Sree Iyer: Hello and welcome to episode number 76, today is January 18 2021. I’m your host Sree Iyer and joining me is Sridhar Chityalaji. Sridharji namaskar and welcome to be PGurus Channel.
Sridhar Chityala: Namaskar, good morning and happy Monday. In the United States, it is Martin Luther King’s Day. So, happy Martin Luther King’s day.
Sree Iyer: Yes, and for a few today is a holiday. So, some of them are enjoying an extended weekend and what better than to wake up to Sri and Sree. And we have a very long list of important items to cover today. We’re going to jump right in, we’ll start with the inauguration that is about to happen on the 20th in two days from now and looks like Washington DC is looking like a fortress that is just putting it mildly. So let’s take it away. Let’s start from there Sridharji, so, why don’t we start at what is going to happen on the 20th? And we hear that President Trump is not going to be there but vice president Mike Pence is going to be there. So take it away, sir.
Sree Iyer: Great. Thank you, sir. This is a very unprecedented kind inauguration that we would have on January 20th. We are in a complete lockdown as Sreeji mentioned. We have pretty close to 25,000 National Guards and troops guarding pretty much every nook and corner of the capital. FBI is doing extensive testing of people coming in. The Army is validating the background of everybody including the National Guard and its own internal troops, just to make sure that there are no issues why because there is a perceived threat that they could be somebody internal who could instigate a problem. Now, whether this is all real or whether it is being revved up but these are facts that have been put out to the Press. They won’t be any public, it’s virtual. The event is virtual. We are also in the middle of pandemic and the United States has seen more than 300,000 deaths. So, there’s also that sombre kind of a moment not to have significant.
So what will happen is that the event kicks off with the President being sworn in after that with the members of his clergy doing the invocation and then basically that it kicks off and he gets sworn in as the President then after all the events are complete in the National Anthem by Lady Gaga. They would then go to the Arlington Cemetery to place the wreath. Kamala Harris becomes the first coloured lady to be sworn in as the vice president. So it’s a very simple and sombre ceremony well-orchestrated and actually, the things kick off today with activities in Washington DC but, mostly around the presidential group. Usually, the process is that the incoming president is received by the outgoing president at the White House and all that stuff given the perceived animosity and given that they don’t want to meet each other. They won’t be such a meeting and that part would be represented by Mike Pence in his capacity. So, Mike Pence will be very much present at that. There is also a kind of an evening ceremony or evening function with Bon Jovi and Demi Lovato and a host of others hosted by Tom Hanks. I don’t know whether you require that Pomp and show given the kind of tensions issues that prevail in DC. So, the whole thing looks very sombre and very unusual if I have to use the trace in terms of this. But, elections are complete, all the stuff is complete whereas parallel investigations are on and all those kinds of activities and the president gets sworn in.
Sree Iyer: Yes, and we have a lot of stuff to share with you. Let’s go take a look at the first 10 days of the Biden agenda starting with a 1.9 trillion dollar stimulus bill. We announced the details of that in our previous hangout. Sridharji, anything to add on that needs to get approved by the Senate. Now the Senate is going to start with which one the stimulus bill or the impeachment. I’m just curious.
Sridhar Chityala: I think if I had my honkers on then, I would say I think they’re going to start with the stimulus bill because the reason is, Biden is notwithstanding all the things that one perceive, Biden is a carrier kind of politician, he has been there. So his first priority of business is to focus on people and the issues. He has laid out four priorities, of which I tend to agree with two of them. One is the Covid because he wants to have a new director, he wants to have an accelerated program. He wants to bring FEMA Act in which is Federal Emergency Management Act, FEMA program so it’ll be like a treated like a pandemic but also a disaster so, there is an orchestrated program. He wants to have more sourcing, more monitoring, much more active program. He is being supported by Dr. Fauci, he says, we can do 100 million vaccines in a 100 days. So, therefore that’s his proclamation, so, that’s one priority which I tend to agree. The second priority is the adjacent economics crisis, so which is namely adjacent to that you have the economic crisis, which is perpetuating in the country.
