Tatas are a family managed business with a different mechanism of control

 There have been several important developments in the Tata group in recent days. First, Mehli Mistry, who was a member of a dissident group at Tata Trusts (by which I mean the two key trusts that control the Tata group, Sir Ratan Tata Trust and Dorabji Tata Trust), had his term as Trustee not being renewed.

Next, Mistry, who had entered a caveat with the Charities Commissioner in Mumbai asking to be heard in the matter, wrote a letter to Tata Trusts saying he was not inclined to the pursue the matter.

Finally, at the meeting of Tata Trusts last week, Noel Tata’s son, Neville, was inducted as a member of the board along with a Tata confidante and former Titan MD, Bhaskar Bhat.

Clearly, Noel Tata is tightening his grip on Tata Trusts which has a 66 per cent stake in Tata Sons, the holding company of the group through which the Tata family has controlled the many companies in the conglomerate.

There has been a lot of discussion about governance in the Tata group. Many ask how Tata Trusts can control a whole group. Well, in most industrial groups, the family directly owns a dominant stake- or the majority stake- in the group companies. The head of the family and his members sit on the boards of the group companies and chair those.

The Tatas have a chosen a different mechanism of control. They parked their funds in Tata Trusts and invested in group companies through Tata Sons. They hold very little personal stakes in the companies. The dividends and other cash flows from group companies go to Tata Trusts, which carries out philanthropic activities instead of going into the personal accounts of the Tata family. While the mechanism of control is different, the outcome is the same: the Tata family calls the shots by controlling Tata Trusts.

That is exactly what you would expect in a family managed business. So, it’s not clear what commentators are unhappy about. In the battle between Ratan Tata and Cyrus Mistry, former chairman of Tata Sons, a few years ago, several issues of legality and governance were raised. The honourable Supreme Court dismissed Mistry’s contentions. Critics of the Tata group may not like it but they must remember that whatever norms the Tatas have put in place bear the stamp of legitimacy. 

More in my column in BS, Tata storm blows over? 

FINGER ON THE PULSE

Tata storm blows over?

 

The Tata group has been in the news again for the wrong reasons. A fight has broken out between a Tata family scion, Noel Tata, and a few individuals in positions of authority in the group. 

The boards of two important trusts of the Tata family — the Sir Dorabji Tata Trust and Sir Ratan Tata Trust (Tata Trusts) — are said to be riven by differences between a group led by Noel Tata and another group in which Mehli Mistry, a relative of Noel Tata’s, is prominent. Now, we learn that Mehli Mistry, until recently a member of the boards of the Tata Trusts, will not pursue his fight with Mr Tata. In all likelihood, the storm has blown over.

Mr Mistry had taken comfort in a board resolution passed by  Tata Trusts in October 2024 that stated that all board members at the Trusts would be renewed for life when their term came up for renewal. Accordingly, the term of Venu Srinivasan, a trustee and Noel Tata confidant, was renewed in the third week of October. 

Alas, when Mr Mistry’s term came up for renewal, the Noel Tata faction withheld its consent. Mr Srinivasan stayed on but Mr Mistry was out. Mr Mistry subsequently entered a caveat in the matter with the Charities Commissioner. He has since written a letter that suggests he has thrown in the towel. 

Many commentators were aghast at the in-fighting and fretted about the grave implications for the fortunes of the Tata companies. Had they closely watched the outcome of the earlier battle between Ratan Tata and Cyrus Mistry, then executive chairman of Tata Sons, they need not have worried. 

The battle between Ratan Tata and Cyrus Mistry lasted five years but did not come in the way of the performance of the Tata group companies. Likewise, the Tata group performance is still less likely to be disrupted by the present battle between Noel Tata and a few individuals. The battle makes for great drama in the media, though. 

There is much hand-wringing over the functioning of the Tata Trusts, their relationship with Tata Sons, the role of the board of Tata Sons, the role of the boards at the Tata group companies and so on. Some commentators say that the Tata group today falls short of the governance standards one would expect of such a highly respected group.

Critics of the Tata group need to read the judgment of the honourable Supreme Court in 2021 in the dispute between Tata group and Cyrus Mistry, who was ousted as executive chairman of Tata Sons. The Court declared, in emphatic terms, that in the matters raised by Cyrus Mistry, the Tata group was fully compliant with the law. Not only that, the group had unilaterally met norms of governance that it was not legally required to meet. 

The Tata family exercises control over the sprawling conglomerate through  various trusts, notably the two mentioned above. The Tata Trusts have two-thirds of the shares in Tata Sons, which is the holding company for a large number of companies in the Tata fold, both listed and unlisted. 

The Tata Trusts nominees have “affirmative voting rights” at Tata Sons, that is, no decision can be taken by the board of Tata Sons without their approval. The other directors on the board (at present said to be numbering five, including three independent directors) cannot outvote the two Tata Trusts nominees. Critics see this contrary to the spirit of corporate governance; on a board, should not the majority view prevail?

