Category: Equitymaster | Page 3

26 March, 2018

Corporates Responsible for More Than 80% of Bad Loans of Public Sector Banks

One of the points that we have been making regularly in our columns and Letters is that public sector banks should not be lending to corporates. And now we have found more data to back it.

In a written answer to a question raised in the Lok Sabha, the government provided data regarding the accumulated bad loans across different areas of lending. Bad loans are basically loans on which repayment has been due for 90 days or more.

Take a look at Table 1.

Table 1:

As on March 31, 2017	Industry	Agriculture and Allied Activities	Services	Retail Loans	Other loans
Total NPAs	4,70,084	57,021	84,686	23,795	5,470

Source: Unstarred Question No: 4614, March 23, 2018

It is clear from the above table that lending to industry forms a bulk of the bad loans of public sector banks. The total bad loans of public sector banks as on March 31, 2017, had stood at Rs 6,41,057 crore.

This basically means that lending to industry forms 73.3% of the total bad loans of public sector banks. Or to put it a little differently, lending to industry forms nearly three-fourths of the bad loans of public sector banks. Take a look at Table 2, which basically lists out the proportion of bad loans that have accumulated for public sector banks, from different forms of lending.

Table 2:

Sector (As on March 31, 2018)	Proportion of bad loans in each sector
Industry	73.33%
Agriculture and Allied Activities	8.89%
Services	13.21%
Retail Loans	3.71%

Source: Author calculations on data taken from Unstarred Question No: 4614, March 23, 2018 and Centre for Monitoring Indian Economy

Table 2 tells us very clearly that the industry and services sector are together responsible for 86.5% of the accumulated bad loans of public sector banks. This basically means that Indian corporates (because while lending to the services sector also, banks are lending to corporates) are responsible for more than 80% of the bad loans of public sector banks.

Of course, one can’t just look at bad loans in isolation of the total loans given out by public sector banks in each of the different areas. Take a look at Table 3, which lists the proportion of the overall loans, given to each sector.

Table 3:

Sector (As on March 31, 2017)	Proportion of loans
Industry	37.78%
Agriculture and Allied Activities	13.99%
Services	25.40%
Retail Loans	22.83%

Source: Centre for Monitoring Indian Economy.

Table 3 makes for a very interesting reading. The total lending to industry by public sector banks forms around 37.8% of the total lending. On the other hand, as we can see from Table 2, the lending to industry is responsible for 73.3% of bad loans. This clearly tells us where the problem with Indian banking is.

Now, let’s take a look at Table 4, which basically lists the bad loans of different sectors as a proportion of total lending carried out to that sector.

Table 4:

Sector	Total Bad loans (in Rs crore)	Total loans	Bad loans (in %)
Industry	4,70,084	26,80,025.00	17.54%
Agriculture and Allied Activities	57,021	9,92,387.00	5.75%
Services	84,686	18,02,243.00	4.70%
Retail Loans	23,795	16,20,034.00	1.47%

Source: Author calculations on data taken from Unstarred Question No: 4614, March 23, 2018 and Centre for Monitoring Indian Economy

What does Table 4 tell us? For every Rs 100 that Indian public sector banks have lent to industry, Rs 17.5 has not been repaid. For retail loans, the bad loans rate is 1.47%. This shows the difference between lending to industry and lending to individuals.

Finally, let’s take a look at Table 5, which lists the retail NPAs and the industry NPAs of different banks as on December 31, 2017.

Table 5:

Name of the bank	Retail NPA in%	Industry NPA in %
State Bank of India	1.3	21.9
Bank of India	2.6	27.6
Syndicate Bank	4	16
Bank of Baroda	3.4	16
IDBI Bank	1.4	39.4
Central Bank of India	4.6	23.5
Bank of Maharashtra	4.4	15.3
Andhra Bank	1.8	29.1

Source: Investor/Analyst presentations of banks.

One look at Table 5 makes it clear that public sector banks do a fairly decent job of lending to the retail sector. The retail bad loans are all less than 5% in every case, whereas the corporate NPAs are higher than 15%.

There are multiple reasons for this. There is no pressure from politicians to lend to crony capitalists when it comes to retail lending. The managers can carry out proper due diligence while giving the loan.

