#EP78 Biden inauguration day. Biden to cancel Keystone XL project; Yellenomics early looks

#DailyGlobalInsights #EP78 Biden inauguration day. Biden to cancel Keystone XL project; Yellenomics early looks

Sree Iyer: Hello, namaskar and welcome to episode number 78, January 20th, 2021 the inauguration day of a new incoming president of the United States, Joe Biden. Sridhar Chityalaji, namaskar and welcome to PGurus Channel.

Sridhar Chityala: Namaskar and good morning to everybody sir.

Sree Iyer: Sir, we have a lot of interesting developments including the sighting of Jack Ma. We have also got a look at what Yellen’s economic policies are going to be. We are going to coin the term Yelenomics, shout and scream and you shall be heard and also a big reveal from the Biden Administration that they will be shutting down the Keystone XL Pipeline that could cause a lot of jobs. You’re going to analyze the pros and cons of all this and more,  I request you to start our conversation today with the inauguration that is about to take place in a few hours from now.

Sridhar Chityala: Great sir, I think we’re all set for the inauguration President-elect. Mr. Biden will be coming on a chartered plane rather than the US government plane. He will be landing in the capital and going for his inaugural function. I think we charted the plan which is the course of events. One is the ceremony at the White House by then Trump would have left. Then, he does a virtual inauguration, this will be a virtual inauguration and they have been told that nobody to come in person. There won’t be anybody in the mall, so this is the launch of the event. So, it is going to be a day-long ceremony. Then, he after the oath swearing-in and oath-taking then he goes to the Arlington Cemetery and places the reeds and he kicks off his first day of the agenda and he is ready to sign off on, 17 different executive orders, which rolls back the Trump’s programs and then re-establishes the Obama-Biden era policies and programs which ranges from, for example, the immigration, the Asylum Seekers, a path for normalization of 11 to 12 million illegal immigrants. You know who is here and you know that was declined. The other is the census which just the won in Supreme Court that is also going to be reversed through, so, they’re going to delay the census, they are going to include everybody in each state legal and illegal migrants and they will be included in the count. So there is a series of programs including travel, he lifted the travel restrictions plus also he is going to remove this word, you know, especially Muslim destinations. And I think he assisted a whole list of countries which were initially restricted to travel to the United States. The Visa processing will commence is apparently set up as Department of Homeland Security to kind of look into that and the TSA to initiate the process for the Visa. So, that process kicks off a line of countries like Somalia, Syria, Libya and so on and so forth there is a whole list. So, the other thing is that $10,000 which is very important for many, they’re looking at signing up looking at absorbing or waiving up to $10,000 in principle a from each of the student loan outstanding. So, there is a radio program that kicks off his activities today.

Sree Iyer: Let’s take a quick look at yesterday’s farewell address by Donald Trump, I think it took the high road in his farewell speech, didn’t he?

Sridhar Chityala: He took a very high road,  it was at least for those who are Trump believers they call it as a classic kind of a speech and he called it as we started the movement has just begun, my departure doesn’t mean that moment. It only is going to accelerate and progress further. He wished them success for the new Administration that is going to come in. He did not name Biden specifically, but he said he wishes the new Administration. He very strong again, and again condemned the attack on Capitol. He says this is not reflective of our values and so on and so forth. So, therefore, again reiterated that point then from that point onwards he began to list a whole series of achievements and what he accomplished be it the West Asia peace Accord, be it the renegotiation or making China accountable. He also talked about the Indo-pacific and the quad, the security arrangements that were redone which is inconsistent with his kind of policies. He talked about the renegotiation of the NAFTA which was called the United States, Mexico, Canada act. So he talked the tax cuts and the per capita increase is that wish that was, his number that he gave his between 8,000 to 10,000 dollars.

So, he ran a whole slew of activities from domestic to foreign policies to tax and he all until the time the pandemic came, he said he had brought the unemployment down to about 3.5%. Then, he also talked about the pandemic and the challenges that that one had to face and he said no other government would have done, what you did which is within 10 months that they came up with vaccines and the vaccine rollout program has just commenced. It has its problems, but he said, we did it, we promised in becoming it and we got to the vaccine. So, I think it was these are all those who believe these are very specific in many clear, one cannot dispute, one can agree or disagree on whether you believe in those things, that’s a different policy. Then, he talked about of course the security which is the immigration policy.

