Will it be pakoda wala tomorrow?

"A simple shop selling 'kachoris' in Uttar Pradesh's Aligarh has left the commercial tax sleuths astounded." Kachoris are a kind of pastry stuffed with lentils and fried, and eaten as snacks. "A team of tax inspectors sat at another shop near Mukesh Kachori and started keeping track of sales. They found that Mukesh was earning anywhere between Rs 60 lakh to Rs 1 crore and even more annually." With an income of Rs 6-10 million one would expect Mukesh, owner of the shop, to be living in a grand bungalow and driving a big car. Not so. "A narrow road, littered with garbage leads to the 225 sq ft dilapidated house of Mukesh Kumar, who is now famed 'kachori wala' who has grabbed the headlines of national media because of his purported sales of Rs 70 lakh, as pegged by GST officials, An old rickety desert cooler in the bedroom, where some plastic chairs are kept for visitors. No car is parked outside the house but an old black colored bicycle and a TVS moped, stand leaning against the house." Tax officials are sticking to their story. It is possible that someone wanted Mukesh out of his shop because he is paying a nominal rent of Rs 300. Mukesh may have been saved by all the media attention but investors in India are not so lucky. Investors in stocks "get dividend from a company after it is taxed at 30 percent. Then the company needs to pay 20 percent dividend distribution tax and then the investor pays a further 10 percent tax plus surcharge on dividend income above Rs 10 lakh," wrote V Kedia. "Truth be told, entrepreneurship in India is today comatose, if not dead," wrote H Damodaran. The period after 1991 "saw the emergence of new capitalists and also the rise of the old not-so-big, on an unprecedented scale". But the current decade has seen few new big enterprises but a whole list of companies "have been neck deep in debt or gone belly-up in the last 6-7 years". If companies are ging bust the government cannot collect taxes. "The government's tack record in raising tax revenue does not inspire much confidence in its ambitions," wrote N Kwatra. "Instead it raises fears of overzealous taxmen raising arbitrary demands to meet unrealistic revenue targets." The reason for unrealistic revenue targets maybe overestimation of GDP growth by 2.5%, as suggested by former Chief Economic Adviser A Subramanian. With weak tax growth the government resorts to borrowing. Instead of looking at fiscal deficit which is kept within forecast by "financial jugglery" we should focus on the public sector borrowing requirement (PSBR), which "may exceed 9% of GDP, wrote SSA Aiyer. "This is almost frighteningly high by international standards." GST can only be collected if people buy goods and services but private final consumption expenditure (PFCE) is falling, wrote R Kishore. Even sales of consumer goods for daily use are not growing. People can spend only if they have money. The government keeps changing tax rules and takes in cess what it gives in higher basic income. People cannot plan long term so they stop spending. Today it is kachori wala, tomorrow it maybe pakoda wala. Terrified people will not spend.

Is this the beginning of his end?

"Turkish President Recep Tayyip Erdogan has often said, 'Whoever wins Istanbul wins Turkey'," wrote Prof M Ayoob. Opposition CHP party candidate Ekrem Imamoglu beat Binali Yildirim of Erdogan's AKP party by an increased majority after, "Under pressure from Mr Erdogan and his party, the High Election Board annulled the March 31 election result on flimsy grounds." Erdogan won a referendum in 2017, granting him excess powers, by blatant cheating. "Astonishingly, Turkey's electoral board announced that it would accept boxes full of ballots but without seals -- all such boxes thus far discovered being, mirabile dictu, full of Yes votes," wrote Melik Kaylan. Erdogan tried everything from lies to abuse but Imamoglu still won in a landslide. "During the 18 days when he ran the city after the last vote before it was annulled, his team uncovered a deficit of almost $4 billion, largely due to state tenders linked to Erdogan's family." Erdogan may use pliant judges appointed by him to unseat Imamoglu because he apparently "insulted the governor of the Black Sea province of Ordu" by denying him use of the VIP section of the airport, wrote Kadri Gursel. The main problem for Erdogan could be the economy with "skyrocketing prices and joblessness". He described high interest rate as the "mother and father of all evil". Retail inflation came in below expectation at 19.50% in April. "The highest price increase last month was seen in food and non-alcoholic beverages -- up 31.86 percent on a yearly basis." "The lira has fallen by more than 10 percent against the dollar this year, adding to losses of 28 percent in 2018. It fell 0.2 percent to 5.97 per dollar in Istanbul on Friday." "Turkey's troubled lira fell to its lowest level since October on Thursday after its central bank scrapped a pledge to raise interest rates if needed." "The bank's benchmark rate is currently 24%." Protests against Erdogan in Gezi Park in Istanbul in 2013 was brutally suppressed by the police, killing 4 people and injuring thousands. There are credible allegations of smuggling of ISIS oil through Turkey, with knowledge and assistance of government institutions. Revelations of emails by Wikileaks suggested that Erdogan's son was actively involved in smuggling ISIS oil. Russia joined the Syrian conflict in 2015 and started bombing ISIS oil trucks, infuriating Erdogan who ordered the shooting of a Russian jet for straying into Turkish airspace for 17 seconds. A failed coup in 2016 gave Erdogan the excuse to sack and jail hundreds of thousands of teachers, police and government workers. There is a strong suspicion that the coup was staged by Erdogan to persecute anyone suspected of opposing him. Clearly, Erdogan is a criminal thug and the noose maybe closing round him. Possibly, around his neck.

Where else can the money come from?

