LyrArc Article Gist
US president Biden points out in his letter to the US Congress- "When I was elected President, a pandemic was raging and our economy was reeling, and trickle-down economics had undermined our nation’s growth long-term. I was determined to rebuild from the middle out and bottom up, not the top down, because when the middle class does well, we all do well. We can give everyone a fair shot and leave no one behind. Our plan has brought transformational progress." "Along the way, we’ve achieved one of the most successful legislative records in generations, bringing new opportunities to communities of all sizes nationwide. We’re tackling years of underinvestment in public infrastructure, clean energy, and advanced manufacturing, making sure the future is made in America by American workers. We’re making the biggest investment in American infrastructure in generations, including over $400 billion for 46,000 projects in 4,500 communities to date. These projects are rebuilding the nation’s roads, bridges, railroads, ports, airports, public transit, water systems, high-speed internet, and more, in every part of the country. We’re also making the most significant investment in fighting climate change in history—advancing breakthroughs in clean technology, boosting energy independence, lowering electricity costs for hardworking families, and revitalizing fence-line communities smothered by a legacy of pollution. At the same time, we’re working with the private sector to strengthen America’s semiconductor and advanced manufacturing industries as well, empowering workers and small businesses to share in the benefits. Already, my Investing in America agenda has attracted $650 billion." ...

LyrArc Article Gist
In this report WSJ looks at US Treasury Secretary's warning to China about its role in the free world and its position in the international trading system and the obligations to human values that come with it. Janet Yellen is so well known as head of the Federal Reserve and as US Treasury Secretary that it is easy to forget her experience at Yale studying under James Tobin who supported meeting social goals, whom she calls a life long mentor. Tobin set the foundations for economic policy in the Kennedy administration in the early post war period, after working in the Franklin Roosevelt administration during the war. Social goals, business paying its fair share of taxes, building infrastructure, were all a part of the FDR and Kennedy-Johnson administration.  It is also easy to forget that Yellen set the foundations for economic policy under Clinton and then under Obama administration the period when social goals were not met, infrastructure was neglected, globalization meant shipping jobs and factories overseas to China, and lack of financial oversight over banks that led to the 2009 financial crisis. The contradiction made Yellen realize only late during the Obama administration how much of a diversion she had taken from the social goals of the FDR-Truman-Kennedy post war period.  As one of the architects of the economic policy underpinning the emergence of China's role as the factory of the world, that destroyed many working class communities in the US, Yellen is in the economic role that Merkel shares in world of political economy with her integration of the German economy with that of China. Today as she calls for a retreat to the values shared by her mentor James T, Tobin and of FDR and Truman as they responded to the Berlin Crisis in the aftermath of 1945, and the Korean War with large scale invasion of South Korea and the kind of refugee crisis that we see today in Ukraine, there is much room for reflection. Reflection on what was lost in the intervening years of the Bush-Clinton and Obama years that led to the situation that the free world faces with totalitarianism today.   ...

LyrArc Article Gist
The logjam continues between the French and German banks- represented by the Institute of International Finance and its negotiator Charles Dallara- and the governments of Germany and Greece, supported by the IMF. The position of the Greek government is that the interest rate on new bonds stretching out over a long time period that woud be exchanged at 50% face value of existing bonds should be set at rates well below 4%, because Greece faces a growing deficit and rapidly worsening economy. The German government which is faced with the prospect of providing additional funds to Greece supports this. The IIF position is for an interest rate of between 4-5%.

LyrArc Article Gist
There is considerable opposition among analysts, Congressmen, and experts to continuing with the current management at GM if help is provided to automakers. And GM's management is insisting on staying on which may complicate things. There is a strong perception throughout the country that management has failed the company, and now the economy of the midwest and the country. And some are arguing that bankruptcy or government receivership will be necessary to effect a complete restructuring of the industry after years of failure both by management and unions, the credit crisis having come as the last blow after a long series of mistakes and inability to get things right.

