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A 3 page July 14, 2015 update on the IMF's July 2015 debt sustainability analysis paper on Greece, points to severe damage to the Greek economy in the last year, especially under the uncertainty and closing of the banking system, making debt unsustainable without haircuts or extension of maturities and grace periods. About 85 billion euros is the additional financing needed as a result of the mismanagement under the Syriza government and closing of the banking system. It draws the conclusion that "haircuts could be avoided if instead there was a significant further extension of the maturities of the entire stock of European debt (GLF, EFSF) , in the form of doubling of grace and repayment periods, with similiar concessional terms on new financing." The paper adds that the maturity extension would have to be "very dramatic extension with grace periods of say, 30 years on the entire stock of European debt, including new assistance." One shocking part of the analysis is that within the space of one year from July 2014 to July 2015 the Greek economy went from reaching Debt to GDP ratio of 105% in 2022, to 170% after the closing of the banking system by July 12, 2015, according to the IMF. In 2014 it was at 177% of GDP....

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Cook and Olson look at how U.S. shale oil firms have handled the slump in oil prices. Their report in WSJ says the shale firms have weathered the oil slump well, with production declines in 2016 of only 535,000 barrels a day compared to 2015. The Saudi decision to not cut production and let oil prices drop has affected mostly higher cost less flexible production for mega projects such as deep water projects and oil sands in Canada. Oil shale firms are expected to snap back, according to experts, as demand increases. U.S. production is expected to increase by about 700,000 barrels a day by end of of 2017, say experts.

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International issues took on larger significance for the U.S. Federal Reserve in September 2015 as it looked at a small increase in interest rates. Schwartz points to the memories of the 1997 emerging market crisis and how fragile economies like Mexico were adversely impacted by rising rates in the U.S.. Mexico needed a large bank bailout and contagion spread to other countries. Kenneth Rogoff says the risks are real with declining commodity prices and falling currencies of emerging markets such as Brazil, Indonesia and Russia. Ripple effects would carry over to India and other countries. The sharp slowdown in the Chinese economy in the second half of 2015 was too recent for the Fed to take any sort of risk in September 2015.

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Kenneth Rogoff, Harvard University economist, author of the well researched book on the 2008 financial crisis, "This Time Is Different," gives his thoughts on the economic prospects for the U.S under the new Trump administration. He says 4% GDP growth and 3% inflation is possible temporarily for a while with stimulus policies, less regulation, and increased private investment. After 8 years of not investing in much needed infrastructure because of concerns about the deficit, the timing is right for such investments, especially as the economic effects of the crisis of 2008 gradually fade.  This is about taking advantage of ultra low interest rates to invest in infrastructure. He says it helps that Trump policies are pro-business. He sees drawbacks as the stimulus program adds a 25% increase with extra debt, adding $5 trillion over 10 years, but adds that for many years Nobel prize winning economist Krugman and others have said that there is good reason to increase borrowing to invest, and this is now being tried. Inflation remains an uncertainty- if there are large quantities of underutilized and unemployed resources it would raise prices less than its effect to increase output. The reverse would apply if the U.S. economy is closer to full capacity. One factor that would help- increasing confidence for business and increasing investment. Against this what he calls optimistic view or spin, is the idea of mistakes under a Trump administration, errors made and a degree of incompetence which he says is a real possibility. Overall his view is that some risks are appropriate now, and from his deep study of financial crises sees the slow growth of the last 8 years a result of a financial crisis that now begins to fade, creating the possibility of higher growth under prudent policies.  ...

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Alex Frangos and Sudeep Jain's interview with Duvvuri Subbarao, the governor of the Reserve Bank of India, India's central bank. India's economy is slowing with higher inflation, higher interest rates, inability of the government to make firm decisions on foreign investment, a declining currency, and a growing deficit. Subbarao has come under criticism for keeping interest rates low for too long after the 2008 financial crisis, and then as higher inflation persisted making a number of interest rate increases in 2011, which reduced the credit flows in the Indian economy. Subbarao's defense of his policy of not acting earlier on interest rates and then raising interest rates repeatedly, is that the economy need stimulus in the years after the global financial crisis. He says the inflation in the early stages was a result of a supply shock in food prices and would not have responded to interest rate adjustments. Inflation declined from 9.1% in November 2011 to 7.5% in December. Subbarao says the interest rate increases are over and he is looking for the right time to increase credit flows in the economy. His remaining concerns are with the fiscal deficit, and he called on the finance minister to map out what he plans to do for the fiscal deficit. He expects the deficit for the current fiscal year to increase from 4.6% to 5.5%, as the cost of fuel subisides rises and tax receipts decline. He calls for the removal of subsidies on liquified natural gas and electricity, but concedes that this will be difficult in an election year. Looking back Subbarao sense is that the central bank's policy actions were well calibrated....

