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The former editor of Britain's Daily Telegraph says that there is no coherent political strategy in Afghanistan, and that Obama's support for troop "surge" in Afghanistan is more a gesture to the generals than a convicing path to success. He says the 30,000 troop surge makes headlnes but shrinks small in the vast mountainous terrain of Afghanistan. The Pakistani people are increasingly more so than 2001 and 2006, hostile to Americans in the region. And hard core security forces in Pakistan also are against increases in US troops. And because of the Karzai regime's failure the Taliban have real if limited support. And Britain he says is turning irrevocably against the war.

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Experts say experience can be a serious handicap if one does not have ahealthy skepticism about ones assumptions and habits that tend to reinforce what one is thinking and not question old ways and old habits. This leads to costly mistakes at the level of project management and costlier mistakes at senior management levels. Experience proved to be a serious handicap at General Motors because management did not question its old assumptions about what sales would look like in future years and old habits went so deep that no effrts were made to change with changing demands for fuel efificency that made their impact even earlier in Europe. This is true of what happened at the central bank with Greenspan and at Treasury with Rubin, and Summers, and at the highly leveraged investment banks like Lehman Brothers, Bear Stearns, and Morgan Stanley. In both cases their was an additional handicap of the culture, with Detroit having its own culture and ways, and New York banking havings its own culture and ways. ...

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Most of the problems in Eastern Europe follow from overborrowing by the privae sector , consumers and corporate borrowing, in foreign currencies. According to David Roche of Independent Strategy, private sector foreign currency debt rose to 126% of foreign exchange reserves between 2002 and 2007. Roche is former head of research and global strategy at Morgan Stanley. As a result he says, 50% of household debt is in foreign currency in Hungary, 30-40% in Poland and Romania, and over 70% in the Baltic states. The debt in lowcost foreign currencies like Swiss Frances, Euros, and even yen, also expanded in the corporate sector. BY mid 2008 non-financial corporate debt in foreign currencies reached over 45% of corporate laibilities in Bulgaria, over 30% in Ukraine and Baltics, and over 20% in Hungary and Russia. To get an idea of the way the foreign subsidiaries of major western european banks expanded their lending, note that lending to homeowners between 2002 and 2007 doubled each year in Romania, rose 60-80% in the Baltics and Bulgaria, rose 20-30% in Poland and Hungary. And lending to corporations grew 20-30% a year. There is aclear suggestio of reckless lending and reckless borrowing in these numbers just as was seen in the way mortgage lending ocurred in the USA. The history of this kind of lending goes back to the reckless lending in Latin America in the eighties that led to lost decades many years before, and is a recurring story. Now Roche sees loss of GDP of 5%-6% for Turkey, Russia, Romania, Czech Republic and Poland, and 8-10% in Hungary, Bulgaria and the Baltic states. That would take 40% of foreign exchange reserves in Turkey,Czech Republic, Poland, Hungary and Ukraine. And this will have a human cost in jobs lost, crime, poverty, and years of progress lost in these countries. And it will ricochet back to the parent companies of the European banks that did a lot of this lending, with $130 billion additional losses, and a loss of 10% of tier one capital (equity capital plus disclosed reserves) of Western European banks....

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As remittances fall and in some places disappear from workers in developed countries to their families in developing countries, Kristof says about 46 million people there will fall into poverty. Something Zoellick of the World Bank has been warning for some time. Everything from food, school lunches, tution for children to go to school, housing, will be affected.

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Questions raised about whether the bets made by trader Iksil of the CIO at JP Morgan Chase were made to hedge risk, or to simply engage in proprietary trading for the bank in the hope of making large speculative profits. Bets made earlier by Iksil made large profits, but were simply speculative trades that increased bank profits. In late 2011 Iksil made a $1 billion bet that some companies would default on their debt in a few months. When American Airlines filed for bankruptcy protection Iksil's trades made about $450 million for Chase. But the trade had little to do with hedging risk.

