LyrArc Article Gist
Difficulties facing a Obama administration, taking over in the middle of a huge economic crisis, with so many high expectations aroused by the lofty rhetoric that a letdown would occur for the faithful and young people energized by his candidacy were these expectations to remain unfulfilled. Two wars and their conduct could raise controversy as they cannot be abruptly be wound down and the Afghan war could present surprises as it has for all foreigners. And there are no easy solutions to the economic crisis which could be stubborn and prolonged like the one faced by Japan and its lost decade. Japan had a leader in Koizumi who energized the Japanese during their economic crisis years, some changes ocurred but Japan still labors on and its a different country now without the same hardworking ethic and cando spirit among the young. And there are no easy solutions like investing heavily in infrastructure and energy and providing healthcare to all working people, because with the one trillion dollars going to shore up the financial system and the banks there is only so much Obama and Democrats can do with public spending without much higher deficits and other difficulties. Not delivering on these promises or delivering inadequately could lead to a letdown for supporters. And for black people and Hispanics in the working class, and workers who have lost jobs as unemployment rises especially in the auto industry in the midwest where he got much of his crucial support, the conditions are tough with jobs scarce and rising home foreclosures, for which the government may be able to help but only in a limited way as the economic crisis may take a long time to unwind. ...

LyrArc Article Gist
Holman Jenkins makes some good points as the auto companies in Detroit look for government rescue. He suggests dumping CAFE altogether if Congress is serious about conservation, a gas tax would be the only intellectually honest thing to do. In the light of falling gas prices in November 2008 with $1.98 a gallon in Michigan and across the country, how will demand for hybrids and the Chevy Volt at $40,000 fare? Its hard to tell but some serious thinking about energy and automobiles is in order. Congressional mandates have a tendency to have poor consequences as Holman mentions, because of the loopholes in the mandates like the fuel mileage rules that allowed fleet averages, loopholes Detroit automakers used to lead the trucks and SUV boom to coverup hidden problems for so long. Some of these had to do with the UAW's insistence on rules and benefits and things like the Jobs Banks that were obsolete in a age of globalized manufacturing and unequal playing fields with the Japanese and Koreans in mostly unuionized factories in the southern United States. Some of them with lack of effort, vision and innovation by Detroit car companies to make the fuel efficient technologies to reduce costly fuel imports, and the failure to bridge the union management divide that has been there all the time in the postwar period skewing decisions and leading to obsolete behaviours. Holman sees nationalization of the auto companies as the only possibility given the car companies history and failures, with or without bankruptcy. Even then he does not see them becoming competitive without good leadership and right policies in running the companies and honest policy at the government level, and courage to get a firm grip on reality. ...

LyrArc Article Gist
Steps taken by Secretary of State Tillerson are drawing criticism from Senator McCain and Democrats in Congress for weakening the diplomatic efforts of the U.S. Before taking office Tillerson, who believes the State Department has a bloated staff, announced a 31% cut in its budget. A year later  the cuts are leading to the departure of many senior diplomats. Some like Mr. Miller have received only a few minutes to talk to Tillerson, six top career diplomats were fired by Tillerson. Most hiring is stopped and a $25,000 buyout is being promoted to get 2000 career diplomats to leave by October 2018. This report describes a retirement class for diplomats with 26 senior employees, including two acting secretaries of statein early 50's who would normally wait many years before retiring. The top two position ranks at State are career ambassador and career minister. This is cut from 39 to 19. Political appointees are also missing to fill positions with only 10 of 44 political positions filled. Some experts see a loss also in diversity as this happens. Differences between the Nikki Haley, who is the next senior official in America's foreign service and a potential successor to Tillerson, and Mr Tillerson are also complicating the situation at the State Department. During the Obama and Bush administrations experts cited the weak role played by the institutions such as diplomatic services in promoting America's role in the world. This was not corrected in any significant way in the last decade. The position of the diplomatic service has weakened further, along with the abandonment of America's leadership role under the presidency of Mr. Trump. It will require a future president's concerted effort to restore the diplomatic service under new leadership and with a new generation of diplomats more in tune with the multipolar world of today.   ...

