A surplus can also be a weakness.

Yesterday the US confirmed 25% tariffs on steel and 10% tariffs on aluminium imports from Europe, Mexico and Canada. Leaders of all these nations have vowed retaliation. "My philosophy is that all foreigners are out to screw us, and it's our job to screw them first," said John Connally, then US Secretary of the Treasury, in 1971. "What distinguishes today's situation from the one Europe faced in the 1970s is the Weimar-like implosion of Europe's political centre," wrote Prof Y Varoufakis. "In the 1970s, America's financial assault on Germany, France, and Britain was met by a united European establishment." By contrast Europe is divided today. Britain is negotiating an exit from the European Union, known as Brexit. In Italy the far left Five Star movement and the right wing League, united by their opposition to immigration and the Euro, won general elections in March. After President Sergio Mattarella vetoed the choice of Paolo Savona as economy minister the two parties decided on Prof Giovanni Tria, to avoid fresh general elections. A crisis in Italy will be too much for Europe to handle, said the Finance Minister of Latvia. Earlier this month Donald Trump decided to withdraw from the Iran nuclear deal. "Forced to insist that Germany would uphold the Iran deal, Merkel found herself immediately humiliated as one German company after another pulled out of Iran." Why? Because they are scared of the financial might of the US and "the tax cuts Trump had delivered to almost 5,000 German companies with a combined balance of $600 billion." Varoufakis was briefly Finance Minister of Greece when Germany insisted on austerity to balance its budget, which was extended to all of Europe including Italy. "Then note that this pan-European austerity drive took place against the backdrop of excess savings over investment. Finally, note that large excess savings and balanced government budgets mean large trade surpluses -- and thus the increasing reliance of Germany, and Europe, on massive net exports to the US and Asia." Germany recorded a budget surplus of 38.4 billion Euros in 2017, with unemployment down to 3.7% and an inflation rate of 1.8%. Germany has saved 300 billion Euros since 2008 because of low interest rate in the Eurozone and benefits from not having its own currency, which would have become stronger against other currencies, making its exports more expensive. Meanwhile, China is busy strangling smaller countries in debt, making them vulnerable to a global trade war. Even as Trump prepares for a meeting with Kim Jong-un China will never allow North Korea to give up its nuclear weapons. It has been using North Korea as its human shield by supporting the Kim dynasty and keeping it dirt poor. In all this confusion Europe seems to have the weakest hand.

Will outsiders control 2019 results?

"The latest poll conducted in May 2018 showed that if snap Lok Sabha elections were to be held today, only 34% of people would prefer Narendra Modi to return as Prime Minister, down from 37% in January and 44% a year ago," wrote T Kundu. Donald Trump's popularity rating is at 40%, apparently  the most unpopular and the second most admired among recent presidents. Elections are never head to head and it is possible to win more seats with less popular votes, as BJP did in the Karnataka assembly elections this month. BJP won 104 seats with 36.2% of votes, while Congress came second with 78 seats despite getting 38% of the votes. In the 2014 Lok Sabha elections BJP won an absolute majority with 282 seats, with 31% of votes, while the Congress came second with 19.3% of votes but got only 44 seats. The BSP came third with 4.1% of vote share but won no seats at all, while the AIADMK won 37 seats with 3.3% of vote share. Did Jill Stein cost Hillary Clinton the election in 2016 by taking away votes in a number of key states where the margin was close, and did Ralph Nader help George W Bush to defeat Al Gore in 2000? So, popularity rating in a multi-party, first-past-the-post system of election does not indicate who will win in 2019. "Data from consumer confidence surveys conducted by the Reserve Bank of India (RBI) show that consumer sentiments have been on the decline since 2016." "Poorer respondents were less likely to report any improvement in their household income or employment scenario compared to richer respondents." The poor are the vote bank. K Das is more sanguine. Despite higher oil prices and tightening of interest rate "India's gross domestic product (GDP) growth will likely remain over 7% in FY19, making it the fastest growing major economy in the world." Inflation and inflation expectation will remain subdued, with the "worst case for CPI inflation looks to be about 5-5.5% average for this and the next fiscal year". The RBI will maintain real interest rate at 1.75% which will create macro stability and the combined fiscal deficit of center and states will be contained because of increased collections from GST. RBI has enough foreign currency reserve to cover imports for 11.5 months so even if it uses some of that to defend the rupee it is not a problem. "Modi backed up his campaign slogan of "minimum government, maximum governance" by implementing a slew of reforms in his first year, including lifting restrictions on foreign investments in many sectors and streamlining subsidies," wrote S Goel. Ultimately, the price of oil, US interest rate and the dollar may decide whether Modi wins in 2019. Not in his control.

Mexico seems far better off from here.

"India would do well to learn from the Mexican experience," wrote N Ramachandran. "Even though Mexico's per capita GDP in purchasing power parity terms has climbed gradually over the years, making it an upper middle-income country, it is in the grip of a middle-income trap." "The resource rich Mexican macro-economy is very stable, with a primary fiscal surplus and low inflation helped by a credible central bank." India almost always runs a fiscal deficit and the deficit has been allowed increase to 3.5% of GDP from the promised 3.2%. The government expects a difference of Rs 5.94 lakh trillion between its revenues and expenditure, which it will borrow from the market. "By end-March 2018, the outstanding loans of the Central government are estimated to hit Rs 82.32 lakh crore. That's up from Rs 57 lakh crore five years ago and amounts to 49.3% of the nominal GDP," wrote A Krishnan. "In short, servicing interest payouts alone will take up 32% of Centre's earnings this year, while pensions and subsidies absorb another 23%." Telecom companies have lost a combined $23 billion in India while the number of users has increased from less than 2 million to over a billion, an increase of 61,436%. "Too many licenses, too little spectrum, high taxes and supply-constrained airwaves auctions has made this a very expensive market to operate in," said SC Bernstein. All because of enormous need to raise revenue. As opposed to Mexico, inflation is always a worry in India. After falling for three months retail inflation rose to 4.58% in April. Mexico exports oil and international price of crude has moderated a bit recently after rising to levels not seen since early 2014. India imports most of its oil and taxes it heavily raising fuel prices to record levels. This is expected to feed into retail inflation eventually. The Indian rupee has been the worst performing currency this year and the RBI is expected to shore up the rupee by issuing NRI bonds, as it has done before. "We expect the RBI to raise $30-35 billion by issuing a fourth tranche of NRI bonds in 2018, with oil breaching $70 a barrel," said I Dasgupta. The RBI has been selling dollars to stop the rupee from falling too fast which has resulted in tightening liquidity and rising bond prices, wrote T Bandopadhyay. India is as corrupt as Mexico with 75% of households feeling that corruption increased in the last one year. India also has a problem with education too. More than a million candidates refused to sit a school-leaving exam when they were not allowed to cheat. When education loses value then 10,300 people, some with LLB and M Tech degrees, applied for 24 posts of drivers in Gujarat, the Prime Minister's home state. Finally we have 1,300 million people, while Mexico has a mere 123 million. Mexico seems far, far better off.