As the new Finance Minister Nirmala Sitharaman presents her partial budget on 5 July she will have to repair the "Real collateral damage under Modi 1.0 was a loss of trust between government and business," wrote R Jagannathan, because trust "has been dented by five years of a relentless pursuit of greater tax compliance and black money". That is not going to relax. The government is preparing for a major crackdown on taxpayers in the belief that everyone is cheating on taxes. "The government dismissed 12 senior income-tax officers on charges of corruption and professional misconduct on June 10 and followed it up with another round of clean-up on June 18, when 15 senior income-tax officers, accused of corruption were made to compulsorily retire." "We are going to see a major crackdown, especially on GST, and to some extent, on the direct taxes side as well," said S Mukherjea. A special task force has been set up by the Finance Ministry, apparently to simplify tax laws and to increase enforcement. The government needs to increase the amount of tax it collects. Deputy Governor of the Reserve Bank (RBI) Viral Acharya resigned recently because he believed that government borrowing not reflected in the fiscal deficit has reached 8-9% of GDP. Bond yields have gone down by 33 basis points even though interest rate has been reduced by 75 basis points by the RBI, wrote A Iyer. "Borrowings by government companies are off-balance-sheet items and do not reflect in the overall government debt. Off-balance-sheet items have surged to 2.4% of GDP in FY19 from 1.4% three years ago, points out Nomura Research." Public sector companies were milked of vast sums of money before the elections to show that deficit was within budget, wrote M Sharma. Bad loans means that banks are unable to lend for new projects. "At 12.3% of loans outstanding, Non-Performing-Assets (bad loans) are at unsustainable levels," wrote A Anand. Now the RBI is warning of serious problems in shadow banks. "The Reserve Bank of India's Financial Stability Report warned that the non-banking finance companies (NBFCs) and mortgage firms in dire straits pose a serious threat." Government owned telecom firm BSNL does not have Rs 8.50 billion to pay June salaries. The telecom department has asked BSNL to stop any spending on new projects or any new purchase. State owned Air India has debts in excess of Rs 583 billion, the Civil Aviation Minister said. However, not every business man has suffered under Modi. Adani Group may take over Dighi Port after another bidder was forced to pull out. Six airports may also be handed over to Adani Group next month. Adani is from Gujarat. There is not going to be any respite for taxpayers. Whatever Jagannathan may wish for.

Can't remove one leg in case it collapses.

"No nation has sustained growth rates of 9-10% for two or more decades without succeeding in global markets. China's share in global merchandise exports rose from 2% in 1991 to 12.4% in 2012," wrote Prof A Panagariya, former Vice Chairman of Niti Aayog from January 2015 to August 2017. "Today India's share in global merchandise exports remains low at 1.7%." India's merchandise exports came in at a record $331 billion in 2018-19, but imports rose to $507.44 billion, giving a record trade deficit of $176 billion. Import of crude oil cost us $111.9 billion last fiscal, part of which was exported after refining, for a total of $35 billion in 2017-18. India has a total coastline of 7,517 km but we hardly produce any oil because most of our offshore areas remain unexplored. A former Petroleum Minister claimed that a strong oil import lobby threatens ministers trying to raise national oil output, but refused to name anyone. "The starting point for this strategy is shedding three of our current obsessions: import substitution, micro and small enterprises, and a strong rupee," wrote Panagariya. "Arbitrarily raising tariffs and bringing anti-dumping suits may benefit producers of some products, but they hurt the economy as a whole." Tariffs are raised to protect local businessmen friendly to the ruling party. Crony capitalism has been rampant in India since independence and nothing much has changed, wrote A Mukherjee. A company which benefits can then donate large sums of money to the party in anonymous electoral bonds. Our laws "incentivise" the creation of micro and small industries with no safety or social protection for workers, said the International Labor Organization. One reason is that companies with turnover of Rs 2.5 billion pay tax at 25%, while those with turnover greater than Rs 2.5 billion pay 30% tax, with a surcharge of 7-12%, and foreign companies pay tax at 40% with surcharge of 2-5%. According to the Organization for Economic Cooperation and Development (OECD) India has the highest effective corporate tax rate of 48.3%, including surcharge, cess and securities transaction tax. Taxes naturally make everything more expensive for domestic users and for exports. Indian citizens pay double for fuel compared to export prices because of 100% tax. The rupee is kept strong to reduce prices of imports which keeps retail inflation under control. Retail inflation rose slightly to 3.05% in May from 2.92% in April. Low retail inflation permits the government to force the Reserve Bank (RBI) to lower interest rate which lowers the rate of interest on government borrowings. Which is why both Urjit Patel and Viral Acharya resigned from the RBI. The government wants the RBI to transfer Rs 3 trillion form its reserves to finance its spending. It is like a three-legged stool. Removing one will make it fall.

Is it already too late to change?

Europe is suffering a hear wave with "Temperatures expected to surge 20 degrees Celsius (36 degrees Fahrenheit) above the seasonal average of 22 degrees Celsius (72 degrees Fahrenheit)." A heat wave in August 2003 killed about 70,000 in Europe, France recording 14,802 deaths related to heat. The shock this time is because it is so early in the season. A Swedish schoolgirl Greta Thunberg has created a sensation by going on strike to force her government to take action to reduce global warming. There has never been so much carbon dioxide in the earth's atmosphere, trapping heat from the sun and resulting in rising temperatures. Rising heat is easy to prove by mapping melting of ice. Photographs taken by spy satellites launched by the US in the 1970s and 80s show that Himalayan glaciers are melting at a much higher rate. A team from Columbia University "looked at 650 glaciers in the Himalayas spanning 2000 km" and "found that between 1975 and 2000, and average of 4bn tonnes of ice was being lost each year. But between 2000 and 2016, the glaciers melted approximately twice as fast -- losing about 8bn tonnes of ice each year on average." Human beings are causing changes, not only by flying, driving, using air-conditioners, but also just by eating food. Studies show that cutting down on meat and sugar is good for health, and for reducing methane produced by grass eating animals. What about milk? No animal drinks milk from another species or after being weaned by its mother but human children drink cow's milk and milk products, like butter, cheese and sweets make up a large part of our diet. It is not just food. We now have 'fast fashion' which apparently means cheap clothing meant to be worn and discarded. This increases profits for producers and retailers and makes people feel they are keeping up with celebrities. It also means that 235 million items of clothing, contributing 1.2 billion tonnes of carbon emissions, are sent to landfills every year. Human beings must live in houses to protect ourselves from the weather, from criminals and from insects. Houses need cement to build. "The most astonishing thing about cement is how much air pollution it produces," wrote V Dezem. "Manufacturing the stone-like building material is responsible for 7% of global carbon dioxide emissions, more than what comes from all the trucks in the world." "China continues to emit an increasing amount of ozone depleting chlorofluorocarbons (CFCs), despite a global initiative to phase out CFCs under the Montreal Protocol", scientists have found. Climate change could end human civilization within 30 years and result in deaths of hundreds of millions of people, from lack of food and water to uncontrolled epidemics. The human population growth could peak earlier than we think, wrote D Fickling. But perhaps, it is already too late. For us and for all life on earth.

Earn less to be safe?

