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Volvo sales worldwide hit 458,000 in 2007 and nowhere near the 650,000 the company set as a target when it bought Volvo in 1999 for $6.45 billion. The dollar has gone from being on par with the euro to $1.50 per euro in the last couple of years. The Volvo cars are made in Sweden and Belgium so this has hurt sales.In North America Volvo sales dropped from 130,000 to 90,000 in 2007. Volvo has come up with a smaller SUV the XC60 just introduced at the Geneva Auto Show and is according Mr Arp the Swedish head of Volvo the safest Volvo model built. It has sensors on the windshield that help it apply brakes automatically if its likely to get too close to the car in front in city driving.

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The CEO of the New York Times and the former director general of the BBC, takes a look at the public discourse in the 2016 U.S. presidential election and in the Brexit campaign, and finds some troubling changes. The use of words that can eaily be picked up by Twitter and social media to attack opponents, the complete disregard for facts, and outright attempts to denigrate and destroy using rhetorical tactics, and a section of the public that has turned away from the facts or is disinterested in facts, is deeply troubling for Mark Thompson. When the public discourse fails, then the politics as a whole starts to collapse, says Thompson. We are children of the enlightenment, says Thompson, and were taught to look underneath statements to discern the truth. This is a crisis in public discourse. Worse it is one in which truth telling by people who say they are outsiders and tell it like it is, is not about telling the truth. Which is what makes it so dangerous. Thompson cites the statement by Michael Gove that "people in this country have had enough of experts," as another dangerous sign. He says it is time that experts make themselves understandable and talk in a way the public can understand. The media needs to explain issues in clear ways, and professional policymakers language of discourse needs to be conveyed in better ways that the public can grasp, in which the Brexit Remain campaign failed, says Thompson. Its important to acknowledge the problem, as the health of our democracies depends on finding solutions to what has happened in 2015-2016 to change the public discourse and let it deteriorate to unimaginable levels.  ...

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A whole range of issues can be seen in the debt crises in developing countries. The margin for error shrinks with poor governance, lack of honest assessment and transparency for finances, wars and conflicts within or outside the countries, living beyond their means, lack of focus on development, infrastructure that is unproductive or unaffordable including some Belt and Road Initiative infrastructure at higher interest rates. Countries that are dependent on overseas remittances, tourism, that were hit hard by the pandemic have seen their finances further weakened reducing the margin for error even more to the point that the smallest tipping point can lead to huge crises. Once the finances are weak all it takes is an external tipping point that creates serious crisis. The war in Ukraine with shortages of wheat, fertilizer and skyrocketing oil prices acted as that tipping point. Because this was a major blow the crises have a level of magnitude that is more than a payments crisis. One sees this in South Asia in Sri Lanka and Pakistan, and in the Middle East for countries such as Egypt and Tunisia shown in this WSJ report. It is now not simply a crisis but a crisis of great magnitude because in the case of Sri Lanka and Pakistan this WSJ report says that both countries foreign exchange reserves have dwindled to the point where they can pay for only one or two months of imports according to central bank data, analysts and IMF. This crisis has affected countries that were seeing steady foreign investment such as Turkey for decades, then a sharp falloff in foreign investment with a change in the climate for foreign investment. The crisis has taken the form of high inflation, significant depreciation of currency that makes imports costlier so that shrinking revenues from loss of remittances, tourism, or other sources will now have less value in supporting import needs. Lack of a credible path can delay setting a path out of the crisis. The $1.5 billion fuel and electricity subsidy made by the prime minister of Pakistan in late February was done without IMF approval leading to the IMF program having to be renegotiated. Lack of national political and cultural consensus on a solution simply makes it that much more difficult to find the way through it. In this regard South Korea was able to tackle the 1997 financial payments crisis effectively because of a national consensus. The situation in Egypt- Egypt has borrowed $20 billion from the IMF since 2016., placing it second to Argentina in aid from IMF since 1980's.  In 2020 and 2021 Egypt' government spent more than 40% of its revenue servicing its debt, and is forecast to do the same in 2022. The situation in Tunisia- A shortage of sugar, flour, and other critical supplies, and government delaying wage payments to civil servants. The government got $400 million in financing last month from the World Bank and hopes to secure a lifeline from the IMF. Compared to the period between the 2 World Wars the two bright spots are China and India where lessons of the past of civil wars, religious or political conflict, and poor governance, lack of knowledge of how the western countries industrialized and modernized, was replaced with the conviction that drives patient effort, courage in the face of adversity, honesty, and humility to learn including from western countries that have forged their own path through the same difficult road. The most difficult experiences have offered lessons which were learned- for South Korea the Korean War and invasion from the north, China the civil war and Japanese invasion, for India the partition of India and million of refugees. Stagnation from stumbled efforts also taught lessons, the Great Leap Forward in China, the License Raj with corruption in India.       ...