LyrArc Article Gist
At the Archway cookie plant in Ohio which closed recently all employees laid off lost their health insurance. A similiar article on Archway in the NYT and the situation in gowing ranks of uninsured.

LyrArc Article Gist
Justice Khanwilkar of the Indian Supreme Court (2016-2022) is appointed the second Lokpal of India. He wrote some of the key decisions of the court in recent years. As Lokpal he is head of the Anti-Corruption Authority of India, that was established in 2013 after the protests against widespread corruption and leakage of funds led by Anna Hazare of Maharashtra that led to loss of confidence in the government of that year. Justice Khanwilkar supported the strict provisions of the Prevention of Money Laudering Act (PMLA) that provide the essentials for a developing country to ensure good governance and prevent the leakage of funds that are destructive for improving the ease of living, and for the confidence of the people in the government. He also decriminalised homosexuality, and upheld the Gujarat government for handling of events in 2002. He was alsopart of the 5 Judge SC bench that upheld Aadhar documentation of every citizen of India that made it possible under Digital India to deposit money directly to bank accounts preventing leakage of funds going to hundreds of millions of needy Indians. This was key to supporting families across India during the pandemic. In 2020 he passed a ruling on regulating the NGO's in India and use of foreign funding, the Foreign Contribution Regulation Amendment Act (FCRA), which ensures the government of a developing country of over 1 billion people can be run by the will of the people for the people, free from interference by foreign ideologies and interests. He tackled a key environmental case in 1996 when surrounding tanneries were polluting the river Ganges. The range of Khanwilkar's decisions is as prolific as it is critical for shaping a modern nation of 1.4 billion people. He served as the Standing Counsel of the Election Commission of India aiding in the operation of EC that is crucial for Indian election process.. He wrote 226 judgements and sat on 817 benches, a hardworking and disciplined judge that is a reflection of the best of India from the period of Indian renewal under Vivekananda and Gandhi to this day. Khanwilkar started his career in 1982, representing the state of Maharashtra as Standing Counsel at the Supreme Court, and was later Chief Justice of Himachal Pradesh, Chief Justice of Madhya Pradesh. ...

LyrArc Article Gist
As with so much in life too much of anything is bad. Obsession for dealing with inequality without grasping the potential of new technology and people with skills, has hurt both China and India, with both moving to correct this in the last 20 years. Allowing too much inequality disturbs the balance in society damaging democratic processes and creating new dangers for democratic processes.  Today Piketty, and other Western and Asian leaders are presenting the argument for fairer societies principally because this is the only way to generate the kind of cycle for growth seen after the second  world war in the 1940's, 1950's and 1960's  following FDR and Truman, De Gaulle and Adenauer. At some point the curve for growth simply drops with extreme disparities in society- something that happened with disastrous consequences in the history of China and India in the 1500's and the long descent into colonial or semi-colonial rule. That pattern is documented in Adam Smith's Wealth of Nations. And it is a drop no nation or society would want to repeat because of the immense suffering, and the decline of Asian societies in a social and cultural sense, leading to a closed outlook to science in general and knowledge accumulation behaviours based on scientific observation of Nature over the course of the 17th to 19th century.  Some traces of this in the early stages are evident in the US and Europe which is why all well meaning people and people of goodwill for their countries seek a way out of this endless fracturing, the rural-urban divide, the society blind and morally neutral views of tech, and the starving of resources which benefit the broad segments of society for infrastructure, health and education through the misallocation of resources to other places. In the long run what is important is not the long theories which can fail, but to "Just Do," follow good common sense, do the right thing as Modi has done for women in essentials such as water, toilets, cooking gas, digital bank accounts, dignity, safety, access to education. And what Xi is attempting to do for Common Prosperity in China. And what Biden and Scholz are setting out to do in the US and Germany. ...