Sree Iyer: Now, let’s take a quick look at the various things going around in the United States Chuck Schumer and many other Senators have weighed in on Donald Trump. So I think this Senate impeachment process is still, you know, people are talking about it. I don’t know if that is going to be the first thing that the Senate will take up or if it’s going to be looking at what the nation needs such as the covid response, covid vaccination and stimulus and so on. What are your thoughts going into the new Administration?

Sridhar Chityala: I think the first priority for them is going to be which is already underway is the confirmation of his nominees for the key positions. So, Janet Yellen really guides them for sailed through the process. There were no objections at all from the Republicans. The Senate hearing was what was going on with Antony Blinken, who is the state Secretary. So, then you have the defence, so, that is one of the top priorities, so, people get, once approved they begin to take up their positions.

I think the second priority is going to be in my view the whole list of processes around how the because we are tied Senate 50/50, So we need a grid locker. So, the rules around the filibuster the process and passage, you know, I think that’s another item that would be agreed to.

The stimulus would be the third item in my view. Before they get down to the articles of impeachment as it last night, the articles of impeachment had not been received. So probably she would be sending it today. This is Nancy Pelosi, the House Majority Leader would be sending it today, so, that would be taken up. To your point, which has said there are both sides of the camp, which is Mitch McConnell has which has created a little bit of stirrup basically said, you know, it was President Trump speech which President Trump and some other members who spoke and fed lies which resulted in this instigation of the mob to do what they did in the capital, so that was his very strong statement from him. Chuck Schumer says, he should not be eligible to run for office. It’s very clear what their agenda is if they convict him, the conviction is around to make him ineligible for any of those things, whether they are going to withdraw other things that come with it, entitled to the office, entitled to personal security, whether they’re going to do all of those things? We don’t know, but, it remains to be seen. It also remains to be seen whether they have the 67 votes to kind of impeach him. And then, of course, there’s the Constitutional challenge that will crop up which is to say can you impeach a president who is not in the office? So that in my view would be the first day’s packed agenda at the Senate.

Sree Iyer: So, would this be a good time for us to take a look at Yelenomics or do you want to do it as part of the market?

Sridhar Chityala: I think, we can, Yelenomics, since you have the topic will get into Yelenomics. Yellen is a very well known figure and represents a very much liberal social-economic framework, but having said that she adapted quite well and then she came in during the period of transition from Bernanke to Yellen but fortunately under the Obama-Biden era, so she managed the monetary policy quite well in terms of interest rates. Now personally, I can give an opinion which is my opinion, whether people agree or not, we can actually do a compare and contrast and we can do it on a chart on a separate day. I believe that she has learned a trick from Steve Mnuchin model who comes from the industry, Steve Mnuchin model is that when you do a large, when you have a major economic effect when you do your large lump of capital as one single stimulus, the effect will be a v-shaped recovery. We have seen the V shape recovery where the unemployment was at 15 per cent and then it dropped within six months to about 7 per cent and then it was going down to about 6.7 – 6.2 per cent before it picked up. The retail sales recovered during this period of the six months, what it was pre-pandemic to what it is during the pandemic, that is the effect of the stimulus program. To some extent, the small businesses were able to sustain through the PPP program. So what she has learned from that is, which is different from the Obama period, where they were doing smaller chunks of capital. So he took a fairly long time in terms of reaching the normal recovery curve, which is anything from more than 18 months for them to do that in the 2008 financial crisis. So Yellenomics is about now in a large, then she goes on to add to that point which is the corporate rates have to increase because you have to have a funding mechanism to offset.

And so she is proposing, she hasn’t touched on personal but she is proposing a corporate tax hike of 28% from 21% She feels that this could. Here comes the catch, she says when we do this increase we must coordinate with other countries to make sure that we are equally competitive not uncompetitive. I don’t know any country in the world, which is going to say. Oh, United States. No problem. You can keep the rates at 28%, we will try to keep it around 23%-24%.

