LyrArc Article Gist
Prof. Scott Kennedy of the Research center for Chinese Politics and Business, voices concerns of experts who think that the $585 billion stimulus and the doubling of lending this year, increase in exports by a third last month, all point to an economy that is expanding too quickly. Kennedy says that no one defies economic laws, that eventually endless growth can get get you in trouble. The concern is whether the overexpansion of credit and the size of the stimulus may have led to overreaction in stimulus spending. People's Daily newspaper of China said that China's leaders are moving much faster than leaders of developed nations. But the flip side of this is that in the rush to increase spending there may be a lot of wasteful spending resulting in many bad loans a few years from now.

LyrArc Article Gist
Hugo Dixon says the deal made by eurozone leaders for Greece in July 2011 favors private creditors. The bondholder haircut was much smaller, eurozone governments and taxpayers will make up the difference. This he says is like a cat in the bag presented to the receiver as a pig as long as he does not look inside, called a "poke." Dixon says that if Greece cannot implement austerity measures under a new government and the deal has to be renegotiated bondholders may face a larger haircut than the 20% under the current arrangement. It would have been better he says to do this now but the ECB's threats may have led to the German and French governments treating private creditors with kids gloves.

LyrArc Article Gist
The CDU convention in Leipzig, Germany passed a compromise resolution that lays the ground for a EU country to voluntarily leave the euro zone and still maintain membership in the European Union. The resolution called for changes to the Lisbon Treaty to allow a euro zone member that is "unable or unwilling to permanently obey the rules connected to the common currency... to voluntarily... leave the euro zone without leaving the European Union." Merkel told delegates that Europe must change the EU treaty to allow for strong automatic sanctions for violations of the monetary union treaty. "We need to send a clear signal. We don't whine; we don't complain. We know instead that we have a job to do." On the issue of voluntary withdrawal from the eurozone, the earlier decision by Merkel and President Sarkozy of France- when prime minister Papandreou of Greece decided to put the issue of membership to a referendum- was to tell Greece that leaving the eurozone would mean leaving the European Union. This CDU resolution provides a basis for Greece to resolve its debt problems outside the euro currency, as experts suggest....

LyrArc Article Gist
Speaking to Cadena Sur, a Spanish radio network, EU Commission Vice President, Joaquin Alumnia said the EC will have plans to monitor the restructuring of each bank that gets EU funds. He said: "Whoever gives money never gives it for free. There will be people coming to Spain to make sure the money will be properly used."

LyrArc Article Gist
Andrew Roth describes a situation in Russia where president Putin is more popular than the ruling party. The United Russia Party was shown having support of 45% in pre election polls. The election campaign used Putin posters and the slogan "the party of the president," to increase voter support.  Some voters see Putin working really hard to improve the economic situation. Samuel Greene, director of the Russia Institute at King's College, London, says that even after efforts to increase support United Russia Party has failed to generate voter enthusiasm. Voter turnout was low especially in Moscow and St Petersburg. The election result is seen by experts as a way to give Putin support to tackle the economic problems facing the country, and ensure stability. About 343 members of the parliament out of total 450 are from the United Russia Party. The budget shortfall of 3% is being met by the government  by using state funds, and one of the sovereign funds is likely to be exhausted in 2017. One of the options is to cut back on social entitlements, increase the pension age. Prime minister Medvedev has already said state pensions cannot be indexed because "we don't have the money right now." ...

