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Serious doubts remain about the effectiveness of value at risk or VAR quant models used by JP Morgan Chase to measure potential losses on a trade on a bad day. A newer model used by Chase in the first quarter showed smaller losses. When the old model was run this trade showed double the losses according to Chase managers. Greenberger, a former CFTC official and a professor at the University of Maryland School of Law, says if the trade become hard to unwind it shows poor risk management. And experts say it is not much of a hedge if it is done in an obscure part of credit markets and hard to unwind without serious losses. Peter Tchir, a former head of index trading at RBS bank, says CEO Dimon must have seen these kinds of hedges as part of his overall strategy, which is why he supported them in April 2012. The problem lies in that the bank size has grown to such proportions that its simply too big to manage, with trades it has to make becoming massive as a consequence.

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The problems of vaccine access in Africa affect us all - this is the simple truth. Here the NYT gives letters from people on the frontlines, healthcare workers in Africa who in one situation in the Sudan had over 4000 people arrive some by canoe through floods and had only 545 vaccines. Africa Centers for CDC show 79% of people in Africa will take the vaccination. Vaccine access for Africa is something that should be on the top of the list for Biden in the US, Johnson in UK, Modi in India, Scholz in Germany, and for all world leaders.

 

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See how dysfunctional today's politics have become in the way the Speaker in the U.S. House of Representatives and the U.S. president expressed utter disdain for each other and their opposite political parties at the State of the Union gathering in the U.S. Congress. Trump focussed on the economic gains for the U.S. in trade and the economy, and sees impeachment efforts as unfair as not rising to the level of high crimes and demeanors defined for that in the U.S. Constitution. Pelosi and Democrats see Trump's style and manner as violating norms for politics followed earlier.  Harry Truman, a president in the fifties never got much respect from Republicans who saw his style and manner as too rustic and Missouri farmlike. Andrew Johnson a Republican during the early post Civil War period after Lincoln, without the education of the upper class was treated with disdain by Democrats. Interestingly both were chosen by icons Roosevelt and Lincoln. This time the focus of attention is a president who comes from outside, motivated to run in politics as he said in his speech in Congress by the wrongs the U.S. suffered from other nations in business and trade. Truman got attention from Roosevelt through the hard work to cut the extensive cost overruns and mismanagement in production for the war effort. Johnson for his loyalty to the Union from a Southern state, Tennessee. All seemed to shrug off the disdain without much discomfort and Truman was known to say- "The Buck Stops Here." ...

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Comment by a former Tory leader, Sir Ian Duncan Smith, on negotiations with the European Union's Ursula Leyen, show how much the term sovereignty has become the word on which everything depends. Smith said on December 10 about the EU demands that Britain adhere to EU environmental and other rules after leaving the EU, "either Britain is sovereign, or it is not."  The word sovereign is discussed in this context in this Times analysis. The word comes from the old French word "sovereinete" during the period when the King's authority was being contested by feudal lords in 16th century France. The Oxford dictionary defines it as the authority of a state to govern itself, and to do this without outside interference. Tory leaders such as David Davis and others including Smith see this as meaning making your own laws. For the European Union to insist on its laws being primary and British law asked to conform with EU law making it secondary, would not only be outside interference, but also divided authority. Older French and British political philosophers Hobbes and Rousseau see this as divided authority. Even though the meaning has changed in modern times, the essential definition in the Oxford Dictionary remains undivided authority. Which is why these Tory leaders insist on the original definition as the right one. Behind the wrangling there is the sense among Leavers that Britain could do better in economic terms by setting its own direction, and doing business its way. How would a new economic power in India by 2030 affect Britain, would it create many more opportunities for Britain to grow because of its history and cultural ties. Could the relationship with the U.S. provide more opportunities for growth? What about French indifference and even disdain of Britain, does Britain have other options? Isn't the European Union merely a Franco-German alliance led politically by France and economically by Germany, and propelled by their three wars since 1871, with a bunch of European countries added in, and what has Britain got to do with it? Closer to the negotiations with Leyen there is also the question - isn't France trying to make certain with its demand that Britain not violate EU law, that Britain's ingenuity and free wheeling spirit outside the European Union does not let it grow faster than France? Where one gets Boris Johnson's immediate reply that Britain is better off not being stuck inside "EU's regulatory orbit."   At the other end of the world you have India with "Atman Nirbhar Bharat" calling for a self-reliant economy and taking the time for transitioning out of the trade relationship with China, at short term cost and long term advantage. Britain is closely watching India as it makes big strides in developing infrastructure, in renewable energy, and setting a bold vision for the future. Even France is mapping out a pathway to self-reliant economy as it looks at ways to bring production home after the pandemic. The pandemic has only reinforced the drive to be self-reliant. ...