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This report in the WSJ makes the America centric thinking mistake of forgetting where China started from in assessing progress and China's new priorities. In 1960 the World Bank shows China per capita at $90 which does not change much till 1990 when it was $300, the Deng opening to western technology and capital pushed it up to $3000 the year 2000 (US $36,000) and $4500 in 2010 (US $50,000) when the global financial crisis hit. Since 2010 the Chinese economy was burdened by high local government debt and struggled to get to $10,000 in 2020 under Xi Jinping's first two terms as president. Yet it paid a huge price for this -the chance of Bo Xilai (2014) upsetting the twin banners of Science and Modernization of the May 4th 1919 movement that set the course of China for 100 years uninterrupted through the Nationalists, the Japanese occupation, the Maoist CCP, the Deng CCP opening and Jinping CCP pullback. The huge inequality was seen as an opportunity for Bo Xi Lai or some other leader to capitalize on moving China in an unknown direction that posed risks for the future of China. Even then the first preference of Xi would be to carry on with what had worked after Deng. Yet it was clear that working class votes were shifting the dynamics of elections after the Trump election and closing the doors to open access to western capital, technology, and investment. With Trump in erratic and uncertain ways, with Biden after the elections of 2020 consistent and with single minded determination to limit flows. Not just Xi, any other Chinese leader would have had to have the internal discussions about the need to shift back to a model China was familiar with and one that worked before- that of state intervention in the economy, that of reducing the inequalities that posed risks for the CCP's survival as forging a path for stability to carry out the twin banners of the May 4, 1919 Movement - Science and Modernization as China's salvation. Unlike the hysteria about China posing a challenge to the US these internal debates of Xi and the party may have concluded that the US with about half the population of China's as it grows with immigration in the future and multiple times the per capita GDP was a country that no other country was going to come close to. In this sense the supply chains are deceptive as these are likely to be completely redone under the Biden administration to bring most important manufacturing back to China. It is in this context that Xi had limited room to manoeuvre and decided to focus on stability for the long term to fulfill China's dream of the May 4, 1919 Movement of the last 100 years for Science and Modernization casting aside the risks associated for instability of the inequality that comes with more of the western type of growth, and with the climate change risks also associated with it. Lower growth gives China a chance to correct some of the flaws of the hyper growth that was partly of its own making and partly thrust upon it by investors from the outside, so that the new climate would best serve the goals of the May 4, 1919 Movement of keeping high the banners of Science and Modernization. This kind of rethinking is also going on in the US in the same manner about inequalities and hardships for workers and families, with some of the anger directed at China as internal political sentiment- hence the trillions of dollars moved by the Biden administration to address the flaws of growth under free markets and intervene in the economy where needed as in climate change to give firm sense of direction. In a sense the direction taken in different contexts the American and the Chinese are the same - address the problems of workers and families, of the people, as Lincoln had pointed out and striven so hard for, so that Labor is the more important than Capital, and workers and families vital to the nation.   ...

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The WSJ looks at Elizabeth Warren's Medicare for All plan that marks a major shift for the U.S. economy.  Households would see their costs go down by $11 trillion, boosting their ability to spend on other goods and services. Because income and wealth was highly skewed in the past three decades in one direction, the spending capacity of lower and middle income households was pushed down. This and other similar plans would help restore a higher level of spending and with it an essential element of inflation of 2-3% to the U.S. economy which was missing in the last decade. This sets the tone for the kind of broad based recovery that happened after 1950 that strengthened America's middle class and made it the core of the economy, the core of the post World War II recovery in America and Europe. The plan would be paid for by higher taxes on corporations, tax rate of 21% for corporations going back up to 35%, and reverse depreciation schedules in the 2017 Republican tax law. The argument that this would reduce business investment does not hold that much says the WSJ because amid new trade tensions business investment has declined over the last 2 quarters, and has been sluggish overall. The other source for the estimated $13 to $20 trillion cost of Medicare for All plan of Elizabeth Warren is a 6% annual wealth tax on billionaires, in an attempt to have all pay their fair share and reduce wide disparities in wealth. Mark Zandl, chief economist of Moody's Analytics, says his sense is at the end of the day from a macroeconomic view- because $11 trillion in the hands of 80% of households who could boost spending after lagging behind in the last decade- the negative effect on business investment will be cancelled out by the higher consumer spending. The overall effect and today's context is infused in this analysis. Private insurance, premiums for insurance, and out of pocket cost that the public pays would disappear in this new system where all health payments pass through the government. Health insurance premiums paid by employers would convert into a new employer Medicare contribution to the government starting at an amount employers pay now and adjusting gradually toward national averages over time. Smallest businesses are exempted. Mr. Zandl says the most important aspect of this now is that Mrs Warren has shown that her plan's revenue sources match the cost so that the plan would not lead to deficits increasing and pushing interest rates higher, leading to negative effects on the economy. Republicans under Mr. Trump have paid little attention to expanded deficits caused by their tax law, and economists across the landscape have also shown less concern. Still attacks are made if the plans don't add up. For this reason a sound assessment in today's context of depressed consumers and an overall impact becomes essential. The WSJ quotes from a pre- assessment of Warren's plan by Simon Johnson, a Massachusetts Institute of Technology economist who co-wrote it with Mr. Zandl and Betsey Stevenson of the University of Michigan. What they point out is that putting cash in the pockets of the lower and middle class for spending makes a lot of sense today, and taking money out of the pockets at the way upper wealthy end,  does not contract the economy at all. Other effects they say are constructive by letting all workers get health coverage from the government instead of employers, this makes it easier to change jobs increasing labor mobility and productivity. A worker getting a better job and better utilization of skills could then shift without looking at the employer health care plan. Warren says there would be a five year transition so that workers in health care insurance industry can work in other insurance fields and in Medicare, no one would be left behind. The important thing being to build America's middle class again. ...

