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India's growth rate is slowing and the government will be taking all the fiscal and monetary measures to keep growth at 9%. Wholesale price inflation is above 5% and is expected to rise higher for food and fuel making it harder for the central bank to cut interest rates, at hte last monetary policy meeting the Reserve Bank of India, India' scentral bank kept a key interest rate at 7.75%. Companies revenue and profit increases are healthy at this time but some impact is seen from the US downturn.

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When so much of infrastructure healthcare and education still needs more funding, and when St Paul's Cathderal lacks essential funds for basic maintenance and is in danger of closing, the Greensill scandal shows how much reallocation of funds to infrastructure, health, and education to help workers, students and families is needed. How much the existing culture distorts allocation of capital in ways that are vital to the future of families, students and workers, and lobbying acts in ways that are against the national interest. Here the WSJ says the lobbying of David Cameron, former UK prime minister extended to getting access to funds for Greensill, a  company that operated in  supply chain finance, lobbying for funds from the emergency financing facility provided by the Bank of England. Treasury rejected 56 messages sent by Cameron to top British politicians over several months to have rules changed. Greensill went into bankruptcy in March 2021, stranding investors who had put in $10 billion. A parliamentary committee is now looking into this case of Greensill. The company was founded by an Australian Lex Greensill, and does little more than provide companies a cash advance to stretch out the time to pay bills. One question no parliamentary committee will ask is why when the needs for infrastructure, health and education are so great $10 billion in funds, public or private even go into something like supply finance that does so little for the country. This is an example of the kind of distortion in the uses of capital that has become commonplace today, creating societies and countries with poorly  funded infrastructure and essential services in the advanced countries of Europe and the US. ...

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China's economic planning agency, the National Development and Reform Commission, has approved $156 billion in new infrastructure projects, new subways, highways and other projects in recent weeks. The response is more carefully planned than the stimulus projects in 2009-2010, which are now seen as excessive response creating the prospect of bad loans in the banking system and causing inflation. The stimulus spread over 2 years, 2009 and 2010, was by government's initial estimates about 4 trillion yuan and this does not include additional local government spending as the government encouraged spending. This time the stimulus is about 1 trillion yuan or $158 billion, 2% of GDP, spread over 4 years, with projects going through careful review, according to Nomura economist Zhang Zhiwei. The Chinese government wants to avoid losing gains made in controlling a property bubble and holding down inflation.

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A Wall Street Journal Survey of how the credit ratings firms have performed in prediciting looming defaults. The Journal's Matt Wirz looked at 35 years of data. He found the ratings firms did not do an effective job with predicting defaults in the 12 month period before an actual default. Of the 15 government defaults since 1975 tracked by S&P, S&P's sovereign ratings division rated 12 of the countries single B or higher in the 12 months preceding the default. S&P says a single-B rating on sovereign debt signifies that the government has only a 2% average default rate in the next 12 months. For Moody's Investors Service the figures show that of the 13 governments rated by Moody's, 11 were rated B or higher one year before an actual default. By contrast the investment grade ratings of the credit ratings firms have worked better- as no government defaulted within 15 years of having a tripe-A, double-A, or a single-A rating. Ratings firms say that the ratings indicate a relative default risk for countries and not an actual default probability, a rank ordering for different countries and their relative risk. Research chiefs at investment management firms point out that once a crisis develops the ratings firms are not much help. They also say the ratings firms use static indicators like current account balances and other critical indicators for countries in emerging markets such as political sentiment and bank deposit flows get less attention. Historically bond yields have priced in higher risk premiums into government bonds before a default and investors look at the bond yields in assessing risk conditions, and not at the ratings which change only slowly. Brazil and Argentina both had a double B-minus rating in Jan. 2001. A year later Argentina had defaulted....

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Finance professors and experts on internet IPO's, Ritter at the University of Florida and Aggarwal, are skeptical that average investors would make money on the Facebook IPO. Ritter's information base shows that from 1980 to 2009, the average IPO's would jump 18% on the first day and 21% in the next three years, showing that hype and marketing with restricted supply of shares relative to demand created can artificially increase the price on the first day. As average investors get to invest after the opening day and on less favorable terms than the insiders and bankers doing the IPO, its not such a good deal for the average investor. Google performed well for the average investor, but this could be the exception rather than the rule. Google operates in a space, namely "search" engine, that is an essential part of the functioning of the internet space, which accounts for its continued growth. This may not be true for game firms such as Zynga, group discount sites such as Groupon, and social network sites such as Facebook, because their growth could stall suddenly. As Jason Zweig points out in the Journal, another factor is the starting price. At a high enough starting price the risk for investors could be high and returns may be no higher than the average 6-7% range....