Who wants this kind of technology?

Zaibullah Khan, alias Hamza, a 20 year old Pakistani terrorist captured in Kupwara in Kashmir has provided terrifying information to Indian intelligence agents. Al Muhammadia Students, a student wing of Laskar-e-Taiba has developed a mobile handset for members of the LeT. When a particular chip is inserted into the phone it can automatically connect to the nearest tower, no matter who the service provider, and it cannot be traced by our intelligence agencies. If anyone tries to trace the call it terminates the call automatically. Zaibullah also said that 450 boys between 15 and 25 years of age have been trained in weapons, survival techniques and mountain climbing. Known terrorist Hafiz Saeed motivated them in the name of Burhan Wani. Burhan Wani was a Hizbul commander killed by the Indian army in 2016. The last of 11 militants who posed for a photo with Burhan Wani was killed a few days ago, one of them had surrendered earlier. American Air Force gunships are being jammed as they fly missions over Syria, rendering them blind and unable to tell friend from foe. This means they are unable to identify targets and could bomb innocent civilians or even US troops. So, they are being forced to abort bombing missions. Jihadists are embracing new technologies, from social media, to end-to end encryption to guide individual operatives, to using drones to drop explosives. If national armies are using drones to assassinate terrorist commanders, then terrorists are experimenting with swarms of drones to overwhelm defensive capabilities as they tried against a Russian airbase in Syria. Russia has launched a new submarine, named Knyaz Vladimir, which is quieter than previous models, is capable of diving to 400 meters and "will be capable of launching 96-200 hypersonic independently maneuverable warheads, yielding 150-200 kilotons apiece". Which means that the submarine cannot be tracked and the missiles cannot be intercepted. Russians have also developed a 'Black Hole' hunter submarine, so called because they make almost no sound, and the new 'Husky' nuclear powered submarine will merge with ocean noise and will be able to travel much further. A recent cat-and-mouse game between a Russian submarine and the US Navy showed new capabilities which is worrying NATO. If Russians are going underwater the US has developed a new class of low-to-medium yield thrmonuclear gravity bomb which can be used as strategic or tactical nuclear weapon from a F-35 aircraft. Terrorists on one side, Russians and the US on the other. Who knows what the Chinese are up to. Fortunately, we can die only once.

What is not earned is usually lost.

"Resentment of the crazy-rich isn't just envy," wrote Prof Noah Smith. "Since 1980, income gains for the top 20% of US earners -- except for top 1% -- have been barely larger, in percentage terms, than gains for the middle 60% of the bottom 20%. Meanwhile, the top 1%'s income has soared. But even within the the top 1% there are vast disparities. The top 0.01% of earners -- those making more than $7.5 million a year as of 2015 -- had much bigger gains than the rest of 1%." The problem is worse in the US which has "more than a third of the world's billionaires despite representing less than a quarter of he global economy. Chief executives in the US are paid about 345 times as much as the average worker..." Last year CEOs received an 8.5% raise in salary so that, " The typical CEO made 164 times the median pay of their employees, according to Equilar's analysis." "At Yum Brands, CEO Greg Creed's $12.3 million was 1,358 times higher than the company median of $9.111." Of course, median is not the same as average so the numbers seem different. Indian CEOs earn 229 times more than average workers which has caused a lot of discussion. This is only for those who have managed to find a job. The government's 2018 Economic Survey observed "that 90% of all employees in the formal sector earn less than Rs 15,000 a month. That is, most of those who are privileged to have a formal job in the country (including experienced seniors) earn less than Rs 15,000 a month.," wrote Chakravarty and Ramesh. Nearly 81% of employed people work in  the informal sector in India, where salaries are lower still, said a report by the International Labor Organization. The study also found that 98.3% of those who are 15-24 year old are in informal employment. "The working poor are not poor because they don't have jobs but because the existing jobs are insufficient to provide them a decent income," wrote Prof Himanshu. "Most of the Jats, Patels and Marathas who are demanding government jobs are also not unemployed but are dissatisfied with the existing income in agriculture. The demand for jobs is not just about subsistence, it is also about aspirations. For a majority of those who are struggling at the bottom of the distribution chain, the reality is either stagnant incomes or decline in real incomes." So what is the solution? "...about 38% of American billionaires inherited at least a substantial part of their fortunes." "Taxing these unearned billions seems like a great way to allay public concerns about the super-rich," wrote Smith. A few billions from taxes in an $18 trillion economy will hardly help. It seems small-minded and mean to get pleasure by deliberately making people poor. In any event, 90% of wealthy families lose their wealth in 3 generations. Winning the lottery is also unearned wealth but most quickly lose everything. Why worry? 

Traders demand yields, banks hate it.

"Thirteen state banks have reported combined losses of $8.6 billion for the year to March -- including $6.5 billion in the last quarter -- and their non-performing loans have surged nearly a fifth from end-December levels," said a report by Reuters. This despite the government spending $32 billion to recapitalize public sector banks. State Bank of India, India's largest bank reported a loss of $1.1, the largest in its history, in the March quarter. This is due to the Reserve Bank's insistence on classifying any loan as non-performing asset, NPA, if interest or installment of principal is overdue by more than 90 days. Gross NPAs in our banks amounted to a total of Rs 8.41 trillion in December 2017. In the event of a default a company will have 180 days to pay up or face bankruptcy proceedings. Around 2,100 terrified companies have paid Rs 830 billion to settle their dues but sale of $210 billion, or Rs 14 trillion, worth of stressed assets is held up because bankers are afraid of being accused of selling at a cheaper price to favored buyers. The problem with bad loans is that banks are reluctant to lend until their books are clean, which reduces funding for new projects. The corporate bond market in India is much smaller than other developing economies and companies depend on bank loans for capital. On the other hand, there is a big market in government bonds, or gilts, which are used by the RBI to borrow money from the market to fund the fiscal deficit, which is the excess of expenditure over revenue in a financial year. Under Statutory Liquidity Ratio banks are required to hold 19.5% of total deposits in government bonds, gold or cash. In the absence of reliable lending opportunities the banking industry already holds around 29% in government bonds and exposure of public sector banks is even higher, wrote T Bandopadhyay. Banks hold government bonds in three buckets -- "held-to-maturity (HTM), available for sale (AFS) and held for trading (HFT)". Bonds held for AFS and HFT have to be valued at market prices, mark to market, and when prices fall the asset values of banks also fall. "Between August 2017 (when RBI cut its policy rate to 6% -- the last rate cut) and end-February 2018, the yield on 10-year paper rose by 160 bps, from 6.38% to 7.98%." Yields rise when the market price falls which means banks are losing on their assets. "There is a sudden rush to sell bonds by banks." More selling pushes price down, further raising yields and increasing losses. Banks are forced by the government to lend to "priority sectors" which are small and marginal farmers and micro enterprises but banks do not know how to evaluate risks of these sectors. The solution is to ring fence a large part of depositors money, making it more difficult for companies to borrow from banks and declare bad loans immediately. Poor banks. They can only take orders.