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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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The Bank of England under Governor Carney cut interest rates 0.25% from a low of 0.5%, and suggested further cuts were on the way. This follows Brexit and action by the central bank to avoid a recession. The British pound fell about 1.6% to $1.3112 against the dollar, and euro 1.770 against the euro. Government borrowing costs declined, and the 10 year bonds yield dropped to 0.639%. Economic growth in Britian for the second half 2016 will be little or none. The GDP growth forecast for 2017 is now 0.8%, down from 2.3% before the Brexit vote. Bank of England staff say their calculations show Brexit vote has "conservatively" reduced growth by 2.5 percentage points over 3 years even after the rate cuts and stimulus action of the Bank of England, which other estimates show could add 0.5% over 2 years. This brings the Brexit impact to about 3% loss in GDP over 3 years, with these reliable estimates. Months after the Brexit vote the question remains whether Brexit supporters misled British voters, leaving the Bank of England to come up with a way to prevent a recession. After the austerity cuts since 2009 and the prospect of some improvement in the economy, this is a step backwards at a time when some of the working and middle class find themselves left behind. ...

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As Nigeria's president Buhari returns from 100 days of receiving treatment for an unknown illness in London, the situation in Nigeria has deteriorated further. For most of 2017 Buhari was absent from Nigeria. In his place Vice president Obisanjo was running the administration. The situation in Nigeria has deteriorated under Buhari- in the northeast that attacks by the Boko Haram group, and discontent in the south from the lack of investment in that region with oil revenues leading to corruption. One of the dominant themes in Nigeria has been that oil revenues have led to corruption with little change under the administration of Buhari's predecessor, Goodluck Jonathan, who came in as "Mr. Clean." Again and again the hope for a clean administration and good governance are not being met in countries with much of Africa's population. Nigeria with 186 million people suffers sorely in this respect.  See Ruchir Sharma's WSJ article on how oil revenues have become a curse with widespread Nigeria corruption. ...

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An account of Kweku Adoboli's trading activities at UBS leading to the loss of $2 billion. The failure of risk management systems at UBS.

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Ed Miliband, leader of the Labor party, tells British prime minister Cameron in parliament on Dec. 12, 2011: "It's not a veto when the thing you wanted to stop goes ahead without you. That's called losing.That's called being defeated. That's called letting Britain down." Miliband was asking what purpose was being served, when it was expected that the European Union leaders were unlikely to provide Britain with safeguards for its financial industry, and when Britain has actually led the way in calling for stricter capital reserve requirements than Basel III standards accepted in Europe. Olli Rehn, European commissioner for economic and monetary affairs, said Britain cannot separate its financial industry from the rest of Europe: "If this move was intended to prevent bankers and financial corporations in the City from being regulated, that is not going to happen."

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Because not much money is being spent the velocity of money as measured by the ratio of GDP to M2 money supply is at a low not seen since 1991, in the 4th quarter 2008. If GDP shrinks in the 1st quarter 2009 at 6% annualized rate as expected, then M2 velocity will be the lowest since 1987, even with the accelerating growth of money supply growth. The M2 money supply, a measure of money in the system including time deposits has grown by $767 billion or 10% in the past year accoding to the Fed. Money that is not being spent is building up in amountain of cash reserves. Banks have about $679 billion in reserves of cash, and this matches the $653 billion by which money supply has increased during that time as aresult of the Fed's repeated infusions. This suggests that inflation is not the risk that it would appear to be, even with the governments huge spending plans and the Fed's efforts to add so much liquidity. Says one economist, the money multiplier is just not working and is broken. Will consumers start borrowing and spending again. Not as long as they are so overstretched and with job losses mounting. And will banks continue to cautious and slow to led? Most likely as long as the bank's balnce sheets are broken, and the bad assets remain on them. This may explain last weeks efforts by the Fed to buy Treasury bonds upto $300 billion and more efforts to get credit flowing again by buying up mortgage securities and raising the ceiling to $1.25 trillion for purchases. cash...

