox the border situation has reached such a precipitous crisis that they’re not going to hold anyone in the Border, allowing them almost like a straight-through passage into the country. And in the prior years, at least they used to be detained, retain and have documentation of notification of arrival or reporting in a specific court. Now they are saying we just don’t have the time don’t have the resources and everything. It’s an open border. And there has been decriminalization of the border crossings. So let people go through even covid tests have stopped. And so these people are coming into the country and this very mixed news (DHS) Department of Homeland Security’s secretary or Department of Homeland Security has given a press statement which is to say borders are closed, doesn’t seem to be the case, when you hear from the southern states, especially Arizona and Texas.
The second story that is coming through as a result of that is many of them are not covid tested and many people, you know, there’s a number that ranges from 10 to 25 to 30% of the people entering the border states, you know, without a covid test.
The third that is also, as a result, is that you can see that you read out in the headlines the ICE (Immigration control enforcement) head saying that this is now a national security issue with people across the country. Trump had reported that you know, there’s some close to according to his reports those two people from more than 100 countries. Not just purely the three Central American Republic’s making the crossing. So I think this particular issue is a great concern which is the most dominating headline as far as the weekend is concerned.
I think the second thing that is also causing a little bit of a concern for people is that we are now taking up both, you know in Georgia and Michigan we have seen and now we are hearing that Arizona is going to take up manual recount of 2.1 million ballots. Did the Supreme Court decide to take a complete pause and allow this chain of events to continue rather than resolving at that point in time? He also had the unfortunate January 6 Capitol hill riots, which probably prevented any kind of an impasse for a period of five days or 6 days, when Jim Jordan was alluding to or would have presented but that never happened. Now, we have the Arizona senate, you know doing the recon what happens if the recon says that it is, you know there was a violation. I’m not suggesting it’s the case, but the fact that it is being taken up again is the cause for concern in terms of without any reforms whether there is going to be a process that that is going to continue.
Now, the third thing is Nancy Pelosi is going you know, gangbusters are going ahead with the Electoral reform process, which is to bring everything to the centre in terms of conducting the elections to the process for voter ID, voter registrations are called as the HR1 act. Undermining the stage such as what Arizona, Texas and some of the other states are doing. So these are three kinds of main dominating from a domestic US issues point of view.
Sree Iyer: Sir, let me ask you a question. Why is it not better for the centre to try and take over control sir, because then it will be a uniform process across the country isn’t it?
Sridhar Chityala: See, I think that there are unique nuances that vary from state to state in terms of how the electoral process is managed and conducted that ranges from technology that ranges from, for example, if you take California, they have a huge army bases, you know, especially San Diego and so on, something similar in Nevada, so those States may require a slightly different mechanism in terms of early to late, that doesn’t need to apply to all of the states. This has been the state’s case and some of the states have to say that they have unique nuances as to why they need to have a specific voter ID and some states feel that the voter ID is not warranted by anybody who is living in the state. So now let us say you bring it to the centre and impose a consistent kind of set of norms. Let us say only 50% of the people which is adequate or 50.5% of the people vote for it and 49.5% of the people rejected. So, how does it then bring about a kind of minimum criteria that constitutes the basis for the conduct of the elections by the states? Because it is asymmetrically to skew towards one way then you find that the vast set of constituents are not taken into account in terms of their views. This has been the constant contention that is a simple majority rule to pass. Now, if you say 66% or 70% of the people have to pass given the importance that this has on the Constitutional relevancy of an election then I would I’d say agree, but if it is going to be without simple filibuster rule, which is likely to be eliminated or you need to establish a minimum kind of criteria. Then, I think it would make sense as you rightly point out to a central scheme, which is accepted by all states or you come up with a central scheme you send it to each of the states and get each of the states to buy into that. Then you have a two-step process to introduce a centralized scheme, where input is taken from all the different states and various constituents and then there is a mechanism that is consistent across the Nation. I would probably tend to agree with that rather than essential simple Central imposition.
Sree Iyer: And White House shuts down Putin invitation to live video chat with Biden after the sparring.
And in US-China South China Sea news, the US-China clash publicly in the first meeting under Biden as the gloves come off. What are your thoughts on that meeting, sir?