Has India missed the tide?

The countdown has begun. General elections must be held by May 2019 when this government completes 5 years, so pundits are scoring the government's achievements and warning on what banana skins to expect between now and then. M Chakravarty gave him an "'A' for a more robust capitalism." The Goods and Services Tax law, contract labor in all industries, tight control of fiscal deficit, increased tax-to GDP ratio, mainly through indirect taxes, improved road building and the bankruptcy law, which allows creditors to get back some of their money, are some of the positives. The first case under the new bankruptcy code involved Synergies-Dooray Automotive which defaulted on loans of Rs 9 billion. Creditors got back Rs 540 million, just 6% of the total debt. However, when Bhushan Steel defaulted on loans of Rs 460 billion last year it was promptly taken to court by the State Bank of India and has been bought recently by Tata for Rs 352 billion, giving much higher returns to creditors. Rs 830 billion has been repaid by 2,100 companies for fear of being declared bankrupt and being forced into liquidation. Modi has been very generous in implementing a plethora of welfare schemes, wrote T Kundu. Zero balance bank accounts, free gas connections, free electricity connections to villages, rural roads and toilets. Generosity has to be financed and Modi was extremely lucky that the price of oil fell from over $100 a barrel in 2014, when he got elected, to below $40 a barrel in 2015. As the high price of oil was already priced into the economy he was able to increase excise duty plus taxes on oil to over 100% while keeping the price at the pump at the same level. With international price of crude at around $80 per barrel fuel prices in India have reached to over Rs 80 per liter in some states, while regular petrol is selling at around $3 a gallon in the US, which works out to less than Rs 55 per liter. Tax on gas is at 18% in the US. As consumers spend more on fuel they will cut down on other spending, reducing demand, inflation will increase, forcing the Reserve Bank to increase rates, and the current account deficit will increase, putting downward pressure on the rupee. It should be easy to reduce prices by cutting taxes but that will send the fiscal deficit out of control. Fiscal deficit target has already been allowed to slip. The only alternative is to increase taxes on other products. Companies have been told to pay more tax by disallowing legitimate expenses. In the guise of protecting local industry the government is increasing duties on all kinds of imports. Even free food served at temples have to pay GST at 18%. "There is a tide in the affairs of men..." said Brutus. Unfortunately for India the tide may have left already.

Twin deficits face twin threats of US dollar and US Fed.

The global economy is facing many problems but there are two which are important, wrote VA Nageswaran. "One is debt in emerging markets. The second is US commercial debt. These will set off chain reactions in other assets, including in American and emerging stock markets." Turkey's economy is in big trouble with its currency, the lira falling 18% against the US dollar this year. "The reason? Erdogan has been sitting on interest rates, opting for a monetary policy that prioritizes growth over controlling its double-digit inflation. Turkey's growth rate reached an impressive 7.4 percent for 2017 and leads the G-20, but at the expense of inflation, which has shot up to 10.9 percent." Erdogan has brought general elections forward to next month and has said he wants to reduce interest rate. This led to a market sell-off and, eventually, Erdogan was forced to allow the central bank to raise interest rate by 300 basis points to 16.5%. In Argentina the central bank raised interest rate by an eye-watering 675 basis points to 40% from 33.25%, one day after they were raised from 30.25%. Inflation rate is at 25% and the central bank is struggling to bring it down to 15%. So far the Indian rupee has dropped only 6%, but that is because of the vigilance of the Reserve Bank of India, RBI. Like Indonesia and Philippines, India has a twin deficit problem of high fiscal and current account deficits. Core inflation has already started to rise and rising oil prices will add to the current account burden. The RBI has to fight inflation, exchange rates and bond yields, and maintain liquidity while raising interest rate. Bond markets view developed and emerging markets differently. "Just compare the yields on the 10-year government bonds of Greece, Portugal, Spain and Italy with those of Indonesia, Brazil, India and Malaysia. The yields do not seem either right or fair but they are there." Stock market valuations for the world have reached $100 trillion for the first time ever and yields on two-year bonds of most European countries are in negative territory. Total world debt has reached $164 trillion which is 225% of the global GDP. "A big China manufacturing group, DunAn Group, sent a letter begging the Chinese government to help it out with its $7 billion (in equivalent domestic currency debt)." "The Chinese currency is more overvalued in real terms than most other currencies of developing economies." Satellite pictures of illumination at night seem to suggest that China's economy may not be as robust as they claim. If another crisis should occur governments will not be able to increase borrowing, because of already high debt levels, to stimulate growth and this will make things worse. Should have saved when oil prices were low. 

When is it alright to bribe?

