LyrArc Article Gist
Only by learning the lessons of "normal" trade with China, and accepting a feeling of "buyers remorse," says Senator Sherrod Brown of Ohio, will a better bilateral trade relationship with China evolve. He points out that every $1 billion of the trade deficit with China, has destroyed 13,000 net jobs, making the $226 billon deficit a tale of shuttered factories and devastated communities. He says China uses illegal subsidies and currency manipulation, and punitive steps are needed, not the moral suasion that the Obama administration keeps doing with no result. He says price manipulation keeps Chinese products 40% cheaper than comparable American made products. He wants the Senate to give tariff authority to the President, to impose tariffs on countries that manipulate their currency, when it convenes next month. Brown is the author of the book- Myths of Free Trade.

LyrArc Article Gist
Amar Bhide touches on the unpredictable consequences of devaluations while commenting on the supposed benefit of a country having its own currency vs a currency such as the euro. The euro takes away the advatantage of devaluing the national currency as a way to regain competitiveness. Bhide points out that devaluations hurt the elderly on fixed incomes and low wage workers. Protections have to be put in place for the sections of the population that are badly affected. Large union negotiated wage increases can also reduce the benefits of devaluation in terms of regaining competitiveness.

LyrArc Article Gist
Mitt Romney states the case for supporting free trade both in principles and practice. Acceptance of the staus quo allows China to game the world trading system, says Romney. In the end accepting the status quo may do more damage to the world's trading system than any efforts to correct the misalignment in currencies and failure to rebalance the world economy. He questions the passive approach of some members of Congress and the Obama administration on the grounds that starting a trade war makes them nervous. China with $273 billion more in exports than imports to the U.S. has reason to see this issue objectively, even with all the noise it is making about trade retaliation, suggests Romney. Other experts have pointed to the problems the misalignment creates for China's economy. A New York Times editorial on October 15, 2011, cites figures from the Peterson Institute of Economics showing this costs China $240 billion a year through trade surpluses in dollars that are declining in value. For years China's fears are that this would lead to higher unemployment. This New York Times editorial points out that jobs have increased by about 1% a year since 2004, even with 10%+growth, because many of the manufacturing jobs use advanced manufacturing technologies. A firm response today also makes it possible to avoid the kind of sudden response that could take place later on if public opinion overwhelmingly shifts away from trade with China under status quo conditions. ...

LyrArc Article Gist
In a program of gradual change the new leadership under premier Li Keqiang steers China's economy in the new direction set by the DRC Report: China 2030 and the Third Plenum in Nov. 2013. New priorities listed under major Tasks in the annual work report by Li Keqiang place setting up deposit insurance at the top of the list. Policy changes include allowing cities to issue bonds directly to increase transparency in construction spending and control burgeoning debt.

LyrArc Article Gist
Xi Jinping is said to have brought up the collapse of the Communist Party in Russia under Gorbachev in a closed door Dec. 2012 meeting of Communist Party officials in Guangdong province. A summary of comments obtained by the media shows Jinping bringing up the situation in Russia, where he said the "ideals and convictions wavered," the system suffered decay, the military and the party went in different directions, leading to collapse of the Communist party system. In Jinping's words it took only one word from Gorbachev for dissolution of the Communist Party, and nobody else came out with a different view. Jinping faces several challenges- tackling corruption in the party, making changes in the economy that move it in a different direction from the dominance of the state owned enterprises, improving the condition of people left out by the economic boom from unemployed students and migrant workers to people in rural areas.

LyrArc Article Gist
An account of the education, influence, political and economic positions of sons, and grandsons of the Communist leaders under Mao-tse-tung from the 1940's and 1950's. This story by Jeremy Page covers Bo Yibo, a veteran Communist leader under Mao, his son Bo Xilai, party secretary in Chongqing, Politburo member and candidate for the Politburo standing committee in 2012, and his son Bo Guagua, a graduate student at Harvard's Kennedy School of Government. The salary for aminister is said to be 140,000 yuan or $22,000 a year. Yet because of the power and economic influence of the Communist party leaders and their offspring, and the state run economy, a great deal of wealth and influence is controlled by this group. In 2010 an internet account described the son of a former vice president buying a $32.4 million harbor-front mansion in Australia.