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 Harris's role for the Border was limited to telling Central American migrants to stay home. Much of the migration was a result of wars started in the Reagan years in Central American states of Nicaragua and San Salvador. This destabilized the region and led to gangs taking over parts of the country in San Salvador and entrenching Castro style regime in Nicaragua, leading to outward migration of young people. As this report points out Harris was supposed to take on decades of such misguided policies in Central America in a few months. A drought hit agricultural coffee regions of Guatemala increasing migration. Her role instead was to ensure several wins. Win No.1 to generate stability setting up the peaceful transfer of power in Guatemala, singling out corrupt regimes. Win No. 2 to generate jobs. US AID and IFDC loans were increased, foreign investment attracted to generate 250,000 jobs. Win No. 3 the increased stability led to gradually declining migration from Central America. What replaced it was Venezuela. And that is a repeat story of Reagan style wars in Central America. Under the Trump Administration the US did not take up the Monroe Doctrine and act directly to support a stable fairly elected government in Venezuela, an obvious solution. Instead going half way- destabilizing the government but then left it on its own. The result about a third of the population leaving the country in these years to Colombia and other parts of Latin America in a immense humanitarian tragedy.  In 2023 Venezuelans not Guatemalans entered at the US Border in large numbers, most of them middle class families that left Venezuela after hyperinflation and mismanagement of the economy. Realizing the danger by January 2024 Biden negotiated with Senate Minority Leader McConnell and his Republican representative Senator Lankford to pass legislation in the Senate closing the Border. All that was needed was the House to act and 30 years of Border problem would be solved.This was blocked in the House by new Speaker Mike Johnson on advice from former president Trump who chose to use the issue in the 2024 election. Biden then used his executive powers to close the Border leading to lower numbers of migrants under Biden by July 2024 than under Trump. Migration Border Czar was never a term used by Democrats in the Obama and Biden years. Biden who also served in a role given migration as one of the issues to handle under Obama, had this as only one of his assignments. Biden played more important roles in foreign policy with his experience as chairman of the Senate Foreign Relations Committee for decades. Border policy was made by president Obama and his advisers. The same is true of Harris, Border policy being done by president Biden and his advisers. Similar to Biden's role as VP Harris was given assignment to cover foreign policy and was the US representative at 3 Munich Security Conferences in 2021-2024 following the Russian invasion of Ukraine. Chancellor Scholz of Germany said of Harris last week that he had full confidence in Harris as both competent and experienced. ...

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Europe's 750 billon euros plan to defend the euro currency, including 60 billion of EU backed bonds, a $440 billion euro fund guaranteed by euro-zone countries, and upto 250 billion euros of IMF money. The plan buys time for the troubled economies of Portugal, Spain and other EU countries, but does not address the fiscal and structural flaws that are endangering the European single currency experiment. The "no bail-out" clause and the stability and growth pact proved worthless in implementation. Sanctions for a country with growing problem of deficits did not work and had soon lost credibility, with the financial markets themselves recognizing the serious problems of some deficit countries only when things had spun out of control. Some other forms of sanctions will have to be figured out and mechanisms of dealing with financial panic such as sovereign debt restructuring need to be put in place. The German emphasis on too sharp budget cuts may have the danger of pushing deficit countries into deflation as well as creating strong popular unrest. ...

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Vehicle sales in the U.S. market went up by 18% in April 2011. There was a significant shift fuel efficient vehicles and small cars with gasoline running at over $4 per gallon. Sales are running at an annual rate of over 13 million vehicles for the February-April 2011 period. Helping sustain sales momentum is the aging of the U.S. vehicle fleet- average for vehicles in the U.S. is above 10 years according to G.M. vice president, Don Johnson. GM sales were up 27% in April 2011 over the prior year- with only a 2% increase for pickup trucks and a 50% increase in sales for passenger cars. There was strong demand for the Chevy Cruze compact and smaller fuel efficient sport utility vehicles. Ford had a 16% increase in sales, with strong demand for the new Fiesta, Focus small cars and the new lighter version of the Explorer SUV. Ford's Ken Czubay, head of sales and marketing, says dealers are selling the Focus right off the convoy truck, which gives some indication of the shift in consumer preferences. Chrysler vehicle sales increased 23%, with car sales up 41% in April over the prior year. Some indication of the shift can be seen in the incentives dollars- the largest rebates of $3200 were given for large trucks, according to Edmunds.com. At the same time overall dollars per vehicle for incentives dropped from $2600 in April 2010 to $2100 in April 2011. Toyota sales increased by only 1% because of shortages as a result of the earthquake, especially for the smaller cars like the Corollas and the Prius....

