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How The U.S. War on Taiwanese Semiconductors Might Benefit Japan

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On May 15, 2023, Berkshire Hathaway reported in a Form 13F filing to the U.S. Securities and Exchange Commission that it had completed the sale of its $4 billion stake in Taiwan Semiconductor Manufacturing Co (TSMC). This sale completed a process that began in February 2023, when Berkshire Hathaway announced that it sold 86 percent of its holdings in TSMC. In April, Berkshire Hathaway’s leader Warren Buffett told Nikkei that the geopolitical tension between the United States and China was “certainly a consideration” in his decision to divest from TSMC. TSMC told Nikkei, is a “well-managed company” but that Berkshire Hathaway would find other places for its capital. At his May 6 morning meeting, Buffett said that TSMC “is one of the best-managed companies and important companies in the world, and you’ll be able to say the same thing five, ten or twenty years from now. I don’t like its location and reevaluated that.” By “location,” Buffett meant Taiwan, in the context of the threats made by the United States against China. He decided to wind down his investment in TSMC “in the light of certain things that were going on.” Buffett announced that he would move some of this capital towards the building of a fledgling U.S. domestic semiconductor industry.

TSMC, based in Hsinchu, Taiwan,, is the world’s largest semiconductor manufacturer. In 2022, it accounted for 56 percent of the share of the global market and over 90 percent of advanced chip manufacturing. Warren Buffett’s investment in TSMC was based on the Taiwanese company’s immense grip on the world semiconductor market. In August 2022, U.S. President Biden signed the CHIPS and Science Act into law, which will provide $280 billion to fund semiconductor manufacturing inside the United States. On December 6, 2022, Biden joined TSMC’s Chairman Dr. Mark Liu at the $40 billion expansion of TSMC’s semiconductor factories in North Phoenix, Arizona. Dr. Liu said at the project’s announcement that the second TSMC factory is “a testimony that TSMC is also taking a giant step forward to help build a vibrant semiconductor ecosystem in the United States.”

The first TSMC plant will open in 2024 and the second, which was announced in December, will open in 2026. On February 22, 2023, the New York Times ran a long article (“Inside Taiwanese Chip Giant, a U.S. Expansion Stokes Tensions”), which pointed out—based on interviews with TSMC employees—that “high costs and managerial challenges” show “how difficult it is to transplant one of the most complicated manufacturing processes known to man halfway across the world.” At the December 6 announcement, Biden said, “American manufacturing is back,” but it is only back at a much higher cost (the plant’s construction cost is ten times more than it would have cost in Taiwan). “The most difficult thing about wafer manufacturing is not technology,” Wayne Chiu—an engineer who left TSMC in 2022—told the New York Times. “The most difficult thing is personnel management. Americans are the worst at this because Americans are the most difficult to manage.”

Blow up Taiwan

U.S. Ambassador Robert O’Brien, the former National Security Advisor of Donald Trump, told Steve Clemons, an editor at Semafor, at the Global Security Forum in Doha, Qatar, on March 13, 2023, “The United States and its allies are never going to let those [semiconductor] factories fall into Chinese hands.” China, O’Brien said, could build “the new OPEC of silicon chips” and thereby, “control the world economy.” The United States will prevent this possibility, he said, even if it means a military strike. On May 2, 2023, at a Milken Institute event, U.S. Congressman Seth Moulton said that if Chinese forces move into Taiwan, “we will blow up TSMC. … Of course, the Taiwanese really don’t like this idea.”

These outlandish statements by O’Brien and Moulton have a basis in a widely circulated paper from the U.S. Army War College, published in November 2021, by Jared M. McKinney and Peter Harris (“Broken Nest: Deterring China from Invading Taiwan”). “The United States and Taiwan should lay plans for a targeted scorched-earth strategy that would render Taiwan not just unattractive if ever seized by force, but positively costly to maintain. This could be done effectively by threatening to destroy facilities belonging to the Taiwan Semiconductor Manufacturing Company,” they write.

Right after Moulton made these incendiary remarks, former U.S. defense undersecretary Michèle Flournoy said that it was a “terrible idea” and that such an attack would have a “$2 trillion impact on the global economy within the first year and you put manufacturing around the world at a standstill.”