Sridhar Chityala: I think it is an unmitigated disaster for the United States and I don’t know why they held this meeting in Alaska and why this had to be a public meeting and why they had to be a press brief independent. Apparently, you know, this five minutes or seven minutes time slot that was given to China. China decided not to follow the rule and you know went on a complete blast it became an embarrassment. Both parties have walked away with what I call, the sub-optimal outcome and the intent never achieved the objective. There was no rush for this meeting, especially when Blinken and Austin attended meetings in Japan, attended meetings in Korea. Then, Austin went to India and Blinken came back to Alaska and Jake Sullivan joined him in that specific meeting. And China called it has two plus two to add insult to injury. Two plus two is usually the Secretary of State and Defense. There was no defence, there was a National Security advisor. So, they called it as 2 plus 2. They let go of the barrage on what all the US has done. So the US has no right to dictate what China does. Basically, I think China is very apprehensive that it is getting increasingly isolated in the world and they let out their full steam. I don’t think China is going to have too many friends, you know after this, but the story is that China ever have lots of friends at any given point to use money and other kinds of mechanisms, to make the influence felt. So I think that this was unwarranted, I think Mike Pompeo and even Trump tweeted. Mike Pompeo tweeted and Trump mentioned this meeting should not have been in Alaska and they should not have been in person and they should have been very specific format agreed to between the two. So, then the net result is they have come out worse than where they started and one thing if you have to say from the policy continuity point of view both Biden and Trump or following a consistent policy, which is putting the rhetoric and pressure on China.
Sree Iyer: And GOP Senators push stripping China’s preferred trade status to protect the US workers. That’s big news.
Sridhar Chityala: It’s big news. They want the subsidies and they want the agro-economy to be protected and preserved. They want the manufacturing industry to be protected. They want the rare earth and semiconductor and electronics industry to be protected. They want some of the more strategic technologies such as 5G and AI Etc., to be outside the purview of what is developed in the United States. I think the GOP also wants to make sure that many of the technologies that are imported from the United States don’t fall into the hands of the Chinese PLA. So, I think that is going to be back on the table if they ever have a discussion or a debate in the Senate.
Sree Iyer: Sir, intelligence officials believe China meddled in the 2020 elections to dislodge Trump. The question sir is this beyond John Ratcliffe somebody else is now weighing in.
Sridhar Chityala: No, it is this set of people within the intelligence Community the names not been released. But the declassified report which we can actually share on the PGurus site. The declassified to the extent of what is available in the declassified report states that it is, not an overwhelming majority that went with John Ratcliffe, but certainly some members of the intelligence Community concur with the outcome that there was interference from China.
Sree Iyer: Stop Asian hate has relevance everywhere even in Asia. Can you please expand sir?
Sridhar Chityala: Well, what’s happening is that many of the people who are frustrated around the world are venting their anger. For example, if you take Myanmar in Myanmar, you know, the many of the factories that were destroyed were Chinese, you know during this revolution, during this Junta takeover of the nation, that’s an example, which namely says the targeting of some of this, you know, Asian or was Chinese. They don’t want to say Chinese, you know, the Asian or East Asian people are the direct result of the fallout from the covid. These people have seen that to some extent in other ASEAN countries as well.
Sree Iyer: The United States and South Korea omit the word denuclearization from the joint statement. Does that mean that South Korea might nuclearize itself?
Sridhar Chityala: I think that that simply implies that the right of deterrence lies with both Nations. That’s all it simply means. We don’t want to have one country going one way and without any kind of unfiltered checks on North Korea.
Sree Iyer: It is interesting news; the Chinese military has banned Tesla cars in its complexes what gives sir?
Sridhar Chityala: I think that it is very similar to Huawei communication. Well, what’s the best definition of Tesla cars? The Tesla cars are called computers on Wheels. So they believe that you know, there’s a fair amount of data that is collected from the ecosystem that is stored in a central database of Tesla. So, which, is accessible because that is within the prerogative of the US law enforcement. So they believe that data is available. So, they’re saying if you’re going to apply to my 5G Huawei technology. Well, I think we would like to apply the same. And, of course, Elon Musk has come back with a rebuttal, he said it is all nonsense, we don’t do any of those things. But then, of course, do the Chinese listen?
Sree Iyer: And in Myanmar coup, Malaysian PM bags the proposal for an ASEAN Summit. Is Malaysia part of ASEAN?
Sridhar Chityala: Yes, they are one of the important members. Actually, they are one of the first five founder members. It was originally the Philippines, Thailand, Indonesia, Six Brunei, Singapore and Malaysia, then subsequently the other nations got added such as Vietnam, Guam, Cambodia and so on.
Sree Iyer: Jokowi also calls for a meeting of ASEAN leaders on the Myanmar crisis. Malaysia gives 48 hours to North Korea for its staff to leave. What happened there, sir?
Sridhar Chityala: I think this is a fallout that is going on there between the two Nations and effectively Malaysia has said that you cannot use our soil for any of your illegal and espionage and other types of activities, and you cannot be a threat to the state of Malaysia. So, therefore, they have given a notification for them to leave.