LyrArc Article Gist
At the current rate of reducing the 10% current account deficit by the central bank, it will be the end of 2013 when it could be brought down to 6%. This may not be fast enough as Turkey could face an external shock if sentiment of foreign investors changes before that. As Turkey partly depends on foreign investors for short term funding of the deficit, this is critical for Turkey's economy. Only one quarter of capital inflows are in the form of long term direct investment. As the situation in the eurozone worsens in 2012-2013, Turkey is in serious danger of a sharp downturn in the economy after years of growth. The IMF has cited Turkey in the list of countries where the credit growth to GDP has increased to the level of a warning light indicator. Other countries cited by the IMF are China, Vietnam, S. Africa and Brazil.

LyrArc Article Gist
Views of Paulson, Summers, Rubin, Murray in a discussion about the long term finances , the stimulus, tax cuts, Lehman's collapse, at the CEO Council in November organized by WSJ. Summers put it this way "we are going to need some impetus to the economy for two to three years." Summers points to demand based stimulus as key and only middle class tax cuts helpful for demand based rebounding the economy. But with all the needs, to help financial institutions, health care coverage for 50 million uninsured, education, energy, he does not see tax cuts as the biggest priority. Summers also sees the net cost of aid to financial institutions as the right number, as investments in the finance sector should be seen as assets even if one has overpaid for a house one is living in, as compared to spending on a vacation which is money thats gone.

LyrArc Article Gist
This editorial in the Economist looks at China's relationship with Russia. It says the Ukraine conflict and western sanctions have resulted in Russia moving closer to China. Yet the two countries have competing interests in central Asia, and different relations with India and Vietnam, in the Asian region. Russia is also wary of China copying designs of Sukhoi aircraft in sales to China of advanced military technology. The major oil and gas deal signed in 2014 provides Russia with a new outlet for oil and gas with the cooling of the relationship with Europe. Yet Russia has strong ties built with Germany over the entire post war period, and differences have emerged in U.S.- German relations. Germany's relationship with Russia- cooled by sanctions and German wariness over Russian intervention in Ukraine and Russian wariness over NATO close to its borders- spans 7 decades and is likely to remain strong in the long term. This comes from the shared sense of awareness of the terrible conflicts of an earlier period, just as it has for French-German relations, and from the strong efforts made by Germany to preserve the relationship and peace in Europe. Chinese president Xi's visit to Moscow on May 9, for celebrations of victory over Nazi Germany, will be followed by a visit May 10 by Chancellor Merkel of Germany. A factor in German-Russian relations is the close trade links, cultural exchanges, and history going back to the GDR where Chancellor Merkel is from, built up over many years, that are likely to set the long term future of relations. China's dominant partner relationship in the China- Russia relations does not bode well for the future of relations, compared to the equal partner relations with its European neighbor, Germany. In this different light Ukraine is a temporary pause, in German-Russian relations and peace in Europe, a situation which is in China's long term interest as it focusses on its economy and the next phase of development for a modernized economy. Especially as China continues to build on its own vital trade relations with Germany and the European Union, the latest example being Germany, other EU nations, and India, joining the China sponsored Asian Infrastructure Investment Bank. ...

LyrArc Article Gist
A shift in priorities away from focussing on high growth to lower sustainable growth was announced by China's premier Wen Jiabao at the National People's Congress, China's parliament, in March 2012. This shift will reduce investment in infrastructure, power generation and exports, which will affect the level of imports of commodities from commodity producing nations in the Middle East, Australia, Canada and Brazil. It should increase imports of software, computers, entertainment, tourism and high tech goods from the U.S. and Europe. Chinese leaders have said they would make this kind of shift for some years now but growth has consistently increased more than the target rate, and domestic consumption as a percentage of the economy has actually decreased in the last decade. Now 9-10% growth rates may be a thing of the past and the target of 7.5% set this year may be actually closer to the real figure. The Chinese leaders have belatedly realized the need to make these changes now because slowing markets in Europe -which is seeing declining growth and high unemployment- and in the U.S., make the issue impossible to avoid. Wen told the Congress: "Accelerating the transformation of the pattern of economc development... is both a long term task and our most pressing task at present... Domestically it has become more urgent but also more difficult... to alleviate the problem of unbalanced, uncoordinated and unsustainable development." This is his way of saying that its unavoidable and better to start in earnest now, and at the same time recognizing the resistance to change from the stateowned companies and the other interests who have benefitted from surging growth, and now occupy a central role in the power structure. An opinion article in the People's Daily, China's official newspaper, said: "imperfect reforms are to be preferred to a crisis caused by no reforms." The World Bank's president Zoellick is respected by the Chinese leaders. He also urged them to make changes now. The recent report of the DRC, China's planning research arm, and the World Bank, also laid out the new direction away from a focus on infrastructure to domestic consumption. The fear is sudden deceleration in the absence of policy action. The impact of this will be negative for commodities over time, leading to slower growth in Australia, Brazil, and Canada. It should boost imports from Europe and the U.S. of high tech, consumer, pharmaceutical goods over time....

