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Efforts by BNP Paribas to get bondholders to take a 50% loss on Greek bonds, and exchange their old bonds for new ones that mature in 50 years. BNP Paribas is working for the Greek government to get other banks and bondholders to accept this exchange so that Greece can tackle its debt load and interest payments on debt. Some arm twisting by BNP Paribas to get bondholders who have insurance through CDS to accept the exchange. This is being done on the grounds that the I.S.D.A. committe would declare the restructuring in Greece as being "voluntary" and not a default, so that bondholders who do not accept this deal would not get paid through CDS insurance.

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This report in the WSJ points to Democrats having won consistently 18 states plus District of Columbia adding upto 242 Electoral College votes in every election since 1992. Democrats need 28 more to cross the needed 270 votes. Republicans consistently having 13 states with 102 electoral College votes. Demographic changes in recent years have shifted to where Hillary Clinton may not need to devote resources to Colorado and Virginia because of a more favorable position there.  Carrying Pennsylvania with these 2 states would put Clinton over the 270 required. Vice Presidential candidate for Clinton, Senator Keane is from Virginia and is popular in the state.  Pennsylvania has a long history favoring Democrats. North Carolina has also seen demographic changes favoring Democrats. The Clinton campaign is focussing ads on these states as well as the swing states of Nevada, Iowa and New Hampshire, as well as Georgia, Arizona and Utah which are becoming competitive for Democrats. By keeping up the effort in Georgia, Arizona and Utah, Clinton hopes to make Trump divert resources there. Other two swing states are Ohio and Florida, but this WSJ report says Clinton has to win only one of the four swing states of Pennsylvania, Ohio, Florida, and North Carolina to go over 270 and Trump needs all four. Of the 20 media markets Clinton or her super PACs have focussed their ads on 16 are in these 4 states. The Clinton campaign is looking at several alternative routes to 270 Electoral College votes, which gives it more flexibility to plan the campaign.  ...

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Fred Hiatt of The Washington Post describes U.S. president Obama's mishandling of Syria during his second term as president leading to the situation today.

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This briefing in the Economist says China now faces a difficult transition to its next phase of development, in which the government is trying to change the model used by Deng Xiaoping of export led development to a consumption based economy. That model produced spectacular results between 2000 and 2015 when the middle class went up from 5% of the population to 25% of the population, as measured by people living on more than $20 a day in 2011 $ purchasing parity, as reported by IMF, EIU. The problem China faces is can this development stall if it fails to tackle problems in the next phase, with an aspiring group behind the new middle class left behind. Recent jump in the stock markets volatility, devaluing of the currency, and confusing signals sent by the government have hurt its credibility. Demographic issues with an aging population, the destruction of the environment with rampant development, and how to manage this next phase of development with respect for the constitution and the rule of law replacing the high corruption levels, are serious challenges. Experts say it will be difficult to manage a transition to the next phase of development without some degree of democratization. The rise of the internet and the social media have created more avenues for expression, which gives the government some guage of public opinion, especially in tackling pollution, mismanagement, and other problems. The government sees the need to manage things carefully, with rising unemployment posing a problem as growth slows and the government closes down inefficient manufacturing facilities. ...

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The turnaround at Ford Motor Company described in Detroit News reporter Bryce Hoffman's book "American Icon: Alan Mulally and the Fight to Save Ford Motor Company."

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IHS Global Insight estimates that output in the US for the auto industry for 2009 will be 9.5 million vehicles, with capacity of 16.9 milllion vehicles this amounts to 56% capacity utilization number which is very low. Center for Automotive Research estimates that the sales began moving ahead of trend in 1996 and really accelerated after 1998. The easy financing fueled the boom. Now the 16-17 million sales years that were considered normal are seen as inflated and way above the trend. All this suggests that there is a lot of restructuring ahead for the auto industry.

