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How Hiroshi Harunari is changing the way Mitsubishi is doing business. He personally answers emails from employees and dealers from 7 to 9 am every day to know what frustrated employees and dealers are thinking and have to deal with. He flies into Dallas and personally drives an Outlander to dealers in Dallas, San Antonio, Austin and other cities to talk to them and listen to what they are struggling with and what their customers are telling them. In 2 months in early 2006 his first 2 months on the job, Hiroshi visited 139 Mitsubishi dealerships in 29 states. He has launched a dealer co-op program to help dealers with advertising (as dealers had suggested) and Mitsubishi uses an upbeat advertising slogan " the next 25 years begin today" suggesting a completely new way of doing things. Hiroshi came from the Mitsubishi Group which financed struggling Mitsubishi Motors with $3 billion infusion after Daimler Chrysler pulled out in 1995. As part of the new plan for Mitsubishi it decided to get out of the old situation where younger drivers with bad credit had been targeted resulting in bad consumer loan losses. It now targeted more financially able customers with the Lancer sedan. It had Merrill Lynch do the financing of customer loans. For the year ending March 31, 2007 Misubishi sold 124,000 cars up 8% over the previous year with sales at dealerships increasing 24%, reversing a 4 year decline in sales, and pulling Mitsubishi USA to a $5 million profit. In 2005 Mitsubishi had lost nearly $2 billion so its quite a reversal. Hiroshi says he had to show that he was ready to pick up the chestnut from the flames, that he had the courage and energy to go out and listen to hundreds of dealers and customers and employees in 29 states in the USA and act immediately to satisfy their concerns. ...

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The WSJ's Juan Montes, in an exceptional report from Mexico City, tells the story behind a landmark achievement for Mexico- Pacto Por Mexico of Dec. 2, 2012. The major political parties of the right, centre and left forge an agreement for the way forward for Mexico- beyond monopolistic pricing and industry structures in Mexico that hurt consumers, to increase foreign investment and new technlogies to modernize the national oil company Pemex operations, change labor laws, and create a climate for higher growth. The pact is broad ranging, shows a grasp of the problems facing modern Mexico, and ranges from anti-monopoly laws to getting junk food out of schools considering Mexico's high obesity and diabetes rate. It covers 95 goals. It is hard to overstate the significance of this achievement for modern Mexico. Montes describes the initiative of the PRD leader Zambrones in rebranding his PRD party as a moderate left wing party open to new ideas. This happened after the departure of Lopez Obrador from the PRD to form his own party in September. Zambrano and PRD moderates brought up the idea based on what happened in a landmark deal in Spain in 1977, that helped transform Spain after decades of stagnation under the Franco dictatorship. Around July after the presidential election, PRD president Zambrano, and the PRD's Jesus Ortega, held meetings in Mexico City with Jose Murat, a senior PRI politician, and PRI president elect Nieto's top advisor, economist Luis Videgaray. The decision was made by president Nieto and economist Luis Videgaray to pursue the discussions for joint agreement on vital issues facing Mexico. The PAN party was brought into the discussions. By mid-September nine people from the PRD, PRI and PAN started work on a draft agreement at Murat's home. The ground rules were set for discussions to be private, to have agreement on all points or assume nothing had been agreed, and not let current events disturb the talks. The nine participants set up the broad principles, and then a group of three, one from each party was given the task of coming up with the right language for the pact. By the end of November a 34 page draft was put together. A night of intense work to 2 a.m. followed the inauguaration of president Nieto on Dec. 1, with the Pact ready for announcement on Dec. 2, 2012. The Pact is a landmark achievement in its potential for changing Mexico and creating decades of economic progress similiar to that envisioned by the Spanish parties for Spain in 1977. ...

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Provides another view of what was covered in detail in a WSJ article on the role of the ratings agencies in this subprime mess. Lehman Brothers and Morgan Stanley say that there were signs of the problems even a year earlier, HSBC a British bank set aside $1.76 billion to cover potential losses, and a former Federal Reserve Governor published a book in June on subprime mortages going bust. So for ratings agencies to wait till July 2007, to reduce their ratings makes them look ridiculous. Lehman's Malvey, global fixed income strategist quoted here sees a recession in 2008 into 2009, as the impact spreads to retail stores and to car buyers. One reason for this is that jumbo loans on homes are going to cost much more than before, slowing the housing market even more, and the number of housing loans going bad will rise in coming months.