Now, which is the 1.9 trillion, but he’s not satisfied just with that he wants to have adjacent programs through executive actions passed, one is deferment on these student loans, which is impacting, which is one of the election manifestos deferred program. I don’t know whether they will accept sign off which they were thinking about we will sign off all the student loans, that’s 1.4 Trillion dollars, you are not going to sign off, you’re going to sign off parts of it. But, then who bears the risk, they would not do it other than it’s an election stunt. The second thing that he was talking about is this, these racial equalities, the third is talking about is Paris Accord. I don’t understand how the Paris Accord is a priority to be candid, we are environmentally safe in the United States, we drink water from the tap and we drive on the roads. We are not wearing masks when we drive on the roads, we are not puffing air. So, how can that be our immediate priority only he knows that not many people. The second is talking about the racial equality crisis, I don’t know I think that the data which we will cover separately another program is that all the kind of the what you call is the minority communities there pay or what you call as the per capita increased during President Trump’s period relative to the Obamas period of relative to any prior president in terms of during this particular phase. So I don’t know what he plans to do with those specific measures maybe extend unemployment insurance etc. He also thinks that there is an imminent and impending crisis of these 11 million illegal immigrants who are here, he wants to come up with dual program to normalize. So, he is identified through executive actions within his first 10 days. He will pass this, but, I can see only two things that are critical which is being the pandemic and whatever is needed on the economic stimulus.
Sree Iyer: Now the reaction for the stimulus plan, thus far people have welcomed the additional $1,400 and the question that has been by small and medium Enterprises is what happens to the PPP program? There is no mention of that here, isn’t it?
Sridhar Chityala: Correct. I think you are right you are absolutely correct. The PPP program gets a little bit dunked, if you recall we critique two things one is 350 billion dollars allocated to local and state Administration. This is over and above the 300 or 340 billion dollars allocated in the first, this 350 billion was a subject of huge debate as to why Stimulus 2 was not released. The stimulus 2 was released then eventually it was released without that and a stimulus 3 kind of package came in, so that’s close to about 700 to 750 billion dollars. So effectively what they’re doing is many of these states which are run by Democrats or Liberals as we call are bankrupt. They basically putting good money for a bad purpose to basically block what they have, this whittled away by way of precious Capital but who to ask right? Because now they control the ubiquitous power, if you ask anything that Democrats will say Hey, you know, you have been critiquing, no problem. If you can economically justify it, talk to us and debate to us on the data side, whether you are Republican whether you are a Democrat use the data anyway, so I think that’s being critiqued.
The other thing that’s been critiqued is this big money again, being put to the schools, which is about 120 dollars, the question is being asked as we have already given in the first two programs. The schools are just coming up, what exactly is this money going to be is going to be targeted for? Similarly, another 63 billion dollars was allocated, You don’t see these numbers here, You see the number in the previous presentation. 63 billion was allocated for this whole covid and Healthcare Support Services. I mean, it’s astronomical one, you kind of look at these numbers mind you, this is not the end, this more to come with this infrastructure green and taxes and so on. So I think that there’s a lot of adverse reaction. We don’t know whether the Senate will pass it as is or pass components of it that remains to be seen. Another big issue that has been stuck in this is the $15 minimum wage economies have calculated this $15 minimum wage will cost at least 1.3 million jobs. Now when I look at yesterday Brian Deese, you know, who’s one of the economic advisors and who ran one of the budget offices under Obama was on Fox channel, and he was trying to say that all these programs kind of help to improve the unemployment. Chris Wallace asked a question. The unemployment rate is 3.2% the lowest in US history before the pandemic, it’s around 7.6 right now? Why do you believe that these programs will bring, they had no answer other than to say these numbers are so there is a lot of criticism around the stimulus, that is being put on the table which is 1.9 trillion.
Everybody agrees that the $1,400 increment should go to them because that’s a direct kind of stimulus the more people are going to spend the money. Similarly. everybody agrees on this $400 unemployment barring those two rest of the numbers really and also the moratorium for both the mortgage that is deferred mortgage payments as well as the rental they agree to that because which is to say this is the time you need to provide support to people that those two programs get a big tick mark by way of Market response.
Sree Iyer: Let’s move on to rid the riots update, sir. Alan Dershowitz is a very senior lawyer and a very well respected lawyer. He has mentioned that the house committed six violations of the Constitution during impeachment. Maybe we can just touch upon a couple of those main ones and then there’s a lot of stuff that we want to share about the riots. Stay tuned. This is probably a very significant portion of today’s debate. Please go ahead, sir.