"A Finance Ministry action earlier this week against over a dozen income-tax officials for alleged corruption and professional misconduct has given rise to conjectures and theorisations that a crackdown against tax evasion is in the offing." "The cash ban did not achieve the government's desired objective of digging out black money, though it offered several fringe benefits." "A reliable estimation of unaccounted income in India was not possible, a standing committee on Monday said while submitting the final report before both houses" and "senior finance ministry officials said that a reliable estimation of black money is extremely difficult, since the three independent studies threw up varied results, showing that it could be anything between 7% and 120% of gross domestic product (GDP)". The National Institute of Financial Management "estimations of total illicit outflow in 1990-2008 was at Rs 941,837 crore ($216.48 billion)". Brilliant. They don't know and yet they resort to vicious 'tax terrorism' against citizens to extract more money. This results in appeals of which "The taxman unambiguously loses 65% of his cases." "When the NDA government came to power (in 2014), the amount locked in tax dispute was Rs 4.67 lakh crore (Rs 4.67 trillion); it was at Rs 10.16 lakh crore in March 2018, an increase of about 2.2 times." Demonetization was supposed to push India towards a cashless society since black money cannot be deposited in banks, without giving rise to questions, and so must be held in cash. But, "Currency in circulation (CIC) has jumped by 19.14 percent to a record high of Rs 21.41 lakh crore (trillion) as on March 15, 2019, indicating that cash is back in the reckoning in the financial system." The government should be celebrating the report because "ILO (International Labor Organization) estimates that 90 percent of India's workforce is in the informal sector" and all these people are paid in cash. A lot of such people are migrant workers who move in search of work. It is not possible for them to open bank accounts at each new place they go to because of stringent know your customer (KYC) requirements at banks. Though fees are much higher compared to bank transfers, "As many as 65 million transactions were effected during 2016-17" through post office money order system in India. Labor force participation rate (LFPR), which measures the share of population which is either working or looking for work, was 54.9% for men and 18.2% for women in rural areas," wrote R Kishore. It is 57% for urban men and a dismal 15.9% for urban women. Of those who are working, 92% of women and 82% of men earn less than Rs 10,000 per month. You have to earn Rs 21,000 per month to start paying income tax in India. People aren't working or earning enough. Perhaps, if they treat people with respect the economy might improve. More people will get jobs and pay taxes.

Will our access to the West become impossible?

"India on Saturday asked its airlines to avoid flying on the over-water of Tehran (Iran) airspace with the Strait of Hormuz that connects Persian Gulf and Gulf of Oman at its heart." Pakistan has closed its airspace to civilian flights to and from India since 26 February though India has capitulated by opening its airspace to Pakistani flights from 31 May. All flights from New Delhi to Europe and the US have to take the long route over Gujarat and then south of Pakistan causing longer flight times and higher ticket prices. Pakistan has been extending the ban incrementally to cause economic damage to India, in revenge for the strike on Balakot. By the end of April Air India had suffered a loss of Rs 3 billion, gleefully reported by Pakistan Today which gave a breakdown for the excess cost. The ban on flying over Iranian waters will extend flight time to Russia and eastern Europe but probably not to countries in western Europe. "US mega carrier United has already suspended both its India flights due to closure of en route airspaces of Iran (partially) and Pakistan." It's not just the extra cost and time. If airlines cut flights to the west India's business will be severely affected. Last week, US President Donald Trump stopped an attack on Iran with ten minutes to go because he thought that 150 casualties would be out of proportion to the shooting down of an unmanned US drone over the Gulf by Iran. Iran said that it chose not to shoot down a Boeing P-8 spy plane with 38 people on board that was flying close to the drone. It was a wise decision because it would give Washington no choice but to retaliate militarily. In 1988 the US shot down an Iranian commercial plane with 290 people on board, a crime it would certainly not want to repeat. Iran will retaliate if attacked. "Iran has demonstrated it can launch dozens of road-mobile short-range ballistic missiles beyond its borders. Recent innovations include a cruise missile likely patterned on a Soviet design with a range exceeding 1200 miles," said Miguel Miranda. "Iran will use militias, cells and spies, in Shia communities throughout the region to conduct sabotage, especially of the energy complex, kidnapping of Westerners and attacks on the US and its allies," said John Wood. Iran is already accused of attacking oil tankers with limpet mines which Iran denies. Iran's militia ally Hezbollah is thought to possess 130,000 rounds of rockets, more than most nations on earth. US launched cyber attacks on Iran's weapons system, which seems pointless because Iran will get them going again. Cyber attacks to paralyze Iran's weapons, coinciding with an armed attack, would be extremely effective. Trump has promised to impose even more sanctions on Iran from today. India has had to stop oil imports from Iran. So far crude oil prices are steady but if conflict breaks out prices will shoot up. The cost of flying to the West along a longer route may become prohibitive. Pakistan must be feeling happy.  

Taxes always go up. So why worry about the budget?

The new Finance Minister Nirmala Sitharaman will present a budget on 5 July and "all eyes will focus on the fiscal deficit number", wrote N Kwatra. "Over the past few years, the government has managed to keep the headline fiscal deficit number under check" by "growing use of off-budget financing". So, "if these expenses were to be included in fiscal calculations, India is already in a deep fiscal hole, with the 'adjusted' fiscal deficit hovering near 5% of India's gross domestic product (GDP)". "Data from the Controller General of Accounts (CGA) show that the government reversed about Rs 700 billion of its incurred expenditure on subsidies in 2018-19 and about Rs 420 billion in 2017-18 just before the end of the respective fiscal year." "Macroeconomic indicators, hitherto conflicting, are all now consistently reflecting a severe growth slowdown," wrote Prof S Mundle. "Growth revival will depend critically on the growth of investment and exports." What exports? India's trade deficit was a record $176 billion in 2018-19, and this financial year has started on a similar note with the trade deficit hitting a 6-month high of $15.4 billion in May. "So a large boost to public investment in employment-intensive rural infrastructure, especially rural roads, minor irrigation, rural housing, etc., should be high on the government's agenda." They are. Prime Minister Modi plans to spend Rs 100 trillion in the next 5 years on infrastructure, of which Rs 30 trillion will be spent on the transport sector, to create jobs. Rs 6,000 will be handed out to all farmers every year and a pension of Rs 3,000 will be given to "farmers, shopkeepers, retail traders and self-employed persons" on reaching the age of 60 years. To spend so much the government needs revenues but according to a Reserve Bank (RBI) survey, people's intention to spend "on non-essential items has fallen to an all-time low since September 2015". It is not just that "Passenger vehicle sales declined by 20.55% in May compared to the same period last year, logging the steepest fall in 18 years", but sales of "toilet soaps, hair and edible oils, milk food drinks and salt fell in absolute terms" in 2018. Falling sales mean a fall in indirect tax collections, which, in turn, means a severe abuse of people through extreme tax terrorism. People are so terrified and harassed by tax officials that they pay unjustified taxes just to get relief from their clutches. The government has shown revenues by selling one public sector unit to another so that "Over the last 18 months, as the need to meet disinvestment targets became urgent, such ideas ended up destroying 18-20% of the Nifty Public Sector Enterprise (PSE) index value even as the overall stock market has risen," wrote R Jagannathan. Minority shareholders have suffered but there is nothing they can do. Since money doesn't grow on trees the budget will be smoke and mirrors, as always. Same to same, as we say in India.

