Categories: DGI

EP 158 India fights back, has enough Oxygen; Biden willing to bend on Corporate tax, Yellen flips


Sree Iyer: Namaskar. Friday, May 7 episode number 158 Daily Global Insights with Sri and Sree. Today, we have some breaking news from the G7 group. Before I do that, let me welcome Sridharji that to our program. Sridharji, namaskar and welcome to be PGurus channels.

Sridhar Chityala: Namaskar, good morning to everybody. As we wrap up, May 7th the Friday, the markets are pumped up, and going up, and up, and up.

Sree Iyer: And G7 leaders’ echo Biden and Suga on the need for stability in Taiwan. Your initial thought sir.

Sridhar Chityala: My thoughts at that this has been a repeated assertion that Taiwan remains, the red flag. I hope Mr Biden is reminded that this is not another red flag, and he and his former boss talked about Syria and then the rest is history. The breach of the Taiwan red flag could be catastrophic not only for the South China Sea and Indo-Pacific but around a whole set of nations in that region.

Sree Iyer: China rejects G7 criticism on human rights. No surprise there, Sir.

Sridhar Chityala: Absolutely no surprise at all because we have again, through DGI, you know, been speaking about that, strangely, but no, surprise under Xi Jinping leadership that they have taken a very aggressive and assertive rebuttal, posture, on all political matters, around the world.

Sree Iyer: Japan and South Korea agreed to coordinate with the US on North Korea. This is just merely reaffirming an existing point isn’t it, sir?

Sridhar Chityala: It is. It is a reaffirmation of an existing point. To me, it’s a statement that is made as a ceremonial gesture because Mr Biden has indicated that Korea and Japan need to work together to address it. I mean, they break up the whole South China in the Pacific into parcels and trying to do it. But to me, it’s ceremonial. The reason being that Mr Biden has spent 37 years in the Senate, he is not solving this particular problem. This is a long lingering problem. Eight years under Obama, he has not solved this problem. The only person doesn’t matter whether it’s Democratic or Republican. The only president who has kept this puppet quiet is President Trump, he met him shed his ego, met him in Singapore and he kept him quiet, until then he was unleashing his toys wherever he wants and wherever they could land. It could land in Japan, it could land near Hawaii. And you know, he was threatening but during the Trump tenure, somehow Trump was able to whine him away, whatever there may have, been with China, he is still kept him away. So I see this as just another ceremonial statement. And the North Korean dictator has cared no hoop about what Mr Biden thinks.

Sree Iyer: So this is an unrelated item but, around China sir, China, half of the coast of China, for example, Taiwan or to the South is very shallow which kind of limits, the mobility of its submarines, but Japan on the other side where the sea between Japan and China is, is deeper and that allows Japan to have more submarines to kind of control what China is up to. So, China is trying to do some Maneuvers, right? I mean, they are trying to do some shallow Subs. What is the status there?

Sridhar Chityala: The status is that the waters around the China Sea are much more shallow, relative to the deep ocean waters in East China. Most of the Chinese submarines are built for you know, much deeper water navigation. So, it’s a giant strategy with Japan and the US are looking at whether they really can choke the Chinese submarines around the Chinese entry point and potentially create your blocking rather than allowing them to come into the deeper South, China Sea and Indo-Pacific. So very interesting strategy, that’s being conceived but it’s also you know, China is obviously always trying to prepare itself to mitigate these kinds of strategic Maneuvers.

Sree Iyer: And viewers, we have put up a small island called Palau on the image here. And Palau is a small island which is invited the United States military to build on its Island. As you can see, it is very close to the Philippines. It’s in the east of the Philippines but it also feels threatened. Your thoughts.

Sridhar Chityala: It is in a very geostrategic location and people can see it from the map, it is not only closer to the Philippines, but it’s also closer to the Indonesian island, it is further north of Australia you know going into the Pacific. There has been a concerted strategy by China to occupy Islands from Vanuatu in Papua New Guinea and small islands in the Pacific. There is also a tender that is the tender for underground cables that go around the Indo-Pacific and connects all the way into South China. So they have been trying to bid and there was a concerted effort made by the quad countries and the Pacific Islands not to give it the licensing rights to build the cable. They also have been threatening apparently Palau to say that, you know, if they don’t, they will occupy the island and, you know, build bases around it. So Palau has now reached out to the United States and says, you know, we need a deterrence and who better than yourself to be part of it. Because you only will build the basis and not take over my island.