LyrArc Article Gist
Estimates show the 50 million Americans enrolled in Medicare today will increase to 80 million by 2030, according to the program's actuaries. Simple demographics as the baby boom generation ages is making controlling the deficit without controlling increase in health care costs as both sides in the fiscal cliff negotiations are attempting to do can only lead to defunding critical areas such as education, R&D and infrastructure, and breaching the safety net for lower income Americans. Health care spending took up 7% of GDP in 1960, increasing to 17.9% of GDP in 2010. Federal spending on healthcare has grown to about 25% in 2012 from 10% in 1960, and is projected to increase to about 33% in ten years by the Congressional Budget Office.

LyrArc Article Gist
Glenn Hubbard describes how the difference in approach between Romney and Obama matters, as it did between Carter and Reagan. The basic difference being the importance of getting long term policy on the right track. See the Reagan memo in Groups for the importance of setting the right tone and emphasis on a consistent long term direction, which was advice given in the memo by Shultz and other advisors to Ronald Reagan. The belief in growth from private sector investment and job creation and putting the right policies in place is a distinct difference between the Romney and Obama plans.

LyrArc Article Gist
How will countries like India generate jobs when technology enables manufacturing and other activity to do work with fewer and fewer people. Even Hon Hai in China is shifting work to robots. Technological progress is leaving more people unemployed and widening income gaps with the benefits going to a few people, says the Economist in this research based essay. It will require carefully managed governance to invest in infrastructure, raise skills of less skilled workers through education, and wage subsidies for those left behind to ensure our current system works in the future.

LyrArc Article Gist
India's lower house of parliament passes a Food Security bill which provides subsidized rice, wheat and other grains to the poorer sections of society, covering about 75% of people living in the rural areas and 50% of the people in cities. The legislation increases the cost of food subsidies by $4 billion to $20 billion a year. Because of high levels of malnutrition in rural areas in India, especially among children, the program helps the needy. Brazil's Bolsa Familia program is more far reaching in helping the poor because it also requires vaccinations of children and making sure children attend school.

LyrArc Article Gist
Kessler in the WP corrects Obama's claim that he created 800,000 jobs. He says this is clever arithmetic as it takes a low point in Feb. 2010 following the financial crisis. Kessler points out that according to the Bureau of Labor Statistics, U.S. manufacturing jobs were 12.56 million in Jan. 2009 when Obama became president. In Nov. 2016, early estimates show there were 12.26 million manufacturing jobs, a loss of 300,000. This loss does not reflect the problems in the U.S. auto industry and older industries in the midwestern states as a result of trade and globalization that speeded up with the rapid industrialization of China. And led as Greg Ip pointed out in a recent WSJ report to a rapid acceleration of job losses in a decade that did not happen in the same scale during Japan's industrialization and urbanization in the sixties. This aggravated the situation in Michigan, Ohio, Wisconsin, Indiana, and Pennsylvania, and was met with a feeble response from Democrats. Even a economist like Krugman favoring the Obama administration's efforts came to the conclusion that TPP did not add much to gains from trade as most of the gains had already been realized. More of the gains went to tech and IT in California, at the expense of the auto industry based in the midwest. A report in WP show a president too close to IT in California and failing to grasp the situation in the midwest. Voters punish whoever is in power, regardless of being Conservative or Liberal, in Canada the hollowing out of manufacturing under Harper in Ontario and Quebec led to the win by Trudeau's Liberals.  ...