After assembly elections in Karnataka on 12 May, in which no party got absolute majority the governor invited BS Yeddyurappa, leader of the largest party, the BJP, with 104, out of a total of 224 seats, to form the government and gave him 15 days to prove his majority on the floor of the house. In his letter to the governor Mr Yeddyurappa apparently claimed that he had the support of 111 MLAs.  The Congress immediately alleged that the governor was colluding with the BJP by giving them 15 days to engineer defections from other parties."Governor invites Mr Yeddyurappa to manufacture a majority in 15 days. Governor gives Mr Yeddyurappa 15 days to convert the number 104 into 111," said Mr Chidambaram.  Mr Kumarswamy of the JD(S) claimed that the BJP was offering Rs 1 billion for MLAs to defect. The Congress claimed to have audio tapes of leaders of the BJP talking to its MLAs and their families. Not taking any chances the Congress and the JD(S) have confined their party MLAs in out of town hotels so that they do not succumb to BJP bribes. Fortunately, the Supreme Court forced a vote on 19 May and Yeddyurappa resigned before the vote could be held. Kumarswamy will be sworn in as chief minister today and MLAs will be kept confined until floor test tomorrow. Yeddyurappa has complained to the Election Commission about "grave irregularities" in conducting the polls. Entertaining yes, but what are citizens to make of this circus? The BJP lied about its support. Allegedly, it was willing to pay huge sums as bribes to induce MLAs of other parties to defect. Obviously, this money was going to be paid in cash, or black money, and not by cheque. The BJP is the party of the Prime Minister, who is on a crusade against black money, and accused the entire nation of being corrupt when he withdrew high denomination bank notes without warning in November 2016. Politicians are so dishonorable that their own parties have confined them to prevent them from taking bribes. Politicians are supposed to be representative of the people so they think that the people are like them. They offer bribes in the form of cash, gifts and liquor to persuade people to vote for them. But, a study showed that bribes don't work. Others resort to extreme violence to win elections and then talk about saving democracy without any shame or embarrassment. "The significance of democracy does not lie just in the act of voting somebody to power, but in the way that power is exercised by those elected," wrote Prof S Sarukkai. "By reducing democracy to this singular act, we have managed to build a society that is fundamentally undemocratic." They tell us not to use cars to reduce pollution even though they go about in convoys of 10-20 cars, but when people protest against poisoning of ground water by a copper plant in Tamil Nadu they are shot dead, including children. Power is extremely lucrative. They have it.

Another aspect of globalization?

"Even by the standards of dystopia set by the the Donald Trump administration, events of the past fortnight have plumbed an alarming new nadir," fulminated Prof WPS Sidhu. How? "The unilateral spiteful decision to pull out of the Iran nuclear agreement and re-impose US sanctions, followed by the inflammatory decision to move the US embassy from Tel Aviv to Jerusalem, and the ill-conceived approach of disarming North Korea's nuclear fangs without any reciprocal 'give' have plunged inter-state relations -- not to mention Washington's reputation -- to a new low." Strong condemnation. "Trump's dangerous triple gamble reflects a lethal mix of hubris and sciolism." North Korea wants concessions from the US and has no intention of giving up its nuclear arsenal, wrote M Boot. "Trump is the one who has made a significant concession by becoming the first sitting US president willing to meet with the leader of North Korea -- an act that will inherently legitimize the ruler of the world's most despotic regime and feed its propaganda that even the world's superpower feels compelled to bow before its mighty nuclear arsenal." Diametrically opposite to Prof Sidhu's opinion. People assume that Kim Jong Un will risk total annihilation by using a nuclear bomb on the South or that his people will be willing to sacrifice themselves and their families by obeying his command. The comparison with Gaddafi by John Bolton would have been terrifying for Kim, even if some think it was a gaffe. Iran is the main support for Hamas, which is orchestrating stone throwing in Gaza. The transfer of the US embassy to Jerusalem has been followed by Guatemala and Paraguay to put pressure on the Palestinians to conclude a peace deal with Israel, but lasting peace will end any reason for Hamas to exist. The victory of Hezbollah in the recent elections in Lebanon is a victory for Iran. "Hezbollah was set up by the powerful Iranian Revolutionary Guards (IRGC) to fight Israeli forces...", and they fought together to fashion Assad's victory in Syria. Iranian forces fired rockets into Israel following which Israel bombed Iranian positions, killing 23. The arc of Iran's influence extended through Iraq into Syria and Lebanon until an alliance led by Muqtada al-Sadr won the recent elections in Iraq. Although a Shia, al-Sadr is seen to be unwilling to take orders from Tehran and has traveled to Saudi Arabia recently. Already multinational companies are pulling out of Iran. Iran being a huge supplier of oil and gas the price of oil has shot up to $80 a barrel. Good news for Saudi Arabia which is planning an IPO of its oil company Aramco. High oil prices will raise Aramco's valuation, raising more money for the kingdom. Will Iran instigate Hezbollah and Hamas to attack Israel and the Houthis to attack Saudi Arabia and will Israel and the Saudis jointly attack Iran, scaring Kim Jong Un to surrender his weapons? If a butterfly flaps its wings in New Mexico. Globalization, in other words.

Are we commodities or individuals?

"There's a right way and a wrong way to fail," wrote B Ritholtz, comparing the airline and healthcare industries. "High stakes make aviation an excellent subject for the study of failure. In other fields, errors may be subtle, and the results not recognized for years. When there is a flying failure, planes fall out of the sky, and footage of the wreckage is on the news." "In 1912, the US army had 14 pilots, and even before the war, more than half (eight) would die in crashes." But, "...in 2013, there were 36.4 million commercial flights worldwide carrying three billion passengers. That year, there were only 210 commercial aviation fatalities." "Last year (2017), zero commercial airline passengers died." Compared to that, "preventable medical errors" "might result in as many as half-million deaths in the US at a cost estimated at $17 billion a year". Why? "First, there is little publicly available data and no sort of standardized review process when errors occur." "There is an attitude among some that doctors are infallible saviours." Comparing airlines with healthcare is like comparing travelling in a bus with a Formula 1 racing car. Airlines are standardized because human beings a treated as commodities. Airlines have reduced leg room for passengers in economy class to just 29 inches to pack in more people like cattle. The airline decides what fees to levy. Ryanair has a long list of fees, including for extra legroom and for checked in bags. Flights are deliberately overbooked because empty seats are a waste of money and a bonafide passenger, who has paid for his ticket, maybe removed by force at the will of airline staff. If any hospital treated any patient as airlines treat passengers it will not only be sued but the people involved will be imprisoned. Even a violent patient is treated with great care. In contrast airlines staff are treated with extreme care, with huge salaries and long periods of rest mandated by the regulator. Every person on an aircraft is treated exactly the same but every patient is completely different. Thus symptoms of heart attack may vary from a crushing pain in the front of the chest, to pain between shoulder blades, to a feeling of suffocation. While passengers in an aircraft cannot tell the captain what to do, a doctor has to get 'informed consent' from a patient for an operation, or even to examine certain parts of the body. While most flights are uneventful and pilots are very rarely asked to make urgent decisions such emergencies are common in patient care. Why do people trust doctors? Because when anyone is seriously ill she thinks, " Why me". She needs reassurance and a discussion of what best course to take. Healthy people accept being treated as things but a sick person is an individual. Cannot be compared.   

It maybe good for us, even if it is bad.

