LyrArc Article Gist
Britain's banks still owe the government 100 billion pounds ($158 billion) from the bailouts that followed the 2008 financial crisis. The incentivizing of risk by pay structures and bonuses was seen as a big part of the problem. LIBOR manipulation abuses by banks are still on regulators minds. The Financial Conduct Authority and the Bank of England's Prudential Regulation Authority, have set new rules to correct the problem. Earlier EU rules limited bonuses to 100% of salary. The new FCA rules require a 3 year period for traders and risk managers have to wait 5 years for performance awards in full. Top executives have a ten year wait to be certain claw back provisions do not go into effect. Andrey Bailey at the PRA says the rule is designed so "that people in positions of responsibility are rewarded for behaviour which fosters a culture of effective risk management and thus promotes the safety and soundness of individual institutions. "

LyrArc Article Gist
Brazil's economy is forecast to contract by 2% in 2015, the currency has lost about one third its value and the stock market is down 22% in the last year. This follows the decline in demand for Brazil's commodities exports as China growth slows down. Experts say Brazil is now seeing another boom bust cycle similiar to boom-bust cycles in the past, such as the 1966-73 boom followed by years of hyperinflation and stagnation. Brazil's exports to China declined 17% in the first 7 months of 2015. The crisis is in many ways similiar to crises in other emerging markets dependent on commodities exports. The resources boom leads to overvaluation of the currency, and decline in development of manufacturing away from dependence on commodities exports. Other errors rise from complacency and politics prevalent in such periods. These errors include mismanagement of resources with poor resource allocation decisions such as spending on soccer stadiums in cities in the northeast while basic bus services remained underfinanced in large urban areas, large overspending by the government using state owned bank BNDES to offer rates at below market rates, a credit fueled boom and credit card binge for households, and a reversal of capital flows from the U.S. and Europe with the sharp decline in investment climate. There is a severe loss of confidence in the government of Dilma Rousseff with her approval rating as low as 8%. Corruption scandals at Petrobras show close links between the Workers Party of Rousseff and executives, with about $2 billion in misused funds. Brazil, like other emerging markets such as Russia and India, have taken some lessons from the 1997 financial crisis by setting aside large foreign exchange reserves for a crisis. Brazil's reserves of $397 billion help it cushion the effects with funding of the safety net and support to industries to avoid large layoffs. Other problems not tackled as in Mexico, India, and other emerging markets, are the weak educational system, and poor infrastructure, that create bottlenecks for growth. Brazil could face a lost decade after the debt overhang, decline in foreign investment and commodity export generated revenues. ...

LyrArc Article Gist
It is too much to expect central bankers to solve the US economy's problems, especially with rates nearly zero, and no agreement between the political parties before mid-term elections. The Federal Reserve by itself cannot fix the economy's problems, with the US economy facing prospects of deflation in 2011; and local governments cutting back as they face revenue shortfalls. Deficit concerns have led to inaction on further stimulus or help to local governments, and the Bush tax cuts are expiring shortly. In 2011 austerity cuts will be the singular theme in the western world, and these cuts are of a magnitude not seen in 40 years. In this situation there is only so much the US Fed can do.

LyrArc Article Gist
One of the favorable factors for Iraq in recent years was the surge in oil production, adding 1 million barrels a day to reach 3.3 million barrels a day. It surged to an average of 3.7 million barrels a day in December 2014 after a deal with the Kurdish region in northern Iraq for an additional 550,000 barrels a day in exchange for Kurds getting a 17% share of federal revenues. This helped Iraq overcome other problems. The drop in oil prices has led to a 40% drop in revenues and the invasion by Islamic State in a loss of some production.The federal budget of $101 billion planned revenues is based on an oil price of $56 and exports of 3.3 million barrels a day, resulting in a $20 billion deficit. It assumes $10 billion in new tax revenues which may be hard to achieve with a lack of strong central government. Experts on Iraq's oil industry say large investments are needed to offset declining oil production from older oil fields in southern Iraq. Oil exports were 2.5 million barrels a day in 2014, and experts say even this will be hard to achieve for 2015. Investments could come from western oil companies, but Iraq and the Kurdistan region are behind in payments to oil companies. Iraq is considering issuing bonds for $10-$15 billion....

