India only has robbers, no barons.

"There is something deeply frightening about relying on billionaires to save us in this crisis," wrote Theodore Schleifer. "Jack Dorsey on Tuesday promised a new $1 billion philanthropy. Apple has donated 20 million masks. Bill Gates is building factories to produce vaccines that don't even exist yet. And other tech elites -- think millionaires, not billionaires -- have mobilized their networks for ambitious efforts to find equipment from around the globe or feed hospital workers in their hometown." So, why is it frightening? "Tech billionaires can be doing good while simultaneously revealing their power" "As the government struggles and the safety net crumbles". The rich should be made to pay more taxes instead, presumably so that the government can distribute it to the poor. According to the Center on Budget and Policy Priorities in the US, 23% of the budget is spent on Social Security, 25% goes on Medicare, Medicaid, Chip and marketplace subsidies and 8% goes on Safety Net programs for the very poor. That is a total of 56% of the federal budget of $4.4 trillion in 2019. "In a typical month Medicaid and Chip provide healthcare or long-term care to about 82 million low-income children, parents, elderly people and people with disabilities" and "government safety net programs kept 37 million people out of poverty in calendar year 2018". This, out of a population of about 331 million. The US has the best higher education system in the world, despite spending just 2% of the budget on education, because of endowments by the rich. The rich have always invited suspicion, some of it justified, which led to the term "robber barons". However, even though these men built their wealth through dubious means, they made America the economic giant it is today and also donated generously to many charities. So bitter is the anger against the well-off that the coronavirus is being celebrated as the "Boomer Remover" in the US because the Boomer generation enjoyed a very high quality of life during the post-war economic boom and have retired on generous pensions. In the UK, it has been suggested that the virus could have some economic benefit by "culling" old people, there by saving on pensions and healthcare expenses. Perhaps, the best illustration of the benefits of capitalism that the left hates so much, are the miles-long lines of cars waiting to collect food parcels from food banks in the capitalist US, compared to millions of daily wage laborers walking hundreds of miles back to their villages to avoid starvation due to the lockdown in India, where socialism is written in the Constitution. It may seem moral to be modern day Robin Hoods, robbing the rich to pay the poor, but, as India proves, it only increases poverty. And keeps us weak.

How to decide which choice is less bad?

"To the best of my knowledge, virtually no country has imposed such a sweeping lockdown as India has; I continue to believe this makes India weak rather than strong," wrote industrialist Rajiv Bajaj. "I Don't buy the condescending argument that all Indians are a bunch of illiterate, ignorant, undisciplined morons who need cattle like shepherding." Trouble is, it takes one ignorant moron to infect multiple people. And there are millions of such people in India. "The Indian Council of Medical Research (ICMR) has estimated that one sick person could infect up to 406 others in 30 days if there was no lockdown, health ministry officials said on Tuesday..." Last month, "Indian authorities in the northern state of Punjab have quarantined around 40,000 residents from 20 villages following a Covid-19 linked to just one man." "Being a profitable, debt-free company that exports almost half of what it makes, Bajaj Auto is, fortunately, in a relatively resilient position as of now." But, "Until we see signs of normalisatiion, we are reviewing our capex budget to be put on hold, marketing budget to be reduced to virtually zero, interest waiver on dealer credit to be tempered, and wages to be cut across the organisation," wrote Bajaj. This is ominous because lower investment will decrease growth of the economy, lesser spending will reduce earnings of suppliers and dealers and lower wages will reduce spending power and tax collections. "Alarmist numbers base on questionable assumptions should not be used to prolong the lockdown, at least not in its present form. Even if there are 25,000 deaths, the economic costs of the present lockdown are disproportionately high," wrote Bibek Debroy & Vijay P Ojha. Normally, no one would have the guts to openly contradict Prime Minister Narendra Modi in public for fear of being arrested for sedition. So, why are they doing so now? Because, growth of GDP had already fallen to 4.7% in the third quarter of 2019-20 financial year and the economy will lose Rs 350-400 billion every day of the lockdown, bringing growth rate of the GDP down to 1.5-2.5% in the fourth quarter ending 31 March 2020, said Care Ratings Even worse, Goldman Sachs predicted a growth rate of 1.6% for the financial year 2020-21 for India. "Locked units, dead stocks, no sales, demanding vendors, uncollected payments and mounting expenses -- Covid-19 has been the last nail in the coffin for a host of MSMEs (micro, small and medium enterprises), post demonetisation and GST (goods and services tax)." The are 69 million MSMEs in India which means that 400 million informal sector workers could be pushed into poverty by the lockdown said the International Labor Organization (ILO). Lift lockdown and risk an epidemic, or continue and risk starvation. Stark choice facing the nation.

All that glitters is actually gold.

"The evidence is mounting that March marked the start of a global recession," wrote Brice Baschuk. "The World Trade Organization (WTO) says 2020 trade could fall as much as 32%." "The optimistic view would mean a 2.5% contraction in global GDP this year, the WTO said, while the worst-case scenario would see an 8.8% decline." "From India to Italy, coronavirus lockdowns have closed businesses and kept billions of people homebound for weeks, provoking a simultaneous demand and supply shock that's snarled global production and logistics networks built without sufficient capacity to absorb a jolt of this magnitude." "Fitch Ratings on Tuesday said multi-notch downgrades of sovereign ratings are likely during 2020 due to coronavirus outbreak and a sharp fall in oil prices." "It said there have been 65 multi-notch sovereign rating downgrades since 1995 involving 33 different sovereigns, representing 22 percent of all sovereign downgrades." "Ratings agency Moody's downgraded South Africa's sovereign rating to 'junk' status on Friday, moving the rating to Ba1 from Baa3 and maintaining a negative outlook." "The key driver behind the rating downgrade to Ba1 is the continuing deterioration in fiscal strength and structurally very weak growth, which Moody's doesn't expect current policy settings to address effectively," Moody's said in a statement. What about India? Goldman Sachs reduced economic growth outlook for financial year 2020-21 to 1.6%. "But it expects a strong sequential recovery in the second half of the fiscal year based on three assumptions" -- that the lockdown is successful in stopping the spread of the virus, a fiscal stimulus by the center and states and monetary policy by the Reserve Bank (RBI). Problem is that India's fiscal deficit is estimated to shoot up to 6.2% of GDP this financial year by Fitch Ratings. Which will increase debt load of the country. "A massive exodus of capital from emerging economies has left many in a Catch-22 position," wrote Enda Curran and Michelle Jamrisko. "Interest-rate cuts can help households and companies, but in an increasing number of countries they're driving rates so low that they don't even compensate for inflation - adding an incentive for foreign funds to pulls out." No one knows how quickly the global economy will recover. "A V-shape in which the rebound is as swift as the slump was the favored trajectory early on but now more are starting to worry about a U-shape. The most pessimistic are looking at global growth tracing an L or a W -- or a more mangled path which bears little resemblance to Roman letters," wrote Michelle Jamrisko and Simon Kennedy. "For years, gold bugs were relegated to the fringes of financial markets," wrote der Walt, Pakiam and Barnert. But now, demand is so great that there is not enough of the metal to buy. Indians have always loved gold. It's more solid than paper.    

