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See Hamm 6/25/07 BW for how hiring by the likes of wipro and infosys in the US is reversing outsourcing phenomena. For Infosys it helps to be closer to customers in the US as it expands further. In this case of startups and smaller companies that setup shop in Bangalore to tap the lower wages there this is turning out to be no longer true as wages are rising and have reached 75% of US wages in the example given here.

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This marks the end of an era in which British Empire based journalists and media barons such as Beaverbrook and Murdoch were able to unduly influence events in the world. The period from 1915 to 2020 was one in which the British Empire and the USA  were dominant in the world. News Corporation will be run by Lachlan Murdoch who is the CEO as his father Mr. Rupert Murdoch has resigned his roles at the company. He remains as chairman emeritus at age 92. This marks the end of an era for a son of journalist Keith Murdoch who gained prominence in Australia evading censors and  covering a disastrous campaign in World War I, the invasion of Turkey by British forces in which 8000 Australian soldiers were killed, 20,000 wounded, about half of the Australian force before evacuation on Dec. 20, 1915. It could be said that Rupert's father Keith Murdoch left with his reputation intact in the British Empire after building the Australian newspaper business that his son Rupert inherited. Rupert introduced new technology and set up Sky News in Britain and Fox News television channel in the US. A large legal settlement for improper coverage of election machinery in US 2020 presidential election leaves his media business with a diminished reputation as Lachlan inherits it compared to the reputation left by Keith Murdoch in standing up to British authorites in the First war for staggering losses suffered by Australia. Rupert Murdoch tried to innovate with an aggregation news site for internet news Knewz to achieve some of what Keith Murdoch had achieved. This venture did not get the resources or ideas it deserved and failed. Apple News has started its aggregation site years later in 2020 with human  selection for aggregation following Lyrarc.com which started in 2010.  ...

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The documentary "Last Train Home," directed by Lixin Fan, shows the life of migrant workers and their families in China. Fan sporadically spent 3 years with one family, Zhang Changhua and Cheng Suqin, to capture glimpses of this family's life as one of China's 130 million migrant workers. The family left a village in Sichuan province, to work in a factory in Guangzhou, which manufactures denim jeans. For 7 days a week -once working 15 hours a day for 29 days straight- the Zhang family works continuously, just to send money back home to the grandmother who raises 17 year old Qin and another child. The daughter is rebellious as she is resentful of the parent's absence. This is the story of migrant families throughout China, the quiet hidden ordeal, that is behind the cheap products available in western countries. And Fan documents this well with scenes at the railway station, as the family catches the last trains back to Sichuan, for the yearly trip back to the village. There is a whole society in transition, and there are many sides to this story, this is the human one of families caught up in this transition. Lack of farm subsidies and taking over of farmland for building and construction has hurt life in agricultural areas. The Communist party has made dissent difficult. And the imposition of a decades old registration system that denies education and social services to migrant workers from the villages, creates huge strains on family life. Fan says- before the showing of this film at the IFC Center in Greenwich Village- that he hopes to raise questions in the minds of viewers. Does the blame for this go to the government, the factory owners and companies, or the West, something Fan says he is not able to answer. That there is little official opposition to the film- in the same manner that the suicides at Hon Hai, and the factory conditions there and in other factories across China, are being freely reported- suggests that China is coming to terms with the different angles from which to view the economic transition that has taken place over the last two decades. It is also a belated recogniton of the whole range of questions raised by a singleminded policy of manufacturing for western markets, especially when these markets with debt-laden consumers may present huge uncertainty in the future....

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Germany's approach supported by public opinion of diplomacy and dialogue with Russia during the Ukrainian crisis in 2014. Germany has strong economic relations with Russia. German companies have $22 billion in direct investment in Russia in 2013. Over one third of natural gas and crude oil imports into Germany are from Russia. Phasing out nuclear power is likely to increase the supplies. Sanctions on Russia are seen in the CDU as hurting German jobs. German economic relations are on a different basis with Russia than U.S. economic relations with Russia, requiring a different approach. About 40% of German public opinion has an unfavorable view of the U.S. according to a recent Pew Research Global Survey. The result is a nuanced and a flexible dialogue based approach to Russia.