LyrArc Article Gist
Alluring scenery but hollowing out. Rail station in Dunedin New Zealand looks like it is from the 19th or early 20th century. New Zealand wages are 27% lower than Australian wages in 2025. New Zealand's weak, economy cuts in public services in 2025 affect jobs and employment. New Zealand sees emigration of 69,000 for the year to Feb 2025, highest on record.  Australia has mining and huge demand from China and India for its coal to support it's economy. In a paradox black coal in the interior supports a healthy lifestyle with weather and sports in the coastal belt of Brisbane, Melbourne, Sydney, and further up the coastline in Perth and Adelaide. New Zealand life means higher grocery prices and less quality than Australia, it means health services are not as good, and the public services are being cut to reduce the deficit and borrowing. Most migration is to Auckland and towns in the interior look scenic such as Dunedin but are increasingly seeing people leaving for lack of prospects, lack of pay raises and high cost of living, poor public services. This is a cycle that was felt in 2002 and goes back a long way and is unlikely to change. ...

LyrArc Article Gist
Labour party leader Corbyn reflects on his years as leader, the 2019 election, his effort to get Britain to spend more money to fix social wrongs made worse through austerity programs of the last decade. He tells BBC's Laura Kuenssberg, that he was denounced in the election for advocating spending more money  than Britain could afford. He sees himself and Labor vindicated in its proposals for spending vast sums, to invest in the state, as this is what the Tories are now doing under Johnson. He sees Britain as ill-prepared for the coronavirus pandemic after ten years of austerity. The result of the Labour party election will be announced on April 4, a contest between Sir Keir Starmer, Rebecca Long Bailey, and Lisa Nandy. Mr. Corbyn is resigning after Labour's defeat in the 2019 election. He says the divisions over Brexit which led to a vote at Labour's conference to negotiate a new deal with EU and put it to another referendum, clearly did not win the election. Reflecting he says he did his best with an expanded level of membership for Labour party, and shifting the party to an interventionist economic policy that was anti-austerity investment led economy. He made his share of mistakes says Corbyn, as he was just human. And urged new Labour party leaders to spend time listening to people in all parts of the country, and recognize the strengths and good in the people.  ...

LyrArc Article Gist
Turkey's currency Lira dropped to 7.2 to the dollar on August 13, 2018, taking the drop in the currency in 2018 to about 70%. About 90% of Turkey's debt with foreign lenders is denominated in foreign currencies. Turkey is highly dependent on money from overseas to finance growth and credit. 

The risks increase with higher interest rates in the U.S. and the falling value in the Lira which makes it harder to pay off debt. Turkey faces loss of confidence from foreign investors as its relations with the U.S. deteriorate in a tariff war with the U.S. increasing the focus on factors long ignored by American and European investors such as its high dependence on dollar denominated loans.

Analysts say the problems in Turley are unlikely to be systemic for all emerging markets because Turkey's problems are unique with questions about the management of the economy and the authoritarian rule of president Erdogan.  