LyrArc Article Gist
Economist Paul Krugman points out the risks of a trade war in the tariffs announced for steel and aluminium by president Trump. Yet he accepts that he advocated stronger action on China's currency in 2009-2010 when the U.S. economy was weaker. In the past on the TPP agreement proposed by president Obama, Krugman said that it would have an insignificant impact as most of the gains on trade were already made. Here Krugman is critical of the language used by president Trump about trade wars being "easy."  This is taken out of context though as president Trump is saying that it is easy in the context of a country enjoying a $100 billion surplus with the U.S., because that country is going to have incentives to maintain a good trading relationship with the U.S. Essentially this means that the steel industry in the U.S. benefits. China also benefits as it closes many of the older steel plants that led to overproduction. This would reduce overcapacity in China's steel industry, a problem China's economic planners see as a priority. China already is making the shift to higher technology products and this process will be accelerated, as it puts less emphasis on steel and metals as it did in its earlier stage of development. As a result contrary to textbook economics this has the potential to be a win-win solution for the U.S. and China in the long run. So little was done under the Bush and Obama administrations to manage trading relationships with other countries so that the interests of small communities across the U.S. were protected from unfair trade- that Reagan administration trade expert Robert Lighthizer took up the cause of the U.S.,workers in these communities. Surveys showed U.S. public opinion also had shifted among educated, professionals and middle class on this issue by 2015, against unfair trade that hurt U.S. interests. Robert Lighthizer is now the Trade Representative for the U.S. in the Trump administration. Reports in the WSJ about the discussion within the Trump economic council, show Gary Cohn favored not imposing the tariffs on steel and aluminum. Lighthizer advocated the tariffs and was able to convince the president.  For Trump this presents a win-win situation, as a mild response by China -and other trading nations that have enjoyed a favorable situation in the past -with its huge surplus and favorable trading relationship with the U.S. would present a win for the president. Economist Krugman accepts this when he says tariffs in the current context of the trading field- that is more favorable to other countries- are not such a big deal, only the use of such policy that is likely to endanger world trade.  As in much of the debate that takes place this adds to the headlines today yet provides delayed and limited relief to communities across the U.S. devastated by world trade as documented by experts who studied trade patterns and their effect on regions across the U.S.  As the WSJ points out in one report the trade deficit itself may continue to grow under president Trump because of other factors. The U.S. dollar surged 8% during the last 2 years of the Obama administration with the economic recovery underway. With Trump's election win the dollar surged another 3%. This may play a bigger role in the direction of the trade deficit than the new steel tariffs announced by president Trump. Workers and unions matter. As TPP pushed by Democratic party president Obama was opposed by the unions, and by the auto industry (workers and auto companies) in the midwestern states which suffered a hollowing out in the last decade. A WSJ survey after the election showed Clinton received 56% support from union workers in 2018 compared to 65% for president Obama in the 2012 election. Some of that erosion in support may come from Obama's TPP stand fervently opposed by the unions and workers in the auto industry. A similar situation took place in Ontario with hollowing out of the auto industry in this large industrial state in Canada and led to the rejection of the Conservative government and election of the Liberal Party under Justin Trudeau. This lesson is so far lost in the Democratic Party's debate.     ...