Taiwan’s officials responded swiftly to Moulton, with minister of defense Chiu Kuo-cheng asking, “How can our national army tolerate this situation if he says he wants to bomb this or that?” While Chiu responded to Moulton’s statement about a military strike on TSMC, in fact, the U.S. government has already attacked the ability of this Taiwanese company to remain in Taiwan.

Taiwan’s economics vice minister Lin Chuan-neng said in response to these threats and Buffett’s sale of TSMC that his government “will do its utmost to let the world know that Taiwan is stable and safe.” These incendiary remarks aimed at China now threaten the collapse of Taiwan’s economy.

Made in Japan

In his May 6 meeting, Warren Buffett said something that gives a clue about where the semiconductor manufacturing might be diverted. “I feel better about the capital that we’ve got deployed in Japan than Taiwan,” he said. In 1988, 51 percent of the world’s semiconductors were made in Japan, but as of 2022, the number is merely 9 percent. In June 2022, Japan’s Ministry of Economy, Trade, and Industry (METI) announced it would put in 40 percent of a planned $8.6 billion for a semiconductor manufacturing plant by TSMC in Kumamoto. METI said in November that it has selected the Rapidus Corporation—which includes a stake by NTT, SoftBank, Sony, and Toyota—to manufacture next-generation 2-nanometer chips. It is likely that Berkshire Hathaway will invest in this new business.

Source: Globetrotter

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China unveils name of first domestically-built large cruise ship

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The name of China’s first domestically-built large cruise ship was unveiled in Shanghai on Friday. 

“Adora Magic City” aims to offer a unique and immersive cruise experience that seamlessly blends Eastern and Western cultures, with Shanghai serving as its home port in the inaugural season, according to details released at an event held by the municipal culture and tourism bureau and China State Shipbuilding Corporation Cruise Technology Development Co., Ltd. (CCTD).

Jointly designed and built by the CCTD and Shanghai Waigaoqiao Shipbuilding Co. Ltd., the cruise ship, measuring 323.6 meters in length with a gross tonnage of 135,500 tonnes, can accommodate up to 5,246 passengers and is expected to be delivered by the end of 2023.

After the successful delivery of the cruise ship, an array of international routes will commence between the home port of Shanghai and neighboring countries serving as the destinations. In addition, medium and long-term routes will be launched to enhance cultural exchanges between China and other countries. (Xinhua) 

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Washington’s trade war causes losses to itself and world

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The recent U.S. Census Bureau data suggest that the U.S. merchandise trade deficit with China was larger in 2022 than when Donald Trump was president, said an article on the Carnegie Endowment for International Peace website.

Adding that America’s overall trade deficit hit an all-time high of 1.18 trillion U.S. dollars, Carnegie noted that this fortifies the view that “tariffs would not reduce U.S. trade deficits and the costs would be paid largely by Americans.”

Similarly, the Financial Times recently commented on “waging war on trade,” describing the current U.S. approach as “a negative-sum game” and stressing that politicizing trade will surely lead to wasteful outcomes.

The slowdown in world trade, the article’s author Martin Wolf wrote, the shift towards economic nationalism, and the growing demands in the West for decoupling from China “are reshaping the global economy.”

In recent years, the U.S. bullying trading tactics have caused an increase in costs for international companies, a decrease in their competitiveness, and harm the interests of consumers.

Statistics show that the previous U.S. government has implemented over 3,900 sanctions, which is an average of three sanctions per day. The Biden administration has also announced a “Buy American” rule, requiring any goods purchased with taxpayer money to contain 75 percent American-made content.

Despite what appears to be a periodic implementation of protectionist and unilateral policies, American firms are reluctant to undertake such a shift, which could undermine their prospects in the global economy, said Rahim Teymoori, a researcher at the Development and Foresight Research Center of the Plan and Budget Organization of Iran.

“Although such economic policies would, in the short term, possibly contribute to the U.S. production sector on the back of the government’s financial support and protection, they, in the long run, would harm the U.S. companies’ competitiveness as they would lose a big integrated market, in which their connections have been formed,” he said.

Domestically, Washington’s trade war have caused sweeping losses borne by ordinary people. Worldwide, U.S. protectionist policies can lead to disordered supply chains, severe inflation shocks, and an increase in living costs.