LyrArc Article Gist
This WSJ report sees Angela Merkel as leaving an international legacy of cooling relations with America. It says Angela Merkel turned down US president Biden's first call after his election as president because she was going to her cottage in the country that weekend. This report says after 4 terms Merkel is to be seen as dramatically increasing her country's economic dependence on China, pushing through a energy deal with Russia, joining France in challenging US political influence in Europe, rejecting American requests on economic policy and setting Berlin's openness to Chinese technology.  What happened with her youthful fascination with America during the years growing up in East Germany asks the WSJ? It also says of the Bush years of unregulated banking leading to the 2009 US banking crisis- that left her with a distaste for Anglo-Saxon banks and Wall Street lobbying. Of the Obama years it says Merkel found Obama unsteady, verbose, and sometimes meddling, with the spying on Merkel's phone also giving her a sense of disrespect to Germany. The result was that Merkel increasingly was fascinated by the Chinese experiment in development, visiting China 13 times while in office, studying Chinese history, politics and economics.  Merkel over this period met with the Dalai Lama and had questions about one party rule by CCP. Yet she became more and more resigned to Germany as a country of 80 million, not the EU and Europe as one group united in vision with a population of about 500 million, larger than America that could be a force for good in its own right. She said "we can be as hardworking, awesome,  as super as we like, but as a country of 80 million we won't be able to prevail if China ever decided that it no longer wants to have good relations with Germany." She ignored the experience of Sweden and Scandinavian countries in their relations with China. In saying this she ignored the potential of India and its neighbors in south-east Asia that make up about 2 billion people or about twice the population of China. She also seemed unaware of the role Woodrow Wilson, FDR, have played in realizing the democratic vision of the German revolutionaries of 1948 who failed to bring democratic government to Germany. And she had forgotten of the role Harry Truman, the commoner president of the US, who played a major role in establishing German democracy and its dignity during the Berlin Crisis after the blockade of Berlin by the Soviets in 1948. The mediocrity of presidents from Bush to Trump has bothered Merkel. Yet it may very well be that there is nothing mediocre about Mr. Biden and America's vision about its future as it grapples with the social and economic problems of the last three decades, as it has done before in its history and come through. ...

LyrArc Article Gist
A very relevant comment about the media coverage on Putin's negotiations in Beijing for supplying natural gas to China, by a reader of the WSJ, Frank Peel. He points out China and Russia do not share the same goals and Putin talked about the Chinese as tough negotiators after signing the deal. The price as a "commercial secret" is because its years, could be 5, before gas actually flows to China from Siberian fields. Russia, is a smaller oil based economy- having failed to make the transition to a diversified economy- and very susceptible to the economic conditions in Europe and the U.S., as the 2008 crisis showed with very steep drops in output. President Obama has also pointed to this. Russia also shares with Argentina the tendency for elites- in the case of Russia a newly created oligarchy of business interests under Putin and his predecessor- to shift capital out of the country, making it even more susceptible to loss of value of the currency, the ruble. Devaluation of the ruble experienced under Yeltsin was severely traumatic for Russia, and the head of Russia's central bank went on state television recently to reassure ordinary Russians that this would not happen. The rainy day sovereign fund of over $400 billion acts as a cushion for shocks in short periods, but sustained loss of foreign investment would damage prospects for future improvements in standards of living or economic growth....

LyrArc Article Gist
Criticism of Bernanke's talk asking bank's to do something to help homeowners reduce the size of their loans even if it meant taking writedowns themselves as ways to help avoid the economic crisis of more foreclosures.

LyrArc Article Gist
Note the description of SIV's or structured investment vehicles, and SIV lites which have borrowings of 40-70 times collateral and less restrictions so very highly leveraged. About 23% of SIV assets are in residential morgage securities and half in American ones. These have very little bank credit line support in a liquidity crunch. Deutsche Bank RBS and HSBC were very active in this as well as the Landesbanken which had state guarantees. Compounding the entire problem is that no one trusts the ratings of the ratings agencies anymore. See related article on this.