LyrArc Article Gist
This editorial in the New York Times points out that the new president of the ANC party -that runs South Africa and has a monopoly of power in the post Apartheid years, under Mandela, Mbeki and Zuma- faces a uphill task as the ANC remains deeply divided after supporting Mr. Zuma in office till the very end. Apart from the stagnant economy, there are challenges the ANC faces in the lethargy of the post Apartheid years, and the culture of corruption, and patronage management that led to mismanagement of state enterprises.

LyrArc Article Gist
There are some major problems in the American jobs market which suggest a long drawn out effort to reduce the high unemployment rate. One is the divergence between the vacancies that are developing and the rate at which firms are filling these vacancies. With vacancies remaining, unfilled and firms remaining cautious about the economic outlook and leery of hiring, the increase in economic output or GDP growth of 3% expected on the optimistic side in 2011 is not translating into lower unemployment. Structural problems are causing a great deal of difficulty in reducing the jobless rate. The recession hit manufacturing and construction very hard. And those who worked in these industries are not those with the skills and training to take up jobs in health care and education or other similiar fields- here skill mismatches are the problem. Geographic factors and the property prices drop are creating additional barriers. About 25% of mortgage borrowers owe more than their property is worth, and their are fewer buyers in regions with depressed job prospects like Michigan. There is a large increase in long term unemployment- over 27 weeks. Those out of work for more than 6 months see their skiils, job connections and confidence erode. A Brookings Institution paper estimates that this rise in long term unemployment by itself can cause labor market recovery to take twice as long as after the 1982 recession under Reagan, when unemployment reached a high of 10.8% and took 2 years to get back to 7.5%. Add to this the fact that a lot of jobs were lost in 2008 and 2009, with a six percentage increase in unemployment in a short period unmatched by anything since the Great Depression, with long term unemployed reaching 6.5 millon or nearly half of the total. And the 3% growth rate estimated by the government is anything but certain. It is questioned by the IMF as a stretch. This does not take into account the problems in the banking sector, as home equity loans gone bad show up on their balance sheets in latter part of 2010. According to a CreditSights report (see the US economy in 2010 in Group search for more information on this) with estimated losses of $33 billion. A struggling banking sector and tighter credit will add a structural dimension from the banking sector to the wobbly hiring. The "muddle through" approach to banking problems of the Obama administration in tackling bank's bad debt will continue to pose risks....

LyrArc Article Gist
The US sees no contradiction to India looking for bargain priced oil from Russia to meet the growing needs of its economy and is actually furthering the goals of the G-7 by lowering the price Russia gets for its oil. It helps the economy of 1.2 billion people that like the rest of the world has struggled to fight the pandemic and has incurred the kind of heath costs that even China is now struggling to pay for. President Biden clearly understands and supports this. Democracies an only succeed if they fulfill the aspirations of their people. On this point Biden made clear in his State of the Union that he will generate what it takes from large corporations that paid no tax, to invest in America. Rather than fuel the profits of large oil companies India has increasingly chosen to use Russian discounted oil to invest in India. The Biden and Modi policies are identical generate savings and invest big time in trillions of dollars over the next few years to put democracies ahead in meeting rising aspirations that have been unfulfilled for far too long, which is where the real battles are being fought and will be won, and rightly so. US Assistant Secretary of State for Energy Resources, Geoffrey Pyatt,  said during a visit to New Delhi on Feb. 16-17- "Our experts now assess that India right now is enjoying a discount of about USD 15 a barrel in the price that it is paying for its imports of Russian crude. So by acting in its own interest, by driving a hard bargain to get the lowest price possible, India is furthering the policy of our G7 coalition, our G7 plus partners in seeking to reduce Russian revenues."  Looking at the bigger picture the problem was created by Germany under Merkel who built Germany's over dependency on Russian oil to power a cheap fuel economy it thought was in Germany's interest. This is now being reversed by the hard work of Mr. Habeck of the Green party in the coalition government of Scholz in securing alternative supplies in record time for the EU to avoid a recession. In this sense the perception created early of India which has suffered itself from invasions in 1962 and incursions in the Himalayas more recently, it is not a problem India can solve by becoming energy short at a time when it has invested so much in fighting the pandemic. A similar problem was created by Republican and Democratic administrations of the past that concentrated the supply chain in one country. India lost much investment in the last 8 years as a result of the policies of Merkel's Germany and past Republican Democratic administrations in concentrating the supply chain in one country. ...