A virus infection for a weak economy.

"The Center is looking at extending the lockdown beyond April 14 after many states and health experts suggested such a course of action on the ground (sic) that the Covid-19 threat is still looming large." "India's already-slowing economy weakened to at least an eight-year low this quarter and will slow even more sharply in the next six months due to the global coronavirus pandemic, a Reuters poll found." "India's informal sector, the backbone of the economy, will be hardest hit as economic activity comes to a standstill." According to Nomura, economic activity will take time to pick up as it will take longer for people to overcome their fear of going out, government finances will be stressed as tax collections fall and bad loans at banks will increase as earnings of companies and individuals fall. The Reserve Bank (RBI) cut interest rate by 75 basis point to 4.40% on 27 March. With retail inflation at 6.58% in February, it means the real interest rate is at minus 2.18%. Real interest rate has been negative since December 2019 which means savers are losing more through the loss of buying power of their savings than interest paid by banks, while the rich can borrow at favorable rates to increase their assets. "The last time India witnessed negative interest rates was the two-year period between March 2012 and January 2014, when surge in crude oil prices had led to the situation of galloping inflation in the country." At around $30 a barrel, crude oil prices are at rock-bottom, allowing the government to earn a fortune through enormous taxes on fuel. The price of petrol at the pumps is around Rs 70 per liter in India, while the price of petrol in the US is around $2 per gallon. At Rs 75 to the dollar and one US gallon being equal to 3.8 liters, it works out to around Rs 40 per liter. That is how much the government in India is clawing out of the people in taxes. However, because of the lockdown, petrol consumption has fallen and so has tax collection. "The Center may need to borrow 2-2.5% of GDP, about Rs 4-5 lakh crore (Rs 4-5 trillion) additionally for supporting people and businesses hit hard by the coronavirus outbreak and nationwide lockdown, according to former Finance Secretary Subhash Chandra Garg. "If you are looking at immediate mitigation, I do not think that the government has any option but to print money and spend it," said former Chairman of the State Bank of India Arundhati Bhattacharya. The coronavirus lockdown could cost India $120 billion, calculated experts. More if the lockdown is extended.  India cannot afford to keep its economy locked down and must get its people back to work sooner, wrote Ruchir Sharma. If only the economy had been sound before the virus. 

The grim sweeper?

"The world's workers are reeling from the initial shock of the coronavirus recession" as the International Monetary Fund (IMF) warned that the virus has "brought the global economy to a standstill and plunged the world into a recession that will be 'way worse' than the global financial crisis a decade ago". So which countries will recover fastest? According to the BBC, the countries with the most resilient economies are Denmark, Singapore, the United States, Rwanda and New Zealand. Denmark, Singapore and New Zealand are small countries with robust economies that took early action to limit the spread of the virus. The US has passed a $2 trillion stimulus package and has the means to initiate a V shaped recovery when the virus abates. Rwanda is a surprise. A small landlocked country in East Africa, ruled by a dictator, not known to be benevolent, Rwanda has been growing at over 7% for years, with low corruption and a friendly business climate. The outlook for the rest of Africa is not so optimistic. "The African labor market is driven by imports and exports and with the lockdown everywhere in the world, it means basically that the economy is frozen in place," Ahunna Eziakonwa, the United Nations Development Program regional director for Africa, told the Associated Press. "We will see a complete collapse of economies and livelihoods. Livelihoods will be wiped out in a way we have never seen before." The only good perhaps is that despots will not be able to fly to western countries for treatment of their own ailments. The current Director-General of the World Health Organization (WHO) Tedros Adhanom Ghebreyesus from Ethiopia is facing growing criticism for appearing to be a spokesperson for China, in its attempts to divert attention from its barbaric eating habits which led to the virus jumping from animals to humans. Another dictator in trouble is Recep Tayyip Erdogan of Turkey where cases are surging but he is refusing to order a lockdown because the economy might collapse. Turkey is heavily dependent on tourism which has ground to a halt as other nations have gone into quarantine and airlines have grounded their planes. This may lead to a loss of $10 billion. "Pencil in the $18 billion of short-term external debt payments due in the next three months, the continued exodus of foreign investors, and the central bank has been completely depleted of net reserves, and it suddenly does not seem too bold to claim that Turkey is heading towards external financing problems, if not a full-blown BoP crisis, during the summer months," wrote Emre Deliveli. With troops in Syria to help rebel groups against the Assad regime, and in Libya to support the government against rebel Khalifa Haftar, Turkey desperately needs money, especially if soldiers go down with coronavirus. Will the virus sweep the garbage from the world. Even a fraction will help.  

Tricks are no substitute for policies.

