By J Mulraj
OCT 21-27, 2023
An endangered world -why does no one talk of peace?
Marvin Gay’s ‘What’s Going On’, is a song to promote peace on Earth. The lyric goes:
There’s too many of you crying,
Brother, brother, brother,
There’s far too many of you dying,
You know we’ve got to find a way,
To bring some loving here today,
We don’t need to escalate,
You see, war is not the answer,
For only love can conquer hate,
You know we’ve got to find a way,
To bring some loving here today.
It is depressing that there is not a political leader of stature who is concerned about the ravages of war and the human tragedies it unfolds, and is not promoting peace, neither in the Ukraine conflict, 20 months old, nor in the latest Palestinian – Israeli conflict. The latter has the potential to escalate, which would be devastating for the entire world.
All nations are over indebted and cannot afford wars. That, though, doesn’t prevent jingoism. Which global leader has the heft to call for calm?
The world’s largest economy, USA, is in a self destruct mode, largely due to bad policy choices by Biden. Take immigration policy. Biden has allowed unfettered access to illegal immigrants, with poor identity checks, and a host of benefits, including housing and food, sometimes at the cost of its own citizens, including war veterans. Unverified immigrants have exposed America to internal terror attacks, especially after another insane policy choice to de-fund the police. More than 142000 migrants were encountered in the first half of September! These unverified, untraceable, immigrants can potentially be a terror threat.
Or take uncontrollable debt. US Government debt has surpassed $33 trillion, adding $1 trillion in the last three months. In addition, debt held by the public is over $26 trillion! After the Federal Reserve has raised interest rates by 5%, the refinancing of this date, when it falls due, is expensive, and difficult.
Or take the economy. The US economy has proven to be resilient, with a buoyant job market. But the 5% hike in interest rates will soon impact corporate profits, with $790 b of corporate debt coming up for refinancing in 2024 and over $1 trillion in 2025. Expect to see corporate bankruptcies and takeovers.
The increased interest rates will also destroy a lot of the commercial real estate (CRE) valuations. An office building in downtown San Francisco was sold for a whopping 66% less than its recently assessed value. Usually the lender, normally the community banks, are left holding the baby. Expect more banks like SVB, to get into trouble.
Or take manufacture. One issue is that a great chunk of manufacturing facilities were outsourced to China, making USA vulnerable to supply chain shocks. The more current issue is labour protests over pay hikes to combat inflation. The UAW ( United Auto Workers) union had led a strike in the three largest auto makers, Ford, GM and Stellantis. UAW demanded a huge wage hike, in order to match the pay increases awarded to senior executives via stock options.
Of these, Ford and UAW have reached a four year agreement under which the starting wage would rise 68 % to $ 28/hour, and the top wage would increase 30 % to $ 40/hour.
The auto industry is in transition to EVs ( electric vehicles), in which Tesla has emerged a clear leader. It’s new initiatives, such as sodium solid state battery, (which will be cheaper, faster and more easily available, than lithium ion batteries), the DOJO supercomputer, and the forthcoming autonomous vehicle + TAAS (Transport As A Service) enabled by DOJO’s awesome computational power, will allow TESLA to soon wipe out competition from legacy automakers. The three have been woefully slow to join the EV race, and the financial burden of the UAW accords will lead them, barring a miracle, to bankruptcy.
The energy industry is also in transition, away from the polluting fossil fuel, towards green energy, as a bridge, but towards, ultimately, a form of clean, plentiful, affordable energy in the future. This could be energy from nuclear fission, or any other source. But until such energy is proven, and commercially viable, Biden ought to have continued with traditional energy, even while building renewables capacity, in order to retain the energy independence it had achieved under Donald Trump. But so visceral is the antipathy between Dems and Republicans in USA that the babies are thrown out with the bath water. One of his first acts, as President, was to ban lease of federal land for fracking, thus losing USA’s hold over the industry and handing it over to OPEC, including Iran, Russia and others. Since enough oil is produced to meet demand, the carbon emissions will occur. And, since the world is one, carbon emissions cannot reduce by one country’s effort alone.
What has happened, however, is that Iran has increased its oil production from around 2.4 m bpd in 2020, when Trump imposed sanctions to around 3.4 m bpd now, giving it revenue to support organizations like Hamas.
Yet the American economy has performed well, with GDP rising by a phenomenal 4.9% in Q3!
Or take domestic politics. The American voters are split down the middle between both parties. It took weeks, and several attempts, before the Republicans could find a person who was electable as Speaker of the House. The temporary ‘continuing resolution’ gives the Government funding to last till November, and if the new Speaker cannot muster up enough votes to raise the debt ceiling (and there are enough hurdles to query that), the US Government may shut down. That, too, at the worst possible time with tensions in Israel as well as in the South China Sea.
China, too, has enough of its own woes and may not be able to mediate and bring peace to warring nations. It’s realty companies are defaulting, in a sector that accounts for 30% of GDP. Youth unemployment is so high that the Government has stopped disseminating the figures. It’s suspected to be in mid twenties percentage. The demographic profile is poor. China’s wolf warrior diplomacy, especially in the South China Sea, has not endeared it to its neighbors.
PM Narendra Modi may, perhaps, be able to mediate; he has the political heft and has developed good relations with the opposing sides. Sadly, his attention is now focused on resolving the issue of the 8 naval officers given the death sentence by Qatar, for espionage.
Marvin Gay was very right to ask ‘What’s Going On’?
When, and how, will this circle of acrimony and retribution end?
Which political leader will do so? All are busy solving their own, self created, problems. Only love can conquer hate, sings Marvin. Sadly, political leaders view both as four letter words!
Last week the BSE Sensex dropped 1615 points to end at 65397, concerned about the possible escalation of the Palestine-Israel conflict. This is a tinder box which needs only a small spark for a conflagration. Pray it doesn’t.
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