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China's Finance Ministry is having a difficult time controlling local governments using local government financing vehicles to invest in more infrastructure, airports roads and subways. One such city is Wuhan which plans six subway lines, three bridges over the Yangste river and a new airport. Much of the money comes from land sales. The Finance Ministry in a 2013 report pointed to the unreliability of land sales for future borrowing as the property market is slowing, and because it is highly unpopular to requisition land for land sales. This matters because the IMF says debt is growing faster in China than when Japan, South Korea and the U.S. fell into deep recessions at different times between the late 1980's and 2009. Local government debt accounts for one fourth of the increase in China's domestic debt since 2008. New rules by China's bond agency in Dec. 2014 prevents investors from using low grade debt to borrow cash. In the past local governments found a way around the central governments effort to curb growth of debt by restructuring the local government vehicles or some other way, as Wuhan has done. Wuhan Urban is the local government financing vehicle for Wuhan and its debt increased by 20% in 2013. Wuhan's mayor, Tang Liangzhi, is pushing construction to the point where he is known as Mr. Dig, Dig. One reason for China's slowing growth below 6-7% is the need to control the growth of debt. Local government debt in China reached 36% of GDP in 2013, double the figure in 2008, and will increase to 52% of GDP in 2019, according to the IMF. And the increase is not proportionally delivering the same results as before. JP Morgan estimates that over 4 units of borrowing are needed in 2015 for every unit of investment, compared to less than 2 units of borrowing for every unit of investment in 2007. PRC Macro Advisors of Hong Kong says half of the borrowing by financing vehicles goes to pay interest on existing debt in 2014. There are 8000 such local government financing vehicles in China today each competing to build infrastructure in its neighborhood, in the case of Wuhan to build a computing back office for financial companies and as transportation hub, even though its uncertain whether this will be realized or not. The problem is that alternative investments as an opportunity cost are being neglected, the hospital not being built as China's population ages with underinvestment in health care, and the private company with better returns that is unable to find financing. A classic example of crowding out of better return investments as a glut of housing and road/bridge/ airport infrastructure gets built. The central government is wary but faced with slowing growth pushes problems down the road, what experts call a Japan syndrome....

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The S&P 500 was down 41.9% in 1931 and 38.6% in 1937. In 1974 it was down 29.7%. What was it down by in 2008. In 2008 the S&P 500 was down 45.5%. This matched what happened in the Great Depression and we are not through 2008 yet as one can see from what is happening to the share price of Citigroup, other banks and the Detroit automakers. It a hell of a year and the errors during the Great Depression were different but there are errors in policy and in managing the crisis in this one also. For example the announcement by the Treasury Secretary Paulson that none of the money in the bailout will go towards buying mortgage securites may have led to renewed doubts about Citigroup's portfolio of toxic assets. The failure of the banks and other companies to get the uptick rule reinstated also ends up causing a run on the stocks of faltering companies exaggerating the impact of any doubts and creating a need for government help. Whern the history of this is rewritten the management of this crisis and the policy making will also be faulted in amanner that the Great Deprtession policies were faulted but for different reasons. The failure to address foreclosures early in 2008 as Martin Feldstein repeatedly urged in the WSJ since the early months of 2008 and continues to do so, and as other policymakers like Sheila Bair at FDIC have urged repeatedly, will be one of these major errors. Any failure to address the automakers cash funds crisis for operating expenses both with money and with the proper conditions could also go out of control and cause a major unemployment crisis in the midwest that could spread to the rest of the country. The NYT editorial took note of this on November 22, 2008, asking for funds however distasteful the behaviour of the automakers management may be. See this link. And public opinion could get the managemnt to resign or this could be a condition for signing onto the bridge loan from the government. In this particular issueof automakers Detroit automaker's management's serious errors will be written about years from now which combined with any indecision or slippage on the part of awmakers could lead to the economy and unemployment spiralling out of control, because so much is happening at the same time. It comes at atime when the storm is shifting to the consumer side to credit card and other consumer loans even as it is continuing to take its toll on the housing sector in the USA and on exports and the auto industry and other sectors around the world. ...

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Richard Thaler, a Professor of Economics at the Booth School of Business, University of Chicago, on the reasons why millions of homeowners under water- owing more on their homes than their homes are worth- have not defaulted in large numbers. In places like Nevada nearly two thirds of homeowners are under water. Changing a home, changing school for children, losing one's credit rating, social stigma. He points out that the costs are outweighed by the benefits of getting out of an underwater mortgage, and research has shown this is contagious once the process of defaulting has started. So once the neighbors are defaulting its much easier to do so and the proces picks up momentum, the psychic costs simply decline. So he says the result is that we may face a tsumani of strategic defaults. Professors Posner and Zingales of the University of Chicago have a proposal. Banks should be required to provide loan modifications in neighborhoods with home prices having dropped over 20%. Banks would reduce the payment by the average price reduction in the area and get in return 50% of the average gain in prices when the house is eventually sold. This requires Congress to pass legislation....

