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If the decline in manufacturing in rural southern Virginia for 500 workers in a low tech deli meatpacking plant can devastate whole communities, then imagine what happens  when manufacturing in chips and science with high paying jobs are put at risk by market forces focused on AI.  This week WSJ carried a story about Qualcomm which does design and does no manufacturing is planning a takeover of Intel, a leader in manufacturing for advanced chips in the US, a key part of Biden-Harris strategy to regain a American foothold in Chips manufacturing. Such a takeover makes no sense for America's long term interests. Qualcomm could simply jettison the manufacturing capabilities -a key part of America's long term chips and science strategy just because AI focus has distorted market forces. IMAGINE THE DAMAGE. Regulators need to safeguard the Nation's long term interests for reliable chips manufacturing within the US, to avoid the crisis experienced with chips outsourced overseas leading to severe shortages in 2021-2023. How this has happened is that AI has created distortions in the market so that companies are valued differently. So that an Nvidia gets valued at $1 trillion and even for a day at $2 trillion then going back down to half that, all within a 12 month period. AI is distorting the market in ways that a chip leader like Intel now gets valued at $90 billion a third of the $290 billion it is valued at only a short time ago, making talk of takeovers possible even from smaller design only companies such as Qualcomm. The market failure in this case comes from markets being distorted by not reflecting true costs of shortages America experienced in chips from lack of its own advanced manufacturing during 2021-2023.   ...

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The "cut, cap and balance" pledge of Republican candidates for the presidential election of 2012. The current House version requires capping federal spending at 19.9% of GDP by 2018. This say House leaders is in accordance with the average spending levels for the last 30 years. It would have to come down from 24%. The balanced budget amendment caps spending at 18% of GDP and a balanced budget within a decade. The pledge is written promise to cut spending immediately.

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The share of new mortgage loans backed by the US government through Fannie Mae and Freddie Mac is at 92%. This makes the fast overhaul of the two agencies much more difficult. Treasury Secretary Geithner said last week that overhaul of the two agencies could take 5 to 7 years. The problems with Fannie and Freddie are real. The U.S. government subsidizes mortgages through Fannie and Freddie, encouraging Americans to take on more debt. Their balance sheets pose serious risks in another crisis, as long term investments are financed with short term borrowing. Any losses will be the responsibility of the US government. A recent paper from the US Treasury outlined some of the steps needed to wind down both agencies and to reform the way they operated including- requiring larger down payments and lowering loan limits, and increasing the fees charged for the government's guarantees to be more in line with the risk being taken. Slower reform in this area means additional systemic risks in the event of another crisis....