Well, the Supreme Court didn’t think so. It observed that affirmative voting rights are “a global norm” and that a “shareholder or a group of shareholders who constitute a majority, can always seek to be in the driving seat by reserving affirmative voting rights.” It also noted that, by reason of having 66 per cent of shares in Tata Sons, the two Trusts could have packed the board of Tata Sons with their own directors. They chose to limit their nominees to one-third of the board strength. 

 

The Tata Trusts also chose to appoint independent directors at Tata Sons even though Tata Sons is not a listed company and is not obliged to have any independent directors on its board. Contrary to what the critics say, Tata Sons is, in technical terms, ahead of the governance curve. 

 

No doubt, the motivation for having independent directors at Tata Sons was to get the benefit of the views of experts independent of the Tata group.  But these views, it must be understood, are only advisory in nature. As the Supreme Court noted, at any general meeting of Tata Sons, the Tata Trusts would command the majority of votes. There is thus no question of the board of Tata Sons taking a decision that the principal shareholders, Tata Trusts, would not approve of. The Article that provides affirmative voting rights to the nominees of Tata Trusts on the board of Tata Sons merely codifies this reality. 

 

In most family-managed industrial groups, the head of the group or his family member typically chairs the boards of the group companies. The industrial group would be the majority shareholder or the dominant shareholder in the group companies. All decisions of the group’s boards would require the family’s approval. In listed companies, only one-third of the board would comprise independent directors. There is no question of independent directors overriding the wishes of the family. 

The Tatas have far too many companies in their group and too few family members. They have thus adopted a structure that gives the Tata family the final say in all matters without the members of the Tata family having to chair the boards of group companies or even be a director. The group companies are controlled by Tata Sons and Tata Sons is controlled by Tata Trusts. It is delusional to suppose that matters have been left to the various boards.

He who rules the Tata Trusts rules the Tata group. And it is Noel Tata who, as chairman, today rules the Tata Trusts. Mehli Mistry has been shown the door at Tata Trusts. One should not be surprised if the same happens to other members of his group. 

Over time, the boards of the Tata Trusts will have members that Mr Tata is more comfortable with. Peace will return. Many like to think the Tatas are different. Well, the Tatas are different in the particular manner in which the family controls the group. However, as in other family-managed businesses, it is the dominant shareholder who calls the shots. And that, as the Supreme Court has averred, is legal.

 

Elon Musk pay package- a case of bad communication

Many people recoil at the suggestion that any CEO can be paid a trillion dollars for performance. They find the package proposed for Elon Musk obscene. Investors are at the moment voting on the package. Musk has threatened to quit and focus on other things if the package is not approved.

The board of Tesla backs the package. Top proxy advisors have opposed the pay as also some investor groups. It is the biggest pay package proposed in corporate history.

People need to look at the fine print before they come to conclusion. The Lex column in FT does just that- and it gave me plenty of food for thought.

Here are the salient points:

• The package will be payable over a decade and in shares, so it makes sense to Musk only if Tesla keeps performing after he gets the award
• EBITDA must rise from $16 bn to $400 bn for Musk to get the whole amount. The lowest target set for him is $50 bn
• Musk has to hit the target not just on car sales but on AI-powered androids, robotaxis and autonomous driving. He needs to take subscriptions for the third from 500,000 to 10 million

It appears that Musk will be paid a trillion dollars for pulling off a miracle! 

What we need to know is roughly what will he be paid at the minimum of the targets set for him. The board should also have told investors and the public what they think he will likely get if he meets targets that appear attainable. Then the uproar would not have been as huge.

Simply telling people that a CEO stands to make a trillion dollars is bad communication.

The importance of being Scott Bessent

The financial markets have held up in the face of Trump tariffs and assorted shocks during the year. Much credit must surely go to the US Treasury Secretary Scott Bessent. 

Bessent is a financial markets player of repute. He made a huge fortune in the markets. He knows financial markets and, more importantly, he respects them. The calibration of various actions as well as the calibration of comments from the US administration are largely responsible for the markets not buckling under the upending of the free trade regime under Trump-II. 

To get into Bessent's mind, it's useful to read the FT story on Bessent that is based on two interviews with him.

Bessent sums up his approach succinctly:

We want the most America-first policies that are possible, without incurring market wrath.

Bessent is in the forefront of the transformation of the policy paradigm- and more:

In just nine months, Bessent has staunchly promoted Trump’s aggressive tariff policies, championed the president’s effort to overhaul the Federal Reserve — including his attempt to fire governor Lisa Cook — and ushered in a new era of sweeping deregulation and tax cuts, including the loosening of crypto rules and the promotion of stablecoins. But he has also brought Maga to the US Treasury in other ways: vowing to use the Internal Revenue Service to probe left-leaning organisations the government suspects of fuelling political violence

How does he differ from his predecessors?

Unlike most of my predecessors I have a very healthy scepticism of elite institutions and elite opinion, whereas I think they didn’t,. But I have a healthy regard for the market.