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900 million eligible voters in India means this is the largest election ever. The election will take place in 7 phases in April and May from April 11 to May 19. Votes will be counted on May 23. The election is for 543 seats in parliament, the Lok Sabha. Turnouts are high with 66% turning out in the last election that brought Mr. Modi and the BJP to power.  Unlike elections in Britain a lot is spent in each election, about $5 billion in the last election and double that this time. The U.S. elections in 2016 had spending of $6.5 billion as a comparison. Women vote at about the same rate as men and more women than men are expected to vote this time. Prime minister Modi won the last election with promises of development and infrastructure. He is delivering on infrastructure but building manufacturing and generating jobs in the formal sector remains a tougher task for any administration in 4 years. During the first term Mr. Modi made needed changes including introducing the GST tax to integrate India's fragmented market and get rid of a patchwork of regional state taxes. He introduced a whole range of projects and yojanas which are setting the stage for widening the middle class, and improving living conditions. Some of the problems such as the bad loans in the banking system date back to previous administrations and the government has taken steps to clean up this problem by refinancing banks and introducing a bankruptcy law. This has slowed GDP growth to about 7%. However this would have happened under any administration.  The brief war with Pakistan in February 2019 has added another dimension to this election with questions about whether this may help Mr. Modi because of his strong stand against terrorism camps in Pakistan.  In the end it all comes down to whether the public still believes the BJP party under Modi is best qualified to develop the infrastructure to modernize the country and improve services, and whether it can create enough of the manufacturing capabilities to generate jobs needed. It may not be that the BJP under Modi has  not made mistakes in the process of learning how best to tackle development, but whether a patchwork of regional parties led by the opposition Congress party is in a position to provide the strong decisive direction to make quick decisions on development. Getting the agreement of a number of regional parties such as the party in West Bengal state or the Uttar Pradesh state when it was under a previous administration of Mrs Mayawati means an even slower rate of decision making as it leads to lack of speedy decision making. Whether voters have short memories and forget the slow rate of infrastructure development under previous administrations or have a willingness to give the BJP a chance to show what it can do under Modi for development can eventually decide this election. An example of what this means is in how the Mumbai Metro is being pushed through to timely delivery- Metro Rail's head Mrs. Ashwini Bhide simply says she feels for the people of Mumbai who have suffered from delays in development of needed infrastructure for so long, with millions doing appalling rides in a creaky old rail system. In her view it should have been done yesterday. It is this attitude that can make or break the current administration, and whether it can get this message through to voters one more time. Most who have this attitude are aware that China is now laying enough concrete every two years than America did in the whole 20th century, as reported in the Guardian newspaper, and are equally passionate about delivery of services and rapid development of badly needed infrastructure.         ...

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The relationship between the southerner finance minister Schauble, and chancellor Merkel from the former East Germany is close, with each depending on the other. The Greece crisis following the referendum, with Schauble's patience with Greece exhausted by July 9, 2015, is reflected in the words he used in February 2015 about the Greece bailout program "ich over", his southwest German accent version of "it's over." In the German parliament Schauble has described the Tsipras government's behaviour as "lacking any rhyme or reason," and Schauble's popularity rating in the ruling CDU party is higher than Merkel in 2015, at over 70%. Schauble is a key CDU member in bringing the CDU's conservative members behind Merkel. This also limits the room Merkel now has in negotiating some last minute deal on Greece before the expiry of the deadline of July 12, 2015. Merkel has also set a higher bar for the negotiation, and a multiyear deal making reforms a high priority. When Schauble says there is no "rhyme or reason" for Syriza party Tsipras's behaviour he may be referring to the EU giving in to Greece's key demand for a change in the surplus targets for 2014-2016. As economists including Krugman point out the surplus is what Greece transfers to its creditors, and additionally with the EU making transfers of about 5% of GNP to Greece according to Harvard economist Kenneth Rogoff, aside from cuts to pensions as part of pension reforms to return a unsustainable pension system to sustainability, the Greeks had most of what they could expect at this time. The debt is basically being rolled over with EU loans helping pay what is now very low interest, making it an issue that could be tackled at a later stage, say economists, even though Syriza made it an overriding issue in the referendum. Both Schauble, Merkel, and the rest of the CDU, and many Social Democrats including their leader Sigmar Gabriel, find Syriza Tsipras's moves incomprehensible and damaging relations. German experts now see the Eurozone and the Euro currency better off for the future with a Grexit, which also limits what Merkel and Germany can now do....

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Bernanke's defense of the action of the Fed's monetary policy making committee, on November 3, 2010, (with a vote of 10-1) to buy an additional $600 billion of Treasury securities over the next 8 months. His defense focusses on the prospects of deflation- how low inflation can morph into deflation (falling prices and wages), that can create a long period of economic stagnation. In addition, with low and falling inflation, Bernanke sees spare capacity in the US that can be utilized to reduce the number of jobless people. He points to the rise in stock prices and fall in long term interest rates in anticipation of the Fed's action, as evidence that this Fed move would improve financial conditions. Lower mortgage rates would make housing more affordable, higher stock prices would increase consumer wealth, confidence and spending. Spending would lead to higher incomes and profits for economic expansion, from this viewpoint. The situation in November 2010, was a deepening housing slump anticipated for 2011, gridlock after the 2010 midterm elections and no agreement on additional stimulus for 2011, the need to rebalance the global economy lacking cooperation from China (with China increasing imports and reducing exports and the US increasing exports and reducing imports). Fed's Bernanke does not mention these factors, and only hints at the gridlock towards the end of the statement. This Fed action will push the dollar lower, just as efforts to improve exports and the trade balance are underway. The Fed's committee sees the risks of commodities inflation as an acceptable risk in the current situation, and the use of a cautious approach assessing the purchase program regularly as sufficient measure of safety. As to difficulties of the unwinding of these policies, the Fed sees present danger outweighing the risks of no action. For emerging markets such as Turkey, India, Australia and other countries seeing even more inflows of capital, the risks are left to these countries to manage. The central banks of India and Australia moved to increase interest rates at the same time that the Fed made its move....

