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A shocking fact about oversupply in one crucial industry. Automakers worldwide have the industry capacity to make 94 million vehicles. According to researcher CSM Worldwide the current sales in late 2008 reflects demand for 60 million vehicles worldwide. This is about 34 million extra vehicles and represents about 100 plants. Toyota has already cut production in Japan by 27% in November, the biggest cuts seen at Toyota in 30 years. The numbers for 2009 will reflect a deepening downturn from higher unemployment and lower spending. Not all of this capacity wil be cut as automakers will look for a rebound as customers replace aging vehicles, but as sales decline in Russia, China and emerging markets and in the USA and Europe, some consolidation will take place and many plants will have to close in the US, China, Portugal, Italy and Spain.

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In a time of relative prosperity in the first months after the boom years uptil 2007, in April 2008 to be specific, it is strange but true that food crisis is overshadowing the credit and housing crisis in the USA. At the G7 meeting, World Bank president, Zoellick, made a passionate statement about the crisis that is developing across Asia and developing countries elsewhere as food prices go through the roof. The World Bank and the IMF are stepping in, but the focus at the G7 meeting was on the US dollar and the world financial system. There have been serious problems about food shortages in Philippines, Indonesia, Haiti and Egypt, and even in other countries like China and India the increase in the price of rice by 146% makes for a serious food crisis. See the link to this.

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Reusable bags can replace 520 plastic bags used at stores each year for each person. Estimated 100 billion plastic bags are discarded in the USA alone each year according to Worldwatch Institute. San Francisco has banned them from stores and Boston, Baltimore and Portland (oregon) are considering banning them. The nylon bags made of thicker material that are being used as a substitute can also be a danger in landfill unless they are reused again and again because those bags will sit longer in landfills than the thinner ones. according to a source at MIT in materials science. The critical idea is getting a good sturdy bag and to kep using it over and over and not discard the bag for a long long time so that we keep less of this plastic in the landfills.

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The 2008 Honda Accord. This is eighth generation Accord with the first coming in 1976, manufactured now 80% in Marysville, Ohio. In 1982 the first foreign carmade in the USA, and in 1989 it leads sales rankings in USA, with antiestablishment appeal and solid credentials. Honda has sold 10 million Accords. This one is larger with more features.

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British Airways to start flights from New York to Paris with a new carrier its launching called OpenSkies. Flights will be added to Amsterdam, Milan and Brussels. This is part of the new Open Skies aviation treaty between the USA and the European Union which lets airlines of both the EU and the USA fly on all transatlantic routes.

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A 2024 Study by the International Trade Commission predicted that a 25% tariff on imports would reduce imports by almost 75 percent while increasing average prices in the US by about 5 percent.  As US companies have about half of the US auto market this would mean US auto manufacturers now have access to an additional 37 percent of the market by investing in auto plants in the US. US steel and aluminium plants will get additional investment to build these cars in the US. There is nothing new about this the US makers built plants in China. Germans, Japanese and Koreans took the US for stupid by keeping US cars out of their markets and thinking this could go on while by destroying US manufacturing it was  destroying America's middle class. It also gives the Germans BMW and VW, Subaru, the Japanese Toyota and Honda, Nissan, the South Koreans Kia and Hyundai, Chinese makers of EV's the option to Make in the USA and build plants invest in US manufacturing.  ...

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Sales of automobiles are shifting from trucks and SUV's to cars in the USA and overall sales are seeing large declines. How is Europe faring in this regard? Spain's car manufacturer's association Anfac said car registrations in June 2008 dropped by 31% from June 2007. Spain' GDP showed a decline to 2.7% in 1st quarter 2008 compared to 3.5% in 4th quarter 2007. In Italy car registrations dropped 19.5% in June from a year earlier. In France car registrations went up by 2.1% in June from provisional figures. Auto sales in Japan dropped 3.6% in June according to the Japan Automobile dealer's Association.