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Much of what is written here about Xi Jinping pursuing Chinese socialist vision was known since he became president in 2013 when China's Communist party was losing its appeal, and efforts were made to seize power within the communist party by a leader in the western province of Chongqing. Bo Xi Lai attempted to take advantage of the situation with appeals to the working class and without any genuine commitment beyond a power grab. It was well known that Xi Jinping is a son of one of the veterans of the Communist party under Mao, Xi Zhongxun, unlike leaders who followed premier Deng Xiaoping such as Jiang Zemin. Zemin was a relatively unknown figure who was in university during the crucial period of 1947-49 when Mao came to power in mainland China. It would not be correct to say that little was known about Xi's own ideas about socialism as the long term answer to China's problems. Xi also came in as president at a time when the Communist party was losing its appeal to working class people after three administrations that followed premier Den Xiaoping. These three administrations followed a form of state capitalism that allowed companies to pollute the environment, compete without any regulations, and allowed to operate without any controls as long as they pursued growth aggressively and expanded the economy.There was an effort by Communist party regional leader in western Chinese province of Chongqing, Bo Xi Lai, to use this as an opportunity to grab power in China. During his first year as president Xi had to resolve this issue by having a court trial after revelations of corruption and misuse of power by Bo Xi Lai.  Xi's father Zhongxun's role in the revolutionary movement offers clues to Xi's own convictions and faith in the party. Zhongxun was a communist soldier who set up the revolutionary base areas in Shanxi-Gansu northwest border region of China that provided a refuge for Mao's army following the Long March. Other clues come from Zhongxun's role as head of propaganda during the period after 1944 and in 1952. Xi's family background particularly on his mother's side shows a fervent commitment to Chinese socialist vision during the chaotic years when the Japanese invaded China and Chiang Kai-Shek's nationalist forces failed to defend China's sovereignty. One reason Xi has been less understood is that little attention is paid to Xi's mother, Qi Xin who was highly educated and fervently believed in Chinese socialism and nationalist spirit during the Japanese invasion in 1938. In fact Qi Xin had to leave middle school after the Japanese took over Beijing. She joined the Counter Japanese Political and Military University to continue education and in 1941 attended the Central Party school. She met Xi's father Zhongxun in 1944. In 1953 she enrolled in the Marx School of Communism, and it was her position at the school that offered her husband added protection during the Cultural Revolution that affected Deng Xiaoping and others. With such a history in the 1930's, 1940's, and 1950's it is likely that Xi was profoundly influenced by his father's role in the revolutionary movement, and his mother's faith in socialism with national spirit as the way to protect against the foreign invasions. It would now appear that by the time Xi joined the Politburo in 2003 there was no question about the future course China would take given the role of his parents, and the events of 1938 the fall of Beijing, his mother having to flee, and the events that followed. Xi showed resilience during the period of the Great Proletarian Revolution when he was sent to the villages at a time when he would be studying in school and college. He was sent to an agricultural commune in largely rural Shanxi province where he worked as a manual laborer alongside other people and developed a relationship with the local farmers. Unlike other leaders during that period which could even be said about premier Deng Xiaoping in 1989, Xi took a different lesson from this experience largely because his father and mother were committed to the socialist vision for the long run. His father was still not fully rehabilitated by premier Chou en-lai when Xi was allowed to enter Beijing's Tsinghua University in 1975. He studied chemical engineering at Tsinghua graduating in 1979. Upon graduation he worked as a assistant for 3 years to a vice premier who was minister of defense. He then left Beijing for Hebei province to work as a deputy secretary of the provincial CCP. He was made Mayor of Xiamen, then governor of Fujian province in 1999 where he tackled environmental conservation before moving to Zheziang province. His father passed away in 2002 and it would appear that he was carefully trained in different provinces instead of staying in Beijing, for a position of national leadership. Xi got his break in 2007 when the upper leadership of Shanghai city was tainted in a wide ranging pension fund scheme. He was made party secretary for Shanghai. This was the position Jiang Zemin had held before he succeeded premier Deng Xiaoping. In only a few months in October 2007 Xi was made one of the 8 Politburo members, ready to succeed Hu Jintao as president. Xi's perception of being sent to the villages and making it to university education was that it was part of the long run socialist struggle, with pain that his father had also endured as simply a phase in which things would be right in the end. Xi's mother comes across as a resilient figure and one who had herself gone through the struggles of the 1930's and aided her husband on one occasion. Some of this resilience could have been passed on to the son. Xi's wife is a zealous participant in Chinese dance and music performances that created enthusiasm for the Chinese socialist revolution from the 1930's period. In his conversations  with colleagues in the party, in culture and temperament, Xi has been forthright about this background and his style of work.  Xi is unlike premier Deng and the presidents who succeeded him such as Hu Jintao mentored by a former mayor of Shanghai Jiang Zemin who came to power in 1989. Xi is more in line with the leaders around Mao like his father in his outlook and thinking, with a cautious temperament that comes from years going through ups and downs of political struggles. He is once said to have responded with dismay about being in a top position in the government knowing how precarious this had been for his father. The education at Tsinghua, his engineering background, and his easy familiarity with farmers in the provinces, mean that he understands China and its history well enough to have the confidence to shape Chinese policies in a way that none of his predecessors had except Mao, premier Chou-en-lai, Liu Shao Chi and a few veterans from that time in the 1930's. That Xi waited patiently for so long to gradually assert his ideas about socialist vision for China may be the surprising part of his behaviour till 2021.  It may be that he wanted to make the changes only after he could persuade party leaders and colleagues of his vision and long run goals. And because the Chinese economy had grown so large that it would take time to steer the ship in a different direction for the long term. In most of the negotiations with president Trump he cautiously let trade negotiators handle the situation, all the time learning about how to tackle problems of China's relationship with US and Europe. US president Biden also has a vision that is veering towards a socialist perspective in terms of bringing gains of progress to workers and families. So does Mr. Trump, Mr. Boris Johnson in UK, and Social Democrat's Scholz in Germany. It is both economic and political as Mr. Xi is quoted as saying in this WSJ report. The necessities of such action are both economic, social and politically driven as capitalism has veered way off course.  In this report it is mentioned that Soho China 40% stake was taken by a large capital markets firm in New York in the hope of large gains, as Soho China developer was a tycoon who wanted to leave China. Seeing it as not favorable to his company following events in Hong Kong. This behaviour of capital markets groups in New York and tech companies in Silicon Valley, driven by profits and not aware of the social and economic problems of working class American families is a problem in the US and in Europe. It is also what has driven so many large tech companies to expand manufacturing operations in China, that hurt US manufacturing capabilities and American workers jobs- an issue raised by president Trump and taken up by president Biden. Biden has already moved to make Intel Corporation change its plans and invest in American manufacturing technologies in a quietly implemented U turn. US president Biden is left with the unenviable job of solving this huge problem during the pandemic. He has also committed to a somewhat socialistic vision with a $3.5 trillion plan for workers and families, as has vice chancellor Scholz in Germany with his own version of programs, after the failures of unregulated forms of capitalism. Scholz goes so far as to say his mission is to show that there is really no such thing as a self-made man, that it is help from society, his fellow citizens, and government, that makes it possible for him to do his work. In a sense the world is shifting away from Reagan forms of capitalism without regulation after seeing disastrous results during the pandemic. Not just China. Some form of government guidance and regulations are now seen as essential in China, the US, UK, Germany and India for a better society and a better, healthier life, and for opportunity for all in each country.   ...