LyrArc Article Gist
Simon Nixon points to two large capital gaps Spain's government faces for Bankia. Spain was not prepared for the events of the last month as it took control of Bankia. The agreement to convert 4.5 billion of preference shares into equity gives it 100% of Bankia parent, Banco Financiero y de Ahorros, and 45% of Bankia. The capital gaps Spain faces for Bankia comes from expected loan losses which it has been slow to deal with. BFA-Bankia's real estate loan losses are estimated at 52 billion euros. Capital provisions for this are only 11%. J.P. Morgan estimates another 4.9 billion euros will be needed under new government rules. But these rules do not reflect all the losses if real estate loans are written off and and other loans are correctly shown as nonperforming, and other corporate loan provisions are increased. When this is done total losses would in reality be about 12% of the 190 billion euro loans at BFA-Bankia or 22.8 billion euros, according to experts. To correctly deal with this would require $15 billion euros, in addition to the 4.9 billion euros, for a total of 19.9 billion euros. The other capital gap comes from BFA's capital carried on books at 12 billion euros, the pre-IPO value. This has been shrinking rapidly to 5.5 billion euros at 2011 end, and is now down to 2.8 billion euros. This could mean another capital gap of 5 billion euros, depending on to whether shareholders are wiped out. Bankia has 350,000 private shareholders and it will be important to maintain depositor confidence. The total is close to 25 billion euros in capital gap for BFA-Bankia that the Spanish government must face up to quickly. It does not stop there because there are other cajas savings banks and other banks that will have to be taken into account- too large a loss would mean losing market confidence and poorer access to financial markets. ...

LyrArc Article Gist
The 4.7 billion euro loss at German steelmaker ThyssenKrupp for the fiscal year ending in Sept. 2012. The loss stems mainly from management's bet on a large project to make steel slabs in Brazil and ship it to a plant in the U.S. state of Alabama for finished product of high-grade sheets. The project suffered delays and by the time the Brazilian plant was running in 2010, the strength of the real Brazil's currency and higher wage costs had affected the economics of the plan. Steel demand also slowed in the U.S. The plants which required an investment of 12 billion euros now have a book value of 3.9 billion euros. Thyssen bet too much on one project and it failed. Three management board members who had oversight over the compliance, steel and building technology areas had their contracts terminated, and a new CEO was appointed in 2011. Heinrich Hiesinger, a manager from Siemens AG is the new CEO. ThyssenKrupp's image has been sullied by reports of price fixing of rail tracks and scandals involving the communications head for foreign railroad contracts. Hiesinger says "until recently there has been an understanding of leadership in which old-boy networks and blind loyalty were often more important than the success of the company." He faces a difficult challenge of changing the corporate culture and developing a new strategy. His plans are to turn ThyssenKrupp into a high-tech engineering business by selling the steel mills in Brazil and Alabama, and the stainless steel division to Finiish company Outokumpu Oyj. This will shrink steel from 41% of sales to 30%. To implement this strategy Hiesinger needs a capital increase. This runs into problems as the Krupps Foundation headed by Berthold Beitz, which controls 25% of the stock, does not want to see its influence diluted. Other problems include the role of Gerhard Cromme, head of the supervisory board, which failed in oversight over the failed project. Cromme is also the head of the supervisory board at Siemens AG. At Siemens he helped a company cleanup after a bribery scandal and brought in new management. He also headed the Cromme Commission on corporate governance code for German business, which makes the current corruption allegations embarrassing for Cromme....

LyrArc Article Gist
Mexico's domestic car market is weak, most of the cars are manufactured for export. From 2000 to 2008 the domestic car market in Brazil grew by 80% to 2.67 million vehicles, and in Argentina by 79% to 610,713 vehicles. Sales went up in 2008 by 14% in Brazil and by 8% in Argentina. Whereas in Mexico domestic sales fell 6.8% during 2008 to 1.03 million vehicles. Sales for 2009 in the domestic market are expected to fall by 20%. And auto exports from Mexico fell dramatically in Jan-Feb 2009 dropping by 52% to 89,242 units over same period last year. Auto exports generate a $15 billion surplus for Mexico so there is concern about this sharp drop. Auto exports rose 3% in 2008 to 1.7 million units, and 79% of 2008 domestic production of 2.1 million units went to exports. One in 74 people were sold a car in Brazil in 2008, and 1 in 66 in Argentina, whereas in Mexico it is one in 107 people. And Mexico's minimum wage of 55 pesos is $3.85 per day, the lowest of the 3 countries. The low paying jobs and poor income distribution in Mexico is a reason for this. Under Nafta Mexico also allows the import of cars from the USA which are over 10 years old. Mexico imported 909,000 vehicles in 2009. To keep the Mexican auto industry from sinking the government is considering assistance to the domestic manufacturers, dealers, and car loan companies, a total of 9.5 billion pesos, as well as sales incentives for buyers. But domestic sales are relatively smaller and the market weak to make up for the huge loss in exports judging by the Jan-Feb 2009 numbers off 52%. A lot is at risk with the domestic car industry generating 24% of manufacturing exports, 16% of manufacturing, and with more than a million workers directly or indirectly associated with the industry. Already GM and VW have announced layoffs. ...