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China's central bank, the People's Bank of China, reduces the capital reserve requirement ratio for the largest banks by 1% to 18.5%, on April 19, 2015. This move is expected to free up $200 billion for new lending by banks. China's securities regulator also acted to curb margin financing, the using of borrowed money to invest in the stock market which faces bubble conditions. China's economy is reported to be slowing making it uncertain whether the 7% annual growth target can be met.

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India's central bank, the RBI, lowered interest rates by a half percentage point to 8% in April 2012.

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Mexican president Nieto's poll numbers are at all time low of 24%, according to Reforma newspaper. He took office in late 2012 and has been hurt by human rights scandal of the murder of 43 students in the state of Guerrero, corruption issues, and failure to improve the economy. The invitation to Trump to visit Mexico left even people close to the president surprised, and was criticized widely inside Mexico. It is not clear what Trump or Nieto gained from the trip. As Trump continued his talk about building a wall on the Mexican border and having Mexico pay for the estimated $23 billion it would cost. He did this in a speech to supporters in Pheonix on the same day he met Nieto, showing the use of teleprompters and prepared script was not his way of campaigning. Just as the message to black people that Democrats take them for granted cannot resonate without the basic message delivered with compassion and understanding- such as done by the presidents Bush and Reagan- so also the message to Hispanic people is suffering from the same lack of empathy. Recent polls show only 3% of blacks support Trump. McCain and Romney gained only 4-6% in the U.S. presidential elections of 2008 and 2012. The message of the wall is also baffling as an election strategy. A Gallup poll in July 2016 shows only 15% of Americans opposing a pathway to citizenship for illegal immigrants, and only 24% of Republicans. There is another problem in the strategy. The rhetoric about walls and mass deportations, and the Trump temperament combined with handling of nuclear weapons is not winning college educated women in the suburbs with polls showing Trump lagging behind Clinton by about 20 points or 4 million voters with this group. It is hard to undo the damage done by this kind of rhetoric used in the primary elections as it gains distrust of voters. It would require a bad economy with illegal immigrants taking local jobs, and handling of immigration seen as weak, for such a message to gain some national traction. Both are absent for the most part with a steadily improving economy since 2012, lower unemployment, a tough enforcement policy on deportatons under Obama that exceeded that under Geoge W. Bush, and the talk of a wall comes with illegal immigration having declined steeply since the 2008 financial crisis. The real culprit appears to be elsewhere, the triple hit taken from hollowing out of the manufacturing economy that hurt the Conservatives in Canada, the insecurity created for older whites from the job losses and hits to net worth from the 2008-2009 financial crisis, and the increasing loss of access to health care and educational opportunities with high  costs. About 62 million households or the bottom half of the distribution in the U.S. have a net worth of about $10,000, a quarter of this group having zero net worth, according to the Federal Reserve's Janet Yellen at an Inequality Conference in Oct 2014. Problems no wall is going to solve, problems that built up over 2 decades, problems that will take a generation to fix.  It shows the tech miracle of the last 2 decades as a mirage for quality of life of the middle and working class. Tech as a tool to a goal, not a goal in itself, is the better way forward. ...

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India's central bank, the RBI, said inflation is expected to moderate to 7% by March 2012. RBI's economic growth forecast for India was lowered to below 7.6% for 2012.

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This WSJ editorial says the Indian government will have to do more to increase the growth rate. Rising inflationary pressures at 5% for core inflation are still present, with inflation in food prices running higher at 10%. Which may be the reason after a cut of 0.5%, Reserve Bank of India Governor Subbarao stated this would be all the country should expect for some time.

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The BBC's security correspondent looks at the cyber espionage being conducted from Russia during the U.S. presidential election. The U.S. director of national intelligence has pointed to the Russian government as the source of hacking into U.S. databases. U.S. intelligence officials say this is intended to interfere with the U.S. election process in some way. It follows hacking into the DNC database of the Democratic Party.