"At the last count, 1,157 economists had sent a letter to US President Donald Trump warning him not to repeat the mistake of the Smoot-Hawley Tariff Act of the 1930s, wrote Nageswaran and Thiruvadanthai. The Smoot-Hawley Tariff Act was passed in 1930, after the stock market crash of 1929, to protect American agriculture and industry. However, tariffs had been raised to an average of 40% by the Fordney-McCumber Act of 1922. Other nations retaliated to Smoot-Hawley by raising tariffs on US goods and global trade fell by 66% between 1929 and 1934. "Trade policies driven by domestic political lobbying and special interests are beggar-thyself policies," wrote Prof D Rodrik. "If we manage our own economies well, new trade agreements will be largely redundant." Globalization has produced both winners and losers, and the elite now agree that losers must be compensated. But, "The time for compensation has come and gone," wrote Rodrik. "Today's consensus concerning the need to compensate globalization's losers presumes that the winners are motivated by enlightened self-interest." They promise compensation before a new trade policy but, "Once the policy is in place, they have little interest in following through, either because reversal is costly all around or because the underlying balance of power shifts towards them." Trump mainly blames China for the loss of jobs in the US. Between 2001 and 2015 US lost 3.4 millions jobs because of unfair trade practices by China. When China joined the WTO in 2001, "it had promised to sign the Government Procurement Agreement, which requires government purchases to be made on a non-discriminatory and transparent basis." Sixteen years later China has not done so. China pledged not to "militarize the islands it has created in the South China Sea. But, it proceeded to do exactly that." A Harvard Harris poll of March 2018, found that 55% of Americans feel that trade agreements cost jobs, 61% agree with Trump on imposing tariffs on imports, 67% feel that the US should punish China for forcing US companies to give up technology secrets, 75% feel that the US should impose tariffs to reduce trade deficit with China and 68% said that the American government should buy American goods and hire American workers. Whatever happens elsewhere India will suffer because a large part of the economy depends of government spending. The stock market could crash, according to Credit Suisse. If China's economy collapses it would be great for us. Even if we suffer. 

Friedman or the Fed, who to follow?

As unemployment falls in the US and price inflation rises the Federal Reserve is going to raise interest rates, wrote Prof T Cowen. But will a tighter monetary policy choke off a labor market recovery? "It turns out economists, forecasters and pundits don't actually have a firm handle on the relationship between these variables." A sudden deflationary shock damages employment. The Fed should lower interest rates to increase purchasing power. High inflation makes people work more and they feel that they are earning more but wages do not keep pace with the rate of inflation so workers lose out. A high inflation reduces costs for employers but workers do not realise that their real wages have gone down, known as 'money illusion', so employers hire more people. That would make inflation good for the economy. Since wage growth is low even with low unemployment the Fed should continue with low interest rates to boost growth. "One thing we know about inflation is that voters hate it." People at the top get higher salaries but those lower down do not have the bargaining power for higher wages, so "it is not wrong or immoral for the Fed to take it into account in setting monetary policy". Previously economists believed that unemployment and higher inflation are related, but, "Friedman instead argued that monetary policy can only impact nominal variables, such as prices, and not real variables such as gross domestic product and employment," wrote A Agrawal. The Reserve Bank of New Zealand adopted inflation targeting, or IT, in 1989 which was followed by most central banks. The US Fed has "twin goals of low inflation and maximum unemployment" and has been credited with the turnaround following the 2008 crisis. Now other central banks, including New Zealand, have adopted the same policy. Economists in India strongly believe that a low interest rate helps growth and our Chief Economic Adviser has been at the forefront in urging the Reserve Bank, RBI, to reduce rates. Low interest rate will reduce inflow of foreign funds and weaken the rupee which will be good for exports, wrote Prof A Goyal. According to her, Flexible Inflation Targeting means that the RBI should tolerate a high rate of inflation while keeping interest rate low to allow the government to borrow more. Or else the RBI should have to justify itself to parliament. High oil prices will reduce GDP growth, increase the current account deficit and weaken the rupee, wrote A Nag. A weak rupee increases inflation because of higher cost of imports and high inflation makes the rupee weaker by reducing its buying power. So what should the RBI do to support the rupee, stimulate GDP growth and keep inflation down? There is no end of advice, but as Cowen wrote, economists don't really know. Hence the anger.

It is not just the Supreme Court.

"India has reached an institutional abyss," wrote Prof S Rajagopalan. "It all began with the infamous press conference where four senior-most judges rebelled against their head, the Chief Justice of India (CJI) Dipak Misra. And since then, it seems every branch of government has entered a perverse race to the bottom." The government has been locked in a battle with the Supreme Court over appointment of judges, repeatedly rejecting recommendations of the Collegium, possibly to fill higher courts with judges grateful to it. "A malleable judiciary potentially serves the executive the most -- after all, it is the biggest litigant in the judicial system." The parliament has oversight over the judiciary, but the government has stayed silent on the disagreement between judges, perhaps to weaken it. The opposition Congress wanted to file a impeachment motion against the CJI but this was denied by the Chairman of the Rajya Sabha, Venkaiah Naidu. Although he did the right thing, " Naidu acted well beyond the discretion granted to him under Judges Inquiries Act, 1968; he did not even refer to the Act in his order while summarily dismissing the impeachment motion." How deep is the abyss? Out of 221 MLAs elected to the Karnataka Assembly in elections on 12 May, 77, that is 34%, have serious criminal charges against them. The Governor called the BJP to form the government, without talking to the other parties, on the basis of a letter claiming support of 111 MLAs, when it has only 104 MLAs. The Governor has been called a "BJP stooge" by the Congress. Uncooperative governors have been unceremoniously sacked by the Prime Minister in the past. No one wants to give up unproductive luxury at taxpayer expense. By allowing the BJP to form a government until they can prove their majority on the floor of the assembly they have been given time to bribe MLAs of other parties to defect, apparently offering as much as Rs 1 billion each. Obviously, bribes will not be paid by cheque, but by cash. This by the party of the Prime Minister who talks very big on black money. So, the Right to Information Act is being slowly choked to death by not appointing officers to the Central Information Commission and by deliberately stone-walling by civil servants. One minister wanted to withdraw accreditation of journalists for transmitting 'fake news', hurriedly overturned by the Prime Minister when he realised that the fallout was going to be costly. While the Prime Minister is trying to be the supreme leader in India he has not made our defense materially strong so that India is "less a leading power and more a pleading power", wrote Prof R Sagar. If one man has all the power institutions will be abysmal. No one gives up power.

Aren't bonds another way of speculating on the rupee?

