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BW's Mandel takes the Bureau of Economic Analysis numbers and finds that the American savings rate is somewere near 6.4% and Americans have cut spending by $200 billion or 3.1% over the past year. And over the past year Americans reduced spending on automobiles by 10.8% and clothing by 4.2%. But this still does not explain the steep decline of nearly 40% in the sales of automobiles for the Detroit carmakers and big declines for the Japanese carmakers also.

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A gradual deterioration in people's confidence in government from illegal activities was the threat XI Jinping saw early by 2013, after over 60 years of a single party running China. It has affected his entire outlook on what China's policy needs to be for its long term interest in modernization. A reminder is this account by Chinese state media that says Tomorrow Group run by a Chinese Canadian illegally collected $45 billion in deposits. Illegal collecting of deposits is connected to collecting on false pretenses money for investment or real estate without proper licenses. Shanghai Intermediate Court says $100 million was given to government officials. This company was dismantled between 2016 and 2020 and was run by a 50 year old Canadian Chinese businessman. It included 4 insurers, 2 trust firms, 2 securities firms and a futures company. Other such scandals including for stock manipulation were revealed by 2016. Xi Jinping was made president in 2013. He realized the danger to China of the extent to which the country's economy was exposed to illegal activity in business and what this could do to the country if the Communist party- the only party that China has known since 1900 and Japanese imperialist invasion other than the Nationalist Koumintang party-lost the confidence of the people and failed. The Nationalists party collapsed because of such illegal activities that profited a small group of business people and led to deep discontent in China in the 1930's and 1940's, the period when the Japanese overran most of China and setup puppet regimes. Corruption Control in Authoritarian Regimes- Lessons from East Asia by Cambridge University Press points out that this type of illegal activity led to the delegitimization of the Nationalists party which ruled parts of China not overrun by the Japanese during the period 1920 to 1949. This led to defeat to the Communists in the Civil war with little that even US help under General Joe Stilwell could reverse shown in Barbara Tuchman's book Stilwell and the American Experience in China. The US had not chosen to work with the Nationalists under Stillwell's leadership and Stilwell was even asked to resign by the Nationalists because he protested these illegal activities that undermined confidence in the government and made FDR deeply uneasy about the relationship with the Nationalists. Xi Jinping understood very well that this could happen again if these types of illegal activities were allowed to continue leading to policies he has pursued since 2013. He grasped that this would leave China without strong leadership at a time that was critical for its modernization. ...

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Greg Ip of the WSJ looks at the result of changes in supply chains away from China, and the new trading relationship with China to 2028. He says the shift to a new global supply chain that diversifies it away from concentration in China is taking place. Would taking the tariffs from 30% to 60% under a new Trump administration be a good idea? Greg Ip thinks it is a bad idea as the change is gradual and is actually taking place. It may have the unintended effect of worsening US China relations essential for global stability when it is coupled with erratic or retaliatory rhetoric. Rhetoric that appears to China that it is being singled out in world trade beyond what are changes that have taken place with Japan in the past in trade. The Biden administration is for good reasons working to restore a balanced yet stable relationship with China. Apple is shifting production of 25% of iPhones to India. Samsung is investing more in Vietnam. The trade deficit with Mexico has reached $151 billion twice as large as in 2017. And $100 billion with Vietnam three times as large as 2017. The US trade deficit with China has dropped from $381 billion to $281 billion in the last 12 months, the Commerce Department reports show. And from $1.1 trillion with the whole world from $1.2 trillion for the last 12 months, 4% of US GDP. Overall the Trump era tariffs of 30% have not reduced the US  trade deficit substantially but has shifted American and European foreign investment to India, Vietnam, Mexico and other countries as well as to the home country. Over time the supply chain would become truly diversified as India makes great strides to become the third largest economy with new infrastructure by 2030. The head emeritus of the European Union Chamber of Commerce in China, Joerg Wuttke, says the pressure to export will be high for China as its economy shifts more to manufacturing from construction. Most Chinese companies are producing more than internal demand in China, and most companies in solar are losing money, in wind turbines and solar all are losing money, Wuttke says. This means China will double down and increase its investments in Mexico, Vietnam, Morocco and other countries so that it can send its products to the US through third countries that do the final export. One expert even says removing a few screws here and some there, find a different supplier, and shipping to a third party for final export that makes it not 100% Chinese content, the pressure for that is high. ...

