LyrArc Article Gist
Barry Ritholtz lists the causes of the financial crisis, He says New York Mayor Bloomberg's exoneration of the financial industry is simply false- what he calls "the Big Lie"- even though Congress, regulators and the Greenspan Fed acted irresponsibly and created favorable conditions for the actions of the financial industry.

LyrArc Article Gist
Jon Hilsenrath of WSJ provides an illuminating account of how Daniel Tarullo as head of the Large Institution Supervision Coordination Committee has changed the way bank supervision and rules are set for U.S. banks since the days of the 2008 financial crisis. Tarullo started the effort under Ben Bernanke and continues this in 2014-2015 under Fed chairwoman Janet Yellen. The New York Fed is seen as ineffective in bank supervision and the supervisory role is now entirely performed under the leadership of Tarullo, assisted by Kenneth Gibson and Timothy Clark. The trio are some of the great unsung heroes of the effort to put the U.S. financial system and the economy on a safer footing.

LyrArc Article Gist
A Sept 2012 Census Bureau report shows the median income of a typical U.S. family declined or was flat in almost all states in 2011. Median household income declined in Nevada by 6%, in California by 3.8%. In Arizona and Florida incomes declined by 2.9%. For the U.S. median income declined by 1.3% to $50,502 in 2011. Poverty continues to increase, with California showing 335,760 people falling into annual income levels below $23,021 for a family of four in 2011, giving the state a 16.6% poverty rate.

LyrArc Article Gist
The IMF's managing director, Christine Lagarde, pointed to the urgent need to recapitalize European banks in September 2011. European banks face potential losses of 120 billion euros for Belgium, Spain and Italy, 60 billion euros for Greece, 20 billion euros for Ireland and Portugal, and 100 billion euros for other banking exposure, for a total of 300 billion euros, according to the International Monetary Fund. In the absence of recapitalization there could be further damage to EU economies from restricted lending by banks. IMF estimates show that deteriorating credit conditions could damage growth in the eurozone countries by 3.5 percentage points, and in the U.S. by 2.2 percentage points, creating another recession.

LyrArc Article Gist
The Obama administration's proposed budget for fiscal 2013- for the year beginning Oct. 1, 2012- shows the budget deficit for the year at over $1 trillion. It shows new revenue of $1.7 trillion over 10 years mostly from ending the Bush period tax cuts on families earning more than $250,000 a year, restoring the estate tax to the 2009 level and limiting subsidies for oil and gas companies. It proposes raising the tax rate on dividends from 15% to as much as 39.6%, for households earning more than $250,000 a year. This measure is expected to generate $206 billion over 10 years. The budget also offers "principles" for future tax reform by proposing the Buffett rule replace the Alternative Minimum Tax (AMT). The AMT was not indexed for inflation so it has the weakness of putting more middle class taxpayers into AMT, leading to temporary solutions by Congress. The Buffett rule would have people earning more than $1 million pay a tax rate of at least 30%. Many wealthy Americans like Mitt Romney paid lower taxes using deductions to lower tax rates- Romney's tax disclosures show he paid effective tax rate of 14%. The White House says the budget will reduce the deficit by $3 trillion over 10 years through the new taxes, and small changes to Medicare and Medicaid and other spending cuts. This is in addition to the $1 trillion in spending cuts agreed to in a deficit reduction agreement in 2011 between Democrats and Republicans in Congress. The budget proposal proposes investment in education and transportation projects of $137 billion, and continuing through Dec. 2012, a tax break for businesses to increase investment. It includes mandatory spending of $2.7 billion for new community college programs, $6 billion to modernize schools, and $1.8 billion to make homes more energy efficient. It also increases the resources of the Securities and Exchange Commission and the CFTC (two agencies overseeing the banks), $26 million for a new Interagency Trade Enforcement Center to counter unfair trade practices, and cuts U.S. postal delivery to 5 days a week. The result is a program designed to be balanced in terms of economic fairness, making modest investments in the future for education and energy, continuing policies to stimulate growth, and extending the date for bringing the deficit under control to 2018 instead of 2014 as planned earlier....

LyrArc Article Gist
Mitt Romney describes his experiences with different companies he worked with at Bain Capital and how he would use that experience in his job as President. One approach he emphasizes is proactive problem solving and tackling problems early.