What message for Pompeo?

US trade representative Robert Lighthizer told  the Ways and Means Committee of the US Congress that India has the "highest tariffs of any country you can imagine". "They have a very status kind of economy. It's very heavily regulated. They have created problems in the digital space, in the agriculture space, in regular manufacturing. I mean in retail, just across the board," he said. But, in a big sigh of relief a spokeswoman from the State Department said, "The Trump administration has no plans to place caps on H-1B work visas for nations that force foreign companies to store data locally." India is the biggest beneficiary of the H-1B visa program, being awarded three-fourths of the total in 2018. Our IT industry is heavily dependent on these visas to provide onsite engineers at cheaper costs. Since IT contributes 8% to our GDP, a restriction of H-1B visas to India will hurt our economy. Earlier, India imposed tariffs on goods imported from the US in retaliation for the US withdrawing facilities for duty-free imports from India under the Generalized System of Preference. Secretary of State Mike Pompeo is to visit India next week. The US does not want India to buy 5G equipment from Huawei and warned any Indian company supplying US equipment to Huawei will face a tough response. "India's decision to buy the long-range S-400 missile defense system from Russia will have serious implications on defense ties," the Trump administration has warned. India has asked all foreign companies to store data on Indian customers within India, apparently to ensure privacy for us. Which is rich, because in 2017, the Attorney General told the Supreme Court that Indians have no fundamental right to privacy, so citizens maybe forced to provide fingerprints and iris scans for government surveillance. He further argued that Indians have no right over their bodies, thus giving politicians and civil servants life and death control over citizens. The government is asking WhatsApp to fingerprint messages so that they can be traced to their source. Which would allow the police to arrest anyone criticising the Supreme Leader. "Over three years after it struck down Section 66A of the Information Technology Act as unconstitutional, the Supreme Court on Monday said that it was shocked to hear that authorities still continue to book people under the now extinct and draconian provision." Our government continues to use British sedition laws to intimidate citizens into silence. The US says that data localization "would damage digital economy and harm privacy", wrote Prof RK Joseph. With China and Pakistan threatening us we need the US. So what will we say to Pompeo?

Legal system in suspended animation.

"Across India's subordinate courts, the first port of call for most cases, more than a third of the 31 million cases have been pending for more than three years," wrote Padmanabhan and Devulapalli. "Half of all the 8 million cases in the HCs (high courts) have been pending for over three years." This is holding our economy back. "The 2017 economic survey of the finance ministry pointed out that the slow resolution of economic and commercial cases was one of the biggest stumbling blocks in reviving the country's investment cycle." The problem is that the government enacts laws to dishonor unfavorable judgements by the Supreme Court, as when the General Anti-Avoidance Rule (GAAR) was enacted to dishonor the verdict in the Vodafone-Hutch deal. The government tried to stop Vodafone going to an international arbitration court in London but was denied by Delhi High Court. But, officials have already said that India may not accept arbitration orders. "Foreign direct investment (FDI) equity inflows to India in 2018-19 contracted by 1%, according to the government's own data," wrote Prof P Ranjan. "This contraction in FDI inflows comes at a time when global supply chains are shifting base as a result of ongoing trade war between the US and China. India has failed to attract firms exiting China." FDI growth rate began to taper off from 2016-17, coinciding with "India's decision, in 2016, to unilaterally terminate bilateral investment treaties (BITs) with more than 60 countries", perhaps giving the impression that India "does not respect international laws". The Insolvency and Bankruptcy Code was enacted to help lenders get at least some of their money from defaulting firms but creditors have managed to delay cases by endless appeals. The government amended the law to prevent the defaulting creditor buying the company but this resulted in continuing litigation and endless delays. "That lawyers are generally dishonest is a well-known fact. Lawyers are (frequently) humorously called liars, and because they are middle-men between judges and the litigating public they act like dishonest brokers," wrote Justice Ruma Pal. The Supreme Court striking down the Reserve Bank's (RBI's) 'Resolution of Stressed Assets: Revised Framework', which tightened bankruptcy rules, was a bonanza for defaulting companies, wrote Prof V Ranganathan. A large number of companies have "interest cover ratio (IC) of less than 1 -- that is earnings are less than interest due". Debts of companies with IC less than 1 are: "Tata Motors, Tata Power and Tata Tele have borrowings of Rs 1,20,000 crore; Jaiprakash Associates and Jaiprakash Power, Rs 96,000 crore; Reliance Communications, Reliance Infrastructure and Reliance Defence, Rs 80,000 crore; Adani Power, Rs 53,000 crore and GMR Infrastructure Rs 50,000 crore. The system is designed for insider loot. Foreigners beware.

We have protected ourselves by trading little.

"If the world was flat and fast before 2008, today it's fat and slow," wrote Ruchir Sharma. It is 10 years since the Great Recession, the longest period of global recovery and US economic expansion. "Once the crisis hit, however, governments erected barriers to protect domestic companies. Central banks aggressively printed money to restore high growth." This has resulted in rising inequality by giving "big companies favorable access to cheap credit, encouraging them to grow even bigger." "In the United States and Europe, 65% of the major business sectors are dominated by the three largest companies in that sector, up from 40% in the years before 2008. As the power of dominant firms grows, the share of national income that goes to workers has been shrinking, fueling inequality -- and anger." Global trade is slowing. "Global flows of foreign direct investment fell by 13% last year" "the third consecutive annual decline, which officials blamed on multinational corporations bringing cash back to the United States after Trump's tax overhaul". US companies "brought back $85.9 billion in the fourth quarter and $664.9 billion for full year 2018", adding to $155.1 billion brought back in 2017. That maybe one reason why the US has been growing so strongly. "US GDP growth will slow to 2.1% in 2019 from 3% in 2018. It will be 1.9% in 2020 and 1.8% in 2021," wrote K Amadeo. The Federal Open Market Committee (FOMC) "expects headline inflation to grow at slower pace at 1.5%, versus the 1.8% predicted in March" while "GDP growth is still expected to be 2.1% for the year, while the unemployment rate is now expected to hold at a 50-year low of 3.6%". Interest rate was held steady at yesterday's FOMC meeting. The global economy could fall into a recession in 2020, wrote Prof N Roubini. "With central banks' ability to serve as lenders of last resort increasingly constrained, illiquid financial markets are vulnerable to 'flash crashes' and other disruptions." "Factory activity contracted in most Asian countries last month as an escalating trade war between Washington and Beijing raised fears of a global economic downturn and heaped pressure on policymakers in the region and beyond to roll out more stimulus." "Credit to non-financial corporations and governments in emerging markets has soared over the last decade and is at record highs," wrote MR Valladares, but India's debt, as a proportion of the GDP, is lower than others, the IMF said. Since we do not export much anyway a global recession should have lesser effect on us, and since private consumption is dropping it may help us by reducing imports. It's win-win all the way.