"The risk of a rupee crash looms large," thinks VA Nageswaran. Why? The Reserve Bank increased the limit of External Commercial Borrowing, or ECBs, on 27 April. On 1 May, it increased the amount of short term government and corporate bonds that Foreign Portfolio Investors, FPIs, are allowed to buy, subject to a ceiling of 20% of their bond holdings. On 4 May, the RBI purchased government bonds worth Rs 100 billion through Open Market Operations, or OMOs, to increase liquidity. Total foreign debt maturing within one year is $120 billion. The RBI is increasing money in circulation through OMOs to keep interest rates down. "Therefore, market participants have correctly concluded that RBI is interested in holding down government borrowing cost." Shouldn't that be a good thing? "Between 2012 and 2013, the 10-year Indian government bond yield did come down from around 9% to 7.5%. But, if one expanded the window to the period between 2009 and 2014, the 10-years bond yield went from 7% in March 2009 to 8.8% in March 20114. In this period, the net RBI credit to government (and this, on paper, includes state governments too) ballooned from Rs 615.80 billion to Rs 6.98 trillion." With rising price of crude oil and rising US interest rate the rupee could crash as in 2013. Rising fuel prices will feed higher retail inflation, a falling rupee will increase price of imports, including oil, still further and higher outflow of dollars to pay for more expensive imports will increase the Current Account Deficit, creating a "triple whammy" for the Indian economy," wrote R Mahapatra. A depreciating rupee should boost our exports by making them cheaper but here India is losing out to other low cost nations, like Bangladesh and Vietnam, despite having a huge working-age population, wrote Agarwal and Chopra. To increase the rate of growth of the economy banks have to reduce their non-performing assets, NPAs, so that they can start lending again. But, bankers are reluctant to sell off $210 billion, or Rs 14 trillion, worth of NPAs because they are afraid of being accused of having accepted bribes to sell them cheap. So, they are content to let stressed companies go into liquidation, when they will be sold for a fraction of what banks could receive if they were sold as functioning concerns. RBI's decision to allow FPIs to buy more short term bonds will create "bond tourists", wrote Choudhury and Merchant. If FPIs move in and out of Indian bonds the rupee will become volatile which will create problems for Indian businesses. Foreigners are welcome. But what if they leave suddenly? 

Is technology a friend?

Two years after it started, Finland is to end its scheme for Universal Basic Income, or UBI. A study at Oxford said that 47% of jobs in the US "are at risk of being automated within the next 20 years". Scholars recommend UBI where all citizens are paid a "basic wage whether or not they are employed", much like universal healthcare and education. "The programme allowed 2,000 unemployed Finnd to receive a UBI dole, even when they tried out casual employment at odd jobs." They were compared to a group of 137,000 employed Finns. The problem with UBI is, "One: it must be paid for by all citizens, which means higher taxes, and two: doles act as a disincentive for recipients who would otherwise be forced to go out and find work." The government of Finland thought that UBI would reduce expenditure by replacing current social security schemes but the Organisation for Economic Cooperation and Development, or OECD, calculated that income tax would have to increase by 30%, it will raise income inequality and raise poverty rate in Finland from 11.4% to 14.1%. Liberalism stands for self-ownership, wrote Prof Y Varoufakis. "You were your own property. You could lease yourself to an employer for a limited period, and for a mutually agreed price, but your property rights over yourself could not be bought or sold." But today, because of the internet, everything has to be a brand. "And today, with colleagues, employers, clients, detractors, and 'friends' constantly surveying our online life, we are under incessant pressure to evolve into a bundle of activities, images, and dispositions that amounts to an attractive saleable brand." Young people, those without family wealth, starting life are "condemned to labour under zero-hour contracts and wages so low that they must work all available hours to make ends meet" or "they must invest in their own brand every waking hour of every day".  Prof V Wadhwa apologizes for predicting that technology will improve our lives. Instead, "Social media has led to less social interaction, not more. It has suppressed human development, not stimulated it. As Big Tech has marched onward, we have regressed." Greater inequality should lead to greater redistribution, wrote Prof D Rodrik. Instead, "progressivity of income taxes has decreased, reliance on regressive consumption taxes has increased". Well educated elite, who believe in merit, have captured leftist parties. Why do people vote for leaders who lower taxes on the rich? Because people have lost trust in governments. Meanwhile global debt has ballooned to $164 trillion which is 225% of global GDP in 2016. With high sovereign debt governments will find it difficult to increase social spending. Back to Marx?

Shouldn't we know the NAV of the rupee everyday?

By the end of December last year bad loans at Indian banks had crossed Rs 8.40 trillion and was predicted to cross Rs 9.50 trillion by the end of March. Stressed assets were expected to rise to Rs 11.50 trillion. Out of total loans of $178 billion to the power sector $53 billion are stressed and of that $38 billion will turn into defaults. "Between April 2014 and December 2017, public sector banks recovered a pitiful 10.7% of the massive Rs 7 trillion worth of loans they wrote off during the period, shows a reply to a question in the Rajya Sabha" wrote SA Aiyar. The problem is not limited to public sector banks. Private banks use ingenious methods to hide bad loans, such as by issuing a loan to another company with the understand that it will be passed on to the company in default, selling bad loans to cooperative banks or issuing two loans at once, one of which is held back and given to the company to pay back its bad loan, wrote T Bandopahyay. How to stop bad behavior by banks? "How a few rules can get banks to behave better," suggested H Husain. We have to understand how other industries "prevent fraud". "For example, all airlines that were flying Airbus A320neos using a certain make of engine were asked to ground their planes. This happened without a single tragedy occurring (thankfully)." Even the possibility of any accident was averted. What about banks? "The fact is that banks can manufacture money." We may think it is our money but it is actually a promissory note from a public limited company, a bank. "Sovereign money or currency is barely 13% of the total. Even the government borrows from banks." Banks use our deposits to lend to companies and manufacture more money to cover bad loans. "A rupee today is worth only 65 paise of the rupee on 2011. It is in fact the net asset value (NAV) of a rupee and the performance metric of all banks put together." Public sector banks have to be recapitalized by the government which owns them which will convert the loans into fiscal deficit and increase sovereign risk, wrote H Vora. So what to do? Force banks to raise capital from share markets by limiting how much of our deposits they can lend. Declare loans as non-performing assets as soon as there is a default. Because interest on debt is tax deductible companies prefer to borrow, which should be discouraged. The only way to stop fraud at banks is to privatize public sector banks, wrote Prof S Rajagopalan. That is never going to happen. Indian politicians have feudal mindset. They issue orders to banks to lend to poorer sections of society, such as agriculture, which bank officials do not understand. Politicians have been using depositors money to buy votes since the days of Indira Gandhi and used to be called 'loan melas' at one time. The NAV of the rupee will keep on dropping. Hope it doesn't go down to zero.

Taxman versus foreign funds, who wins?

