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India Insider: Growth Without Development an Inequality Trap

India Insider: Growth Without Development an Inequality Trap

An India and Latin America Comparison

India’s strong headline growth reflects a rapid expansion of aggregate output. Yet this growth often coexists with weak job creation, uneven human capital formation, and persistent inequality. This coexistence is not a temporary anomaly. It reflects a deeper political & economic structure in which inequality itself constrains development, rather than merely emerging as a byproduct of slow growth.

This mechanism is similar to Latin America. In unequal political economies, rising income concentration encourages elites to exit from public systems like education, healthcare, transport, and social insurance. Once affluent groups no longer depend on public provision, political incentives to strengthen these systems weaken fiscal capacity erodes, public services deteriorate, and inequality becomes self-reinforcing.

Latin America’s experience illustrates this dynamic clearly. Despite periods of high growth driven by industrialization, commodity booms, or financial liberalization, many countries failed to build universal public systems. Elites relied on private schools, private healthcare, and offshore financial arrangements, while the majority depended on chronically underfunded public institutions. The result was a narrow tax base, weak state capacity, and growth that was volatile and socially shallow.

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Figure concept adapted from book, “The cost of Inequality in Latin America” by Diego Sanchez-Ancochea

India increasingly shows signs of a similar trajectory. Public spending on health remains around 1.2 – 1.4 percent of GDP. Government expenditures on education is around 3 percent of GDP, which is low not just by OECD standards, but comparative to many middle income Latin American economies. Out of pocket healthcare costs account for roughly 45 – 50 percent of total health spending in India, among the highest shares globally. These figures point to a systematic private substitution over public provisions, a hallmark of elite exit.

Implications of Elite Leaving Public Systems

Withdrawal from public systems has direct implications for growth quality. When education and healthcare remain uneven, the diffusion of skills and productivity across the workforce is limited. Growth then concentrates in capital intensive or skill intensive enclaves, while large segments of the labor force remain trapped in low productivity informal employment. India’s employment elasticity of growth has remained structurally low, estimated at below 0.2 in recent decades, meaning that even high output growth generates relatively few jobs.

This structural weakness is reinforced by the nature of Indian capitalism. Like much of Latin America, India’s growth model rewards scale, access, and regulatory navigation more than technological risk taking. Firms that can manage land acquisition, compliance complexity, market concentration, and political connections earn higher returns than those that invest in frontier innovation. Private investment in research and development remains modest: total R&D spending in India is around 0.6 – 0.7 percent of GDP, with a particularly weak contribution from the private sector. By contrast, East Asian economies that achieved solid employment growth invested 2.0 – 4.0 percent of GDP in R&D during their catch up phases.

This outcome produces poor job growth and entrenched dual labor markets, which is also another Latin American hallmark. A relatively small formal sector benefits from capital strengthening and productivity gains, but the majority of workers remain in informal employment with stagnant wages and weak social protection. Gradually this weakens domestic demand and increases reliance on credit, exports, or asset inflation to sustain growth. Latin America’s history also shows that such growth patterns are inherently fragile.

India Vulnerability and Structural Risks

Narrow tax bases limit counter-cyclical policies. High inequality constrains mass consumption. Credit expansion often substitutes for income growth, increasing financial vulnerability. India has thus far avoided repeated balance of payments or sovereign debt crises, but the underlying structural risks look similar to Latin America. Growth looks strong on paper, yet remains vulnerable to shocks and has been slow to translate into broad based societal gains.

India differs from economies that have escaped their inequality traps, like East Asia and Northern Europe, because of poor development sequencing. These successful regional giants expanded universal public education, healthcare, and social insurance early, before inequality became politically entrenched. Elite dependence on public systems sustained fiscal capacity and productivity diffusion, allowing growth to create gainful employment.

India’s Social and Economic Dualism

India’s economic liberalization grew before consolidating universal public provisions. As growth has accelerated, inequality has widened and the exit of elites has deepened from public centers. An opportunity to create inclusive institutions during this early growth phase is missing for parts of the society.