Sree Iyer: And news from the same region China suspends the economic dialogue with Australia. Sir, this is been going on, we have been reporting in DGI about the tensions between Australia and China. So, now China says look, we are suspending everything with you, so your thoughts on where you think this will be headed.

Sridhar Chityala: It’s a tit-for-tat game. Where is this headed? It depends on whether you know, who is at the helm Scott Morrison and his defence minister and the foreign minister they are very strong and they recognize that Australia must assert and have its sovereignty and Independence, you have seen statements come out and they also are contemplating the Dorbin Island cancellation of the 99 old leases or restricting the components of the lease without compromising the sovereignty of the nation. So what does China do? China basically says I’m suspending all discussion on trade until further notice.

Sree Iyer:  In US related news, US embassy puppies post riles of the Chinese social media. It sounds very interesting what happened here?

Sridhar Chityala: Well, this very interesting picture but in the interest, we have not posted that picture you can see on the social media which is, you know, there are little puppies moving around, you know, puppies are sent for training and then they are ready to be unleashed, ready to be absorbed as a pet into various households. So the May 4th was the day, when the Visa processing started for the Chinese students, we again reported that in DGI. So this particular little post made its way, which is to say, you know, to subtly but sarcastically endorse the re-entry of the Chinese students on social media. Obviously, it’s a little game and received very adverse, is it what I forget the name of? Is it Weibo or WeChat, one of these big social media Chinese platforms, they saw that backlash coming out as a result of this?

Sree Iyer:  And in other news, the US must re-engage with Asian Partners and rejoin CPTPP and US-China to assess phase one trade deal, according to the Biden trade Chief. So, all its sins are all washed away. The US wants to sit down and start engaging with China again.

Sridhar Chityala: Well, I think I just want to make one clear observation to all the viewers, listeners, followers, Etc. The United States policy today is consistently inconsistent or it is consistently ambiguous and ambivalent. One can understand the reason on Katherine Tai who heads the trade, as well as in the WTO representing the United States. You are beginning to see the ripple effect of these three or four people running the White House. One can see why CPTPP, though it does not have significant relevance to the United States, we have already covered this extensively as the bilateral relationship with a number of countries in the trans-pacific all are symbolic. While one can understand, you know, you want to get in, you remember that the UK is the number one waiting list candidate there, then you hear this next statement, which is to say that we are now re-engaging with China and we will be assessing what would be the phase one of the specific deal. If you recall again, DGI we have, we have indicated that the reason why China has stopped their rhetoric on Taiwan in the recent days and stop its incursions, which it was doing almost on a daily basis is that it wants to sit down for discussions with the United States. So this is obvious they know something and this is the ripple effect of this. If all hunky-dory and we again reported two days ago, maybe even yesterday the trade deficit has increased by about 74 billion dollars for the month of April and of which 11.6% increase is with China and contraction with Mexico, which is right near shore. So, it is a very interesting set of data that you’re beginning to see and it is more conflicting and compounding in terms of what Biden’s policy is full of rhetoric, whenever he is in any of these big platforms, but it contravenes with some of the on-ground decisions that is being made by some of the members of his cabinet.

Sree Iyer: Now, this whole idea of trying to raise taxes on corporate is definitely going to push the US towards disaster because nobody would want to do business inside of the US. That means jobs will be going away and the very people that are dependent on them that is their whole voter base those are the ones that are going to suffer, isn’t it?