"Critics of Narendra Modi's 21-day shutdown have had a field day after media started reporting lakhs of daily-wage migrant workers and their families from Delhi and its surroundings escaping joblessness of the Covid-19 lockdown and trudging back to their villages," wrote Omkar Goswami. Italy, Spain and France have resorted to lockdown after the number of cases started soaring. In the US, "The number of cases nationwide Sunday climbed to at least 337,274, with at least 9,633 dead, according to data compiled by Johns Hopkins University." That is because the US government was tardy in asking people to stay at home and practice social distancing. "Could a lockdown of 1.3 billion people have been better and more humanely designed? Ex ante almost certainly not." Modi has a habit of grandstanding to draw attention to himself. "On 8 November (2016), Prime Minister Narendra Modi gave only four hours' notice that virtually all the cash in the world's seventh-largest economy would be effectively worthless," wrote Justin Rowlatt. This was despite a meeting of the Board of the Reserve Bank (RBI) warning, "Most of the black money is held not in the form of cash but in the form of real sector assets such as gold or real-estate and...this move would not have a material impact on those assets." This time also the lockdown was announced with 4 hours notice, trapping foreign tourists with no means of getting home. "Mr Turner and Mr Ainley were among hundreds of UK nationals unable to leave India, which was put under 21-day lockdown on 23 March with less than four hours' notice in an attempt to slow the spread of coronavirus," wrote Johanna Carr for BBC. During a speech on 3 April, "PM Narendra Modi has appealed citizens (sic) to switch off electric lights at 9 pm on Sunday for nine minutes, and light candles and diyas, or flash torches or mobile lights standing at their doorsteps of balconies." This was to show solidarity with the poor. An alarmed  Power System Operation Corporation Ltd (POSOCO), which manages the national electricity grid, was forced to "initiate an elaborate set of contingency measures to avert any crisis caused by the sudden massive load reduction quickly followed by a sharp increase". No one has dared to ask the poor if they were impressed. On 19 March, Modi asked Indians to clap their hands to show appreciation for healthcare workers. Few days later doctors were attacked as they tried to treat patients with the virus. Modi has been constantly branding doctors as dishonest and did so even on a visit to London. "We are the poorest nation in the world to have announced such a lockdown," wrote Goswami. IAS officers reported widespread lack of healthcare infrastructure, with no masks, testing kits or ventilators. The coronavirus was completely unexpected but Modi is definitely responsible for the slowing down of the economy despite being blessed with low crude oil prices. Times are desperate. Tricks are not going to help.

It is really, really bad. Can they do it?

"The last three weeks have marked one of the most devastating periods in history for the American job market, as first-time claims for unemployment benefits have surged more than 3,000% since early March," wrote Anneken Tappe. "Businesses continue to lay off and furlough workers amid the coronavirus outbreak." "The soaring US unemployment rate might not match the peak of 25% seen during the Great Depression of the 1930s, but it could come uncomfortably close in the next few months," wrote Jeffry Bartash. The unemployment rate could climb to 20%. However, "The official unemployment rate, even one that rises to 15% or higher, might actually underestimate how many people are actually out of work. That's because millions of workers might continue to collect checks from their employers even though they aren't doing anything." "The recently passed $2.2 trillion federal-rescue package effectively pays many companies, particularly small businesses, to keep employees on payrolls and pay them accordingly. Businesses that do so would be allowed to receive government loans they don't need to pay back." The US is like a sprinter at the starting blocks ready to take off as soon as the situation improves. "We have witnessed the world economy coming to a standstill. We are now in a recession. It is way worse than the global financial crisis," said IMF managing director, Kristalina Georgieva. "As the International Labor Organization (ILO) warns of almost 25 million layoffs if the virus isn't controlled" economists at JP Morgan Chase & Co predict that "unemployment in developed markets will jump by 2.7 percentage points by the middle of this year" and "while there will be some healing as economies recover, they still predict elevated unemployment of 4.6% in the US and 8.3% in the euro area by the end of 2021". Ursula von der Leyen, the President of the European Commission, is a woman, as is Christine Lagarde who is the President of the European Central Bank (ECB), having been replaced as the Managing Director of the IMF by Georgieva. Angela Merkel is Chancellor of Germany, the largest economy in Europe, until 2021. Women control all political parties in Finland, which maybe tiny, but as a member of the European Union has voting power. Lagarde is of the opinion that "whenever the situation is really, really bad, you call in a woman". The situation is "really, really bad". Ideal time to show that they are indeed more capable than the countries run by men -- the US, UK and Australia. On your marks.    

Don't we need decency in economics?

"New Delhi: The Center on Friday released Rs 17,287.08 crore (Rs 172.8708 billion) to different states to enhance their financial resources to deal with the various challenges in the country's fight against Covid-19 pandemic." Is this enough? "India currently has 40,000 ventilators" but may need 800,000 under the best case scenario at a cost Rs 400 billion, wrote Abheek Barua. "We need more testing kits, protective gear for healthcare workers, more hospital beds." Taking India's huge population, adjusted for preponderance of young and prevalence of pre-existing diseases, the cost of containing the virus could be Rs 2 trillion. Add economic cost of keeping people at home and Rs 3 trillion for cash transfers to the poor and the bill comes to $100-114 billion which would be 3.5-4% of GDP. "If the pandemic follows the exponential trajectory seen in other countries, the crisis is going to entail massive fiscal expenditures, perhaps 4-5 percent of GDP, much more than the government has announced," wrote Prof Devesh Kapur and Arvind Subramanian. The total deficit could be in excess of 10% and government debt will rise. The government will need to transfer funds to the poor, help farmers, help industries and set up a solidarity fund to help the informal sector. This is to be financed by wealth tax on the rich, eliminating tax saving schemes for the middle class and a "small, progressive tax on salaries and pensions". Why do Indians living abroad write communist drivel likely to destroy the middle class in India? As the Chief Economic Adviser from 16 October 2014 to 20 June 2018, Subramanian cast his malicious gaze on the Reserve Bank of India (RBI), saying that it should transfer Rs 4.5-7 trillion out of its total reserves of Rs 9.6 trillion, collected over many decades, ostensibly to recapitalize banks. He would have known that once politicians and civil servants got hold of the money they will use it for their own benefits. Eventually, the RBI was forced to transfer Rs 1.76 trillion but non-performing assets (NPAs) at public sector banks was Rs 7.27 trillion on 30 September 2019. Gross NPAs of banks was Rs 910.8 billion or 9.2% of advances, wrote George Matthew on 22 February 2020. With the coronavirus lockdown bringing the economy to a standstill bad loans are set to rise in Indian banks. The RBI needs its reserves to support banks and the rupee. In the US, where these two live, the government is to pay $1,200 to taxpayers earning up to $75,000 per year, when the median yearly income in the US is $48,672. That is why there was half a mile of cars in the US to collect food handouts from food banks, while in India, desperately poor migrants walked hundreds of miles to get back to their villages to escape the lockdown. Kapur and Subramanian should not try to increase poverty in India just to publish papers. Should have some decency.