The critics have been wrong about the markets crumbling under the onslaught of Trump tariffs:

Since he was sworn into the job on January 28, the S&P 500 equity index has risen about 12 per cent, while the 10-year Treasury yield, a proxy for long-term borrowing costs, has dropped by slightly more than half a percentage point over the same period to 4 per cent. Please use the sharing tools found via the share button at the top or side of articles.  .... “Where the hell is the market risk? They’ve just been wrong.”  

What Trump is attempting has the potential to derail the markets. Give credit to Trump for choosing the right person to manage the markets.  

 

The pundits were wrong: Trump tariffs are not impacting the world economy

The IMF has upgraded its forecast for world economic growth a second time. It now projects growth of 3.2 per cent for the world economy, a tad below growth of 3.4 per cent in 2024. 

In April, the IMF had forecast growth of 2.8 per cent. The projection must hav been prepared ahead of Trump's Liberation Day announcement but Trump's stance of tariffs in general was well known. In September, tariffs went into effect. 

From the day, Trump assumed office, the pundits have been predicting apocalypse for the US economy and the world economy. Well, it ain't happening. 

IMF Managing Director Kristalina Georgieva offers several explanations but these are not entirely persuasive:

• Policy making has improved especially in the emerging economies: Well, the improvement didn't happen in the last six months. The IMF should have built this element into its foecasts
• Private sector agents front-loaded their orders to beat tariffs and corporate balance sheets are healthier than before: Again, the latter was known. As for front-loading, that too should have been expected. And that shouldn't make a difference in 2026- for which the IMF has a projection of 3.1 per cent global growth, 0.1 per cent below that of 2025
• Tariffs are not as bad as expected, the US weighted average tariff is at around 19 per cent, which is below the 30 per cent feared earlier: But it's still a lot worse than the 3.5 per cent level before Trump! The free trade regime is being upended and it's not a making a big difference. 
• Financial conditions are supportive, equity prices have surged thanks to AI stocks and the surge has boosted consumption: The AI revolution has been in the works for some time. If the AI effect is overwhelming the impact of protectionism, that too should have been taken into account. The dollar has depreciated but it hasn't collapsed following any exit by investors, as was forecast.

To put it bluntly, the IMF, like so many economic pundits, got it wrong. After the turbulence in the market following Liberation Day, Trump said hat things would settle down- and it seems he has got it right.

There's an interesting observation that FT commentator Chris Giles makes in his article on the IMF forecasts. He says the IMF as wrong is saying that pre-pandemic growth was 3.7 per cent and the world outlook has turned gloomy because we are now looking at 3 per cent growth.  

The reality is that the pre-pandemic average growth rate was 3.4 per cent when using the full set of data in the IMF database, not 3.7 per cent. The higher figure relies on giving much more weight to the boom years before the global financial crisis and limiting the sample to 2000-2019. The 3 per cent medium-term future growth rate relates to the average over six quarters, starting in the second half of 2025 to the end of 2026. After that it climbs back to an average of 3.2 per cent a year, which is hardly lower than the long-term average.

In other words, the IMF is fiddling with the numbers to tell a story it wants to!

 

Economists have been wrong about Trump's tariffs- so far

I had a post a few days ago about the Economist saying that the US economy is defying gloom. I had a post with my own analysis earlier in which I had argued that Trump was winning the tariff war- on X, the article evoked harsh comments and I was branded a Trump admirer. 

When economists say the US economy will crash or the world economy will crash on account of Trump's tariffs, it is no more than wishful thinking, I'm afraid. They don't like Trump for a variety of reasons  and they would like to see the economy crashing. Well, it ain't happening. The facts on the ground are otherwise.

The Economist acknowledges that six months into Trump's term, things look "surprisingly rosy":

Yet six months on the full reckoning has not arrived. There is no runaway inflation. America’s economy grew by 3.8% at an annualised rate in the second quarter; the Atlanta branch of the Federal Reserve expects similar in the third. Consumers are spending, firms investing and the stockmarket booming. The outlook has also improved elsewhere. In September the OECD lifted its forecast for global growth to 3.2%, up from 2.9% three months earlier.

And it proceeds to explain why:

One reason is that tariffs have been gentler than advertised. In April America’s average rate was estimated to be near 30%; today the same models put it closer to 18%. Mr Trump threatened China with tariffs of 145% but by September was imposing levies at barely a third of that. South Korea’s fell from a promised 25% to 15%. ....

....Carve-outs have blunted the impact further still. Nearly half of America’s imports have been exempted from Mr Trump’s tariffs. Electronics such as smartphones and computers were spared entirely. Brazil’s rate of 50% includes nearly 700 exemptions, trimming it to 30% or so. Canada’s headline tariff of 35% is nearer 6% in practice, according to Scotiabank, a local lender, largely because goods qualifying under the United States-Mexico-Canada Agreement (USMCA) are exempt. Even sectoral levies are riddled with loopholes. Mr Trump’s new pharmaceutical tariffs, announced at 100% and due to take effect on October 1st, excluded generics (which make up 90% of drugs sold in America) and branded firms with investment plans in the country. That day he paused the measures altogether as talks began.