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Problems facing India as it searches for a way to modernize the country, build infrastructure, and create strong jobs growth. Glaring weaknesses are evident in a number of areas which have not been addressed: a weak public education system, food poverty for people at the lower end worsening with today's 10% food inflation, child malnutrition, weak infrastructure building capabilities, growth in services but not enough in manufacturing to create jobs, a growing black economy, and a general acceptance of illegal behaviour that has increased with the increase in opportunities for corruption and bribes in a growing economy. The political governance is weak. The dependence on smaller regional parties in ruling coalition governments weakens initiative at the federal government level. The general lack of new political leadership, and the failure to develop new leaders in the Congress party because of the six decades long presence of the Nehru family. Some striking facts- the role of the black or underground economy has actually increased over the years. Arun Kumar, chairman of the Center for Economc Studies and Planning at Jawaharlal Nehru University in New Delhi, says his estimates show it was 40% of GDP by 1996, and 50% by 2006. This means more business activity evades direct taxes, and less money is available for investments in education, infrastructure and healthcare. It also indicates a widespread tolerance of illegal activity and corruption. The other striking facts are that the calorie consumption by the bottom of the 50% of the population has been declining since 1987, according to a 2009-10 economic survey by India's Ministry of Finance. The modernization of the country appears not to be following the path taken in East Asia- by Japan, S. Korea and now China- where people moved in large migrations from farms and rural areas to cities and manufacturing jobs, resulting in gradual urbanization. Manufacturing in India is only 16% of GDP in 2009, the same as in 1991, according to the World Bank. Certain regions are doing better than others- Gujarat and the Punjab in the north, Tamilnadu, Karnataka in the south- with large population areas in Uttar Pradesh and Bihar lagging behind badly. ...

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Major decline in oil prices in Oct. 2014 as prices drop to $81 per barrel and are forecast to reach $70. U.S. oil production increased by about 56% or 3.1 million barrels a day since 2004. U.S. demand for gas and fuel declined 8% compared to 2004. Initially instability and wars in the Middle East sustained high oil prices in 2012-2013. Yet with growing output from shale and other sources in N. America and slowing economies of Europe and China, the situation reached a point in 2014 where supply exceeds demand. This shift more than offsets any instability in trouble spots. The situation affects the U.S. consumer favorably with an estimate of $1 billion in savings for American consumers with every one cent drop in price at the gas pump, by one estimate from Deutsche Bank analysts. Typical American families gained an extra $50 a month from the decline June to October 2014, according to analysts at Gasbuddy.com. The declines are a boost for the slowing economies of Europe, Japan, China, S, Korea and India. China's imports for 2015 are estimated at 61% of oil consumption, using official estimates. In the current slowdown the lower prices offer relief. India which imports 75% of its energy benefits signficantly, as this helps lower inflation and reduces cost of fuel subsidies for state run companies. Russia is adversely affected by the declines as it depends on oil and gas exports for 50% of the nation's budget. Estimates by AFK Sistema economists show the Russian economy contracting in 2015 with oil at near $90 per barrel (Brent crude is at about $85, and WTI at $81 in early Oct. 2014). Russia's former Finance Minister Alexei Kudrin reflects opinion among Russian executives and politicians, when he told state television that Saudi Arabia may be pushing prices lower to target Russia's oil resource based economy and Mr. Putin, in an effort to broaden the effect of sanctions. (The Saudis have strongly protested the Putin intervention in Syria.) Venezuela has used $120 per barrel and Angola $98 for its budget, leading to a strong hit for the economy. ...

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WSJ Lingling Wei's interview with Ding Xuedong, chairman of China Investment Corporation on its plans and strategies for 2015-2016, and future years. China's government formed CIC in 2007 to improve the returns on its foreign exchange reserves, estimated at $3.8 trillion in 2015. China Investment Corporation had largely stayed with low yields on U.S. Treasury debt till 2007. CIC has about $650 billion in assets in 2015. Its strategies provide insights into how China sees the outlook for the global economy. Ding sees opportunities in real estate and infrastructure, with a focus on the U.S. and Europe for steady cash flows. He singles out the U.S. as of particular interest as its economy rebounds. Strategies also include paring down of energy holdings. Foreign holdings are now $220 billion and have increased by 16.6% since 2009. A special unit CIC Capital was formed recently to more directly participate in managing foreign holdings with a long term view. Earlier focus of CIC on natural resources and commodities is now shifting as the commodities crisis has reduced long term prospects in that sector. The plan for the future is to shift to an allocation where financial products such as stocks and bonds are about 50%, and long term assets such as infrastructure investments, real estate and other investment take up the other 50%. At the end of 2013 equities and fixed income represented 57.4% of CIC global assets, and 28.2% were in long term assets. Ding wants to see China as the No. 2 engine for the global economy after the U.S. as No. 1. He sees the prospects for Brazil, Russia and South Africa as poor, and is optimistic about good performance from India, Mexico and Nigeria. On Japan Ding is skeptical of prime minister Abe's plans because he sees the lack of structural reforms in the efforts leading to a kind of lazy effort in his view. CIC is learning from the experience of other national investment funds and improving its in-house investment and management capabilities. Ding has many years of experience with China's Finance Ministry, the Cabinet, and the State Council. ...