LyrArc Article Gist
Allan Meltzer, professor of political economy at Carnegie-Mellon University and the author of the most comprehensive history of the Fed, and John Taylor, atop Treasury official under George Bush both oppose expanding the powers of the Fed and putting it in charge of controlling systemic risk. Meltzer says the Fed exacerbated the crisis by keeping rates too low for too long, and did nothing to control systemic risk. He also says the in testimony to the House Financial Services Committtee, that the Fed has in its whole history never done well in controlling systemic risk. It has failed to see the storms coming. Kohn, vice chairman of the Fed, says the change is only incremental, as the Fed has asupervisorty role already. Taylor's view is that the Fed does best when its responsibilities are limited to its original role. A change would dilute its main mission of steering the economy and jeopardize its independence.

LyrArc Article Gist
California's economy is going through tough times during the coronavirus. Unemployment is up to over 20% which compares to 14.7% for the U.S., closer to that of New York. The state depends on the tourism industry, agriculture in the San Joaquin Valley, and entertainment industry around Los Angeles for jobs. Tech in the San Jose area does not account for as many jobs. The state also has a public university system and foreign students mostly from China bringing in $7 billion.   Its port system around Long Beach and Los Angeles connects with the Asian economies and China, for goods mainly transported to the rest of the U.S.  All these sectors are the ones most badly hit during the coronavirus.  California now has a deficit of $54 billion and was the first state to borrow from the federal government to pay $13 billion in unemployment claims. Undocumented Californians are not able to collect unemployment because of their immigration status, creating an American version of the informal economy that is found in India and Italy or Spain. California has 83 million people taking plane trips to the state for a tourism industry that normally brings in $145 billion. 600,000 travel industry jobs were lost in the state. Taxes related to travel are a significant source of revenue for cities in California bringing in $12 billion. The only sector that is less affected is the tech industry, yet this makes up only about 10% of the jobs or 1.7 million higher paid but fewer jobs. This tech sector at about just 15% of the California economy GDP, is of a precarious nature with a boom bust pattern, the last boom one that happened since the 2009 financial crisis. It in no way forms a significant support for employment or income for people in California or the U.S., and may even be responsible for distortions in the allocation of capital away from infrastructure and public services, through its disproportionate influence on how the nation's capital is allocated. The broader changes underway during coronavirus are likely to affect the state over many years, as supply chains shift away from China, and as infrastructure and public services investment assume their rightful role again in the nation rebuilding effort, agriculture and rural America become a part of the American renewal story.   ...

LyrArc Article Gist
James Glassman, has published a new book, "Safety Net." In the book he makes an admission that he was wrong in his theory and understanding of the stock market described in his earlier book, "Dow 36,000," published in 1999. That book called for stocks to triple in value in 5 years. Glassman wrote then, at the height of the tech boom, that stocks could immediately double, triple or even quadruple as was happening at that time for tech stocks going public, and they would still not be too expensive. Part of the arguments rely on a definition of risk. Glassman said in his earlier book that stocks and bonds are equally risky in the long run, because stocks had never lost money over the long term and over long periods of time their returns were constant. But Glassman is using a technical definition of risk as how much returns can deviate from the average. What investors face in the real world is a common sense definition of risk, which is- what are the chances you will lose money? This point says Jason Zweig, is clearly stated in Howard Marks coming book, "The Most Important Thing." And what about the point about stocks never losing money, the central point in Glassman's thesis? Here research from Dimson, Marsh and Staunton of London Business School is useful. This research shows that in France from 1912 through 1977, stocks lost money after inflation. The upshot of this is to emphasize the need for looking at risks as real in the real world, where things have changed to the point where the current stock market rally is attributed by the Fed chairman to vigorous efforts to fight a downturn in the economy. For investors these risks are not going away with a sudden surge in stock prices....

