Chillin' out till it needs to be funded
Here it is, a first report Card of 2010 as April drives the missile home. Nuclear Security can see traction, and nearer to the dinner table, Car sales are up, General Merchandise and retail sales up in double digits in the US and pretty much roaring in India , China and rest of the world. It’s a home truth all of us born in the 70s know well, consumption rises with inflation. Inflation is the talking point on which sales are completed and the Economic Engine whether in the US where JP Morgan Chase has started selling fresh Auto loans again or in India and China where a never before spike in Car sales, DTH and rural consumption to the point of a real estate bubble in China is fuelling rising GDP projections and scares around super-high inflation likely fading in a quarter or so even in India. US in fact reported a lower 1.2% non-food inflation number today for March and just 0.1% M-o-M inflation. India has already seen Potatoes shoot down after the harvest and now with the next harvest season in, food inflation is again been brought down purely by natural forces. Meanwhile, the retail lifestyle consumption boom and interest rates will rise in tandem thru 2010 and 2011.
Other fun things are happening on the reform front as well. I call them ‘fun things’ as they are being well taken by the markets and wolfed down with the evening supper by the populace. India would be our staple fodder for the simile as we watch MSA on screen and Manmohan Singh comes back after the Nuke Summit and well we remain an open example with publicly available data and access while Us is a little over structured ( The Nasdaq Economic calendar reports new statistics daily, though even we in Asia would adopt 2-3 different home sales statistics ) China, I’d say we are the best in Data on China as a whole and boy it has taken some sifting!
To emphasize, a lot of other positive activity is afoot. In India, we are finally game enough to tackle food Security with 102 million “Below Poverty Line” ration cards already issued by over zealous states to get more of the subsidized cereals for their citizens and latest calculations ( Suresh Tendulkar Committee) taking actual eligibility to 84 million and the 93-94 base calculations showing 54 million poor. Food Security guarantees availability of a fixed amount of grain, the amount of which has already come down by 50% as affordability and feasibility questions rose near to introducing the boll in parliament. Much like the 32 million uninsured being helped by Obamacare these newly identified 30 million poor would have a hard time being identified, monitored and accessed thru a rent forsaken Public Distribution system.
After Food Security, we see the zealous consumption figures in Cars, Television and even the booming Sports Broadcasting matter, even as Greece survives with a $45bn package from IMF and Europe bringing their debt cost down to 5% That one is a bad one, as the cost should have been capped to a percent of GDP that lets them know what is avl to spend. They need to be spoon-fed and three years later would still be holding governments to ransom. Even the new China stance on Nuclear security and the Yuan would be good news for the market, China’s stance obviously tempered by realism as we figure out the real impact of the new equation. But now is the time to point out the undercurrents flowing from good inflation and the sudden disappearance of governments from the market.
On the China front, the good news for everyone is the new deficit. Ask Reagan and again anyone else outside the Pearson institute and without the benefit of Economics. Growth is a super function of Inflation and Deficits. We have seen that live for thirty years. It is empirical evidence I cannot ignore. Now that you have a deficit even when the Oil prices are just $80, two things become the limiting envelopes of growth – First, the price of Oil, which you can easily not afford and all of us growing are consumers that import it, and Second, the currency getting weaker to increase trade.
China’s deficit would give it a counterbalance to its stronger currency as it throws more of its Yuan into global currency trade, it will fuel a hunger to close export deals and it will keep the importers in China happy as they import hitech Capital Equipment and throw out labour to the rest . Not exactly what US imagined when they thought China was holding its belt in for its own selfish ends, but then International trade is more than my home tap that can be closed and opened at will.
And the weaker dollar, well it’s a godsend for those who want to export American goods and expertise..It is also a sign that the $39/$40 billion US trade deficit that is larger than India’s trade with the US, will be a material amount to price International Freedom, Democracy and trade. In short US can now be a happy participant in global gowth with out looking like the defunct elder brother of defunct ‘Developed Europe’ swimming in 125% of GDP as national debt in each of its major economies. US is good credit as long as it is growing, remember! Japan is that thing we keep as example and work around it to keep the parameters fine. Let’s go shopping.
I am happy enough if it works this Retail Inflation co., for this whole decade.