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The Economist's index on the value of the USA currency shows the euro is overvalued by 22% relative to the $US, and most currency analysts think that the euro is overvalued by 20-30% relative to the dollar. As the economy in the EU and in Britain in particular is doing poorly and may contract in the second quarter and at some point the European central bank may lower interest rates especially if crude oil prices continue to drop and inflation is under control. The Fed increasing rates and the ECB decreasing rates would help the dollar rebound.

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The balloons detected over US airspace at 40,000 feet that stirred up tension are now seen as intended for surveillance over Guam and Hawaii and blown off course by winds into Alaska and then Montana. This report in the NYT says US State department officials told Chinese diplomats on Feb. 1 about the balloon - 24 hours later China's Foreign ministry officials told US diplomats at the US embassy privately that the balloon a harmless civilian machine had gone off course. On Friday Feb. 3 China issued a public statement expressing regret. What happened after wards showed a series of poor decisions by Chinese officials and the balloon's civilian run balloon company under contract with the PLA says the NYT.  At that point the balloon's operators tried to accelerate it out of American airspace before it was shot down over South Carolina. On Saturday NYT says China told the US this acceleration was intended to get it out of American airspace.This story may not be widely read or covered so that most of the people in the US may already believe that China had intentionally flown surveillance equipment over Montana and the continental US. The US flies hundreds of reconnaissance flights near the coast of China says one defense expert.  This NYT correction of the original story on the spy balloons did not get any front page coverage in the WSJ, BBC, The Guardian, DW.com, FR24, and the NYT story itself got only 5 comments, showing how important it is for governments and information communicators to get each story right. A similar situation of a lack of communication with poor decisions may have delayed a unified response to the covid pandemic in its earliest stages. It shows how gaps in perception and information can gradually affect a relationship which the US had once nurtured into a critical part of its supply chain manufacturing following wartime cooperation against the Japanese invasion, the civil war in China, and later the Korean,  Vietnam Wars during the Cold War.    ...

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Michael Boskin, Professor of Economics at Stanford University, and chairman of the Council of Economic Advisors during the Presidenc of George H.W. Bush writes about Obama's economic policies, what looks good and what might fail. He thinks the paln for toxic assets is one that might expose the USA to the risks of a Japanese style lost decade. He doesn't like the idea of the Fed as asystemic risk regulator. He thinks the health care bill should level the tax subsidy playing field so individuals can purchase low-cost, high deductible, catastrophic insurance. And he sees abetter alternative to the climate change bill in a broad based transparent carbon tax, and energy efficiency intitiatives. He sees the tax hikes proposed by Democrats in California driving marginal rates on earnings to among the world's highest at 57%. He calls for a rethinking of many aspects of Obama's economic plan.

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The Economist view is that the USA, the Euro-zone, and the emerging markets, are all moving in different directions. The US has failed to address deficit concerns in the recent Bush tax cuts deal between Obama and the Republicans. The Euro-zone faces the prospect propping up its weaker members facing a debt crisis. and slowing growth from spending cuts.The monetary conditions are too loose and the flow of capital into emerging markets risks increasing inflation. This increases the chances of a macroeconomic shock if the govenments and central banks in emerging markets don't get the adjustments right- either doing too much or too little. The US faces the prospect of problems in the bond market with current management of public finances.The Economist views the risks compounding as a result of these divergences between these three regions, with the prospect of 2011 becoming a year of damaging shocks.

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Foley cites a recent survey by the Zhejiang Academy of Social Sciences shown in the South China Morning Post. This survey shows 96% of respondents "resenting the rich." In 2007, the Asian Development Bank estimated the Gini coefficient for China at 0.47%, up from 0.28% in 1983, same as Sweden, Japan and Germany. Now its closer to Argentina and Mexico. This is happening as less than 70% of graduates have jobs. And a peculiar situation is occurring in China where the retail prices are not increasing but prices of real estate and of commodities like iron ore and oil are high. There is too much liquidity with $1.5 trillion of governmet manadated bank lending and inflation is rising creating a speculative bubble in stock and real estate. And there are protectionist pressures with the USA sensing that cheap imports subsidized by artificially low currency in China is worsening America's trade deficit.