The implication is clear. High growth alone does not guarantee development. When inequality weakens public systems and limits fiscal capacity, this discourages technological risk taking and produces inadequate job growth. Output expansion becomes narrow and periodically fragile. Latin America’s experience is a warning. Without building strong public institutions and reshaping incentives toward broad based innovation, India risks portraying impressive headline growth while vast disparity persists.

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U.S National Security, Part 2: Regional Alliances – Europe

U.S National Security, Part 2: Regional Alliances - Europe

Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 25th of December via The Angry Demagogue.

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As we continue our tour of the administration’s National Security Strategy we will stay with “part III: What Are America’s Available Means to Get What We Want?” and move to the sixth bullet point: “A broad network of alliances, with treaty allies and partners in the world’s most strategically important regions” and work through the important regions that the strategy documents – Asia, Europe, the Mideast and Africa. For good or for bad we will need to split these regions up since the key point is forming coalitions that can handle their actual region. Sweden can’t be part of a coalition to protect Italy’s interests in the Mediterranean and Japan won’t be protecting Singapore.

Some U.S allied countries, like Australia, Israel and India will be involved in multiple regions helping lead alliances in all areas important to them. With that in mind we will point out the first mistake of the discussion on regions and that is Europe. We will suggest something here that would not usually come from the mouth of a hawk and pessimist and that is that NATO has no real mission and needs to be replaced by a series of alliances that make more sense. While the fear during the Cold War was a Warsaw Pact ground invasion into Germany and beyond which would have required the totality of American and European forces, Europe now is facing a Russia that could not conquer Ukraine in nearly four years of war. That is not to say that Russia is not to be feared only that each part of Europe needs to ally to face a Russian onslaught in its own theatre.

Italy is not going to send troops to Sweden to prevent an attack and Norway won’t be helping Greece in any fight. Turkey is a country that other NATO countries fear more than trust, especially regarding Russia.

In short, NATO needs to be broken up into different alliances where each country will be allied with countries whose fall would affect its national security. The United States can either be a signatory to these alliances or it can decide how involved it wants to get in any conflagration depending on its own interests at that time. It can decide to position ground troops in the countries, supply air cover or, as in the 12-day war between Israel and Iran, help with missile defense and in providing the final blow with weapons only America has. Or – it can decide that it will never participate. One hopes that that won’t happen, but each alliance will need to be ready to fight on its own.

We can include France and the U.K as large countries with advanced armed forces as allies to all of these alliances. France certainly can contribute air power to each of the alliances that are faced against Russia. As for the U.K, it is difficult to know where that country is going but its navy and air force are still powerful.

Today we will deal with north, central and western Europe.

The Baltic Alliance

This would be an alliance that includes Poland, Germany, Sweden, Finland, Norway, Denmark, Latvia, Lithuania and Estonia and would provide cover for land, air and naval battles. Each of these countries, with the exception of Germany, has a border with Russia and all are on the Baltic Sea – a key waterway for them and for Russia.

An alliance of these countries would force them to concentrate on those areas necessary for their defense. An incursion, for example into Finland would force Poland to mass forces on its border with Russia and Belarus (Poland borders Russia in Kaliningrad which is separated from Russia proper by Lithuania) and Germany to move forces to Poland. All countries could also contribute ground forces to Finland as well as naval and air power.

The only thing missing is the lack of a nuclear umbrella. That is no small issue but can be dealt with by support or threats from France or the U.K.

The Atlantic Alliance

Aside from helping the Baltic Alliance, France and the U.K will have major responsibility along with the Netherlands for patrolling the North Atlantic and, with help from Portugal, and Spain the South Atlantic. As the Atlantic Ocean can be considered one of America’s seas, this alliance will need to have the close cooperation if not outright membership of the United States. Canada too, will need to be part of this alliance. We can include the increasingly important Arctic Ocean into this alliance’s responsibilities.

As we move towards the south Atlantic countries such as Morocco, can be included as well as other western African allies of the west. An alliance like that could encourage western African countries to abandon close security and economic ties with China and Russia. The “border” of this alliance would be that squiggly line in the middle of the Atlantic that separates the Eastern and Western hemispheres.

