Arvind's Newsletter

1.Belt and Road Initiative to be extended to Afghanistan ? The Taliban agreed with China and Pakistan to extend the Belt and Road Initiative to Afghanistan, potentially drawing in billions of dollars to fund infrastructure projects in the sanctions-hit country reported Bloomberg. Given the problems CPEC is having in Pakistan and the debt trap it has created in several other countries this will be worth watching. How China manages the wily Taliban will be interesting.

China’s foreign minister Qin Gang held talks in Pakistan with Afghanistan’s acting foreign minister Amir Khan Muttaqi and his Pakistan counterpart Bilawal Bhutto Zardari as part of the China-Pakistan-Afghanistan trilateral foreign ministers’ dialogue.

The trio discussed security and trade while Afghanistan also said it “hopes to strengthen co-operation with China in . . . infrastructure development within the framework of the Belt and Road Initiative”, according to China’s foreign ministry. Since ousting the Nato-backed government in 2021 after two decades of war, the Taliban have courted global powers including China and Russia for investment to shore up the crumbling economy and ease the regime’s international isolation.

2.Berkshire CEO Warren Buffett, 92, holds the annual “Woodstock for Capitalists” in his hometown every year to discuss his company’s performance and share his thoughts on timely economic issues with tens of thousands of fans in attendance.

Here are the highlights.

On the regional banking crisis: Buffett bashed leaders at the banks that failed this spring (First Republic, SVB, etc.), saying they “should suffer” and face “punishment.” But he also blamed the “totally crazy” bank regulations that incentivise bad behaviour and “very poor” messaging around the debacle from politicians and the media. Buffett thinks the government was right to intervene to protect SVB depositors, claiming, “It would have been catastrophic” otherwise.

On the status of the dollar: “We are the reserve currency. I see no option for any other currency to be the reserve currency,” Buffett said. He called the notion of bitcoin or other tokens dethroning the dollar a “joke.”

On Berkshire’s investment in Apple: The value of Berkshire’s stake in Apple has ballooned to $151 billion, amounting to nearly half the value of its entire stock portfolio. “It just happens to be a better business than any we own,” Buffett said.

On living your best life: “You should write your obituary and then try to figure out how to live up to it,” Buffett said. “It’s not that complicated.”

3. The Cholas — Beyond Ponniyin Selvan 2

   Beyond the movie, there are a number of reasons why the Cholas matter writes NS Ramnath of Founding Fuel Publishing, which is one of my favourite blogs. He has researched how we can follow the Chola trail and get a deeper experience of what you saw in the movie. This one rabbit hole I am going to burrow. Its is long read buy to make it reader friendly he has written it such that you can approach it at three levels:

   • as armchair enthusiasts, if you want to get a deeper experience of what you saw in the movie;

   • as amateur explorers, if you are into travel and feel like breathing the Chola air;

   • as erudite mavens, if you want to get into the Chola rabbit hole.

4.Why dollar still reigns supreme opines economist Vivek Kaul in the Mint.

“Every few years, doubts are raised on whether the US dollar will continue to be the premier international currency or lose steam. 2023 seems to be another such year when questions are being asked.

Has de-dollarization started? Will the dollar continue to be the main currency in which countries hold their foreign exchange reserves and carry out international trade? Will it continue to be the main currency in which foreign exchange transactions are carried out and cross-border loans are given?

While some chinks seem to have appeared in the dollar’s armour, it is safe to say that there is still no alternative. In this piece, we will try and understand why that is the case.” Read on. Long Read.

Some excerpts :

As of December 2022, more than 58% of the global foreign exchange reserves were in dollars. Now, if we want to build a case of the world moving away from the dollar, we can say that this proportion in 1999 stood at more than 70% and has come down since then. If we want to state the opposite, we can say that in 1995, 59% of foreign exchange reserves were in dollars and were at a similar 58% in December.

The nuanced proposition is that the world is moving away from the dollar, but at a very slow pace. At the same time, no other currency seems to be emerging as a challenge. 

A chink in the dollar’s armoury is the fact that Saudi Arabia seems to be looking to gradually move away from pricing oil in dollars. Also, the US is no longer dependent on Saudi oil like it was in the past, having become a net-oil exporter. So, in that sense, the security guarantee to the ruling clan of the Al-Sauds might not be as important as it was in the past.

As of December, only 2.7% of global foreign exchange reserves were in the renminbi.

Further, as the Reuters reports, renminbi’s “share of global payments is merely 2.5%, and tiny compared with US dollar’s 39.4% and euro’s 35.8%, according to SWIFT."

China cannot let money move freely primarily because the Chinese growth model depends on the government channelizing massive domestic savings towards huge infrastructure projects. Allowing money to move freely runs the risk of Chinese domestic savings moving out of China.

Clearly, while the political rhetoric around the renminbi might be strong, it’s nowhere near becoming the premier international currency.”

5 Finally an article from the World Economic Forum focussing on jobs likely to be lost (and created) because of AI.

• Around 40% of all working hours could be impacted by AI large language models (LLMs) such as ChatGPT-4, says a report from Accenture.

• Many clerical or secretarial roles are seen as likely to decline quickly because of AI, according to the World Economic Forum's Future of Jobs Report 2023.

• But roles for AI and machine learning specialists, data analysts and scientists, and digital transformation specialists are expected to grow rapidly, the report adds.

• Re-skilling people to use AI effectively will be the key to companies being able to use the technology successfully, says Accenture.

Another study this time by Open AI with a slightly different approach.The OpenAI working paper specifically examined the U.S. industries and jobs most “exposed” to large language models like GPT, which the chatbot ChatGPT operates on

Key to the paper is the definition of what “exposed” actually means:

“A proxy for potential economic impact without distinguishing between labor-augmenting or labor-displacing effects.” – OpenAI

Thus, the results include both jobs where humans could possibly use AI to optimize their work, along with jobs that could potentially be automated altogether.

OpenAI found that 80% of the American workforce belonged to an occupation where at least 10% of their tasks can be done (or aided) by AI. One-fifth of the workforce belonged to an occupation where 50% of work tasks would be impacted by artificial intelligence.