Some food for thought
"A position of eminence
makes a great person greater and a small person less."
—Jean de la Bruyere (French
Philosopher, 1645-1696)
Word for the day
Dirigible (n)
An airship;
Designed for or capable of being directed, controlled, or
steered.
First random thought this morning
The premier investigation agency of the country, The Central
Bureau of Investigation (CBI), had always been mired in controversy. Almost
every government in past 40-45 years has been accused of misusing the agency to
further the agenda of ruling party. All politicians accused of wrong doing by
the agency have invariably termed its action as political vendetta. Even the
Supreme Court on many occasions has raised questions over independence of the
agency.
This suggests that the country in general and political class in
particular, has little faith in CBI. Ironically, the politicians from all
parties have always wanted CBI to investigate their allegations against each
other.
The recent controversy involving CBI and the government's
response in removing the top officers must be seen from this prism, in my view.
I guess, the response of the government is decisive and shall
lead to structural reforms in the working of the agency. We shall see, in near
future, a comprehensive constitutional framework to ensure credibility of the
agency and brining transparency and accountability in its operation.
The situation could be compared to the circumstances that led to
autonomy of election commission about three decades ago, making it one of the
most respected institutions globally.
I am not too worried about the dust and din being raised for
now.
Chart of the day
It is, what it is. Diary
After going through numerous research reports about the current
state of global economy and markets, I have come to a conclusion, which many
would like to term cynical, preposterous, myopic or even bizarre. But it is
what it is.
I feel we are fast approaching a stage, where trends begin to
deviate from historical path. This is the stage in global history where the
economy makes a "shift". Forecasting the direction and trajectory of
this shift is not possible using the conventional tools. The forecast has to be
institutive (or speculative if you like the word better).
I find most of the contemporary research suffers from one or
more of the following limitation, viz., treating the current turmoil:
(a) A normal
financial market correction, mostly led by higher valuations of equities in a
rising rate environment; and fall in bond prices due to US rate hikes and
fiscal slippages.
(b) A usual cyclical
economic downturn, led primarily by peak employment conditions in US and rising
inflation.
(c) A usual cyclical
correction in global economic cycle led primarily by rising US rates, tariff
related disruptions in trade, and higher crude prices due to OPEC curbs and
Iran sanctions.
(d) A pause in
secular bull market led primarily by geopolitical concerns as specter of cold
war revisits.
(e) A global
liquidity event led by unwinding of USD carry trade as US rates begin to climb
and trade related disruption caused USD supply to contract materially.
(f) Two engines of
global growth EU and China are not functioning properly.
My intuition says, these reports perhaps suffer much from ad
hocism and myopia.
I see the current market turmoil as part of the Endgame for the
biggest bubble ever created in the human history. The pain that was suppressed
by artificial liquidity (only book entries without even printing the currency)
created in the wake of market freeze post Lehman collapse, is beginning to hurt
again.
The global trade and geopolitical balances that got skewed in post
USSR (Coldwar) world, and further exacerbated post China's entry into WTO in
early 2000s, shall seek to return to a state of equilibrium.
This gigantic rebalancing effort, inter alia, shall see:
(a) China seeking a
respectful place in the global arena, given that it has subsidized the global
growth with cheap labor and capital for almost two decades now. The Chinese
State shall fight the global powers which do not find China (not being a
democracy) suitable to sit on high pedestal with them; and the internal dissent
from vast majority of people that shall seek freedom from decades of
suppression.
(b) Europe seeking an
alternative to the common market, as the common currency experiment seems to
have failed in bringing equity to disparate regions.
(c) The third
generation of the losers of WWII (Germany & Japan) seeking to obliterate
the guilt from their national consciousness and seeking an equitable role in
global affairs.
(d) Countries like
Russia, India, Australia, Korea seeking a commensurate role in global affairs
and metamorphosing the world into a multipolar field from the current unipolar
field.
(e) The world
seeking to correct the demographic imbalances by changing the norms for cross
border movement of people.
Intuitively I feel that India may have a large role to play in
this whole effort. The top level political and corporate leadership perhaps
recognizes this opportunity too. However, I do not see any vision or plan to
prepare the 1.3bn people for this opportunity.
This is where the greatest risk to Indian economy and markets
lies, in my view. Bothering about meaningless things like elections, kilometers
of road made or not made, failure of few NBFCs or banks, etc. could just be a
distraction, a rather fatal one.
May also like to read the following:
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