Is this the catastrophe that could save the world?

The good news is that coronavirus lockdown has released latent artistic talent among ordinary people, with somewhat dubious results. The rest of the news is mixed. "China wants to grab the mantle of global leadership, except it's falling flat on its face -- the face it always tries so hard to save. Its propaganda has gone from pathetic to laughable," wrote Seema Sirohi. "Chinese companies that made socks were suddenly making masks, and protective gear and selling them to Europe and Asia -- a bad attempt by the regime to capture goodwill." "Chinese 'largesse' is nothing if not a second, more deadly pandemic of propaganda and fake goods in Huawei emblazoned boxes. The masks its state supported companies are selling -- not donating -- don't protect the doctors and its test kits produce false results." The Czech Republic paid $546,000 for 100,000 faulty test kits from China. Spain and the Netherlands suffered as well. As is usual, China has resorted to blatant lies, accusing others of racism for saying that the virus originated from Wuhan. "A prominent Chinese official has promoted a conspiracy theory that the United States military could have brought the novel coronavirus to China -- and it did not originate in the city of Wuhan, as thought." "In another effort to skirt blame for the global coronavirus pandemic, the Chinese government has now pointed the finger at Italy as part of its ongoing propaganda campaign meant to sow disinformation about the outbreak." This is especially macabre given that Italy has recorded over 115,000 cases of coronavirus, of which 13,915 have died. This is also a lesson to the world that you do not hug a brutal uncivilised people who eat every living thing after slaughtering them in the most brutal fashion and have separated 500,000 Uyghur children from their parents to brainwash them. The total lockdown on the entire Hubei province, including Wuhan, isolated it from the outside world and allowed Beijing to manipulate figures. It is now believed that 42,000 people died in Wuhan and not the paltry 3,200 claimed by the inhuman regime. Even as the virus incapacitates and kills people the global economy has begun to contract already as all movement has effectively come to a halt. The recession may not reverse so quickly, wrote Peter S Goodman. "So long as human interaction remains dangerous, business cannot possibly return to normal." "The abrupt halt of commercial activity threatens to impose economic pain so profound and enduring in every region of the world at once that recovery could take years." Loss of earnings may lead to a global consumer default of debt, starting in China. Hopefully, the reduced demand will kill Chinese industry and destroy its threat of being the center of the global supply chain. Divine vengeance on a devouring atheist nation. How ironic.    

Covid-19 is new, our old friends are still there.

"As India grapples with coronavirus, cases of bird flu, H1N1 has surfaced in Bihar. Deaths of hundreds of crows and other birds have been reported from Patna, Nalanda and Nawada district, which were confirmed for bird flu. Cases of swine flu have also been reported from Bhagalpur and Rohtas, and action is being taken in this regard, informed the secretary of the department." As winter has receded mosquitoes are out in force. Last year India recorded 136,422 cases of dengue, of which 4,155 were in the capital Delhi. Mortality rate in dengue is 1% but for severe cases can reach 20% if left untreated. By September last year, number of malaria cases stood at 304 in Delhi. To tackle an expected surge in coronavirus cases. "Every Indian state today has similar priorities: add new beds, increase capacity of intensive care units, requisition portions of private hospitals, order life-saving ventilators, recruit medical practitioners on contract, weigh in on extending services of retiring doctors and nurses and earmark select government hospitals for Covid-19 patients." "Sample this: Italy has 4.1 doctors and 3.4 hospital beds per 1,000 persons. Yet its infrastructure appears to be crumbling today. In comparison, India has 0.8 doctors and 0.7 hospital beds per 1,000 persons, according to the World Bank..." But reserving hospitals beds for coronavirus patients creates a shortage for patients suffering from other serious ailments. "Deaths due to cardiovascular diseases in India increased from 1.3 million in 1990 to 2.8 million in 2016, and more than half the deaths caused by heart ailments in 2016 were in persons less than 70 years of age, according to the study, 'The Changing Patterns of Cardiovascular Diseases and Their Risk Factors in the States of India: The Global Burden of Disease Study 1990-2016'." As ICU beds are diverted to treating coronavirus patients what happens to these patients whose lives could be saved by early treatment? With the economy at a standstill Prime Minister Narendra Modi asked companies to pay all their staff on time and protect families of the poor. To encourage small firms to retain their workers the government will bear the cost of provident fund contribution of employers for three months. How will the government pay for all this when tax collections could fall by Rs 2.5 trillion in the last financial year ended 31 March. The central government is asking for contributions to the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM CARES). However, given the stress, the government has forgotten the richest segment of Indian society. The Lok Sabha has 475 multi-millionaires and 52 of the 70 members of Delhi Assembly are multi-millionaires. If all our elected representatives, who compete to love the poor by announcing myriad handouts with taxpayer money, were to contribute just 10% of their wealth, PM CARES will raise trillions of rupees. Problem solved.

Will the new tantrum be bigger than the last one?