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Landon Thomas looks at the European Financial Stability Facility, the organization that was formed in May 2010 to be the mechanism for raising and channeling funds to troubled eurozone economies Ireland, Greece and Portugal. He describes its evolution, its new responsibilities under the July 2011 eurozone agreement, and the difficulties it might face. The credibility of the EFSF is critical to the solution being worked out by eurozone leaders. The EFSF is based in Luxembourg and is headed by Klaus Regling, a German economist and a top official in the European Commisson's financial division. The EFSF raises funds in the financial markets. With Germany as the largest backer the EFSF is able to raise funds at low interest rates such as 3.3% for 10 years at one recent offering. The fund has a triple-A rating. In June and July the stability fund raised 8 billion euros in two auctions. It plans to come to the market four times during the rest of 2011 for funds to support Ireland and Portugal. The EFSF will need new powers and structure to meet its new role as the principal mechanism for solving the crisis. It is now given the role of the buyer of last resort for the bonds of troubled eurozone economies. This means national parliaments in the eurozone will have to approve these new powers and resources. One concern in financial markets is how the EFSF would deal with the needs of Italy or Spain if one of the two economies runs into trouble. Italy and Spain consitute 30% of the EFSF's backing, if they were to run into problems, would the burden fall disproportionately on France and Germany? And because France may have public finance problems of its own with declining competitiveness, does this mean Germany would be the real backer in that situation....

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Dilip Hiro's new book on the emergence of two states India and Pakistan in 1947 presents the story in terms of the two founding leaders Mohandas Gandhi and Mohammed Ali Jinnah. The division of the region into conflicting states is shown as a result of the divergent views and politics of the two leaders. Jinnah who was skeptical of the mass civil disobedience movement of Gandhi and preferred a legislative approach, and Gandhi who appealed to the masses and oppressed millions in British India. Jinnah and Gandhi's style and approach were fundamentally different. Seven decades later Pakistan has failed to build a genuine participatory democracy for most of this period with military actively involved in government, and India in the manner of Gandhi built institutions of participatory democracy under different political parties. Jinnah was an assistant to Dadabhai Naoroji, India's first nationalist leader at the turn of the century, when the two were in London. Naoroji passionately argued against the British policies that entrenched the poverty of millions of Indians in the countryside. Ironically it was Gandhi, not Jinnah, who took up Naoroji's call for bringing hope to the hundreds of millions of people on the subcontinent in "Poverty and Un-British Rule in India," first published in 1901, and showing how the draining of the country by the British was leaving India weak and oppressed. In 2015 that struggle of Naoroji for bringing hope and economic opportunity to millions of people is the task taken up by India's new government and the new government in Pakistan. Naoroji, the first Asian to be elected as a member of the British parliament, established the East India Association in 1867, the predecessor organization to the Indian National Congress which he founded with Hume, and is the leader Gandhi and Jinnah most respected in the first three decades of the twentieth century. Naoroji was elected to the British parliament for the Liberal party from Finsbury Central in 1892, and was assisted in his campaign and duties as a member of parliament by Mohammed Ali Jinnah. In the light of this common upbringing for Gandhi and Jinnah, the nineteen forties and their aftermath could be seen as a detour, not the substance of political life on the subcontinent- just as Mao and Chiang Kai Shek are a sort of detour for today's China. Particularly in a globalized world where technology continues to open up unbelievable economic opportunity, interchange and communication. ...

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The U.S. Justice Department files a civil lawsuit accusing S&P and parent company McGraw Hill of giving improper ratings to poor mortgage investments which allowed them to inflate in value, creating the conditions for a crash in these investments when the crisis happened in 2008. The penalty sought by the Justice Department and the attorney generals for 16 states is $5 billion to cover losses to investors such as state pension funds and federally insured banks and credit unions. The civil suit comes 5 years after the onset of the financial crisis of 2008, which created the greatest financial crisis since the 1930's. Negotiations for a settlement were conducted by the Justice Department with McGraw Hill for an extended period of time. The talks broke down in January 2013. In these negotiations the Justice Department sought a penalty of over $1 billion and S&P's acceptance of wrongdoing. S&P countered with a proposed settlement of $100 million. The government pushed for admission of guilt on at least one count of fraud. It is not known why the Justice Department filed this lawsuit 5 years after the crisis when the public's memory of the ratings issue is beginning to fade. Is it because the preparation of the case required this much time, the action not taken because it would be seen as punitive in 2011 when S&P downgraded the U.S. sovereign credit rating, the fragility of the economy in 2011, because of the approaching election in 2012, or some other reason. One of the reasons why it was important to take corrective action early was to preserve the integrity and credibility of financial markets, so critical for public confidence. An additional reason was to secure from credit ratings companies the internal reforms and change in leadership and culture that would prevent recurrence and damage to the economy. An example of this change is the change in leadership and culture underway at Barclays bank in Britain after the investigation into the manipulation of the London Interbank Offered Rate or LIBOR. The Justice Department action in this respect is an advance from the policy at the S.E.C., which has not insisted that companies involved in the crisis admit wrongdoing, setting up the process for changes in leadership and culture such as the one at Barclays....