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Boosting vaccine production for the Indo-Pacific region that includes Bangladesh, Indonesia, Malaysia, Thailand, Philippines, Vietnam with production done through Biological E in Hyderabad will be discussed at the meeting with Biden. Japan will fund the project, and Australia will handle the distribution. This will be part of a followup to a March 12 virtual meeting of Quad leaders. This effort to meet the vaccine supplies challenge for the Asian region covering south east Asia and its population of 600 million will be one of the major outcomes of Quad countries collaboration, making it a peacetime collaboration that supports development in the region without burdening the financial position of any country.  The other part of US- Indian collaboration and Quad collaboration centers on two related themes after healthcare and pandemic. The immediate challenge is to tackle the breakdown in the supply chain for semiconductors. The US and Europe can no longer depend entirely on a supply chain based in Taiwan. The narrowest part of the Taiwan Straits which separates Taiwan from the Chinese mainland is only 81 miles wide, which makes continued dependence on chip production on Taiwan an unreliable option and the need to build a new supply chain for Japan, EU and US. Plans will be made to address this in the talks. The Biden administration has already taken action with Intel Corp making a U turn and bringing chip manufacturing back home to the US with $50 billion investment planned. India and other Asian countries may form additional options for semiconductor manufacturing. The third part of the Quad effort will center on US and Japan ramping up infrastructure building capabilities with India to build infrastructure across Asian countries and in Africa that will be financed in a way that will not have some of the liabilities of the Chinese initiative called Belt and Road. Loans given by Chinese state banks and contracts including manpower from Chinese contractors are now seen as not meeting the needs of Asian and African countries. These loans most of the time cannot be repaid as in Zambia, and other parts of Africa, and in Pakistan, leading to interest accumulating on debt and making future infrastructure development extremely difficult. The use of manpower from China also means no learning curve for infrastructure is formed for local companies and infrastructure comes without new jobs jobs being created.  For most of the period 1900 -1950 the British built Asian and African infrastructure. During the period 1950 onwards the US assumed a major role, as did the Soviets. This changed after belligerent Reagan administration policies and wars in the Middle East sapped the funds that could have gone to infrastructure building that would improved living standards in Asia and Africa. Mr Biden wants to see this change and this is what he meant when he said at the UN General Assembly today- " we want relentless diplomacy to take the place of relentless wars." He means every word of this and the diplomacy is between allies and also adversaries, but mostly with allies such as Japan, the EU and India to build a better world. That he has to do this quickly Biden is aware of that, which is why he said "the next 10 years will determine our future."   ...

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Seib points out why the current political landscape with the popularity of Trump and Sanders reflects demographic, economc and social changes in America compared to when Geroge H.W. Bush won the election in 1988 and Bill Clinton won in 1992. The Republican party is more populist, with older Americans, more Southern and conservative, making it harder for Jeb Bush or Wall Street backed candidates. The Democratic Party more liberal, more popular on both the east and west coast of the U.S., with younger Americans, diverse demographic groups, making it harder for Hillary Clinton as an establishment candidate. A Journal/NBC poll of Oct. 2015 shows 28% of Republicans describing their views as very conservative, and 26% of Democrats saying they are very liberal. Yet there is another aspect that will show up once the primaries are over. And this is the steady group of somewhat conservative and moderate combined in the Republican Party of 64%, and the steady group of somewhat liberal and moderate in the Democratic Party of 62% in the 2015 Journal/NBC poll. The moderates are up from 26% in the above 1990 poll to 31% in the 2015 poll for the Republican Party, and from 26% to 33% in the Democratic Party. So that one sees about a quarter of people polled in each party pushing for fringe views and a countervailing trend for moderate or close to moderate views with about two thirds support in the 2015 Journal/NBC poll for each party....