The deal is done, Walmart is to buy a 77% stake in Indian online retailer Flipkart for an eye-watering $16 billion which values the loss making company at about $21 billion. Amazon was also in the hunt to buy the company but that would have created a near monopoly. Walmart is locked in a battle for dominance with Amazon in the US, with Walmart buying Jet.com to enter e-commerce business, while Amazon bought Whole Foods, which owns 450 stores in the US, to enter bricks-and-mortar retail. In February, Walmart stocks plunged 10.2% in one day when it reported lower-than-expected profits in the fourth quarter. Walmart is investing heavily in its online business in the US and the purchase of Flipkart is extending its fight against Amazon to India. Walmart has been selling businesses in several countries. It is selling Asda in the UK to Sainsbury's and could not get its business going in China. Getting into India when its growth momentum is picking up, and seeing how Amazon has grown, proved to be tempting. Shareholders in the US were less than impressed as Walmart shares fell 4.2% on news of the deal and "S&P lowered Walmart's outlook to negative from stable". There were protests by groups of traders and farmers against the deal yesterday. Small shopkeepers fear that a fight between two giants, by cutting prices, will put them out of business. They feel that Walmart is planning to set up multi-brand retail stores through the backdoor. However, they have nothing to fear. The present government will not allow it for fear of losing elections and Walmart stores are huge, from 40,000 to over 100,000 sq feet in size with car parks so huge that thousands of people live there. There is no land in Indian cities to build such huge stores and politicians believe that car parks are waste of valuable land. Walmart makes profits, despite very low prices, from selling large volumes. To take advantage of its prices people will need to buy in bulk which means they will need cars to carry their shopping home. With population increasing relentlessly that will not be possible in the next 100 years. So shopkeepers have nothing to fear. The deal needs to be approved by the regulator. But that is surely guaranteed. The government needs vast amounts of money for handouts to win next year's general elections. Tax officials were told to extort Rs 10.05 trillion in direct taxes from an earlier level of Rs 9.80 trillion. Tax officials have offered to help Walmart to withhold taxes before it pays the sellers. If they manage to extract a larger amount of tax than is fair the sellers will have to go to court to recover the excess and, with cases dragging on for decades, the money will have lost half its value through inflation. However, Flipkart is registered in Singapore and is owned by foreign financiers so we expect sparks to fly. Great fun.

If Ramdev can do it why can't others?

"The Economic Survey of 2017-18 identified exports as the biggest source of upside potential for growth in FY18," wrote A Agarwal and S Chopra. "The optimism seems appropriate with exports growing for the fifth consecutive month in January." The US Federal Reserve is going to increase interest rates which will lead to an outflow of dollars. This usually leads to a weaker currency and a fall in economic growth, but it will benefit exports. During the 'taper tantrum' in 2013 the rupee fell from 54.39 to 62.68 to the dollar. Exports "grew at 12.98% on year-on-year basis in Q2 2013-14, the highest in a quarter for the five-year period between 2012-13 and 2016-17." The "inevitable trade war between the US and China" is an opportunity for India to take over low cost manufacturing. Increase in demand from the EU, which grew at 2.5% in 2017, and diversification of manufacturing in China towards high technology are other favorable factors. Of course, to export you need to manufacture high quality goods in great quantities. "More than 90% of entrepreneurs and establishments in the manufacturing sector in India fall in the small enterprises category," wrote E Ghani. "More than 80% of employment is generated by small enterprises in the unorganized sector." The productivity of small enterprises is low and they cannot compete with huge factories churning out large volumes in China. Poor electricity supply, lack of qualified labor and a corrupt bureaucracy make it very difficult to set up any business. Strangely, small enterprises constitute 85.1% of businesses in Japan, medium enterprises make up 14.6% and large enterprises a mere 0.3%. Total exports of Japan were $788 billion in 2016, while imports were $656 billion, with a positive trade balance of $21.6 billion in net exports. India exported a tiny $260 in 2016, while we imported $357 billion. If we take out export of petroleum products our exports have not grown at all, wrote M Chakaravarty, while imports, other than oil, gold and silver, jumped. Imports of electronic goods increased by 12.2% year-on-year, showing our weakness in manufacturing. "One, there aren't that many of the big and modern firms that are investing a huge amount in R&D," said W Maloney of World Bank. "And the vast majority of firms in India don't have the capability to do R&D." The main reason why there is a lack of big business is because rules keep changing according to whims of politicians and civil servants, wrote R Seth. There is only one wholly Indian business that is taking on the foreign challenge, and that is Patanjali run by yoga guru Baba Ramdev. Perhaps we need a Patanjali management institute.

Will the regime become stronger or weaker?

President Donald Trump withdrew his nation from the Iran nuclear deal, just as he had promised during his campaign, and reimposed sanctions. "It is clear to me that we cannot prevent an Iranian nuclear bomb under the decaying and rotten structure of the current agreement," said Trump. "This was a horrible one-sided deal that should have never, ever been made. It didn't bring calm, it didn't bring peace, and it never will." In response, Iranian President Hassan Rouhani said, "it is possible that we could face some problems in the coming two to three months, but we will overcome this". Earlier he had said," If America leaves the nuclear accord, this will entail historic regret for it." Maybe not. The Iranian currency has been in free fall in the expectation of Trump's decision. The official exchange rate against the dollar was 37,000, but the black market rate was 60,000, so in early April the government combined both rates and set an exchange rate of 42,000 rials to the dollar. Following Trump's announcement the rial collapsed to 65,000 to the dollar and could go as low as 110,000 in the next few months, with inflation rising to 3 times the present level. There were riots against the government in Iran earlier this year. Unemployment in rural areas is 45% and, in some areas it has reached 60%. Previous protests were by the middle-class and by students but this time, more ominously, protests were by farmers and workers from "rural and religiously conservative villages and towns". Protesters were shouting "Death to the dictator", about the Supreme Leader, and "Death to Hezbollah", which would have been unthinkable in the past.  Hezbollah and its associates have just won more than half the seats in Lebanon's elections, prompting Hassan Nasrallah to claim "mission is accomplished". Barack Obama who had negotiated the deal criticized Trump as "so misguided". So desperate was Obama to strike any kind of deal that he pardoned Iranians convicted of smuggling nuclear parts from the US to help build centrifuges and the Justice Department dropped charges and international arrest warrants against 14 individuals angering agents and prosecutors who had spent "years, if not decades, working to penetrate the global proliferation networks" of Iranian agents. Present Secretary of State, Mike Pompeo urged his Republican colleagues in Congress to vote against the nuclear deal in 2015. Obama also reached a quiet deal with China to supply coolant technology which will make their nuclear submarines quieter. With Assad's victory in the civil war in Syria, Iran's influence now stretches through Iraq to Syria and Lebanon, threatening Saudi Arabia, Jordan and Israel. If there is a regime change in Iran support for the Hezbollah, the Shia government in Iraq, and for Assad will disappear. Or so Trump is hoping.

