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U.S. companies are required to use a discount rate that reflects current corporate bond yields for future pension liabilities for workers. The low interest rate environment supported by the Fed increases these liabilities. Some companies including Ford Motor see increases in the liabilities even though steps are taken to reduce the amount on the balance sheet. This is a major problem for companies with defined benefit plans- for Ford, GM, Chrysler, Boeing, Dow Chemical, Verizon, AT&T and other large companies. Ford plans to put $5 billion in its pension fund in 2013, close to what it will spend on plants, equipment and developing new models. In 2012 Ford's unfunded pension liability increased to $18.7 billion. Ford reduced pension liabilities by $1.2 billion through buyouts for salaried workers. Having to reduce the discount rate from 4.6% to 3.84% ended up increasing Ford's liabilities for pensions on the balance sheet. Boeing faces a similiar problem.It plans to put $1.5 billion in cash in the fund to reduce unfunded liabilities in 2013, following $1.6 billion it put in 2012. This still leaves the unfunded pension liabilities at 26% for Boeing....

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Malkiel says both sides in the investor debate are right. Those saying the CAPE ratio in the U.S. at 25, well above long run average of 15, are right to point this out. So are the others in the debate who point to the lack of alternatives for investors when the 10 year Treasury bond is at 2.4% and short term rates essentially at zero. Stock prices reflect the discounted present value of future cash flows from dividends and capital gains. This discount rate in 2014 has to take into acount the rate on low risk securities such as 10 year U.S. Treasury bonds and and a premium for riskiness of the stock market. Add three or four percentage points to this and one gets a low discount rate for future earnings that helps support reasoning for higher stock prices, says Malkiel. On the issue of low interest rates Malkiel's view is that they will be around for a long period because the unutilized productive labor capacity and low growth are likely to persist for a long period. Here he supports Fed chairwoman Yellen's view based on the U6 labor utilization. He also sees the long run equity returns from today's prices to be much lower than the 10% long run average. By accomodating both sides Malkiel supports a broadly diversified portfolio with adequate room for emerging markets and international stocks....

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A report from the U.S. Federal Reserve on the impact of the financial crisis of 2008-2009 on the wealth of American households. Between 2007 and 2010 says the report the median net worth of American families went down by 39%, from $126,400 in 2007 to $77,300 in 2010. This had the result of putting Americans back to the level of net worth in 1992. Much of the loss in net worth was from asset value reductions. The median value of stock market based retirement accounts decreased by 7% to $44,000. The biggest drop was in housing values- falling by 42% to $55,000 in the three years. Americans are working down their debt- a quarter of families are debt free, credit card balances declined 16% to $2600 from $3100 from the period 2007 to 2010 of the report. Yet the median level of family debt remains the same as more families support their kids education by taking out college loans. Median income fell about 8% to $45,800 in 2010, with income losses especially large in the manufacturing industries as the U.S. manufacturing sector worked to improve competitiveness. Other factors supplement this picture. The burden of college loans increased to over $1 trillion for middle and working class families. With the burden of college debt young people were more likely to delay buying first homes, indefinitely dealying recovery in the housing market. Seniors on retirement see interest income from savings negligible with low interest rates and higher risk in a volatile stock market. ...

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Former U.S. Federal Reserve chairpersons Volcker, Greenspan, Bernanke and Yellen, are together at the International House, on the campus of Columbia University, in April 2016, in a forum hosted by journalist Fareed Zakaria. The discussion covers topics related to the financial crisis of 2008 and its aftermath, with quantitative easing, Fed communication as policy tool, and the gradual increase in interest rates.

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Ukraine's central bank says its foreign currency and gold reserves dropped to $6.4 billion in Jan. 2015. The conflict in the east with the flareup in Fe.b 2015 is taking its toll on the Ukrainian economy. The central bank raised interest rates and moved to a freely floating exchange rate in Feb 2015. The currency hryvnia lost half of its value in 2014. Ukraine's currency lost one fifth of its value on Feb. 5, 2015. FactSet figures show the decline was down to 25 hryvnia to the U.S. dollar.