The United States is not only restricting its companies’ overseas economic activities, escalating export controls, and introducing the Chips and Science Act, the Inflation Reduction Act, and the Infrastructure Investment and Jobs Act to protect its interests, but also coercing other countries into joining the sanctions and forcing others to do things that are not good for themselves, said a Japanese researcher, noting that “this is an act of the mafia.”

Kiyoyuki Seguchi, research director at Japan’s Canon Institute for Global Studies, said that the U.S. export restrictions on semiconductors have affected companies in Japan, South Korea, the Netherlands and other countries, and even the United States itself.

In Seguchi’s opinion, the U.S. adoption of a zero-sum economics policy cannot succeed in the real economic field because “the logic in economic relations is that either win-win or lose-lose, there can be no result where one side wins and the other loses.”

Partly due to U.S. trade protectionism and the spillover effects of previous monetary and fiscal policies, global inflation has risen to a 40-year high and more than 60 percent of low-income developing countries are in debt trouble.

While the Trump administration had tried to bring profits and dividends to the country by imposing tariffs on multinational products, the Biden administration continued with this industrial policy of incentives, fueling high inflation and making the whole world bear the consequences, said Hsia Hua Sheng, an economist at the University of Sao Paulo.

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India’s Coal Policy Ignores Zero Emission Target: But Little Choice

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During the Glasgow Climate Meet, the Indian Prime Minister announced with much fanfare that India would achieve zero net emission target by the year 2070.

The pre-condition to reach zero emission level is that the use of fossil fuel namely crude oil and coal and to some extent natural gas too (as it is known natural gas results in methane emission during handling and transportation) should be totally eliminated.

At present, India consumes more than 250 million tonne per annum of crude oil and around 80% of its requirement is met by import. In the case of natural gas, India imports around 35 billion cubic metre per annum, which is nearly half of India’s requirement.

India’s coal production hit a milestone of 892 million tonne during F Y 2023, which is an year on year growth of 14.7%. In addition to the domestic production of coal, India’s import of coal surged by 26.18% year on year to 237.93 million tonne during April,2022 to February,2023, with non coking coal accounting for 65% of the import.

The question is whether India can achieve the net zero emission target by the year 2070, considering the present usage level of fossil fuel and considering that the present pattern of energy mix would largely remain the same and that the usage level has to increase at the level of around 8 to 9% per annum in the coming years, if India were to maintain GDP growth rate of 6 to 7% per annum.

The ground reality is that India in all probability, may have to ignore the net zero emission target by the year 2070 with whatever consequences to global climate scenario.

Ground reality:

India and China account for about 80% of all active coal projects in the world, even as most nations take steps to reduce coal project capacity to meet climate targets. China plans to build some 100 new coal-fired power plants to back up wind and solar capacity, which goes against China’s stated intention to reduce the role of coal.

As of January 2023, only 20 countries have more than one coal project planned, according to E3G, an independent climate think tank.

India, whose proposed coal power capacity is the highest after China, has repeatedly refused to set a timeline to phase out coal, citing low per-capita emission and the need for inexpensive fuel sources.

India’s comparative emission level

India and China are the world’s two biggest CO2 emitters from coal.

However, Australia and South Korea lead the world in emissions from the world’s fossil fuel when adjusted for population size, according to energy and climate research organization Ember.

Data calculated since the Paris Agreement on climate in 2015 show that some of the richest countries in the world have the most work to do in moving away from coal to cleaner energy sources.

Coal power emissions in selected countries – per capita, G20

Name of the countryAnnual average from 2015-2020,
in tonne CO2
Australia5.34
S Korea3.81
S. Africa3.19
US3.08
China2.71
Germany2.37
Japan2.08
Canada1.27
EU271.16
Turkey1.03
Russia1.01
India0.64
Indonesia0.47
Mexico0.18
France0.12
Brazil0.1
Argentina0.04

World average                            1.06

India’s per capita average emission is much lower compared to developed countries ,. However, the fact is that India is one of the largest emitters in quantitative term. This is a weak argument to defend India stating that India’s per capita emission is lower than several other developed countries and perhaps implying that India should be considered less guilty with regard to emission level

India’s coal policy – Confusion galore

A number of pronouncements have been made in recent years by Govt. of India about India’s coal policy and utilisation of coal as fossil fuel. Several committees have been set up and a number of them appear to be providing what appear to be contradictory recommendations. It is not clear as to whether India’s coal policy has been finally arrived at and framed

In a draft proposal, which is India’s first attempt at revising its National Electricity Policy (NEP) enacted in 2005, it was recommended that the retirement of old coal-fired however plants should be delayed, until energy storage for renewable power would become financially viable.