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Polls on Deutchland opinion trends show Merkel has gained support with her careful handling of Brexit, and the AfD has lost support. Only a month ago media reports covering the immigration issues had put AfD in the light of gaining using this issue. The infighting in the Conservative Party and the lack of any plans of ministers in the British government favoring Brexit for leaving the EU have Germans questioning this kind of politics compared to Merkel's promise of a "calm and composed manner" in dealing with issues of people's lives and the future of Europe. The extensive coverage in Germany of the vote for Brexit, the EU referendum in Britain, increased awareness in Germany of the benefits of the European Union. Merkel and other leaders offered their assessment of how the European Union has brought peace to Europe and improved the lives of the people during the pre Brexit media coverage. Now Infratest Dimap polls show the popularity of Merkel has increased to 59%. Compared to a June poll before Brexit things look better for Merkel-  the AfD Alternative for Germany has lost 3 percent of support dropping to 12 percent, the Christian Democrat party of Merkel is up by 2 percentage points to 34 percent in popular support, the Social Democrats also increasing support by 1 percent to 22 percent.The vast majority of people said the European Union provides security (74 percent) and prosperity (79 percent). Germans are skeptical about the value of referendums on such major decisions as EU membership because of swings in popular opinion such as that on immigration that swayed British voters- 49 percent saying parliament does better in these situations than a referendum, 42% saying referendums are better. For voters who said Germany was hindered by membership only 11% supported that proposition and 52% said the EU is beneficial for Germany. Over 75% actually favor more cooperation on refugees, data policies and energy, setting the prospect for a stronger European Union. Also proving the importance of responsible politics, and honest, flexible leadership, responding to people's concerns yet not pandering to swings in opinion for temporary advantage. A separate piece in the Guardian by Yonge points out that Cameron actually won only 23 percent of the eligible voters for Conservatives in the 2015 elections in Britain, reflecting a two decade slide. Brexit only made this failure widely visible, and did not escape the attention of the German people.   ...

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Texas is becoming a swing state for 2024 The deep divisions in the Republican party in Texas with one faction supporting former Governor Rick Perry who was the longest serving Texas governor 2000-2014, and the Bush family and the other faction supporting Mr. Trump. Attorney General Ken Paxton who supports Mr. Trump faces impeachment by Republicans who support Perry-Bush. Texas is the home of Democrat Lyndon Baines Johnson (LBJ) who was John F. Kennedy's vice president and then president, and also of the 2 Bush Republican presidents George H. W. and George W. Bush. It is also a state that has swung to Republicans since 1976, but has a history of Democrats under LBJ.

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Britain's former prime minister David Cameron who said after resigning that he would continue as constituency Member of Parliament, says he will stop representing his constituency in the county of Oxfordshire. The decision comes early compared to previous prime ministers. Cameron says he does not want to continue because of the "risk of becoming a diversion." Critics say Cameron was reckless when he called for the referendum that led to the "yes" vote on Brexit with 52% support, leaving Theresa May with the daunting job of negotiating Brexit throughout the remainder of the term as prime minister.

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Portugal sold 1 billion euros of 12 month Treasury bills at an average of 4.331%, up from 4.057% at the previous offering on March 2, 2011. Moody's downgraded the country's rating by two nothches to A3. Analysts say that these higher funding costs will lead to a bailout for Portugal. The yield spread between 10 year Portuguese and German bonds is now at 4.35%.

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This Journal editorial says Portugal's focus should be on making the Portuguese economy more competitive, and not merely the fiscal tightening and tax raising policies recommended by the IMF in the past. The focus should be on growth, a freer labor market, creating more efficient firms, and lower costs to compete in the European free trade zone. The euro currency reduced Portugal's borrowing costs in the past, but growth requires a more productive workforce. Only 28% of working age Portuguese have completed high school, showing an alarming lack of investment in education. (See the group on education in Portugal). The Journal also questions the lofty sounding agenda of the Lisbon agenda after the2000 EU summit in Lisbon, as it did not get down to addressing problems in individual countries.