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David Reilly says the Fed's response to the large volatility in the stock market after the credit downgrade of the U.S. to AA+ makes sense. The Fed's Open Market Committee voted 7-3 on August 9, 2011, to keep interest rates exceptionally low till mid-2013. With credit markets working and the financial system having sufficient liquidity the Fed did not need to take drastic action. Coming only a short period after the end of QE II, a QE III could be seen as an over-reaction. Another reason for the Fed's action- more pressure was needed for the U.S. government and Congress to shoulder responsibility for the economy. In an earlier statement the Fed had pointed out that the Fed by itself can only do so much and this is consistent with that thinking. There are important headwinds from housing, large consumer debt, deficits, and high unemployment that the Fed alluded to in that statement that will take time to reverse with policy action on several fronts over a longer period. In the speech made on June 6, 2011, U.S. Federal Reserve chairman, Ben Bernanke, said "monetary policy cannot be a panacea."...

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The U.S. financial sector is facing a future in which there will be lower revenues and a smaller number of jobs. A low interest rate environment does not help the banks. According to analysts surveyed by Bloomberg, net revenue for the six largest U.S. banks will decline by 3.7% in the second quarter of 2011. As a result financial stocks in the U.S. have trailed the broader market in the last 9 of 11 months. The ratio of the price of the S&P 500 financials index to the S&P 500 stock index is less than 0.16. The only time it was less than 0.16 in the last two decades is during the January-April 2009 period when banks were facing a major financial crisis. Bank of America's stock was at a two year low on June 6. Tighter regulation, state and federal investigations, and higher capital requirements from the Fed, will affect revenues and jobs.

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Janet Yellen preceded Mr. Powell as Fed chairman, to head the U.S. central bank. Mr. Powell has warned that it took 8 or 9 years for the Fed policies to work to get tighter labor markets where minorities and other less advantaged groups could find employment. A better solution has to be found. Crises should be anticipated and prevented such as the mortgage crisis of 2009- banks, business, regulators in government, bank policy and political leaders all have a responsibility to ensure this. A mediocre leadership in each field alone could have led to the crisis of this magnitude in 2009. The pandemic is a second blow to these same groups in society struggling to make a living and has added many more. Two large whole sections of society were hurt in the rescue from that banking debacle with shoddy mortgages. The rescue involved low interest rates and the offshoot effect of this was to reduce the return on savings of people in retirement or close to retirement who in the past could depend on interest rates of somewhere between 5 to 8% annually to increase their savings over a decade. The high costs of medical care as a result of artificially inflated medical costs and poor managing of this cost are a burden for this section of society- with diminished savings from both low interest rates and loss of employment from the financial crisis. The young people with high tuition burdens were the other section of society hit hard. Tuition costs are also out of control similar to medical costs, putting great burdens on whole sections of society in an unconscionable way for a society that claims to be "for the people." Mr. Mnuchin, Mr. Trump's Treasury Secretary, did not have a close understanding with Mr. Powell. As Mr. Powell enters the last year of his term as Fed chairman, his close relationship with Ms. Yellen at Treasury is seen in a positive way by the WSJ. Powell worked at Treasury in the 1990's. After 2012 to 2018 both Powell and Yellen were at the Federal Reserve, working closely and having adjacent offices. Will this duo make a difference? ...

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The Labor Department reports 295,000 seasonally adjusted jobs created in Feb. 2015, with the unemployment rate dropping to 5.5%. This opens the path for the U.S. Fed to increase interest rates as early as June 2015.