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Political activism and grassroots efforts- other than street protests - are increasing in eurozone countries facing high unemployment and austerity cuts. The focus is on cleaning up the political system rife with cronyism, corruption and wasteful spending. Brat and Bjork describe one such effort in the town of Torrelodones, Spain, 18 miles from Madrid. Criminal investigations in many Spanish cities have increased public awareness and participation in local government. European Social Survey based in London, reports political activity of this kind in Spain jumped from 27% in 2008 to 39% in 2010. There is an increasing sense that the political elites of the two main parties, the Partido Popular and the Socialists have failed to bring clean government and transparency to Spain. As a result progressives are joining conservatives in an effort to clean up years of wasteful spending, cronyism and corruption in government. The Union for Progress and Democracy, representing an alliance of such groups would win 13% of the vote in a national election, and the ruling conservative Partido Popular would lose half of its support and get only 22.5%, according to independent Spanish polling firm Metroscopia. The new push for transparency is one of the welcome changes at a time of austerity cuts and 27% unemployment in Spain. Many of the perks of public officials such as chaeuffer driven cars and police escorts, contracts for favored few at higher prices, are out in many cities, and accounts made public for scrutiny and change. Transparency International's transparency index shows 33 out of 110 of Spain's biggest cities scoring top grades on the 2012 index, jumping from only one. Following the example of the regional government in Navarra, the central government is drafting the first open-records law. Castilla-La Mancha, the area around Toledo, run by a clean government advocate Maria Dolores de Cospedal from the Partido Popular has taken aggressive steps to clean up the local government and wasteful spending- see the link to Castilla La Mancha. Her long term approach is to clean up government spending and accounts with the idea of preserving spending where it is most needed, in education, healthcare and vital services hit by cuts, an approach being taken in other Spanish cities. ...

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The 4.7 billion euro loss at German steelmaker ThyssenKrupp for the fiscal year ending in Sept. 2012. The loss stems mainly from management's bet on a large project to make steel slabs in Brazil and ship it to a plant in the U.S. state of Alabama for finished product of high-grade sheets. The project suffered delays and by the time the Brazilian plant was running in 2010, the strength of the real Brazil's currency and higher wage costs had affected the economics of the plan. Steel demand also slowed in the U.S. The plants which required an investment of 12 billion euros now have a book value of 3.9 billion euros. Thyssen bet too much on one project and it failed. Three management board members who had oversight over the compliance, steel and building technology areas had their contracts terminated, and a new CEO was appointed in 2011. Heinrich Hiesinger, a manager from Siemens AG is the new CEO. ThyssenKrupp's image has been sullied by reports of price fixing of rail tracks and scandals involving the communications head for foreign railroad contracts. Hiesinger says "until recently there has been an understanding of leadership in which old-boy networks and blind loyalty were often more important than the success of the company." He faces a difficult challenge of changing the corporate culture and developing a new strategy. His plans are to turn ThyssenKrupp into a high-tech engineering business by selling the steel mills in Brazil and Alabama, and the stainless steel division to Finiish company Outokumpu Oyj. This will shrink steel from 41% of sales to 30%. To implement this strategy Hiesinger needs a capital increase. This runs into problems as the Krupps Foundation headed by Berthold Beitz, which controls 25% of the stock, does not want to see its influence diluted. Other problems include the role of Gerhard Cromme, head of the supervisory board, which failed in oversight over the failed project. Cromme is also the head of the supervisory board at Siemens AG. At Siemens he helped a company cleanup after a bribery scandal and brought in new management. He also headed the Cromme Commission on corporate governance code for German business, which makes the current corruption allegations embarrassing for Cromme....

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Haruhiko Kuroda, 68 years old, a senior finance ministry expert who ran the ministry's currency policy as vice finance minister for 4 years in the early 2000's, is prime minister Abe's nominee for central bank chief. He lectured at Hitoshibashi University for two years before becoming the head of the Asian Development Bank. His book "Success and Failure in Fiscal and Monetary Policy," is critical of the Bank of Japan for mistakes in being first too accomodative in monetary policy to set up the 1987 crash, and then tightening too quickly leading to the deflation and recessions of the last two decades. By choosing an expert with a long experience in the field of monetary policy and a vigorous advocate of getting things right to shake off the deflationary trends, Abe is sending a strong signal to financial markets. Kuroda says he is looking at a shorter time frame to achieve a 2% target for inflation- about two years. In essence Kuroda is taking a page from the policy book of a small group of MIT trained economists, Bernanke at the U.S. Federal Reserve, Draghi at the European Central Bank, and Mervyn King at the Bank of England to boost domestic economies in the context of increasing global growth. The yen weakened to 94.77 to the dollar on Feb 25, 2013, after the announcement. Abe's nominee for one of two deputy governor appointments is Kikuo Iwata, a 70 year old economist who was also critical of Bank of Japan monetary policy since the 1990's. The Abe administration has also carefully communicated this message. Speaking at the Centre for Strategic and International Studies in Washington D.C. Abe said Japan's goal was to increase exports, but at the same time it will increase imports which should benefit the U.S., China, India and other countries. He described a recovery in Middle America from the Dakotas to the Carolinas and sees something like this happening also in Japan. Even the appeals to nationalist sentiment are also coupled with the message to China and S. Korea of not climbing up the escalation ladder and seeking good relations to promote mutually beneficial development. Abe's focus is on building the U.S.- Japan relationship....