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T-Mobile plans to spend $4 billion to upgrade its wireless network to LTE. The failed plan to merge with AT&T has affected T-Mobile because plans to upgrade its network were put on hold. As a result T-Mobile will be 2 years behind Verizon in upgrading to LTE and will be the last wireless network upgrading. Contract customers declined in the 4th quarter of 2011 by 802,000 with all the uncertainty surrounding the merger. AT&T made a cash payment to T-Mobile of 2.3 billion euros for the failed merger. However the situation has turned out negatively for Deutsche Telekom because of a 2.3 billion writedown in the value of T-Mobile USA ,and an additional 800 million euro writedown in Europe. If T-Mobile decides to offer the Apple iPhone to attract contract customers additional financial commitments will have to be made.

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The view from Pakistan, the views of the oppossition parties, the army, the Intelligence agency, on American aid to Pakistan and increaed involvement in the country's affairs. Some likened it to akind of colonization attempt. Politicains of some political parties oppose a large new embassy in Islamabad for the USA and a consultate in Peshawa, Northwest Frontier Province. Ambassador Patterson said that Pakistan should eliminate the Afghan Taliban leader Mullah Omar who is supposed to be in Baluchistan, or America would do what was needed, and National Securtiy Advisor Jones said that addressing the Quaeda sancturies in Afghanistan was the next step. The head of the Intelligence agency Shuja Pasha met with CIA officails last week in Washington and argued against sending more troops to Afghanistan. And the Army chief Kalyani said that missile drone attacks in Baluchistan as the AMericans impled would not be allowed.

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Brazil lost 650,000 jobs in December 2008, with automobile manufacturing one of the hard hit industries. Also affecting Brazil is declining demand worldwide for Brazilian exports of iron ore and other commodity exports. The job loss is higher than the job loss of over 524,000 jobs in the USA in December 2008, and 533,000 jobs in November 2008, according to the Bureau of Labor Statistics. Brazil will see a contraction in GDP in the fourth quarter 2008, and first quarter 2009. Brazil has an inflation of 7%, but there is a always a fear of hyperinflation from its experience in past decades, and even a trade union leader like President Lula has resisted calls for rate cuts in the last 6 years because of this. This time Brazil's central bank has relented and reduced rates by 1% to 12.75% which is still the highest rate in Latin America.

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The 2002 decision for HSBC, a British bank, to buy Household International, which was into subprime lending in the USA, has turned out to be a disaster. Now it will close the 800 offices of Beneficial and Household Financial. HSBC's losses from Household are a big reason for the need to raise $18 billion in new capital. In getting into this business of subprime lending HSBC also sullied its high credit rating and its reputation. In doing so it also added its reputation to make it look like the subprime business was a good one and got it going in a big way. With the securitization process older standards of safety disappeared, as so called financial engineering and its engineers made it believable that inherent risk of a borrower's weak ability to pay could just be reduced or eliminated by packaging it differently and spreading it all around.

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Efforts to save the VW brand in North America as it faces disappointing sales. It lost $1 billion in North America for each of the last 3 years. VW faces perception issues among customers in the USA who read JD Powers surveys. The surveys show VW in the bottom 20% for reliability, quality and service. Its younger customer base does online shopping and compares models and this led to sales declining from 338,00 to 235,000 in 2006. Now Jacoby, an accountant by training, who headed VW global sales and marketing and boosted market share from 18.1% to 20.3% in European car sales, has been given charge of the American operation to get VW to breakeven n North America by 2009. Previous ad campaigns showing VW safety in car crashes and Helg a German dominatrix failed to stir up much interest in Jetta and Passat models.