LyrArc Article Gist
The 2011 State of the Union address by President Obama. A calculated effort to move the debates that will frame the future election to a different place. He emphasizes the importance of investing in the future, in global competitiveness, through spending on education, infrastructure, alternative energy and other projects. But there was little in the way of specifics for reducing the high jobless rate which stands at 9.4%. And little in the way of specifics of how the investments in the future for global competitiveness and infrastructure spending are to be achieved. Especially when the fiscal imbalances are growing after the compromise on the Bush tax cuts and the passage of health care legislation. The Washington Post says that a majority of Americans approve of his overall performance, yet they are generally negative in their evaluation of how the Obama administration and President Obama has handled key issues relating to the economy. And this is more so among independent voters who will be crucial in the 2012 elections....

LyrArc Article Gist
Brazil's GDP increased by 0.34% for the 4th quarter of 2011 from the prior quarter. For the full year GDP increased by 2.7%, with an actual decline in GDP for the third quarter of 0.1%. The GDP growth for 2010 was 7.5%. The slowing economic growth reflects an overvalued currency, weak manufacturing competitiveness, and inflation. Brazil's growth will be lower than potential say analysts, and it will be tough to get to even 3.5% growth in 2012-2013. A similiar process is seen in other emerging markets. China's premier Wen Biao announced lower growth targets of 7.5% and a shift in priorities recently. And India's growth rate for 4th quarter, 2011, was 6.1%.

LyrArc Article Gist
The U.S. Federal Reserve Flow of Funds report for 2011 shows Fed purchases of 61% of total net Treasury issuance. Goodman points out that the net issuance of Treasury securities for covering U.S. budget deficits is normally 0.6% to 3.9% of GDP on average for the last six decades since 1950, compared to on average 8.6% of GDP today. A big jump in Fed purchases with a corresponding steep fall in the participation of foreigners and the private sector. Foreign purchases declined from 6% of GDP in 2009 to 1.9% of GDP in 2011. U.S. private sector- mutual funds, banks, corporations and individuals- purchases declined from 6% of GDP in 2009 to 0.9% of GDP in 2011. This helps keep interest rates low and funds U.S. government needs. Lawrence Lindsay pointed out in the WSJ in 2011 that Fed has itself boxed in being forced to keep interest rates low for years. If the government borrowed at a more normal rate of 5.7%, instead of the Fed induced rate of 2.5% today, Lindsay estimated the U.S. government would face an additional $800 billion in interest costs by 2021....

LyrArc Article Gist
A big change for the presidential election in 2012 is the lopsided way in which white voters who are struggling with job losses or seeing economic difficulties are alienated from President Obama. By 58% to 32% these voters favor Romney over Obama in a May 2012 Wahington Post-ABC News poll, a 26% margin. Of those struggling financially about 7 in 10 lack a college degree. This is happening even though 31% of these voters in this poll say they are Republicans and 27% Democrats. It is true that Obama could still win in 2008 losing this group 58% to 40%, an 18% losing margin, similiar to Kerry in 2004, and Al Gore in 2000. A wider margin of 26% poses more risks if the unemployment situation and the economy looks weaker by November 2012.

LyrArc Article Gist
In the most recent Global Financial Stability Report out in Sept. 2011, the increase in the ratio of a country's outstanding credit to GDP is highlighted as a key warning light indicator for country economies. An increase in this ratio of over 5% signals a warning light according to the IMF. It tells us that borrowing is expanding at significantly faster rate than the growth of the economy. Using this indicator would have set a warning light up for the U.S. before the 2008 mortgage crisis, and a warning light well before the financial crises in Greece, Portugal and Ireland. The outstanding credit to GDP ratio went up for China by 24 percentage points in 2009, with 4% percentage point increase in 2010. The ratio was up 30 percentage points in Hong Kong for 2010. The warning light is also up for Turkey and Vietnam. Capital inflows into countries that can be suddenly reversed, and overvalued currencies are a danger for emerging market countries and act as supplemental indicator warning lights. Brazil and South Africa have overvalued currencies. Turkey has high capital inflows. Only a small portion of this is foreign direct investment, the rest helps support a high amount of lending and credit provided by the banks. That a significant portion of this is in short term borrowing poses additional risks, as evident in the 1997 Asian financal crisis for S. Korea, Thailand and Malaysia....