LyrArc Article Gist
Greece's political parties negotiated through the night of Feb. 9, 2012, over the details of the 130 billion euro aid package from the EU and the conditions laid out by the troika of the EU, IMF and ECB. The political leaders Papandreou and Samaras agreed on wage cuts -with a 22% cut in the minimum wage- and public sector job cuts, but resisted deep cuts in pension benefits which would leave a 300 million euros shortfall in 2012 budget targets. This is part of 3 billion euros in austerity measures set by the EU finance ministers as a condition for further aid. Another sticking point was the serious consideration given by the EU, according to EU economics commissioner Olli Rehn, that the 130 billion euros be placed in a special escrow account so that Greece's private creditors would be paid from the account before money was taken out for the Greek budget. This was seen by Greek political parties as an infringement of Greek sovereignty. The EU is requiring all the main political parties in Greece give written pledges agreeing to the program and the Greek parliament voting to approve it. The language used by Greece's finance minister, Evangelos Venizelos, as he put the choice to Greece, shows the difficult choices facing Greece, Venizelos said: "If we see our future and the salvation of the country in the euro zone, in Europe, we must do what we must do in order for the program to definitely be approved...If our country, our people prefer another political decision that necessarily leads out of the euro zone and therefore outside European integration, we have to say this clearly to ourselves and to our compatriots." Because the agreement is designed to get Greece's debt to 120% of GDP by 2020- it asks for a decade of austerity measures. Some experts say Greece is better of defaulting like Argentina and going back to the drachma to recover export competitiveness. Another factor complicating this is the rapidity with which the Greek situation is deteriorating and the lack of political consensus on austerity measures, with all poltical parties enjoying less than 25% support in the country making political party pledges meaningless. Elections are due in April 2012. The EU and Germany may be too focussed on getting through a March 20 deadline for a bond payment of 14.5 billion euros- because of nervous financial markets- and not able to gets its hands around the problem of long term unemployment and deteriorating economic situation facing Greece. Greece's unemployment rate increased from 18.2% to 20.9% in just one month from October 2011 to Nov. 2011, according to Elstat, the government statistics agency. Another difficulty is that the EU ministers may see the achievement of European unity as progressing without any pauses and corrections of course, as if in a straight line, when achievements of a vision of this kind take many years and problem solving; where even a Greek withdrawal from the EU could be a temporary step towards eventually rejoining in a better EU framework. ...

LyrArc Article Gist
Time Inc. publishes about 80 print magazines, including Time, People, and Sports Illustrated. CEO Joe Ripp says Time Inc. was slow to respond to the digital transformation of media, and revenue is declining for several years. In 2014 Time Inc. ad revenue from digital ads was only 17%. Unlike Meredith Corp. and other companies which have television stations, or cable-television systems which can support its business, Time has little in the way of support, and could be broken up if the transformation into digital fails. Ripp was Chief Financial Officer of first Time Warner in 1999, and then of AOL Inc. at the time of the merger with Time Warner Inc. One of Ripp's recent risky moves not followed by other media companies is merging the media content side with the advertising side in native advertising. Time Inc. has 7000 employees as of Dec. 31, 2014, 800 fewer than the prior year.