LyrArc Article Gist
This article by Saeed Shah and Syed Hasan describes the Taliban factions from the tribal areas that control parts of Karachi, Pakistan's main commercial city on the Arabian Sea. It provides a detailed map showing the outlying areas around the city centre, especially the shantytown areas and the areas with Pashtun majority population controlled by Taliban with roots in the tribal areas. The Taliban charge taxes and adminster law in the areas they control. A major operation was launched since Sept. 2013 by the Sharif government to free this key city of Pakistan from Taliban control and the wave of kidnappings, extortion and other violence from Taliban members. About 168 police officers have been killed in the efforts to control the city, but areas under Taliban control are still hard to patrol by government police and special Ranger force. Karachi anxiously awaits the result of peace talks of the Sharif government with Taliban. If the talks fail and an operation is launched against Taliban in tribal areas the repercussions will be felt in Karachi. Shah and Hasan provide a excellent picture of the tribal loyalties, religious extremism and entrenched culture of violent activity that extends from the border tribal regions of Pakistan into the commercial centres such as Karachi that is a vexing problem for the Sharif administration, police, business and ordinary citizens....

LyrArc Article Gist
Orlik reports that the link between China's GDP growth and lending has broken down as credit expansion is accompanied by slowing growth. Slowing credit growth and lowering GDP growth even further is the price China's ecnomic planners are willing to take to forge a new path of sustainable growth, increasing efficiency of investment and increasing domestic consumption. The ratio of China's credit outstanding to GDP has jumped to about 180% in 2012 from 123% in 2008. Rapid expansion of credit is one of the danger signals before a crisis according to the IMF. Turkey and China are facing danger signals according to this IMF danger indicator.

LyrArc Article Gist
How will countries like India generate jobs when technology enables manufacturing and other activity to do work with fewer and fewer people. Even Hon Hai in China is shifting work to robots. Technological progress is leaving more people unemployed and widening income gaps with the benefits going to a few people, says the Economist in this research based essay. It will require carefully managed governance to invest in infrastructure, raise skills of less skilled workers through education, and wage subsidies for those left behind to ensure our current system works in the future.

LyrArc Article Gist
Italy's premier Renzi's economic policy to generate 0.8% growth in 2014, and reduce deficits by achieving higher growth rates to meet EU targets.

LyrArc Article Gist
A Tax Policy Center study (joint project of the Brookings Institution and the Urban Insitute) shows $157 billion would be generated in the first year from an increase in taxes on the top 1% of income earners in the U.S., about 1.13 million households earning average $2.1 million, by increasing the federal tax rate from current 33.4% for this group to 40%. This could pay for a program to provide tution free education in America's colleges and universities. Even increasing the federal tax to 40% on the 115,000 households earning over $9.4 million on average, the top 0.1% of American households, would generate $55 billion in the first year, enough to pay for the $47 billion cost of tution free education at all of America's public colleges and universities, according to the Tax Policy Center. Economists including Stiglitz and others, point to significant impact of revenue generated from such a tax when applied to improving educational opportunity for the middle class and lower income groups. Education is a great leveler of income disparities as seen in the U.S. after World War II. During recent decades the highest income groups weren major beneficiaries of tax and economic policy, at the very time the middle class and factory workers were hit hard by global competition which lowered wages and exported jobs. The interest rate policies of the Fed after boom bust cycles also favored large investors in equity markets over smaller income earners with savings account deposits, whose savings experienced little growth under interest rates close to zero. ...

LyrArc Article Gist
This editorial in the Wall Street Journal on U.S. Defense Secretary Chuck Hagel being asked to step down is critical about the conduct of policy. It says Hagel is taking responsibility for the failures of foreign policy in the White House. It points to the memo written by Hagel to the NSA advisor Valerie Jarrett, whom it refers to as "Vice President," which called for clarification on policy towards the Assad government, reflecting the views of the military brass. Hagel was criticized for this inside the White House for not providing options. WSJ says the president and the small innner circle of advisors McDonough, Jarrett, around the president, want nothing more than appearing to be solving the problems without having to take action for achieving solutions. WSJ's editors say everywhere they go they hear "rogues" think they have a 2 year window to push ahead for the remaining 2 years till a new president takes office.