Sridhar Chityala: Here I just don’t want to misquote the words. I want to read these words that he has stated. So everybody is clear. So he says the Constitution is very clear, the object, the subject and the purpose of impeachment is to remove a sitting president and there are only two presidents one when President Nixon resigned and the former president resigned, there was no impeachment and the second he based on goes on to cite an 1876 incident when impeachment was brought against to remove the Secretary of War in these two circumstances, there was a precedent in terms of doing it because they were sitting and once they resign then it became redundant. In this instance, he says the president is no longer in office. So he cites besides the constitution is clear and he also goes on to say the house has engaged in an unconstitutional process of taking up something that is not laid out as enshrined in the Constitution. This is his kind of principled stand. Then he comes to process, in terms of process. There was no investigation by the House Judiciary Committee in terms of what exactly is the specific evidence that they have which constituted this as an impeachable offence. like you need to have. It is basically saying there was a riot in the Capitol Building, there was a speech that was preceding he incited the public to do it. Now, Is there an independent inquiry investigation that looked into it and said here’s this sentence, here are these words, here’s is this constitutes free Speech, here’s this a threat. It all seems to be a political kind of agenda. This is his view. So therefore it does not stand the test of principle process, investigation, evidence, the unconstitutionality of trying a non-sitting president etc is the reasons that he has no less than three times. By the way, Alan Dershowitz is a known constitutional lawyer. Especially around impeachment. He featured very highly in Bill Clinton’s lead time. He also represented here to be clear President Trump in the first impeachment trial where he got acquitted, President Trump got acquitted in the first trial. So therefore he is citing these instances which are quite explicit as to why it has been violated.
Sree Iyer: Let’s move on to the number of House committees that have started looking into this, there are four different separate house committees that are looking into this. The documents are sought by few February 15. So at least there is some concerted attempt to try and get to the bottom of it. What are your thoughts, sir?
Sridhar Chityala: Well, I think they have to the Judiciary, the intelligence committee the National Security Committee as well as the National Intelligence. I think there’s you have a House intelligence, Homeland Security, the oversight and reform committee and the judiciary committee so all four committees will look at various facets of the things that went wrong not just on the riots but, also on what kind of led to the whole gamut of issues including security breaches, etc. Etc. I think, Sreeji will put up a video which shows a specific incident that took place and it’s almost like, hey, you know, you’re welcome here, you know to do your sightseeing tours around the whatever chamber it is, whether it’s a house chamber, whether it is a chamber within the gigantic building in the Capitol Hill, your guess is as good as mine. By the way, this is making wide rounds on Twitter, you can see it, it’s not blocked by Twitter. So, therefore, we believe the content to be valid.
Sree Iyer: Here we go and you can see that this particular individual, who is wearing the bullock clothing and Viking like head armour and you can see his comments and so on and so forth. And as best as we can guess this appears to be the Congressional chamber, we could be wrong about that but, we are sure it is the Capitol Hill. I mean it is a capitol building it is taking place inside this I have seen the President walk through those doors every time when there is a state of the union, this looks very very familiar. So like Sridharji said this has been making the rounds in Twitter and we just presented for what it is worth.
So let’s get back to our main image deck, here I’m going to go back to where we were sir and that was that we were looking at the riots update and I’d like you to continue with Senator Lyndsey Graham who’s going to declassify all the Russian investigation documents, which he refers to as fraud. So, the whole interference of Russia in 2016 is this relating to that?
Sridhar Chityala: Yeah. So there was this inquiry that was said that and then the Trump was investigated before and after that, there is Russian interference in elections, as collusion between Russia and President Trump in terms of interfering and advancing the elections towards, a Trump Victory, this was the allegation. So, he is declassifying all the documents. He says this is how these people engaged in a game of political victimization and you should all see these documents. Not that it’s going to make a change because the nation is divided as Republicans and Democrats, or the nation is divided as you can say pro-Trump or anti-Trump, these two lobbies. So, those who are anti-Trump can see but, they’re not going to believe it. It only reinforces the pro-Trump believers that this whole thing is personally targeted at Trump and this whole investigation, impeachment process everything. They have harassed him for four years. They will continue to harass him until you know, whatever their agenda is they can get to that seems to be the path that they’re pursuing people like Rand Paul and Lyndsey Graham are laying out the evidence which is to say now you dig it, declassified see for yourself, whether you believe it or not, at least the world will see it.