There are other reasons. Firms rushed to front-load imports to beat the tariffs. There seems to be underinvoicing of imports from China; as a result, tariffs paid are much lower for the actual value of goods imported.

Most importantly, trade wars, such as those that erupted after the Smoot-Hawley, have been noticeably absent. Except for China, no country has retailiated seriously against American tariffs. The reason is that many countries find they can diversify exports. America accounts for only 8 per cent of world imports today compared to 20 per cent at the turn of the century. Countries are forging closer trade partnerships with like-minded countries so that there is a large area of free trade after excluding the US. 

The Economist thinks that with Trump spreading the roll-out of tariffs over several quarters, inflation in the US could become persistent. Well, the last month data shows a monthly inflation rate of 0.2 per cent of an annual rate of 2.4 per cent. 

I repeat what I said earlier: Trump is winning for now. 

RBI's deregulatory moves raise concerns

The RBI did not announce any rate cut at its MPC meeting earlier this month. Instead, the governor uneashed a wave of deregulatory measures.

The government has constituted committees to examine the entire gamut of regulations and see how regulations that weigh heavily on businesses and individuals can be axed. The committees are looking at non-financial regulations. Financial regulations, one presumes, will be looked at by the concerned regulators. The RBI has made a start.

Nobody doubts that Indian businesses are hamstrung by a whole slew of regulations, a large number of which need to go. I would argue, however, that banking regulations are a different cup of tea and need to be handled with care. Some of the deregulatory measures announced by the RBI earlier this month do give rise to concerns.

More in my BS column, Deregulation is the flavour of the season

FINGER ON THE PULSE
Deregulation: The flavour of the moment

T T Ram Mohan

In a year in which India has been hit with additional tariffs of 50 per cent on exports to the United States, you would not have expected India’s gross domestic product (GDP) growth projection to be revised upwards from 6.5 per cent in April to 6.8 per cent in October. Or the inflation rate to be revised downwards from 4.0 per cent to 2.6 per cent.

Yet, that is what the Reserve Bank of India (RBI) did in its latest monetary policy statement earlier this month. The tariffs will indeed impact growth. However, since they kicked in from September, the impact will be felt in the third and fourth quarters. The RBI’s downward revisions for these two quarters indicate the impact will be extremely modest. For the year as a whole, the impact of tariffs in the second half of the year is overshadowed by GDP growth of 7.8 per cent in the first quarter of FY26, which was a good 100 basis points (bps) above expectations

Commentators have been crying gloom and doom for the Indian economy ever since Donald Trump’s announcement of reciprocal tariffs on “Liberation Day”, April 2. Little of that has materialised in all these months. Analysts were projecting India’s GDP for FY26 to be shaved by around 50 bps, from 6.5 per cent to 6 per cent or below. The RBI believes nothing of the sort is on the cards.

But then the Indian economy has a habit of delivering pleasant surprises in recent years. In FY23, a year in which the Ukraine conflict erupted and unfolded in a big way, India’s GDP grew at 7.6 per cent when analysts were unsure if growth of even 6.5 per cent was possible. In FY24, GDP growth shot up further to 9.2 per cent, a number that defied all forecasts by a wide margin.  

These outcomes cannot be said to be accidental. They are the result of sound macroeconomic policies, regulation, and governance. The economy has become resilient in the face of serious challenges.

What we are faced with at the moment is uncertainty. We do not know exactly how the tariffs will unfold, where they will settle, or when. Geopolitical shocks have thus far not spiralled out of control but nobody can bet on that. The answer is not “big bang” reforms, dramatic measures that exacerbate uncertainty in the present while promising returns in the distant future. Instead, the focus must be on reducing uncertainty in the present while creating a more enabling environment for economic agents.  The government is right in moving deregulation to the top of its agenda, even as it maintains the momentum of public investment. 

That also appears to be the thinking behind the stance of the RBI in its latest monetary policy statement. With inflation at a record low, there seemed to be little risk in cutting the policy rate. The RBI resisted the temptation to do so. With a projected growth rate of 6.8 per cent in a challenging environment, there is not much upside to be had from cutting the policy rate at this point. Better to conserve ammunition for when the growth rate threatens to sag. 

The RBI has instead announced deregulatory measures that are intended to boost credit growth at banks. Bank non-food credit has grown at 10.2 per cent over the previous year, down from 13 per cent in the year before. It is driven mostly by growth in consumer loans (11.8 per cent). Loan growth to industry is a disappointing 6.5 per cent and it is propped up by growth in loans to micro, small and medium enterprises (18.5 per cent), once regarded as a problem area by banks. Growth in loans to large corporations is a mere 1.8 per cent

The RBI says that industry is taken care of by funds from non-bank sources. In 2025-26, the total flow of resources from non-bank sources to the commercial sector increased by ₹2.66 trillion, more than offsetting the decline in non-food bank credit by ₹0.48 trillion.  One does not know why the RBI is coy about providing the figures for the flow of funds from different sources (banks, non-banks, external commercial borrowings, internal resources, etc), as it used to in the past. 