Sridhar Chityala: Well, this whole corporate tax, first Mr Buttigieg said 17 million, then he retracted, he said 3 million and that 3 million also looks out of whack. When you tax a corporation, how are you going to allocate the additional capital that’s available to them or additional capital that’s been taken out in terms of expansion of their businesses? Doesn’t add up. Actually, a Tax Foundation study found that actually, there is going to be a loss of more than 170,000 jobs and there is not going to be revenue accretive as a result of this. There is going to be a net loss of this. Now, he’s probably got wind of that and so he has come up with another strategy, which is a 61% increase in wealth inheritance tax. So, the latest statement that is making rounds is many people who have two homes, two boats and a private jet can afford to pay for those who don’t have any. So this is Biden’s now marketing adage as to how to justify. So wherever he is going to lose, suppose he loosing on the corporate side when he says he’s willing to compromise. The next thing that you see is you have some new tax coming up. We already have found he has a 1.3 trillion dollars hold on the America child plan. So more and more numbers mean more and more gaping holes. So he has to find a way. Clearly, on the corporate side, as you rightly pointed out, there’s a huge push back.

Sree Iyer: Now, AOC and Markey want to push a 10 billion. 1.5 million people run Climate Corporation, which is an entity if you think of it that will enforce this climate compliance by various countries. First of all sir, do we need that many people? Second of all, how can the United States enforce compliance on other countries?

Sridhar Chityala: First and foremost, all you need to do is, I’m not going to repeat in the brevity of time, all of you need to go back and look at AOC’s background. Study the background and Markey’s background and figure it out for yourself whether they have any competencies to make judgments around how you make policy decisions. Just because you attended a climate rally doesn’t entitle you to be a subject matter expert in that domain. So she wants to have 1.5 million people and the 10 billion budget. Has she managed a penny in her life? Go back and take a look. This is how the Democrats run havoc with money. It has only two agenda items, one, votes and jobs. 1.5 million guaranteed votes, so they probably are willing to pay $10 billion of your money and my money and then run an agenda that is not going to produce the outcome in the tenure that she’s in. So, therefore, to me, this is what I see as the agenda.

Sree Iyer: India related news, Reliance will be flying in Israeli exports to operationalize the diagnostic system. Is this something to do with the covid case, sir?

Sridhar Chityala: It is to do with covid. India, today is all about covid, oxygen cylinders. If you’re not talking about oxygen cylinders, you’re probably talking about burning homes and people playing Bengal. These are the only two things that are going on in India at the moment. While in the media, while in the background, there’s a lot of activity going on but the primary focus is around oxygen. So we are now breeding so much oxygen, I’m told that in India there is an excess supply of oxygen. It is more around facilities that need to receive this oxygen and give it to people. So now this gentleman Mr Ambani has come up with a much more innovative scheme. He has brought in the Israelis, he said, within 15 seconds to 2 minutes, this Israeli equipment will be able to diagnose and say whether it is covid are not covid. I’m told, again, a lot of people are getting admitted out of fear or running around in the fear that they have covid but it’s taking a fair amount of time by way of testing and so on. So this could be one way by which people can be tested and say, ‘look you don’t have a covid or you’ve very mild symptom of covid, 10 days at home, you will be relieved. So, I think it’s a very good program.

Sree Iyer: Indian Navy is bringing home, liquid medical oxygen and medical equipment in 9 warships. India has received 3,000 concentrators as supplies arrived from all around the world. This reinforces what you just observed that perhaps now, India has enough oxygen.

Sridhar Chityala: I think India has enough oxygen coming out. People forget that just because you have lots of oxygen doesn’t mean that the states can sleep. The states slept, that’s a separate topic, which we don’t have time to run into. And again, mainstream hides the news. How much money has been given to each of the states and what they have done with the money in terms of augmenting the oxygen capability as part of the covid program? So you can have all the oxygen in the world but if the states don’t gear themselves to receive, manage it and give it to people, all of it will be lying in warehouses or will be lying in ships.

But the great news is the world has supported it. Entire logistics have come into play Army, Navy, Private Corporate Enterprises are now supplying oxygen. So, including Taiwan has sent 150 or so containers of oxygen. So India is well on its way in terms of its domestic needs. Now, they have to get the logistics and the healthcare services going.

Sree Iyer: In Markets News, Pfizer’s insistence on protection against lawsuits stalls India approval. Now, Pfizer is asking India for what? That they are immune from any deaths that might be happening because of taking the vaccine?