Sree Iyer: In India news, the United States Defense Secretary Lloyd Austin meets Indian leadership, focused on the expansion of strategic ties, the 3-day visit achieved expanding bilateral defence and security ties emerging from China threat and this is notwithstanding the media barrage in China, Pakistan, and Russia against India.
Sridhar Chityala: Well, I think in the new definition, which we will probably cover in a very special show on the other status of QUAD and where we are heading. I think the United States has declassified or reclassified the construct of the QUAD into two groups. The QUAD has those who are allies and those who are strategic partners. The allies are Korea, Japan, Australia even Britain for that matter, they are allies with whom the United States has much deeper alignment in terms of strategic partnership. Whereas they classify India as a partner. India is not an ally because India has preserved its autonomy in terms of the choice. So, therefore, they call them as a partner. So when you look at the statement that is coming out in a technical term, it has become 1 plus 1 rather than 2 plus 2, historically 2 plus 2, relegated to 1 plus 1. But the good news is Austin met the Prime Minister, met Doval, all met Rajnath Singh Ji and then they expanded in a number of areas where they want to have more drones to be bought, integrated 29 MHQ drones. They want to have more Helicopters and more defence expansion. That’s one thing, the second is they also want to have what Austin calls bifurcated and allocated roles for managing the Indo-Pacific and the South China Sea. So they’re moving towards, without saying QUAD is being reshaped, they are saying that it is moving towards a different kind of architecture. What responsibility India will have, we don’t know. In QUAD architecture India is supposed to be one of the leads or one of the leaders of the QUAD partnership in the strategic objectives that QUAD was defined to be by Shinzo Abe. Shinzo is behind QUAD. Even for the QUAD meeting, Prime Minister Modi was quite reluctant and he was persuaded by Scott Morrison and Mr Suga to attend the inauguration and which he did, meeting once the agenda was defined. So I think that the objective seems to have been accomplished. There was some media news that said that Mr Menendez, one of the senators from the United States had written that sanctions would apply if S400 was imported from Russia. That issue was to be brought up, whether it figured in the discussion, I don’t know but the fact is that I think India is well prepared to deal with it because they’ve dealt with it quite a few times as to why S400. So I think, overall, that the discussion seems to have gone in the right direction. But we could see recalibrated outcomes emerging out of it.
Sree Iyer: According to Reuters, I believe it did. So we don’t know we’ll have to wait and see how it goes. In the United States, India launched an artificial intelligence initiative to boost bilateral cooperation. Now combine this with the fact that Israel is also going to work with India in its drone technology. That’s a significant step to try and help India to have state-of-the-art drone technology, isn’t it?
Sridhar Chityala: It is. I think this is what I have also been talking about that India’s Intent and Strategy to be strategically flexible in terms of the choice of partners, working with India in various programs as part of either PLI schemes or part of the domestic programs that have been launched by Prime Minister Modi is giving it the flexibility to shape the direction as is required or as is deemed from an Indian vantage point. So it no longer is a static fixed relationship. That means my partner is only Russia and I will work only with Russia. So Israel clearly has emerged as one of the strategic partners. Japan needless to say has been the long-term strategic partner for India. In the recent past, we’ve also seen Taiwan emerge as one of the partners. Of course, Korea has also been an independent strategic partner to India with a vast amount of investment in the country. So Israel is the latest country to join. I assume it is going to continue. We have seen major defence expansion potentially 5G and AI because there’s an AI-US partnership that’s also announced. You find that the United States is another partner that is very very strategic. We have seen that in the Avionics with the partnership with the French. So India is using the right set of partners, a combination of investment, technology, localization of the production, emergence os Israel in this specific Drone is very significant.
Sree Iyer: Made in India LCU – Landing Craft Utility has been commissioned into the Indian Navy report player. It can carry battle tanks and trucks.
Sridhar Chityala: It is. It’s very interesting because the reason is if you recall Port Blair is one of the important strategic vantage points for the Indian Navy to apply the blockage in the Malacca Straits. So it requires both capabilities on land and sea, of course, it already has the capability in the air by virtue of the carriers. So the story is that this indigenous locally produced LCU is one more feather in the cap of India and it basically is building fortress type capabilities to manage its defence and offence needs in the waters of the Indian Ocean.
Sree Iyer: India and UK to sign a joint trade agreement during Boris Johnson’s visit. So this visit finally is happening and it was to have happened during Republic Day. So let’s hope that things start taking an uptick from here.
Sridhar Chityala: Indeed and I think that if you can again look at it from a UK point of view, the United Kingdom has formed a strategic partnership with ASEAN which is it’s traditional, which ASEAN welcomed, in fact, Singapore welcomed wholeheartedly. Japan, the UK has formed a partnership with Japan, it has a partnership with Australia. Now, it is coming to India which is historical, the UK is one of the important partners of India. So, they are establishing a partnership with India as well. So which augurs well, so they have not tied to the EU scenario anymore and Boris Johnson is on his way to say how to rekindle and repave the UK economy with all its vintage, heritage, empire partners.