There is very little incentive for the manager to crack a deal on the side, with a retail borrower (unlike is the case with a loan given to industry) and give a loan, where he shouldn’t be giving one. This is primarily because the average loan amount is much smaller in case of a retail loan than a loan to industry, and any dishonesty while giving a retail loan is really not worth the risk.

In case of default, the legal system can be unleashed on to the retail borrower, unlike a loan given to industry, which has access to the best lawyers. A retail defaulter is unlikely to leave the country, like has been the case with several corporate defaulters, in the recent past. The asset against which the loan has been given to a retail borrower can be easily repossessed in case of default, unlike is the case with a loan given to industry.

In case of a home loan, which forms a little over 50% of all the retail loans given out by banks, the value of the home against which the loan has been given tends to much more than the outstanding loan at any point of time. This is primarily because banks don’t fund 100% of the value of the home, getting the borrower to put in at least 20% as a down payment. Over and above this, most homes in India when they are bought also involve the payment of a black component and this adds to the margin of safety of the bank.

In comparison, many loans given to industry are gold plated where the borrower essentially fudges the cost of the project, takes a higher loan than he should and then tunnels money out from the project, thus having very little of his equity in the project. In some cases, the value of the asset against which the loan has been taken tends to be lower than the value of the loan.

Narrow banking is the solution. Most of the public sector banks in India, should not be lending to corporates.

It will ensure that Indian public sector banks do not end up in the mess that they currently are in, anytime in the near future. The trouble is the politicians aren’t going to like it because it is the crony capitalists who fund their elections at the end of the day. And where do crony capitalists get their money from?

The other problem is that if banks do not lend for long term projects, what is the alternative arrangement? The corporate bond market in India barely exists. Pension funds, provident funds and insurance companies, prefer to invest in government bonds, and do not really have the expertise to invest in long term corporate projects. The project finance institutions of yore do not exist, having turned themselves into retail banks.

Having said that, the first and the foremost function of a bank is to ensure the safety of the money of the depositors.

To conclude, all these factors leave the public sector banks in India, in an extremely vulnerable space. As far as the government (or should I say governments) is concerned, all it has done is to throw money at the problem, which is never enough to solve any problem.

Some thinking is necessary as well.

The column originally appeared on Equitymaster on March 26, 2018.

21 March, 2018

If Home Loans Are Growing, what is the Problem with Real Estate?

India-Real-Estate-Market

The government shared some data earlier this month in the Lok Sabha, which has led to this column. Take a look at Table 1. It gives us the total home loans given by public sector banks and housing finance companies over the last few years.

It was further pointed out as a part of an answer: “As per the data compiled by National Housing Bank, the growth in housing loans of public sector banks and housing finance companies during the six month period from 1^st July, 2017 to 31^stDecember, 2017, has been about 34% as against 12% during the corresponding previous half year.”

Table 1: Total amount of home loans given by public sector banks and housing finance companies.It would have been great if the government had shared the total amount of home loans given out between July 1, 2017 and December 31, 2017, instead of just sharing percentages.

Also, on a slightly different note, the National Housing Bank needs to share home loan lending data (both banks and housing finance companies) on a regular basis, which it currently doesn’t. While, the Reserve Bank of India shares the total amount of home loans given out by banks, no such data is regularly available for housing finance companies.

Anyway, getting back to the point. Between July 2015 and June 2016, the home loan disbursement grew by around 25%. Between July 2016 and June 2017, it grew by around 13%.

Since then, growth rate has improved considerably, which tells us that the ill-effects of demonetisation which plagued the sector, are on their way out to some extent.

Now contrast this to data recently released by property consultant JLL. As of December 2017, a total of 4.4 lakh housing units remained unsold in seven major cities. Delhi along with the National Capital Region came on the top with 1.5 lakh unsold homes. Mumbai, Delhi-NCR, Chennai, Hyderabad, Pune, Bengaluru, Kolkata were the seven cities covered in this survey.

How does one contrast the JLL data with the increase in home loans being disbursed, is a question worth asking. There are several explanations. One is that homebuyers are no longer buying under-construction properties. Take the case of the JLL data, only 34,700 units are ready-to-move-in flats. Hence, people are not interested in buying properties which aren’t totally ready. Why?

The answer for this is very simple. Many builders in the last decade have taken money from prospective buyers and not delivered homes. And the prospective buyers have seen what has happened to the earlier set of buyers, and does not want to make the same mistake again. Nobody wants to get into a situation where the biggest investment of their life gets stuck and doesn’t go anywhere.