Carry trades carry increased risks.

Central banks are known to be cautious and the RBI is no exception, wrote M Bhusnurmath. The RBI increased the limit of any government security that can be held by Foreign Portfolio Investors, or FPI, to 30% from 20% and reduced the lock-in period of holding corporate bonds from 3 years to 1 year. This was on top of an increase in the amount of government bonds that FPIs are allowed to hold, from 5.5% to 6% in early April. "Is liberalisation of short term, admittedly volatile, overseas flows the best remedy to tackle emerging pressure points in India's macro-economy? More importantly, is there a danger that RBI, in its search for quick-fix remedies, might have sacrificed hard-won long term stability?" What is the danger? "One it turns the clock back on past efforts to incentivise long-term, rather than short-term, inherently destabilising capital flows. Two, it makes India much more attractive to those looking to make a fast buck...", such as, "the infamous carry-traders who borrow funds at absurdly low rates overseas and invest, typically, in risk-free G-secs at 7-8%". Why is the RBI taking such risks? To reduce the Current Account Deficit, or CAD, which is rising to near 2%, and to bring down bond yields, which are tending to go over 7.7%. The RBI must also be concerned about the rupee which has fallen to a low of 67 to the dollar because of some selling of Indian stocks by foreign funds and higher price of oil. FPIs have been buyers in January and March and net sellers in February and April. However, from January to April they are positive by Rs 97 billion. Why is the rupee falling? Retail inflation in India is always around 3% higher than its major trading partners and exports are weak. Exports were 17.2% of GDP in 2013-14 but fell to 12.4% of GDP in 2016-17, which led to the CAD reaching a level of 1.9% of GDP. The Real Effective Exchange Rate, or REER, is overvalued by 17% compared to 2005 which makes exports more expensive and imports cheaper, wrote H Bhattacharya. Vietnam and Bangladesh have overtaken our garment exports and imports of electronic goods increased to $42 billion in 2016-17 from $3.4 billion in 2011-12. There are many positives for the economy, found A Kapoor. Growth rate has increased, a good monsoon is predicted which should be good for agriculture, a weakening of an overvalued rupee will be good for exports, the bankruptcy code will revive industry and the fiscal deficit is manageable. However, rising commodity prices, the risk of higher inflation and global uncertainties are worries. Never any peace, is there?

Time running out on 'time bomb'.

Unauthorised construction is a "time bomb", said the Delhi High Court recently. The Supreme Court ordered the removal of all encroachments on public space. The Court had told municipal authorities not to allow unauthorised construction in 2004 but its order was ignored. Obeying the Court's order can be dangerous. An officer was shot to death in Kasauli in Himachal Pradesh because she refused a bribe from a hotel owner not to seal an illegal structure. This being India, there could be more to the story than we are being told. The hotel owner could have paid bribes to other officers previously to allow him to build the illegal structure and may have been enraged by what he sees as a betrayal and waste of money. He cannot say that because politicians and civil servants have protected themselves by passing a law that punishes a bribe giver equally as the taker of a bribe. No wonder, in a survey 45% of Indians admitted to having paid a bribe in the last one year. Unauthorised colonies are nothing other than land grabbing in the name of the poor. Politicians promise to make them legal, or 'regularise', before an election. This breeds a feeling of immunity that being poor excuses breaking the law. An engineer, inspecting theft of electricity, died when his car crashed as he tried to flee a mob armed with iron rods and hockey sticks. Another engineer suffered head injury when checking for electricity theft at an apartment in Ghaziabad. We are not talking about building a small hovel with one-brick walls, covered with tarpaulin or metal sheets. Authorities in Noida have stopped illegal buildings consisting of 6 to 9 floors without planning permission. Strangely, no one ever goes to prison for the serious crime of land grabbing and building illegal, unsafe structures. In the Campa Cola case residents have been evicted from their apartments because these were built illegally but it means that those who have been conned have been punished while the cheats and officials, who took bribes, to allow the cheats to build the flats are allowed to enjoy their spoils. Officials should have stopped the extra floors by taking out an injunction. People take their cue from politicians. Former Chief Minister of Bihar, Lalu Prasad Yadav was sentenced to 14 years in prison for stealing money. All this time he was in good health and even celebrating by-election victories through social media. Suddenly he decided to get admitted in the All India Institute of Medical Science, a tertiary hospital, in Delhi. Goons of his party created a disturbance in the hospital when he was discharged and Lalu called it a "political vendetta". When the top is rotten the system is rotten. Breaking the law becomes a right.

Will Marx make a comeback?

China has presented a statue of Karl Marx to the town of Trier in western Germany to mark the 200th anniversary of his birth. People of Germany are divided over how to remember their famous son. Those who lived in East Germany before German reunification still have memories of the dreaded secret police, the Stasi. The Stasi maintained secret documents on almost every citizen and encouraged people to snitch on their families, friends and neighbors by creating terror in the minds of citizens. Although all the Stasi files are now available most people of eastern Germany would rather forget those times. It was not just the police. Information was gathered by universities, municipalities and workplaces. "No matter where one shared information, the state would put it to use." "Mutual evaluation, judgment, criticism and self-critique were omnipresent. Across the country, people were on the lookout for divergent viewpoints, which were then branded as dangerous to the state. Often to one's advantage." "The losers of this system often didn't know why their lives suddenly became derailed." Marx was born of Jewish parents who had converted to Christianity because of racism and was expelled from Prussia for his radical views. Y El-Gingihy wrote a spirited defence of Marxism. "Marx's ideas had apparently been discredited with collapse of communism and consigned to Trotsky's dustbin of history." "Then came the 2008 financial crash and the demise of political economist Francis Fukuyama's 'end of history'. A decade of austerity was the death knell for the ideological vacuum." Prof A Sen wrote about the philosophy of Marx in which he picks two of Marx's "relatively neglected ideas" which were "his highly original concept of 'objective illusion', and related to that, his discussion of 'false consciousness'." In a highly exploitative society workers suffer from objective illusion wherein they fail to see that they are being exploited which is a kind of false consciousness. Surely, the same argument can be made against China where the Communist Party clings on to absolute power through a mixture of capitalism and total state control of media. On the one hand, the government is trying to restore rights to private ownership of property, on the other, it will strictly control what information or entertainment is available to people, effectively controlling how people think. Socialism and communism are more acceptable to the young people in the US than it is to the older generation. Marx has been long dead but his ideas are still generating hot debate. There will be losers in any system. Including Marxism.