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Paul Krugman points out that the Bush tax cuts if continued in the US for all income levels will cost $680 billion over the next decade. This estimate is from the Tax Policy Center.

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The National Association of Realtors reports that sales of previously owned homes dropped by 27.2% from June, to seasonally adjusted annual rate of 3.83 million homes. House prices gained ameasure of stability in 2009, after dropping since 2006. Now that measure of stability may be lost as house prices weaken. The expiry of a home-buyer tax credit was expected to dampen sales but not by this much. Paul Dales of Capital Economics expects a further drop of 5% in house prices. Combine this with sluggish consumer spending and prospects of deflation in 2011, a weak Obama administration HAMP homeowner relief program, fading stimulus and the likelihood of no further stimulus because of deficit fears; and the picture shows serious problems. The underlying picture of housing is not changing. One in four homeowners with mortgages owe more than their house is worth. Banks are handling over 5 million loans that are delinquent, if these loans are modified or short sales are permitted by banks, there would be support for housing prices. HAMP has failed in this regard, see the link to this....

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Debt of poor countries is a serious problem in 2022. Debt owed to foreign lenders by low and middle income countries increased by 6.9% on average to $9.3 trillion in 2021, faster than the 5.3% in 2020, according to World Bank estimates. As a result the percentage of the poorest countries in debt distress or high risk of debt distress increased from 15% in 2015 to 60% in 2020, according to the International Monetary Fund.  The pandemic has clearly worsened the situation for countries in weak economic situations in 2019. A country is in debt distress when it is unable to fulfill its financial obligations and debt restructuring is required. Argentina, Sri Lanka, Pakistan are recent examples of countries undergoing serious debt restructuring after falling behind in debt payments. Rising interest rates, inflation, and weak growth lower government revenues and make it harder to make the debt payments to service the debt. A list of weaker economies shown in this WSJ report where interest rates have risen are Russia, Ukraine and Belarus in Europe, Argentina, Ecuador and Venezuela in Latin America, Ethiopia, Ghana and Mozambique in Africa, Pakistan and Sri Lanka in Asia. Mismanagement of the economies, overborrowing, not taking corrective action during a period before the crisis, corruption, wars or drought, factors affecting tourism or remittances from overseas, are some of the factors leading to debt distress. ...

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There is this wonderful story from Kempley Gloucestershire, England, where a retired physicist 75 years old suffers from loneliness five months after losing his wife to pancreatic cancer. He lives close to his wife's family to whom he is not close, and he is not close to 3 siblings. He was very close to his wife with whom he did cooking and worked in the garden and an orchard he had.  Two adverts in the paper, putting out cards and giving them out while out shopping failed. FInally after putting the fact of his loneliness on a page on his window in large letters he gets a response from locals and from all over the world from Germany, Netherlands, U.S., Japan, India and Australia.  It said "I find the unremitting silence 24 hours a day unbearable can no one help me?" He says he was not having pity on himself. All he wanted was someone he could have a pleasant conversation with which is now happening. This period of hectic life of the last three decades we have transitioned to without realizing it is made worse by tech driven pace.  More and more people are feeling this loneliness with children far apart and busy with their own lives, and the loss of a spouse or loved one can make loneliness worse.    ...

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Trump has an interview with Larry King, a veteran TV personality, who made the interview for the Russian government controlled RT network. In it Trump says the war in the Middle East has cost the U.S. trillions of dollars and that we should never have gone in there. The interview was phoned in and done as a favor to Larry King, lasting 10 minutes and ending abruptly.  Trump also denied the Russians are involved in the hacking of the Democratic Party computer networks. The issues over Trump's opposition to the war in Iraq also comes up in an NBC interview. Media sources say this is not true, that initially Trump supported the U.S. going into the war, and Matt Lauer of NBC has come under criticism for not pursuing this question with Trump. It has become common for political leaders to blame the Bush administration for action since 9/11 including the war in Afghanistan, and the war over WMD in Iraq, because of the unpopularity of the wars today. Yet at the time this was not the case, and only when WMD was not proven and the war in Iraq's Anbar province dragging on did the situation change. Separately Trump in other events praised Putin as a stronger leader than president Obama. This has come under criticism from Republican party leaders. ...