LyrArc Article Gist
This report by Martin in the NYT points out that Ohio no longer plays a critical role in U.S. presidential elections. It was critical for a Bush win over Gore, and president Obama carried it by 2 points against Romney in 2012. It is critical for Trump to win. For Hillary Clinton other states are gaining importance as they better reflect the demographic changes in the U.S. and the mix with minorities- states such as Georgia, N. Carolina, Colorado and Florida. Ohio has not seen an influx of Hispanics as other states, and is now more white, more evangelical voters, and reflects a mix that was prevalent earlier. 

LyrArc Article Gist
Douthat offers insights into U.S. president Obama's thinking when he said at a National Prayer Breakfast, that Christians also had committed bad acts in the name of religion and reminded listener of the Jim Crow days when blacks were oppressed by church going Christians. The Crusades were a long battle against an advancing Islam over several centuries and many regions, says Douthat, and do not quite compare with the actions committed by an individual organization such as Islamic State in 2014-2015. The Jim Crow reference comes from personal experience during the fading days of racial discrimination. Yet says Douthat this reference to Christian culpability does little to bring the criticism back to self that the writer Niebuhr, Obama's role model, suggests, because it does not take the criticism back to self or political party to serve as useful introspection. It is almost like saying Christians are just as bad,(so why act?) without distinguishing from Christians and Muslims who respect tolerance and peaceful coexistence from those who do not. It also encourages one to remain a bystander in foreign and defense policy, leaving a younger generation with any future consequences. Ike does better by bringing self-criticism home to his own party and ideological wing by talking about the military-industrial complex and the problems it will create....

LyrArc Article Gist
ECB president Mario Draghi tells a newsconference on April 14, 2015, that the bond buying program is "proceeding smoothly." He said that he does not see scarcity in the bond market. The ECB plans to continue its purchases of government bonds and other debt at a rate of 60 billion euros a month through September 2016. He said the program of very low interest rates for a very long time "is fertile terrain for financial instability imbalances," but he did not see evidence of systemically large financial imbalances at this time. The ECB approach would be to tackle the risks by using its power as a bank regulator, not by changing monetary policy, said Draghi. He was optimistic about the initial results, saying "more accomodative monetary policy is being translated into better credit conditions, which is something we have not seen before." The euro is down to $1.06 and low oil prices have helped improve economic conditions, as well as ongoing structural reforms pushed by the EU and ECB. Draghi's forecast for economic growth in the eurozone is now up from 1% to 1.5% for 2015....

LyrArc Article Gist
"In the spring of 1971, I met a girl," with that beginning Bill Clinton gave one of the most memorable speeches at a Democratic Convention in history, to introduce the very human, Hillary- sometimes frail, but always looking for new mountains to climb, new barriers to break, new injustices to be righted. Of the long courtship at Yale and the years at Arkansas, buying that house in Little Rock Hillary liked before proposing marraige,  the time when they cried while leaving their daughter Chelsea at college dorm in Stanford; and all the private moments of a political couple one gregarious and outward looking, the other serious and inward looking. An introduction to someone you have heard too much about but you never knew. Never saw too close because of her intense longing for privacy- possibly coming from her own mother- Methodist upbringing that you were never the one to focus on, and family experience. Bill had seen this Methodist up close, and shared his experience with his countrymen who had not known her so well as he had.  ...

LyrArc Article Gist
Samuelson discusses the differences between the Bureau of Labor Statistics figures for June 2014 using the Payroll Survey and the Household Survey, each telling a different story. According to the Payroll Survey 288,000 jobs were added. The Payroll Survey is a monthly survey of 554,000 business locations, with firms asked to give the number of people on payrolls, pay and occupations. The Household Survey of the BLS asks households in monthly interviews with 60,000 Americans whether they have a job, is it part time or full time, are they looking for full time work, or jobless and for how long. The Household Survey showed June 2014 job increase at 407,000, using an estimate of 1,115,000 increase in part-time jobs and a loss of 708,000 full time jobs. Of the two the payroll survey is larger and considered by economists to be more representative. Other statistics show the parttime workers at about 3 million higher than 2007 before the 2008 financial crisis, suggesting the shift to part time jobs has been one negative result of the crisis....