LyrArc Article Gist
The IMF's changing views on the value of fiscal austerity. In the current debate about the value of fiscal austerity, there is the IMF view, a German view based on its own experience, and the views of other countries in Europe. The IMF's view has shifted over time. The IMF World Economic Outlook 2010, describes its view of the effects of austerity measures in the form of spending cuts and tax increases- "Fiscal consolidation typically has a contractionary effect on output. A fiscal consolidation equal to 1% of GDP typically reduces GDP by about 0.5% within 2 years and raises the unemployment rate by about 0.3% percentage points." Over the longer term there are benefits as the private sector is not crowded out in the search for captal funding by the excessive government borrowing. The IMF's economic models suggest that it would take 5 years before reaching the breakeven point when the benefits of austerity measures exceed the effects of austerity. The German view held by German central bankers is that the actions stimulate growth in the short term. Manfred Neumann, professor emeritus at the Institute for Economic Policy at the University of Bonn, says this is called the "German hypothesis" as it reflects the experience of Germany from austerity actions taken by Germany. Laurence Ball, professor of Economics at John Hopkins University, is critical of the "German hypothesis" and its application across Europe in different situations. Germany is a large exporting nation and exports helped counterbalance the effects of austerity measures. Within the eurozone with fixed exchange rates the exports of less competitive countries cannot be boosted through devaluing the currency to gain price competitiveness. The other problem is that with interest rates close to zero in the euro zone the central banks cannot cut rates aggressively to counteract the effects of spending cuts. The problem gets compounded when a number of countries are taking austerity measures at the same time accentuating the downturn....

LyrArc Article Gist
Responding to criticism of the Clinton Foundation which has affected Hillary Clinton's ability to win voter support in her contest with Bernie Sanders, the Clinton family has decided to take action in August 2016. The Clinton Global Initiative will be discontinued in 2017. Bill Clinton and Chelsea Clinton will stop raising funds for the Clinton foundation. The Clinton Foundation will not accept funds from foreign donors. What started as a do-good effort to raise funds for worthy causes such as world health, poverty and hunger turned out -because of its very success in raising large amounts of money from corporate donors- into a distraction for the election campaign of Hillary Clinton in 2016. It opened up Hillary Clinton to charges of having conflicts of interest from outsiders Sanders and Trump. Hillary Clinton discontinued her association as a board member of the foundation in 2015 when she began her campaign. Bill Clinton continued to give paid speeches and raised $2.6 million. All that fund raising appears to have been a big mistake and not even fair to the candidate, as it gave rise to misperceptions about the candidate going far beyond what the Clintons ever understood about was happening. As former Labor Secretary Robert Reich put it, it gives rise to accusations of impropriety that may affect an election, without the voters getting a chance to evaluate the candidates on the basis of what each candidates program or agenda is. In this the Clinton family may have realized that in retrospect the entire foundation activity appears to be a small matter, when put next to the choices facing the U.S. and the world in 2016 for the next decade and beyond. The Clinton Foundation in future would be managed by people independent of the Clinton family and circle. The next step would be setting it up as a public foundation, a new board and professional staff. Was it all worth the problems it has created for voters being able to get a clear idea of what each candidate offered, an not acting as a huge and dangerous distraction which Hillary Clinton and the country and the world could do without, considering the significance of making good choices in a general election- very much so. The foundation and the fund raising made it possible for outsiders Sanders and Trump to turn this election into one of slogans and accusations, to which the Clintons were unprepared to respond, acting as a distraction  which was bad for the country and the world. ...

LyrArc Article Gist
According to a report from China's Environment Ministry for the first half of 2013, only 4 cities met the acceptable air quality standards. The national grade 2 standard in China is for 35 micrograms per cubic meter for levels of airborne particulate matter smaller than 2.5 micrograms in diameter. WHO standard is for 25 micrograms per cubic meter in a 24 hour period. The 4 cities with acceptable air qualty out of 74 cities monitored by the Environment Ministry are Lhasa in Tibet, island city Haikou, coastal town Zhoushan, and Pearl River Delta city of Huizhou.