Given that many people bought real estate as an investment over the years, and kept those homes locked, my guess is, it is that inventory which is now being cleared, to some extent.

This loss of trust between the real estate companies and the prospective buyers, is the basic problem at the heart of India’s real estate crisis. And the data suggests, the lack of trust continues to prevail.

Further, the growth in home loans is basically coming in the affordable housing segment. As the Affordable Housing Report released by the Reserve Bank of India (RBI) in January 2018, points out: “Affordable housing is currently driving home loan growth in India… Housing loans up to Rs 10 lakh recorded robust growth in 2016-17, primarily driven by the public sector banks.. While the number of beneficiaries for loan amounts up to Rs 10 lakhs has increased sharply in 2016-17, the number of beneficiaries for higher value loans of above Rs 25 lakhs has, in fact, declined marginally during the year.”While the bulk of the lending still happens in the greater than Rs 25 lakh category, the growth actually is coming from the sub Rs 10 lakh segment, which is where the real market for homes in India is. Of course, much of this growth is being pushed by the government (which is why the government loves public sector banks) and is not happening in the top seven cities that JLL covers.

What this again tells us is that if home ownership in large cities has to pick up, the prices need to still fall from where they are. Also, buyers are not interested in buying under-construction property and that is something that the real estate companies need to realise and do something about. But that would mean a substantial change from their current way of operating. It hits at the heart of their current business model. And all change is a slow process.

This appeared on Equitymaster on March 22, 2018

20 March, 2018

India’s Demographic Dividend is Collapsing

Sometimes we get accused of being a stuck like a broken record. But then how else does one follow an issue of utmost importance to a nation, without saying the same things over and over again.

A few days back, The Economic Times reported that the Indian Railways had received a record 1.5 crore applications for 90,000 vacancies. This is the highest number of applications that the Railways has ever received. These are vacancies in Group C and Group D categories, with salaries ranging from Rs 18,000 to Rs 60,000.

Of the 90,000 jobs, around 63,000 jobs are in the Group D category, which includes the job of a gangman. Around 26,500 jobs are in the Group C category, which includes jobs of loco pilots and assistant loco pilots.

The last day of the application is March 31, 2018. “The number could cross even two crore as there’s still a lot of time to file application,” a senior railway ministry official not willing to be identified told The Economic Times.

Around 167 individuals are competing for one job. If the number of applicants goes up to 2 crore, then 222 individuals will compete for one job in the Indian Railways.

This is India’s demographic dividend, competing for a government job, when barely any are going around. Nearly two million people cross the age of 14 every month in India. Potentially, all of them can join the labour force to look for a job. But all of them don’t. Some people continue to study. A bulk of the women do not look for a job. After adjusting for this, and folks leaving the workforce through retirement, nearly a million Indians join the workforce every month i.e. 1.2 crore a year, which is around half the population of Australia and two and a half times, the population of New Zealand.
A recent estimate made by the Centre for Monitoring Indian Economy suggests that in 2017, two million jobs were created for 11.5 million Indians who joined the labour force during the year.

Of course, the Indian Railways example cited earlier is just one example which shows the lack of jobs for the Indian youth entering the workforce every year. A random Google search will tell you that this is not an isolated example. A late January 2018 newsreport in The Times of India points out that, engineers, law graduates and MBAs were among the 2.81 lakh people who applied for 738 peon posts in Madhya Pradesh.

Another newsreport which appeared in The Indian Express in early January 2018 pointed out that at least “129 engineers, 23 lawyers, a chartered accountant and 393 postgraduates in arts were among 12,453 people interviewed for 18 Class IV posts — in this case, for jobs as peons — in the Rajasthan Assembly secretariat.”

Imagine, if 12,453 individuals were interviewed for 18 posts of peon, how many people would have applied in the first place?

Another newsreport in The Telegraph points out that 1,000 people turned up for three data entry posts that the Odisha University of Agriculture and Technology (OUAT) had advertised for. As the newsreport points out: “While the required qualification for the post was graduation with mandatory knowledge of computer, candidates with BTech, MCA and law degrees turned up for the job interview.”

These are not isolated news stories. Such stories have appeared in the media regularly over the last few years. They are the best example of the fact that there aren’t enough jobs going around for India’s youth, the country’s demographic dividend.

