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Wall Street Journal Original article ›
LyrArc Article Gist
The Federal Reserve reports show capacity utilization in the U.S. at 76.9% in April 2011. This is less than the 81% when the recession began in 2008. It shows an increase from the 67% capacity utilization in June 2009. The capacity utilization figures are 78.1% for the chemical industry, 80.5% for the computer and electronics industries, and 74% for the auto industry in March (which dropped temporarily to 63% in April as a result of the earthquake in Japan).
Washington Post Original article ›
LyrArc Article Gist
Samuelson says the bill in the U.S. Senate is symbolic because it allows companies to cite the undervalued renminbi as an illegal subsidy and have the Commerce Department impose duties on Chinese products. This would have to be done on a case by case basis, making it largely ineffective in dealing with the large trade deficit with China. He also cites the differences among economists that show a range between 1 million and 2.8 million jobs lost. The 2.8 million jobs estimate is from the Economic Policy Institute for the period 2001-2010. The 1 million is an estimate for 1990-2007, which estimates a loss of quarter of all manufacturing jobs. By WTO rules subsidies that are not targeted at specific industries or firms are allowed, according to lawyers. Which means China could appeal to the WTO, and impose retaliatory duties. In the meantime the trade deficit with China, with imports of $364 billion in 2010, and $86 billion in exports, would remain largely unaffected. This is the reason some Senators, including Republican Orrin Hatch (Utah), see this move as political posturing by President Obama and the Democrats, because the administration has no new proposals to address the trade deficit and the gradual erosion of America's manufacturing base. Samuelson cites Arvind Subramanium of the Peterson Institute, and his book "Eclipse: Living in the Shadow of China's Economic Dominance." Subramanium says what is at stake is not a temporary imbalance in world trade a happened with Japan in the 1980's, but a gradual shift to a system of trade in which China has preferential access to raw materials (oil, grain, minerals), subsidizes exports in new industries as it moves upscale from shoes and textiles to automobiles, aircraft and alternative energy, and changes the very nature of the global trading system as it becomes the dominant trading nation in the world. By Subramanium's estimate China's share of global trade increased from 1.6% to 9.8% in the 2 decades from 1990 to 2010. In two more decades he estimates China could increase this to 15% of global trade, significantly larger than the U.S. In a response to Congressmen, businessmen and policymakers wary of starting a trade war, Samuelson says there already is a trade war as a "fixed" system of trade undermines America's manufacturing and industrial base. The only difference being that today only one side is fighting that war, and America is slow to grasp the implications or its policymakers are clueless how to respond....
Wall Street Journal Original article ›
WSJ Original article ›

Taking On China

New York Times Original article ›
LyrArc Article Gist
Krugman points to the need for action on revaluation of the yuan, and sees the vote in the House of Representatives sponsored by Sander Levin as a necessary step to get China to act. He sees China as dragging its feet on this issue for many years, and the need to keep the heat on US policy makers, who have acted very passively on this issue. He describes the US policymakers as being infuriatingly, incredibly passive in the light of the Chinese inaction and stalling on currency appreciation. China he says denies manipulating the exchange rate, even as $2.4 trillion foreign currency was purchased by China. Krugman says China is not letting what is a natural process to unfold that would help the world economy as a whole to recover. Its manipulation of the exchange rate, is in effect subsidizing its exports at the expense of other countries like the US. See the link to Roubini, who shows how this is bad for China. Roubini says China will see a growth collapse in 2-3 years, if it does not change direction and let the yuan appreciate. He says it is in effect a large transfer of income from Chinese households to Chinese state owned companies which is dangerous because of increasing misallocation of resources and real estate speculation. See David Barboza for information on the real estate speculation of these Chinese state owned companies. When all this information is added up, it shows China's serious need to act. This would make possible a transition to a new model of development that relies on domestic consumption, and bettter allocation of resources and investment. ...