LyrArc Article Gist
A recent Deutsche Bank study points to the pro-cyclical nature of oil prices in this decade where oil price increases do not lead to decreased worldwide consumption. The IEA forecast is for 1.64 million barrels of oil a day in increased coonsumption in 2013 compared to 2011, which hides a drop in consumption of 640,000 barrels a day in OECD countries. That is offset by higher demand in China, the Middle East and Russia. Middle East consumption is about 80% of consumption in China, and oil price increases lead to higher growth in these countries and Russia leading to increased oil consumption reinforcing a pro-cyclical cycle. What is not clearly understood is how this changes with weaker economic growth. Additional factor to consider is future increasing growth of oil consumption in India, Pakistan, Bangladesh, Indonesia, Vietnam and other developing countries that offset reductions in Chinese consumption as China's growth rate slows.

LyrArc Article Gist
Krugman points to the economic muddle that China is getting itself into. He says one way of looking at what is happening now with high inflation is that inflation is the market's way of undoing the currency manipulation that China has engaged in. By following aweak currency policy to protect export interests China has created an artificially high trade surplus. But this is now turning into a lose-lose proposition for both China and the US as market forces push wages and prices up, whittling away at any competitive advantage of China's weak currency policy. He says some estimates he has seen show that Chinese undervaluation could be gone in two or three years. Chinese consumers are asked to accept interest on savings limited to 2.75% and below inflation, with the spread designed to help banks earn their way out of bad loans made during the stimulus lending binge of 2009-2010. What is happening is a massive allocation of capital away from consumers to lending for state owned companies that have created overcapacity in many industries, and use part of this capital to engage in real estate speculation. Krugman says China may be on its way to some kind of crisis with collateral damage to the rest of the world as it is a major importer of commodities from Canada, Brazil, Argentina, Australia, and a major importer of high tech goods from Germany and the USA....

LyrArc Article Gist
India's crude oil imports were sharply higher in 2011 and 2012. India's imports of crude oil for the first 11 months of the 2012 fiscal year ending March 31, show a 40% increase over the same period in 2011 fiscal year. India's import bill was $128 billion for crude oil imports for the 11 months of fiscal year 2012. Indian subsidies to lower prices for fuel are $30 billion annually. The higher prices for crude create inflationary presssures in India and restrict economic growth.

LyrArc Article Gist
The elections in Italy in Feb. 2013 show the centre left coalition headed by Pier Luigi Bersani with 29.6% of the votes in the lower house, the centre right coalition headed by Silvio Berlusconi with 29.2% of the votes, the Five Star Movement headed by Beppe Grillo with 25.6% of the votes, and the Civic Choice headed by Mario Monti with 10.6% of the vote. In the Senate the results show the centre left coalition with 31.6% of the vote, the centre right with 30.7%, the Five Star Movement with 23.8%, and Civic Choice with 9.1%. Election rules in Italy give the party with the highest number of votes for the lower house an automatic majority of 340 of 630 seats. The vote shows voter protest over austerity measures. This benefitted both the centre right and the Five Star Movement and hurt the Civic Choice centrist party of Mario Monti which implemented austerity measures in 2012. The centre left was affected by its role in coming to the aid of Monte de Paschi bank in Siena and failing to mount a strong campaign under Bersani. A majority in both houses is needed to provide a stable coalition government which opens the prospect of new elections. The Five Star Movement emerged as the largest single party. Its support comes from young people, internet based campaigning, and a rejection of the right and left parties from the old order in Italian politics, and offers a new dimension to Italy's political future....

LyrArc Article Gist
Bernie Sanders announces his support for Hillary Clinton as nominee of the Democratic Party after a long season of bruising primaries. The effort is now to heal the divisions in the Democratic Party. Hillary Clinton has adopted some parts of the Sanders agenda including some aspects of providing tution free education in public colleges. Both Hillary and Bernie appeared at a joint rally in New Hampshire. Sanders said that at the Democratic Platform Committee ending on July 10, 2016, the two had come together on setting a platform that he believes is the most progressive ever for the Democratic Party.

LyrArc Article Gist
A study by AARP of 514 brand name and generic drugs between 2005 and 2009, shows that generic drug prices went down an average of 31% during this period, and brand name drug prices went up by 41%. One of the authors of the report says that it is important to look at individual drug prices and not studies showing total spending on drugs, because this is a significant cost for people paying out-of-pocket, It drives up insurance premiums, and pushes retirees into coverage gaps in Medicare Part D drug program. Analysts indicate pharmaceutical companies are increasing prices on drugs before patent expiration to get as much profit before the patents expire.