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Ingrassia presents a different view of Steve Miller. He became the bogeyman for putting the facts the way they were: the days of the highly paid auto workers were over in a global economy, where automakers compete globally and parts can be made anywhere in the world sometimes at a fraction of the cost in the USA. Should Steve get some of the credit for the union taking the wakeup call? Delphi did not benefit from this public acrimony with the union. Was there a better way. Dana's McCracken thinks so doing this in a less public way. On the other hand the debate needed some kind of point man who got the discussion into focus even with straightforward remarks that would make few friends. Was it risky for Delphi and GM ,with the possibility of a lengthy strike. This was a serious risk.

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Contrasting Gurgaon in the capital region near New Delhi, with Bihar state in the northeast where much of the region is without electricity, as more Indians look for electricity and lighting in rural areas and the trend towards quadrupling of electricity demand in the next 25 years. Half of India's people have no access to the electricity grid and the government plans to extend electricity to rural India in the next 5 years. Transportation will add to energy demand as will construction. Per capita emissions for this reason, the large part of unlighted rural India, is low at 2 tons per capita compared to 20 tons in the USA, and yet India is already the fourth larges emitter of greenhouse gases in the world. With increasing use of abundant coal reserves for electricity production there will be more emissions in the years to come.

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Mandel of BW has done some calculations that show that consumers in the USA have spent $3 trillion more than if they had spent with the spending patterns of the 1990's. This acceleration in spending is an overhang that has to be cleared up and he thinks its going bring a nasty surprise in the next few months to the cosnumer stocks and also bring down the rest of the stock market in the next couple of months. Mandel is making a good point here that should be listened to carefully and which makes a lot of sense. its not about predicting the stock market but about using good common sense that the debt is just so large and the signs of consumers in a pinch so widespread in reports throughout the media that something like this just may be likely to happen.

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Hispanics expected to make 20% of the US electorateby 2020 up from 9% today. In California efforts to deny social services to illegal immigrants alienated Korean and Chinese voters who are mostly small business owners. Thus it creates an anti immigrant bias. Another point made here most of the Latino illegal immigrants here are related to legal immigrants so these are mothers brothers, sisters and relatives so this issue and poor treatment of these immigrants sparks protest in the minds of legal immigrants as well. As the USA demographics change how will this issue develop and play out. By 2042 the Census Bureau projections stated that the ethnic and racial minorities will comprise a majority of the US population thanks to higher birth rates and the media has focused on this and the Republican platform has according to this editorial called for walling off Mexico.

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What the French take for granted today- 99% of the French people are covered by national health care- started when Charles De Gaulle faced rising scial discontent in the postwar period, and accepted a demand for worker protections. During the postwar period Frenchmen are paying higher taxes, but in the first 30 years because French salaries were growing fast this was not noticeable. With slow growth and rising healthcare costs its getting harder to increase these tax deductions for overall social security, which have reached one third of apaycheck at the low end, say for ataxi driver in Marseilles. So you have the government running deficits of $15 billion in 2004, even after increasing co-payments for routine care and doctors visits. Experts say this could reach $40 billion in 2010 and $90 billion in 2020. In 2007 health care cost the government $300 billion, or 11 % of GDP, (OECD numbers) and the bureaucracy and rules are getting more complicated. This 11% is well below what Americans pay for asystem that leaves out about 50 million people. France ranked 8th on the OECD list in cost per capita, the US at the top. And the French life expectancy is higher at 80.98 vs. 78.11 for the USA, higher by about 3 years. For this cost the system is cost effective according to the OECD. And the French find the American debate abouthealthcare public option "altogether surreal", as the newspaper Le Monde put it. To keep the system in viable form the government is increasing copayments, such as the decrease in reimbursements from 80% to 65% for routine care and doctors visits in 2004. As aresult the deficit dropped to $6 billion in 2008. ut the global economic crisis and rising unemployment has made this grow to estimated $13 billion for 2009. Measures under consideration: increasing hospitalization copayments to $28 a day from $22. To fill this substantial gap for routine care and other costs the French system has private insurance companies called mutuals that offer different policies. Which is where the Fench notion for equal treatment in health care gets distorted because different people can have different coverage. The French though compare their system to the British system and say theirs is not as nationalized as it appears and the Brisih one is much more so. The French system though supervised by the government is different from government run health care as in Britain. French people are free to choose their own doctor who is often a private practitioner. ...