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Indian prime minister's speech in the Rajya Sabha, India's upper house of parliament presented the government's ideas behind the reforms in the agricultural farm laws. He made the point that the mandis for minimum support price or MSP will always be there, so that farmers looking for MSP would always be covered. "MSP tha, MSP hai, MSP rahega,"  his words in Hindi. Some of the main points are covered here in The Times of India. Many governments in India in the past have talked about reforming Indian agriculture. During the administration of Lyndon Johnson after famines and food shortages in India effort was made for the Green Revolution. Lal Bahadu Shastri, prime minister took up the work of the first development phase in 1965 to benefit Indian agriculture. The speech cited the work of Shastri for the Green Revolution that made India self sufficient in food grain production. India benefitted from American scientists mainly agronomist researcher Norman Borlaug. The prime minister cited the words of Manmohan Singh, Congress party prime minister preceding him, who had emphasized how important it was to bring changes to Indian agriculture. "Modi implemented what Manmohan said, You should be proud."   Manmohan Singh had said- "There are several rigidities in the whole market since the 1930's which prevent our farmers from selling their produce where they get the highest rate of return. It is our intention to remove all the handicaps that come in the way of India to become one large common market."  Other parts of the speech said about the new agriculture laws- "There are many laws. every law is amended in a few years. We are not static. Change is tradition. We should talk to the protesters, implement the changes. I will take the abuses. You take the benefit from the new laws. We can move ahead together... There are old people sitting in the cold, it is not right." The government has stated it will hold the new agriculture laws for 18 months and the Supreme Court has appointed a committee on the laws. In his speech Mr. Modi said that there was nobody to look after the small and marginal farmers, and asked who will speak for the 12 crores or 120 million marginal farmers who own less than 2 hectares of land.  In fact it was a call from these small and marginal farmers that led to Jawaharlal Nehru, son of a British trained lawyer Motilal Nehru, to join the struggle for Indian independence. This is shown in his autobiography written from jail in 1934-35.  At the time the British simply used the Indian police trained and run by the British Army to silence farm or agrarian unrest from small farmers. Nehru was asked in a phone call to come to one of the locations of the unrest during the early years. The bedrock of Gandhi's movement for independence was villages in which marginal farmers lived lives without making enough. When Vivekandanda talked about India's hundreds of millions living in poverty he was speaking of small farmers who then were a majority of the population of the country. Charan Singh, a former prime minister in 1970-80,  said that 68% of farmers were small and marginal farmers who owned less than 2 hectares of land. The government crop insurance scheme was changed to make it farmer friendly, PM Kisan scheme to empower the farmer. The Indian Rails initiative is intended to speed agricultural produce to locations throughout India taking produce from locations in southern India to places as far Kolkata. This is opening up new opportunities for farmers to increase incomes.   ...

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Lulu Garcia-Navarro interviews Homeland Security head Alejandro Mayorkas and asks him direct questions about the border with Mexico, published Feb 2, 2024 in NYT. Why the surge in migrants asks Navarro. Mayorkas is himself a Cuban born immigrant. Republicans in the House are impeaching Mayorkas. Navarro asks can you clearly say what has gotten us to this place and what went wrong? Clearly something had happened in Latin America. Central America drove migrants north after conflicts in Salvador, in Nicaragua and drought affecting Guatemala's agriculture for over 2 decades under different administrations. Mayorkas says in response to the question that the world is experiencing the largest level of human displacement that it has seen since World War II. He says the entire hemisphere is experiencing the enormous displacement in Venezuela as its economy collapsed. During the nineteenth century after president Monroe put forward the Monroe Doctrine that created a uniquely American sphere that asked European powers to stay away from the Americas north and south, any attempt by European powers was seen as an hostile act. It was American opposition to European colonialism. By the time of the Eisenhower and Kennedy administrations this policy was not followed with the intervention of the Soviet Union in Cuba leading to a a wave of refugees from Cuba in the sixties. In the last decade the situation in Venezuela has worsened to the point that 8 million people have left Venezuela for neighboring nations, 2 million to Colombia alone, destabilizing the southern hemisphere. Venezuelans many from the educated middle class form the bulk of the surge in migrants across the US border with Mexico in 2022 and 2023. The problems were actually exacerbated under the Republican administration as the Venezuelan inflation spiralled after 2016 skyrocketing into hyper inflation by 2018 leading to the flow of immigrants outward that reached 8 million. This kind of hyperinflation the worst in the history of Latin America need not have happened with better managing of the crisis at that time. Mayorkas says the problem is that America's system of asylum is broken and both parties need to fix it. This is proposed by Tillis-Graham and Lankford all Republicans in the US Senate with president Biden's support. When he joined the Department of Homeland Security in 2009 Mayorkas says, US Border Patrol chief told him the real problem was that from the moment a migrant claims asylum at the border under US law and the adjudication of that claim it takes several years. This is the root of the problem the law can be fixed with the will of enlightened persons in both parties by simply passing a new law. Immigrants from Latin America are just as likely to vote Republican as Democratic and this may be particularly true for Venezuela's middle class that left the country as the economy collapsed with policies that led to inflation not seen in this hemisphere.  The other alternative is for the US and both parties to agree to what would be today's version of the Monroe doctrine- then opposing European colonialism, now opposing the breakup from within of Democratic countries in Latin America leading to waves of migration north of the border and causing upheavals all over the western hemisphere. Much less a policy of such resolution both parties have failed to fix basic policies of asylum and parole that today are being addressed by legislation being put together by Senator Lankford of Oklahoma, Lindsay Graham of South Carolina, Senator Tillis of North Carolina, three core states that are Republican since the Civil War, with the help of the White House and Senator Schumer. Yet in the House of Representatives Speaker Mike Johnson calls it dead on arrival simply refusing to break the status quo. ...