Abolish the MPC and downsize the RBI?

"Few people beyond the political opposition believe that real GDP growth was as much as 2.5% below the official estimates for the 2011-2017 period," wrote R Jagannathan. This was claimed in a new study by the former Chief Economic Adviser Arvind Subramanian. "Actual growth may have been about 4.5 percent, with a 95 percent confidence interval of 3.5 to 5.5 percent," he wrote. It was the fault of the Monetary Policy Committee (MPC) of the Reserve Bank (RBI), feels Jagannathan. It is possible that "there could be some overestimation of GDP in the new series" which means that if "we have been growing far slower than what the officials statistics indicate, then monetary policy should have been much looser, much earlier". The overestimation was not done by the MPC or the RBI but by the government. "Questions over the quality of Indian data have been growing since 2015, when the Modi government made major changes in the way it calculates GDP. Eminent economists, including Raghuram Rajan and Gita Gopinath, have flagged the anomalies in the new system," wrote an editorial in the Mint. "While nobody had a quarrel with the revision in methodology, the real issue was the reliability and credibility of the underlying database. In this case, CSO (Central Statistical Office) preferred to use the MCA-21 database of the ministry of corporate affairs, which was not only incomplete, but also untested and unreliable," wrote Prof Himanshu. Two members of the National Statistical Commission resigned in January when the government suppressed the jobs report, but it made no difference. Is the MPC supposed to reject data published by the government, accusing it of lying? Jagannathan feels that "the MPC has failed and needs to be wound up". Excellent idea. In fact, there is no need for the RBI as well. The Ministry of Finance can set rates, raise funds by selling bonds, manage liquidity through open market operations (OMO) and manage our currency. Finance ministers  Arun Jaitley, P Chidambaram and P Mukherjee are lawyers, Jaswant Singh graduated from the Indian Military Academy and Yashwant Sinha has a degree in political science. The present incumbent Nirmala Sitharaman does have a degree in economics. Of the recent governors of the RBI, Prof Raghuram Rajan was not given an extension, Urjit Patel resigned before his term ended. The present incumbent is a retired civil servant with a degree in history, who has cut interest rate three times since he was appointed. Duvvuri Subbarao, a civil servant with a masters in economics, was governor of RBI from 5 September 2008 to 4 September 2013. Average retail inflation ranged from 8.32% in 2008 to 10.92% in 2013 and only came down when he was replaced by Rajan. Annoyingly, Lata Venkatesh wrote that interest rate should not be lowered any more. Get rid of the MPC and RBI, let the IAS do it.

GM crops are suicidal for Indian farmers.

On 9 June, the Shetkari Sanghatana, a farmer's group in Maharashtra, marked its protest against the government ban on genetically modified (GM) crops by planting Bt brinjal and HT cotton," wrote Prof S Rajagopalan. Brinjal, or aubergines, is the second most consumed crop after potatoes in India and is grown by "1.5 million small and resource poor farmers". "The traditional brinjal crop is threatened by a number of pests and diseases but most seriously by the fruit and shoot borer (FSB), which causes 60-70% yield losses, even after extensive insecticide use." Bt brinjal "has a gene that produces a protein that affects FSB larva but no other animals or humans". 'Bt' stands for Bacillus thuringiensis which produces proteins that block digestive enzymes of certain insects and causes them to die of starvation. DDT has been banned in many nations, although the Center for Disease Control and Prevention (CDC) in the US has found no evidence of its toxicity to humans. DDT is not easily destroyed and high concentrations have been found in people with Alzheimer's Disease. Many papers have been published linking pesticides to cancer though some say that no link can be demonstrated between pesticides and cancer. Recently, Bayer was ordered to pay $2 billion because its weedkiller Roundup, used with GM crops, was found to cause cancer. GM foods were first planted in the US in 1996 and are being grown extensively without the need for regulation. A study by RL Siegel et al shows that incidence of colorectal cancer has been accelerating to 3% annually from 2003 to 2012". Dutch researchers "analysed trends in 20 European countries" and "found a rise in cases of bowel cancer between 1900 and 2016 in most countries", though European countries are far more restrictive in using GM foods. Every medicine is extensively tested for toxicity by double blind trials before being allowed onto the market. But even after extensive testing drugs are found to cause surprising problems. The widely used pain killer diclofenac has been banned for use in cattle after India's vulture population was nearly wiped out. It is no longer available as an over the counter (OTC) medicine for humans in the UK after it was found to increase heart attacks. Lifetime studies of GM foods, where one group of volunteers are given GM-free foods compared to another group which eats everything, are necessary to establish their safety. "While protesting parties highlight the environmental risks of GM crops, they ignore the risks and costs of not using GM crops," wrote Rajagopalan. Not really. GM seeds are expensive and yields gradually decline as pests develop resistance. GM cotton resistant to boll worm were destroyed by whitefly in Punjab, leading to suicide by 15 farmers. Finally, losses are multiplied if expensive GM crops are destroyed by drought. Indian farmers are poor. They need better advice than GM. 

Hey Carrie Lam, what's your game now?