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Latest data from the U.S. Treasury shows it has collected $63 billion in tariffs over the preceding 12 months. Even though there is no agreement on trade with China, president Trump says the U.S. is benefitting from higher tariffs by tens of billions of dollars. In May he estimated tariff revenues could reach $100 billion.This report in the WSJ says this could happen if the the new tariffs of 10% on additional $300 Chinese goods imported to U.S. goes into effect on September 1. This is likely considering that China sees this in different terms than the U.S. such as its sovereignty, whereas the U.S. sees it simply in terms of fair trade. With new elections China may be simply putting things off till the election is decided as Mr. Trump has pointed out. The tally of what the U.S. Treasury gets annually if $100 billion is generated in tariffs goes something like this. Of this $30 billion was generated previously for the U.S. government, so the incremental amount is $70 billion. Of this about $16 billion goes to offset the effect of loss of farm exports to farmers, mainly soyabeans exports to China, through a rescue fund. This leaves additional $54 billion for the U.S. Treasury. Money that could conceivably be put back into infrastructure that the U.S. badly needs in mobile and fixed to improve internet speeds and move up from its low rankings compared to China and other countries. A WSJ report this week shows Germany in worse shape than the U.S., both countries having dismal status in mobile infrastructure- the U.S. at No. 37, and Australia No. 4, Canada No. 3, and even Croatia No. 9. This throws some light on why this trade dispute has become intractable, for China the right of a sovereign nation to move past middle income status even as its telecom technology with Huawei 5G is top class, and for the U.S. the right not to fall behind in advanced technologies such as Telecom. It is also why one hears so much about Huawei and why it has become a flashpoint of the conflict in trade and trade practices. It is thought Mr. Trump is conducting this trade dispute. Yet less known is the fact that prominent Republicans in Congress such as Senator Warner have stated on television talk shows that they are concerned Mr. Trump may give up too much in negotiations that lead to the U.S. not being able to compete in telecom advanced technologies that matter for competitiveness and for national security. What was treated by Bush and Obama administrations routinely without much attention to the consequences is now a top concern for Republicans and others in Congress and business. ...

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This NYT report looks at the last minute negotiations on the day the trial was to begin that led to the FNN television network working out a deal with Dominion.It says in a conference room down the hall from Judge Eric Davis's courtroom in downtown Wilmington, Delaware, were the head of Dominion, John Poulos, and the top investor in Dominion, State Street Capital co-founder Hootan Yaghhoobzadeh. In a call from Los Angeles was Viet Dinh, chief legal officer, close to Rupert and Lachlan Murdoch. Also calling in was a mediator who knew both sides, Jerry Roscoe, a veteran of wartime negotiations in the Balkans on a Danube river cruise with his wife. Roscoe says he had two things working for him- the about to begin opening statements of Dominion ("lies have consequences,") and the finalization of the jury selection (12 jurors presenting much uncertainty for Dominion) that had given pause to both sides. That Viet Dinh's hardline was just that an appearance, was Fox head Lachlan's earlier decision unknown to each side to raise the money needed for a larger settlement close to $787 million the company actually paid. It suggests that Fox heads Lachlan and Murdoch really wanted to settle in the final moments using as skilled a mediator as Jerry Roscoe . FNN television network also owned the WSJ, and WSJ had independently supported the 2020 election results from the beginning, as WSJ pointed out in its editorial this week. Murdoch's own position being ambivalent about his positions, never quite convinced what was the right thing to do whether his own judgement was dependable. FNN was simply following the practice of creating controversy to increase circulation, a practice going back to the Melbourne Herald in the 1920's when competing with papers from Sydney, under Keith Murdoch. Setting the early twentieth century origins of News Corporation, parent of FNN, following  the practices of increasing news circulation by pursuing controversy of British newspaper businessmen Beaverbrook and Northcliffe through the prewar period in the 1920's to the 1950's. In that period it had led to Beaverbrook to support Neville Chamberlain, and to oppose Truman and Churchill during the early days of the Cold War till the Berlin Blockade in 1948, positions which were speedily retracted in that time to back Churchill in 1940 and in 1948.   ...