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The Venezuelan government provides gasoline to people in the country at a few cents a gallon- almost free. Even Saudi Arabia, the Emirates and Kuwait which have way better financial balances and dollar reserves do not provide gasoline at such prices. The result is chronic shortages of basic parts and other imports because the government does not have enough dollar reserves for imports. Venezuela devalued its currency by 32% recently, making imports more expensive and pushing inflation up even higher to 28%. The problems it creates are excessive and wasteful use of gasoline, and free gasoline that then provides consumers money to pay for surging cost of everyday imported products. Nullifying any real benefits when shortages, inflation, dilapidated infrastructure and lack of development and jobs, are taken into account. The lack of capital to invest in the oil industry has led to declining production making the situation unsustainable. Yet neither party of Maduro or Capriles in the upcoming April 14, 2013 election, following the death of Chavez, supports ending this subsidy. Efforts to end the subsidy by president Carlos Andres Perez in 1986 led to riots and about hundred deaths in police response, and a coup by Chavez, then a military officer, a few years later. Under Chavez the subsidy was extended to the level at which gasoline is about 4 cents a gallon. Compare this with the price in neighboring Colombia at $4.72 a gallon, and Brazil at $5.40 per gallon. Consumption per capita in Venezuela is excessively high, about seven times per capita than neighboring Columbia. The investment in infrastucture is hobbled by lack of capital, the capital Caracas dilapidated, and no major infrastructure projects taken up by the government. It costs Venezuela 8.6% of GDP or $27 billion to pay for the excessively high subsidy, compared to 3.2% of GDP going to healthcare spending and 5.1% for education. In comparison Indonesia, another developing country, uses 2.5% of GDP or 21 billion for its subsidy for a population of over 200 million. It is not that a fuel subsidy is provided, but the entitlement to free gasoline that makes Venezuela the lone exception. There is a reason why prices in Brazil and China, large developing countries, price gasoline to motorists at over $4 a gallon- to discourage excessive and wasteful use, and release scarce capital for infrastructure development, building dollar reserves for imports of machinery and equipment, and other uses in industrializing economies. Compare Venezuela with Bolivia under the socialist government of Evo Morales. In 2010 Bolivia increased its price of gasoline by 80%. The price in 2013 is about $2.00 per gallon. Morales cushioned the increase by increasing salaries in the health and education sectors, armed forces and police by 20%, and increasing prices of locally produced wheat, corn and rice by 10%. Morales said he did this to reduce state subsidies of $380 million for $660 million in gasoline imports, of which $150 million was siphoned off by smuggling gasoline to neigboring countries. Incentives were provided to oil companies to produce gasoline in Bolivia to reduce imports. ...

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European leaders meeting in Brussels set Sunday July 12, 2015, as the final day by which Greece is expected to submit proposals and reach an agreement with the EU. All EU leaders will be present at the Sunday meeting at which Greece's postion as a member in the eurozone will be settled, and measures for humanitarian aid to Greece can be discussed. EU chief Juncker called Sunday July 12, 2015 the deadline date. Greece's finance minister Tsakalotos surprised European leaders by not having any proposals to submit. German chancellor Merkel said at a news conference- "There are only a few days left for a discussion on what's going to happen in the future. What we need now is a multi-annual program tht goes far beyond the program that we discussed ony 10 days ago." Experts at Bruegel research organization in Brussels say the ECB providing emergency financing is dependent on Greece coming to an agreement with the EU, and if no agreement is reached Greece's exit from the eurozone is very likely....

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The plant in Tychy, Poland where Fiat turns out 500,000 small cars a year, one every 55 seconds. Chrysler engineers are now visiting this plant to see what can be done with small car production. The Fiat 500 is turned out here. Its Fiat's best effort in terms of quality. Zdzislaw Arlet, is director of the Tychy (pronounced TICK-ee) plant. He says the right combination of robots to individual workers was critical to achieve efficiencies and to have the flexibility to switch to different Fiat small car models depending on which is selling more. This enables the Tichy plant to operate round the clock six days a week. About three years ago workers were assigned an individual ID that is stamped on the sections of the car that they assemble so any problems at the end of the line can be traced to the source. As a result of these efforts defects have fallen from 20% in 1996 to just 4% now, and the time to have a car roll out of the assembly line has been halved.

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S. Korea and the U.S. propose limiting trade imbalances to 4% of each country's GDP by 2015. S. Korea is the host of the current G-20 meeting. Germany and Japan oppose this move, arguing that their governments cannot engineer such outcomes, as it was determined by economic activity in the private sector. Japan's representative, Finance Minister Yoshihiko Noda, said that while he was dubious about the idea of setting strict numerical goals, it would be acceptable to use them as reference numbers. Germany has traditionally opposed the idea. Germany wants to be counted as part of the European Union, rather than as a single nation, in any such reference goal. China has not commented on the target. S. Korea has presented the idea as a way to use more than currency exchange rates to achieve a global rebalancing. And People's Bank of China Deputy Gov. Yi Gang said Oct 10, that China is planning policies that could result in its surplus falling below 4% of GDP in 3 to 5 years, from about 5.8% in 2009....