The Central European Alliance

We can look at the smaller central European countries that formed the heart of what was the Hapsburg Empire but are not front line countries bordering Russia – Romania, Hungary, Slovakia, Czech Republic, Austria, Serbia and Bulgaria – and we have an alliance that, backed by Germany, Poland and the United States, would create a further deterrence to Russian encroachment into Europe proper.

Where, do you ask does Ukraine fall in this European alliance structure? That answer will have to come from the major European powers in concert with the United States. Adding Ukraine to the Baltic alliance might be viewed as another attempt to NATO-ize them by the Russians. However, attaching them to the less threatening Central European Alliance of smaller countries might be the excuse and “victory” that Putin would need to end the war. But we are getting ahead of ourselves here. Ukraine is a problem that can only be solved if the West decides to actively join the fight against Russia (unlikely) or when Putin and Russia get tired of the fight and look for a way out that could allow them to claim victory (more likely than the former, but sadly, a long way off).

The Administration’s concentration on regions and how certain countries can become leaders in support of western and American interests is correct – but the breakdown of the regions has to go beyond the post WWII world. The place of America in the post-cold war world, with a China that wants to challenge America’s economic and military interests and leadership needs to break down old alliances into more manageable and logical pieces.

The wild card in all of this is, of course, the will of the European powers to take their own defense seriously. The Baltic Alliance we spoke about seems to be filled with countries that understand the threat from Russia, but do they recognize the threat to them from the alignment, the Axis if you will, of Russia, Iran, North Korea and China? And of more importance have they yet come to understand the threat to their countries, as they know them, from open immigration and from their own abhorrence of families? The former is something only the governments can handle, the latter though, must come from the people themselves.

A whole generation (or two in many instances) of Europeans have grown up not only as “only children” but in families that have no aunts and no uncles, no cousins and only very elderly grandparents, if that. They have grown up in other words without families. Will the young generation see the importance of families to themselves and their countries or will they continue the nihilistic lives that they parents have “sanctified”? Religious institutions, too will have a major role in this challenge. No amount of “parental leave” and childcare subsidies will convince the young to marry and have children – will only come from a change in the culture. Is Europe up to it?

Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.

You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/ 

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U.S National Security: USD Reserve Currency Importance

U.S National Security: USD Reserve Currency Importance

Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 23rd of December via The Angry Demagogue.

We would like to start going through the U.S administration’s National Security Strategy released last month. There is a lot in there – much of it the same as in past administrations and much of it different. The tone of course is full Trump and while the introductory parts try to make it into a revolutionary document it does in fact build upon much of what has been American foreign policy for decades. One thing it most certainly gets right is that American foreign policy since the end of the Cold War has not found its compass. From a unitary world to one dependent upon global organizations, from a sharing of goals with western Europe to a pivot to Asia, from the war on terror and the middle east to Russia-Ukraine, the United States has struggled to find its way in the post-Cold War world.

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We however will concentrate today on one aspect of the strategy, the third bullet in part III – “What Are America’s Available Means to Get What We Want?”. The third bullet point speaks of America having “The world’s leading financial system and capital markets, including the Dollar’s global reserve currency status” – a point that no one with any knowledge of global capital markets can not accept. The end of the bullet point – the Dollar’s global reserve currency status – is the most important because it underscores America’s leadership and essentially allows the United States of America to finance its military and its welfare state. The U.S Dollar as the “reserve currency” means that nearly all the world’s goods are quoted and therefore sold in Dollars.

Why is that important to the United States? Because the U.S government depends on its ability to issue Treasury bonds and bills at will – something no other government can do. It can do this because for another country to buy oil or copper or titanium or corn or soybeans from a country that is not their own– they need access to Dollars. Saudi Arabia and the other gulf states quote the price of oil in U.S Dollars and demand payment in U.S Dollars. The Saudis can deposit those Dollars in American banks or in what is called Eurodollar deposits in foreign banks (there are some 13 trillion Dollars in Eurodollar accounts globally). The Eurodollar accounts are essentially promises by the bank to give U.S Dollars to the holder when he makes a withdrawal. This strengthens the U.S capital markets and allows investors to have better and more investment choices. It is not only America’s often superior companies that bring profits to 401k’s and pension funds but the liquidity and vastness of America’s capital markets that can list domestic and foreign corporations. The reserve currency leading to the advanced capital markets allows the world – and America – to do this.