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The number of student loan borrowers in the U.S with loans over $100,000 has surged from about 1 million in 2010 to 1.82 million in 2014, according to the Federal Reserve Bank of New York. Th borrowers are graduate students who have piled up so much debt in the last decade that 40% of student debt of $1.19 trillion in 2015 is from graduate student debt. A major problem is that there are no limits to graduate student borrowing and the rates are higher because of bad loans in the system, increasing the size of the burden of student debt on individual borrowers rapidly, ironically at a time of low interest rates. This leaves borrowers worse off with unpayable student debt affecting them all their lives, taxpayers paying more, prudent student loan borrowers paying higher rates, and all the time reducing the pressure on universities and colleges to reduce costs for affordable graduate education. This is now a major problem in the U.S. and a major issue in the 2016 presidential election.

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The European bank stress tests could trigger the restructuring of the troubled landesbank sector in Germany say German experts. The landesbanks do about 25% of the lending in Germany and are in severe financial stress. The landesbanks suffered hundreds of billions of losses in the US subprime mortgage securities. There has been no serious reform of the landesbanks. Even though the management of one of the landesbanks Bayerische Landesbank in Munich was under criminal investigation- the management made bad decisions that led to the losses in bad investments totalling 25% of the Bavarian state's yearly budget. A similiar problem is unfolding in Spain where the Spanish government has initiated action for the troubled cajas bank sector, the regional savings banks in Spain. In Spain the government and opposition came together to reach an agreemet to consolidate the cajas from 45 to about 20 and set aside a fund of 99 billion euros for this task. In Germany the landesbanks are controlled by German states and regional savings banks, so the German government has no direct control over this failing banking sector....

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The huge risks the misallocated stimulus capital from real estate speculation poses for the Chinese economy. China's government rapidly expanded lending after the 2008 global financial crisis. One estimate is that about 10 trillion yuan in new loans were made in 2009, over twice the amount of 2008, expanding the loan portfolio and money supply by one third. A major problem is vacant homes as Chinese put their money in second homes as an investment. Chinese are not investing in the stock market because of the volatility, and with the low yields in bonds and banks money is going into real estate. According to a Morgan Stanley economist, about 25-30% of private commercial and housing space is vacant. This happens just as middle class Chinese are being priced out of the housing market. Prices went up by 12% in the housing market this year according to the China National Bureau of Statistics. Couples wanting to leave their parent's homes find it difficult to do so. It was the topic for a Chinese TV series "Dwelling Narrowness." ...

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The weaker dollar has given a boost to U.S. exports. The dollar has dropped by 9.1% compared to the prior year against a broad basket of currencies. U.S. exports have provided 1.4 percentage points of the 3.0% annualized growth since the 3rd quarter of 2009. The U.S. dollar is now 5% away from its all time low in March 2008, when tracked using the dollar index. Before the 2008 crisis the dollar had over a six year period lost about 40% of its value. Low interest rates in the U.S. and concerns about the deficit have contributed to the dollar's decline in value. While the decline helps boost exports, it also increases the price of oil in dollar terms and increases inflation. A Gallup poll in April showed 42% of Americans had no confidence in the Fed's policies for the economy, and 43% had no faith in Treasury Secretary Geithner. The decline is taking place even as Japan is recovering from the earthquake, and Greece is likely to have to restructure its debt obligations with European banks taking losses....

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The drop in oil prices in 2014-2015 leads to a decline in the value of Nigeria's currency, the Naira, by over 10% in 2014. The Naira dropped to 186.9 to the dollar by Dec. 2, 2014. The foreign exchange reserves drop to $2 billion in Dec. 2014 from $20 billion in 2008. Investment in infrastructure and the electricity grid is badly needed. Imports of arms for the military add to budgetary strain as the government tackles the Boko Haram terrorist threat in the Kano region. The central bank puts out a revised budget based on an oil price of $73, as Brent crude dropped to $68. Like Guinea, Liberia, Sierra Leone dependent on iron ore exports, Angola and Mozambique on oil revenues, Zambia on copper, and South Africa on mining exports, much of Africa's economy is dependent on commodity exports. About 80% of Nigeria's government revenue is from oil exports, according to the IMF. And the entire budget for the nation with the largest population in Africa is only $30 billion.