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The PBOC makes a 0.25% cut in interest rates and a 0.5% reduction in bank reserve requirement ratios in October 2015, designed to lower financing costs for business and put more liquidity into the economy.

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Oil prices in the U.S. drop to $55 a barrel on the New York Mercantile Exchange, and $65 a barrel for Brent crude price. Earlier expectation of the impact of reimposed sanctions on Iranian oil shrinking global oil supplies have been reversed with increased production from Saudi Arabia, Russia and the U.S.

Another new development that caused this reversal in sentiment is that the Trump administration granted waivers to some buyers of Iranian crude oil. The U.S. trade dispute with China has also added to this with lower growth forecasts. Unlike in previous years OPEC or Saudi Arabia cannot by itself shrink global supplies with production cuts. The U.S. and Russian output also plays a significant part.

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Wagoner became President at age 45, CEO at age 48. So you would think that young blood is coming in to GM, but that does not appear to be the case. At the Board level most of the Board members like George Fisher formerly of Motorola, have been around for a long time, and there does not appear to be new blood that would bring in fresh thinking. And serious decisions about investment in developing new technologies to develop fuel efficient cars, like hybrid technologies, electric and other alternative technologies, diesel technology, have been held up for years at General Motors. The way decisions are made on such issues with Board members voicing their opinions more than wrestling seriously with the issues, shows serious shortcomings of management and the Board. At key points of decision making the CEO and key members of his team had not prepared carefully, and Board members did not come up with serious thinking on the problems facing GM. It, appears that the investment in technologies to develop fuel efficient cars much earlier, long before they were finally being addressed in 2006, was a failure of Wagoner's management and of the Board. Management discussed this but continued to be mired in old ways of thinking that continuing with the status quo- cars with existing low fuel efficiency- would not expose GM to illwinds as preferences changed. Its clear from the description here of discussions within GM that the old thinking is quite entrenched at GM, and Wagoner just was not the kind of person who could vigorously articulate a new vision for GM. A couple of things are noteworthy in this account of management indecision at GM. When fuel prices began hurting sales of SUV's and large vehicles in 2005, efforts to get a decision on investments in new technologies for fuel efficiency for the whole product lineup failed at the Board level in an April 2005 meeting. One Board member saying at that meeting, that" do we want to lose another billion dollars in developing new technology for fuel efficient cars." And no one calling him to account that the remark still did not address the point that GM had to respond to the changing market and world oil dynamics, and not just hope for the best, as GM had aggressive competitors, and faced continually diminishing role in the market place for the entire decade of the 1990's. While April 2005 was already at the tail end of the previous era of gas guzzling cars and a decision then would still not have shown a forward looking vision of things, it was not until 10 months later that a decision was reached. And this almost from necessity, as oil prices jumped in 2006 after hurricane Katrina, and by this time President Bush was also calling for higher mandated fuel efficiency standards. The other noteworthy point here is that by making the changes so late in the game, GM had to compress the development cycle for new and some cases unknown technologies into short time frames. If the ingenuity of its engineers comes to its rescue it still faces another hurdle that of cost, because the technologies have to be perfected and improved, so that the costs are low enough for customers, and importantly comparable with what it is costing competitors to make the same fuel efficient technology engine or other part. Which is why one Honda executive remarked, "GM like everyone else is serious about this, because they have to be, but how many of their hybrids and how many Volts will they sell? Their technology is very expensive." Even if GM develops the Volt electric car by 2010, GM will need a whole range of fuel efficient technolgies to power its large product lineup. Its just to hard to avoid the conclusion that this is going to prove costly. All the dragging of feet and indecision, and failure to prepare GM for a different world in case something drastically different from what was expected happened, will prove very costly especially considering how aggressive and well financed some of the Japanese and German competitors are. It also hard to avoid the conclusion that there is too much bureaucracy at the large auto companies, and getting new blood and new ideas and fresh thinking is tough in a place where everybody agrees with everybody else, and there is uniformity of thinking. This makes it difficult for any original or wayward types to thrive. These bureaucracies look up to the top for direction. Initiative is discouraged on one hand, and at the same time even if a new direction is taken at the top. a lot of resistance can be expected to implementing it throughout the company without persistent persuasion and reminder of new facts and realities. This is true for both Wagoner and Mullaly as they face the skepticism of subordinates to new direction. Mullaly for instance has to remind his managers that large vehicles are only a small percentage of the entire global market, and if Toyota is making money in small cars so can Ford. See the link to this. Is Toyota immune from bureaucracy type behaviour throughout the company? Not really, Toyota's chairman emeritus came out of retirement in fact and went out of the way to caution its CEO and management about their complacency a year or so before. Shoichiro Toyoda personally intervened to caution against too much expansion in the US and climbing wage costs, and other risks they perceived such as the company managers in the USA appearing to be resting on their laurels. See the link to this. A lot of discussion is probably going on within these companies about the present state of affairs, and considerable anxiety for what the future will bring. It may be useful to ask the question is there something that makes it difficult for once successful organizations -now with entrenched bureaucracy and set ways -to put forward leaders with vision and foresight, till it becomes very late? The vision and foresight about where their markets and the world is heading, and the ability to move their organizations in that direction. Or to break out of old patterns of behaviour and thinking....