The U.S Treasury market is so liquid because every country needs Dollars in order to trade. They need to have enough dollar reserves since no one actually wants their own currency. In Israel, for example, local gas companies cannot buy oil with Israeli Shekels, since what will Azerbaijan, for example, do with them? There are only so many products that Israel can sell them. They need Dollars so that they are free to buy other commodities or other products.

The U.S Dollar as a reserve currency also is a break on inflation since the price of oil and other commodities is always in U.S Dollars. A weak or strong U.S Dollar influences the inflation rate in non-USD countries. A weak Israeli Shekel, South African Rand or Chinese Yuan does not influence the price of gasoline in the United States.

In short – as the Trump Administration understands well, the dollar as a reserve currency is a luxury the U.S cannot give up. The lack of the USD as a reserve currency could cause the Dollar to collapse and along with it the price of U.S Treasuries. As UST prices drop, their yields will rise and the cost of financing the U.S government will make interest payments on debt to rise well beyond its already absurd figure of over 4% of GDP – while debt itself is 120% of GDP. The U.S government currently pays over $1 trillion in debt service (interest payments on its bonds and bills). By contrast, the U.S defense budget for 2024 was $836 billion (about 3.3% of GDP).

We need to ask ourselves what can challenge the USD as the reserve currency and what could happen that would encourage the world to change? While the E.U had dreams of making the Euro an alternative reserve currency, the lack of growth in the E.U’s economy and population have put that dream to rest. The only other country that could theoretically replace the United States as the global economic go to country could be China. While in the long run, China’s lack of openness would probably mean that the Yuan would not last long as the reserve currency, that does not mean that they couldn’t jolt the global economy just enough to force it to use the Yuan to buy oil and other commodities.

China is already cornering the market on rare earth minerals and it making inroads in Africa where it mines all sorts of commodities from gold to copper to platinum and so many others (Africa has about 30% of global mineral reserves). That in itself is not enough to rock the global markets and cause a change in how the world does business.

Oil though, is that one thing that could allow China to challenge the USD as the reserve currency, even if it just presents the Yuan as an alternative.

How could that happen?

A Chinese takeover of Taiwan, by whatever means it uses would give the Chinese Communist Party control not only of the South China Sea but also allow its noisier and inferior (to America’s) submarine fleet to enter the Pacific and patrol it freely. The Chinese Navy, with a base on the “other” side of Taiwan would give it control of the north-south sea lanes that Japan and South Korea are dependent upon. Essentially, Chinese control of Taiwan would put Japan, South Korea, Vietnam and the Philippines at the mercy of the Chinese Navy. China could blockade these countries but that would be an act of war and then involve the navies of those countries and possibly the United States. It would affect the global economy negatively but it would not cause a change in world’s reserve currency. But, what if China works out a deal with Saudi Arabia to quote and sell their oil in Yuan (or the Chinese Petro-Yuan it wants to create) and then tells these countries, especially industrial powerhouses and energy poor Japan and South Korea that it will allow the passage of oil as long as they purchase the oil in Yuan?

Russia is already trying to get India to pay it for its oil in Yuan, to some success. Adding economies the size of Japan and South Korea would mean that any country that wants to buy oil could buy it in Yuan instead of Dollars. Once in Yuan, these countries would need to use the Yuan to buy Chinese products, deposit cash there and buy Chinese treasury bills. If China were to combine that with demands that all chips made in Taiwan also be sold in Yuan, the U.S Dollar would suddenly and forcefully no longer be the only reserve currency in the world.

Obviously, the way to stop this from happening is by stating outright that the United States will not tolerate a Chinese takeover of Taiwan. It is true, that the Strategy claims that the US “will also maintain our longstanding declaratory policy on Taiwan, meaning that the United States does not support any unilateral change to the status quo in the Taiwan Strait” but in practice the administration has criticized Japan’s tough talk on China instead of leaving it be. A strong silence on Prime Minister Takaichi’s remarks on China would have served the purpose of keeping the status quo more than telling her to tone down her rhetoric. There is a strong “no intervention ever” strain in the country and the President must make the case that that is not an option if the United States wants to maintain its leadership position, way of life and general prosperity.