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A native of Turin, who was a debonair lawyer then retrained as a physiotherapist, is beloved as "Alberto" to the Afghan people. He runs the Red Cross Afghan Rehabilitation Center in Kabul, and is the most loved westerner in Afghanistan. Its a visible location, but in all these years of war it has never been attacked. In the tradition of the Red Cross founded in 1860 as a neutral entity, the Red Cross's orthopedic centers make no distinction by political affiliation and help combatants on all sides because only the name is asked, as well as civilians who have lost legs to landmines. About 90,000 people have received new limbs since 1988, and 70,000 revisit the centers each year for replacement or adjustment of their prostheses, which last an average of 2 to 3 years for adults and as little as 6 months for children. All the treatments, including overnight stays at the centers that can run for weeks, are free. About 10 million mines were strewn across the landscape in the Soviet invasion from 1979 to 1988. Because most of these mines have been cleared by the UN and charities like the Britain's Halo's Trust, patients now recieve help for congenital deformities, polio, tuberculosis, and accidents as well as other war injuries....

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EU Competition Commissioner, Margarethe Vestager, on a trip to the U.S. to meet FTC and Justice Department officials, says the situation in Europe is different from that in the U.S. In Europe Google has a dominant position with over 90% market share, much more than in the U.S. where Yahoo and Microsoft are competitors in general Internet search. She said about Google following the filing of formal antitrust charges by the EU against the company- "is a successful company because they have good products. But the compliments, they stop when you get the suspicion that there may be an abuse of this very strong and dominant position." In earlier statements Vestager has said that the dominant position in all its ramifications poses "societal challenges." Complaints to the EU Commission originated with Microsoft and smaller companies affected by Google. News Corp, publisher of the WSJ, has joined a group of companies in filing new formal complaints in April 2015 with the EU Commission about Google practices. Google now has 10 weeks to respond to the charges. In the U.S. the FTC also had concerns, with FTC staffers favoring filing formal charges. In the end the FTC decided to rely on Google making voluntary changes to three practices taken up by the FTC- including complaints about "scraping" of content from rival websites, and its restrictions on the ability of advertisers to use competing platforms. Vestager sees the need to get the process moving, as it has dragged on for about 5 years, saying "it is important for us to be more speedy in getting the question out, to be able for Google, for competitors, but most of all for consumers to see our concern." The EU Commission charges about Google favoring its own comaprison shopping service are a way for Vestager to establish a broader precedent, as it looks into other ways Google's uses its dominant position to favor its own products and services....

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More doubts about the $200 billion program that will lend money to private investors to buy securities backed by student and auto loans, credit card debt and small business loans, called the TALF or Term Asset -Backed Securities Loan Facility. The Fed will provide these loans at attractive interest rates and provide an insurance policy for possible default of some of the securities, as investors stoped buying in October 2008. This is a vitally necessary step to keep consumer lending going as it collapsed in October. Lenders package these loans into securities and sell them so they can make more loans. See the link and graph on this. But will it stimulate purchases of automobiles and other items? It will keep the lending going but the problem lies in that lenders are asking for higher credit scores from consumers to make loans, and banks do not have confidence in consumers just as millions of consumers have damaged their creditworthiness by missing or late payments. And consumers are reluctant to borrow and make purchases. And while this is a necessary move to keep unclogging the credit channels in the system by the Fed and Treasury, it still means in actual practice to be a limited lending and borrowing to make the continuing slide in demand a continuing fact. Small businesses may fare better with credit unions which should pick up their lending. The situation with mortgage lending is again the same with higher credit scores required and millions of homeowners under water not able to take advantage of the lower rates to refinance. Cameron Findlay, the chief economist at Lending Tree says that at the end of the day it is not just about lower rates but also of qualifications with credit scores of 720 required and a down payment of at least 20%, at a time when unemployment is rising and wages declining. So he sees little or no significant meaningful impact....