Wall Street Journal Original article ›
LyrArc Article Gist
The Australian government forecasts lower GDP growth in 2012- dropping to 3.25% fro 4% earlier. The government plans spending cuts of 11.5 billion Australian dollars over the next 4 years, which will further affect economic growth. The mining and resources sector boom is leading to an overvalued currency which is affecting growth in manufacturing, tourism, and retail sectors. Australia has two economies and this limits economic policy options.
Wall Street Journal Original article ›
LyrArc Article Gist
The dangers to China's economy and banking system from the large number of bad loans at the local level. Difficulties of absorbing bad loan losses by the central government as new loan losses are piled on top of previous loan losses from earlier efforts to tide over bad loans. Considering all nonperforming loans that may end up as sovereign debt China's national debt is upwards of 80% of GDP, say Walter and Howie. The lack of any serious change in policies, inability to control lending for state enterprises and local governments, the tax on savings with low interest rates which keeps down domestic consumption, and the absence of a serious discussion on these issues leaves China exposed to higher systemic risk from excessive financial leverage.
Wall Street Journal Original article ›
Wall Street Journal Original article ›
LyrArc Article Gist
Browne describes the excessive focus on "hard" GDP targets in China and the results in wasteful spending and neglect of other vital indicators of development such as healthcare, education, environment.
New York Times Original article ›
New York Times Original article ›
LyrArc Article Gist
China's central bank, the People's Bank of China, reduces the capital reserve requirement ratio for the largest banks by 1% to 18.5%, on April 19, 2015. This move is expected to free up $200 billion for new lending by banks. China's securities regulator also acted to curb margin financing, the using of borrowed money to invest in the stock market which faces bubble conditions. China's economy is reported to be slowing making it uncertain whether the 7% annual growth target can be met.
New York Times Original article ›
LyrArc Article Gist
NYT reporting on the wealth of China's elite is followed by restrictions on journalists. Visa restrictions were eased for students, tourists and business travellers, but tightenend for journalists under the Jinping administration in 2014. This NYT editorial says NYT will not succumb to pressures from the U.S. or any government, including China, to change the high standards of reporting, and will continue to meet the fair reporting needs of its readers worldwide.
Economist Original article ›
LyrArc Article Gist
The lower oil prices in 2015 helps lower the current account deficit, which reached 7.9% in 2013, to 5% projected for 2015. Inflation is projected at 6.8%. GDP growth of 3.5% is expected for 2015. Turkey imports oil amounting to about 6% of GDP making for a large impact. Weakness is in the area of manufacturing, as Turkey's high tech exports are only 2% of manufactured exports, according to the Economist. About 1% of Turkish students have advanced computer skills. With problems in Brazil and Russia, money flowing into emerging markets is giving Turkey a second look after the emerging markets crisis in early 2014, when the lira slumped and interest rates had to be increased. The economy is recovering in 2015 from that situation. Two major beneficiaries of lower oil prices in emerging markets are India and Turkey in 2015, as both economies struggled with a large oil import bill.