In the first draft of the NEP in 2021, it was said that India might add new coal-fired capacity, though it proposed tighter technology standards to reduce pollution.

The Central Electricity Authority, an advisory body to the power ministry, had said last year that India might have to add as much as 28 GW of new coal-fired power in addition to the plants under construction to address surging power demand.

The report on Optimal Generation Capacity Mix for 2029-30, released by the Ministry in May 2023, also says that between 2023 and 2030, India will build 26.9 GW of coal power plants. The investment for that, at Rs.8.34 crore a MW, therefore, works out to Rs.2.25 lakh crore, or Rs.32,050 crore a year.

The report further says that essentially due to coal based power plants, India’s annual carbon dioxide emissions from the power sector are set to rise from 9.10 million tonne from 2,36,680 GW of coal power capacity today to 1.11 billion tonne in 2030. All this implies that coal power is both costly and harmful to the planet.

So far, old coal-fired power plants with a cumulative capacity of 13 GW have been earmarked for functioning post retirement deadline to meet high power demand

The latest news is that India plans to stop building new coal-fired power plants, apart from those already in the pipeline, by removing a key clause from the final draft of its National Electricity Policy (NEP). Obviously, the new policy, would not impact the 28 GW of coal-based power in various stages of construction.

However, the final draft of NEP, which will guide India’s policy making on energy over the next decade do not seem to have made reference to new coal fired power plants.

Will coal be the dominant fuel for all time to come in India?

Coal is expected to be the dominant fuel for generating electricity in India for decades.

Even as India has committed itself to achieve net zero emission by 2070, it has not made any efforts so far nor look like making any efforts in future to reduce steadily coal production in the country, which is a pre condition to reach zero emission target.

The Ministry of Coal has now announced that capacity for coal production would be increased by 885 million tonne per annum by the following coal projects and these projects are targeted to be completed by 2027 and India is expected to produce 1.3 billion tonne of coal by the year 2030.

Name of the companyNumber of  coal projects
Coal India Ltd          59
Singareni Colleries Company Ltd            5
NLC India Ltd (NLCL)            3
Total          67

Little choice for India: Likely fossil fuel-based energy mix in India Year 2023

CategoryInstalled generation capacity ( MW  )% of share in total
Coal204,43549.7%
Lignite6,6201.6%
Gas24,8246.1%
Diesel5890.1%
Total Fossil Fuel2,36,46957.4 %
Total Non-Fossil Fuel175,18042.5%
Total Installed Capacity(Fossil Fuel & Non-Fossil Fuel)4,11,649100%

The above figures clearly indicate that coal-based power projects would have the lion’s share of energy mix and the situation is unlikely to change anytime soon.

To reduce the dependence on import of fossil fuel and reduce the domestic consumption of fossil fuel , the Government of India has taken several steps, particularly keeping in view that the domestic production of crude oil and natural gas will not increase in India significantly and India has to depend heavily on domestic coal production for energy source.

Government strategy broadly consists of promoting electric vehicles , boosting the production of wind and solar power , blending of ethanol with petrol and promoting green hydrogen economy. Solar and wind power production depend on seasonal factors and capacity utilisation would be low. Green hydrogen technology for large scale commercial production at economic level is still in development stage. Whatever work that has been done so far to develop green hydrogen economy is in experimental stage and, at the present juncture, it would be difficult to predict about the ultimate development of green hydrogen economy at required level and economy of scale.

Obviously, the above strategies would not be adequate to reach the net zero emission target of Government of India and at best , these strategies can only contribute to reduce the growth rate in the consumption of fossil fuel in India.

Under the circumstances, achieving the zero net emission target by India can be justifiably termed as Utopian expectation.

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The Debt Ceiling Debate Is a Massive Deception Against the Public

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Future historians will likely look back at the debt ceiling rituals being reenacted these days with a frustrated shaking of their heads. That otherwise reasonable people would be so readily deceived raises the question that will provoke those historians: How could this happen?

