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Consumer prices rose 0.4% in June 2013, in early signs that the policies of the Abe administration against deflation are working.

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Japanese carmakers are still recovering from the loss of sales in China's market after the dispute over the Senkaku islands, and are losing ground to GM, VW and other carmakers in the interior of the country.

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Internet IPO's of unprofitable companies in 2013. Investor interest in these companies.

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Lower reserve capital ratios of China's mid-size banks, Citic, Mingsheng, China Merchants bank falling below the Basel III requirements of Tier 1 capital ratios- mostly common equity- of at least 8.5% of assets by 2018, 9.5% for systemically important banks. In comparison the higher capital ratios exceeding Basel III requirements of Industrial and Commercial Bank of China, Bank of China and Construction Bank of China, the large state owned banks. The situation is worse when one considers that these midsized banks have tried to grow aggressively taking on credit risks beyond their capacity. China Merchants Bank has off-balance sheet wealth management products, high interest deposits invested in riskier assets of $83.7 billion at the end of Sept 2013, equivalent to 200% of shareholders equity.

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Republican Jeb Bush's address to the 2013 CPAC conference focusses on the decline of social and educational mobility in the U.S. to its lowest point since 1945. In this address he points out that " the central mission of conservatives is to reignite social mobility in this country- restoring the right to rise." His focus on restoring the right to rise is on doing everything to increase opportunities for "quality education," an issue on which he focussed as governor of Florida. He sees technolgy and relative youthful population compared to China and other countries in Europe, as giving America a unique advantage. On this and individual efforts he pins the broad hopes of the middle class revival he sees. He puts the problems of America's middle class and working class as wages declined and the economy suffered from misallocation of resources in stark terms- "Today, the sad reality is that if you're born poor, if your parents did'nt go to college, if you don't know your father, if English isn't spoken at home- then the odds are stacked against you. You are more likely to stay poor today than at any other time since World War II." And he sees Conservatives having a response to this situation, and restoring the idea of America as a land of opportunity for all....

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Its clear from the task force's rejection of the plan GM submitted in March 2009, that the restructuring at GM was moving too slowly, too many brands, too many dealerships, no clear idea of what the new GM should look like. And a wistful look back to the past that clouded every decision. Wagoner and his team could not leave the old GM behind and clung onto too many brands, plants, dealerships, and sales numbers that were too optimistic at every turn of the economy, even as they were lowered. The task force said GM was "far too slow" to adapt and that "a substantially mmore aggressive restructuring plan" was required. That GM was just a year ago 2008 about this time still thinking in terms of sales numbers that would match Toyota's, as the largest carmaker in the world, shows how this wistful looking back at the past may have blinded GM to all the potentially dangerous bets that it was making, wihtout realizing it. Bets that the huge gap between the US carmakers and the Japanese and the Europeans in fuel efficiency and the technologies that went with it, would not someday come to hurt GM. Bets that the numbers game could be played without huge risks, that incentives related sales couild simply be inflating the market now with bigger risks ahead. That simply relying on sales revenue to support unsustainable retiree and union costs would be another dangerous bet on unsustainable sales numbers of a16 million market. The other large industrialized societies were seeing shrinking car sales, Japan, Germany, are prime examples, where sales are nowhere what they were at the peak in the postwar recovery of these industrialized countries. See the links/groups to these two countries car markets. Had GM considered the prospect of similiar declines in the US? Even if the car sales had remained at levels much lower than 16 million without the consumer buying spree and incentives, the market would be shrinking, the sales inflation simply made the sales fall that much steeper, hitting the 40% range. ...

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Wagoner says GM can get 37mpg on average by 2012 for its cars in response to Congressional demand for higher fuel efficiency and energy conservation. Congress is looking for European mandated levels of 50mpg by 2015, which were initially opposed by European automakers also. It becomes the condition for loans. The awfully bad unemployment numbers for November of 533,000 layoffs led to some compromise from Speaker Pelosi, so that $15 billion could come as a bridge loan to the Detroit automakers from the $25 billion allocated for the specific purpose of fuel efficiency technologies. The only way this compromise could be reached is by a complete shift by the auto executives on the issue of fuel efficiency, which is a sore point with Congress especially the way automakers in Detroit have dragged their feet on this issue over 2 decades, contributing to the jump in oil prices in 2007 and early 2008.