In short, the threat to the Dollar as the reserve currency heads right through Taiwan. For those who think that the investment the U.S makes in keeping the Dollar where it is, is too expensive, just think of going on vacation and having the change to Yuan before you leave the country, wondering how much to change because of currency fluctuation and how much fun it is to return with hundreds of dollars in banknotes that you can’t use. Imagine your credit card bill on such travels and wondering how you went 15% over budget but didn’t get anything extra for it. Now imagine the national economy working that way.

Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.

You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/ 

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India Insider: The 8.2% Growth Mirage Needs a Reality Check

India Insider: The 8.2% Growth Mirage Needs a Reality Check

India is celebrating the 8.2% real GDP growth result for Q2 FY26, as if it has entered a new economic orbit. Politicians are claiming victory and media is packaging optimism. The narrative is simple: India cannot be stopped. But once we move beyond the headline, the number loses credibility. It rests on a broken deflator, a statistical gap that no one can trace, and data architecture that doesn’t consider half the economy. This is not a story of unstoppable growth. This is a story of statistical convenience.

The Production–Expenditure Divide

On the production side, the numbers look heroic. Manufacturing allegedly grew 9.1%, and financial and professional services posted more than 10% growth. Corporate India looks like it is flying. But when the same activity is measured from the expenditure side – who actually spends this income – the story weakens.

Private consumption at 7.9% is respectable, not outstanding. The real shock is government consumption, which contracted by 2.7%. A shrinking government should normally mute growth, not accelerate it. Yet the GDP shoots up. How does that make sense? It doesn’t unless the number is being propped up somewhere else – and this is the case.

₹1.63 Lakh Crore of ‘Unknown Growth’

GDP includes a category called ‘discrepancy’. It exists because the two methods – production and expenditure – never perfectly align. The discrepancy stands at ₹1.63 lakh crore ($18.2 Billion USD) which equates into roughly 3.3% of real GDP. That means a chunk of this 8.2% growth has no identifiable spender: No households. No firms. No government.

It is income without absorption. A statistical plug. When a number this large is called ‘discrepancy’, the headline becomes unreliable – suspicious. You cannot claim world beating growth when your own data admits it cannot explain where that growth came from.

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Chart via the National Statistical Office

The Deflator Illusion

The next distortion is the nominal vs real GDP gap. Nominal GDP is growing at 8.7% and real GDP at 8.2%. A gap of 0.5 percentage points implies inflation has almost vanished. Every Indian knows this is not true. Costs did not collapse. Food inflation has not disappeared.

The explanation is mechanical: India still uses the Wholesale Price Index (WPI) to deflate nominal output. Global commodity prices fell, WPI softened sharply, and that flattening pushed up the real number. In other words, GDP grew because the denominator fell, not because production surged.

This creates a fiscal problem. The Union Budget assumed 10.1% nominal growth. At 8.7%, tax buoyancy will weaken, deficit targets become more difficult, and next year’s fiscal capability shrinks. Real GDP does not pay the bills, Nominal GDP does.

The Informal Blind Spot

India still cannot measure its informal economy accurately. Nearly half of GDP and employment sits outside the formal system, yet the NSO uses formal sector proxies such as corporate balance sheets, GST data, and financial flows to estimate the rest of the economy. If a small business collapses and a corporate giant expands, the data shows a net gain, erasing distress at the bottom which means real economic circumstances are not portrayed accurately for Indian citizens.

Agriculture grew at 3.5%, but it still supports 46% of India’s workforce. That means growth is concentrated in capital intensive and balance-sheet heavy sectors, not into areas that put cash into rural hands. A booming Nifty Index via the stock market does not translate into household prosperity.

An Economy Measured with Old Tools

India continues to measure GDP using a 2011–12 base year, an era before UPI (Unified Payments Interface), before fintech credit, before e-commerce, before gig workforces, before the pandemic rewired supply chains and consumption patterns. India is living in a digital economy, but measuring activity with analog instruments.

A shift to a 2022–23 base year, plus replacing WPI with a Producer Price Index, may finally align the numbers realistically. But until then, headlines are running ahead of bona-fide measurements.