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This report shows an alarming trend in China which is fueling a real estate bubble similar to the one that Japan, and more recently the U.S., experienced. State owned companies are actively speculating in real estate, and are buying real estate from local governments eager to profit from the real estate boom. Local governments obtain land and build infrastructure on it to raise the price that they can get for it in an auction. In many cases one state owned company outbids another state owned company from different sectors such as oil, chemical, military, telecom and highway. Land records reveal that 82% of land auctions in Beijing in 2010 were won by state-owned companies up from 59% in 2008. The National Bureau of Economic Research in Cambridge, Massachusetts, has estimated that land prices leaped by 750% from 2003, with half of this happening in 2008-2010. In many cities housing prices have doubled in the last 2 years. The National Bureau estimates that on average these state owned companies paid 27% more for the same piece of land than other bidders. China's $586 billion stimulus and its aggressive lending program by state owned banks may have helped in other ways after the 2008 economic crisis, but in this area it has fueled a real estate speculation boom, with the local government and state owned companies being the key participants in this speculation. Local governments earned an estimated $230 billion in land auctions in 2009. The demolition of older neighborhoods and poorly compensating residents are all part of the effort by local governments to profit from this speculative boom. The implications for the banks are serious. Local governments use other companies created for the purpose to engage in this investment in land. And off-balance sheet accounts create the danger that China's state owned banks may have enormous amounts of debt that is not showing up in the regular accounting. Analysts say that the $1.4 trillion in loans made by state banks in 2009 was twice that in 2008, and a large portion of this was diverted into real estate speculation with records set in land bids and booming prices. All this is happening as China's Ginni coefficient has deteriorated rapidly. And the simple fact remains that even as apartment prices exceeded $200,000 in Shanghai, the average disposable income is about $4000 per year. Prof. Shih of Northwesten University has followed the investment companies of the local governments closely and comes to similar conclusions about the size and implications of this real estate bubble in progress. Shih estimates LIC (local investment companies) debt owed to banks at $1.68 trillion or 34% of China's GDP. See the link to BW's Dexter Roberts. ...

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Texas electricity rates are twice the national rate and rising. Texans pay anywhere beteen 13 and 27 cents per kilowatt hour compared to the national average of 9-10 cents and Texas uses more electricity than most other states. Texas deregulated electricity markets in 2002 but prices are higher than before. Higher electricity costs are a result of higher natural gas prices for power generators and congested transmission lines. A $325 million computer redesign is upposed to improve things.

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Note this comment by the head of the U.S. National Highway and Traffic Safety Administration in the Bush Administration. NHTSA Administrator Jackie Glassman says the average mileage for the fleet today is 30 miles per gallon and raising the current standard of 27.5 mpg for an automakers passenger fleet by 2.5 mpg won't put much pressure on automakers. The Bush administration- and the prior Clinton administration- has not committed to making major improvements to the national mileage standards, with the current standards of 27.5 mpg not having changed since 1990! Glassman says the NHTSA starts with the manufacturers product plans and then sees whether it can get additional fuel savings with these plans. This suggests an NHTSA that is more follower to the auto industry rather than a leader in setting the standards that the auto industry then tries to achieve to reduce the U.S. dependence on foreign oil. Also note that it takes 2 years for things to change, as it will take months for rule changes, and 18 months have to be given to automakers to implement the new rules. By 2008 the fuel efficiency based on market competition and Toyota focussing on hybrids and higher fuel efficiency across the whole car lines, might well exceed any new standards that are watered down, especially if crude prices hold up. Lawsuits by attorney generals of different states and the Lugar-Obama bipartisan bill pushing the adminsitration to mandate higher standards are intended to put pressure on the Bush administration to come up with new higher standards. The failure of Democrats and Republicans in the Clinton and Bush years to raise standards and require the auto companies to use new technology to meet these standards with government assistance is one of the significant failures. This will affect the prospects for the U.S. economy in the years ahead....

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A 2011 survey by Universum shows technology firms such as Google, Apple and Facebook as the most preferred choice of university graduates during campus recruiting. Financial firms lag far behind, with J.P. Morgan Chase ranking 41st in that list. At Harvard Business School only 17% of the class went into investment banking and finance. Students from the University of Texas at Austin to Yale, say they want to build something tangible or follow their dream project.

