Do it yourself

The idea of a “global reset” has gained popularity in recent years. It reflects a widespread sense that the extant world order is no longer working and a fundamentally new thing needs to emerge to replace it. Total collapse of global growth in the past couple of decades, unsustainable trade balances, and excessive socialism (social security in developed countries) have raised the specter of a total collapse in the global order, just like it happened in the early part of the twentieth century. While this feeling is understandable, the term itself might be misleading, in my view. What we are witnessing may not be a reset, but a reorganization of global institutions and systems. Global systems rarely collapse overnight. Instead, they evolve unevenly, often while appearing stable on the surface. Trade continues, markets function, currencies circulate, and institutions remain intact. Yet beneath this continuity, the logic guiding decisions is changing. For much of the post–Cold War era, eco...

After the recent geopolitical escalation between India and Pakistan, the president of the United States (POTUS), Donald J. Trump, has become one of the most hated personalities amongst Indian households. His babbling about facilitating a truce between two neighbors, offering trade deals as incentive, may not have gone well with most Indians; even though the Indian government has officially denied any role of the POTUS and his administration in negotiation with Pakistan. This is perhaps one of the reasons the market discourse has mostly ignored “the strategic economic partnership” signed between U.S. President Donald Trump and Saudi Arabia’s Crown Prince Mohammed bin Salman, last week. In my view, this renewed strength in the Arab-US relations is very significant, not only for the US economy, but also for a much wider global economic context. Although, it might be speculative on my part, nonetheless I believe that this “strategic economic partnership” deal could potentially result in— (...

About 17 years ago, a global financial crisis (GFC) engulfed the global markets. The impact of the crisis on financial markets was mitigated in a couple of years by collective efforts of the governments and central bankers. However, the social, geo political and economic impacts of the crisis largely remain unmitigated even today. The "Reset" button pressed by the crisis resulted in widening of socio-economic divide across the world. The geopolitical tensions have intensified materially with rise in nationalism, protectionism and parochialism. This has not adversely impacted global trade. The rising unemployment in Europe and most commodity dependent economies in Asia, Africa and Latin America, declining growth in China, substantial cut in developmental aid to least developed nations due to fiscal pressures, has caused widespread rise in human suffering. The COVID-19 pandemic further accelerated the "Reset" process, paving the way for the emergence of a new glob...

Early this year BRICS, a bloc of leading emerging economies, announced the induction of five new members, viz., Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates, to its fold. The ten-member bloc has a significant presence in global trade. More specifically, it exercises significant control over the global energy markets, controlling 42% of global oil production and 35% of total oil consumption. In July 2023, the then President of BRICS, South Africa claimed that over 50 emerging nations have expressed their desire to join the group. Recently, Russia’s Federation Council Committee on International Affairs, stated that BRICS would be expanded further as more than 40 countries are desirous of joining the group. The cooperation between BRICS members is free, and flexible and extends to a variety of subjects of common interest amongst members. The members and other countries desirous of joining the group, view BRICS as an alternative to global bodies viewed as dominated...

Last month, in one of my posts ( read here ), I mentioned that “From the events of the past few years, it is evident that the era of peace and global cooperation, which started in the aftermath of two devastating wars in the first half of the twentieth century and flourished after the end of the Cold War in the late 1980s, may be coming to an end. In my view, the year 2024 will see a new paradigm unfolding in global economic, political, and geopolitical spheres. The new paradigm which would take a couple of decades to manifest fully, may inter alia see multiple axes and alliances emerging in the global order, competing with each other for supremacy. Consequently, global trade may get fragmented into multiple trade blocs.” I also expressed a view that “The trend in the financialization of economies may reverse. Physical resource ownership and localized manufacturing may become the primary focus again.” A team of the International Monetary Fund (IMF) analyzed the economic impact of t...

  Last weekend the already tense situation escalated materially in the Israel-occupied Gaza Strip area of the Palestinian state. Apparently, the Hamas controlled militia launched a massive ariel and ground attack on Israeli territories, killing over 700 people and injuring many more, including several civilians - women and children. In retaliation, Israeli forces attacked the Palestinian territories in the Gaza Strip, killing over 300 people, including women and children, and destroying several civilian targets. This is the deadliest episode since 1967, in the conflict that started in the late 1940s. The government of Israel has formally declared war on Hamas, committing to a “mighty vengeance” and “a long and difficult war.” They have received support and solidarity from all their traditional allies like NATO members, Australia, and strategic partners like India. As per the latest reports 84 nations have issued formal statements supporting Israel’s right to self-defense. On the ...

