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People don't design their own electric motor, then why should they pick stocks when index funds are widely available. Charlie Munger of Berkshire Hathaway says one of the reasons he was economically successful is that he read so much, "read so damn much all my life." He says it is charlatanism to charge three percent to pick stocks and manage other people's money, when index funds can do the job better. He doesn't believe in bitcoin, a sovereign issues money for a reason and it has worked, artificial currency he calls "a stink ball."

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A look at the economic collapse in Lebanon as reported in the NYT. Lebanon depended on foreign inflows of money for its economy and standard of living. The economy has collapsed in recent years because of mismanagement, corruption and sectarian conflict. A civil war in Syria. and wars in the Middle East hurt Lebanon's economy after 2011.  After Lebanon's civil war ended in 1990 the central bank decided to tie the currency lira to the US dollar at 1507 lira to the dollar. To be able to exchange lira for dollars the central bank had to attract dollars. To attract foreigners to deposit dollars the central bank head decided to pay 15% interest. With insufficient US dollars as dollars were also needed for imports, the central bank ended up paying depositors with dollars from new deposits, what is called a Ponzi scheme says the NYT. When these deposits stopped coming in 2019 people could not withdraw their money. Three developments after 2019 hurt the economy. The pandemic hurt tourism which makes up 18% of the Lebanese economy. The pandemic hit Lebanon hard. Then in 2020 a bomb blast hit Beirut port from an abandoned ship in the port destroying three large neighborhoods that could not be repaired. ...

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Krugman points to the economic muddle that China is getting itself into. He says one way of looking at what is happening now with high inflation is that inflation is the market's way of undoing the currency manipulation that China has engaged in. By following aweak currency policy to protect export interests China has created an artificially high trade surplus. But this is now turning into a lose-lose proposition for both China and the US as market forces push wages and prices up, whittling away at any competitive advantage of China's weak currency policy. He says some estimates he has seen show that Chinese undervaluation could be gone in two or three years. Chinese consumers are asked to accept interest on savings limited to 2.75% and below inflation, with the spread designed to help banks earn their way out of bad loans made during the stimulus lending binge of 2009-2010. What is happening is a massive allocation of capital away from consumers to lending for state owned companies that have created overcapacity in many industries, and use part of this capital to engage in real estate speculation. Krugman says China may be on its way to some kind of crisis with collateral damage to the rest of the world as it is a major importer of commodities from Canada, Brazil, Argentina, Australia, and a major importer of high tech goods from Germany and the USA....

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Japanese prime minister Kishida joins president Biden in deciding not to run again with low popularity ratings and cost of living concerns of the public. The LDP administration of prime minister Kishida put through a $100 billion investment package to revive the economy in November 2023. In the first quarter of 2024 the Japanese economy GDP growth suffered from a 0.7% decline. Japanese prime minister Fumio Kishida of the LDP party popularity has remained at around 25% and Kishida has decided not to run again for prime minister. His term expires in 2025. A new LDP leader will be elected. This report says growing voices in the LDP party persuaded Kishida not to run and have a new leader. Inflation which was tame for over a decade has increased with surging prices for oil and gas after the Ukraine war. The situation is similar to the US and EU where rising prices have hurt ordinary people struggling to make a living. Kishida committed Japan to investing 2% of GDP on defense. The effects of economic developments is that the Japanese currency is weakening. ...

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Argentina's economy minister, Axel Kicillof, and the nationalization of YPF, compensation to Repsol and international creditors. Kicillof lectured on Economics at the University of Buenos Aires. As deputy minister in 2012 he was responsible for the natonalization of oil company YPF, controlled by Repsol. Kicillof was critical of the sale of YPF to Repsol in 1999. In a recent interview he wa critical of "disinformation" campaigns in social media and the psychological effect of media information in creating economic situations such as a run on a national currency. The peso has declined sharply in January 2014. Critics say Kicilloff created some of the problems with international creditors that he is now working to correct and attract foreign investment.