The U.S. Congress has imposed successive ceilings on the national debt, each one higher than the last. Ceilings were intended to limit the amount of federal borrowing. But the same U.S. Congress so managed its taxing and spending that it created ever more excesses of spending over tax revenues (deficits). Those excesses required borrowing to cover them. The borrowings accumulated to hit successive ceilings. A highly political ritual of threats and counterthreats accompanied each rise of the ceiling required by the need to borrow to finance deficits.

It is elementary economics to note that if Congress raised more taxes or cut federal spending—or both—there would be no need to borrow and thus no ceiling on borrowing to worry about. The ceiling would become irrelevant or merely symbolic. Further, if taxes were raised enough and spending cut enough, the existing U.S. national debt could be reduced. That situation has happened occasionally in U.S. history.

The real issue then is that when borrowing approaches any ceiling, the policy choices are these three: raise the ceiling (to borrow more), raise taxes, or cut spending. Of course, combinations of them would also be possible.

In contrast to this reality, U.S. politics deceives by constricting its debate. Politicians, the mainstream media, and academics simply omit—basically by refusing to admit or consider—tax increases. The GOP demands spending cuts or else it will block raising the ceiling. The Democrats insist that raising the ceiling is the better choice than cutting spending. Democrats threaten to blame the GOP for the consequences of not raising the debt ceiling. They paint those consequences in lurid colors depicting U.S. bondholders denied interest or repayment, Social Security recipients denied their pensions, and government employees denied their wages. The unspoken agreement between the two major parties is to omit any serious discussion of raising taxes to avoid hitting the debt ceiling. That omission entails deception.

Here are some tax increases that could help solve the problem by avoiding any need to raise the debt ceiling. The social security tax could be applied to all wage and salary incomes, not only those of $160,000 or less as is now the case. The social security tax could be applied to nonwage income such as interest dividends, capital gains, and rents. The corporate profits tax could be raised back to what it was a few decades ago: near or above 50 percent versus the current 37 percent rate. A property tax could be levied on property that takes the form of stocks and bonds. The current property tax in the United States (levied mostly at the local level) includes land, houses, automobiles, and business inventories, while it excludes stocks and bonds. Perhaps that is because the richest 10 percent of Americans own roughly 80 percent of stocks and bonds. The current property tax system in the United States is very nice for that 10 percent. Another logical candidate is the federal estate tax which a few years ago exempted under $1 million of an estate from the tax, but now exempts over $12 million per person (over $25 million per couple). That exemption makes a mockery of the idea that all Americans start or live their lives on a level playing field where merit counts more than inheritance. The U.S. could and should go back from that tax giveaway to the richest. There are many more possible tax increases.

Of course, there are strengths and weaknesses entailed in raising every tax, positive and negative consequences. But the exact same is true of raising the debt ceiling and thereby increasing the U.S. national debt. Likewise cutting spending has its pluses and minuses in terms of pain and gain. There is no logical or reasonable basis for excluding tax increases from the national debate and discussion about raising the debt ceiling and thereby the national debt.

It is rather the shared political commitments of both major parties that require and motivate the exclusion. There is no reason for U.S. citizens to accept, tolerate, endorse, or otherwise validate the debt ceiling deception perpetrated against us.

Nor is the debt ceiling deception alone. The previous national debate over responding to inflation by having the Federal Reserve raise interest rates provides another quite parallel example. That debate proceeded by debating the pros and cons of interest rate increases as if no other anti-inflationary policy existed or was even worth mentioning. Once again elementary economics teaches that wage-price freezes and rationing have been used against inflations in the past—including in the United States—as alternatives to raising interest rates or alongside them. U.S. President Nixon in 1971 used wage-price freezes. U.S. President Roosevelt used rationing during World War II. But the government, Federal Reserve, major media, and major academic leaders carried on their recent policy debates as if those other anti-inflationary tools did not exist or were not worth including in the debate.

Wage-price freezes and rationing have their strengths and weaknesses—just as tax increases do—but once again the same applies to raising interest rates. No justification exists for proceeding as if alternative options are not there. The U.S. national debate over fighting inflation was deceptive in the same way that the debate over the debt ceiling is.

