Are we really safe or is it post-truth?

China and Europe will do poorly in 2017 feels Financial Consultant Anantha Nageswaran. The yuan will fall further and growth in Europe will fall. A recession is almost definite in the US and the stock market is a bubble waiting to burst. He is predicting that the dollar will fall but others predict that it will get stronger. All this is moot until we get to know the economic policies of the Trump administration, after 20 January. Ajit Ranade foresees a "dollar winter" this year. Past episodes of strengthening of the dollar resulted in the Latin American crisis of 1979, the Japan crisis of 1985 and the East Asian crisis of 1997. If the Federal Reserve tightens interest rates and Trump gets US companies to repatriate funds they are holding overseas, so as not to pay tax in the US, the dollar will become very strong. Greater spending on infrastructure will increase deficit in the US and raise inflation, because of the tight labor market, leading to greater trade deficit with China. This will result in a boom, which will lead to a bust later on, writes Sanjeev Sanyal. There have been 12 boom-bust cycles in the US since the war. Special Economic Adviser to the Japanese Prime Minister, Koichi Hamada writes that large public debts are not always bad for the economy. "Excessive government debt can be highly damaging. In inflationary periods, high outstanding government liabilities impair fiscal policy, because higher taxes are needed to finance the same level of real government spending. Making matters worse, governments can be tempted to inflate their debts away -- a power that has been abused since the age of monarchs, resulting in uniform inflation tax on asset holders," writes Hamada. This is exactly what successive Indian governments have been doing. The government spends over Rs 2.5 trillion, or 12.66% of the budget, on subsidies. 21% of government spending is financed by borrowing, which is why taxes are so high in India and retail inflation is allowed to run at over 5%, to reduce government debt. The debt to GDP ratio for India has dropped from 90% in 2003-04 to 68.5% in 2013-14, this when the Congress was consistently running high fiscal deficit. The average retail inflation was 3.79% in 2004 and rose to above 6% after that, rising to 12.11% in 2010. However, this has not happened in Japan where the increased consumption tax is acting as a break despite enormous monetary stimulus. What will happen to our economy we do not know. If interest rate in the US and the dollar go up it will create an enormous stress on corporate debts of emerging market countries. Non-financial corporate debt has increased from $4 trillion in 2004 to over $18 trillion in 2014. Apparently, India will not be badly affected. With the severe contraction in money supply what happens to the rupee will be key. We fear the worst.