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The New York Times reports that comments from Obama administration officials describe an alarming loss of trust and confidence between China and the USA over the last two years. David Shambaugh, director of the China Policy program at George Washington University, says the administration had hoped to work with China on major challenges like climate change, nuclear nonproliferation, and a new global economic order. China, he says, has failed to step up and play that role. He describes the Chinese as responding as an increasingly narrow-minded, self-interested truculent, hyper-nationalist, and powerful country. Jeffrey Baker, a key China policy adviser in the White House, says China's responses reflected a sense in Beijing that China was a rising power and the USA a declining power, especially after the strong rebound of the Chinese economy after the 2008 crisis. The administration is determined to counteract that impression. Other factors complicate things. China is facing a transition to a new leadership in the next year. There are differences within the Chinese Communist party leadership ranks about the direction China should take. Trade and currency issues have come to the point where American public opinion is shifting greatly, with educated professionals changing their views on trade and currency matters. See the recent WSJ/NBC September 2010 poll on world trade, reported by Murray and Belkin in WSJ, Oct 2, 2010. The Obama administration cannot ignore the deep concerns of the American people on these issues. The House overwhelmingly voted in September to threaten China with tariffs on its exports if the Chinese currency, the renminbi, is not allowed to appreciate significantly enough (experts estimate that it is overvalued by 20%). It is not clear whether the Administration's rhetoric on this issue is to assuage public opinion in a business as usual manner, or expected to achieve substantative results to rebalance world trade. The G-20 summit in S. Korea leaves this change for well into the future- China with current account surplus of 5.8% of GDP in 2009 is expected to lower this to 4% by 2015. With the high jobless rate in the US and the large and rising current account deficit, the United States may have reached a juncture where this cannot be put off well into the future years. Other issues, the different foreign policy objectives, and differing perceptions of China and the US of each other, the relationship with US allies in the region, may create additional tensions. These tensions may be navigated by governments of both countries, but the shift in American public opinion on trade, currency and jobs issues will require tangible and real change. As trade tensions will only increase in the next two years with the lack of fiscal stimulus on the jobs front, and no significant change in jobs expected from the Fed's purchase af additional Treasury debt, and a sense that the mutual benefit in the trade relationship with China has been lost to America's serious detriment. China's position may be perceived as stronger than it really is from the faster rebound from the 2008 crisis, and may in reality not be as Jeffrey Baker sees it. As David Barboza has reported in the New York Times, and experts have pointed out, the huge amount of lending encouraged by the government has accentuated weaknesses in the Chinese economy. A significant amount has gone into real estate speculation and will only increase the bad loans on the books of China's banks. This happens at the very time that growth is expected to slow down and make it harder to absorb the bad loans, as was done in the past. ...

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The simple fact that countries like Greece and Portugal cannot adjust their exchange rates under the existing euro currency arrangement remains a critical problem says Krugman. Krugman points out that till 2007 Greece's budget deficit was no higher than America's as ashare of GDP than the deficits America ran in the 1980's, and Spain actually ran a surplus. The global financial crisis changed all that as inflows of capital dried up, revenues plunged and deficits jumped. Now membership in the euro area becomes a sort of trap in that Greek costs which rose quickly in the boom years now need to come down in relation to German costs, and the only feasible way of doing that would be to devalue the Greek currency, now impossible under the euro currency arrangement. The euro currency he says is in serious danger unless forceful action is taken to avoid a chain reaction that starts with a Greek default.

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A major example of how the Ukraine war has pushed the financial situation to the brink in other parts of the world is Egypt. Egypt has borrowed $20 billion from the IMF and is turning to the IMF again. Egypt imports two thirds of its wheat from Ukraine and Russia and the war has sent prices of wheat soaring with shortages. This wheat is subsidized by the Egyptian government for decades as part of the social contract. In recent years foreign money entered the short term debt market, with the crisis some of these inflows have reversed. The Egyptian currency was devalued recently in response to financial crisis with significant part of earnings going to finance interest on loans. On June 24 the IMF approved a standby arrangement for Egypt. Because Egypt has borrowed $20 billion in 3 loans since 2016, and has now reached the limit allowed by its drawing rights Egypt has sought a cosponsor for additional borrowing. This comes through Saudi Arabia which deposited $5 billion in the Egyptian central bank recently. Saudis, Qatar and UAE have offered to invest in Egypt in a show of solidarity. Of this $10 billion were offered by Saudi public wealth fund and $5 billion by Qatar public wealth fund. In addition UAE plans to invest $2 billion by taking stakes in companies listed on the Egyptian stock exchange. ...