As the Fifth Report on Employment and Unemployment points out: “The Unemployment Rate for the persons aged 18-29 years and holding a degree in graduation and above was found to be maximum with 18.4 per cent based on the Usual Principal Status Approach at the All India level.” Also, the Usual Principal Status Approach considers anyone working for a period of 183 days or more during the course of the year, as employed. Hence, a person could be unemployed for 182 days, and still considered to be employed.

In fact, in a recent answer to a question raised in the Lok Sabha, the government basically pointed out that the more educated an individual is in rural India, the more difficult it is to find a job, in India. Take a look at Table 1.

Table 1:

Educational classification	Unemployed
Not literate	2.3%
Primary	3.3%
Middle/Secondary/ Higher Secondary	3.7%
Graduate & above	23.8%

Source: http://164.100.47.190/loksabhaquestions/annex/14/AU1385.pdf
As the 12th Five Year Plan (2012-2017) document pointed out: “One hundred and eighty-three million additional income seekers are expected to join the workforce over the next 15 years.” This essentially means that a little over 12 million individuals will keep joining the workforce every year, in the years to come. This works out to around one million a month. And at this rate, the Indian workforce is expected to be larger than that of China by 2030.

And this is India’s demographic dividend. As these individuals enter the workforce, find work, earn money and spend it, the Indian economy is expected to do well. This will put India on the path to faster economic growth, which will eventually pull millions of Indians out of poverty.

The demographic dividend is a period of a few decades in the lifecycle of nation where the working population expands at a faster pace than the overall population. As the working population gets into the workforce, finds a job, starts earning and spends money, all this creates rapid economic growth, which pulls millions of people out of poverty. At least that is how it is supposed to work in theory. In India’s case it isn’t.

How have things been with other countries been in the past? Have countries which were expected to benefit from the demographic dividend benefitted from it?

As Ruchir Sharma writes in his new book The Rise and Fall of Nations—Ten Rules of Change in the Post-Crisis World: “The trick is to avoid falling for the fallacy of the “demographic dividend,” the idea that population growth pays off automatically in rapid economic growth. It pays off only if political leaders create the economic conditions necessary to attract investment and generate jobs.” This has clearly not happened in India, with the investment to GDP ratio constantly falling over the last decade.

Sharma then talks about the Arab world which despite being poised to, did not benefit from a demographic dividend. As Sharma writes: “The Arab world provides a cautionary tale. There between 1985 and 2005 the working age population grew by an average annual rate of more than 3 percent, or nearly twice as face as the rest of the world. But no economic dividend resulted. In the early 2010s many Arab countries suffered from cripplingly high youth unemployment rates; more than 40 percent in Iraq and more than 30 percent in Saudi Arabia, Egypt, and Tunisia, where the violence and chaos of the Arab Spring began.”

So, what is the way out for India? The answer as we have said over and over again in our previous columns, is the export of low-end manufacturing goods. This is something that India has missed out on. As Sharma said in a recent conference: “If you look at the success stories across the world, their key to success was all the same thing which is they all exported their way to prosperity. They exported their way to prosperity by producing low end manufacturing goods. It is low end manufacturing goods where you end up getting a huge amount of employment growth as well.”

Given that India has missed the manufacturing bus, jobs are hard to come by. As Nobel Prize winning economist said in a recent conference: “India’s lack in the manufacturing sector could work against it, as it doesn’t have the jobs essential to sustain the projected growth in demography. You have to find jobs for people.”

All this leaves us with the question, what does the future have for India? Pakodas we guess.

This column originally appeared in Equitymaster on March 19, 2018.

16 March, 2018

There’s a Basic Disconnect in Trump’s Plan to Make America Great Again

This is the third and the final column in the series, where I explain that Donald Trump’s idea of making America great again, by imposing tariffs, is not going to work.

Dear Reader, before you start reading this column, it perhaps makes sense to read the two columns published before this, in order to get a complete perspective on the topic. (You can read the columns here and here).

In today’s column we will take a look at how Trump’s entire idea of driving up exports while driving down imports, is contradictory to say the least. Let’s start by looking at Figure 1, which basically plots the trade deficit of the United States over the years.

Figure 1: US trade deficit (in $ million)

Trade deficit is a situation where the imports of a country are more than its exports. We can see that the United States has run a trade deficit with the rest of the world over the last four decades. The trade deficit peaked between 2004 and 2008, fell for a few years after that, and started going up again.