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What were the stories in the Economist magazine that were the most read stories of 2019? Not on president Trump. On Malaysia, China under Jinping, and exodus from San Francisco and Silicon Valley. The most read article was on the newly elected president of Brazil, Jair Bolsonaro. The mismanagement of the economy particularly extravagant state spending on the Olympics and soccer stadiums for the World Cup at the expense of basic sanitation services, bus and transport services, health services, led to the result of a majority of Brazilians rejecting the Workers Party and its leader former president Lula. Unfortunately most of the media including the Economist did not draw attention to this gap. During a period in which income from mining with export of iron ore, and soyabeans to China, enabled Brazil to live beyond its means, there was no effort to draw attention to glaring gaps in development of public services such as sanitation, bus services and transport, lack of building infrastructure other than to support mining. Glaring gaps in education and health services made the situation worse. The second most read piece in the Economist  was on March 10th- Malaysia's PM is about to steal an election. Here the Economist magazine joined the Wall Street Journal which originally broke the story on the 1MDB fund and irregularities in Malaysia where a development fund was misused by the government. Najib actually lost that election and the WSJ covered the story of the developments that followed in which Malaysia's new governemnt led by a returning former prime minister in his nineties Mahathir Mohammed, ousted his own protege Mr. Najib.  The third most read piece in the Economist magazine was - How the West got China Wrong.  Unfortunately the Economist magazine and most of the media covered China in the two decade long boom years without covering the other emerging story as well in which Mr. Lighthizer (now president Trump's top trade adviser) and others questioned the huge unsustainable trade surpluses in U.S. trade with China. With the economy facing huge downside risks and rising trade tensions with the U.S. Chinese president Jinping's move to remove the limit on terms in office in the Constitution was considered a shift from the notion that China was likely to turn into a democracy. Mr. Jinping had already completed his first term in office and the anti-corruption campaign, managing the economic boom for a soft landing, was carried out with the central leadership of the party, after the destabilization evident in the early part of Xi Jinping's first term. Much of China's path was predictable and rational behaviour in its national interest, what was not clearly defined or defended was the way the U.S. could sustain the trade deficits that had reached a billion dollars a day. Leading to Mr. Trump seizing on this as an election issue to form a bloc of voters separate from the two main parties, the Republicans and the Democrats. The fifth most read piece was on Oct 11, 2018- the next recession. It pointed out that with low interest rates central banks in the U.S. and Europe and America could not cope effectively with a recession. The sixth most read piece was on June 29, 2018- Bullshit jobs and the yoke of managerial feudalism. It cited Prof. David Graeber of the London School of Economics, who wrote a short essay that went viral on the prevalence of work that had no social or economic reason to exist, work he called "bullshit jobs". Graeber said people want to feel they are transforming the world around them in a way that is leading to a positive difference. No. 7, 8, 9, were on Bitcoin, Netflix and programming language Python. No. 10 most read was on Aug. 30, 2018- Why startups are leaving Silicon Valley. It showed that in 2017 more people left the county of San Francisco than entered. The main reason the cost of living was burdensome and out of control. As Amazon shifts attention to India and Brazil, and Apple pulls back from India, social media companies coming under fire for disinformation, this period of Tech is making way for a shift in a new direction. A direction that focuses on people's lives, wages, spending on much needed infrastructure and services. ...