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Annamaria Andriotis does enormous service to millions of borrowers for student loans by putting down in simple payments terms everybody can understand the approach to take for a university education. She points out the pitfalls in taking federal loans and following the advice of the student loan office. The federal student loans have an origination fee of about 4.2%, so even if you pay off the loan early you are stuck with the origination cost, which private lenders such as major banks do not normally charge. On a $100,000 loan this could be $4200 right off the beginning, reducing the loan to $95,800. Private lenders offer fixed rates also at attractive terms of about 4%-4.25%, with added reduction of 0.25 to 0.5% for loans with automatic payment. The lenders include Wells Fargo, Suns Trust. It is important to have good credit ratings. Scores of over 700 or 720 in credit ratings provide the most attractive rates, yet a good credit rating is also acceptable. FICO scores range from 350 to 850 for credit ratings. Added reduction of quarter to half percentage point for automatic payment. A loan for $100,000 taken with Federal PLUS loan and government guarantees could run 7.21% for fixed rate. Andriotis points out that compared to the $4586 payment on a $100,000 student fixed rate private loan at 4.25% for 10 years, a federal guaranteed PLUS loan at fixed rate of 7.21% for 10 years would cost $3541 more over the life of the loan. Mortgage loans for 30 year fixed rate jumbo loan is about 4.14%. In September 2014, the rates for jumbo mortgage loans offered by private banks are now converging at the 4.18% for conventional mortgage loans. For auto loans zero percent financing from auto company lenders such as Toyota Financial are a better option. Rates of 2% on auto loans may be available from private banks and credit unions. SunTrust Banks has an online lending division LightStream that is offering personal loans to borrowers having good credit ratings scores, with interest rates of as low as 1.99%. The borrowers with excellent scores can get the unsecured option at the best rate of 1.99%. Credit unions are offering lower auto loan rates of 2.64% and 2.74% compared to banks charging average of 4.79% and 4.9%, according to data from SNL Financial. Millions of borrowers with good credit ratings, especially for student loans, need to start early in checking out the rates and shopping for the best rate. A good credit rating of parents can enable a student to make a huge difference in payments for undergraduate or postgraduate education, and avoid the unnecessary burden of high interest rate loans in a low interest rate environment....