Sree Iyer: John Radcliffe the DNI director has sent in his report to the Congress wherein he states that China did interfere in the 2020 elections. Could you spare us a little bit of what was in that report, sir?
Sridhar Chityala: Yeah. We had referred to this previously, in 2018 there was an executive order passed by President Trump which stated that if there is a written independent report validated as foreign interference in the US Elections, then those elections would be declared null and void. So this is not one Department but few departments coming together, assessing and coming up with a specific recommendation. So I want to read, I don’t want to miss any words here. So John Radcliffe assessed that China interfered in the 2020 elections. According to a letter that he has transmitted to Congress, in the letter, Radcliffe alleges that intelligence about China’s election interference was suppressed by management at the CIA which pressured analysts to withdraw their support for the view, citing a report by intelligence community’s analytical Ombudsman Barry Zalauf, the Director of National Intelligence said that some analysts were reluctant to describe China’s actions as election interference because they disagreed with the policies of President Donald Trump quote-unquote. Now we can get a PDF and put it on the PGurus website, the exact letter. But these are his exact words. So people ask the question which is effectively to state ‘what happened to this report?’ This report was to have been submitted, one month after the elections which is November 3rd to December 3rd, 45 days, December 14th, December 15th was the date that it was mentioned. So it was not it has not happened. And now you know why the December 15th deadline was not met he asked for additional time. That report now has been tabled to the house to the Congress. And once we get a copy in a PDF form, we will put it up on the website. So you begin to see lots of things unravelling as things go out. Now that the power has shifted, there is also going to be a senate inquiry committee that is going to look at the Electoral reforms and what happened in 2020 elections. Whether anything will come out of it doesn’t matter. Also, the six battleground States will also do their own independent process. All this may be too late, by way of changing the outcome or by looking into the whole thing, but this is underway.
Sree Iyer: Let’s take a quick look at events around the globe. The G7 Summit is going to be held in the United Kingdom in a seaside resort and the focus will be of course climate. All of a sudden climate is being discussed a lot. In fact, if anything for the last year thanks to reduced activities on the road as well as in industrial production, the air quality must have substantially improved. So I wonder why the climate is suddenly now in the front burner. Climate and covid are to be the focus there.
Sridhar Chityala: Well, original G7 Summit which was postponed was to address centralized coordination of Central Bank monetary stimulus program so that there is no asynchronous stimulus and asynchronous withdrawal because they didn’t want the economies to be impacted as a result of one rising rates and the other reducing rates That was supposed to have been the focus somehow and the second was some of the G20 Nations are tabled to G7. Look you need to show some more concessions for lesser Nations to do borrowing, that was supposed to be the theme. Somehow that’s just gone out of the window. Now it is conceivable, that the G7 agenda the way it works is that people have to work on a consensus. You have the Sherpas, the G7/G20 Sherpas, they work. with the people. Now needless to say there is a big change taking place in the United States. The US will be represented now by Mr Biden and Janet Yellen. I can only assume the climate Accord has come to the forefront, I’m only speculating here and natural and basically Canada is another country and China is another country somehow which wants to put this into the agenda to make sure the United States commits more money. So the story is that’s the only reason I can think of this Paris Accord coming to the forefront rather than, I would say had to put two priorities one is covid and the second is being continued sustenance of capital infusion and basically a moratorium which is around the rate rise as well as a moratorium around concessional loans to allow smaller economies to regain their momentum. So that should have been the focus. Clearly, not the Paris Accord.
Sree Iyer: Quickly, on to Guatemala. A new Caravan of 9,000 odd people has started moving from Honduras. They are either at the border of Guatemala, people are saying some about 2,500 crossed into Guatemala. The total is estimated to be 9,000 and this has happened in the past. How is this one different?