"New York: The Federal Reserve's term repurchase agreement (repo) operation on Friday morning received no bids out of a possible $500 billion for the first time since regular operations began last year," reported Reuters. "The Fed now offers up to $1 trillion in overnight repo support daily, along with several longer term operations, but dealers are taking only a fraction of the available cash." "The Fed's balance sheet surged to a record $5.3 trillion after growing by more than half a trillion in a week, according to data released Thursday." "A repurchase agreement (repo) is a form of short term borrowing for dealers in government securities." This is a means to provide short term liquidity by the Fed but it received no bids because of the amount of excess money in US markets. The Fed's balance sheet is the balance between its assets and liabilities. Theoretically, the Fed can buy any amount of assets by printing dollars. After the financial crisis of 2008, the Fed "embarked on a monetary experiment now widely known as 'quantitative easing' (QE): buying Treasury bonds and mortgage backed and US agency securities in the open market", expanding its balance sheet to $4.5 trillion. Now it has exceeded even that. It would be of no concern to us in India, except that we still have memories of the rupee plunging 3.7% to 69 to the dollar in August 2013, when the then Chair of the Fed Ben Bernanke hinted at reducing the balance sheet, setting off panic selling which came to be  known as the 'taper tantrum'. The Fed's actions resulted in a fall in the value of the dollar as investors stopped hoarding it. "The sell-off in the US dollar is a reaction to the liquidity measures announced by the Federal Reserve and other central banks," said Jane Foley, a currency strategist at Rabobank. "Fear may have subsided for now." Knowing there is no shortage of dollars investors stopped selling emerging markets. "As the new quarter starts Wednesday, repatriation funds will slow and the haven bid from a worsening global pandemic may fuel a resurgence in demand." The rupee has not benefited. "A massive rate cut that the Reserve Bank of India (RBI) announced on Friday now casts darker clouds over the domestic currency." The rupee has fallen to 76 to the dollar. "Meanwhile, domestic companies with unhedged dollar debts are in deep distress and there has been a clamor in recent weeks to buy covers." Just eight months back the Finance Minister Nirmala Sitharaman proposed sovereign borrowing in dollars to increase government spending in an effort to stimulate growth. Borrowing in rupees decreases liquidity in banks and pushes up interest rates. The fiscal deficit reached 135% of Budget prediction by February. Hope there is no repeat of the taper tantrum.

If our villages escape we have won.

India is caught by the coronavirus pandemic but, "Thankfully, Prime Minister Narendra Modi has acted decisively and confidently. India is now on a 21 day lockdown," wrote Prof Arvind Panagariya. Though, "the lockdown asymmetrically disadvantages those living hand to mouth", the Finance Minister Nirmala Sitharaman has announced a Rs 1.7 trillion package targeted at the poor. The assistance includes 10 kg of food grain and 1 kg of lentils per person per month, one cylinder of liquefied petroleum gas (LPG) per household and cash handouts to farmers and laborers. As the lockdown was announced millions of migrant workers rushed to get back to their villages fearing starvation, as daily wage laborers are unable to earn their living. The total number of internal migrants in the country (accounting for inter- and intra-state movement) is a massive 13.9 crore (139 million). Images have reached all over the world and have created fears of an explosion of infections with so many people packed together. The incubation period of the virus is said to be up to 14 days, which means that cases could start to emerge by 12-14 April. The 21-day lockdown started on 25 March and so should end on 14 April, exactly at the time cases are beginning to emerge in villages right across India, but "Cabinet Secretary Rajiv Gauba denied reports that the lockdown would be extended beyond 21 days. He said such reports are baseless". Besides, viruses don't just disappear. They may become endemic, which means that it could go on infecting small groups of people over a long period of time. The H1N1 swine flu came to India during the 2009 pandemic, but it caused another severe outbreak in 2015 and has affected 6 Supreme Court judges this year. Influenza vaccine is available but has to be taken every year and most people don't bother. Authorities in India, central, state and municipal, are known to throw their weight around by inventing their own rules and forcing citizens to obey using draconian means. "While the central government has come up with advisories on exemptions from curbs being implemented during the nationwide shutdown until mid-April, consumer companies and retailers are facing hurdles, with local authorities in some states frequently changing rules, company executives said." In Surat, in Gujarat, police fired tear gas at migrants when they started throwing stones as the police tried to stop them from moving out of the state. People found it funny when a video went round showing police sterilizing lathis (canes) before beating people. Poor vegetable vendors were not so amused at being at the receiving end. An article in the Daily Mail alleges ill treatment of British citizens by authorities in India. If only news could be locked down as well.  

Sports is big business, not just games.

"Following the Black Death, the plague that's believed to have killed 60% of Europe's population in the second half of the 14th century, the realization that life is short, played a big role in shaping interest rates in the late medieval Europe, stretching all the way to the Enlightenment," wrote Andy Mukherjee. As the population fell, productivity improved and wages increased due to disinflation. "The change in behavior was more stark." "Products that hadn't been for mass consumption earlier -- such as linen underwear and glass panes in windows -- became more widely available as cheap capital rushed to satiate the growing desire to consume" and "English kings attempted by issuing ordinances, repeatedly for nearly a century, to fix summer wages for masons and carpenters to their low pre-Plague levels". Will the coronavirus change behavior with working from home, more automation and universal basic income to offset changes in working conditions. The virus has brought the whole world to a standstill, never seen in living memory. As nations have gone into lockdown, flights have been canceled, with the airlines industry facing a loss of $113 billion. Prospects for airlines in India are dire. "A recent ICICI Securities report on two listed airlines, Indigo and Spicejet, forecast Indigo to post a loss of Rs 230 crore (Rs 2.30 billion) and Spicejet to report losses of up to Rs 525 crore (Rs 5.25 billion) in FY21." Airlines in India have a history of failing, the latest being Jet Airways, wrote James Asquith. This is because of extremely high taxes on aviation turbine fuel (ATF) and protection of Air India which makes it impossible for private companies to compete. With aircraft grounded, the tourism industry has come to a standstill. Up to 50 million jobs are dependent on tourism worldwide as it accounts for 10% of global GDP. All sports have been stopped which could invite a shrug. After all, sports is not an essential service. "The global sports market reached a value of nearly $488.5 billion in 2018, having grown at a compounded annual growth rate (CAGR) of 4.3% since 2014, and is expected to grow at a CAGR of 5.9% to nearly $614.1 billion by 2022." "The global recreation market, of which the sports market is a segment, reached a value of nearly $1,435.4 billion in 2018, having grown at 4.5% since 2014." The Indian Premier League (IPL) for cricket is worth $6.3 billion, more than the English Premier League of football and the National Hockey League in the US. If the IPL gets canceled players, boards and sponsors will take a big hit. All because of the filthy eating habits of the Chinese. The animal markets in China have opened up already so we could face another pandemic in the near future. The virus is an infection. The Chinese are an infestation.