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Article about what should the Fed do by Robert Lucas, Jr, who was given the 1995 Nobel Prize in Economics, and is a Professor at the University of Chicago. He thinks inflation targeting is where the Fed should be, and lender of last resort is a qualification of this role in exceptional times when there is a bank run type phenomena in the market. However he argues caution in the role of lender of last resort so that it does not become automatic based on questionable economic forecasting as this part of economic forecasting can be fuzzy, for example who knows with reasonable certainty that something bad is going to happen. So a good case has to be made for lowering rates and a cautious approach like the one Ben Bernanke took is not at all a bad one. he did lower rates the day prior to this article appearing, by half a point.

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The Romney campaign's campaign manager Matt Rhoades is from Saratoga Springs, New York and attended Syracuse University. He rose through the ranks doing opposition research at the Republican National Committee. He has a good sense for the media cycle, getting the candidate out in the best light, and a willingness to use a barrage of ads at critical points to turn the tide. Rhoades is competitive and eager to win. He has conserved resources throughout the campaign, maintained a loyal team and tightly run the campaign to avoid the dysfunction of the previous Romney campaign in 2008. Some of the key decisions Rhoades pesuaded Romney to make are releasing his tax returns before the must win Florida primary given Romney's reluctance to do so, and getting the candidate to give up his suit and wear informal clothing. The informal dress and manner has taken away some of the negative image of a Romney as a business type not comfortable with ordinary people.

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

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Martin Feldstein says the eurozone summit of Dec. 9, 2011, was a failure because the plan for closer economic integration and financial discipline does not address the immediate problems of increasing bond yields for Italy and Spain. The summit concluded with decisions to set up a constitutional rule for each euro-zone country to balance its budget, take corrective action if the "structural" deficit exceeds 0.5% of GDP, and impose penalties if the actual deficit is larger than 3% of GDP. German chancellor Merkel wanted to have these rules put in a revised version of the EU Treaty, enforceable by the European Commission through the European Court of Justice. With Britain not agreeing to accept the plan without safeguards it requested, the new rules apply to the eurozone only, are not part of a revised Treaty and are not enforceable by EU institutions. Feldstein says it is wrong to have a common solution for Italy and Greece. For Greece the best option is to go back to the drachma, because of its shrinking economy and high debt load, and the need for a competitive currency. Italy, he says has a good chance of convincing investors to lower yields by taking strong steps. Italy's fiscal deficit is 4% of GDP, and the IMF projected Italy would have a balanced budget in 2013. How should Italy plan for the 300 billion euros of Italian bonds that need to be sold in the next 12 months? Feldstein says only 40 billion euros are needed to finance the projected budget deficit and for the rest is for existing bonds to be rolled over when they are due. Italy can repay the maturing debt with new bonds and not cash. And Italy can get the help of the IMF for some of the funds needed. On the issue of the ECB engaging in large scale buying of Italian and Spanish government bonds, Feldstein says Mario Draghi is doing the right thing by rejecting French proposals to do this, because this would be against ECB rules in the Maastricht Treaty to bailout governments and would reduce the incentive to make changes in Italy and Spain for lower deficits. ...

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For 2 decades now Estonia has followed the principles of Milton Friedman in freeing up its economy to be completely open. Now the economic downturn has to lead to a shft in policy. The infusion of $3.4 billion euros from the EU from 2007 to 2013 as cohesion funds to even out disparities between rich and poor countries in EU should help and some business people say Estonia could emulate Luxembourg or Swizerland by looking for its own niche say in high end technologies and knowledge intensive production and in design.