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Under Blackstone private equity ownership Hilton expanded overseas, acquired the international operations, and increased room capacity and revenues. It also almost doubled the debt load to about $13.5 billion in 2013 and hit a rough patch in timing because the 2007 buyout happened close to the 2008-2009 financial crisis. About $4 billion of the debt load has been reduced by negotiating with creditors during this period. Room capacity went up from 501,000 in 2006 to 665,000 in 2013, occupancy from 72.5% to 72.3%, average daily rate from $124 to $136, and revenue from $8.2 billion to $9.4 billion. Hilton adjusted earnings before interest, taxes and depreciation were up 25% from 2010 to nearly $2 billion in 2012, according to SEC filings. Hilton now plans an IPO for the first half of 2014 to raise $1.25 to $2 billion. About 80% of rooms under construction are outside the U.S. showing the opportunities overseas Blackstone has focussed on.

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World Bank projections of Indian growth rate are lowered from 6.6% to 5.8% because of DJT US administration's 50% tariff on imports from India. "It is in America’s national interest, then, for South Asia, and especially India, to grow at a rapid clip. That would create a counterweight in Asia to China’s massive economic and military expansion." This is the opinion of the Editorial Board of The Washington Post. It goes on to say that -  "But Trump is determined to negotiate a grand trade bargain with Chinese leader Xi Jinping, so he didn’t impose secondary sanctions on their purchases of Russian crude.Trump wants U.S. trade policy to be more self-interested, but it doesn’t serve America’s strategic interests to strengthen China’s position relative to its neighbors. At some level, the administration surely knows this." The Washington Post has identified a basic flaw in the US policy towards India. Both parties in America have fallen into a trap of believing that first Japan, then China with accelerated economic expansion in the 1920's and 30's and in the 2000's and 2010's  are not going to run into issues with such expansion, this being the military and the separation from US economic cooperation that enabled the economic expansion of both Asian countries. Another aspect is that in 1950 China was similar in size of economy to India at 1.18, in 1903 and in 1962 at 1.18, and the gap between China and India is only a story of the last 2 decades. By 2047 India surely has the potential to close this gap with economic and technological integration with the US and European economies that were the pillars of China's economic expansion in an earlier period.  There are other aspects of culture and size- The Bhagavad Gita and the Bible provided Gandhi with an integrated view of western civilization. With its interactions and adoption of western institutions and government, of law, the new Indian state and its neighbor Indonesia represent 1.7 billion people in Asia, with Japan and the Philippines 2 billion people twice the size of China.   ...

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Chinese companies are building railways, power projects, airports and other infrastructure in East Africa. This report looks at work in Uganda building infrastructure projects and exploring for oil near Lake Albert. Chinese state owned banks provide access to financing for projects and other infrastructure companies build projects using about 60% of labour from China, on low interest rates but with payment over shorter periods than with World Bank projects. The U.S. lags far behind in investing in African infrastructure which badly needs modernization. 

The drawback of debt load is being balanced by exploring for oil in Uganda and keeping the debt load manageable. CNOOC is exploring for oil near Lake Albert. Uganda received $1.4 billion from 200 to 2014, in 2015 another $1.9 billion for 2 dams, and now $2.2 billion loan for new railways.

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Financial firms in the U.S. S&P 500 are expected to increase 4th quarter 2013 profits over prior year by 24%, according to FactSet. Increase in long term interest rates increases the spread between short term rates that banks borrow at and the long term rates at which banks lend, easing the pressures on bank's net interest margin that were present as the Fed lowered rates. Prospects of recovery and increased lending improves the prospects for banks in 2014.

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The U.S. Federal Reserve Open Market Committee's minutes for its April 26-27 meeting show prolonged discussion on an exit strategy from a loose monetary policy. The first step would be to make a significant reduction in the $2.4 trillion portfolio of mortgage and Treasury securities. Fed chairman Bernanke has pointed out that the Fed will first make a decision to reduce its mortgage portfolio by letting the securities to mature without reinvesting in Treasurys as it has done so far. This would be followed by reducing its holdings of long term Treasury bonds in the same manner. These steps would precede raising short term rates followed by the sale of agency securities. The minutes reveal the Fed's thinking and strategy. For instance, the minutes show "a majority of participants preferred that sales of agency securities come after the first increase in the Fed's target for short term interest rates." The minutes also show that "many of those participants also expressed a preference that sales proceed relatively gradually," which could be over a five year period. Economists expect the Fed to wait till sometime in 2013 to raise rates, with the signalling of Fed moves to reduce its holdings before raising rates....