India’s 8.2% print is impressive, but growth estimates that don’t reflect grounded realities produce illusionary optics rather than useful insights. For India to strengthen fiscal and economic credibility, measurements must capture households, labor markets, and productivity, not solely corporate outputs. Policy cannot be shaped by statistical ambiguity, it requires transparency and trusted data.

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India Insider: Why a Deep Corporate Bond Market is Needed

India Insider: Why a Deep Corporate Bond Market is Needed

India’s corporate bond market remains small relative to the size and ambitions of its economy. This is often described as a regulatory shortcoming. In reality, it reflects a deeper structural choice: India’s financial system was built to channel savings through banks, not markets. That choice now imposes visible constraints on capital formation, governance, and risk pricing.

During the Covid-19 pandemic, several Indian companies including firms such as Arvind Fashions were forced to raise capital by diluting their equity in public markets. Equity issuance is not inherently wrong, especially during a crisis. However, businesses built on consumer brands, distribution networks, and long gestation cycles require patient, long term capital. Financing such models primarily through short term bank loans or repeated equity dilution creates a mismatch between the nature of the business and the nature of the capital supporting it.

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India Corporate Bond Comparison to the U.S 2024-25 Approximated Totals

In countries like the U.S, this gap is filled by intermediate forms of capital. Private equity firms often provide long duration funding through instruments such as mezzanine debt, while deep corporate bond markets allow companies to raise long term money aligned with their operating horizons. In India, the absence of such markets make corporate choose to either raise capital via short term debt that strains cash flows or equity dilution at unfavorable points in the cycle.

A corporate bond market also serves a broader purpose: governance and accountability. A Parliamentary Standing Committee report in 2022 noted that nearly ₹10 lakh crore ($110 Billion USD) of corporate bank loans were written off over the preceding five years. While write-offs do not automatically imply wrongdoing, they highlight a system in which credit losses are repeatedly absorbed by public sector balance sheets where the capital is often infused by taxpayers money. In bank dominated systems, credit assessment is periodic and opaque. Market discipline remains weak.

Traded securities impose a different standard. Michael Milken once observed that bond markets re-evaluate credit daily, not every six months. Prices respond immediately to new information. If sellers suddenly outnumber buyers, the market forces a reassessment of risk in real time. In effect, every trading day becomes a fresh credit decision.

This discipline is missing when loans remain locked within banks. A vibrant corporate bond market which is supported by securitization, secondary-market liquidity, and institutional investors would allow credit risk to be priced, transferred, and monitored continuously. It would expose stress early, rather than after losses have already been socialized.

Today, banks account for nearly 70 percent of financial intermediation in India. Fintech has begun to challenge this dominance, but largely in consumer and personal finance. For corporate and MSME (Micro, Small and Medium Enterprises) financing, long-term capital cannot come from apps or short duration loans, it must come from markets designed to price risk over time.

India’s corporate bond market will not look like America’s, nor does it need to. But without deeper liquidity, institutional participation, and price discovery, India will continue to build long term businesses on short-term money ,and bear the consequences when cycles turn.

(Notes: 1 USD = 90.58)

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Fed Today, Tmrw and Mid-Term with Changing of Guard

Fed Today, Tmrw and Mid-Term with Changing of Guard

The Federal Reserve will cut its Federal Funds Rate by 25 basis points in a handful of hours, that is unless they want to cause a major selling attack on Wall Street and pandemonium in Forex and gold. The Fed which spoke about uncertainty in last month’s FOMC Statement and utterly refused to give guidance about today’s decision, has had the ignition regarding an interest rate cut delivered with nearly 100% certainty because inflation for the moment remains tame.

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U.S Dollar Index One Year Chart as of 12th December 2025

Fed Chairman Jerome Powell will leave the Fed in May of 2026. This isn’t a subjective opinion, he is leaving because he is not going to be reappointed by the White House. President Trump has made it clear he wants a lower interest rate and that he believes the Fed has failed to be proactive. Given Trump’s propensity for saying outlandish things, he is not wrong about Powell’s overtly cautious posture. The Fed could have cut the Federal Funds Rate in the early summer and refused to initiate.