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The Russian economy gets an exceptional boost with the behaviour of ruble currency separating from the oil prices. Russia benefits from higher oil prices at the same time as it benefits from a weaker ruble. The ruble has declined 15% since April after more sanctions on Russia. The revenue earned in dollars converts into more rubles for imports and other financing for the Russian economy. At the end of 2017 a barrel of oil brought in 3,835 rubles for Russian sellers, when converted into rubles from U.S. dollars. In October 2018 each barrel brings in 5,262 rubles, an increase of 40%.  Russia deftly managed its emerging market crisis with lower ruble following the crisis in Ukraine by adapting its economy to a lower ruble, lowering imports and using import substitution. Initially Russia split with OPEC and Saudis to produce oil all out, but by 2018 with the Saudi economy hurting and Russia feeling the impact of lower oil prices, an OPEC agreement with Russia has pushed prices higher with production limits. Earlier adaptation by 2016 to the lower ruble, further decline of the ruble in 2018 with sanctions by U.S. for Russian interventions in other countries including the U.S. election meddling, have combined with higher oil prices to strengthen the Russian economy. Russian private and government debt held by foreign investors has fallen since 2016 to 32% in the first quarter, according to Societe Generale. This means Russia is less sensitive to foreign investor exit from the country with political and economic winds changing. Russia's current account surplus increased to $18.3 billion in the first quarter of 2018, up from $14.6 billion in the prior quarter. A weaker ruble has translated into more inflation which reached 5.5% at the end of 2017, above 4% target. Russia's central bank made quarter point increase to 7.5% for the interest rate in September 2017. Overall the management of the emerging market crisis since 2016 as Russia responded to NATO expansion and adopted its own policy is remarkable considering the damage from earlier emerging market crises. Countries such as Argentina, Brazil, and even India are feeling the impact of the current emerging market crisis, each with its own version of the crisis- Argentina with dollar denominated debt, Brazil lacking money in the budget after high pensions, and India with higher energy costs and weaker rupee.   ...

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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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The Obama administration's budget for 2016 includes $19 billion for cybersecurity, a 35% increase.

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Matthew Kaminski gives his assessment of Angela Merkel's years in office. He cites a former German chancellor Helmut Schmidt's words: "People who have a vision should go see a doctor." She is no Konrad Adenauer or even Helmut Kohl. A scientist by training she is dispassionate, intelligent, diligent and takes the time to understand the details of the financial situation from her advisors, then sorting out the situation in her own mind. She gets less credit for bold action than she deserves because of her down to earth manner.She gave banks no option as bondholders to share losses in late night meetings at EU headquarters, called the president of Italy and secured a change in government after Berlusconi lost the confidence of the EU. In the current impasses between the Bundesbank and the ECB's Draghi over sovereign bond purchases with Jens Weidmann, Germany's representative at the ECB, supporting Mario Draghi's position, she has navigated the fine line between the German public's reluctance to take on the debts of its neighbors in the eurozone and the need for lowering the borrowing costs of Italy and Spain to save the euro. After the visionaries from Adenauer to Monet, todays eurozone leaders are focussed more on the nuts and bolts of making this idea of Europe work, requiring the skills and ability to learn and grow that she has demonstrated....

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Blackston and Karnitschnig describe the European Central Bank's role in the current crisis and buying of bonds of troubled eurozone countries. And the resistance in Germany to the ECB's purchase of bonds of eurozone countries to prevent contagion effects in the eurozone. ECB President Trichet only reluctantly pushed the ECB into bond purchases in the recurring crises, and saw the ECB's role as strictly limited to controlling inflation and maintaining a stable euro currency. There is resistance in Germany to the ECB printing money to cover eurozone debt of Greece, Ireland, Italy and Spain. This comes from the searing experience with hyperinflation, an economic crisis similiar to that of the U.S. with the Great Depression, when the Reichsbank printed money in the 1920's to buy large quantities of government bonds. The Bundesbank that ensured Germany's postwar recovery focussed on a single mandate to control inflation, and this is a key part of the ECB's charter. The first president of the ECB when it was founded in 1998, was Dutchman Wim Duisenberg, who would tell politicians: "I hear you, but I don't listen." When Frenchman Trichet became the second ECB president, he focussed on inflation fighting efforts. He warned against the extravagant spending and fiscal irresponsibility of some eurozone countries saying "we are dancing on a volcano."...

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Prime minister Modi cites the successful Mars mission "Mangalayan" as showing India's technological capabilities and its ability to do things speedily at very low cost. For foreign investors India offers a stable politcal climate because his party has an absolute majority in parliament and controls many state governments, as well as being a democracy with a vibrant and internet connected young generation. A young population with 55% of the people under age 35 makes India the manufacturing powerhouse of the next two decades, said Modi. And the consumer base of over 1.2 billion people an attractive market. It was a rare combination of hands on salesmanship rarely seen ever on television from a prime minister. In one exceptional response about the condition of women, Modi said he personally led his ministers and legislators through Gujarat state's rural areas house to house in 45 degree centigrade summer heat on June 11-13 school opening days. He did this urging parents to send their daughters to school with the slogan "Send your daughter to school, Save a Girl." The result he said was 100% school enrollment in these rural areas for girls. A rare person at a special moment in India's history pushing the goals of development with uncommon tenacity....

