A 2020 vision is used to describe the ability to see things sharply, at a 20 feet distance. Modi would need it in the coming year, 2020. His first term focussed on economic reforms, and initiatives such as Swachh Bharat (Clean India), Direct Benefit Transfers (to avoid leakages), Ayushman Bharat (insurance cover), Digital India (to reduce the dependence of cash), Ujjwala Yojana (for LPG gas connection) and others. These helped him win a thumping majority for a second term, and expectations were high that he would accelerate the pace of economic reforms. Instead, the focus of the government is now more on correcting past wrongs, which has resulted in unrest.

Looking back, 2019 started as year with plenty of global concerns. North Korea, with its nukes, China’s growth, Iran’s blockade of the Straits of Hormuz, and the continuing US-China trade spat.

Ultimately, none of these concerns got played out, and, thanks to extremely low interest rates and easy money, which flowed into assets (more than to help create consumption demand or investment demand) stock markets are at a high.

So, what does 2020 portend? What are the risks to stock markets/investors?

The biggest risk is an impending financial crisis which would be worse than the 2008 one, likely to be triggered by excessive debt. Global government debt, at $250 trillion, is over three times global GDP. This excludes other debt and liabilities; eg: the pension funds of all 50 of the States of USA are underfunded, and unable to meet its obligations. As much of $17 trillion of funds have been invested with a negative return! This is a debasement of money.

Continuous debasement of money and continuous borrowing to pay off old debt, will be the triggers for the next global financial crisis.

In order to give people the option to protect their wealth from the depradations of soulless politicians, heartless commercial bankers and directionless central bankers, a person using the pseudonym Satoshi Nakamoto, created a first crypto currency, Bitcoin, stored in a distributed ledger, or blockchain, and outside the grubby fingers of greedy politicians.

Different countries have reacted differently to this innovation. The US has recently proposed a bill called Cryptocurrency Act of 2020, in order to have clarity over use of digital assets, and to appoint regulators to oversee it. PBOC People’s Bank of China is ready to launch its own, officially sanctioned, crypto currency, aimed at keeping a track of digital transactions.

India’s politicians have taken the lazy way out and banned investment in crypto currencies. Why tax the brain trying to understand a new concept when one can simply ban it, is their philosophy.

In an article by on Doug Casey’s International Man, author Jeff Thomas writes about a ‘Farewell to Paper Money’. Is this what 2020 portends? Once cash is banned commercial banks can charge customers to deposit money and governments can track payments. Is that why $1.5 trillion in US 100 bills are untraceable?

Investors should watch out for signs that the debt bubble is imploding, as when rolling over of government, corporate or bank debt becomes difficult, and of failing banks that lead to ‘bail ins’ under which the assets of depositors are seized to pay for follies of the banks (as in the PMC case).

It is on these things that the government would do well to refocus attention to. Those guilty of frauds have to be severely and swiftly punished in order to set such an example that others would not attempt to do so. The judicial system must be strengthened, and a timeline set for deciding on cases. Property records must be digitised. Contracts must be strictly enforced. If focus returns to economic reforms, if the Centre can start looking with an open mind on innovations such as crypt currencies and block chains, the India story can take a dramatic leap forward in 2020.

Will Modi have a 2020 vision?

The writer is India Head — Finance Asia/Haymarket. The views are personal.

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