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What Krugman makes of the $1.089 trillion dollar U.S. deficit for fiscal year ending in Sept. 2012. He points out that the U.S. can have a stable to declining debt to GDP ratio with $400 billion debt. He cites the Clinton years (1992-2000) when the debt to GDP ratio declined from 49% to 33% with steady growth. What about the remaining $600 billion. He attributes this mostly to temporary factors which are reversible as growth picks up. Of this remaining excess deficit he says $400 billion is from lower tax payments to Treasury because of the 2008 economic crisis and the recession that followed. This includes the payroll tax cut which is also temporary to keep up consumer spending in the recession. The $150 billion is from unemployment insurance, food stamps, and other aid which is also reversed once growth picks up. He places emphasis on restoring economic growth as early as possible and reducing unemployment and using the recession for business to continue to invest in R&D, productivity, and government to preserve the social fabric, invest in education, and provide incentives for growth. S&P Nov. 8 report says the net government debt to GDP ratio is estimated to be over 80% in 2013. It will have to stabilize at current levels for S&P to preserve the U.S. credit rating, says S&P executive Chambers. The higher debt to GDP ratio in 2013 and lower growth rates expected makes the situation different from the lower debt to GDP ratios during the Clinton period. Britain, France and other major industrialized nations with political parties at either end of the political specrum have also chosen to stabilize or reduce debt to GDP ratios rather than take on the risks of them going much higher. The U.S. has the added problem of health care costs out of control with an aging population and about 17.9% of GDP going to healthcare costs in 2010 expected to increase significantly, as Medicare actuaries estimate enrollee numbers jump to 80 million in 2030 from 50 million in 2012. Democrats and Republicans have largely sidestepped this underlying problem in fiscal cliff negotiations....

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John Taylor, a professor of economics at Stanford, points out that the numbers being thrown back and forth in the budget debate can be confusing. He suggests a better way to look at this. The U.S. budget was 20% of GDP in 2007, and has been at or below that level in recent years, before the higher spending to counteract the effects of the 2008 financial crisis. As the economy recovers and private investment increases it makes sense to bring the spending back to levels where it has been- spending levels that do not endanger the country's credit rating and are a prudent way to manage the nation's finances. Taylor asks the question- if the U.S. got by by spending 20% of GDP in 2007, then why is it not possible to do this in future years when the GDP will be higher. In 2000 spending was actually 18.2% of GDP. Taylor says that with higher incomes people will be moving into higher tax brackets which should increase revenues in future years. In three years since 2009 the spending levels are up to 24.4%. Under this scenario private investment would make up for lower government spending and debt, leading to higher employment and GDP as business confidence rises. ...

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Japan's new prime minister told the Japanese Parliament in a policy speech, that a crisis like that in Greece was possible in Japan, if trust in national bonds was lost and the policy of public spending to lift the economy was not reversed. This speech followed the resignation of Shizuka Kamei, as banking minister. Kamei was seen as an advocate of continued public spending. He cautioned that a policy of relying heavily on issuing debt could not be sustained for long. Japan has government debt of $9.7 trillion, which is close to twice its gross national product in 2009. Much of this debt is held by the public in Japan, but analysts have cautioned that with the aging population, it is possible that people who retire will need the cash from bonds, requiring the government to turn to the debt markets for financing. Among the proposals Kan suggested is raising the 5% sales tax to pay for rising social welfare costs for an aging population. Satoshi Arai, the new national strategy minister, says the government will draft a plan by June 22 to address the public debt. He said the government would not exceed $500 billion in bond issuance for fiscal year ending March 2012....

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U.S. budget deficit reached 10% of GDP with the 2008-2009 recession and the need for federal spending when tax revenues dropped. Partisan budget fights took place in Congress in 2010 and 2011, with a downgrade of the U.S. credit rating in 2011. By December 2014 the budget deficit declined to $488 billion for calendar year 2014, or $483 billion for fiscal year, as the unemployment situation improved. The deficit in 2014 was a liitle below 3% of GDP.