The American trade deficit came down in the years 2009 and 2010, and these were years when the American economy and the global economy, were both not doing well. Now let’s take a look at Figure 2, which basically plots the exports and imports of the United States over the last four decades.

Figure 2:

Figure 2 makes for a very interesting reading. The exports and the imports curves of the United States, move more or less in the same way. This basically means that when imports go up, exports also go up and vice versa. Why is that the case? The reason for this is very straightforward. The United States is the largest market in the world. When it imports stuff, it pays dollars to other countries, which are exporting stuff to the United States. These countries can then use these dollars to pay for American exports.

Hence, if Trump keeps going ahead with imposing more tariffs on imports into the US, as he has suggested for a while, he will deny other countries an opportunity to earn “enough” dollars through which they can pay for their imports from the US, which are basically the exports for the US. The larger point being that it is not possible to increase American exports and decrease American imports at the same time. This is the simplistic plan that Trump has to make America great again and there is a basic disconnect at the heart of it. Also, any such plan will have a negative international impact.

Now let’s take a look at Figure 3, which basically plots the American trade deficit with one country, and that is China.

Figure 3:

Figure 3 clearly shows that the American trade deficit with China has gone up dramatically over the years. The Chinese imports help keep inflation low in the United States. They also help keep interest rates low, as the dollars earned by the Chinese, have over the years found their way back into the United States and are invested in American treasury securities and other debt securities. This foreign demand for American financial securities has helped keep interest rates low in the US. Over and above this, there is another major point that arises here. Take a look Figure 4. It plots the overall trade deficit of the United States, along with the trade deficit that the country runs with China.

Figure 4:

Figure 4 tells us very clearly that over the years, the trade deficit with China has formed a greater proportion of the overall trade deficit run by the United States. In 2017, the trade deficit with China formed nearly 66% of the overall trade deficit.

Much has been said about the fact that Trump is basically not thinking about the long-term, but is trying to beat down American trading partners into giving American companies better terms. The trouble is that the bulk of the American trade deficit is with China and unless Trump takes on China, the gains of his so called policy are going to be very low.

Of course, it is not easy to bully China, given that other than helping maintain a low inflation and low interest rates in the US, the Chinese also own more than a trillion dollars of American government treasury securities and if push comes to the shove, it can use these treasury securities, as a bargaining tool.

Also, the current Chinese regime is turning more and more authoritarian and is unlikely to take to any bullying by the US, lightly. The only way America can become great again on the industrial front is, if it is able to compete with the products being produced internationally, both on the price as well as the quality front.

The column originally appeared on Equitymaster on March 16, 2018.

14 March, 2018

Trump’s Trade Wars Will Hurt Dollar’s Exorbitant Privilege

donald_trump_by_gage_skidmore_2
Dear Reader, we would suggest that before you start reading this column, you read the column published yesterday. In yesterday’s column we saw how the tariffs unleashed by the US President Donald Trump will hurt America, instead of making it great again. Reading this column, before you read today’s column, will give you a complete perspective on the issue. This is the second in a series of three columns on the issue. The third column will appear on Thursday.

The American dollar is at the heart of the global financial system as it has evolved. The reasons for this are historical.

By 1944, it was clear that the Allied forces are going to win the Second World War. In July 1944, they gathered at the Mount Washington Hotel, Bretton Woods, New Hampshire in the US, to design a new financial system for the world. Europe had been totally destroyed during the course of the war and even countries like Britain and France were in a bad shape despite being on the winning side. European countries were in no position to negotiate. And so, the American dollar was placed at the heart of the financial system that evolved at Bretton Woods.

The US was ready to convert dollars into gold at the rate of $35 for one ounce (31.1 grams) of gold. This came to be known as the Bretton Woods Agreement. It made the
American dollar the premier international currency of choice, as it was the only currency that could be converted into gold.

This ensured that over a period of time countries moved to carrying out their international trade primarily in American dollars. It also ensured that countries held their foreign exchange reserves in dollars because dollar was the only currency which could be converted into gold.

This structure that emerged gave the American dollar an exorbitant privilege. While the rest of the world had to earn these dollars by exporting stuff, the United States could simply print them and buy all the stuff that it needed. This has been one of the primary reasons why United States, over the decades, has turned into a big buyer of things. All the American buying drives global demand.