The New York Times Original article ›
DW.COM Original article ›
DW.COM Original article ›
LyrArc Article Gist
German perceptions of Mikhail Gorbachev are shown here in DW.com. He is revered in Germany because of Gorbachev's efforts to end Soviet rule in East German state called the GDR, leading to the fall of the Berlin Wall. Gorbachev supported German reunification but did not do this is in a way that ensured that ordinary Russians and citizens of the GDR could make the transition to democratic processes in a smooth way. He also failed to grasp that economic transition could be difficult and would require extensive aid and grants from the west, and that safeguards and protections for retired pensioners and vulnerable sections of society needed to be in place. The following is a reflection of the background in political government and economy of the events in Europe leading to the war in Ukraine.  As a result Gorbachev's instincts were right by first 1956 as a student, and then 1979 as government official about the need for democratic processes to realize the real potential of Russia, just as has happened in many countries that lacked these processes for change in government- Japan, Germany, South Korea, India, Brazil and many countries in Asia and Latin America. But not realizing that these countries made the transition with considerable American and British assistance. Even where there was no direct assistance indirectly the British setup the first limited Swaraj or free rule in India, with elections and elected assemblies in Indian states in the 1930's, following the pattern in Dominion states Australia and Canada. Mohandas Gandhi negotiated within these processes for rights of South African Indians and Colored people, gaining experience, including study of British law.  A son of poor farmers in the agricultural region of North Caucasus, in Stavropol, it is relevant today that his maternal grand parents were from Chernihiv in Ukraine. He came to power in 1980 after entering the Politburo that year. These were the waning years of Leonid Brezhnev, president of the Soviet Union who followed Nikita Khrushchev (1953- 1964). Khrushchev was from eastern Ukrainian region near Donetsk. Leonid Brezhnev was a protege of Krushchev since 1931, from Kamianske, Ukraine.   Gorbachev was influenced by Khrushchev's speech that denounced Stalin in 1956 in favor of a freer and more open society. Khrushchev, became first secretary of the Communist party in 1953 after the death of Stalin and set the pace of post war Soviet society from 1950 to 1964. He removed the fear of the dictatorship of the proleteriat working class, increasingly dictatorial under Lenin, and blatantly arbitrary under his successor to make Soviet Union a freer society.  Yet his tendency to make decisions on his own without consulting others, and the failure of agriculture in the Soviet Union including food shortages led to his replacement by his protege Brezhnev. Brezhnev's whole career was built under Krushchev in Ukraine, in the army in Ukraine, and as a political leader in the Soviet 18th Army that entered Prague in 1945 defeating the Nazis. Why is this relevant? Gorbachev was educated at Moscow State University when the Soviet Union was in the Sputnik era, and felt at the time that it could reach the 1950's standard of living in the US- very different from the earlier leaders. Yet he may have been too much of an optimist and not hands on in understanding the working of a modern economy as large as Russia and the interests of different groups of society that had to be be balanced and protected. His understanding of the US and of how the US and British economies had evolved was limited or nonexistent. The isolation of the Soviet period may have compounded this. The Russian state in the Soviet Union could not simply unwind the power of the state and its intervention and everything would come out right of its own accord.   Leonid Brezhnev, the Ukrainian Russian who succeeded Krushchev from 1964 to 1979 let the system of Soviet rule remain as it was, in the Great Stagnation, leading to lethargy, lack of innovation, and a weak economy with military expansion. Gorbachev tried to regenerate the system by opening it up, but failed to see that there was a risk that it could come apart quickly as it did in just 4 years after he became president in 1985. Only the centralized power of the state had kept the Russian state together from the Tsarist period through the Communist period. The risks of this Gorbachev failed to grasp. What if it happened too quickly without a safety net for the people who could not make the transition. What lawlessness and failure of the rule of law could happen. The US and Britain had evolved their democracies over centuries. Wars were fought in the US and Britain over rights and responsibilities of kings and parliaments. In the US Lincoln fought the civil war not just for emancipation but to ensure safeguards for free white men on the farms so that Labor did not get disabilities placed on them by Capital (entrenched forces of Capital of which the southern plantation economy was only one aspect.)  Japan and Germany were set up as democratic states through American power and constitutional frameworks with Marshall Plans or agreement to take in unlimited imports from Japan. This bad scenario happened in Russia because Gorbachev failed to set the conditions first and work patiently to achieve them including introducing limited  elections and parliamentary processes first in Russia.  