Nor is the deception any less if it is covered by a claim of “realism.” Those who grasp elementary economics enough to know that tax increases could “solve” the debt ceiling issue become complicit in the deception by invoking “realism.” Since the two major parties are jointly subservient to corporations and the rich, they rule out tax increases on them. It thus becomes “realistic” to exclude that option from the debt ceiling debate. What is best for corporations and the rich thus gets equated to what is “realistic.” It is worth remembering that throughout history ruling classes have discovered, to their shock and surprise, that the ruled can and often do quickly alter what is “realistic.”

The debt ceiling deceptions favor corporations over individuals and the richest individuals over the rest of us. In our thinking and speaking too, the nation’s class structure and class struggles exhibit their influential power. The mainstream debt ceiling debate deceives by lying by omission rather than commission.

 This article was produced by Economy for All, a project of the Independent Media Institute.

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Head of OPEC underlines its role in promoting oil market stability

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The Organization of Petroleum Exporting Countries (OPEC) plays a “vital role” in supporting oil market stability, the organization’s chief said on Thursday, in an apparent defense of surprise output cuts earlier this month.

Addressing a joint workshop with the International Energy Agency and the International Energy Forum, Haitham Al Ghais said OPEC and its oil-producing allies (OPEC+) “have been taking proactive and pre-emptive actions to stabilize the market based on detailed research and analysis”.

In early April, OPEC+ announced voluntary production cuts of 1.66 million barrels per day from May until the end of 2023, as “a precautionary measure aimed at supporting the stability of the oil market.”

The move prompted oil prices to rise above 80 U.S. dollars a barrel, after falling to 70 dollars a barrel in March. However, crude prices have in recent weeks pulled back to the level prior to the OPEC+ cuts, amid continued recession risks and demand concerns.

Regarding the financial side of the crude market, the OPEC chief said on Thursday that the organization has been “observing an accelerated trend in speculative trading, with investors and other players trading futures and options at faster rates, sometimes severely impacting market liquidity and hindering price discovery mechanisms.”

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More lenders could be at risk of failure in U.S. banking turmoil

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More U.S. regional banks could face loss of investor confidence and succumb to deterioration of business amid banking turmoil, as the First Republic Bank continues its struggle to find a way out of the current crisis.

First Republic Bank, a U.S. regional bank headquartered in San Francisco, regained attention after newly released data showed that clients pulled a staggering 102 billion U.S. dollars in deposits in the first quarter. The bank saw its shares plunging nearly 50 percent on Tuesday and 30 percent on Wednesday.

It’s reported that the bank is exploring to sell 50 billion to 100 billion U.S. dollars worth of assets at above-market rate to rebalance its books.

If the bank can’t secure a rescue deal in time, it’s likely to be put into receivership of the Federal Deposit Insurance Corporation (FDIC) following in the footsteps of Silicon Valley Bank and Signature Bank, which failed in March.

Despite First Republic Bank’s reported efforts to convince large banks to share a few billion U.S. dollars of loss, defending the bank from falling and paying more membership fees to the FDIC, some analysts remain skeptical about the effectiveness of this approach.

It’s a hard sell for First Republic Bank to offload some of its loans and securities at well above market rate, while investors’ biggest fear is that First Republic Bank goes into receivership of the FDIC, said David Chiaverini, managing director of equity research at Wedbush Securities.

It’s hard to imagine Jamie Dimon, chief executive officer (CEO) of J.P. Morgan, or Brian Moynihan, CEO of Bank of America, or Jane Fraser, CEO of Citigroup, each agree to buy 5 billion dollars mortgages and Treasuries at prices significantly above the market rates, said Don Bilson, head of event-driven team at Gordon Haskett Research Advisors.

It’s becoming clearer each day that the First Republic Bank is toasted and the only question is whether the FDIC moves in before or during the weekend, said Bilson in a research note on Wednesday.

Moreover, more regional banks, in the event of a run on deposits, could be at risk of failure and could be acquired by big ones in the fallout of the ongoing banking turmoil.

A recent research, done by economists at several U.S. universities at the request of The New York Times, showed that the failures of Silicon Valley Bank and Signature Bank have continuing potential for widespread damage to the entire banking system, which has seen many banks’ financial positions deteriorate as the U.S. Federal Reserve has raised interest rates to tame inflation.

Moody’s Investor Services recently downgraded 11 U.S. regional banks including Zions Bancorporation, U.S. Bank and Western Alliance Bank, among others.