Given that the dollar became the international trading and reserve currency, the oil cartel OPEC (Organization of the Petroleum Exporting Countries), also sold the oil that it produced, in dollars. This was one more reason for the world to buy and sell stuff in dollars. Every country did not produce the total oil it consumed, and in order to import enough oil to fulfil its consumption needs, it needed dollars. The only way to earn these dollars was to price its exports in dollars.

In fact, the Saudi Arabia led OPEC continuing to price oil in dollars, is one of the major reasons why dollar continues to be the major reserve as well as trading currency of the world. Even the Americans recognise this fact.

As Nassim Nicholas Taleb writes in his new book Skin in the Game—Hidden Asymmetries in Daily Life: “It is clear since the attack on the World Trade Center (in which most of the attackers were Saudi citizens) that someone in that nonpartying kingdom had a hand—somehow—in the matter. But no bureaucrat, fearful of oil disruptions, made the right decision—instead, the absurd invasion of Iraq was endorsed because it appeared to be simpler.”

So, dollar due to various reasons is the international currency in which people and countries want to deal with. As George Gilder writes in The Scandal of Money—Why Wall Street Recovers But the Economy Never Does: “Today it [i.e. the dollar] handles more than 60 percent of world trade, denominates more than half the market capitalization of world stocks, and partakes in 87 percent of global currency trades.”

Given this, over the years, countries have accumulated huge dollar reserves. A significant chunk of these reserves have been earned by exporting stuff to the United States. The United States is the biggest economy in the world. It accounts for nearly one-fourth of the world’s GDP. By virtue of this, it is also the world’s biggest market, where China, Japan and countries from South- East Asia sell their goods and earn dollars in the process.

It is also the world’s biggest consumer of oil and consumes nearly a fourth of the global oil production. This meant that oil-rich states such as Saudi Arabia could sell oil to it and thus earn dollars in the process.

The dollars earned by other countries haven’t stayed in the vaults of their central banks. They have been invested in American treasury securities and other debt securities. Treasury securities are basically financial securities issued by the American government to finance its fiscal deficit, which is the difference between what a government earns and what it spends. Take a look at Figure 1. It basically plots the foreign investment in American treasuries over the last 40 years.

Figure 1:

Source: Board of Governors of the Federal Reserve System (US)

The foreigners currently own more than $6 trillion of American government treasury securities. This along with the easy money policy initiated by the Federal Reserve of the United States, in the aftermath of the financial crisis that broke out in September 2008, has ensured that the interest that the US government pays on these securities has been around 2% per year, over the last five years.

The interest paid on the US treasury securities sets the benchmark for other loans in the American financial system (or for that matter any other financial system) because lending to the government is deemed to be the safest form of lending. Over and above this, the foreigners have invested close to $3.3 trillion in other American debt securities.

This inflow of dollars into the United States has kept interest rates low. These low interest rates have kept the American consumption story going to some extent. As the American stand-up comedian George Calrin once said: “Consumption is the new national pastime. People spending money they don’t have on things they don’t need, money they don’t have so they can max out their credit cards… And they didn’t like it when they got it home anyway.”

Donald Trump’s tariff policy will attack at the heart of this model. Countries earn dollars by exporting stuff to the United States and other parts of the world. These dollars then find their way back to the United States where they are invested in treasury and other debt securities, and help maintain low interest rates.

If Trump and America shut out the American market to other countries, the countries exporting stuff to the US (Japan, China, South Korea, Taiwan, and a whole host of other countries), will not earn as many dollars as they currently are. And if they don’t earn enough dollars, the likelihood of them continuing to invest in American debt securities, is very low. This will mean that the interest rates in the United States will start to rise. This is something that the country which is currently going through an early stage of economic recovery, cannot really afford.

Further, the other countries might also start to try and price their exports in currencies other than the dollar, as well. China has been working towards this for quite a while. Trump’s decision to introduce tariffs might just be the final push that the country needs.
If countries start pricing their exports in non-dollar currencies, Trump’s plan to impose tariff will hurt the exorbitant privilege that the dollar has enjoyed over the years.

In fact, in the third and final column in this series, which will appear on Thursday, we will see why Trump’s plan of trying to increase American exports while shrinking its imports, is essentially contradictory in nature.

The column originally appeared on Equitymaster on March 13, 2018.