Sridhar Chityala: Worldwide, we have seen the Gallup poll, we have seen the Rasmussen poll, we have seen the WHO poll, there’s still a lot of resistance. In fact, the United States Target is offering a $5 discount coupon for those people who are willing to go and vaccinate. People might think what’s $5, but for a lot of people who do coupon redemptions, $5 is a lot of money, to be discounted at the tip. So there’s a resistance. So Pfizer has been given permission in its entirety to retail. It is saying, there is bound to be issues and the issues can come from a range of things including the vaccine itself. But I don’t want to be sued for the collateral consequences resulting from it. And people are always afraid of India by way of any adverse kinds of activities, then you have all these rights, lobbies and groups and so on, they pump up. So I think that’s what it is about. It’s a new vaccine. It’s getting into the market. It’s very well tested in the United States, but there will still be collateral consequences, we want to be immune from damages.

Sree Iyer: Record day in the Markets Sir, with your permission, I’ll put up the deck again and we will show where the Dow is. It has risen to 34,848.53 and it is a new record, sir, and like you said it just keeps going and going like energizer batteries.

Sridhar Chityala: It is an energizer battery on the back of very important data, which is our unemployment numbers have dramatically come down. It’s come down to less than 600,000. Remember, we are around the 300 to 400 thousand number. But it’s coming very close to that getting there. So, I think the markets are saying, that we are on the way back to recovery, what you call the traditional stocks rather than the pandemic stocks will begin to see the earnings as we head out into the outer ear and we have plenty and plenty and plenty of money in the hands of the consumers, coming through the dole-out schemes. So, therefore, it points well, to the earning season. So the markets are rewarding Dow more than SNP or NASDAQ. Having said that you also have, as I said, this is everyday news. Here there’s more dough so you don’t need dough from work. You are getting dough delivered to your home. So why do you need to work? So there is a huge problem in the market in terms of employment, people not coming back to work because they are enjoying the benefits of free money being given by Mr Biden.

Sree Iyer: In an interesting development, Janet Yellen flip-flops, again. This flip-flopping consistently has been a feature of this government.

Sridhar Chityala: Well, it has. And at least a couple of the viewers talked about, how can Janet Yellen be critiqued. Well, Janet Yellen can be critiqued because generally, in my view, people who are Central Bankers, don’t hold themselves accountable for any sort of… They are macro policymakers, not micro policymakers. They’re not accountable for the quarter to quarter earnings. If their projection goes from 4.3%  to 5.8% or 4.3% to 3.2%, nobody is going to hold them accountable. So they make a broad set of statements. So what is the criticism about? She basically said on one day, the interest rates are inevitable to rise in an overheating economy. So, there is a lot of criticism. She said, I never meant that, all I meant is interest rates could rise as a result of the economy showing very positive strands. Today, she has again been critiqued. So this is the flip-flop that we are referring to. She’s also apparently not gone to the senate or the house and briefed on the covid funding while she goes on the Press Corps and makes statements. She was dinged for that as well. So it’s a very interesting difference between Mnuchin, who was not in the press and making statements on the fiscal policies and they used to come out as a normal course. You have almost an active engagement by Janet Yellen. So, there’s a lot of criticism coming out as a result of that.

Sree Iyer: Yellen is doing a lot of yelling.

Sridhar Chityala: Yellen is doing a lot of yelling from the wonderful State of California and from the shores of San Francisco, sir. So we are hearing a loud and clear.

Sree Iyer: With that, we bring to an end today’s episode. I will be back again bright and early next Monday, but we may have a weekend program where we are going to do a deep dive into the Digital Currency where we and explain the current rise in value that is going on, what is the intrinsic value, why you should look at investing in a Bitcoin or a Coin or a Doji coin. There are so many digital currencies that are going to start sprouting out or they are going to come out of the woodwork. We are going to have a discussion about this, where the relevance of these things is and so on and so forth, do join us for that. But before that Sridharji, if you would like to say something, in summary, I’d like to invite you sir but I’m saying goodbye for now.

Sridhar Chityala: Good Bye. Good night. We look forward to seeing you on Sunday.

 

 

Sahil Mishra

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