Sridhar Chityala: Well, it’s according to Fox and within Fox report, NBC is being quoted. NBC is being quoted that these 1000, the number that they’ve mentioned is 1000 out of the 9,000, apparently, the Honduras Government tried to stop them but 1000 have reached pretty close to the Border. They say that the Biden administration had promised that, when they seek Asylum they would be granted Asylum. This is quoted that the Asylum was supposed to have been granted and there’s also communication going back from this unofficial spokesman, this is not the right time to we will tell you when it is the right time is but it’s not the right time. But all this points to the fact that there seems to be some underlying agenda. I don’t know what it is, because these people suddenly don’t turn up at the border and they don’t reach out to this refugees and repatriation settlement program. They just don’t turn up, randomly. Again this is another area which either will be investigated, will be looked at or basically, people will turn a blind eye and say ‘why not, another 10,000 people, we will have 11 million people normalize. So we have 9 million people who are below the poverty line. We have 11 million illegal immigrants in this country who needs to be nationalized, we can add another 9,000 10,000. That would be the new administration’s view. We are very generous, we are a very compassionate nation, we care for the people. So I’ve asked the question, ‘why you put such stringent conditions for people like me where I have to go through these examinations and apply for University and qualify myself and then go through six years or four years of process to qualify myself after educating myself, I should have been given if I am educated within two years. So it begs the question around the whole immigration policy which drove the economy of this country. The economy of this country was built by education, innovation, competence. Yes, refugees and illegal immigrants have to be accommodated. But if you are going to formalize this as a process and a method then it’s creating precedence. I didn’t mention this. One of the first 10 days programs is basically also to retreat and withdraw those put under Trump Administration certain countries’ travel to and from such countries pose risk. That is another item that is going to be withdrawn in the first 10 days to the executive order. So all these points to the fact that there is a fundamental shift that is taking place what that holds to the country we will know in the next 12 to 18 months’ time.
Sree Iyer: China is building ground effect vehicles to defend South China claims. What is a ground effect vehicle? And how is this going to impact South China, they have all these Spratly Islands activities around that they’re building artificial islands and so on and so forth. What exactly is the ground effect vehicle sir?
Sridhar Chityala: I think if you recall we touched a little bit on this when we talked about Africa, the horns of Africa where they built these multi-tier buildings, which is gaslighted and with armoured vehicles, which can move in these buildings, which will act as a security barrier not just purely on the surface where you have armed weapons and artillery and all those kinds of things. So they have kind of in-ground, under the ground, bunkers which are built with capacity and which is like a fortress to God. So I think this ground effect vehicles are saying is not just purely the surface but they also have got bunker type facilities to address any kind of imminent threat that is being posed. So in other words what they’re saying is we are in and we are not moving like nobody is going to move so we are going to further strengthen our footprint in the South China Sea. That is why to me China’s role as a member of United Nations, P5, and China as a member of the United Nations and member of various International bodies begs the question and also begs the issue around the business Community notably in the United States, which have refused either on human rights or which have refused to take a position on fragrant violation of universal norms and coexistence with fellow members. Any other country is taken to task, but China, they take a soft position, be it on the west coast, be it on the East Coast. Have we ever seen businesses in the United States take a position on human rights? No. Have you ever seen businesses take a position on these kinds of sovereignty violations? No. Why? Because I don’t know. Your guess is as good as mine, right? I can guess what it is, but this is the reason why that, I mean United States passed a UN resolution when you are doing an act of war in any of these countries, you pass a resolution you move forward, any of these countries be it France, be it the UK etc, but not with China. China does not come to the United Nations to pass a resolution and seek permission. In fact, we have even talked about ICJ – International Court of Justice sovereignty violation of the case filed by the Philippines. They have been proved wrong, but they refuse to comply.
Sree Iyer: A few more things happening in and around the globe. We are running out of time, unfortunately. The Dutch police have used water cannon on anti-government protests. You might know that the Dutch government has resigned. A new government probably will take shape and place soon. India and Japan have signed an MOU – Memorandum Of Understanding to enhance cooperation in the field of information and communication technologies. That’s a welcome step in my opinion because India is now beginning to wean itself away in Event of a Biden Administration being less conducive in its approach towards India than the outgoing Trump Administration. India’s effects reserves search to 586 billion. Let’s touch upon that real quick and then we have look at Market sir.