Chief Executive of Hong Kong Carrie Lam issued an apology to the people for trying to rush a bill, "which would allow people to be extradited to China to face criminal proceedings there". "The chief executive apologizes to the people of Hong Kong for this and pledges to adopt a most sincere and humble attitude to accept criticisms and make improvements in serving the public," a statement said. A day earlier she had sounded angry when she said that she had decided to suspend the bill because of "injuries to law enforcement, media workers and the people of Hong Kong". Earlier in the week police fired tear gas and rubber bullets to stop the protests but yesterday the police held back and allowed protesters to continue their march. The Hong Kong government is a puppet of China but it did not use live bullets to stop protests, whereas in India, police regularly shoot at any peaceful protest. "Before the mass street protests, a pregnant young woman went on a romantic getaway to Taiwan. Poon Hiu-wing, 20, never returned to Hong Kong from that Valentine's Day trip last year, but her boyfriend, Chang Tong-kai, 19, did. He would later tell Hong Kong cops that he had strangled her, stuffed her body in a suitcase and dumped it in a thicket of bushes near a subway station in Taipei." This was taken as an excuse to rush the extradition bill through the Hong Kong legislature. The reason for the massive protests is that in 2016, "Five Hong Kong booksellers disappeared and later turned up in police custody in mainland China", presumed kidnapped by Chinese government. In 2010, Chinese authorities visited Bao Pu "after he obtained a copy of what he believed was the diary of Li Peng, China's premier during the crackdown on protesters in Tiananmen Square in 1989". Bao never published the diary. Earlier this month China's defence minister Wei Fenghe said that it was "correct policy" for troops to kill protesters at Tiananmen Square. "The government was decisive in stopping the protest," he said. So why was Beijing so soft and cuddly with protesters in Hong Kong? Maybe because it would attract enormous coverage because of the 30th anniversary of Tiananmen massacre on 4 June. Even the Great Firewall may not be able to black all the news out from the people of the mainland. The US warned China of Hong Kong businesses losing confidence because of is meddling. Normally Beijing would bristle at what it sees as interference in its sovereignty but with so many Chinese companies listing on the Hong Kong exchange it did not want to take a chance. The main reason could be a threat to remove Hong Kong's special status by the US Congress. Beijing cannot denounce that because US citizens passing through Hong Kong could be arrested and handed over to Beijing under the bill. If the special status is removed it would be a huge economic loss for Beijing. Xi Jinping has learnt how China is hated. After the enormous loss of face Carrie Lam's days could be numbered.

We cannot force the US to be charitable.

India imposed higher duties on 29 goods imported from the US in retaliation for the withdrawal of duty-free status of $5.6 billion worth of goods imported from India by the US under the Generalized System of Preferences (GSP). The US is the biggest importing nation in the world, spending over $2.4 trillion in 2017 in buying goods from all over the world. In order to help poorer countries the US levies very little tariffs under GSP on a whole list of goods to beneficiary countries. As Indians, we may feel a bit miffed at being singled out by the US which we consider a friend but surely no one can force charity? "Indian officials said the withdrawal of benefits is part of the 94 products on which the US has revoked benefits for all countries and is not a major portion of India's $5.6 exports through duty-free entry 1,937 products to the US under GSP." Which means, we have no case for retaliation. "Higher duties have been proposed on apples, walnuts, chickpeas, lentils, boric acid and diagnostic reagents." The hikes are not even proportionate. While the US has increased tariffs on steel and aluminium from 10% to 25%, we are to increase import duties on chickpeas, Bengal gram and masoor dal from 30% to 70%. This will hurt the millions of poor for whom 'dal' is a vital source of protein and higher taxes on diagnostic reagents will increase medical costs. With such stupidity no wonder we have to resort to cooking our statistics to a higher GDP growth rate. SSA Aiyer vehemently disagrees with former Chief Economic Adviser A Subramanian because, "The technique of deriving estimates from a few economic indicators yields an educated guesstimate of GDP, but no more," and wrote that 4.5% is not "solid" economic growth but "pure disaster". Hiding the disaster with fake statistics is a bigger disaster. Apparently China did the same. "China over-reported its economic growth between 2008 and 2016 by an average of 1.7 percentage points, according to a recent study by researchers at the Chinese University of Hong Kong and the University of Chicago." Maybe, but China always runs a trade surplus which was around $420 billion in 2017, while we had a record trade deficit of $176 billion in the last financial year. Our trade deficit increased to $15.36 billion in May from $15.33 billion in April. So, China is earning new money while we are constantly losing money to other countries we trade with. If the US grows at 3% it is considered huge but a 4.5% growth is a "disaster" for India because we are so poor. "Whether looking at credit growth or vehicle purchases, exports or investment, there is little support for the idea that India is enjoying breakneck growth at the moment," wrote M Sharma. Only accountants support our dubious figures because, "Some of them, as fund managers, have given investors' money to firms that are in deep trouble now," wrote A Mukherjee and "don't want Modi to tell creditors and debtors the truth about growth, especially since they can;t undo their previous bets on 7% expansion without career-limiting, wealth-destroying -- and possibly freedom endangering -- consequences". If we are really growing at over 7% why do we need GSP?.

With their past histories, who to believe?

Couple of days back two tankers were attacked in the Gulf of Oman. Norwegian owned Front Altair had a crew of 11 Russians, 11 Filipinos and one Georgian who were rescued by Hyundai Dubai but it was surrounded by Iranian military boats which forced the captain to hand the men over. The crew of the Kokuka Courageous, owned by a Japanese company, saw "flying objects" and said they were shelled. A Dutch vessel rescued the crew but it was also surrounded by Iranian military boats which demanded the crew. The Iranian news agency Irna claimed that Iranian boats had rescued 44 crew members from both vessels and taken them to the Iranian port of Jask, while the US says that USS Bainbridge rescued the 21 crew of Kokuka Courageous. The US army Central Command released a video apparently showing Iranian Revolutionary Guards removing an unexploded limpet mine from the hull of the Kokuka Courageous, but Iran denied US accusation as "ridiculous" and "dangerous". "You know they did it because you saw the boat," said President Donald Trump. "I guess one of the mines didn't explode and it's probably got essentially Iran written all over it." It seems odd that Iran would attack a Japanese tanker when Japanese Prime Minister Shinzo Abe was visiting Tehran to reduce tensions between the US and Iran but, on the other hand, it is also odd why Iran would forcibly abduct the crews of the two vessels. Iran has a history of waging a 'Tanker War' in the 1980s when it is estimated to have attacked 160 ships. Mines were described as "God's angels that descend and do what is necessary" by future President of Iran Akbar Hashemi Rafsanjani. There were skirmishes between US and Iranian navies culminating in a deliberate shooting down of an Iranian civilian aircraft with 290 people on board by USS Vincennes. On 12 May, "Four tankers were damaged by explosions within the UAE's territorial waters in the Gulf of Oman". There seems no reason why any other nation should attack these tankers. On the other hand, the US insisted that Saddam Hussein possessed weapons of mass destruction (WMDs) as an excuse to attack Iraq when the UN chief weapons inspector Hans Blix reported that all WMDs had been destroyed. This was later confirmed by the CIA. Trump said that he is ready to hold talks with Iran. "We want to get them back to the table," he said. "I'm ready when they are." "I don't consider Trump as a person worthy of exchanging messages with. I have no response for him and will not answer him," Iran's Supreme Leader Ayatollah Khamenei told Abe. With the victory of Bahsar al-Assad in Syria, Iran's influence now extends from its border with Afghanistan to the Mediterranean. However, if Iran thinks it and its allies, like the Hezbollah, can win a war against the US it is deluded, wrote Prof Jehanbegloo. We haven't even considered Israel and Saudi Arabia.