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A.G. Lafley returns to P&G to take over from Robert McDonald as CEO. Lafley retired from the CEO position 4 years ago. He worked his way up in the detergent division starting as brand assistant for Joy dishwashing liquid in 1977. McDonald's role as CEO was marked by weak growth in the U.S. for P&G's premium priced brands during the period following the financial crisis of 2008-2009, when consumers were becoming frugal. McDonald increased emphasis on emerging markets but this could not make up for weak growth in P&G's largest market in N. America. Lafley had built up the premium brands during his period as CEO, and not focussed enough on reducing costs of manufacturing and overhead as much as competitors. This turned into a problem for P&G when consumers became more frugal and price conscious. In 2000 Lafley was brought back the first time after the abrupt departure of CEO Durk Jager following a large earnings shortfall and decline in share price. This time private investor Ackman had pushed for McDonald's replacement....

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Deutsche Bank's image takes a hit in a criminal investigation of alleged tax fraud at Deutsche Bank involving cross border trading of carbon emissions certificates by traders. Co-CEO Jurgen Fitschen called the Governor of Hesse to protest a raid by 500 German police officers and investigators of the headquarters of Deutsche Bank in Frankfurt. The officers arrested some executives and confiscated data. Fitschen and co-CEO Jain were in a supervisory role for the trading and not directly involved. Fitschen signed a tax declaration that is part of the case. Over 20 Deutsche Bank executives are under investigation in the case. Because Fitschen was also being examined in the case this is being viewed in Germany as placing himself ''above the law," by interfering in a criminal investigation. Christopher Frank, head of the German Association of Judges, a senior prosecutor in Freiburg, said in an interview: "Its disturbing that a bank executive believes he can influence the independence of the judiciary through a phone call...This shows a fundamental misunderstanding of the principle of separation of powers."...

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Philippe Varin faces some tough decisions when he takes over Peugeot-Citroen. Unlike the turnaroungd he achieved at Corus steel group where the booming demand from China for steel helped, this time the auto market in Europe is declining by about 30%. He has to navigate betwen the interests of the Peugeot family which has 45% of the voting rights, employees who are affected by the cost cutting, the French government which has required no closing of factories for as long as the company receives governement aid. Peugeot-Citroen received a low interest loan of 3 billion euros from the French government. Questions he will have to address, as do all auto manufacturers in the USA and Europe relate to overcapacity as demand declines. And for Peugeot this has to be tackled without factory closures. And the other major issue facing auto manufacturers worldwide is how much to focus on the fuel efficient small car segment. Peugeot has key strengths in this segment and Varin may decide on refocussing on this segment....

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U.S. president Obama invited NYT's columnist Thomas Friedman to the White House for an interview on Saturday afternoon April 4, 2015. Here Friedman gives president Obama's response to his questions, and Obama's concerns about the heated rhetoric in the U.S. and Israel on the negotiations with Iran detracting and distracting from his key goals of protecting U.S. interests and Israel. On the Sunni states, Saudi Arabia and Egypt, Obama points out that there are some tough conversations needed about changes inside their societies which pose a greater threat to the governments than Iran. Obama says he understands perfectly that Israel and the Jewish people after their experience of the last hundred years are determined to not let Iran develop a nuclear weapon, and their right to be concerned that the agreement could let Iran clandestinely develop one. Obama says the verification is extensive and covers any facility in Iran, any suspicion about secret facilities, yet it leaves the subsequent decisions if Iran created difficulties, to a international body over which the U.S., UK, France, have no control. This is a principal issue for critics of the negotiated agreement. No mention is made of why Iran simply discarded the option of sending the atomic material to Russia to be processed into nuclear rods for the Bushehr nuclear plant built by Russia only a few days before the final outline was developed. And why the U.S., with allies Germany, France, UK and Japan, did not offer the Iranians an economic aid package if needed in return for the billions Iranians invested for that atomic material, to ensure that the atomic materials are shipped out of the country- to create a nuclear agreement that would be credible to all parties. The economic aid would benefit Iran modernize its oil industry, including refining operations, meet basic import needs, and provide tangible proof to the Iranian people of our best intentions for the future, that president Obama strongly espouses in the interview. The interview does show the quandary president Obama faces in Iran for strong action, that is a result of failed policies with Iran since the Eisenhower administration's intervention 1953 during the Cold War that displaced the elected government of Mosaddegh in Iran and setup the Shah's regime in 1956, the support of Saddam Hussein in Iraq in the war against Iran, which Obama mentions in this intervew. In the light of the repeated failures of the U.S. policies a Democratic party leader faces increasing reservations for taking strong action against Iran's development of nuclear weapons capabilities, preferring to exhaust every diplomatic channel, and take risks in the hope that time will give the Iranian people an opportunity to to reintegrate in the global community and pursue the peaceful development of nuclear energy. This strain in president Obama's thinking is evident throughout the interview with Friedman. Other aspects of president Obama's policy in the Middle East shared in the interview are about supporting the Sunni states in some areas, and Iran in some areas, at the same time as the nuclear issue is "put in a box" and separated from the regional conflicts. Friedman presents this as the Obama doctrine, yet it appears to be coming after a series of improvisations in foreign policy following a failure to act in 2011-2013, when the "once in a lifetime" opportunities presented by the Arab Spring were not taken up by the Obama administration, leading to the region's current disintegration....