The deregulatory measures are about growing banks’ loan business at the expense of competing sources. The big deregulatory move is allowing banks to fund mergers and acquisitions (M&As). This is long-term funding that entails asset-liability mismatches. It also requires care in judging valuations of M&As. The RBI might  have allowed such financing for the better-rated banks to start with and then extended it to the lower-rated banks. 

Another deregulatory move is the removal of the framework that disincentivised lending to corporations with bank credit exposure of over Rs 10,000 crore. The RBI argues that the Large Exposure Framework suffices to manage risk at the bank level. The issue of lending to highly leveraged corporations, however, does not go away. As we all know, banks lent merrily to a high-profile, highly leveraged group. It required the shock effect of an equity research report for the group to bring its leverage down to more sensible levels. 

The RBI says it will address concentration risk through macro-prudential tools if necessary. Presumably, it does not see a problem of high leverage at corporations at the moment. Nevertheless, there is merit in specifying higher risk weights for bank loans to corporations with debt-to-equity ratio above a certain level (instead of specifying an absolute value of credit exposure). A third regulatory move- a proposal to license new urban cooperative banks- is truly mystifying. 

The deregulatory measures will boost credit growth and bank income but will not boost economic growth because, for the most part, they substitute non-bank credit with bank credit. It is not clear that low rates of credit growth are a serious problem for banks at the moment. Return on assets of scheduled commercial banks was a healthy 1.4 per cent in March 2025; for public sector banks, it was 1.1 per cent. Besides, banks continue to face the problem of deposit growth lagging credit growth: Deposits grew at 9.5 per cent in the last year while credit grew at over 10 per cent. Boosting credit growth without getting a handle on deposit growth is not a great idea. 

Deregulation in the economy in general is a good thing.  There is always a case for visiting regulations that have outlived their rationale and cramp business activity. In banking, however, it is wise to make haste slowly with deregulatory initiatives. Bank governance and risk management still have a long way to go. It makes sense to conserve the hard

Turbulence in the Tata group

For some reason I have not been able to fathom, some of the best reporting on the Indian economy and Indian corporates happens in the foreign media.

The Indian media has flagged the board-level disputes in the group and the fact that the government has stepped in to arrange a resolution. But it hasn't quite spelt out what the issues are. FT's report yesterday does that.

i. Operational issues: The Air India plane crash in Ahmedabad last year was bad publicity. Then came the cyber attacks on JLR in the UK and the involvement of TCS, which manages JLR's technology backbone. TCS also was at the cetnre of the cyber attack on Marks and Spencer as it happens to be the service provider. Then, the job layoffs- estimated at 12,000- have spelt controversy. 

Analysts are asking whether top management has a grip over the sprawling empire.

ii. In-fighting in the board of Tata Trusts which ultimately controls the group: Noel Tata, chairman, could not succeed in getting an extension for Tata Trusts member Vijay Singh, former defence secretary. It appears Noel Tata has also not been successful in engineering an exit for the Shaporji Pallonji group at Tata Sons in which Pallonji owns 18 per cent.

iii. Listing of Tata Sons: The RBI thinks Tata Sons is an NBFC and wanted it to list by September. Tata Sons is resisting the move apparently because it doesn't want greater scrutiny of itself and also doesn't want to cede control. 

We do not know what the government has conveyed to the group. 

How Trump shook up NATO in his first term as President

Jens Stoltenberg was Nato  secretary-general during Trump 1. The Guardian carries an excerpt from his forthcoming account of his time as Nato chief. It's a terrific read. It brings alive Trump's interactions with European leaders during his first term and how he read the riot act to them on stepping up their contributions to Nato- I didn't know the US contributed 80-90 per cent of Nato's budget!

In May 2017, Trump visited the Nato headquarters. It was a new building that he was to inaugurate. He didn't approve of the expenditure at all:

“Do you really need such a big headquarters?” he asked. “What do you need all these people for?”

I replied that while the organisation itself isn’t that large, member states’ delegations also use the building – it makes it easy to meet with security measures in place, and everyone uses the same cafeteria. I told Trump who had designed the headquarters: architects Skidmore, Owings & Merrill, who also designed the Trump International Hotel & Tower in Chicago.

“I know those people. They’re extremely expensive,” Trump exclaimed. “I don’t understand why you chose those expensive architects. Extremely expensive!”

Later in 2018, Stoltenberg spoke over the phone. Again, Trump did some plain speaking:

Trump had recently met with Merkel, too, and told her things simply couldn’t carry on the way they were. “I said, ‘Angela, you have to cough up. You need to spend 2%.’ She said, ‘Maybe in 2030’ – and she laughed as she said it … She laughed!”