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A political novice whose only political experience is being elected to the Bureau of Administrative Justice, is elected to be the 58th prime minister of Italy. Giuseppe Conte is a jurist. With him as deputy prime ministers are the leaders of the Northern League, Mr. Salvini, and the Five Star, Mr. Maio. 

The Northern League has taken anti-immigrant positions and sees the eurozone and euro currency as "a crime against humanity." The Five Star and the Northern League are in many ways polar opposites. Initially the anti-euro currency Paolo Savona was put forward as economy minister and rejected by the president.

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The results from the EU elections show neither traditional centre right or centre left parties are able to form a majority. The euroskeptic parties in Italy led by Mr. Salvini and in France by Marie Le Pen have not won with the kind of support they expected. Also important is that these parties in Italy and France have changed their position on membership in the European Union. They now support remaining with the single currency the Euro, and staying in the EU, hoping to change it from the inside. In Spain the Vxx party on the right has from its inception supported the Euro and the European Union. Only Nigel Farage's Brexit party is for Britain leaving the EU. These parties such as the League in Italy and the National Party in France are in accord with globalism and global capitalism. The changes they call for are now on immigration, migration, and against a single market for labour with social services for new immigrants or migrants. They are for ending multiculturalism in favor of nativist national ideas, sweeping indictments of bureaucracy and elites, curbing migration and building national pride. In Spain their is also concern for separatist movements such as in Catalonia for the Vox party, and interest in stronger federal structures. There is no coherent strategy for these new parties to tackle problems such as lack of growth, widening regional divide within the countries. Yet now the discussions will be about what the  EU will do, not about whether there should be a single currency the Euro or whether to remain in the EU.  In this sense the European Union is set for the task of regenerating from within. The European Union was itself an experiment that started with the effort to set up the initial arrangements to bring together the economies and political structures of European countries after a disastrous war. It accepted nation states and individual country differences even as it sought an ideal of a united Europe. This means there is room for more ideas and for differences within Europe and the European Union than allowed for by existing structures, politics or ideas. ...

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The economic crisis in Turkey in 2022 wiped out half of the value of the lira. Inflation surged. The war in Ukraine hurt Turkey as it is dependent on Ukraine for grain supplies. The surge in fuel prices and the weaker currency meant higher inflation and more of its scarce foreign reserves going to imports of oil and gas. Net foreign reserves dropped to $6 billion in July, coming back up to $26 billion by December 2022.  President Erdogan maintained close relations with Russia to have access to  Russian oil and gas. Turkey has increased exports to Russia by 45% including clothing, household appliances and electronics. Russia is considering postponement of $20 billion owed for natural gas imports. And Russia transferred $5 billion to Turkey in July for a nuclear plant, with $10 billion expected later on. This helps cover the more than $100 billion the Turkish central bank used in 2022 to support the currency Lira. Erdogan's foreign policy has been to act as an intermediary in a UN negotiation for opening the Black Sea shipments of grain from Ukraine and fertilizer exports from Russia. This helps Arab countries in North Africa including Egypt which depend on Ukraine for vital grain supplies.  Everything Erdogan does says a former foreign minister is designed to push up his poll ratings which have risen about 5 percentage points from a low of about 39% in January of 2022 to about 44%. Inflation at 57% in Jan 2023 is still hurting ordinary people in Turkey and the outcome of the May 2023 election after 20 years of Erdogan in power is uncertain.  ...

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Meltzer says the northern European countries France, Germany, Netherlands, and others should form a new currency union, and leave the euro currency to Portugal, Ireland, Italy, Spain, and Greece (the PIIGS countries). This way Greece can devalue its currency to bridge the gap of 20% between wages in Greece and the productivity of workers in Greece. The new currency union would follow fiscally binding rules. After the adjustments in currency were made by Greece, Portugal, Italy and Spain, these countries could be admitted to the new currency union of the northern countries. This would be conditional on acceptance of financial discipline and enforceable sanctions by these countries. Meltzer says clever agreements designed to protect the bankers are not the solution, as they only shift the responsibility and the burden for wasteful and reckless behaviour to taxpayers. Bondholders would take losses in a devaluation, and banks that are at risk should be either allowed to fail or given loans on strict repayment conditions. ...