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A landmark ruling and a huge win for consumers and for the country, as the Supreme Court says states can enforce fair-lending laws and other consumer protection measures against the largest banks in the USA. The Suprem COurt said that the rules issued by the federal banking regulators like the Comptroller of the Currency under the NationalBank Act - a law passed in 1864- could not block sfforts by the states to enforce their laws. For the country its a win because the lack of enforcement of state laws only allowed abuses in the subprime area to continue and helped create the subprime mortgage crisis. The case began with letters by the New York Attorney General Eliot Spitzer in 2005 to several national banks including CItigroup, JP Morgan Chase and Wells Fargo inquiring about lending practices to minorites. The letters referred to "troubling" disparities that suggested black and Hispanic borrowers were being charged disproportionately higher interest rates on mortgages compared to whites. THe letters asked for information "in lieu of subpoena." Protection of minorities and the weak in American society is part of the moral fabric of America and that it had eroded in recent years is evident in the manner the banking sector responded. A banking trade group and the Office of the Comptroller of the Currency brought a lawsuit to block the New York Attorney General's request saying that the National Bank Act nd rules issued by the Bush administration in 2004 gave that type of authority to comptroller and prohibited such efforts by the states. And then afederal district court ruled against the states, aand the U.S. Court of Appeals for the Second Circuit Court affirmed that decision. These are instances where the system failed to protect the weak even with the laws that states had on their books. Justice Scalia voted in favor with a 5-4 vote to allow states to enforce consumer protection laws, even though his written opinion was based on an interpretation of what "visitorial powers" of a federal regulator were, and not about the importance of fair lending in the proper functioning of the American economy. Justices Roberts, Alito, Kennedy and Thomas voted against....

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The Dean of Harvard Medical School says the Health Reform bill gets an "F" grade. He say its disingenuous to call this reform, and Congressmen and the White House are deceiving the public if they attempt to pass this off as reform. What it will do is accelerate health care spending in the US, and the bill has simply postponed most of the major health care problems, especially the ones that drive cost including the fee for service system and delivery of health care.There are no substantial efforts to control the growth in health care costs or improve the quality of care, which makes this effort unacceptable as reform. In his discussions with other health care leaders and economists, Dean Jeffrey Flier, says he has found the opinion unanimous on this point, that whatever the final legislation looks like in Congress, it will only serve to accelerate health care spending rather than contain it. On the present system's failings he is explicit- the current system he says promotes fragmented care making it difficult to assess outcomes, the true costs of care are disguised, and competition based on price and quality is made impossible. The new legislation while expanding access to coverage makes a terrible tradeoff of an accelerated crisis of health care costs and merely continues the current dysfunctional system. The experience of Massachusetts, where access to care was expanded but spending went up, is that this won't work. He points to the Special Commission on Health Care Payment System in Massachusetts recommendation, that the health care system there must be changed from a fee for service system to one with "capitated" payments. So what is really disingenuous about this whole affair? Congressmen making it look as if reform has happened and congratulating themselves on increasing access to health care, when many of the serious problems of funding health care, skyrocketing costs, and a dysfunctional system, have only been kicked further down the road for some future legislators to tackle. With the national debt about 12 trillon dollars when this plan is factored in, this is cause for serious concern. ...

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Cerberus will lose control of GMAC, and this may be a good thing, as decisions at Cerberus and GMAC while under its control were made not in the interests of GM and its customers but of Cerberus,s efforts to extricate itself from its troubled investments. One of these decisions was the decision in September 2008 to raise the credit scores for prospective GM customers to 700 before approving credit. Johnson of Barclays Capital says that in November 2008 only 1% of GM's customers used GMAC financing from a figure that was normally at 45%. During September, October, and when the credit crisis hit hardest in November 2008, GM continued to suffer hugely declining sales, and the decision to cut GM's customers off from GMAC credit must have only aggravated a bad situation from GM's concentration in SUV's and trucks and the tight credit conditions. With the November situation worsened by customers simply postponing car purchases due to concerns about job security (as about 586,000 jobs were lost in November), the credit scores decision could only hurt GM badly. Now Treasury is stepping in with $5 billion to GMAC with another $1 billion to GM to invest in GMAC. The result will be reducing Cerberus control of GMAC from 51% to 14.9% of voting shares and 33% of total equity. Cerberus will also stop providing consulting services to GMAC and the 2 companies will no longer share executives. And the GMAC Board will be reconstituted reducing the number of members affiliated to GM and Cerberus, and adding agovernment appointed board member. The government's $5 billion stake will pay an 8% dividend and it will put the government ahead of Cerberus's common equity holdings. Originally Cerberus and dozens of co-investors paid $7.4 billion for the 51% stake in GMAC in 2006. Now Cerberus plans to distribute piev=ces of it current GMAC stake directly to coinvestors. Cerberus has other troubled investments. With its flagship $4 billion fund down 15.8% as of November 30, 2008, and the firm has suspended withdrawal requests from investors after suffering big losses in October and November on a bet in fixed income markets....