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An extraordinary achievement after months of careful planning in designing the 1 trillion euro bond buying program to calm German fears, diplomacy in Germany, and persuasion with German media, for Mario Draghi of the ECB and other members of the six member Governing Board of the ECB. Risk will not be passed onto other countries and will remain largely within each central bank and each country for managing its finances- this is the ECB's approach that convinced other countries, Netherlands and Germany.

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Unemployment in the eurozone drops to 7.7% in 2017. Unemployment in Spain drops to 17%.

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Another useful piece giving insights to the way China has approached the economic development tasks and what this means for the future. China's development is very capital intensive because the cost of capital is really low. Inputs like land and energy costs are also kept low by the government. Cost of labor is low and this has resulted in the share of wages as a percentage of GDP to drop from 53% in 1998 to 41% in 2005 and it is dropping further. In America wages to GDP is 56% and includes investment income which in China is lessthan 2% but much larger in the USA. The pool of surplus labor in China does work to depress wages. The percentage of consumption to GDP in China has fallen from 47% in early 1990's to 36% in 2006, the lowest of the large economies. But this does not reflect a higher savings rate. In fact the household savings rate also has fallen as a percentage of GDP. According to World Bank's Beijing office this has fallen from 21% in mid 1990's to 15% in 2006, relative to personal disposable income it has fallen from 30% to 25%. This is lower than India's household savings rate. So what is going on. The Economist points to the lower share of wages as a percentage of GDP because the large pool of surplus labor has depressed wages from where they might otherwise be so that consumption is not where it could or should be for China to move away from manufacturing led export driven economy to one that depends on the domestic market for growth. Higher consumption and a bigger domestic market would make it easier to sustain strengthening of its currency, a key demand of western countries. This would also provide a fair deal to millions of migrant workers and reduce labor unrest. It would also reduce pollution as the economy would not be focussed on production at all costs. It appears that the existing model has worked well for China in bringing millions of people from the villages into cities and growing manufacturing industries, and in urbanizing China. But China is so large that there are millions another 200 million who would migrate from villages and rural areas into cities as migrant labor to 2020 according to what the Government envisions ( see article in this issue of the Economist "Barefoot Doctors"). But this model needs fixing or changing as the pollution costs are already severe and can prove catastrophic if continued, and the western countries are demanding strengthening of the yuan to correct imbalances in the trade deficits as a result of this model of development focussed on manufacturing and export industries and short on consumption in the domestic market enough to drive the economy. ...

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India's central bank chief, Rajan, favors a lower inflation target of 4%, with fluctuations of 2% up or down. Lower inflation is critical for India to achieve higher growth rates. The World Bank lowered the rate of growth in the global economy but kept the rate of growth of 6.4% for India unchanged. Rajan also favors creating a more formal system for setting rates, with a committee like the Open Market Committee in the U.S. deliberating over the different factors for such a decision. Rajan was a professor at the University of Chicago, and chief economist at the IMF, before joining the central bank. Central bank policies have helped stabilize India's currency, the rupee. The lower cost of oil for India with an oil import bill of $100 billion is a big boost for economic growth. For the global economy this comes at a time when China's growth rate is slowing to below 7%.

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Goldman Sach economists say that technological improvements have increased productivity but this is not reflected in the statistics. Statistical measurement is an issue they say. Economists at JP Morgan Chase say the problem is that many of the technological improvements have not increased productivity in manufacturing, and there is a misallocation of resources to apps such as Uber and new products that do not increase productivity in the economy. Their view is that this is not a measurement issue, the drop in productivity makes sense and is very real. Compared to earlier shifts in technology this one has provided little in the way of serious improvement.