Now, I’m not trying to be facetious here. But I think the United States has to make its own decision. And I’m sure that’s what she means. So I think that her view is, she used the phrase from we discuss this which is 350 billion dollars was allocated to PPP, but 350 was actually allocated to local and you know, we’re going to press and talk about that on another day, but that basically reflects her kind of proposition which is to say that you need a large stimulus, you need to have tax increases and then she began to play the same program which is around the Green energy and Paris Accord and institutions of governance where we need to be part of. Now, when you look at the team, that would be under her, which is we discussed it yesterday, they reflect what you call either Gensler or Chopra, both are very Warren kind of nominees, very strong regulation. So whether it is going to be very strong regulation and how exactly industry will fight it out or we’ll all become part of this new Yellenomics type of model. So very different too. She is now a fiscal policy person more than a monetary policy person. That was her role previously, but she is very comfortable with world leaders, either Treasurers or Finance ministers are so on. So I think she will in my humble view, that she is going to do quite well and she will probably carry the Biden Administration as a voice and she’s always very measured. And she’s very mature and she’s very composed. I may not agree with her, but I am more of a pro markets guy rather than a centralist left. So, therefore, there’s nothing that I would undo with Trump policies, but that’s not me. That’s Biden. So Mr Biden has his own views and she would be supportive of that.

Sree Iyer: Now one of the first announcements that came out of the new Administration is the claim that they are going to shut down the Keystone XL pipeline. Now, this is a lot of controversy over the Obama years. It was debated to death than finally, they gave approval and now they are again going to shut it down. What are the ramifications of this and more importantly who does this benefit?

Sridhar Chityala: First and foremost, this is a very controversial project, which is always the Canadians wanted this because this helps them and also it helps to create jobs around the energy belt running from Canada right through the Central United States. The project was hung up because of the passage of the area’s has environmental issue potentially disturbing the environmental balances around that area where the pipe goes through. Now Trump felt that that will be managed by the industry because we have had several areas where we do this with the industry has managed quite well and he felt that it was strategically important in terms of the energy independence as well as the energy reserves that the United States needs to acquired. The United States is now a net exporter of the energy even without the key line project given the whole notion of fracking and everything being green under Biden Administration this has been under the radar of this green group and the anti-kind of the fracking group, though he flip-flopped between, I never said fracking I said fracking etc, but he’s now being more kind of explicit. So if I have to give you a direct answer, to me it is basically, mind you, the constituency is the green group.

Sree Iyer: Well, let’s take a quick look at Global events, and I want to touch upon a couple of things again is related to business but that we will do it at the end of the politics part of the global events. So the first thing that I wanted to touch upon was that the Italian Premier Guiseppe Conte has won a vote of confidence and that means that the Italian government lives to fight another day. The viewers will remember that there was a talk about Conte government collapsing following the revelation that came of the role of Italy in the United States elections. Does this mean that now everything is all closed, nothing is going to come out of all those questions being raised?

Sridhar Chityala: Nobody is talking about any of those events because there seems to be a chain of events. Nashville is forgotten, you remember the Nashville bombing. What has happened is just washed away. That’s a very very major event that took place, Bombing or suicide whichever way you want to call it. Then we had this major revelation that the Dominion servers in Germany, Frankfurt, Barcelona and the machines were manipulated or the data flew from Germany to Italy, and from Italy to the United States and there was a revelation and a prosecution, in fact, it went to their local supreme court. What’s going to happen? It just seems to have quietened down now that Mr Biden is the president. Then your own famous question that you asked me what has happened to that pipe bomb which was discovered, twice you asked. Again the pipe bomb, nobody has a clue as to what’s happened to the pipe bomb. Then the laptop, which was Nancy Pelosi’s laptop that’s been discovered but nancy says that I don’t have anything in it, so let’s go on. So, I’m sorry I went from Giuseppe Conte to this. I’m just trying to create a story which is to say that all this stuff is now history.

Sree Iyer: Oh! you’ve missed out on one. Hunter Biden.

Sridhar Chityala: Yes, I missed out on that one. The breaking story this morning is, – he’s very famous Chris Steele, the MI6, who has declassified the documents of James Comey investigation around the Clinton email scandal. This name popped up and so those documents have been declassified. I gather there’s also going to be declassification of some of the documents around this November 6th riots, what the findings were, but let’s see. So I don’t want to deviate from the global story which we were moving on but there’s a whole raft of those things. I think let’s not look behind but look ahead.

Sree Iyer: Yes, and if you take a look at, sorry to look behind first to look ahead, if you look at what Trump had accomplished towards the end of his presidency, there was a very noticeable shift away from Europe and towards the Quad which comprised of India, Japan, Australia and the United States. Now, Macron is calling on Biden for greater military involvement. So under the democratic dispensation, do you see a shift back to the old days of Paris Accord and taking the European community along and so on and so forth? And perhaps a little less emphasis on Quad, what are your thoughts?