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The US view of the response by India to a terrorist attack in Phalgam, Kashmir, Indian Union territory with strikes on terrorist camps. J.D. Vance US vice president says- “Our hope here is that India responds to this terrorist attack in a way that doesn’t lead to a broader regional conflict.” “And we hope, frankly, that Pakistan to the extent that they’re responsible, cooperates with India to make sure that the terrorists sometimes operating in their territory are hunted down and dealt with.” Vance was forced to cut short his visit to India after visiting Jaipur, Rajasthan in India when the terrorists with a history of aid from Pakistan killed 31 tourists in Phalgam, Kashmir. A long history of terrorist or militia trained in Pakistan has led to  terrorist incidents all over the world for the last three decades including the Kashmir and Afghanistan conflicts, the last having drawn Russia and the US into long wars which depleted their resources and led to loss of many lives. Yet much of the media remains oblivious of this in the US and Europe, and how it has led to the rise of China using this period of conflict under Bush and Obama since 2000, and the access to US, EU technologies and assistance. ...

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Polls on Deutchland opinion trends show Merkel has gained support with her careful handling of Brexit, and the AfD has lost support. Only a month ago media reports covering the immigration issues had put AfD in the light of gaining using this issue. The infighting in the Conservative Party and the lack of any plans of ministers in the British government favoring Brexit for leaving the EU have Germans questioning this kind of politics compared to Merkel's promise of a "calm and composed manner" in dealing with issues of people's lives and the future of Europe. The extensive coverage in Germany of the vote for Brexit, the EU referendum in Britain, increased awareness in Germany of the benefits of the European Union. Merkel and other leaders offered their assessment of how the European Union has brought peace to Europe and improved the lives of the people during the pre Brexit media coverage. Now Infratest Dimap polls show the popularity of Merkel has increased to 59%. Compared to a June poll before Brexit things look better for Merkel-  the AfD Alternative for Germany has lost 3 percent of support dropping to 12 percent, the Christian Democrat party of Merkel is up by 2 percentage points to 34 percent in popular support, the Social Democrats also increasing support by 1 percent to 22 percent.The vast majority of people said the European Union provides security (74 percent) and prosperity (79 percent). Germans are skeptical about the value of referendums on such major decisions as EU membership because of swings in popular opinion such as that on immigration that swayed British voters- 49 percent saying parliament does better in these situations than a referendum, 42% saying referendums are better. For voters who said Germany was hindered by membership only 11% supported that proposition and 52% said the EU is beneficial for Germany. Over 75% actually favor more cooperation on refugees, data policies and energy, setting the prospect for a stronger European Union. Also proving the importance of responsible politics, and honest, flexible leadership, responding to people's concerns yet not pandering to swings in opinion for temporary advantage. A separate piece in the Guardian by Yonge points out that Cameron actually won only 23 percent of the eligible voters for Conservatives in the 2015 elections in Britain, reflecting a two decade slide. Brexit only made this failure widely visible, and did not escape the attention of the German people.   ...