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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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The failure of the economics profession to produce any red flags for this economic crisis, and the failure of economists to come to any consensus on what works to come out of this crisis, along with the huge confidence with which the economics profession displayed as the economy sailed along in most of the post war years, is one of the very noticeable things as one reflects on what has happened. Journalists like Peter Coy at BW who wrote this report followed the housing market for BW and raised red flags long before the crisis hit, just by looking at the facts. So its clear that looking at the facts through the lens of a particular theory of economics, or the lens of some ideological bias, or the lens of triumphalism, can handicap economists. There are economists who believe in the stimulus, and economists who don't believe in a stimulus, and others who think the economy reaches equilibrium of itself if left alone, and economists who believe in tax cuts. Were it not for the fact that the risks in a time like this are really great in depending on one or the other for advice if things don't work out the way they think, this would not be such a big issue. But a lot hangs inthe balance. Which is why decisions are based on what is actually happening on the ground, and by getting a good sense of that, and a grasp of real conditions, and getting agood sense of what will work in that particular situation, and not just hoping that things will work out according to some theory or conviction in the mind. And those who execute or manage the economy instead of teaching a class, have to be aware of the great responsibility for the lives of millions of people here and in poor countries around the globe, whose lives and the lives of their children, nutrition, health and education depend on their decisions, not just when they are in office but years after they have left. And for this reason exercize needed caution....

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Axel Friedrich, a top German Environmental Agency regulator who advocates using modifications of existing vehicles as a more effective solution to the auto emissions problem. He recently reconfigured the VW Golf to show that by making changes- such as lighter seating and weight saving hood other steps to reduce the car's weight, low resistance tires, and engines that turn off when stopped and start when accelerator is pressed, more efficient gear ratios, removing the mirrors and substituting tiny cameras, and improving the aerodynamics- emissions can be cut 25% even with horsepower intact. Working with the Institute of Automotive Engineering at RWTH University in Aachen, Germany, Axel redesigned the Golf in this way to achieve a CO2 emissions reduction from 172 grams per kilometer to 131 grams and is working to bring it to 120 grams. 120 grams per kilometer is the EU's tentative target for emissions for cars sold in the region by 2012. Automakers have for years complained that this would be difficult to do in this manner because customers were concerned about safety and comfort. Its not clear that this would affect safety. However with global warming a big issue in Europe, most automakers are making changes now to prepare for a shift to 120 grams per kilometer in emissions. VW has announced a diesel version of the gasoline version that incorporates some of the redesign changes that Axel Friedrich made on his Golf, such as low resistance tires, and more efficient gear ratios, lower chassis for improved aerodynamics etc. This diesel version costs a base price of euros 20,615, and is only euros 315 mor than a standard diesel Golf. BMW has a new diesel version of its 1-Series with low resistance tiresand a gearshift indicator, which emits 16% less CO2 and costs nearly same as its predecessor. At Frankfurt Auto Show Mercedes Mercedes is expected to announce more cars with stop start systems. All this will help automakers in Germany achieve the EU 2008 target of 140 grams of CO2 emissions by 2008 on the way to the 2012 EU target of 120 grams. ...

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The expansion plans of VW will add more competition into the US market which is declining. Martin Winterkorn ran VW's Audi business. He became VW's new CEO this year and brings a new leadership perspective to his job. He has several new strategies. In the area of pricing he wants to reduce unneeded features such as external mirrors that fold inward for narrow European streets, and bring down the price of VW Jetta and Passat models to be competitive with Toyota's Corolla and Camry models. Currently a Jetta is $17,000, a Corolla is $ 15,200 and a Passat is $23900 compared to a Camry at $20,000. VW's plans are to set a sales target of 1 million cars by 2018, tripling sales in ten years from the current 330,000 vehicles. In the next 3 years to 2010 sales world wide are expected to increase by 12 to 15%, VW wants to capture a bigger share by seeing its sales increase by 30% from the six million units today to 8 million units by 2010. Winterkorn sees this as possible given that VW has a more centralized management structure now which makes for quicker decisions. VW is also working on a new family of small fuel efficient cars on a common platform to be sold in China, India and other markets where a small car will be popular. Winterkorn referred to its new concept car as an example of the direction this would take. As importing cars from Europe is becoming costlier with the strong euro and the Japanese in contrast have the advantage of a weaker yen, the expansion plans will require lower pricing. VW looks to build a plant in the USA. Another strategy is to add 12 new models to its global product line and to launch more new vehicles in new product segments. This is what Winterkorn thinks has given Toyota its increased sales. A new compact SUV caled the Tiguan will be introduced. What all this means is that VW is seeking to move buyers of Japanese and American cars to try German cars, make German cars cost less and make a strong showing in the American and global markets. ...

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Don't let the current holiday season retail sales fool you as they have held up reasonably well. The impact of the mortgage and housing crisis will be felt in a delayed manner. It won't be till 2008 that the impact will really be felt. And the impact is expected to be lasting and deep, could take the rest of 2008, 2009 and into 2010 for this protracted tightening of credit. About $300-400 billion contraction in credit is expected when banks tighten their credit lending because of losses they are taking in the mortgage crisis. This will happen in an environment of falling house prices and consumers will not have access to the $340 billion in cash from home and mortgage equity financing that they took out in 2006, estimate of the Bureau of Economic Analysis. Auto, retail, apparel, and luxury items would be hit the most. On the jobs side not all the jobs will be lost in the USA. The USA imports about $740 billion in consumer goods and autos each year, which is one third of consumer spending excluding food and energy. The lower consumption in auto and apparel would affect exporters in Japan and China and South Korea. But Chinese exports have reached a point that they are causing trade tensions and a call for strengthening the yuan. An increase in American exports and lower imports could help bring down America's trade deficit. This could give China an opportunity to build its domestic market and markets in Asia and Europe so that it is not so dependent on the US market. For the US where the savings rate is near zero this is an opportunity for consumers to build their savings and reduce debt. Europe and India and the Middle East are expected to continue growth and China may see slower but continued growth in 2008 and 2009. In the US industries like aircraft and infrastructure promoting companies that sell to countries like Russia, India Brazil, the Middle East, and China will continue to grow. And because rates are still low large nonfinancial companies still have access to funds for expansion and capital investment. In a global economy the US consumer may be one part of a much larger picture. ...