Financial institutions have factored the 25 basis point interest rate cut into Forex already. Again, unless if for some reason they want to initiate a massive selloff in the equity indices and cause the 10 Year Treasuries yields to rise like a wildfire, the Fed needs to cut today. Day traders need to understand the first couple of reactions following the FOMC Statement tonight should not be wagered upon without deep pockets and steel stomachs.

There are three more FOMC meetings scheduled for the Fed after today’s decision while Fed Chairman Jerome Powell remains in office. The 28th of January, the 18th of March and 29th of April are the listed FOMC Statement announcement dates, this before the June meeting which Jerome Powell will not helm. While some analysts strongly believe the Fed will find it difficult to cut interest rates early in 2026, the potential for a shift in sentiment and open disagreement regarding the Federal Funds Rate could turn intriguing in late January. If inflation remains steady via the Core PCE Price Index it would not be a shock to see another interest rate cut next month.

Caution has prevailed in Forex the past couple of months. Major currencies like the EUR and GBP have lingered within known ranges. Yes, the JPY has incrementally lost value due to BoJ policy. President Trump cannot make the Fed decide what to do, but he can certainly keep appointing folks who agree with his policies and approach to enterprise. If Powell does not outright say an interest rate cut is impossible for next month’s FOMC decision, U.S economic data that will be generated over the next handful of weeks could deliver enough impetus. Let’s keep in mind ladies and gentlemen that holiday trading will come into full force after next week’s price action.

The Fed’s borrowing rate essentially stands at 4.00% for the moment. After today’s rate decision the Fed Fund Rate should be at 3.75%. And for the moment there is little justification to not make the borrowing rate 3.50% in late January. As economic data presents itself now via the PCE Price index and CPI and PPI statistics, there is reason to believe a more proactive Fed is on the horizon as the pressure is turned up on Jerome Powell.

Perhaps nothing will happen in January, but if inflation remains tame not only will Jerome Powell be criticized by the White House, but he may also face a rather public debate from Fed members who do not agree with his cautious approach to interest rate policy. A weaker USD in Forex against many major currencies mid-term appears to be a real possibility. The ability of the EUR/USD to linger within a cautious middling range may be an indicator that financial institutions have built a mechanism which will allow them to become stronger buyers. Dangerous as it is to predict a timetable, the EUR/USD over 1.17000 would not be a surprise in the weeks to come – at least to me. Let’s see where behavioral sentiment takes us.

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India Insider: Why Russian Oil Should Be Treated Skeptically

India Insider: Why Russian Oil Should Be Treated Skeptically

As Russian President Vladimir Putin arrives in New Delhi for a bilateral summit, the mood in India’s capital is one of profound strategic tension. The core of the problem is India’s massive appetite for discounted Russian Crude Oil, which has shielded the economy from high energy prices but is now causing significant financial and geopolitical risks. This move comes at a time when India’s most important trade surpluses lies with the West, raising anxieties about U.S sanctions and shrinking strategic space.

Trapped Rupee Problem

Since the Ukraine war, Russia’s share of India’s Crude Oil imports has surged from under 2% to nearly 40%. This has simultaneously inflated India’s trade deficit with Russia to nearly $59 billion.

The transactions are largely settled in Indian Rupees (INR). Moscow has accumulated billions of Rupees in Indian banks. However, because the Rupee is not fully convertible on the global market, Russia has very limited ways to use this huge surplus within India. These billions of Rupees are essentially ‘trapped liquidity’ – a problem neither country can easily solve.

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India – Russia Bilateral Merchandise Trade Chart from 2017 – 2024

The Kremlin, meanwhile, is shifting its financial allegiance. It is preparing to issue Yuan denominated sovereign bonds, a decisive step that deepens its reliance on Beijing’s financial system amid a cut off from the Western financial system. This financial trajectory clearly signals the next logical step: Russia will inevitably demand that India begin paying for its oil shipments in Chinese Yuan (CNY).

Structural Risk of Holding Chinese Yuan

India has never been comfortable holding Chinese Yuan or settling trades in the currency. That’s partly strategic as New Delhi wants to protect its geopolitical autonomy and position itself as the democratic anchor of the Global South while staying closely aligned with the West.