Sree Iyer: In Europe news, Ukraine to return ownership of jet engine maker from Chinese investors. So is it like resting it back?
Sridhar Chityala: Yeah, basically they’re saying that we do not want Chinese investment.
Sree Iyer: EU countries resume using AstraZeneca vaccine. The lockdown extensions loom in Germany as instances increase, so is Belgium, Paris, the Netherlands, everywhere in Europe, we are seeing covid cases going up. In fact, Romania has record patients in ICU in one day. What is this sudden surge? What is the reason for this, sir?
Sridhar Chityala: Variant. There are various variants that are now coming in. We have a Brazil variant. We have a UK variant. We have an African variant, so we have quite a few variants coming into the mainstream. As is the case, nobody is able to determine how these things are happening, but it’s the biggest arising variants and it is the next wave as people try to relax. And remember, the EU is the confluence of a free flow of people. Whenever they have a mild attempt to lift the sanctions you have people moving from one place to another being very densely populated and densely located.
Sree Iyer: In markets, the G7 suggest boosting IMF reserves to help vulnerable nations first time since 2009.
Sridhar Chityala: In other words, they want to create a reserve. Those countries which can print money, those nations which don’t have the ability to borrow by virtue of week balance sheets, they cannot be left to fend for themselves. So IMF or World Bank, especially IMF in these circumstances comes to the rescue. This being a pandemic, they are asking and reaching out to the nations to create a reserve so that some of the weaker nations can be funded to manage their balance sheets.
Sree Iyer: DOW fell more than 200 points as there was a bank sell-off breaking the two weeks winning streak. Now, the rate fears are being highlighted for the blame and it looks like the bond market is basically dictating what the stock market are to be doing. Your thoughts, sir?
Sridhar Chityala: That’s exactly it. The bond markets are not buying into the theory that inflation is containable and the rates can be kept to the levels that they are. So clearly, I think this excess stimulus that is getting into the economy is not very welcome. Yesterday, which is the Sunday, Lawrence Summers, who is considered in many ways as the czar in the Democratic Economic Policy framework and who himself has served as the Treasury Secretary went public by saying that in 40 years he has never seen a fiscal and monetary policy that’s on a collision course not auguring well for the United States. So this shift that we talked about which is the focus is not on traditional vectors, but more around the labour market as the basis for determining the rate hikes are causing a lot of hiccups. And the synchronization of both the treasurer as well as the FED chairman moving in the same direction where they are allowing inflation to run high according to the bond markets without adjusting the rates is not an appropriate acceptance of the market movements.
Sree Iyer: FED’s decision not to extend a pandemic era exemption on strategic liquidity ratio requirements further hurts, isn’t it?
Sridhar Chityala: It does. I think that under the pandemic certain asset classes like treasuries where they were exempted from holding risk Capital against it because it’s the treasury. But on March 31st that expires so which means that even for assets held as treasury there has to be a risk capital provision. What that may see is that you may see the treasury being sold off by the Banks. So the Banks took a hit as a result of that because it’s more Cabral. The second I think is this $120 billion program that is continuing and there is more stimulus planned. So when you remove this provision; SLR provision then you are left with the public to effectively buy or overseas debt holders to buy this new debt that is going to be put into the market. So this is another kind of gridlock which is why the bank stocks took a hit.
Sree Iyer: Crude finished at $61.51 Brent at 64.51. 10-year treasury at 1.725%, 30-year treasury at 2.436% and Bitcoin at $58,427.65. Where is Bitcoin headed; up, down, or sideways?
Sridhar Chityala: Once the economy begins to recalibrate and recover as in the second half of the year or from the third quarter by all calculations and predictions the Bitcoin could be in the $75,000 to $100,000 kind of a number because when the markets go up you find that the tech stocks begin to take a little bit of a hit, as the rates climb you find Bitcoin speculation moves up. So I feel that Bitcoin will move. The reason why we say that from the second quarter to the fourth quarter, you will see an uptick because all of this cash that is now going to get into the system, we just got in right because the $1.9 trillion stimuli just got passed so that liquidity is going to sit in the system besides there’s more coming and that has to be spent in some way or the other. So you will begin to see maybe, asset inflation or inflation in some of the market princes. That’s also reflected in the GDP revised growth that FED has forecast.
Sree Iyer: That’s all we have for today. Namaskar and see you again tomorrow. Same time. Same place. Namaskaram Sridharji and thanks as always.
Sridhar Chityala: Namaskar. Have a wonderful day and we look forward to seeing you all tomorrow. Thanks for all your support.
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