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The first spread event for Omicron outside of South Africa is now known to be in Norwegian capital of Oslo. Some workers of renewable energy company Scatec SA returning from South Africa where the company has a solar panel project attended an annual holiday party. The party was at Louise an upscale Oslo restaurant, with 120 people all vaccinated, and tested the day before. More than half have tested positive for covid 19, with at least 13 having the new variant Omicron. Oslo municipal health department says it expects more Omicron cases among the 64 coronavirus cases as remaining workers get tested. The results so far are anecdotal and thin to be sure, yet they show none of the infected employees were seriously ill, says this report in WSJ, citing a company spokesman. The spokesman says people had different sysmptoms but none were severe. Tine Ravlo, assistant superintendent of the Oslo municipal government says- all of them are under isolation at home. And  for now they have what they describe as mild symptoms such as headache, cough, sore throat, and flulike symptoms.  Norway has 80% of population of 5.4 million people fully vaccinated. Mask mandates are in place again in Norway, private indoor gatherings limited to fewer than 100 people. ...

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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. ...

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Oil supplies are not expected to go up with Mexicio and Russia's aging fields crimping production, non opec production barely budging with 1% increase this year according to IEA. Indonesia production down by half from its peak. Countries in the middle east like Iran are consuming more and have less available for export. And the Saudis plan to build huge chemical aluminium and other plants as well as cities in the desert, and increase electricity production. This will take up some of the oil production and make less available for export. Militant strikes have shut down over 25% of production of Nigeria's 2.5 million barrels a day of production repeatedly in the last few years. And Saudi Arabia has according to CERA only 2 million barrels a day of spare capacity or 2.3% that it can add, all of the safety cushion in one country according to Daniel Yergin. Yergin sees prices up to $150 barrel based on the supply constraints. The demand side is showing declining consumption in the USA but not by enough to compensate for growing consumption in China by 5% this year, and the increase in consumption in India, Russia, Brazil and other developing countries including Middle East. The reason for continuing consumption increases in the rest of the world is that price impact has been less severe in Europe because of the strong euro and oil priced in US dollars, and in China because Petrochina is required to put price caps so gasoline price increases are not that harsh. And India also cushions the price impact to some extent to protect consumers. And autos are just taking off in large numbers in China, Russia, India, Brazil and other countries. The drop in consumption in the USA has to be large enough to have an impact. And the shift to fuel efficient targets in the new fuel efficiency regulations in the USA are too modest and over a number of years to have any impact in the short term or in the next 1-3 years. In February US oil demand dropped to 19.7 million barrels a day, down 1 million barrels a day from the US average for 2007, but this insufficient conservation to impact price. Even though new cars are shifting to higher fuel efficient small cars the impact on the total fleet is gradual as cars on the road purchased in the last 5-10 years are still on the road. Even as the consumption falls in the US the offset is occurring in the other countries like China, Russia and India. Some of this is due to the euro and some to speculation but the supply constraints are real and demand momentum is still there in China, Middle east, Russia and India to keep offsetting savings elsewhere and keeping supplies tight. The euro increased in value by 2% while oil prices increased by 10% since the 1st week of April so there is more than the weakening dollar and some speculation to this surge, which may be why the normally cautious Yergin says the price rise to $150 is realistic and says, its not just that the genie is out of the bottle, a hundred genies are out of the bottle. That is to say for the immediate future of demand momentum and supply sluggishness which could run 6-24 months, to the Olympics and maybe a year or so from then. This ties in with the thinking behind the Goldman's estimate and CERA's estimate. ...