LyrArc Article Gist
A recent book "The Spirit Level" has become popular in Britain. It says that countries with greater disparities in income also do worse in a number of social indicators, from higher murder rates to lower life expectancy. It also affects the consensus in society which is a necessary underpinning for sustained economic development and economic growth. Inequality when it affects the middle class and reduces the size of incomes in the middle, or creates stagnation in incomes, poses large risks for society and affects economic growth. In the US the home foreclosure crisis and the lack of bargaining power of wage earners in the middle class has created this problem. This is exacerbated by the banking crisis and bad loans in the banking system. Studies show that slow growth in college graduating rates in the USA after 1970 compared to the period 1900-1970, has increased inequality, especially with today's knowledge economy. Germany is also affected by this problem as wages for workers have remained stagnant with the labor reforms. Interestingly a combination of economic growth and payments to the poor have increased the size of the middle class and its incomes in Brazil. The austerity policies in Britain will affect incomes and income growth in Britain for the middle class. In China the gap is widening quickly between the urban areas and the rural areas. And the policy of residency permits- the hukou system-which limits internal mobility from rural areas to the cities and towns, makes the inequality all the more glaring. The lack of democratic election makes the situation worse in China compared to Brazil, because free elections in Brazil enabled leaders from the working classes such as Luiz Inacio Da Silva and Ms. Rousseff to emerge as heads of government. These leaders pursued policies that would explicitly bring a more shared prosperity in Brazil compared to the leadership in China. In China policies are determined by entrenched interests in its model of development- the state-owned companies and banks and their managers, local and government officials of the Communist party, and businesses with the networks and connections with the Communist party and local governments. This is why the ginni coefficient which measures inequality has dropped significantly in China, putting it in the rank of developing countries with poor records in equality. Inflation in China, India and Africa also affects the poor and lower middle classes to a greater extent. Current trends suggest that rebuilding the middle class in the developed countries and providing fairer distribution in developing countries will be of serious importance in coming years. Especially with the likelihood of more economic crises which tend to adversely affect the middle and lower classes disproportionately....

LyrArc Article Gist
Wang Xiaofang is a former bureaucrat and writer who documents real life stories of corruption in China's bureaucracy by using fictional characters. A similiar approach by another Chinese writer Mo Yan in literary novels led to him being awarded the 2012 Nobel Prize for Literature. Censorship in China has not affected writings using fictional characters and literary novels of this kind. It may be seen by the government as a way to let the public ventilate some of its frustrations with corrupt bureaucrats and communist party officials in China. It also shows how widespread the problem has become and is a serious matter for the future of the Communist Party. Wang tells the Beijing Bookworm Literary Festival after he entered the official bureaucracy he felt the desire "not to be spiritually crippled." Wang is the author of the Civil Servant's Notebook, which is described as a guide for the 1.4 million people taking the civil service exams in China each year. This suggests that China's new leadership sees this as one of the ways to give right direction to young people joining the civil service, and comes with a new focus on corruption. Wang is also part philosopher in his musings when he says China has lost its traditional culture and cannot adopt western culture, and so it remains confused at a crossroad. This leads to his idea of operators in China's official circles as people who have lost their faith and spiritual home. ...

LyrArc Article Gist
Krugman points out that the federal tax rate for the top 1% is 34% in 2013, according to the Congressional Budget Office, because president Obama let the high end Bush tax cuts to expire. It is the number to remember says Krugman- 34. In 2008 the figure was 28.2. Under Hillary Clinton the average tax rate for the top 1% would go up by 3.4 percentage points, according to the Tax Policy Center. Some of this would help pay for the tution plan to provide access to the middle class to public universities. Under populist Trump, Krugman points to the elimination of the inheritance tax and tax rates going down substantially, and no such programs to promote the upward mobility that everyone is talking about, and no way to pay for a big infrastructure building effort for growth and jobs- upward mobility that is the focus of every candidate's election campaign including Sanders, Trump in appealing to older white working class families, Clinton, Ryan, Bush, and others in both parties.   ...