LyrArc Article Gist
The Federal Reserve Open Market Committe voted 7 to 3 to carry out "Operation Twist." This does not involve printing new money as was done for the $600 billion QE II Fed program. This time the Fed will shift its holdings to hold fewer short-term Treasury bills and notes and increase holdings of Treasury securities with longer maturities. The overall impact would be to increase the average maturity of its Treasury securities portfolo to 8 years from the current 6 years. The idea is to put pressure to reduce long tem rates. The Fed says the impact on short term rates is expected to be small because of its conditional pledge made in August 2011 to hold short term rates near zero until mid-2013. The impact of the Fed's move is likely to be modest considering the fact that the average rate on 30 year fixed rate mortgages is already low. It is at 4.09%, according to the latest Freddie Mac survey.

LyrArc Article Gist
Efforts in 2014 by Jizhong Energy Company to reduce pollution in the city of Xingtai, population 7.6 million, by closing down the worst polluting plants and installing new equipment. The World Bank put the cost of pollution, including cancer and other health problems, at 9% of gross national income in 2009. The Ministry of Environmental Protection estimates 3.5% of GDP as the cost of pollution in 2010. Xingtai's pollution levels have been recorded by air quality monitors at as high as 30 times China's national standard. Government figures show the PM2.5 in the city's air is 150 micrograms per cubic meter over the last 12 months, more than 4 times the national standard. To get some idea what this means, consider that Fresno, California, with the highest pollution level in the U.S. had PM2.5 level of 18 micrograms per cubic meter. To show it is serious the central government requires the city to post pollution figures online, down to individual smokestacks and exhaust ports.

LyrArc Article Gist
The U.S. Justice Department opens an investigation of the largest airlines, Delta, American, United Continental, and Southwest for collusion in limiting expansion. The major 4 airlines control 80% of the domestic airline seats in the U.S. The 3 major airlines have grown slowly compared to Southwest in recent years. JetBlue and Spirit are also growing faster. Southwest plans to expand by 7% in the 4th quarter. U.S. airline domestic seats show slow growth since 2010, with growth picking up in 2015 over the prior year to 3.5% in 2015, according to Innovata. For 2013 and 2014 <0.5% growth in seats, in 2012 decline of <1%, 2011 growth of less than 1%, and slight decline in 2010. During the crisis 2008-2009 airlines cut seat capacity. Price increases have averaged 5% increase from 2007 to 2014 to $391, adjusted for inflation for domestic seats. The U.S. Justice Department investigation will look at "possible unlawful coordination."

LyrArc Article Gist
The British governmet announced its own bailout plan. It offered to recapitalize its banks with an injection of capital i exchange for preference shares. It offered banks like the RBS, Barclays, HSBC upto 50 billion pounds to shore up their capital. It also provided guarantee of 250 billon pounds to help banks refinance debt and the Bank of England will double the amount it lends to banks under the special liquidity scheme to 200 billion pounds. The aim is to restore trust in British banks and allow banks to lend to each other and lend to consumers and companies which is becoming difficult or is even frozen and the financial arteries getting clogged as banks are afraid to lend to each other similiar to what is going on in the USA. In Spain the government announced it was creating its own 30 billion euro fund to buy assets from the nation's banks.

LyrArc Article Gist
For the first time the Census Bureau reported the number of non-Hispanic white American deaths exceeded the number of births for that group by 12,400. White births declined by 13% in 2012 from 2007 levels, partly because of the difficult economic situation following the 2008 global financial crisis. Experts say this could reverse with higher fertility rates for whites in future years with an economic recovery.