The seduction of MMT.

Swaminathan Aiyar, with a masters degree in Economics, said that the Indian government should forget about fiscal deficit and just print money to stimulate the economy. "I would say just print money. In other words, the government should have extra borrowing, financed entirely by the Reserve Bank of India printing money. This will be a once and for all huge explosion of the fiscal deficit, so be it," he said. This thinking has been around for sometime and is known as the Modern Monetary Theory  (MMT). Advocates of MMT say that governments of the US, UK, Canada and Japan can print any amount of money without fear of inflation. The theory was developed by American economist Warren Mosler who made a profit of $100 million in the 1990s when Italy did not default on its debts as people feared. Supporters of this theory say that taxes and government borrowing are ways of draining excess liquidity from the system and keeping inflation in check. MMT does not apply to emerging market countries, said Prof Larry Summers which could see a situation "where people could buy two drinks at bars at one time to avoid hourly price increases". The inflation rate in the US in the year ending February 2020 was 2.3%, while retail inflation in India was 6.58% in February, down from 7.59% in January. India has one of the highest income tax rates in the world, for which taxpayers get no returns such as pensions or healthcare, and excise duty on fuel was raised by Rs 3 per liter following collapse in price of crude oil, with Brent crude at $27.95, while West Texas Intermediate (WTI) is at $21.51 per barrel. Prime Minister Narendra Modi announced an almost complete lockdown in India so that people are not allowed to go out except to buy food and medicines. This means that very few vehicles are running, which means that sales of fuel have plummeted, thus reducing tax collection. Malls and restaurants have been shut down bringing goods and services tax (GST) collections to almost nothing. States in India collect revenue from taxes on alcohol, fuel, aviation fuel, stamp duty on real estate sales and on sale and registration of automobiles. Alcohol shops have been shut so no taxes there. International flights had been suspended earlier and now even domestic flights have been stopped. The central government is supposed to share GST collections with the states but with collections down there is little in the pot to share. The US has passed a bill to spend $2 trillion which is 10% of its GDP, while India is spending just 0.5-0,8% of GDP to help its people, which is pathetic says Aiyer. Perhaps, India is looking over its shoulders at Venezuela. Economists say that when something appears too good to be true, it definitely is. Aiyer should know. 

We can only pray that the virus doesn't infect the rupee.

"New Delhi: Finance Minister (FM) Nirmala Sitharaman on Thursday announced Rs 1.7 lakh crore (Rs 1.7 trillion), named Prime Minister Garib Kalyan Scheme, aimed at taking care of the poor, urban and rural workers, and those in need of immediate attention." "Under Pradhan Mantri Garib Kalyan Ann Yojana, FM announced 5 kg of rice or 5 kg of wheat for the next three months. This is in addition to 5 kg of rice or 5 kg of wheat, the government is giving at present. In addition, FM announced 1 kg of pulse for the next three months via public distribution system." In tandem, "Mumbai:The Reserve Bank of India (RBI) on Friday cut interest rate by 75 basis points (bps) -- the sharpest in over a decade." This was done to decrease the borrowing cost of the government. The RBI borrows money for the government by selling bonds and, "The 10 year benchmark bond yield dipped 22 basis points to as low as 5.98% before paring some of its gains." Question is whether there will be demand for bonds at these lower rates because on 24 March, "For half an hour after trading started, nobody bought or sold a bond on the Reserve Bank of India's platform." Also, "RBI slashed the cash reserve rate (CRR) by 100 basis points to 3% of bank deposits straight away unleashing Rs 1.37 lakh crore into the banking system for the next one year." CRR is the proportion of deposits that banks have to hold in cash so as to be able to meet sudden withdrawal demand. Boosting liquidity in banks was necessitated by the withdrawal of Rs 530 billion by depositors from banks in the fortnight ending March 13. The rupee has been falling against the dollar because foreign funds have been selling Indian equities, at one point falling below 76 to the dollar. The fall in interest rate should be a disincentive to carry trade, because, although the Federal Reserve slashed interest rate in the US to 0-0.25%, investors have to factor in any future fall in the value of the rupee. Strangely, the rupee has hardened to 74.876 to the dollar. This maybe a reaction to the news of an enormous rise in the number of coronavirus patients in the US to over 100,000 and investors fear a recession in that country. Foreign exchange reserves have dropped by $11.98 billion in the last week maybe because of repatriation of dollars by foreign investors and sale of dollars by the RBI in an effort to support the rupee. Selling dollars reduces the amount of rupees in banks so the RBI cut CRR to increase money supply. The RBI paid Rs 1.76 trillion to the government from its reserves last August. The rupee is the key. It plunged from 53.67 against the dollar in May 2013 to 69.13 in August, just on talk of tapering quantitative easing in the US. On the one hand, sale of dollars and bonds reduces liquidity, while reduction in CRR increases it. What this does to the rupee the future will show. We can only pray that the virus will go away. 

Virus will pass, stamping will continue.