Sridhar Chityala: Yeah, well, I think that Japan is a Continuum in terms of the Strategic partnership. You can see that Japan is raising its hand and I think that as the United States perhaps takes a different route in terms of its policies India’s strategic partnership will continue to enhance with Japan on all facets from investments, from security, and from IT technology and communications as extended cooperation to develop the service. I think we’ve covered or we didn’t cover, I don’t know. India is now also training people, youngsters in Japanese because Japan suffers from population issues, demographic growth issues. So there’s a lot of skilled youngsters who are going to be sent to Japan to augment the human resource challenges that they face in Japan. So the funny thing isis when the Japanese Finance Minister and the Treasury Secretary here made we want jobless growth whereas in the United States you want full job growth. You want employment. We don’t want it because we don’t have people here, but we still want growth. So this is after the joke that they play at each other and India is also engaged in the skill transfer program.
Sree Iyer: Yep, Global Market, Yellen has committed to Market Affirmed Dollar. This is jargon. Could you please expand what Market Affirmed Dollar is?
Sridhar Chityala: What is it saying is that it will not interfere because there’s so much of money that is coming into play. It is going to force the dollar depreciation because it is typically that debt is total debt continues, astronomical debt is going to be added, 5-6 trillion dollars is about close to we added first 10% when we launched the first stimulus. Today, we are at 3 trillion, which is 15% of GDP. And then we are going to add another 1.9 trillion. When it gets added that’s 4.9 trillion. So 4.9 trillion is roughly equal to, if you take your GDP to be around 19.5 or 20 trillion, you’re talking about 25% that added in one single year to the total debt of United States.
What does it do? it depreciates the dollar and when it appreciates the dollar all other export exporting countries become totally uncompetitive and the US becomes very competitive to several products which are protected from Imports in several Nations. So she is saying don’t be scared. Okay, we are not going to force the dollar down. We will go by the market principles. So whatever the market however market prices the dollar that will be the dollar because the world has picked US dollar as the base currency.
Sree Iyer: Central banks are bracing for more damage to growth as the pandemic lingers on, Already, the rates are close to zero. Are they going to start doing negative rates across the board now?
Sridhar Chityala: There are some countries where the rates are negative. Japan is one. I think this is I this is my point, This is a topic that should be discussed in G7. Paris Accord and the environment is not a priority. So in other words, there’s an adjacent Group which is below the G7 which is you know, which is a financial stability group. They should be looking at this as a specific what they’re saying is that look there’s only so much money that can be, what else can be done amongst the countries which are trading to make sure that we do not go down, continue to go down the path of asymmetric reduction. There are only two tools. One tool is raised, the second tool is an asset purchase. Right both these tools have been used quite extensively by the FED here. Something similar is going on in Europe. If you take India, which is another, one of the big G7 economies if I have to use the word G7, I’m talking about the top 7 economies by GDP in the world, India is in a kind of a different state in terms of its interest rates. So the question therefore is and China is completely different though it is in the G7 by being one of the top seven economies. So the question there for you is that due to a need to do something different to make sure that there are no impediments also whether there should be, some kind of a funding program for all these vaccines and other kinds of things or whether each nation is left to fend for itself to accommodate.
I know Singapore has been giving some aid to countries, India has been giving aid by way of free vaccines. I think they want to think outside the box. This is where they’re heading.
Sree Iyer: Lastly. There is a global wall of cash,right, to snap up US treasuries. Does it mean that the world is seeking refuge in the United States Treasury bills?
Sridhar Chityala: There’s a lot of sovereign funds with plenty of liquidity, and so, therefore, I think they are working through that process in terms of saying that there is significant demand and usually when total debt is added they reach out informally, United States doesn’t print and add to the total debt without talking to some of the key members to say. Okay. Are you going to buy my debt? are going to buy my piece of paper? So apparently, there’s a fairly good number of sovereign funds which are willing to buy US debt. Now that is the message that is coming through, so to again calm the waters, which is to say this is not going to be the debt. That’s just sitting and going to be by printing cash, but it is going to be funded by external Sovereign funds.
Sree Iyer: That brings us to an end of today’s hangout will be back again tomorrow same time, same place. Sridhar Ji, Namaskar and thanks for joining us and we will be back again tomorrow. Namaskar!
Sridhar Chityala: Namaskar!