Leaders such as Yeltsin who succeeded Gorbachev in 1989, winning the elections that followed, failed to provide a safety net for the vulnerable in the 1980's. Unemployment increased rapidly, life expectancy dropped in Russia, and the economy failed in the early years after 1980. A Marshall Plan like that offered to Germany could have helped but Gorbachev's failure may have been his failure to provide this transition by arranging for West Germany and the US to support a planned transition, a kind of Marshall Plan of Aid, and maintaining a gradual move to democracy as the country was given time to learn institutions of American and British parliamentary democracy. No such Marshall Plan was negotiated for a smooth transition over inevitable obstacles, no safeguards were put in place for illegal efforts to control the state by rogue elements and to seize assets of state companies, no efforts to first introduce limited elections and parliamentary processes for learning democratic process in Russia, and the people of Russia were left with a memory of the this period as a bad lawless period from 1989 to 2005.  Leading to the situation today under Putin of aspiring to the Soviet period as a kind of period that had offered Russia the world recognition it had lost. And this had happened even though the Russian economy had recovered and the standard of living had risen under Putin. Putin's career spanned the period as a Russian official in Dresden, Germany Democratic Republic or Soviet period East Germany to working in the St Petersburg City Council under Yeltsin. He personally witnessed the fall of the Berlin Wall and the fall of the German Democratic Republic from Dresden and Gorbachev's refusal to build a transition period for the changes so that it would not be traumatic for the GDR. Even after reunification these traumas remain in some segments of the older population in East Germany that saw themselves as neglected and support extreme right wing parties in eastern German states by 2020- considering the Soviet period as one in which their lives were less neglected.  After three terms as president Putin with his own traumas from that period in Dresden, and with a mother lost in the period after the Nazi invasion of Russia, a father who survived the Battle of Stalingrad, saw the period of lawless behaviour in the collapse of the Soviet Union as the"greatest geopolitical disaster of the century."  Putin and people around him made missteps and miscalculations launching a war in Ukraine, leading to the situation today- jeopardizing hard won gains for the Russian economy. By 2022 Russian standards of living had risen and the economy was in the best shape it had been in the modern period since the Industrial Revolution. Yet largely exposed because of the dependence on oil and gas during a period of climate change and focus on building future economies free of fossil fuels.  Putin in his own peculiar logic may have seen this as the only opportunity in 2022 before deliinking from fossil fuel reduced the importance of the Russian fuel dependent economy to make some territorial readjusments in Ukraine with a quick war taking Kviv. That turned into a massive miscalculation with the emergence of nationalist fervor in western Ukraine spreading to the whole country of 40 million people. In the future to 2030 with phasing out of the fossil fuel economy, Russia without the connections to the US and European Union's technology and resources it had during Putin's three terms, and facing strict sanctions from US and EU, faces a difficult future. This has cautionary lessons for all countries- the US that read too much into the fall of the Berlin wall and indulged in a losing proposition with free markets that damaged its infrastructure and manufacturing with shifts to China, China understanding of how it to was dependent on the world economy for its future development, India that had to navigate a difficult period and what lessons to draw for building a bigger economy, the EU realizing the failure of its policies of depending on Russia for energy and China for manufacturing with fragile supply chains,  and Russia that there were twists and turns and the need for safeguards and experience building democratic processes before these processes would work for the economy, its people and for Russia as a nation. ...
Washington Post Original article ›
BusinessWeek Original article ›
LyrArc Article Gist
The President of the American Chamber of Commerce, Harley Seyedin, says that the days when migrant workers did not know their rights, labor laws were not enforced, and factory owners could keep wages low, are gone. With 787 million mobile phone users and 384 million Internet users- which includes migrant workers who can now get the news about the latest developments, send messages, video, and access the internet. For its part the government made serious effort to create awareness about new labor laws of 2008 through the state run media outlets. And workers have greater awareness and understanding of their rights for safe working conditions and double overtime pay, as well as other rights guaranteed in China's new labor laws. And something else is happening that connects the universities with workers. The expansion of the number of students at Chinese universities has brought more people from rural areas into the universities. This has created sympathy and support for migrant workers at the universities. Nine sociologists at Peking and Tsinghua universities signed an open letter calling national and local governments to implement actions that let migrant workers integrate into the city environment and share in the country's progress that they are creating. The government's security system has prevented the creation of a worker's movement in the past. But this time the government may be thinking of the need to develop China's domestic market, as the reliability of markets in the USA and European countries is uncertain as economic conditions change. For this to happen China's workers need higher wages to buy the goods China produces. ...