Sridhar Chityala: I’ll give you a very direct answer to this. Paris Accord is one of the priorities that will be signed today. Back to Paris Accord, back to WHO to be a strategic partner with all partner and member nations so we can all move forward, says Mr Biden. So WHO is on. UN has not featured so that will come on, the UN. So Macaron is very smart, so, therefore, he said ‘hey you remember that usually the democrats are very pally ally with Europeans and invest more time and resources with NaTO. So we want to make sure that you do not forget that and this is again a contrarian foreign policy differences. Somehow the democrats believe Russia is the threat, so you will see all the think tanks around Washington DC talking about Russia as a potential threat. Remember Will Burns or William Burns, who comes from Carnegie Foundation, who was the head of the Carnegie Foundation, former Assistant Secretary of State, he’s going to now head CIA. So, therefore, he also has a favourite flavour which is Russia. So to your smart question which is Mr Macron’s foray is to say ‘turn your eye towards NATO and be my partner because Europe has few problems, I think.

Does it mean it’s going to take eyes away from Asia? I can give you three examples, they no longer are talking about Indo-Pacific, they’re talking about Asia-Pacific. So, therefore, it’s very clear, number one. Number two they have no specific mention to Quad which simply implies they don’t believe in it. Number three, South China Sea, they are talking about Kurt Campbell has already mentioned, Kurt Campbell is the designated representative or secretary in charge of Asia and he’s fairly well known in those circles. I can see some anonymous people, I wish they can put their names up in PGurus and put the data and I stand by my word and I have said this time and again, even in debates with several people it is Obama-Biden who slept and allowed the South China Sea to be occupied by China, going back to 2008-2009 and when the initial tussle that happened between Philippines and China on South China in the Scarborough Shoal that happened and Kurt Campbell was in charge he said he will negotiate a transaction. Only, you don’t negotiate with Chinese because nothing happens. So that fell away, encroachments happened, International Court of Justice ruled and China said I don’t follow ICJ. End of story.

So to me, Quad is gone, the Asia-Pacific is up. Kurt Campbell has already stated that he’s going all the way to the Indian Ocean which is to basically say, it’s Asia-Pacific with no Indo. Even James Crabtree has written an article that the Indian Ocean going up to Djibouti which we touched yesterday is our strategic interest. So all these changes are coming.

Sree Iyer: Quick look at what Pompeo, the outgoing secretary of state said, that the Chinese genocide against Muslims is the crime of the century and I’m going to add that add to that, UK lawmakers are debating genocide clause to all the deals that the United Kingdom might make with China. So this is now beginning to come to the front burner, isn’t it?

Sridhar Chityala: It is. I think if you listen to, we have not heard Anthony Blinken because he’s not yet been formally confirmed but Janet has given her proverbial promise and then Kurt being a secretary who doesn’t need to formally go through we like to see what Mr Blinken’s views are on this. There’s a general belief that the China toughness policy will be continued under the Biden administration. They’re not going to change that’s reflected in the statements of Yellen. How tough the toughness is, I don’t know, whereas Trump’s administration was very strong. The unusual thing about the UK situation that you have alluded to is, the UK is recognizing that this as a human rights violation. How do you kind of legitimize a trade policy which embeds the human rights issues, which also embed some of the trade policies of China? You can’t use trade policies because you have the WTO framework. So what they’ve done is they have now got a law passed wherein local British courts if you make a decision, if it is decided through evidence and witness and so on that, there is a genocide taking place then they will put a caveat which is to say that trade pacts with such countries are prohibited.

Sree Iyer: That’s a big statement and let’s see how that’s going to play out, but I want to draw your attention to India and to the new claims that construction has started around November last year in a portion of Arunachal where it was claimed that this is a new intrusion and this was an article that came by, it was written by Brahmachalani that has been the talk of the towns if you will in India as to whether India was caught napping again. There are also questions about what China is doing in the Uttarakhand part of the LAC, the Line of Actual Control. Can you give us an idea of where things stand? Is this something that we should be concerned about as being born out of India? Plus, is India keeping quiet or India also is reinforcing on their side of the perceived LAC? What are your thoughts?