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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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Discussion at the U.S. Fed Open Market Committee meeting in April 2014 revealed in the minutes shows concern about inflation levels being too low in 2014-2015, a factor in policy about raising interest rates. Other concerns are the weakness in the housing market.

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The number of student loan borrowers in the U.S with loans over $100,000 has surged from about 1 million in 2010 to 1.82 million in 2014, according to the Federal Reserve Bank of New York. Th borrowers are graduate students who have piled up so much debt in the last decade that 40% of student debt of $1.19 trillion in 2015 is from graduate student debt. A major problem is that there are no limits to graduate student borrowing and the rates are higher because of bad loans in the system, increasing the size of the burden of student debt on individual borrowers rapidly, ironically at a time of low interest rates. This leaves borrowers worse off with unpayable student debt affecting them all their lives, taxpayers paying more, prudent student loan borrowers paying higher rates, and all the time reducing the pressure on universities and colleges to reduce costs for affordable graduate education. This is now a major problem in the U.S. and a major issue in the 2016 presidential election.

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US public companies, manufacturers and retailers that make up more than half of the S&P 500 index, came out with strong sales per share of 24% increase in 2022 over 2019. This means slower growth is expected ahead in 2023, says Justin Lahart in the WSJ.  The shift to consuming more services such as dentist visits and tourism from buying washing machines and appliances will mean slower sales for these large companies that are manufacturers and retailers. Fed chairman Jay Powell's higher interest rates will also limit growth in sales in 2023. Overall the US economy may barely skirt a recession, and this depends on which forecaster one talks to.

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Francesco Gurrerera, Money and Investing Editor for the WSJ points to the risks in the U.S. and global economy in April 2012- overdependence on the U.S. Federal Reserve and the European Central Bank, not enough "de-leveraging" of financial institutions after the 2008 global crisis, and the increasing risk associated with individual investors and businesses investing in risky securities in search of yield in a low-interest rate environment.

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As the U.S. economy continues to gain in job growth with unemployment at 3.8% in May 2018, wage gains remain low. Wage growth over the past year is about 2.7%. Labor participation rate is at 62.7%. Reasons given for low wage growth are the lack of wage increases for people who stay at their current jobs, the digital disruption lowering wages, decline of union bargaining, and low productivity growth. This gives the Federal Reserve more room to increase interest rates gradually.

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The campaign rhetoric for renegotiating NAFTA and building a wall at the border has had a sharply negative effect on growth in Mexico. Growth slowed in 2016 and is expected to be close to zero in 2017 with declining foreign investment in the economy. The uncertainty is leading to sharp decline in foreign direct investment of 24% in the first 9 months of 2016, according to the Bank of Mexico. Further declines can be expected in 2017. The decline in the value of the peso of 16% since May 2016 has led to 6 interest rate increases in the past year. Inflation on annual basis was at 4.72% in Jan. 2017 and is rising. As Mexico depends on exports for one third of its output growth, and 80% is sent to the U.S., there is a need to diversify with trade agreements made with the European Union and other countries. Mexicans now question the value of NAFTA trade agreement as average growth of 2.6 since NAFTA was signed is below the 4.6% in the 2 decades prior to that. And poverty level is the same with about 60% of people in the underground economy. In addition crime, drug trade, a weak education system, weak rule of law, political corruption, show that Mexico has not made the progress since NAFTA that it should have made. ...