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The hike in the interest rate by 6% by the central bank of Argentina brings interest rates up to 40%. This is part of an effort to stem the decline in the value of the Argentina peso. The peso has lost a fifth of its value against the dollar so far in 2018, with a run on the peso seen on May 4th. The problems started with the central bank loosening its inflation target to 15% from 12%, says this report in the Economist. Inflation has shot up to 25% in Argentina in the last 12 months. Raising interest rates to as high as 40% is a risky move because of the effect on economic growth. President Macri and his Cambiemos (we can change) coalition won the election in 2015 by 2 percentage points over the Peronista Kirchner led party which ran the country after the debt crisis on a policy of debt reduction (desdeudameinto). Argentina's current account deficit is at 5% and growing rapidly. A major problem is the huge dollar denominated debt issued in 2016 and 2017 by the government, local government and private sector. According to the central bank BRCA the dollarized assets in 2016-2017 are about $25 billion representing capital flight, with $8 billion going for debt interest payments, profits and dividends, and $14 billion for travel and tourism. For a total of $50 billion according to central bank BRCA going to finance debt service payments, capital flight, profit remittances abroad, and tourism as a result of the issuance of $100 billion in dollar denominated debt by Argentina's government (90%) and private sector (10%). This is the first time such a large figure of dollar denominated debt was created after the financial crisis in Argentina during the first 2 Kirchner administrations during which time the debt was substantially reduced. This has led to S&P putting Argentina on the list of 5 most fragile economies in 2017. Instead of a gradual increase in issuing debt to finance economic development and focus on limiting loss through capital flight, avoiding rapid growth in dollar denominated debt, the Macri government has repeated the mistakes of the past in managing the economy. ...

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Jakab says Pfizer has managed the transition to a generic version of Lipitor and loss of revenues from the blockbuster drug in a well planned manner. The branded version of Lipitor still has a 32% market share according to IMS. An approved generic version of Lipitor sold by Watson Pharmaceuticals has a 27% market share. As a result the shock of losing Lipitor revenues has been cushioned to some extent. In 2008 Lipitor comprised 26% of Pfizer sales, in 2011 this has about 14%. This was partly achieved by acquiring Wyeth in 2009. Pfizer has returned $12 billion to shareholders in dividends and share buybacks in the year ending September.

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Jonathan Rockoff interviews Pfizer CEO, Ian Read. Read says Pfizer will make up for the loss of patent protection on Lipitor sales of $10.7 billion. He plans to cut Pfizer's $8.1 billion research budget to $6.5 billion. Pfizer sold one unit that makes drugs in capsule form for $2.4 billion. He looks to growth in Lyrica for fibromyalgia, and Prevnar for pneumococcal vaccine. And sees growth in China and emerging markets. Even with government ordered price reductions in China, increase in volume sales make up for the price reductions. Asked about the closing of the Pfizer labs in Sandwich, England, Read says the competitors were ahead of Pfizer in areas of research at Sandwich such as allergy, respiratory and urology. Pfizer will move scientists from Groton, Connecticut, to Cambridge, Mass, to bring scientists together in hubs of innovation such as La Jolla, Boston, and Cambridge, England. In the old days Groton served as a location because it was near a river, fermentation was needed and water access had to be provided. Read says Pfizer will focus on the core- neuroscience, cardiovascular medicine, oncology, inflammation, immunology and vaccines, specialized units for pain, sensory disorders and biosimiliars- and make sure this is producing results....

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Andrew Jacobs provides this exceptional accoount of disillusionment of ordinary people in Brazil with the corruption scandals, deep recession, and the drop in president Rousseff's popularity from 50 percent in 2014 to 16 percent in April 2016.

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Tesco has a loss in market share in the UK going from 31.6% in 2007 to 28.9% in June 2014, according to Kantar Worldpanel. Profit margins of 6% a few years ago have dropped to an expected 4% in 2014, according to Bernstein. Tesco is losing out to more competitive discount retailers such as Aldi and Lindl. For larger spending shoppers Tesco does not have the same appeal as rival chain Waitrose. CEO Philip Clarke, who took over in 2011, resigned in July 2014. Dave Lewis, executive at Unilever, will replace Clarke. Tesco's share price has dropped by 30% since March 2011, when Mr. Clarke became CEO. Lewis is expected to come up with a new strategy. Tesco does not have the cost structure to compete with the discount retailers such as Aldi, which should lead to a different approach. The current approach of only making Tesco marginally better to compete with established discounters is not working.