LyrArc Article Gist
Fed's Bernanke sees cuts and higher taxes by state and local governments combining with higher oil prices slowing the U.S. economy. He told the Citizen's Budget commisson in New York, that in the long run the most important issue in fiscal matters will be whether the composition of the federal budget serves the public interest. And in saying this he emphasized the benefits of early childhood education, preschool programs and lifelong acquisition of skills. He advised states to take anticyclical steps to avoid the impact of boom and bust spending. One way to do this is to build rainy day funds that are then used for capital investment when times are bad.

LyrArc Article Gist
Xi Jinping is seen in this WSJ report as putting China on a course as a competitor of the US compared to other leaders such as Hu Jintao and Jiang Zemin, yet these prior leaders faced a enoromous gap in technology and capital to make it ludicrous. The shrinking of this gap is a result of free markets theory that took no account of the national interests of the US or of the European Union in shifting manufacturing lock stock and barrel to China.  A deeper look at China requires looking at it from putting oneself in China's situation since the period of the 1912 revolution and the 1919 May 4th movement for Science, Modernization and Democracy, to better understand its motives and realities. Jiang Zemin could not pose the question of competing with the US at the time because China's per capita GDP was less than $100 in 1990 and by 2000 during Hu Jintao's term still about a tenth of American per capita GDP.  Even today with population in North America of about 500 million in the economies of US, Canada and Mexico, China lags far behind in technology and capital resources. The Biden administration does not believe in this idea of free markets theory, wrong from the beginning that prevailed incredibly and puzzingly for too long, that it does not matter where you make as long as it is made at the least cost anywhere. It ignored what China and the US under Biden both believe for the US or China that the US is its people and the people is the country. For the US the Civil war itself as Lincoln said in rallying people to the Union, was fought because labor was more important than capital. When looked at the situation in China as stated by Xi at the party congress recently is for having made progress for the overriding goal of Modernization to build a moderately prosperous socialist economy. Huge problems in China remain hidden- ensuring self governance that is honest and accountable to the people, creating jobs and opportunities for hundreds of millions of young people even as supply chains shift after the pandemic in Europe and the US, India and other countries to their home countries for Made In USA, Made in Europe, and Made in India. China is not such a believer in the flawed free markets theory of the non existence of national interest to not grasp the natural aspects of the US and EU, India wanting to build their own manufacturing up again to the fullest. In this situation it also probably realizes the need for a pause to the rampant free markets type of growth that has damaged China's water, air and environment as much as it has damaged the world through climate change. Quality of growth is the new ethos and this gives the US and China, India, the EU and other countries a common frontier to shoot for. The nuclear aspect is also there and managing this well is a common interest for all countries exercizing responsible leadership. ...

LyrArc Article Gist
Upward mobility in China was weak and income growth for average workers sluggish during the years before the coronavirus outbreak. In this sense China is similar to the U.S. and Europe where upward mobility gains after the second world war were lost in the last 30 years partly from the loss of manufacturing to China. It is much worse now as the effects of the coronavirus lead to drops of as much as a third in income for ordinary workers. Lower income workers, the vast majority of Chinese numbering hundreds of millions now suffer from lost work or diminished wages. Small businesses cannot afford to pay the salaries paid before and as workers dip into savings or increase borrowing the retail spending is taking a hit. As a result economists see a vicious cycle of lower spending and lower incomes for the hundreds of millions of ordinary workers in construction and smaller businesses. Some small businesses could just close down because of weak demand affecting the economy over the long term. Before the coronavirus China went over three decades from being a Communist country with relatively equal distribution of wealth but lack of growth and technological development to a capitalist country with the structure of state control of the economy from the Communist period. The result is that 1% of the people control 33% of the wealth and the bottom 25% having 1% of the wealth, according to a 2015 Peking University study. China's president Xi Jinping, head of the Communist party, tried to reverse some of these trends by attacking corruption and making changes that began the task of reversing decades of unequal distribution of wealth under state sponsored capitalist growth. Investments were made in rural medical care, infrastructure and basic services. This did not have much impact because much of the pattern of growth over three decades continues including the housing bubble.  With coronavirus the trend is set for even more unequal distribution of wealth as many workers at the bottom half of the population in incomes either lose work, or see drop in incomes as businesses that hire them struggle from shoe factories to other retail business. Reports of informal economy and street markets in Chengdu in western China and bringing this part of the economy back by the state are effort to get people work in other ways. Researchers estimate that China's bottom 60% of household in incomes lost about $200 billion in income in the first half of 2020. In May premier Li Keqiang said 600 million people in China earn only about $140 a month. Many who lost income or jobs do not have support from the government as China lacks a program of comprehensive unemployment insurance as in Europe and the U.S. to help people get over bad times. 300 million migrant workers are particularly vulnerable to loss of income and dipping into savings.   ...