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DJT selects as Treasury Secretary, Scott Bessent, who was Chief Investment Officer for George Soros before starting his own hedge fund. Bessent was investment officer for George Soros when he made the bet against the British sterling currrency. His hedge fund manages $500 million in assets. He supported Mr. Trump in his first bid in 2016 and joined his campaign effort at a time when Nikki Haley was in the primaries. While campaigning he offered economic advice to DJT and said  Trump should strive for 3+3+3 for the economy cutting the deficit to 3% of GDP, 3% GDP growth to reduce the deficit with more tax revenues, and 3 million barrels a day of oil production in the US.

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The CDU convention in Leipzig, Germany passed a compromise resolution that lays the ground for a EU country to voluntarily leave the euro zone and still maintain membership in the European Union. The resolution called for changes to the Lisbon Treaty to allow a euro zone member that is "unable or unwilling to permanently obey the rules connected to the common currency... to voluntarily... leave the euro zone without leaving the European Union." Merkel told delegates that Europe must change the EU treaty to allow for strong automatic sanctions for violations of the monetary union treaty. "We need to send a clear signal. We don't whine; we don't complain. We know instead that we have a job to do." On the issue of voluntary withdrawal from the eurozone, the earlier decision by Merkel and President Sarkozy of France- when prime minister Papandreou of Greece decided to put the issue of membership to a referendum- was to tell Greece that leaving the eurozone would mean leaving the European Union. This CDU resolution provides a basis for Greece to resolve its debt problems outside the euro currency, as experts suggest....

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Faces of ordinary Argentines in Buenos Aires, as Argentina faces high inflation following a devaluation of the peso by 17% in early 2014. Argentina has faced recurring crises of devaluation of the currency and high inflation, in 2001 and a decade earlier under president Alfonsin, and in periods stretching back to the period after independence from Spain. Brazil had recurring bouts of inflation and devaluation of the currency which was followed by a buildup of foreign currency reserves during the recent boom in commodity markets. This has helped Brazil keep inflation under control, better than the situation facing Argentina with much smaller currency reserves.

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After the ruble declines by about 30% in 2014, and a $30 billion failed intervention in October, the Bank of Russia decided to go to a free float of the ruble starting Nov. 10. 2014. Bank of Russia governor, Nabiullina stated it was "impossible to stand against fundamental factors" for a Russia so dependent on oil exports. The oil price dropped below $80 in Nov. 2014. Russia's gold and foreign currency reserves dropped to $421 billion in early Nov. less than enough to cover 6 months of imports. Nabiullina says the ruble has the potential to firm without "additional negative external factors."

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Krugman points to the need for action on revaluation of the yuan, and sees the vote in the House of Representatives sponsored by Sander Levin as a necessary step to get China to act. He sees China as dragging its feet on this issue for many years, and the need to keep the heat on US policy makers, who have acted very passively on this issue. He describes the US policymakers as being infuriatingly, incredibly passive in the light of the Chinese inaction and stalling on currency appreciation. China he says denies manipulating the exchange rate, even as $2.4 trillion foreign currency was purchased by China. Krugman says China is not letting what is a natural process to unfold that would help the world economy as a whole to recover. Its manipulation of the exchange rate, is in effect subsidizing its exports at the expense of other countries like the US. See the link to Roubini, who shows how this is bad for China. Roubini says China will see a growth collapse in 2-3 years, if it does not change direction and let the yuan appreciate. He says it is in effect a large transfer of income from Chinese households to Chinese state owned companies which is dangerous because of increasing misallocation of resources and real estate speculation. See David Barboza for information on the real estate speculation of these Chinese state owned companies. When all this information is added up, it shows China's serious need to act. This would make possible a transition to a new model of development that relies on domestic consumption, and bettter allocation of resources and investment. ...