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Sharp swings in attitudes have left America divided in terms of education. A comparable situation exists also in the UK as areas with more education access have separated from areas with less access to higher education. As the WSJ analysis points out at one time social cohesion prevailed in the postwar years till 1970 with educational attainment playing a small part leaving social cohesion intact. Even in the period 1970-1990 when there was a shift for college educated women to prefer Democratic Party and white men without a college degree to prefer Republicans this was not a significant gap. The Democratic Party appealed to less educated union voters in manufacturing industries as well as it did with college educated men and women. This gradually fractured during the Clinton and Obama administrations as the Democratic Party  moved closer to the higher educated and drawing more support from new tech industries than manufacturing. Nowhere is this more evident  than in the way college educated women have shifted to the Democratic Party and white men without a college degree have moved to the Republican Party. Swings of different types are normal in elections and politics. But swings purely based on education are rare in American politics and not healthy for the democratic system of government. As the analysis from WSJ/NBC News shows college educated women favor Democratic Party by 33 percent margin. And the swing is even deeper for white men without a college educated degree who favor Republican by a 42% margin. This is the situation before the 2018 U.S. Congressional elections. The combined group of college educated women and white men without a college degree make up 40% of the U.S. voting public. This makes each group unreachable for the other party, a situation unimaginable for many of America's leaders if they would be living today- from presidents Harry Truman and Dwight Eisenhower, John Kennedy and Lyndon Johnson. White voters make up 70% of the electorate, and a situation where they would be unreachable for Democrats would be unthinkable or unimaginable for Truman, John Kennedy. And Eisenhower would also find it unimaginable that he would have to writeoff college educated women in his campaign.  By returning the Labour Party to its roots Britain is combatting this tendency for fracturing of social cohesion. In the way the UK's Blair administration moved away from Labour party's roots in manufacturing and the trade unions, the Democratic administrations under Clinton and Obama  moved away from manufacturing industries and the trade unions.   Most of the postwar leaders of the stature of Eisenhower and Kennedy would have seen such a situation as a significant failure in political leadership. ...

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Questions raised by analysts at the Peterson Institute for International Economics and the European Policy Center in Brussels, about the lack of leadership from Chancellor Merkel of Germany and EU leaders in addressing swiftly the crisis facing Greece and countries in southern Europe. Facing voter displeasure in Germany Merkel stalled in the hope of delaying adecision till after a regional election in Germay on May 9. In the process Merkel turned a smaller crisis in Greece into a crisis facing many countries in Europe including Spain, Portugal and Italy, and a crisis for the euro currency. French member of Parliament Juvin, told the French press: "are they waiting for the collapse of the euro?" One sticking point is that the Lisbon Treaty has no provisions for coordinating fiscal policies, and Germany did not insist earlier on oversight of Greek statistics which were generally known to be false since the 1990's. Another French member of the European Parliament, Le Grip, insisted on the need for a new European economic government, and the creation of new institutional responsibilites. The problem lies in the feeling in countries like Germany not to cede sovereignty on economic matters to a European economic body. ...