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Vietnam devalued its currency by 8.5% on Feb 11, 2011. A series of devaluations have reduced the value of Vietnam's currency by 20%. The devaluation will lead to higher cost for imported products, especially refined oil products, thus fueling inflation that is already high in developing countries. The Communist party central committee is not giving inflation fighting a priority, and instead is focussed on keeping high growth rates. The party's inflation target is 7% annually, same as 2010 for 2011, when the inflation is already estimated to be about 11% for 2010. Barclay's now expects inflation to reach 13.5% by March and exceed 15% by June. Part of the hesitation to raise interest rates and slow inflation as is happening in China and other developing countries, is the need to create new jobs for a young and increasing workforce. Vietnam's inefficient state enterprises, poor management at some enterprises, and state subsidized lending, have created problems which are putting downward pressure on the currency. State owned shipbuilder Vinashin approached bankruptcy recently with $4.4 billion in debts and poor management decisions. Another significant reason for the devaluation is the seriously precarious situation of Vietnam's foreign exchange reserves. State media have reported that Vietnam's international reserves have fallen to "more than $10 billion" at the end of 2010, compared to $16 billon for 2009 and $26 billion for 2008. This suggests a deeper crisis from years of loose monetary policy and lending to state enterprises to create China type growth rates. Vietnam still a less developed country and not equipped to handle this kind of growth, say analysts....

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Paul Singer, head of hedge fund firm Elliott Management and its unit NML Capital, has relentlessly pursued a case in U.S. courts involving collecting full payment on bonds from the Argentine government after its default on the bonds in 2001. Singer bought bonds with face value of about $170 million according to legal filings, but paid a price well below the original value. Elliott and other investors are now seeking $1.5 billion, including unpaid interest. Judge Griesa's ruling in a federal court in Manhattan blocks Argentina from paying bondholders who accepted an agreement for about 25 cents on the dollar from being paid $530 million in interest in July 2014. Argentina has to consider other risks in settling the dispute as more than the $1.5 billion as a one off payment is involved, because as Stevenson points out in another article (see link), the payment could run from $15- $27 billion depending on whether it then has to pay all holdout bondholders or all exchange and holdout bondholders at a higher rate. The result is an intractable dispute beyond the statement of honoring creditor rights, seen by a debtor country facing difficult finances in a different light. Serving as a reminder for Greece, Argentina, and other countries with chronic borrowing and debt history about the need for care and constant vigilance on state finances. In May 2012 Greece paid over $436 million in a one off payment to holdout bondholder financial firm Dart Management in a similiar bind, even as pensions were being cut and Greeks protested daily on Athens streets with over 20% unemployment (see link)....

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June unemployment numbers will jump say experts at IHS Insight as GM and Chrysler downsize even more to become smaller companies with even less market share. This will reflect closing Pontiac and sale or closing of the other GM brands Saturn, Saab, and Hummer. It will reflect closing of more dealerships of GM and Chrysler. THis might be offset by a pickup in sales if something like the European trading clunkers for new cars program takes off in the USA. But with the US customers more in debt and with rising job losses, the pattern may be different in the US. It may only offer a small boost in sales. Manufacturing still matters in a recovery. In 1980 manufacturing was 20% of America's output, now it is 11.5% says Mark Zandl of Moody's Economy.com. Manufacturing, he says, has a bigger impact than its size suggests, because it responds quickly. As sales resume workers are called back to their jobs. The sharp V shaped recoveries in the early 80's reflected the rapid response of manufacturing. After the 1980's both the declines and the recoveries were shallow in 1990-1991 and 2001. Now with GM and Chrysler shrinking further under the government plan to fix these companies, and taking the supplier impact, the rebound leg of the V is missing. The kick from the Big Three and their suppliers is missing, says Nigel Gault of IHS Insight. Of the 5.7 million jobs lost from Jan 2008 to June 2009, 1.6 million were in manufacturing and 289,000 were in motor vehicles, split almost evenly between assemblers and supplier networks....

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Countries which ignored the lessons of the 1997 financial crisis are affected to a larger degree in the 2014 emerging markets financial crisis- Argentina, Turkey and Thailand have high government gross debt as a percentage of GDP. Investors are taking a careful look at individual countries this time and there is less contagon. Flexible exchange rates, and higher foreign exchange reserves are reducing the effects in 2014. The effects on the U.S. and Europe are limited to how this affects the global economy.