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To understand the way DJT has selected key people- it follows a traditional Republican pattern getting the best qualified Republicans on board. Some of them may not be as good as the ones they replace but some may be better administrators with good judgement. Sheila Bair of Wichita, Kansas, ran the FDIC from 2006-2011 and was one of the finest at FDIC who also contributed to solve the 2009 financial crisis.  Gary Gensler was slow in acting on cryptocurrency and other regulatory matters. He is one of the first to go in the new DJT administration. At the SEC a former SEC commissioner now legal officer at Robin Hood, or law partner at Sullivan and Cromwell. At CFPB a law professor at George Mason University or a previous Comptroller of the Currency. To understand where DJT is headed there are opposing ideas cap credit card interest rates at 10% that no Democratic administration ever brought up, and discarding a rule challenged in courts that caps credit card late fees. The VP Vance's instincts also come into play as he has also fought to lighten the burden on consumers. The Comptroller of the Currency- A law partner at Jones Day, who was Deputy Comptroller of the Currency in the past. The five member FDIC can only have maximum of 3 members from one political party. For the FDIC to replace Martin Gruenberg who had to resign for not taking enough action to correct a toxic workplace that was unfriendly to women, DJT will consider the Republican Vice chairman of the FDIC, or one of the Republicans board members on the FDIC  ran an investigation into the FDIC.  ...

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The Economist cites figures showing Canada lost 500,000 manufacturing jobs since 2005, with employment in manufacturing down to 1.7 million by 2013. From 2000 to 2013 manufacturing's share of GDP declined from 18% to 10%. This situation is shown by the decaying manufacturing towns seen in Ontario. About 500,000 manufacturing jobs were lost between 2005 and 2013, as the price of oil increased to the $100-$120 range and the Canadian currency was overvalued, leaving the Canadian economy more dependent on energy exports. Some of the auto manufacturing supplier base has shifted from the midwest to southern U.S. states, reducing the attractiveness of Ontario for manufacturing investment. Overvalued currencies have hurt the manufacturing sector of commodity producing countries dependent on exports of mining products or oil, especially Brazil and Canada. The depreciation of the Canadian currency in 2014-2015 may not help, as many of these jobs are not likely to return.

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Banks in the US are moving away from cryptocurrency and shunning connections with the cryptocurrency business after a regulatory crackdown by the SEC and public warnings about its future. Banks are reevaluating exposure to the crypto sector no matter how small, says this WSJ report. In early 2020 the regulatory agencies were not vigilant enough about this sector which is now seen as highly risky and not for the private sector- digital currencies being the province of central banks just like the US dollar which is issued with the backing of the US government. The Federal Reserve website says about CBDC, Central Bank Digital Currency in highlighted language.- "Like existing forms of money the CBDC would enable the general public to make digital payments. As a liability of the Federal Reserve, a CBDC would be the safest digital asset available to the general public, with no associated credit or liquidity risk." It is because the US Congress failed to act and a prevailing culture of laissez faire, failure of regulatory agencies to act quickly that allows this to happen, that the private sector was allowed to dabble in what is clearly the province of central banks. Laissez faire is originally a French word meaning "allow to do" which has been taken to extremes such as letting private sector issue digital currencies in the prevailing culture. The Fed's Lael Brainard, Jay Powell, Treasury's Janet Yellen did not come out saying what the Fed's website now says and highlights that the only safe digital asset is the central bank's digital currency. Compare this with the caution taken from the beginning about crypto sector by India's finance minister Nirmala Sitharaman and the head of the central bank of India the RBI Mr. Shantikanta Das. ...