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Ruffenach gives an excellent account of how many people describe their expectations and how it actually turned out in retirement, the good and the bad. He cites numerous examples to give as broad based a picture as possible. Health and active life, passions and interests, loss of self esteem in work for some and finding substitute interests, taking risks to try something new and the rewards. More people describe positive experiences in those surveyed. Health is the main concern for 41% in actual retirement, children and other things are all less than 10%. Travel should be planned early as it becomes harder as the years go by and one gets older. It is not as difficult as people think to make new friends in retirement, and this active social life with new friends can play a positive part in spending time. In addition there is the opportunity in retirement to take things slowly and leisurely, and spend time more on oneself and one's own interests.

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The current economic expansion in the U.S. in April 2014 is at 58 months from the beginning of recovery in 2009. In this exceptional account Josh Zombrun of WSJ compares the current expansion to previous expansions since 1950, with the views of experts such as Stan Hall of the NBER committee, which studies turning points. This expansion is forecast to go for 90 months into 2016 by the U.S. Federal Reserve, and 102 months into 2017 by the CBO. Sooner or later, says Stan Hall, some adverse unpredictable event takes place that ends the expansion. So far the expansion has been slow and protracted, as predicted by economists Reinhart and Rogoff from previous financial crises in the last century, giving it room to grow as corporate earnings continue to improve. Fed chairwoman's sense of slack in the economy also provides room for employment and incomes to grow in the later stages of the expansion. This is good news for the emerging market economies such as India and China, and for the European Union, faced with slowing growth. So how does this expansion compare with earlier ones. The expansion of the 1991-2001 of the tech boom was 120 months, 1961-1969 of the Sixties 106 months, 1982-1990 of the Reagan era 92 months. The controversial one on shaky foundations is the recent housing boom 2001-2007 of 73 months ending in a huge bust with the 2008 financial crisis. The shorter expansions are the 1975-1980 Post-Vietnam one for 58 months, and the 1970-1973 spurt before the OPEC price surge. Figures are from the NBER, CBO and the Federal Reserve's Summary of Economic Projections....

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Checking the facts, Obama's claim of Romney's $5 trillion in tax cuts and Romney's claim of Obama taking $716 billion out of Medicare.

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This editorial in the WSJ argues against Trade Representative Lighthizer's move to increase the percentage of North American content in a vehicle so that it creates more jobs. Currently Nafta rules require 62.5% of a duty free vehicle be made in North America. Lighthizer wants to lower the content coming from Asia or Europe. This is not favored by Canada and Mexico and it makes Mexico less competitive than it is now.

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Paul Ryan asks President Obama to put forward his plan for deficit reduction the day after the passage of the August 2, 2011 Debt Ceiling and Deficit Reduction bill in Congress. Ryan points out that health care cost increases are on an unsustainable path with costs going up by 8% in 2011 and projected to go up by 8.5% in 2012. The Obama Health Care legislation tries in Ryan's view the same failed bureaucratic efforts of the past to cut health care costs. Without a genuine and sure plan to cut costs the only way to pay for Medicare with new mandates is to increase taxes again and again. He cites the CBO's Long Term Outlook in June that total tax revenues would have to double by 2050 to finance the current rate of spending on Medicare and other programs. For Ryan the failure of the Obama administration to come up with its own plan for deficit reduction after passing the Health Care legislation- with expanded mandates and no certain cost control in the reform - is the most difficult to swallow. ...

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Krugman points out that the federal tax rate for the top 1% is 34% in 2013, according to the Congressional Budget Office, because president Obama let the high end Bush tax cuts to expire. It is the number to remember says Krugman- 34. In 2008 the figure was 28.2. Under Hillary Clinton the average tax rate for the top 1% would go up by 3.4 percentage points, according to the Tax Policy Center. Some of this would help pay for the tution plan to provide access to the middle class to public universities. Under populist Trump, Krugman points to the elimination of the inheritance tax and tax rates going down substantially, and no such programs to promote the upward mobility that everyone is talking about, and no way to pay for a big infrastructure building effort for growth and jobs- upward mobility that is the focus of every candidate's election campaign including Sanders, Trump in appealing to older white working class families, Clinton, Ryan, Bush, and others in both parties.   ...