He said the United States was spending 4% of GDP on defence, and covered 80-90% of Nato’s expenses. “And we’re not doing it any more. We’re gonna pay what Germany pays.”

By the end of the call there was no mistaking Trump’s warning: “Look, if we leave, we leave. You need Nato, desperately. We don’t need Nato.”

Trump doesn't believe the US needs Nato; it is the Europeans who need it. And if they need it badly, they had better pay for it. Well, Trump has had the last laugh. Many Nato allies have met the 2 per cent target and the fresh target that Trump has set is 5 per cent.

Fed news: Economists back Waller, oppose Trump petition for Cook removal

Eight two per cent of economists polled by an agency want Christopher Waller to replace Jerome Powell. Only 20 per cent think it will happen.

Thirty nine per cent think Kevin Hassett, Director of National Economic Council, most likely to take over. 

Meanwhile, the who's who of economic policy have filed an amicus brief before the US Supreme Court opposing President Trump's move to remove her from office while her petition challenging her removal is pending before the Court. In other words, they want a stay on her removal untl her case is disposed of. 

The list of signatories includes for Fed chiefs Alan Greenspan, Ben Bernanke and Janet Yellen,  former Treasury Secretaries Larry Summers, Tim Geithner, Robert Rubin, Jack Lew and Hank Paulson and former members of the President's Council of Economic Advisers Jason Furman, Gregory Mankiw and Glenn Hubbard. 

U-turn on Ukraine?

President Trump stunned everybody with his remarks on Truth Social following his meeting with Ukrainian president Zelenskyy.

Trump wrote: 

“Ukraine, with the support of the European Union, is in a position to fight and WIN all of Ukraine back in its original form…With time, patience, and the financial support of Europe and, in particular, NATO, the original Borders from where this War started, is very much an option. Why not?”.

Trump also called Russia a "paper tiger".

These remarks seem to mark a U-turn from his position after the Alaska Summit with President Putin last month. Trump had said at the time that Ukraine would have to accept loss of territory to Russia as part of any peace settlement.

Trump also said Nato was free to shoot down Russian planes that introduced into Nato airspace.

So, what's cooking?

Well, the key point is that Trump refuses to commit any American support for Ukraine's war with Russia. The Europeans are free to purchase arms from the US and give these to Ukraine- no more freebies from the US. The US will not be directly involved in the conflict. Moreoever, Trump refused to commit any support to Nato if it shot down Russia aircraft- any American intervention would depend on the circumstances.

We need to connect these positions with Trump's earlier exhortation to Europe to impose tariffs of 50 to 100 per cent on Chinese exports to the EU and to stop purchasing Russian oil and gas altogether. There's no way the Europeans can do that- their economies would be wrecked. Similarly, there's no way the Nato allies can wage war on Russia on their own. 

The Europeans have been urging Trump to get tough with Russia, impose more sanctions and to step up support for Ukraine. Trump is now telling them: if you think you can this war, go right ahead and fight the Russians, I'm not going to join you.

Trump's remarks amount to a dare and a taunt to Europe. As he made clear in his address to the UN earlier this week, he has very little regard for Europeans- he knows they will chicken out of a confronation with Russia sans American involvement. 

America's economy defies gloom- Economist

I have reproduced the headline of the Economist's piece- and the Economist is no fan of Trump's.

Some eight months into Trump's administration, the US economy is far from plunging into the abyss as his detractors had forecast (and continue to forecast).

The Economist spells out the positives in the US economy:

Growth has certainly slowed. But dig deeper in the data and you do not have to be an uber-bull to see reasons for hope. The slump has been modest and no longer seems to be worsening. America’s 1.4% annualised GDP growth in the first half of the year would be a happy surprise for many Europeans. And the 2% growth America has managed over the past year is better yet in comparison

The jobs situation is not bad because demand for jobs has been reined by the crackdown on immigaation:

The Congressional Budget Office (CBO) has revised down its estimate for net migration in 2025 from 2m to 400,000. Researchers at the American Enterprise Institute and the Brookings Institution, two think-tanks, peg the figure at between -500,000 and 100,000. Customs and Border Protection reported just 8,000 “encounters” with illegal migrants on the southern border in July, against 100,000 in the same month last year and nearly 200,000 the year before.

Slower population growth lowers the “breakeven” rate of job creation (that needed to keep the employment rate stable), meaning even weak employment figures could be consistent with a healthy economy......For his part, on September 17th Jerome Powell, the Fed’s chair, guessed the breakeven rate was “between zero and 50,000”.

Then, there is greater clarity on tariffs:

Now the outlines of the import-tax regime look more certain. Tariff revenues, after rising sharply, seem to have stabilised in the past few months. Uncertainty measures have fallen, even if not all the way back to the levels of last year.

The Economist thinks Trump's campaign against the Fed could give rise to problems. It is likely to be proved wrong- as it has been proved wrong so far. 