"Last week, the mayor of Ecuador's largest city ordered the international airport's runway blocked to prevent a KLM airliner from landing to pick up Dutch tourists stranded by the coronavirus." Apparently, she did it to protect residents of her city from the virus. Politicians are arming themselves with extraordinary powers "made possible only by rapid advances in technology. and while citizens across the globe may be willing to sacrifice civil liberties temporarily, history shows that emergency powers can be hard to relinquish". In India, "officials are tracking mobile phones, pulling out reservation data from airlines and railways, and stamping people's hands with indelible ink". "When I first heard of the stamping in Mumbai, I thought it was fake news," said Supreme Court lawyer NS Nappinai, an expert in data privacy legislation. Nothing unusual. Governments in India, both central and states, are known for their brutality, beating and humiliating citizens with little provocation. A 32 year old man died in West Bengal after being thrashed by the police. Maharashtra is using a law, enacted by the British in 1897 to combat Bubonic Plague, to stamp people flying in from countries with virus epidemic. The Act protects authorities from litigation for any action, however draconian or lethal. Milady, the Countess de Winter, had been branded with a fleur de lis in Alexander Dumas's novel 'The Three Musketeers'. Ironically, the fear of authorities drove thousands of migrant laborers to rush to stations in Mumbai and pack into trains to get back to their villages. When train services were stopped migrants from Rajasthan started walking home from Ahmedabad in the adjoining state of Gujarat. The chaos caused by the coronavirus is similar to the events at the beginning of the 20th century, wrote Pankaj Mishra. "The opening years of the 20th century, too, were defined by a free global market for goods, capital and labor." "As with our own crisis, the seminal crashes of the 20th century -- the First World War followed by the Great Depression -- were harder to grasp because their principal causes were set in motion decades before and largely neglected by mainstream politicians and commentators." "In the interwar era, an expanding state assumed unprecedented powers over its citizens, metamorphosing in some countries into outright fascism." Governments are assuming unbridled powers to contain the pandemic. "Certainly, the techniques of surveillance available to the contemporary state, starkly evident in China today, can only further restrict human rights and liberties." With facial recognition technology and Aadhaar, India is not far behind China. The virus will pass, but we will continue to be stamped. Into submission.  

The difference is in how much we can print.

The US Senate finally passed a $2 trillion spending bill to support small businesses and those who have lost jobs due to the coronavirus outbreak. This is in addition to the $700 billion that the Federal Reserve will spend to buy mortgage backed securities and corporate bonds and to increase liquidity. Total spending will be almost equal to India's gross domestic product (GDP). Travel industry, restaurants, car sales and industrial production are falling precipitously. The price of crude oil has plummeted to its lowest level since June 2001. With people being restricted indoors and commercial activity at a minimum, pollution levels are falling. "Mumbai: For the third time in three days, the Wall Street brokerage Bank of America Securities has lowered global growth projections on Friday to zero, saying the world has already plunged into recession because of the coronavirus pandemic." It lowered India's June quarter growth rate to 3.1%. "The US recovery will begin in the second half but the speed and magnitude will depend on the policy response. We believe there is no upper bound, it added." So, what can we do to stop our economy falling into recession? Experts believe that the government can spend the equivalent of $18 billion if it increases fiscal deficit by just 1% of GDP. That would be less than 10% of what is required because, "Mumbai: Pegging the cost of the COVID-19 lockdown at USD 120 billion (approximately Rs 9 lakh crore) or 4 percent of the GDP, analysts on Wednesday sharply cut their growth estimates and stressed on the need to announce an economic package." Care Ratings has predicted a daily loss of Rs 350-400 billion which adds up to a total of Rs 6.3-7.2 trillion. Seems unfair that the US, with an estimated population of 331 million can spend a 1,000 times more than what we can spend with a population of 1.3 billion. Especially since the US government has a debt of $22 trillion which is about 80% of GDP, while our government has a debt of about $1.9 trillion which is 67% of GDP. Governments raise money by selling bonds through their central banks but on Tuesday, "For half an hour after trading started, nobody bought or sold a bond on Reserve Bank of India's platform," wrote Sircar and Goyal. The benchmark 10-year yield has risen 33 basis points since falling to 5.99% in early March, which was the lowest in a decade." Whereas in the US, "Short-term government bills in the US are offering negative yields for the first time. The one-month and three-month Treasury bills dipped below zero Wednesday." The reason is that the dollar is the main currency of trade in the world and only the US can print dollars. If the Indian government prints rupees its value will plummet, pushing up the cost of imports and resulting in inflation. The rupee fell to its lowest level of 76 to the dollar. We own the printing press. But we can't use them.

Why worry? Take selfie with coronavirus.

"Hong Kong: Evidence of the devastation wreaked on the global economy by the coronavirus pandemic mounted on Tuesday as activity surveys for March from Australia and Japan showed record falls, with surveys in Europe and the United States expected to be just as dire," wrote Marius Zaharia. "Entire regions have been placed on lockdown and in some places soldiers are patrolling the streets to keep consumers and customers indoors, halting services and production and breaking down global supply chains. Mirroring the emptying of supermarket shelves around the world, indebted companies have rushed into money markets to hoard dollars, with a global shortage of greenback funding threatening to cripple firms from airlines to retailers." Both supply and demand are being hit. "Goldman Sachs has issued a grim forecast, predicting that US gross domestic product (GDP) will plummet by 24 percent in the second quarter of this year, by far the largest drop since detailed records have been kept." Ray Dalio, founder of hedge fund Bridgewater Associates estimates that US corporations will lose $4 trillion and companies worldwide will lose a staggering $12 trillion. "Constituting less than 5 percent of the world's population, Americans generate and earn more than 20 percent of the world's total income." Total retail sales in the US, excluding automobiles, gasoline and restaurant sales, exceeded $5 trillion in 2017. If the coronavirus outbreak is not controlled by May, "The early estimates suggest that the global economy will contract by about 5 percent," said Ruchir Sharma. Despite pessimism by experts, President Donald Trump wants to reopen the economy by Easter which is just 2 weeks away. Good Friday is on 10 April. "We will assess at that time and give it more time if we need a little more time. We have to open this country up," he said. The great influenza pandemic of 1918 reduced global GDP by about 6% and consumption by 8%. Many have predicted that a rush to open US businesses could result in a sharp rise in mortality. Trump also wants trials on a combination of the anti-malarial drug chloroquin and the common antibiotic azithromycin because of anecdotal reports of benefits in patients with coronavirus. Again experts have ridiculed him. Why? It should be relatively simple and quick to carry out trials. To date over 422,000 have been infected so sample size should not be a problem. Earlier cases were treated symptomatically and extensive statistical data are already available so there is no need for placebo control. Patients can be randomized into those receiving chloroquin plus various antibiotics and those receiving cholroquin plus anti-retroviral drugs. Presence or absence of benefits should be apparent within a week. Amid all this gloom some are very optimistic. 6 Pakistani officials have been suspended for taking selfie with an infected colleague. Thank you Pakistan. 