U.S. banking turmoil is not over yet, and it’s expected that a large-scale restructuring would take place in the U.S. banking sector, said Tianyang Wang, associate professor in the Department of Finance and Real Estate at Colorado State University.

Many medium-sized and small banks won’t survive the loss of deposits and some of them have to be acquired by big banks at low prices, said Wang during a recent webinar.

U.S. banks are paying more to hold on to deposits, setting aside more reserves for potential loan losses in the event of a potential recession, and are now more focused on building capital rather than returning it to shareholders in the form of dividends and buybacks, said a research note by Swiss banking giant UBS.

The highly anticipated Q1 results from U.S. banks did not raise any new red flags about stresses in the banking system, largely putting to rest concerns about systemic risks, said the UBS.

The UBS said it remains least preferred on financials stocks and continues to expect guidance and estimates to trend lower in the coming quarters as deposit pricing issues become more apparent and as the economy weakens.

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What are some ways Sri Lanka can capitalise on its wealth opportunities?

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One of the easiest ways is to cut expenditure. It is within the power of Sri Lanka’s status as an island nation in the middle of the Indian Ocean. Put simply, it must capitalise on wealth opportunities given our geography, our knowledge and our experience.

Researchers maintain we have not effectively used the pristine culture and traditions of our island in the most vital need of recovery from debt. Development efforts they complain are not mindful of our heritage. We need to ensure engagement in specialist focus areas.

Have we missed the boat or is it that we want to imitate the West, in living beyond our means? What are some ways that we can focus in areas to help us propel economic development in order to reduce our debt?

Here I list some of the focus areas in our attempt at resource mobilisation.

  1. First and foremost, we need to mobilise our tax revenue.
  2. Facilitate access to concessional finance for new investment.
  3. Direct more attention to private investment.
  4. Reduce remittance cost of migrant Sri Lankan labour.
  5. Effectively train people to manage our debt.
  6. Curb illicit financial flows.
  7. Capacity building.
  8. Promote digitalisation.

Can we immediately address our needs before resource mobilisation?

We have not addressed the importance of “Risk Management”.

We are prone to nature’s risks like flooding, landslides, disruption to coastal flooding,

availability of fresh and drinking water, agricultural production and biodiversity. Need,

I say more, about man’s share of the environment with the animal kingdom, or the less spoken about accidents on roads and highways, due to negligence of man.

Having a Disaster Management Ministry or Department is not sufficient? We have an urgent need to plot the path of large scale disasters of the future and have plan A ,B and C. These large scale disasters lead to serious loss of life, to damage to infrastructure that sets back our incremental developmental process and our way out of debt?

Natural disasters cannot be prevented but an advance plan or programme of risk management has to be effectively managed. Investment in the present will ensure fewer resources are required in the future to respond to such unplanned disasters? In short, we need risk reduction measures as part of strategy of development.

We need more than risk management, we need to bolster our resilience to economic shocks, like what we have recently economically experienced? This is particularly significant on our utter dependence on imports of many essentials, of food and materials which we have grown accustomed. Our disproportionate reliance on tourism and exports of our planation commodities is well known. However, what is not well known is the captive market of women workers.

Women form part and parcel of casual or seasonal jobs in the tourist trade and migrant work.  They are left without safety nets given the informal nature of work and especially without any or much social protection.

The high cost of sending remittances from abroad limits their potential to contribute to sustainable development. The Government must have a plan, a commitment to reduce transaction costs for migrant remittances to less than 3%. It is prohibitive as the market is trading at 10% at present? Need I say, technological advancements can reduce transaction costs? Setting up “Fintech” businesses will greatly facilitate transfer operations and reduce costs?

Most of all we need not only mobilise private investment in “Sri Lanka Inc” but ensure these resources are aligned to the country’s development objectives.

I would suggest we need to levy a “Special tax for compensatory claims for Women undergoing poverty”. This is gender equality in a sense.

Further, our greatest asset is the use of our geographical location in the Indian Ocean. The strength of the maritime transportation system, such as maritime tourism, fisheries and maritime piracy prevention has just been realised, as a wealth opportunity. We need to promote sustainable coastal shipping, rather than overcrowded roads and railways. This service has the benefit of the development of low carbon, cost effective and cheaper coastal transport systems.