But Russia’s financial plumbing is now increasingly routed through China. As the Kremlin becomes more deeply integrated into China’s banking and payments system, its dependence on the Yuan becomes structural. Moscow needs Yuan not only to service Chinese creditors, but also to pay for its expanding list of manufactured imports from China. The Ruble, being a largely non-convertible currency, simply cannot support this scale of trade.

For now, Russia-China trade is balanced enough because Beijing still buys large quantities of Russian energy. But this equilibrium can shift quickly. As the Ukraine war drags on and Moscow’s defense spending rises, the Kremlin will be forced to rely even more heavily on Chinese financing, Chinese goods, and ultimately the Yuan itself, tightening its economic dependency on Beijing.

When that moment arrives, the Reserve Bank of India (RBI) will be forced to accumulate Yuan as part of its Forex reserves to ensure the continued flow of oil. This decision, born of necessity, introduces a structural vulnerability into India’s financial system as the adoption of Yuan as a reserve currency subject to China’s capital controls.

Risks of Holding the Yuan

China may have both the onshore (CNY) and offshore (CNH) Yuan, but the currency is ultimately controlled by the PBOC, which makes it a risky reserve asset for India. In a crisis, Beijing’s capital controls could restrict liquidity and prevent the RBI from freely converting yuan into hard currency like the USD, effectively trapping India’s capital.

Beyond this financial rigidity, large Yuan holdings also expose India to CCP driven political risk, tying its external stability to China’s domestic decisions. And unlike the Dollar which can be deployed anywhere, Yuan reserves are usable mainly for transactions with China or countries in its financial orbit, sharply limiting India’s strategic and financial flexibility.

Strategic Win for Beijing

For Beijing, this shift delivers a double strategic win, cementing the Yuan as the dominant settlement currency across Eurasia especially among countries squeezed by Western sanctions and it allows the yuan to slip into India’s financial system indirectly, not through Chinese pressure but through Russia’s growing dependence on Chinese finance and India’s reliance on discounted Russian oil.

For Moscow, this is a reluctant compromise: giving up some monetary autonomy in exchange for necessary financial support from China.

For India, however, it introduces a new long term structural risk with a slow but steady Yuan encroachment into its trade and reserve system, operating alongside the dominant U.S Dollar. The oil corridor that was meant to offer an independent strategic opportunity for India is now becoming a channel which Beijing can strengthen its monetary footprint. In this complex triangle, India risks paying a dangerous tactical long-term price for its energy security.

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Digesting Holiday and Markets to Come as Fed Looms Next Week

Digesting Holiday and Markets to Come as Fed Looms Next Week

Day traders trying to gauge markets may be feeling a bit of angst for the moment. Always wanting to participate when record highs are being made in the stock markets, the S&P 500 and Nasdaq 100 remain under their respective apexes from late October and early November. Though the markets have produced gains recently, they have not come particularly easily for those who like to ride momentum waves. As always timeframes matter, it is often easier to make mistakes and be impatient when short-term wagers factor into decision making.

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S&P 500 Index Six Month Chart as of 2nd December 2025

Gold has done well the past couple of weeks, regaining its upwards traction, but also remains under its apex values. The Federal Reserve will release its FOMC interest rate decision on the 10th of December, and this is what many in the markets may be waiting for in order to make their last big bets for the year per speculative plays.

The Forex market like equities and commodities continue to provide choppy behavior. The ISM Manufacturing numbers from the U.S came in below expectations yesterday. Retail Sales data and Consumer Confidence numbers last week from the States came in below expectations too. There will be jobs statistics via the ADP report on Wednesday and an ISM Services figure. Thursday will see U.S weekly Unemployment Claims. Friday will provide a rather interesting clue for Forex traders and likely influence bond yields when the Core PCE Price Index reading is provided – which the Federal Reserve pays quite a bit of attention regarding their interest rate decisions. The Consumer Sentiment Preliminary University of Michigan data will also be seen on Friday.

As Tuesday starts, day traders should also beware that full market volumes will emerge, this after last week’s Thanksgiving holiday in the States and perhaps a slow return to offices yesterday. The markets will provide plenty of action over the next couple of weeks, before the inevitable Christmas and New Year’s trading doldrums begin.