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Warnings to governments and leaders in industry and pharmaceutical research about epidemic preparedness by Bill Gates were ignored. He spent hundreds of millions of dollars to develop new vaccines and create disease tracking systems. But only governments could tackle this problem. He tells the WSJ in an interview that he feels terrible and that he wishes he had done more. His fear that a once in a century pandemic has come true. Governments did respond to the public health preparation needs as reported in France 24 to both SARS and the H1N1, both in Britain and France. It was the disbanding of this effort in the period of the global financial crisis and the eurozone financial crisis that led to the level of unpreparedness that Western Europe finds itself in today. This was caused by irresponsible banking practices. The response was austerity measures in Britain, France, Germany and Spain that led to leaving public health system investment being neglected, without fixing the original source of the problem. Misallocation of capital and lopsided priorities continued through most of the period leading up to the pandemic. There is a lot that Gates and other public spirited leaders could do now do in the new reordering of priorities and shifting the allocation of capital to public services and investments in infrastructure, and supply chain renewal to safeguard national interests. Today he is working with pharmaceutical executives and governments to produce billions of doses of vaccines while they are being tested. His foundation has reserved space in a manufacturing plant so that production can begin quickly once an effective vaccine is found. He says nobody has made 7 billion vaccines so that it will need all the help that it can get and international cooperation.  In an earlier interview with WSJ he told the interviewer in November 2014 that the world as a whole did not have preparedness. France and Britain prepared and then abandoned the effort for epidemic response by 2012 following the global financial and eurozone financial crises. Gates repeated the warning to 2016 presidential candidates in the U.S.  In 2017 at the Munich Security Conference he reminded people- "getting ready for a global pandemic is every bit as important as nuclear deterrence and avoiding a climate catastrophe." One focus of Gates was to come up with faster ways to a vaccine by using ready made components and then customizing it. This is an approach being adopted today by Oxford scientists and by Quidel Corp. in the U.S.   ...

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The U.S. Federal Reserve begins to scale back its quantitiative easing stimulus for the economy in December 2013. Ben Bernanke announced the Fed will cut back on purchases of Treasury and mortgage backed securities from $85 billion to $75 billion in January 2014, and gradually taper the purchases down to zero by the end of 2014. The Fed will also strengthen its plan to hold short term interest rates near zero to provide additional support because of weakness in the economy. This sets out a plan for the next two years with the first increases for short term interest rates not till near the end of 2015. This removes uncertainty in the economy and the stock market responded with a 1.7% increase after the announcement by the Fed fllowing a 2 day meeting. The Fed's announcement coincided with the Senate passing the Ryan-Murray compromise bill that provides an agreement between Republicans and Democrats on the budget, removing risks of a debt limit standoff in 2014.

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An index for consumer prices for the U.S. was up only 0.8% for the 12 months of 2014, according to the Bureau of Labor Statistics. This is well below the U.S. central bank's target of 2% inflation. It creates uncertainty about whether the U.S. Fed will raise interest rates in 2015.

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Allan Meltzer says a Fed QE III woud be bad monetary policy. He puts several questions to Bernanke- how the Fed and Ben Bernanke can know now what is the right interest rate policy in mid 2013, and what reason can the Fed give for adding excess reserves when U.S. banks have $1.6 trillion in idle reserves at the Fed. Meltzer cautions the Fed and other policymakers not to pay attention only to short term forecasts, which can be susceptible to large errors. And calls for attention to the long term consequences of their actions. One point he emphasizes is that the unemployment problem cannot be resolved with short term policy actions nor can it be resolved in a short time. It will take population growth, falling housing prices and rising rents to create opportunities for new construction. Another change is the transition to a less consumption driven and more export oriented economy. This transition which has started will also take time. He urges the Congress and the administration to focus on: reducing corporate tax rates by closing loopholes, long-term reductions in entitlement spending, a 5 year moratatorium on new regulations, and the Fed adopting an explicit inflation target between 0% and 2%....