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At the height of the Eurozone crisis in December 2011, David Brooks points out that it is important not to forget what the Germans are saying in this crisis. They are arguing for truth in accounting, which the government in Greece failed to do, and which may have more to do with negative opinion in the media and with the public in Germany about Greece than any other factor. They are arguing against speculative excesses that enabled Greece to borrow recklessly. And they are making the argument that the only way to put the finances of the eurozone on a sound basis is to have the financial discipline that is necessary for a sound currency. Anthony Faiola pointed out recently that one estimate for tax evasion in Italy is $340 billion a year- Washington Post, 11/25/2011. Greece has a similiar problem, which needs to be addressed. This view has credibility and the backing of every principle of sound financial practices, irrespective of country or region. For ordinary Germans who have gone through years of wage restraint during the period of high unemployment, their attitude is captured in one German workers response to Greece's situation - when she said there are "poor children in Germany also." Years after reunification were a difficult experience for Germany, and left parts of the country still affected by the experience. The period of high unemployment is still a fresh memory, as the economic recovery is fairly recent. There is a feeling that the situation is precarious, depending on exports, as the 2009 downturn showed. These facts remain even when one considers the criticism levelled at Germany. Germany benefitted from the bubble in the economies of Southern Europe through surging exports- from a currency that was undervalued in relation to neighbors- because of the common currency. German banks lent heavily to Greece, Ireland, Italy, Spain, and Portugal, along with French and British banks, and bear responsibility for reckless lending and not doing due diligence for loans to Greece and other countries. Germany also carries the burden of memories of hyperinflation in the 1920's, and the sense along with France that partnership is necessary for peace in Europe. Germany's position on austerity measures also has one underlying weakness - if this leads to shrinking economies in southern Europe in the name of fianncial discipline, then the plan fails as tax revenues decline and budget deficits increase. Given this experience Germany faces the challenge of convincing neighbors of the need for good governance and sound spending practices for long term stability of the currency, even as it leads the effort for providing short term funding. In the short run this reaps criticism for Germany, including criticism for some members such as Greece having to leave the euro as a way to regain competitiveness and growth. Experts have suggested that this would be a better option for Greece than a shrinking economy after strong austerity measures, and the referendum proposed by former prime minister Papandreou on strict austerity measures is likely to have gone in this direction. ...

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India's foreign exchange reserves of $295 billion cover about 7 months of imports. This is not enough in currency reserves for India's central bank to take actions to prevent a depreciation of the Indian currency, the rupee. The central bank, RBI, has taken other actions including giving local exporters 15 days to convert half their estimated $7 billion foreign exchange holdings into rupees. Analysts say the RBI is running out of policy options and is down to micromanaging the currency. India's trade deficit was at $13.4 billion in March 2012 with rising cost of importing oil and lower exports. The rupee is close to 54 rupees to the dollar.

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Brazil's GDP increased by 0.34% for the 4th quarter of 2011 from the prior quarter. For the full year GDP increased by 2.7%, with an actual decline in GDP for the third quarter of 0.1%. The GDP growth for 2010 was 7.5%. The slowing economic growth reflects an overvalued currency, weak manufacturing competitiveness, and inflation. Brazil's growth will be lower than potential say analysts, and it will be tough to get to even 3.5% growth in 2012-2013. A similiar process is seen in other emerging markets. China's premier Wen Biao announced lower growth targets of 7.5% and a shift in priorities recently. And India's growth rate for 4th quarter, 2011, was 6.1%.

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Turkey's currency Lira dropped to 7.2 to the dollar on August 13, 2018, taking the drop in the currency in 2018 to about 70%. About 90% of Turkey's debt with foreign lenders is denominated in foreign currencies. Turkey is highly dependent on money from overseas to finance growth and credit. 

The risks increase with higher interest rates in the U.S. and the falling value in the Lira which makes it harder to pay off debt. Turkey faces loss of confidence from foreign investors as its relations with the U.S. deteriorate in a tariff war with the U.S. increasing the focus on factors long ignored by American and European investors such as its high dependence on dollar denominated loans.

Analysts say the problems in Turley are unlikely to be systemic for all emerging markets because Turkey's problems are unique with questions about the management of the economy and the authoritarian rule of president Erdogan.  

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The protests in Chile that started with a subway fare increase and then into protest against inadequate pensions, poor health care and schools, have turned into violent protests with extensive damage. Damage to supermarkets, stores and other businesses is estimated at billions of dollars. Damage to the modern Metro is about $370 million dollars. The economy will grow at 1% this year after growth of 4% in 2018.  The government plans a $5.5 billion stimulus, and the central bank could sell $20 billion including a quarter of its reserves to support the peso currency.  The government of president Pinera has only a 13% approval rating. A December poll by COES Santiago think tank shows 65% of Chileans support continuation of protests, and found that 89% of Chileans planned to back a new constitution. The old constitution was designed in a way that led to poor support for retirement and inadequate pensions. It also led to increased inequality in this country of 18 million. This constitution was drafted during the Pinochet dictatorship  and has now lost its legitimacy along with the rest of the political leaders. A referendum will be held in April 2020 for a new constitution.  The copper mines that support Chilean copper exports are intact and the country has low debt, which should help Chile invest in a recovery with the stimulus. ...