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A report published by Capital Economics of Toronto, based on Labor Department data, shows the U.S. is not adding the kinds of jobs with the pay, benefits and hours of the 8.75 million jobs that disappeared during the recession. Labor Department data support this analysis. The number of food preparation and serving workers are expected to grow by 394,000 by 2018, but the pay is only $16,430 for these jobs. The good well paying jobs are continuing to be lost. Large employers such as Lowe's home improvement chain is eliminating 1700 managers, and adding 10,000 weekend sales positions and new assistant store manager positions. This use of parttime workers also reduces income levels of workers. The impact of this is to limit the consumer spending. As local government is shrinking from budget cuts, better paying jobs are being lost in state and local government, and workers are earning less in the new jobs that do similiar work.

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Krugman points to the low productivity improvement in the U.S. since 2005, and looks at the nature of tech changes since 2005 with products from Apple, Google, Microsoft, Amazon and other companies targeted more at consumers than at the core industrial economy. Listening to my favorite music or using smartphones does not add to productivity in the same way that changes in an earlier period improved productivity. Low productivity improvement hurts workers in the U.S., Britain and in the eurozone, as this is holding back growth in wages. Figures actually show a further deceleration in productivity since 2010 to a mere 0.3% annual growth in the U.S., from 1.3% since 2005, and 2.9% for the period from 1995 to 2005.

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Former Senator Chuck Hagel of Nebraska, has called for fresh thinking in U.S. foreign policy and foreign engagements after the wars in Iran and Afghanistan cost the U.S. about one trillion dollars. He says the U.S. should avoid single issue engagement, get the participation of other countries, and increase common ground on a host of issues which concern most of the major nations in the world. This is why we have a G-20 and not a G-8, says Hagel. This policy also helps the U.S. by having other countries in Europe, Asia and the Middle East take up some of the responsibilities that would otherwise fall disproportionately on the U.S., and lets the U.S. devote attention to strengthening the domestic economy which underpins strength in world affairs. On Iran he sees continuing talks as the better approach to coming up with a solution, for which he has come under criticism from some Republicans.

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Interview with Honda CEO Takeo Fukui. In June Honda will rollout a new hydrogenpowered fuel cell vehicle called the FCX Clarity. Its powered with electricity produced by combining hydrogen and oxygen in batterylike fuel cells. Honda will have this vehicle available for lease this summer in California and aims to deliver about 200 of these cars by 2010. Fukui's attitude is refreshing when compared to that of other automakers when answering a question by John Murphy of the WSJ about why try to build a hydrogen car when the stations to power the cars do not exist yet. He tells Murphy if you asked were there any gas stations when Henry Ford came up with the Model T, there weren't any, lets build the cars first and the infrastructure will follow. And Honda is working on the technology that will make it possible to charge hydrogen into fuel-cell vehicles at home . He sees it happening first in California and some other states, and in Japan and Europe. And he sees it taking about 10 years to get some sort of infrastructure in place. Considering the long term nature of the demand side with the gradual inclusion of billions of people in China and India as well as Brazil and Russia into the world economy as well as people in other developing countries this is a solution that takes patient and focused development of technology which Honda is setting out to do. He does not see a safety issue in use of hydrogen vehicles as he is confident Honda can develop the expertise to handle the safety issue for hydrogen. What is his thinking on green vehicles? What happened to the Insight the first hybrid car that Honda introduced? The Insight was never intended to be a mass seller, only to establish Honda's record as having the best record in fuel efficiency. What is Honda doing in this area. Honda does see a problem in this area. Toyota he says developed a green image largely on the back of one car the Prius. Honda will come up in 2009 with a dedicated hybrid vehicle to match the Prius. And Honda is setting the bar high for this Honda hybrid, saying that his feeling that this model will have to overwhelm and overtake the Prius. He goes on to say that this is key for us. Honda he says will take on the challenge and compete with Toyota with its products, its technology, and its racing spirit. This gasoline-electric hybrid will be introduced early next year in the USA, Japan, and Europe, and it will be the first of 4 hybrid models Honda will introduce by 2015. Regarding price the company says it will be "affordable". Honda's goal is to sell 500,000 hybrid vehicles a year. Toyota aims to sell 1 million hybrid vehicles early in the next decade and is working on developing its own hydrogen fuel-cell vehicle. Is Honda developing electric cars? Takeo Fukui thinks the practical feasibility of the electric vehicle is very limited. The two biggest issues in his view being driving distance and recharging time. The FCX Clarity can be recharged in one minute, compared to the several hours for an electric vehicle. In his view the electric vehicles will be uselful only for restricted applications like golf carts. Nissan and General Motors are planning to launch electric vehicles. What is Honda's environmental strategy? Honda being a smaller company has to focus its resources wisely with strategic choices. His focus is on the hybrid as the core product, and after that comes fuel cell and clean diesel as the core products to tackle fuel eficiency and CO2 issues. Takeo has spent more than a decade on Honda's racing teams. He drives a CR-V and enjoys driving up and down the mountains, does not race but does get on Honda's test track once or twice a year. And what has he learned from all the years in racing. When he was fully engaged in the motorcycle racing teams he says the pressure was very high and if they did not do well they got bashed by managers and the media. And actually the results were disappointing for years and the teams kept losing. For hime the series of difficulties and challenges was something that he feels everyone should experience because in some ways he acquired wisdom and creativity to get through these experiences. This is some thing Honda and Fukui will need as they try to develop their own hybrid to take the lead from Toyota and come up with industry leading technology in tackling fuel efficiency and CO2 issues. His own approach to management? Two things he always keeps in mind are take time to keep up good communication with associates at work, and testing Honda's own products with his own hands. What does he think about the auto industry in 2008, is it a turning point? He says it has becom clear in 2008 that a company has to have the technology to deal with carborn dioxide and fuel efficiency issues. And its clear that smaller vehicles are more attractive than larger vehicles. And its possible he says that we may go back from automobiles to motorcycles. In fact in India Honda is promoting motorcycles in a big way, while Tata is developing the Nano for mass market, so Takeo is talking about something that Honda sees happening in some places. ...