Sridhar Chityala: I’ll try to give answers where I have a reasonable idea. As far as the Arunachal situation is concerned it seems to be a political puff that has come out. This land has been occupied since 1959 by the Chinese. What is correct though, that the construction activity has occurred and very visible through satellite images both the US as well as the Indian satellite images of little villages. Previously there used to be intruders or there used to be army positions coming fairly close encroached, just as what happened in Galwan Valley. Now, this is more like a village which is comprising of about 110 houses that have come up in that particular region. Now, is that true? The answer is yes. Both the minister for external affairs, the head of the armed forces as well as secretary Pompeo have been very explicit that China has been trying to alter the unilateral change of border, or unilateral line of control changes without any consultations and discussion, especially around the disputed area. So you have two borders then you have a buffer area. They’ve also been coming into the buffer area as it happened on the other side which is the Ladakh-Leh areas. And then they had to be pushed back and there was a negotiated retreat. So the answer is yes, based on security pundits and some of the data that we have seen, the Himalayan Kingdom is very much within their radar, we may see more incursions.

Is India keeping quite? No, India is not keeping quiet. India has built more infrastructure that one can think of especially in the last 12 months. And more so ever since Galwan valley incident came up they built more infrastructure. Also, they are better prepared. The entire Rafale fleet is deployed in that area, BrahMos missiles are deployed in that area, the Agni missile system is deployed which are nuclear capability in that area, the B12 B1 bombers from the United States is deployed in that specific area. I think more than 100 120 LCA Tejas fleet is in that area recognizing. They also have ordered and they continue to order these mobile vehicles which can facilitate the quick building of the bridges as well as navigation in the high altitude. They’ve also got drones that have been supplied by the United States. And they’re now going to manufacture domestic drones from DRDO. They also have light tanks, a whole huge fleet of light tanks. Then of course the Chinook helicopters that are also being licensed and leased. So if you kind of look at the parade and the whole activity India is well prepared. They recognize this is an area which is under threat so, therefore, whether they have any occupations, we will never know because that’s the providence of secrecy. China may tell us that you have occupied these areas but we’re not going to get that from India. So to summarize, yes there was a place, yes India is now far better prepared, yes it has also allies working with them. At least until recently, it was India, France and even Israel. Britain had said that you would even have boots on the ground to preserve the richness and the tradition of the Himalayan Kingdom to support India, should it have to get into a fight with the Chinese.

There’s only one thing that is in favour of India with regard to this issue from Biden administration. Biden administration does support one Tibet policy. It was a unanimous decision that was made, a non-partisan decision that was made in the senate and the house. There is an allocation of $1.2 billion in the stimulus-2 package if you recall we listed this under the other chachka items this $1.2 billion has. So, therefore, to that extent, the United States may continue to support in making sure, but China has its eyes set on Himalayan Region, South China Sea. The question that is being asked is the next foray is Taiwan?

Sree Iyer: Yes and we will see, won’t we? Now take let’s take a quick look at global markets and I just want to pick up the pace here a little bit because we are coming to the end of our program and I don’t want to take too much time here if you will sir. The US markets are looking promising based on stimulus stocks, the foreign markets not so much. The more important thing is there has been a Jack Ma sighting in a video link and this is coming out from China. We have to wait and see. The location has not been revealed. We don’t know if there’s going to be a newspaper like the Wall Street Journal with a certain time and date to tell us that it was indeed taken today. We don’t have that information yet but suffice to say there was a Jack Ma sighting.

The most important thing that we forgot to touch upon yesterday and I’d like you to touch upon today is the French giant Total’s investment of $2.5 billion into the Adani group. Can you share some light on this?

Sridhar Chityala: Well, I think it’s very strategic. Adani has been focused on renewable energy. They’re one of the largest producers of alternate energy especially solar in the world. The $2.5 billion dollars investment is into Adani Energy Green Limited – AEGL and that gives them access to 20% stake in AEGL into the broad renewable energy resources plus it also gives them access into 50% stake very specifically in the solar energy assets that Adani group manages.

Sree Iyer: Well, we wish Total good luck in this endeavour and it’s going to be interesting. Its importance I think that is underlined here is that the world recognizes that India is going to be a big player in green energy especially Solar perhaps in Wind and we don’t know if they’re going to be looking at other forms of energy such as hydrogen fuel cell and so on. But there are interesting times ahead we have to wait and see what the Biden administration does vis-a-vis China. Will it toe the same line that was put down by Trump? Will it be more aggressive, will be less aggressive? We’ll have to wait and see. Sridharji, thanks once again for joining us and viewers please do subscribe to our channel. Your support is very important; you can refer us to your family and friends. We are trying to scale the 250,000 mark first and onwards up to a million, and we will really really appreciate it if you can refer us to your friends and your families and also if you could donate to our cause. Thank you very much Sridharji, and we’ll be back tomorrow same time same place.

Sridhar Chityala: Thank you and Namaskar


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