LyrArc Article Gist
Sheila Bair, former head of the FDIC, says householders, business leaders, politicians and government leaders are all prone to looking at the short term, and refuse to make the short term sacrifices necessary to put the economy on a trajectory of long term growth. There is also a sense of short sightedness and resistance to any regulatory steps that would actually create a better framework for the financial industry for longer term growth. The financial industry opposes increases in capital requirements for reserves that would lead to a healthier balance sheet for the industry, and opposes any efforts to create amore stable financial system for the country that might sacrifice short term profits. She points to IBG-YBG sense that prevailed in the industry, I be gone- you be gone, leading to the mortgage crisis. The industry tolerated faulty ratings, faulty packaging of securities, and showed complete lack of attention to the long term consequences of such behaviour and excessive leveraging, as long as the short term profits could be made. To a large degree the situation remains the same today, says Bair. Bair and Feldstein were among the first to suggest the Obama administration tackle the huge number of bad mortgages, that were leading to a wave of foreclosures. Only if this problem was tackled head on could this be put behind and the economy be put on a path to steady growth. As it stands today the Obama administration has not tackled the problem, the financial industry still has bad mortgage debt on its books, foreclosures continue, housing prices face further declines, and this will hold back an economic recovery. She refers to the "rationalization" of the last crisis by leaders in the financial industry through the assertion that nobody saw the crisis coming, when she says some of us did see it coming, and a "rationalization" by the same leaders in saying they did nothing wrong. Bair says that the continuation of business practices that led to the financial crisis of 2008 create risks for a new crisis. And some people in government continue to support these same practices while claiming popular support. The President's focus every two years is on getting re-elected and raising funds for re-election, business is focussed on the short term, and this creates a pervasive sense of the short-term throughout out the system and society. ...

LyrArc Article Gist
Roshe gives an independent view of whats happening in the economy and sees a recession, sticky inflation that will last a long time for the US and the world economy in a semirecession for a long time. Roche of independent Strategy consultancy in London does not see the Fed's actions to increase liquidity having any effect in resolving the issues of solvency which have resulted from the overleveraging of brokerage and mortgage firms on Wall Street, only exacerbating the effects of a weaker dollar and higher inflation over the longer term. He points out that hedge fund and broker balance sheets or nondeposit financial institutions (NDFI's) half the size of banks in the USA and a quarter of the size of banks in Europe have their assets and liabilities financed by repurchase agreements. They lend and borrow against the collateral of assets that are marked to market, which means that they can borrow more and easily in a rising market cycle and can borrow less and with more difficulty in a falling market cycle. With the contracting cycle in place now they are facing insolvency issues. This may have been delayed till now because of investment banking profits and having credit lines for the duration of a contract. Till now investmet banking profits gave them leverage over lenders who made money from fees in investment banking. Now the banks hurt by writedowns of loans in mortgages and other areas are likely to tighten lending and call in their loans. What the Fed's actions will do is delay things a bit but not prevent a credit contraction and fall in asset prices. David Roche was Global Strategist for Morgan Stanley before starting Independent Strategy to provide fresh thinking and new insights on financial markets. His estimate is that reduction in available credit for corporate investment in technology, R&D and factories as a result of contraction in the financial system will require reducing corporate debt ultimately by 11-12 %. This will generate a loss of 5% points of real GDP growth for the US and put into a recession. For Europe he estimates loss of 2% points of real GDP growth. Global credit losses of $1.4 trillion would cause a contraction in world GDP of 2.5 percentage points or half the current rate of growth. For the global economy he sees a gray dull world of semi-recession and stickly inflation that will last a long time even without any major policy blunders. If this is original thinking and he is right then the Fed, the IMF, the Council of Economic Advisors, and general thinking on Wall Street that sees a short recession lasting several quarters may be in for a big shock....