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Nigel Farage of Reform UK surges as its membership reaches 100,000 to Kemi Badenoch's Tories with 132,000 and split in their ranks. Tories are nervous about what is happening. Labour is trying to get its act together, and trying to get the civil service to serve the people. Starmer even goes on to warn that the civil service is "in managed decline." Every ministry is asked to save 5% through cutting waste and inefficiency, and to make good use of limited resources to deliver results to the British people. 2025 will be critical not only for Wales, Scottish and local elections, 2025 will show whether Labour can tackle the immediate problms of housing, cost of living, transport and show results in delivering on infrastructure and improvements at the NHS. Labour needs to get its execution for the goals set right and stay on top of delivery metrics at every stage on a monthly and quarterly basis. Can a lawyer like Starmer do this? It took years of execution of projects for Modi of India at the state level as chief minister in Gujarat to executi at the national level. Can Starmer/Reeves and the rest of the team learn, and learn quickly? ...

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Alan Blinder points out that the political partisanship that has emerged in 2010 has not served America well, as it has deprived the government of the fiscal policy tools, which would be more effective than the Fed's only mildly effective tool of buying $100 billion a month of medium and long term Treasury debt. The country he says is tied up in partisan knots that prevents the use of the fiscal policy tools, and leaves the Fed with the choice of doing something only nudging the rates on government and private securites a bit (by 30 basis points for Treasury debt and 15 basis points for private securities as an example, not enough for more than a mild impact on corporate spending). The fiscal policy tools are he says of a wide variety and pack a lot more power, and he cites three as examples: offering significant lasting tax breaks for job creation, large enough to produce results (larger and long term than the HIRE program), government hiring directly onto public payrolls and government paying local and state governments for hiring at the local levels, the government offering to compensate states for a cut in the sales tax for a year to stimulate consumer spending. Would'nt this raise the deficit though? Blinder points out that the deficit problem lies in the future. Right now there is so much slack in the economy, that public spending will not crowd out private spending. And with Treasury rates at an all time low, Treasury can finance the larger deficit in the short term. A depreciation of the dollar or inflation, he says, is not a worry, because now there is worry about deflation, and the USA needs a lower dollar to push exports up and rebalance its economy. This does not slight the deficit issue and the culture of poor budgeting among both parties, as Reagan Budget Director David Stockman pointed out in an op-ed piece, but accomodates the real dangers and opportunities of difficult policy choices. This is why he laments the advertising campaign and public relations campaign against the 2009 stimulus bill, and the expected paralysis of fiscal policy from the extremely partisan 2010 midterm elections, and public opinion consumed by fear of deficits. Leaving the Fed with the unenviable choice of using only mildly effective tools. Other experts and columnists mention the risks associated with the Fed's large scale purchase of securities, if this leads to another asset bubble and subsequent collapse, and another bailout needed for financial institutions. Peter Eavis in one column in the WSJ points to the lack of effectiveness of the first round of quantitative easing of $1.7 trillion. And Kelly Evans, in the WSJ, points to the risks of "bad" inflation, if another round of quantitative easing by the Fed leads to increases in the price of commodities such as oil and food (such inflation falling heaviest on lower income households).The US Financial Regulatory Reform bill has received low grades, and recent standards for reserve capital in worldwide banking reforms are stretched out over a long period, leaving fragility in the economic system, if something were to go wrong....

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Thomas Kleine-Brockhoff, a senior transatlantic fellow at the German Marshall Fund of the United States, leads the EuroFuture Project. Here he offers his ideas of the dilemmas facing German leaders in agreeing to letting the European Central Bank take a larger role of supporting the bonds of Italy, Portugal and Spain. He says Germans are seeing a contradiction between European demands for German leadership and not wanting to be led by Germany or perceiving Germany as a hegemon. Brockhoff says Germans have never in the postwar period wanted to or learned to exercize continental leadership. He recounts the postwar period when Germans were content with the deutsche mark, and limited their expression of national pride to the deutsche mark. Giving up the deutsche mark was part of the deal for reunification of the two Germanys, a surrender of economic sovereignty for the sake of a larger integration into Europe. He says that even though the arguments are framed in terms of orthodox economics, economic nationalists who never really wanted to give up the deutsche mark are the core of the opposition to the common issue of eurozone bonds. The German position is to go back to the framework of principles for economic and monetary union and tighten the rules for spending and taxes, something that is good in the long run, but does not work in the short run with shrinking economies from austerity programs and nervous markets. The Merkel government's resolution of this crisis is to set new fiscal rules for the eurozone, and either move in the direction of letting the ECB play a larger role, or support such a move. What is not clear is whether the government will survive the next election taking on this leadership role in Europe, or a revolt in the Christian Democratic party....