Depends on how you use it, doesn't it?

While acknowledging that they cannot be sure of the safety of Artificial Intelligence (AI), Ghosh and De think that "it can be said that it is least likely that AI will probably destroy humans". Why? Because AI "is playing a huge role in the detection and, in turn, finding of antidotes for many of the maladies  that are affecting almost 95% of the world population". Last year airlines transported 4.3 billion passengers around the globe and accounted for 35% of global trade by value. Airlines flew 1 billion passengers in the US alone and contributed 5.1% to the GDP of the US. Despite flying being the safest form of transport, it did not stop terrorists using commercial airplanes as missiles on 11 September 2001, known as 9/11, or the US using planes to drop nuclear bombs on Hiroshima and Nagasaki. The House Intelligence Committee of the US Congress is holding a hearing on 'deep fake' videos and the dangers posed by "other types of artificial intelligence-generated synthetic data to the US election system and national security at large". China maybe using AI for mass surveillance through facial recognition but, "Being a Luddite in today's world is not only foolish but counterproductive too," wrote an editorial in the Mint. In other words, if North Korea has nuclear weapons then Iran wants them too. San Francisco banned the use of facial recognition by the police but allows it for its airport and port. Of course, AI is extremely useful in early diagnosis of diseases but what happens when rogue states use AI for warfare? "The rapid development of AI weaponization is evident across the board: navigating and utilizing unmanned naval, aerial and terrain vehicles, producing collateral-damage estimations, deploying 'fire-and-forget' missile systems and using stationary systems to automate everything from personnel systems and equipment maintenance to the deployment of surveillance drones, robots and more are all examples," wrote J Pandya. Once activated AI weapons could continue to battle forever, with humans powerless to stop them. At the very least AI will make millions of workers redundant by doing manual jobs quickly, efficiently and cheaply. There is historical evidence that "the previous industrial revolution had indeed extracted a heavy toll on workers whose set of tasks was the most susceptible to automation; there were rising levels of inequality; workers did not always benefit, fully or immediately, from technologically induced gains in companies' productivity profitability; and periods of technological transition were often lengthy as well as painful", wrote Prof Nageswaran and Raman. Who will be held responsible if AI goes wrong and results in financial losses or loss of life, asked S Deb. Ghosh and De think that AI will work in synergy with humans. That is, until it goes rogue.

Better to tell the truth from the safety of the US.

Prime Minister Narendra Modi is not "a great believer in privatization" but he has not done anything to strengthen the public sector, wrote R Jagannathan. Instead, "the public sector has been used to milk it of resources for budgetary, social and political needs, not strengthened". For example, "the Oil and Natural Gas Corporation (ONGC) was asked to pay cash to buy a majority stake in Hindustan Petroleum Corporation Ltd (HPCL), Power Finance Corporation for Rural Electrification Corporation, and Life Insurance Corporation of India (LIC) for IDBI Bank". "A cashless share swap" would have been better" but the government pocketed the money, "to maintain a mythical fiscal deficit target of 3.4%". Strange that he was defending Modi just last month when he wrote, "Why critics of Modinomics are more wrong than right." And he defended the complex Goods and Services Tax with its multiple rates though he conceded that "people are reluctant to pay taxes when they do not know whom they help", as opposed to Scandinavian countries where people are happy to pay high rates of income tax because social services are for everyone, while in India subsidies are targeted to sections of society. Couple of days back the former Chief Economic Adviser Arvind Subramanian published a paper which seeks to prove that the growth rate of India's GDP is overestimated by 2.5%, and so we are growing at 4.5% and not 7%. This is when he is safely back in the US where he lives. Naturally, the Prime Minister's Economic Advisory Council trashed this study after the Ministry of Statistics and Programme Implementation said, "The GDP estimates released by the ministry are based on accepted procedures, methodologies and available data and objectively measure the contribution of various sectors of the economy." Why do we need a minister when statistics is a branch of mathematics? The leaked unemployment rate of 6.1% made no difference to Modi's victory in the recent general elections because "the flip side of unemployment rate is employment rate, which stood at a hefty 94%", wrote Prof A Panagariya, who is also safely back in the US. But what kind of employment? Out of a total of 131 million workers, 111 million are in unincorporated enterprises, which means the informal sector, and of these 62% are own-account enterprises (OAEs), which means daily laborers and roadside vendors. Since these people constitute the 'vote bank', "politicians champion the cause of these very activities". Since people do not own their properties in India they cannot borrow against them, wrote Sengupta and Katragadda. "The net result is that only about 3% of all private and public land in India is leveraged for capital. Contrast this with the US, where conclusive title and clear boundaries allow 40% leverage-- unlocking over $15 trillion of low cost capital -- leading to its unarguable position as the world's largest economy." "Confidence in India's economy continues to be shaky -- and a few more quarters of bad indicators will erode it completely," wrote M Sharma on Bloomberg. Maybe even earlier. 

How can the GDP grow if so many are sanyasis?