LyrArc Article Gist
"Defend blue sky and breathe together" says a painting on a brick wall in the coal producing region of Shanxi, northern China. China is finally acting seriously to impose strict environmental rules from the top. Old coal stoves are thrown into a dump as China shifts away from coal stoves to heat homes. So many new homes shifted to natural gas in Shanxi province. population 37 million, that demand overwhelmed natural gas supplies. Results are to be seen in cleaner air in Taiyuan, capital of the province and in Beijing itself.  President Xi's commitment to climate change accord reached in Paris is seen as firm in this report in the NYT. The head of the gas, coal and power markets division of the International Energy Agency, Mr. Peter Fraser, says that even though homes use only 6% of total coal used in China, the effects are disproportionately high because homes do not have any emission reduction mechanisms. Natural gas demand has increased by 16% in 2017 as provincial officials eager to meet the demands issued in Beijing to cut coal emissions even let some homes and schools go without heat in an early winter spell. This extraordinary report shows how in cities in northeastern China the people welcome the change to natural gas and cleaner air. Even in coal country, in cities like Linfen population 4.4 million, the change is seen as people welcome the clean air and officials build natural gas connections to execute the plans issued in Beijing. In Beijing itself Greenpeace estimates show 54% reduction in PM 2.5, harmful particulate matter for breathing by 54%, a startling fact showing Beijing's determination and effectiveness of its actions. Natural gas is more expensive and citizens do not complain in neighboring provinces near Beijing because the state provides adequate subsidies to compensate people. Decrees are being enforced to avoid coal stove use with people knowing they could see action by authorites if reported. Compare this to the problems of crop burning around New Delhi, in Haryana and Punjab provinces, and one can see that centralized control and direction has advantages when used in the right way for a good purpose and supported by people who want to breathe clean air. ...

LyrArc Article Gist
Speaking at a banking conference, advisors including the head of Russia's largest retail bank Sberbank, German Gref, minister of the economy, Aleksei Ulyukayev, and head of the central bank , Elvira Nabiullina, express deep concern about the economic prospects in 2015. Foreign investment is down from about $90 billion in the 1st quarter of 2013 to a negligible amount in the 3rd quarter of 2014. Capital outflows following the Ukraine crisis are estimated at about $110 billion by former finance minister Alexsei Kudrin. The ruble dropped to its lowest level against the dollar since the 1990's. And the sharp decline in oil prices with Brent crude at about $90 is another risk factor as 50% of the budget comes from oil and gas revenues and 60% of exports are still oil and gas, with no serious or effective effort to diversify under the Putin adminstration. Putin told the banking conference that a deficit free budget and reserves of $460 billion are "fundamental factors supporting stability." Advisors and leading bankers remain unconvinced. The problem is that even at the beginning of 2014 before the Ukraine crisis foreign investment had slowed to a trickle, similiar to what India experienced in 2013. The central bank head says her effort to open up the bond markets in Russia to foreign investors is now in vain because there are few foreign investors. Instead of reversing the situation as is happening in India with the new Modi administration, policy under Putin and the Ukraine conflict may have scared investors away with the increasing western sanctions and stagflation (estimated 8% inflation and about 0.5% growth in 2014). The head of Sberbank Mr. Gref told the banking conference- "The Soviet Union broke apart because of the mind boggling incompetence of the Soviet leadership. They did not respect the laws of economic development." The problem with sovereign reserves is that it can protect a sovereign currency such the Russian ruble or the Brazilian cruzeiro to some extent, but today's vibrant economies need foreign investment and foreign technology for growth. Even a country such as China with a trillion dollars in reserves needs the reserves in its special case because of its billion plus aging population, and is no exception to these laws of economic development about the need for foreign technology and foreign investment. ...

LyrArc Article Gist
A study by the National Employment Law Project shows most of the job creation in the economic recovery to 2014 in the U.S. is replacing the better paying jobs with lower paying jobs in fast food retail and similiar low paying industries.

LyrArc Article Gist
After the debt swap of old bonds for new bonds with private bondholders for an estimated 53% haircut, the IMF's March 2012 report on Greece says a lot remains unresolved. It predicts a "disorderly exit from the euro" without further help. The April 2012 elections may result in a dilution to committments to austerity policies in Greece, as these policies are highly unpopular in Greece. Greece is still "accident-prone." And competitiveness issues may take over a decade to resolve.