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Several quotes from Bloomberg that have a lot of value. Reward people for trying new things, if they take risks to try new things reward them and encourage them even if it doesn't work out the first time. Remember the recent interview with the South Korean infrastructure building companytop manage and how it decided to take up the challenge of building the first highway between Seoul and the second largest city in S. Korea entirely using Korean knowhow in the early years of development. 311 was a very good idea especially when Bloomberg goes through the weekly reports. His office in glass in rooms without walls is another good idea to get things done quickly and be on top of things. Getting Katherine Oliver to boost NYC with the movie industry is another one. The reporter who interviewed Bloomberg describes as one of his strengths getting people who are better than him on board and getting them to do important jobs. That plus a can do attitude willingness to face up to difficulties and not shrinking from the task make for a winning combination, as it says in this article his way is to take a big task piece by piece and tackle each piece at a time.Then add to this his openness in communication and eagerness to listen makes for effectivness in execution. In fact the reporter could not even find Bloomberg in the NYC mayoral offices as his cubicle sat smack in the middle of the large room surrounded by his other staff' cubicles. Intel's Andy Grove also used a similiar ofice and so do top managers at Honda Motor Company, its merit is that it speeds up communication and helps in execution. ...

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Elliott Abrams quotes former President George Bush from November 2003 when he asked the question: "Are the peoples of the Middle East somehow beyond the reach of liberty? Are millions of men and women and children condemned by history or culture to live in despotism? Are they alone never to know freedom and never even to have a choice in the matter?" Abrams, former deputy natonal security advisor for President Bush, says the autocratic regimes and dictators of the Middle East have offered a false choice to the US- its us or the Islamists. Roger Cohen also points this out in a recent article in the New York Times. For Tunisia he says this was never defensible. It is a largely secular nation with a literacy rate of 75% and per capita GDP of $9,500, and Ben Ali, the dictator of Tunisia, jailed moderates, human rights advocates, editors, anyone who represented hope and change. Abrams says Mubarak has done the same in Egypt. And he warns that if you make moderate politics impossible as Mubarak in Egypt and Ben Ali in Tunisia have done, then you make extremism more likely. Ruling by emergency decree for decades creates a real emergency, as has happened in Egypt. Bush made that speech at the 20th anniversary of the National Endowment for Democracy, and he reminded Americans that "sixty years of Western nations excusing and accomodating the lack of freedom in the Middle East did nothing to make us safe- because in the long run, stability cannot be purchased at the expense of liberty." He admits that the Bush administration did not always conduct US diplomacy in this vein, but the President took the lead and the Obama administration's abandonment of that mindset is nothing short of a tragedy. Obama's policy of "engagement" actually endangers the US position as a supporter of liberty and freedom wherever it is stifled or muffled, because it turned a blind eye to the people themselves as it engaged with the dictatorial regimes in the Arab world and other countries. When the elections in Iran were stolen the Obama administration hesitated, waffled in its committment to liberty, fearing that it would affect nuclear negotiations. Obama did not -as of late Friday night Jan 28, 2011- call for free elections or clearly demand democracy. The law school analytical processes that Obama brings to the presidency and the demands of geopolitical diplomacy are impervious to the loud voices demanding freedom in countries denied liberty. Obama has forgotten the very same voices he passionately heard when he wrote in his first book that in the words "we hold these truths to be self-evident" he could hear the spirit of Douglas and Delaney, as well as Jefferson and Lincoln, the struggles of Martin and Malcolm and unheralded marchers to bring the words to life. He could