  Five months ago, I had highlighted the likelihood of a trading opportunity emerging in gold. ( see here ) The opportunity did present itself, though not exactly in the manner I had anticipated. Nonetheless, the gold prices rallied about 19% in USD terms; from a low of USD1630/oz in early November to a high of USD1950/oz in early February. Since peaking out in early February, the gold prices have corrected about 7% in USD terms. It would therefore be pertinent to ask what traders and investors should be doing with their gold positions. It has been my long standing view that gold is no longer an investment asset. (for example see  here  and  here ) The view is even strengthening with each passing year. I believe that it is highly unlikely that gold will stage a comeback as a widely accepted medium of exchange (gold standard); and it will be gradually phased out as a store of value as better digital options emerge. In this context, the latest report of the World Gold ...

In the past one year, inflation has been one of the primary concerns for most countries across the globe. Rising prices of food and energy in particular have materially impacted the lives of common people on all continents. The central bankers of most major economies have hiked policy rates in the past one year to control inflation. In the current year 2023 so far, 13 major central bankers have taken policy action(s) and all of these actions have been hike in policy rates. However, in recent weeks inflation has shown some tendency of cooling down. It is difficult to assess how much of this cooling down is due to tighter monetary conditions; and how much could be attributed to other factors like restoration of supply chains that were broken during the pandemic and warmer winters resulting in lower energy demand in the northern hemisphere, etc. Nonetheless, some central bankers have adjusted the pace of tightening to smaller hikes. Most of them, though remain...

  The toughest job in the present day environment is risk management. Of course, it has never been an easy job; but when we consider the proportion of moving parts, fragility of systems, disregard for conventions, total lack of mutual trust and disillusionment with the status quo, managing risk appears the toughest job. I can now appreciate the risk managers’ plight during the first half of 20 th   century; when similar conditions were prevailing. To illustrate my point, let me highlight the following instances which may not appear ominous to a common man, but could give cold sweat to risk managers. Interest rates have risen in most parts of the world in the past one year. In many cases the rise in rates has been rather steep, especially the developed economies. Most of these economies were struggling with deflation pressures for the better part of the past two decades. Obviously the rates were low (close to zero and negative in many cases). Many businesses were built assuming...

 In the current year 2022, inflation in India has consistently remained above the RBI tolerance band of 2-6%. For the month of August Consumer Price Inflation (CPI) was 7%, led primarily by the food inflation of 7.6%. Both rural and urban inflation recorded a MoM rise in August. Unfavourable weather conditions apparently led to sharp rise in the prices of vegetables, fruits, spices etc. However, the core inflation (CPI ex food and fuel) has also persisted over 6% since the past many months; emphasizing the persistent pricing pressures. The IIP growth in July also moderated to 2.4% led primarily by consumer non-durables – indicating pressure on household finances. The sharp rise in household debt, especially the expensive credit card rolling credits, also corroborates the rising stress on household finances. In view of the elevated price pressures, the Monetary Policy Committee (MPC) of RBI is expected to keep raising rates in line with the global peers. The market consensus is ex...

It is a basic human tendency to long for what they do not possess. It is common to find people who have struggled very hard to achieve certain goals; but almost instantly feel dissatisfied with (or indifferent to) the outcome. They either realize that it was not something they actually wanted in the first place; or they immediately shift the goal post and begin to struggle/strive for a different/higher goal. This basic human tendency, that often manifests in a constant need to move, evolve and grow, is at the core of all economic growth and development. And perhaps this is the key factor that undermines the issue of sustainability. Metaverse is nothing but a realization that humans never wanted to globalize in the first place. They like to remain confined to their caves and tribes. It was perhaps the starvation and disease that would have forced the first tranche of immigration. Of course since the end of the stone age, this realization has taken more than 5000 years; many rounds of po...

  Some of the most popular video clips shared on social media in India in the recent past were of India’s External Affair Minister, Mr. S. Jaishankar, giving stern replies to the global media about India’s stand on Russia-Ukraine war. In these clips, the minister is seen ‘exposing’, the hypocrisy of European media and politicians in raising questions over India’s purchase of energy from Russia, despite sanctions imposed by US and EU, while the European countries continue to buy natural gas from Russia. Most social media constituents who shared these clips cited the confident and unabashed counteroffensive by the Indian minister as a harbinger of ‘rising India’ and ‘declining west’. I personally have no disputes with the social media warriors on this issue. It does feel good to see a representative of the Indian government taking a firm stand against the developed nations on global platforms. However, the point I am presently more concerned about is ‘declining west’. Worsening d...