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A period of ample oil and gas supplies and low prices in 2015, the opening up of alternative sources of energy supplies including LNG for Europe, are factors reducing the leverage of Gazprom through pricing and supply restrictions.

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Xi Jinping's experience as Communist Party secretary in eastern Zhejiang province, and in running Shanghai, gave him insights on how the private sector had changed the province and the weakness of state run companies; as well as how state run companies operating efficiently such as SAIC in the automobile industry in Shanghai had achieved success by diversified ownership through listing on the Shanghai Stock Exchange. Studying how Singapore's Temasek has provided efficient management of state owned enterprises, which are run like private companies and have private investors and compete in markets; has reinforced the idea in the Communist Party that state ownership in key sectors can be maintained. The idea being adopted is retaining a majority controlling interest for the state at the same time as transformation of state run enterprises to operate similar to private enterprises takes place. The new plan put out by the Communist Party and the State Council, China's cabinet, takes up reform of the large state owned enterprises in China along these lines. The enterprises will take on private investors, list on stock exchanges, and operate like private companies hiring managers at the market rate. The energy, resources and telecom sector state enterprises will be reorganized as asset investment firms, and these enterprises will be required to operate like private companies to maximize profits, hire managers, and list on stock exchanges. ...

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Bondholders and the Greek government are stalled in talks and waiting for Germany and the IMF to come up with the 14.5 billion euros that is due on March 20, 2012. It may suit the bondholders holding out for a higher interest rate in the 4-5% range for the new bonds to be issued at 50% of face value with long term maturities, but is bad for Europe. This Journal editorial points out that this is bad for European taxpayers and points to other steps that can be taken which are being discussed in European circles. One step is for acollective action clause to be inserted for the existing Greek bonds under which all bondholders have to accept losses if two thirds of the bondholders agree to accept losses. To ensure the safety of the Greek banking system Greece would restructure the bonds held by Greek banks so that they continue to be acceptable as collateral with the ECB, and issue new bonds to the ECB with face values, interest rates and maturities matching existing holdings. The idea is to make it possible for Greece to reduce its total debt and its debt servicing costs- which is really the only way out of the crisis. The ECB and Greece would use the collective action clause to restructure the Greek debt to reduce interest and debt servicing costs on new bonds to be issued. The Journal editorial says it should also mean Greece and the ECB are not required to put up the 30 billion euros in up-front cash that was agreed to in a poorly devised agreement in 2011....

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Neil Irwin of NYT provides some counter intuitive ideas on U.S. Fed interest rate policy. He says it can't be take as a given that the Fed will raise rates in 2017-2018. This depends on how much punch there is in the Trump economic policies for stimulus, and for infrastructure spending, tax cuts. He cites Senate Majority Leader McConnell who said he would like to keep "tax reform revenue neutral." Getting large spending and pushing up the deficit is likely to run up against Republicans in Congress who have for 8 years opposed large spending increases and large deficits. Trump has given few details about his stimulus or infrastructure spending plans. He says the scale of the spending might not match the talk. Irwin cites JP Morgan Chase economists who have kept their forecasts for GDP growth just under 2% for 2017 and 2018. And he points out that even Trump appointees at the Fed might act independently. The Fed might look at being cautious considering that increased trade tensions with China, and the unpredictability of a Trump administration could hurt growth. Irwin does not mention the uncertainty in other areas such as policy towards Russia on which the Republican party and Congress have very different views than Trump, tensions over Taiwan, that can also affect growth. ...

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Binyamin Applebaum cites different experts on how U.S. Fed policy could play out in 2017-2019. He cites Fed governor Dudley that there is increased uncertainty under the Trump administration, and other economists who say that aging population, lack of innovation, and steady growth under the Obama administration with falling unemployment, make it unlikely that growth will jump well above 2%. The Fed's own forecasts are for for under 2% growth in 2017 and 2018, and Applebaum says this is not expected to change by much. Janet Yellen does not see a huge stimulus as a positive, says Applebaum, because it would increase the deficit at the wrong time. He cites Yellen who prefers to see more fiscal space now that unemployment is down to 4.6%. Steady growth in the view of Fed officials has taken up much of the backlog of people looking for work since the 2008 crisis. Yellen sees some fiscal space as desirable with high debt to GDP ratio at 77 percent, so that the government could respond to some adverse event in the future. A Republican Congress is also averse to sudden increases in the deficit. See the link to views about the uncertainty of how things can play out in a separate article by Neil Irwin of NYT. ...