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 A member of the WSJ Editorial Board, says the Republican National Convention was more consequential in the way it continued the theme of getting non- white people to see how the president is taking action on issues that affect them. Mr. Trump cited his work on prison reform legislation, on funding for black colleges and universities, rebuilding broken families, and bringing back jobs in Detroit, Cleveland and Milwaukee. 69% of registered voters are white in 2019 compared to 73% in 2012, according to the Pew Research Center. Getting it right now means he says not merely the defending American workers to prevent "offshoring of jobs, opening the borders, and sending sons and daughters to fight in endless foreign wars," but also how to defend the rights of minorities in America and of working class non-white people. In 2016 the Republican party got 8% of the black vote nationally, which was the lowest in 4 decades excluding the years Mr. Obama ran for election. The effort to highlight the work on behalf of Black people and Hispanic people was to take this number back up as far up as Republicans can to the level reached under Eisenhower. This he says will be good for Republicans and good for the country. Under Eisenhower in 1956 the Republican party gained 36% of the Black vote, the highest ever.  ...

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The WSJ's Peter Nicholas, Carol Lee and John McKinnon describe the events leading to the election of Obama to a second term as U.S. president. A significant move by the Obama campaign was to spend heavily in the early part of the campaign to show Romney as a predatory capitalist by focussing on his record a a private equity business executive who focussed on profits. More voters perceived Obama as caring about people like themselves. The voter turnout was also carefully executed especially for minority voters. For the first time since Mondale's loss to Reagan fewer white voters supported a presidential candidate- only 38% of the white vote went for president Obama compared to 60% for Romney. Obama's campaign focussed on protecting the middle class and working class from sharp spending cuts. Voters major issue was the economy, with unemployment at 7.9%. Yet voters largely did not hold Obama responsible for the economy and considered Wall Street and the previous George W. Bush administration responsible for the events leading to the 2008 financial crisis....

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On one hand the issue of the $165 million in bonuses going out to employees in the 370 person Financial Products Group, and oth the other the need to wind up the complex derivative contracts that are causing these huge losses at AIG. But are such huge payouts needed for these employees to do their job? Isn't this aprofessional responsibility of these employees? And AIG's retention-payment program was disclosed a year ago and the amount of the bonuses $400 million, says the Washington Post, had been widely reported. The company is set to pay according to the WPost $600 million in retention awards to about 4700 people throughout the global insurance units. WHat happens to the $600 million, as no opinion has been voiced on these upcoming payments. The whole idea of retention payment raises another question. Will the skills of these employees be needed in a long drawn out economic downturn spread over several years or longer. And will thefailure of such things as derivatives, and the tighter regulation, mean that they will play amuch smaller role in the future. And even in the insurance units will these skills draw a premium in a market where the supply of new talent is larger than the job market ? One expert has sugggested that even if some of them left, there would be younger people to replace them who might bring an even better set of qualifications, with amix of skills, caution and prudence. So is there something self-interested and spurious in the retention argument itself and shouldn't this bluff be called? ...

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Steven Ratner says the Obama administration is not considering bankruptcy for GM and Chrysler, asit does not see bankruptcy as necessarily abetter place for the auto companies, especially because of the consumer-facing nature of these companies. And the government is not considering calling the $17.4 billion loaned to the auto companies. THis takes alot od the pressure off of GM and Chrysler.

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The large response triggered on the internet by Anne-Marie Slaughter's article in the July/August 2012 issue of the Atlantic on women and work, how it is difficult for women to work and raise children without making changes in today's American society so that a healthy balance can be achieved.

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Highlighted green for fuel economy miles per gallon information and green for types of vehicles sold and the mix which is weighted towards bigger vehicles. More than 55% of all new vehicles purchased in 2005 were minivans, pickup trucks, vans or SUVs, says R.L. Polk, an auto-data provider in Southfield, Mich. Despite gas prices topping $3 a gallon in California and other parts of the country, light trucks have outsold passenger-car vehicles for the first six months of this year, making up 52.5% of total vehicle sales, according to Autodata Corp. The average fuel economy of new 2006 models was virtually flat with a year ago at 21 miles per gallon, according to the latest EPA report, despite the increasing deployment of technologies such as systems that shut off cylinders in V-8 engines and six-speed transmissions. The incremental gains from those technologies were offset by consumers, who continued to buy lower-mileage minivans, pickup trucks and sport-utility vehicles....

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GM is conducting a wholesale review of its product lineup and its brands as the severity and sharp decline in sales of SUV's and pickup trucks has caught many automakers including Toyota by surprise. Prices of used pickup trucks and SUV's have declined by 25% in a matter of a few months with the sharpest decline in May and early June according to CarMax a used car retailer. See the link to this in WSJ, June 19, 2008. For GM this amounts to a redirection of critical resources that would be wasted under the earlier plan which involved a new generation of trucks and SUV's to hit the market in 2012. Now these resources need to be redirected to where the market is in smaller fuel efficient designs. GM is seeing its stock price and critical resources of cash and investment in desirable new product impacted by this lack of perception and action on the direction and speed with which the market is moving. is moving