Stephen Miran makes his presence felt on the Fed

Stephen Miran, who has joined the Fed board on leave as Chairman, Council of Economic Advisers, made his presence felt at his first FOMC meeting. He voted for a 50 bp cut in the policy rate while the others voted for a cut of 25 bp. 

Seven members of the FOMC indicate they do no expect any rate cut for the rest of the year. Another two expect  just one cut. Miran projects a drop of another 1.25 bp by the end of the year. Trump's two appointees, Michelle Bowman and Christopher Waller, voted for 25 bp cut. Waller did so despite being in contention for the Chairman's post when it falls vacant next year.

Trump's bid to get the Fed to make a steeper cut in the rate has not succeeded. Looks as though the Fed will not change tack as long as Powell is at the helm. 

What would be Trump's next move?

Brits grit their teeth over Trump's state visit

The UK laid out the red carpet for Donald Trump on his second state visit to the UK, the first one being in his first term.

It is a clear attempt by UK PM Keith Starmer to ensure the 'special relationship' endures, however much the UK may be uncomfortable with Trump's policies. The Guardian's columnist sums up the sentiments of many Brits:

No, it is not ideal. The era of shared values is ebbing fast. Keir Starmer did not need to play the state visit card so soon or so generously. He should have made Trump wait for the invitation, extracting a higher price for it, and offering hints that it might be offered in return for the right deal. But Starmer is not alone in struggling to read a president who is both unserious and utterly serious at the same time. All nations are still trying to work out how to respond.

What does UK want out of Trump now? Here goes:

Three things will matter in particular when Trump meets Starmer on Thursday for the political half of the visit: trade, the Middle East and Ukraine......On the Middle East, meanwhile, the immediate goal must be to prevent Trump exploding when Britain and others recognise Palestine next week.

So raison d’état says that pressure on Trump over Ukraine needs to come first. Russia’s threat to Europe is existential. Long term, the solution to that is in Europe’s own hands. The idea that the US should continue to be primarily responsible for Europe’s security 80 years after the second world war is now barely credible. But Starmer still needs to do whatever he can to press Trump to arm Ukraine more now.

Well, what better can you expect of a vassal state?

Trump fires Fed Governor Lisa Cook.... but markets are hardly rattled

President Trump has fired Fed Governor Lisa Cook in what is a first for an American president, the removal of a serving member of the Fed.

Analysts see Trump's move as an assault on the independence of the Fed. They say- and they have been saying this for several months now- that Trump's remarks and actions carry the risk of seriously upsetting the financial markets. 

The stock market and the bond market, they say, will not take kindly to a move that undermines the ability of the Fed to effectively battle inflation.

Well, that is the theory. 

The outcome so far is turning out to be very different. 

The markets seem quite unfazed by Trump's latest move or his earlier broadsides against Fed Chairman Jerome Powell. The media notes that the stock market reaction is "muted". The Financial Times seems seriously disappointed that the markets have not fallen off the cliff. It comments:

some analysts are concerned that investors aren’t taking Trump’s cumulative threats on the Fed’s independence seriously enough. Although bond yields jumped on Tuesday, they eased back somewhat over the course of the day.....investors also have shown signs of being lulled into a false sense of complacency.. Ultimately, more severe market ructions might be what is needed to force Trump to pull back from causing greater damage to the central bank and the US economy at large

Well, the "greater damage" just ain't happening. 

Could it be that the markets think that Trump is right? That the economy will benefit from cuts in the interest rate? That the fear of inflation getting out of control is exaggerated?

India's purchase of oil Russia: Peter Navarro clarifies what the gripe is

President Trump's decision to impose punitive additional tariffs of 25 per cent on Indian exports to the US has sparked outrage as well as disbelief in India. The Indian position is as follows:

• India's imports of oil from Russia (88 million tonnes) are less than those of China (109 million tonnes)
• India was encouraged by the Biden administration to buy oil from Russia so that prices in the oil market (sans Russia) did not go up 
• India is not violating any sanctions in importing oil from Russia. There is no US or NATO ban on countries importing oil from Russia, only a price cap (which was $60). 
• India has every right to procure oil from the cheapest source as that benefits the Indian economy

India has articulated these points repeatedly in recent weeks. Trump's trade advisor Peter Navarro thought it necessary to counter the Indian position through an article in FT:

Importantly, before Russia invaded Ukraine in February 2022, Russian oil made up less than 1 per cent of India’s crude imports. Since then, daily imports have soared to more than 1.5mn barrels — more than 30 per cent of India’s total.  To be clear, this surge has not been driven by domestic oil consumption needs. Rather, what really drives this trade is profiteering by India’s Big Oil lobby. Refining companies have turned India into a massive refining hub for discounted Russian crude.  The refiners buy oil at a steep discount, process it, and then export refined fuels to Europe, Africa, and Asia — all the while shielding India from sanctions scrutiny under the pretence of neutrality. 

So, the objection is that India is not using cheaper Russian oil for the benefit of Indian consumers. Instead, oil companies (mostly one private company) are using cheap Russia oil to sell refined oil in the international market at huge margins and have reaped massive profits. India's oil imports from Russia are not about benefiting the Indian economy but about enriching India's oil refiners. 