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A detailed account by Thomas Schweich, a senior official and deputy in the law enforcement bureau to Anne Patterson, Assistant secretary of State for international narcotics and law enforcement affairs. He talks about how the Pentagon and the UK military have thwarted efforts for aerial eradication of poppy fields which has worked in other countries like Columbia. In fact Anne Patterson was an Ambassador to Columbia and knows about this first hand. He also talks about how through their efforts northern Afghanistan was cleared of poppy fields but how the cultivation has shifted to the south to Helmand and Kandahar provinces. The government officials in these provinces are actively involved in the poppy farms that are being setup there and support Karzai and help him organize the Pashtun vote for coming elections. So Karzai is protecting these officials and because of this opposes aerial eradication and does not support using Afghan Army for land eradication. The military in the U.S. and the UK does not want to take more casualties by turning against them the officials and farmers who support the government, but this is a short sighted policy because this helps make the Taliban insurgency stronger with access to cash and weapons because they also are actively setting up farms in their areas of southern Afghanistan. Aerial eradication takes care of poppy farms in all areas and has been effective in other countries. In the long run the military takes many more casulaties because of the bigger insurgency and Taliban they have to deal with. The military's policy is called "Sequencing," and its basically we'll deal with drugs later which is based on a complete misperception and understanding of the situation facing them. Schweich is in the thick of these battles and has fought them wit courage it appears from this account. He has the support of Secretary of State Rice but has not been able to get the Administration to get Karzai to change the way he is operating. It risks making the situation and insurgency in Afghanistan a lot worse if not corrected. Its a call for action and for educating the public and clearing all the misunderstanding and myths and fog about whats happening in Afghanistan....

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McCain's Plan announced in the debate with Obama moderated by Tom Brokaw was clarified further and looks more like the plan proposed by Hubbard in the WSJ. The government would step in and clear up the old mortgages and issue new 30 year mortgages at 5%. Taxpayer money would be involved, about $300 billion but the effect would be immediate relief to all homeowners, and the opportunity to stabilize home prices before a recession makes the situation worse with higher unemployment, more foreclosures. As much as 40% of all mortgages acccording to Deutsche Bank expected to go under water with home values dropping below the outstanding mortgages, and encouraging default in that situation. Lenders who made mistakes would get off without punitive price but even in the purchase of toxic assets by the government there is no certainty that private equity and other buyers of the assets from the government would not benefit. And the banks themselves could unload these assets at below their value to the Treasury because of asymmetric information, the lenders having a better idea than Treasury what these assets are really worth. And bad lending practices especially abusive ones can be prosecuted through investigation, the courts, and tough negotiations by the states and the government just as Jerry Brown obtained a settlement against Countrywide/Bank of America for $8 billion. And some of the people involved in the abusive practices and who benefited from them could have charges filed against them and end up serving time. The advantage of such a plan is that it would be decisive action and comprehensive action to see immediate effects of preventing whole neighborhoods being blighted across the nation, as most people underestimate the speed of this downturn from 6% to 16% home foreclosures from 2007 to 2008 and expected to hit as much as 40% of all mortgages in 2009 or 2010 absent any such action. Making what seems sensible letting lenders take the pain for their mistakes could then end up causing systemwide pain. When other ways of punitive action or shared pain or burden could be found especially prosecuting such behaviour and getting settlements through investigations and tough negotiations with the offending lenders. ...

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Vernon Smith, Professor of Economics and Law at Chapman University, 2002 Nobel prize winner, makes an effort to explain in simple language what has happened in the housing bubble, the various aspects of this crisis, and what might help and what might be difficult to accomplish in the rescue plan. He thinks that a reverse auction is awfully hard to do with some success especially as Treasury has no experience with this, and thinks its better to inject capital in banks and companies in return for equity stakes, which incidentally is what Gordon Brown's plan in the UK intends to do. With that Chapman believes Treasury has experience having recently demonstrated that several times including the way Treasury and the FDIC assisted JP Morgan takeover Washington Mutual. He asks readers to look at the Shiller price index graph from 1987 and asks do they think the home prices which only in 2006 and 2007 gradually turned downward and plumetted in 2008, has it run its course. The answer from the graph looks like a no after such a long runup in prices since 1987 and there is a ways to go in 2009 and into 2010. In this context and the context of a declining economy wiith higher unemployment what are the prospects of stabilizing home prices anytime soon? Which suggests injection of capital in return for equity by the government to recapitalize them and get lending back up, as well as act a a clearinghouse to take some of the fear risk out of transactions, as some of the more sensible solutions. And at the same time putting in a comprehensive homeowner relief program with taxpayer money and lender participation to have the lenders modify mortgages, or something like the Hubbard or Feldstein plans, to keep homeowners in their homes. And there is one bit of good news in all this oil prices have already hit $80 a barrel and are headed downward, and so are the prices of all commodities including steel, and the prices of soybeans, corn wheat and so on. ...