A feature that has been ignored up to now is the “exploration” of the untapped reserves of deep seabed minerals, offshore oil/or gas platforms, fish stocks, marine algae. We have not explored our large coastal shelf in the Indian Ocean. This is our opportunity for economic expansion.

It must be noted that these opportunities must be exploited responsibly in a way that protects the environment and man and promotes inclusion and sustainable growth, not greedy exploitation?  It not only requires significant financing but responsible use of the ocean surround. There is investment potential, but it has not been researched?

 Last but no way the least, public expenditure management has been lacking and now is vital. Strong public expenditure management goes beyond conventional government budgeting. Primarily forecasting future needs, a research based budgetary alignment of finances to Sri Lanka development Goals is paramount.

What are our national development priorities? “We desperately need Capital Building, Knowledge Exchange and Technological Transfer, if we are to manage our debt burden within a reasonable time frame for the benefit of our people, our future generation.  

We need all the resources available to us at present to clear our inability to resolve our dependence on hand outs? Resilience involves the ability to recover and rebound from challenges and setbacks. Can we bounce back! Yes we can?

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Chile’s President Announces Plan to Nationalize Lithium Industry

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Chile’s President Gabriel Boric, in a televised address to the nation on April 20, announced his plan to nationalize the country’s lithium industry to boost the economy and protect the environment.

Boric stated that his national lithium policy includes the creation of a state-owned company that will eventually take control of the country’s lithium mining sector from private industry giants.

Chile has one of the world’s largest lithium reserves and is the world’s second-largest producer of the metal after Australia. Albemarle and Sociedad Química y Minera de Chile (SQM), the world’s number one and number two lithium suppliers, respectively, are the two companies that currently hold licenses for lithium exploration, mining, and exploitation in the Atacama salt flat in the north of Chile. SQM’s contract is set to expire in 2030, and Albemarle’s in 2043.

Lithium is in high demand worldwide for the manufacture of batteries. Its demand is predicted to increase as much as 40-fold by 2040 due to the global energy transition. Latin America will play a key role in this shift. According to the United Nations Development Programme (UNDP), the region is home to an estimated 60 percent of the identified lithium reserves globally.

The head of state added that the plan includes encouraging the use of new technologies to minimize the impacts of mining on ecosystems and promoting research through a salt flat protection network.

President Boric said that future lithium exploration would be undertaken with the participation of all Indigenous communities residing near the extraction zones and reliant on local water basins for their livelihoods.

from the Peoples Dispatch / Globetrotter News Service

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IMF urges tighter fiscal policy to help tame inflation

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The International Monetary Fund (IMF) on Wednesday urged fiscal policymakers to adopt tighter fiscal policies to help central banks fight inflation.

“Amid high inflation, tightening financing conditions, and elevated debt, policymakers should prioritize keeping fiscal policy consistent with central bank policies to promote price and financial stability,” the IMF said in a blog as it released its latest Fiscal Monitor.

The report argued that many countries will need a tight fiscal stance to support the ongoing disinflation process — especially if high inflation proves more persistent.

“Tighter fiscal policy would allow central banks to increase interest rates by less than they otherwise would, which would help contain borrowing costs for governments and keep financial vulnerabilities in check,” said the blog, authored by IMF economist Francesca Caselli and her colleagues.

Meanwhile, the IMF noted that tighter fiscal policies require “better targeted safety nets to protect the most vulnerable households,” including addressing food insecurity, while containing overall spending growth.

According to the newly released Fiscal Monitor, following 2020’s historic surge in public debt to nearly 100 percent of gross domestic product (GDP) because of economic contraction and massive government support, fiscal deficits have since declined.

In the last two years, global debt posted the steepest decline in decades and stood at 92 percent of GDP at the end of last year, which is still about 8 percentage points above pre-pandemic projections.

“Reducing debt vulnerabilities and rebuilding fiscal buffers over time is an overriding priority,” the blog noted. In low-income developing economies, higher borrowing costs are also weighing on public finances, with 39 countries already in or near debt distress.

The IMF called on policymakers to step up efforts to develop “credible risk-based fiscal frameworks” that reduce debt vulnerabilities over time and build up the necessary room to handle future shocks.

Noting that low-income countries face “particularly severe challenges,” the IMF said international cooperation is “crucial” to helping these countries resolve unsustainable debt burdens in an orderly and timely manner.

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