Scott Bessent has reinforced the point made by Navarro by saying that China had increased Russia's share in its oil imports from 13 per cent to just 16 per cent whereas India had increased it from 1 per cent to 42 per cent. 

This is what I would call the Indian arbitrage – buying cheap Russian oil, reselling it as product.....They’ve made $16bn in excess profits – some of the richest families in India. 

Perhaps the controversy would not have arisen if India had used cheap Russian oil to lower the price for Indian consumers through lower duties. 

Italians and the 'evil eye'

In India, we call it 'nazar'. In the west, it's the 'evil eye', envy at one's success or good fortune in life. The superstition is rife in India and, it appears, in Italy as well, going by this story.

In India, people make offerings in the temple to mitigate the effects of the 'evil eye'. In Italy, it appears they hire witches to do the job: 

While many modern Italians shrug off the idea as superstition, a number of people in both rural and suburban areas — including the town where I grew up — still call on witches to perform removals (a service also available by phone). Victims of an evil eye are supposed to feel heavy-headed and restless, as though they’ve been beset by ill fortune. They have migraines and can’t sleep. They may forget a pot on the stove or have a car accident. Babies who cry inconsolably are believed to have caught the evil eye. The most beautiful infants and their mothers are thought to be especially vulnerable. 

Nor are Indians or Italians the only ones susceptible to the belief:

Eleni, from Greece, says she had the evil eye removed “multiple times a day” by her grandmother when she was growing up. Now an astrophysicist, she admits to having maintained a belief about the ritual into her mid-twenties — long after she knew that the behaviour of oil in water depends far more on the temperature and metallicity of fluids than spells. Sina, from Tehran, tells me his mother hides money around the house if a visitor gives her family a compliment — a superstition designed to ward off the evil eye. Rasha, from Beirut, has adorned her baby’s pram with evil eye talismans. Megha tells me that her father still paints a mole on her neck or cheek if she looks nice before leaving the house — a version of the ritual in which Indian babies’ faces are smudged with henna to protect them from “nazar” or the evil eye. 

Trump- Putin Alaska meet triggers fury amongst Trump's critics

There was no deal, no announcement of ceasefire, no mention of any follow-up talks between the US and Russia. Yet President Trump gave the meeting a rating of 10 on 10 and expressed optimism about what would follow.

Why? Because the meeting helped reaffirm the long-standing personal relationshp between Trump and Putin. 

Trump stood at the mid-point of a red carpet and clapped his hands at Putin walked towards him after alighting from his plane. Trump received Putin with a warm handshake and then escorted him past a guard of honour to a podium. It was roses all the way

The equation between the two Presidents has long been a source of annoyance to neocons in the US and Europe. And, seeing the way the two got along, the neocons and Trump's critics in general are furious.

The Guardian's correspondent caught the mood very well in a priceless piece of reporting, never mind that the report oozes bile:

That was the moment he knew it was true love.

Donald Trump turned to gaze at Vladimir Putin as the Russian president publicly endorsed his view that, had Trump been president instead of Joe Biden, the war in Ukraine would never have happened.

“Today President Trump was saying that if he was president back then, there would be no war, and I’m quite sure that it would indeed be so,” Putin said. “I can confirm that.”

Vladimir, you complete me, Trump might have replied. To hell with all those Democrats, democrats, wokesters, fake news reporters and factcheckers. Here is a man who speaks my authoritarian alternative facts language.

......Trump, 79, purportedly the most powerful man in the world, literally rolled out the red carpet for a Russian dictator indicted for alleged war crimes over the abduction and transfer of thousands of Ukrainian children. Putin’s troops have also been accused of indiscriminate murder, rape and torture on an appalling scale.

In more than 100 countries, the 72-year-old would have been arrested the moment he set foot on the tarmac. In America, he was treated to a spontaneous burst of applause from the waiting Trump, who gave him a long, lingering handshake and a ride in “the Beast”, the presidential limousine.

Putin could be seen cackling on the back seat, looking like the cat who got the cream. As a former KGB man, did he leave behind a bug or two?

The reaction in the US has been hostile. FT reports:

Donald Trump returned to a political backlash in Washington over his handling of Vladimir Putin after failing to follow through on his threat of “severe consequences” if the Russian president refused to agree a ceasefire in Ukraine...

Europe continues to be in denial. The European Council has released a statement that says:

Ukraine must have ironclad security guarantees to effectively defend its sovereignty and territorial integrity. We welcome President Trump’s statement that the US is prepared to give security guarantees. The coalition of the willing is ready to play an active role. No limitations should be placed on Ukraine’s armed forces or on its cooperation with third countries. Russia cannot have a veto against Ukraine’s pathway to EU and Nato.

The latest news is that Zelenskyy will meet Trump on Monday at the White House. If all goes well, Trump, Zelenskyy and Putin will meet.