According to a new research paper "India's GDP growth between 2011-12 and 2016-17 was probably bumped up by about 2.5 percent". The study was conducted by Arvind Subramanian who was India's Chief Economic Adviser (CEA) from October 2014 to June 2018. "A variety of evidence -- within India and across countries -- suggests that India's GDP growth has been overstated by about 2.5 percentage points per year in the post-2011 period, with a 95 percent confidence band of 1 percentage point," he said. Why didn't he say all this during his 4 years as CEA? "We raised these doubts frequently within the government, and publicly articulated these in a measured manner in government documents, especially the Economic Survey of July 2017." He thinks that interest rate was too high by 150 basis points. He has been banging on about interest rates since the beginning but the Reserve Bank (RBI) did not agree. Prof V Dahejia thinks that "inflation targeting in the country is a rip-roaring success". Rich people love low interest rates because they can borrow cheaply to buy assets and government loves it because it is the largest borrower. Total government debt is in excess of Rs 82 trillion. The government's debt to GDP ratio is 70%, wrote SA Aiyer, so, "One-third of all central revenue disappears in interest payments." It is very good to promote economic inclusion "via the public provision of essential private goods and services, including toilets, housing, power, cooking gas, bank accounts, emergency medical assistance, and now a basic income for all farmers", wrote Subramanian. 'Sanyas', in which a person gives up all material possessions and survives by begging, is highly respected in India. Should begging be counted in our GDP? There were 4,13,670 beggars in the country last year, according to the government. In 2015, 75,000 beggars had passed high school, some had masters degrees. Subramanian has taken many parameters to calculate how our GDP has been overestimated. Perhaps he could have reached the same conclusion by subtracting the portion of fiscal deficit used to finance welfare schemes. "While the need for stimulating growth is paramount, there is a limit to which fiscal deficit may be stretched," wrote Rangarajan and Srivastava. "In the early 2000s, the household sector's net financial savings were 10-12%. To this, if we add, about 2% of GDP as net foreign capital inflows, 12-14% became the investible surplus. If out of this, 6% was pre-empted by GOI's borrowing, a margin of 6-8% was still available for the private corporate sector and the non-government public sector." Now household savings have dropped to 7% so higher government borrowing means less for private investment. "India has been operating in a 2-4-6-8 macro framework in recent years," wrote N Rajadhyaksha, but it maybe time to deviate from rigid rules. We have been deviating already. That's why the pain.

We can't grow rich by our money going around in circles.

"The Reserve Bank of India (RBI) has cut its benchmark repo rates by 75 basis points (bps) over four months," wrote R Singhal. Now it is up to the government to revive "animal spirits" in the economy "which faces fresh risks from weakening private consumption expenditure and investment demand, incipient inflationary pressures because of rising food and oil prices, and global headwinds from trade wars and geopolitical tensions". The government will need to spend more to stimulate growth because, "According to the Centre for Monitoring Indian Economy, the monetary value of stalled projects touched Rs 2.68 trillion by the end of March 2019, up more than 600% since June 2018." The growth rate of the Indian economy was 6.8% in the last financial year ending on 31 March, and is expected to increase to 7% in this fiscal. But, what is the optimum growth rate for our economy? Indian politicians compare with China which grew by 10% in 2003, 10.1% in 2004, 11.4% in 2005, 12.7% in 2006 and 14.2% in 2007. India is not China. China's total exports were $2.41 trillion in 2017 which is new money coming into the economy. India, on the other hand, exported a total of $331 billion but imported a total of $507.44 billion in 2018-19, so that our trade deficit was a record $176 billion, which was an outflow of money. The International Monetary Fund (IMF) "lowered its growth forecast for 2019 to 3.3 percent from the previous level of 3.5 percent in its latest World Economic Outlook (WEO)". But the World Bank is more pessimistic, predicting a global growth rate of "2.6% in 2019 before inching up to 2.7% in 2020". If other economies are slowing down there will be lower appetite for our exports. So growth has to come from domestic consumption. However, a survey by the RBI showed a sharp decline in Private Final Consumption Expenditure which "had an average share of 56% in India's GDP between 2014-15 and 2018-19", wrote R Kishore. One obvious way to increase consumption is to create more jobs but the government has resorted to "a heavy emphasis on welfare payments and social-sector resource transfers, streaking the government's economic policy with a social-democratic tint". Where is the money going to come from? One is to raid the surplus of the RBI of Rs 3 trillion for which a committee has been set up to make it look kosher. The other is to raid the 37 listed public sector companies whose reserves grew by 25%. And finally, "the government should not be afraid of accommodating a slight slippage in the fiscal deficit target". The government already does that by hiding its expenditure by borrowing through companies it controls, known as "off balance sheet", and by not paying its bills. For sustained economic growth the government has to follow proper economic policies and not resort to flimflam. The first lesson: Money doesn't grow on trees. For governments, as for individuals. We won't grow if we keep paying others.

Not just a cold, it could be much worse.

"The dollar sign is among the world's most potent symbols, emblematic of far more than US currency," wrote H Anderson. "It's shorthand for the American dream and all the consumerism and commodification that comes with it, signifying at once sunny aspiration, splashy greed and rampant capitalism." But why is the dollar represented by the letter 'S' and not by the letter 'D'? The word dollar came from 'thaler' in 'joachimsthaler', which gave way to "the Spanish dollar", also know as the peso, wrote M Jones. So, the dollar symbol '$', does not stand for U and S of United States but the S and P of the Spanish peso. So what? The US being the largest economy in the world, 'when America sneezes the rest of the world catches a cold'. Actually, it is China that is sneezing and infecting the world, especially Asia, and not the US, wrote A Yao. What happens if both of them sneeze on each other? Apparently, both may fall into the renowned "Thucydides trap", according to Prof N Roubini. "A full-scale cold war thus could trigger a new stage of deglobalization, or at least a division of the global economy into two incompatible economic blocs. In either scenario, trade in goods, services, capital, labor, technology and data would be severely restricted, and the digital realm would become a 'splinternet', wherein Western and Chinese nodes would not connect to one another." "In the simplest terms, bonds investors are screaming recession, while equity and credit traders refuse to hear it," wrote Potter and Lee. "We still see many markets overpricing global growth prospects," said J Bateman. "The one market not overpricing growth prospects is bond. The yield on 10-year Treasuries has dropped in the past five days, after the biggest monthly decline since 2015. Europe's benchmark, 10-year German bunds, closed at minus 0.257% on Friday, the lowest on record." The German economy is based on exports, which increased 3% to just of 1.3 trillion euros, in 2018. But, "Industrial production in April fell by 1.9% compared with the previous month and exports were 0.5% lower than a year earlier." The national central banks, the Bundesbank "is now predicting growth of just 0.6% for this year, compared with a forecast of 1.6% it made in December". "Factory activity contracted in most Asian countries last month" as "PMIs were below the 50-point mark separating contraction from expansion in Japan, South Korea, Malaysia and Taiwan, came below expectations in Vietnam and improved slightly in the Philippines". If there is a recession central banks will compete to cut rates to weaken their currencies to increase exports. So, whether it came from the thaler or the Spanish peso, the $ will remain the reserve currency of the world. The US will sneeze the loudest.