Not easy when you have to worry about foreigners.

"Poor cash flows, rising leverage, and stretched valuations of of firms had analysts worried about an impending global recession last year. But no one guessed that a micro-organism could be the trigger for a global financial shock," wrote Bhatia and Bhattacharya. As the country gradually goes into a shutdown, earnings will fall and people will cut spending, both because shops and malls are closed and because they will be fearful of spending. This will affect both direct and indirect tax collections, limiting the amount of stimulus the government can provide. On the other hand, the price of crude oil has fallen dramatically which will save enormous money for the government. West Texas Intermediate has fallen from over $60 a barrel at the beginning of the year to around $25 per barrel today. "For every dollar the price of oil drops, India saves approximately $1.5 billion, according to Akhil Bery, an analyst at political risk consultancy Eurasia Group." But, though the government gains in foreign currency saved, consumers in India will not see a fall in prices at the pump because the rupee has fallen to below 76 to the dollar for the first time ever. Also, the government was quick to increase excise duty on petrol and diesel by Rs 3 per liter to rake in higher revenues. "Growth may weaken to 3% in the first three months of this year from 4.3% estimated previously, according to Oxford Economics, while Jeffries sees room for the government to spend $18 billion to support activity," wrote Anirban Nag. This will increase fiscal deficit for the next financial year from 3.5%, as predicted in the budget, to 4.5%. However, the IMF says that India's fiscal deficit is second highest among emerging market (EM) nations. "According to 2019 estimates from the International Monetary Fund (IMF), India's fiscal deficit (standing at 7.5% of GDP) is the joint highest among the cohort (along with Brazil) and significantly higher than the EM average (3% of GDP). Unlike the Budget 2020 fiscal deficit estimate (3.8% in 2019-20), which captures fiscal deficit of the union government, the IMF's fiscal deficit definition includes the financial position of all levels of government within a country (center, state and local governments)," wrote Surbhi Bhatia. The government has already spent 128.5% of its budgeted expenditure for the year between April 2019 and January 2020. So far, foreign investors have sold Indian equities worth Rs 1 trillion in March. The stock market index the Sensex has dropped from 40,723 at close on 31 January. It fell 13.15% to close at 25,981 yesterday. If fiscal deficit zooms up our credit rating maybe cut, which will result in a massive sell out of Indian stocks and bonds and the rupee will plummet as foreign investors take money home. The proverbial rock and a hard place.

Italy is suffering for being woke. Shouldn't we learn?

Responding to a call for 'janata (public) curfew' by Prime Minister Narendra Modi, India went into an almost complete shutdown yesterday. Since it was a Sunday, and everything was closed anyway, people stayed at home. Delhi Chief Minister Arvind Kejriwal announced a lockdown of Delhi with borders closed to interstate traffic, except for essential services. All shops, offices, religious services and Delhi metro are to stop. Malls, cinemas, markets and restaurants were already shut down. Banks will run with skeleton staff and groceries, shops selling fruits and vegetables, pharmacies, petrol pumps and home deliveries to will continue to function. Bengal Chief Minister Mamata Banerjee was furious with Indian Railways for allowing workers, who had migrated to other cities looking for work, to return without screening at stations. Railways is canceling all passenger trains till 31 March in an attempt to localise infections. However,  when the news got out, thousands of panicked people in Mumbai rushed to station, completely overwhelming railway officials and security personnel, and packed into trains to get back to their homes in other states, completely oblivious to the danger of catching the virus from such close proximity over days. "Ram Sagar Mistri, 32, a native of Danapur in Bihar, said people like him depend on daily wages. 'Once we stop getting work, it is not possible for us to survive more than a week in Mumbai,' he said." "Due to the sudden surge, we plan to run 14 special trains on Friday and Saturday from Mumbai and Pune. Out of these 14, nine will be to UP, Bihar and West Bengal," said CR (Central Railway) chief PRO Shivaji Sutar. That is India's unique problem in a nutshell. The world's largest population of very poor people. "More than 90% of the country's workforce is estimated to be in the informal sector. The Economic Survey of 2017-18 had said that 87% of the firms in the country, representing 21% of total turnover, are purely informal, outside both the tax and social security nets." Other countries are enforcing home quarantine, telling those who have had contact with anyone testing positive for the coronavirus, to stay at home. But that would almost impossible in India. "The largest chunk of Indian houses have only one room which is followed by two room houses. Together, these two types of houses comprise 69% of total houses in the country or 170 million households." "Also, there are about 10 million households that do not have any exclusive room for living as the room in which they live is also used as a shop or office." About 400,000 people die every year of tuberculosis in India, 200,000 die of diarrhea and pneumonia, 150,000 die of traffic accidents and 10,000 are electrocuted to death, wrote TK Arun. If only 5% of patients infected with coronavirus need intensive care (ICU), why not allow it to spread? Because, the rich will take all ICU beds and only the poor will die. Arun recommends increasing healthcare facilities. That's as silly like hugging Chinese, as the Italians did. The only answer is to reduce population by 80%. Woke solutions will not suffice.