LyrArc Article Gist
Anton Harder in this Wilson Center publication of research uses correspondence between Jawaharlal Nehru and his sister Vijaylakshmi Pandit ambassador to the US in 1950, to show that the US made an offer for India to take a permanent seat at the UN Security Council. India had supported two resolutions on June 25, and June 27, first condemning the invasion by North Korea and second the organizing of a UN force of 29 countries to push back the North Korean invasion. Even though the US is not seen as actively engaging with India during that period and seeing through British eyes the colonial policies of encouraging  different powers in South Asia, that may not be true.  Who was India's foreign minister in 1950? Jawaharlal Nehru was both prime minister and foreign minister till 1964, which means there was less discussion of foreign policy than happens today during the Ukraine invasion with Jaishankar a career diplomat with 30 years experience, Rajnath Singh, and Mr. Modi, in talks with president Biden recently, and in further discussions Modi had with EU's Von der Leyen and UK's Boris Johnson, Kishida of Japan. Who was India's defense minister in 1950? Baldev Singh, a Sikh independence struggle leader was Minister of Defense for 1947-52 and tackled partition of Punjab and Kashmir issues. The rest of the years to 1957 when India faced the Chinese invasion of Tibet India's defense minister was also for most of the period Mr. Nehru, except Ayynagar in 1953, and Kailash Katju in 1955 and 1956. The controversial V.K. Krishna Menon was Defense Minister from 1957 to 1962, when Indian defenses were further neglected leading to the Chinese invasion of India in 1962, and his replacement by Yashwantrao Chavan. The purpose of this is to look back at what happened in earlier periods to understand where India stands today- and what choices it makes today. Clearly the US was looking for allies then and now. Nehru saw things from his own reading of history seeing China and India as both suffering from western invasion, not realizing that China's experience under Mao was different- that of Japanese invasion and bombing of China's major cities not just colonization of Hong Kong and other ports for trade under British trade based policies in 1850-1900. Thus a Communist Chinese version of China's defense involved taking over border regions such as Tibet putting China in direct and open opposition to India. Nehru never really grasped what was happening in Tibet and the war China fought against the Nationalists. American general Stilwell loved China deeply and had an understanding of its people as shown in Tuchman's account in her book Stilwell and the American Experience in China 1911-1945. Stilwell during that war had a better understanding of China, the strengths and weaknesses of Mao's China and of the Nationalists under Chiang, than Nehru. Some of these errors post 1950's and a concentration of foreign, defense and embassy positions in the person of Mr. Nehru and of Nehru family member such as Mrs. Pandit led to the Indian failure to act on Tibet and see it as see it for what it was -facing a Communist Mao led China that had fought the Japanese invasion as different from Bodhidharma's China of the history books. Bodhidharma's China will outlast Mao's China, yet it is Mao's China that India faces today. This also tells us that India has to think in new ways- as Lincoln said during a period when America was also making its own progress as an industrial nation in the 1860's. "The dogmas of the quiet past are not adequate to the stormy present. The occasion is piled high with difficulty, and we must rise to the occasion. As our case is new, we must think anew, we must act anew. We must disenthrall ourselves, and we shall save our country." India's values are values of democracy heightened not just by Mohandas Gandhi's ideas with Hind Swaraj written in 1910 just as powerful in 2022, but also by the heights of Ladakh where elections are held in remote regions of the Himalayas. India's values are values that are also shared in the best that America has in its values and culture and in the defense of freedom.    ...

LyrArc Article Gist
Turner and Travis get ideas of what a better prison system would look like in German prisons- showing a different way to treat and rehabilitate prisoners, a system with a human face.

LyrArc Article Gist
Obama's five year $200 million "My Brothers Keeper" effort to help black and minority youth.

LyrArc Article Gist
This WSJ editorial says the U.S. Federal Reserve needs a chairman who is politically independent, especially since the Fed has not been politically independent since 2008. It calls Ben Bernanke a political sidekick of Timothy Geithner at Treasury since 2008. A Summers Fed would have become too much influenced by the White House, which would not serve the country well, as new policies will be needed to wind down the loose monetary and fiscal policies, says the editorial.