LyrArc Article Gist
Landers and Gale of the WSJ show how undersupplied conscript soldiers, high inflation and industrial breakdowns during wartime have led to major upheavals in Russia. Three conflicts led to such changes in Russia's domestic situation. The Russo-Japanese war in 1905 led to Russia seeing one fourth of 340,000 Russian troops killed in a battle near the Chinese city of Shenyang, and loss of most of its Baltic fleet in a Japanese attack on Port Arthur. The war ended with a peace treaty arranged by president Theodore Roosevelt of the United States. The Russian czar gave up most of his absolute powers in 1905.  In 1914 Ukraine was involved in regime change as the Germans fought to take Ukraine. The czar wanted to keep Russia's expansive sphere of influence. Without Ukraine's agriculture and industry and its population Russia would not be a great power, says an expert on Czarist Russia. At the time the Russian military was ill prepared in motorized vehicles and communications equipment, and industry lacked the ability to resupply the military. Inflation jumped leading to unrest and protests. Fighting in the First World War led to millions of refugees. In 2022 experts see the same old problem of seeking spheres of influence leading to wars, and the lack of sufficient ability to cope with prolonged wars when short wars were expected by the regimes in power in Russia. Dissent inside Russia and protests led to the abdication of Czar Nicholas in March 2017, and Bolsheviks led by Lenin seizing power in November of 2017. By 1979 Ukrainian leader Leonid Brezhnev was leader of the Soviet Union as Russia's economy could not keep up with modernization. Seeking spheres of influence Brezhnev pushed into a long war in Afghanistan in the mistaken idea that a quick strike on Kabul with a change in government would achieve Soviet goals in central Asia. By 1989 the Russian army withdrew from Afghanistan and in 1990 the protests led to the fall of the Berlin Wall and the collapse of the Soviet Union and emergence of Russia as a separate country. Landers and Gale of the WSJ see these events in Russian history showing how wars have led to domestic changes and upheavals in Russia when leaders projected power beyond Russia's capacity to handle the results of conflict. Russia's economy is about the size of Italy or Britain say experts and its industry much smaller than the European Union economies and the US, Japan combined.  ...

LyrArc Article Gist
Alexandra Stevenson provides this exceptional account of how the debt deal between Argentina and the hedge funds was negotiated. A decade long deadlock was broken for the first time when Argentina's finance secretary in the newly elected government of Mauricio Macri met Jonathan Pollock and Jay Newman of Elliott Management on Dec. 7, 2015, at the Waldorf Astoria hotel in New York. It is based on 8 intervews with the participants in the negotiations, court filings and emails. Critical to the settlement was the work of Dan Pollack, a trial lawyer with the McCarter & English law firm who acted as the mediator and made some rules including no pen and paper allowed, building trust through open discussion. Back channels helped including one setup through Marcos Mindlin of energy firm Pampa Energia in Argentina, who helped the hedge funds communicate with the Argentine negotiators. Mindlin met the hedge fund representatives at the World Economic Forum in Davos. Argentine president Macri insisted on making the terms he offered public on Feb. 1, 2016 of $6.5 billion because this is a sensitive issue in Argentina. Pollack pushed for a simple business transaction to close the issue and not the complex debt structuring the hedge funds favored. On Feb. 19, Judge Griesa of Federal District Court in Manhattan, who presided over the legal settlement, agreed to lift an injunction that would prevent Argentina from making bond payments and raising new money, and set a deadline of Feb. 29 for the settlement. On Feb. 28 the deal was signed by all the hedge funds. Argentina paid all holdout hedgefunds $9.3 billion, according to the Economy ministry, Elliott getting $2.4 billion....