Wall Street Journal Original article ›
Wall Street Journal Original article ›
LyrArc Article Gist
Research firm Dragonomics says real estate prices fell 4.9% in April from the prior year for nine cities in China. In 2010 prices in these nine cities went up by 21.5%, the increase in 2009 was 10%. Standard Chartered estimates China's second tier cities, such as Dalian and Tianjin, could have 20 months of housing inventory by the end of 2011. Standard Chartered says price declines of 10-20% can be expected. Government data understates the extent of the bubble and the drop in prices say analysts. Beijing real estate consultant, Soufun, confirms the slowdown in price increases, saying its data show average property prices went up by 5.1% in May over the prior year, compared to the jump in prices in 2009 and 2010. Prices of copper and steel are coming down after rapid increases. The price increases in the Chinese real estate market have put housing out of the reach of ordinary couples. In 2006 an average price of a new apartment in Beijing cost $100,000, by 2011 this had gone up to $250,000. It woud take 57 years of saving for an average person to buy the apartment at todays cost. The government's response has been to boost down payments on mortgages for second homes to 60% from 40%, prohibiting state owned enterprises outside the real estate sector from investing in real estate, and raising the reserve requirements of banks....
Wall Street Journal Original article ›
LyrArc Article Gist
In an effort to address global uncertainty, Australia's Treasurer, Wayne Swan, presented a budget designed to move to a surplus of A$1.5 billion from a deficit of A$44.4 billion for fiscal year ending June 30, with large cuts in defense spending. Savings and cuts amount to A$33.6 billion. The trade deficit is widening, and Australia faces uncertainty about the prospects of the mining boom continuing to sustain economic growth with the slowdown in China. The budget plan is based on assumptions of 3.25% growth in the next fiscal year, unemployment at 5.5% slightly above the 5.2% today. The growth in GDP for the last quarter of the prior fiscal year slowed to 2.3%. Australia's widening trade deficit for the first quarter 2012, was A$3.2 billion. New taxes on mining profits will generate A$6.5 billion in 2 years, and taxes on carbon pollution A$7.4 billion. With elections set for 2013, the government plans to continue payments supporting low and middle income families.
Wall Street Journal Original article ›
LyrArc Article Gist
Using a new methodology India's statistics agency revises growth for 2013 to 5.1%, for 2014 fiscal year to 6.9%. Growth for 2015 is forecast at 7.4%. For the 3 months Oct-Dec. 2014 the growth in GDP was at 7.5%. Changes in methodology include computing it at market price, not at factor cost. This adds up consumer and firm spending instead of producer costs.
Wall Street Journal Original article ›
Wall Street Journal Original article ›
LyrArc Article Gist
Wessel describes the changes in American manufacturing as it goes through some of the same changes that happened in Germany in the years after reunification. With high unemployment German manufacturing companies worked with unions and the government for wage restraint over the last decade, resulting in wages barely keeping up with inflation. The increase in productivity and wage restraint helped Germany become more competitive with factories in Asia and Eastern Europe. Wages are now increasing with larger wage increase negotiated by the unions in Germany, as skilled labor is becoming scarce. In the U.S. Labor Department figures show an increase in output per hour in American manufacturing of 13% in the last 5 years and 21% in the five years before that. Typical of the wage changes in manufacturing- American Axle & Manufacturing plant in Three Rivers, Michigan hires assembly workers at $10 per hour, with older "legacy workers" making $18 per hour. General Electric brought back manufacturing work from Mexico paying workers $13 per hour for new hires, compared to to $21- $23 in prior years. At GM, Ford and Chrysler workers make $16-$19 per hour in base pay compared to older workers with legacy rates of $29-$33. The Bureau of Labor Statistics shows earnings for production workers in manufacturing averaging $19.15 per hour in April, which is where they were in 2000 adjusted for inflation. The impact of this large increase in productivity with new machinery and production methods, and the wage reductions in manufacturing, is a return of offshored jobs. Wages increased in China and Mexico in the last decade. After a 35% decrease in the number of manufacturing jobs in the U.S. from 1998-2010, the number of jobs has increased by 4.3% to 11.9 million in April 2012, according to the Labor Department....
Wall Street Journal Original article ›

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