LyrArc Article Gist
British prime minister David Cameron tells the House of Commons- after it is revealed that Barclays management set artificially low LIBOR rates- "We need to take action right across the board." CEO Diamond resigns. This was designed to avert regulator scrutiny of Barclays in the aftermath of the financial crisis of 2008.

LyrArc Article Gist
JP Morgan estimates that 150 million Chinese were in the stock market at the end of 2007. THese would be in the urban areas and in large cities where the brokerage houses are located. As a percentage of the new middle class this is is a significant part of the urban population. The drop in the Shanghai stock exchange of 46% from its high in October 2007 is going to significantly impact consumption in 2008 and 2009 as savings of the average person on the street have taken a big hit And 15-20 % of the earnings of pubicly listed companies on the Shanghai stock exchangenot involved in banking and finance came from stock trading gains according to experts. If you add the earnings of financial companies and banks then you have banks having large losses which happened in Japan from the drop in their stock assets holdings, and reluctant to lend to business leading to a tightening in credit and a contraction in the economy from another angle. Something similiar to what happened to banks in the USA but in that case originating from a housing bubble. The industrial companies that engaged in stock trading would also have a drop in assets and earnings and thus have less to invest. That this would lead to a small drop in growth rates is not plausible, growth rates dropping from 11 to 9% as some experts say. Because there are overextensions in other areas such as real estate and other negative factors such as rising inflation including rising food prices, rising oil prices, and rising labor costs, and a slowdown in the export sector as markets in the western countries especially in the US go through a protracted slowdown. All these factors take time to have an impact and one could see much lower growth rates taking the pressure off oil demand and oil prices. A similar situation may be seen in other countries like India where the Bombay stock exchange dropped 31% from its high late last year and 53% drop in Vietnam. Vietnam and India may benefit from a shift in production from China as companies try to look for alternatives to the higher cost environment in China but they would still see a significant drop in growth rates before resuming high growth rates. ...

LyrArc Article Gist
The WSJ Dollar Index , which shows the strength of the U.S. dollar against a trade-weighted basket of currencies, jumped up by 22% from July 1, 2014 to March 17, 2015, according to FactSet. Since that time the dollar has risen slowly by 2.7%. Scott Mather, chief investment officer, U.S. core strategies, PIMCO, says the dollar normally rises faster in the period when there is an expectation of rising rates than when the actual increase of rates takes place. Analysts say if the Fed raises rates in 2016 this could strengthen the dollar further, complicating the Fed's rate increase plans with slower increase in inflation. U.S. S&P 500 companies have reported lower earnings by 10-12% in the third quarter of 2015- when actual earnings dropped by only 1.5%- because of the stronger dollar, according to Binky Chadha, chief global strategist at Deutsche Bank. He says core goods inflation would have risen by half a percentage point more without the stronger dollar, meeting the 2% Fed target, had the dollar not strengthened....

LyrArc Article Gist
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.

LyrArc Article Gist
Texas law written into the constitution of the state when it was founded in 1845 banned home equity loans. This was a result of a bank panic and foreclosures of that period when many homesteaders lost their land. The change banned lenders from selling mortgages to homesteaders. Till 1998 Texans could not take out home equity loans. New laws restricted the total debt on a home to 80% of its appraised value. This loan to appraised value limit plus the restriction that home equity loans could not be used to pay other debt kept homeowners in Texas from facing a high rate of foreclosures. Fed studies show that in 2005 U.S. homeowners took out $500 billon from their home's appraised value through home equity loans and cash out refinancing. Of this $263 billion went into consumer spending and paying off debts. This Fed study co-authored by Greenspan shows that 80% of the three fold increase in American mortgage debt between 1990 and 2006 came from home equity taken out on rising home values.