hear the words of interned Japanese families, the voices of Russian Jews in lower East side sweatshops, of dust bowl farmers during the depression, all these voices clamoring for recognition and asking the question about what is community and how it can be reconciled with freedom. This failure to recognize these voices clamoring for freedom and economic opportunity is all the more striking because it was vision and a bold sense of purpose that energized the Obama campaign and both the vision and the bold sense have eluded the administration. Abrams calls for a clear unequivocal committment by the US government in favor of freedom and peaceful efforts to achieve it in the Middle East, because he says that as the demonstrators are telling the world outside supporting freedom is the best policy of all. ...

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The New York Times reports that comments from Obama administration officials describe an alarming loss of trust and confidence between China and the USA over the last two years. David Shambaugh, director of the China Policy program at George Washington University, says the administration had hoped to work with China on major challenges like climate change, nuclear nonproliferation, and a new global economic order. China, he says, has failed to step up and play that role. He describes the Chinese as responding as an increasingly narrow-minded, self-interested truculent, hyper-nationalist, and powerful country. Jeffrey Baker, a key China policy adviser in the White House, says China's responses reflected a sense in Beijing that China was a rising power and the USA a declining power, especially after the strong rebound of the Chinese economy after the 2008 crisis. The administration is determined to counteract that impression. Other factors complicate things. China is facing a transition to a new leadership in the next year. There are differences within the Chinese Communist party leadership ranks about the direction China should take. Trade and currency issues have come to the point where American public opinion is shifting greatly, with educated professionals changing their views on trade and currency matters. See the recent WSJ/NBC September 2010 poll on world trade, reported by Murray and Belkin in WSJ, Oct 2, 2010. The Obama administration cannot ignore the deep concerns of the American people on these issues. The House overwhelmingly voted in September to threaten China with tariffs on its exports if the Chinese currency, the renminbi, is not allowed to appreciate significantly enough (experts estimate that it is overvalued by 20%). It is not clear whether the Administration's rhetoric on this issue is to assuage public opinion in a business as usual manner, or expected to achieve substantative results to rebalance world trade. The G-20 summit in S. Korea leaves this change for well into the future- China with current account surplus of 5.8% of GDP in 2009 is expected to lower this to 4% by 2015. With the high jobless rate in the US and the large and rising current account deficit, the United States may have reached a juncture where this cannot be put off well into the future years. Other issues, the different foreign policy objectives, and differing perceptions of China and the US of each other, the relationship with US allies in the region, may create additional tensions. These tensions may be navigated by governments of both countries, but the shift in American public opinion on trade, currency and jobs issues will require tangible and real change. As trade tensions will only increase in the next two years with the lack of fiscal stimulus on the jobs front, and no significant change in jobs expected from the Fed's purchase af additional Treasury debt, and a sense that the mutual benefit in the trade relationship with China has been lost to America's serious detriment. China's position may be perceived as stronger than it really is from the faster rebound from the 2008 crisis, and may in reality not be as Jeffrey Baker sees it. As David Barboza has reported in the New York Times, and experts have pointed out, the huge amount of lending encouraged by the government has accentuated weaknesses in the Chinese economy. A significant amount has gone into real estate speculation and will only increase the bad loans on the books of China's banks. This happens at the very time that growth is expected to slow down and make it harder to absorb the bad loans, as was done in the past. ...