LyrArc Article Gist
A hard look at the idea of the "Great Moderation" a peiod of stable prosperity that America has enjoyed for 20 or so years with low inflation, stable unemployment and smaller bumps along the road even in recessions such as the one in 1990 and in 2000 which had shorter durations with good rebound. The IMF report on the world economy for September looks at this period of stability and sees a continuation. This report takes a look at the current crises in housing and credit markets and takes a more cautious view wondering if things may be at a turning point where such stable growth cannot be taken as a given. In general the world economy has become more flexible and structural shifts to globalization and the shifts in manufacturing to other parts of the world such as emerging countries have made for a more resilient world economy compared to the economy that faced the oil shocks of the seventies. The three specific causes to which this stable period is attributed are the better handling of monetary policy, the better inventory management with Just in Time and manufacture to order, inventories literally being the shipments that are carried by Fedex or UPS on a particular day, and credit markets securitization of debt packaging it into marketable securities creating a large credit pool so thay companies could have better access to credit. Securtization has suffered because some of the basic rules were broken such as how securities are rated and not because of the basic concept. Have the markets and investors and households taken on more risk in their asset portfolios because of the belief that this period of 'Great Moderation' would simply continue. Its these kinds of behaviour that get tripped up until things get cleared up and return to normal. Is this simply a phase like the prior downturns preceding it that should see a similiar rebound or is it something different. One thing that is noted is that the period of relative prosperity has ocurred as in many countries in Europe and Asia. And the housing markets in many countries in Europe and Asia have also seen rising prices similar to that of the US. Can this turn into a worldwide recessionary situation? Comment made later on April 12, 2008 after the Bear Stearns crisis in March 2008 and the Fed meeting summary describing the downturn as expected to " be protracted and severe", and the emergency measures by the Fed itself made to prevent a possible global financial crisis. In hindsight the 3 reasons for the Great Moderation can be evaluated in this way. The first was the only real one to which researchers attribute about 50% of the Great Moderation, which is the revolution that Just In Time inventories have accomplished for smoothing drops in demand. The second financial innovation proved to be illusory just as mentioned here because it was gamed because the financial houses and other firms were able to get around regulation or the regulations were inadequate and the innovation fell victim to unrestrained greed in the manner mortgage securitization was done. The third wise better monetary policy as mentioned here did not get much credit from researchers and this turns out to be true. Keeping interests rate low was possible because of the disinflationary aspect of globalization specifically manufacturing in China which ended in 2007. Further the success of the US economy made it possible for the US dollar to remain strong and the USA to continue to attract capital for much of this period even while interest rates were low. But its the export of disinflation from China, and no pressures of inflation from globalization through commodities demand for much of this period, that kept inflation low and made it possible for the Fed to keep interest rates low without creating inflationary pressures. Of the three financial innovation and monetary policy may have in them in fact unlike the first Just in Time and information technology, may have in them the seeds of trouble as well as gain if not carefully managed, like fire a good servant but bad master, and this is really what happened in what turns out to be a very human world, greed subverted financial innovation without the necessary appropriate regulation to go with it and the Fed's libertarian instincts and complacency or lack of energetic oversight under a man past eighty years made it lose sight of its need to adjust interest rates to cool off excesses in the market and send appropriate signals to the financial and housing markets. The Economist was slightly ahead of the curve when it makes the observation here that this is likely to be a global housing crisis and a global credit crisis with all the implications of this for global economic growth. ...

LyrArc Article Gist
Thomas Sargent of New York University, the 2012 Nobel prize winner in economics, says the EU leaders can learn from the way the federal government in the U.S. handled the issue of state's debt when it came up in the 1790's and in 1840. In 1790 the federal government- under the leadership of Washington and Hamilton- saw the need to honor state's debt because of the contribution made by states in the war of independence and the U.S. assumed state's debt. In 1840 the U.S. refused to assume state's debt and states went into default. The result was beneficial because state's passed balanced budget rules and restrained reckless spending. Another benefit was that this preserved state rights to manage their finances and the federal structure setup under the constitution.

LyrArc Article Gist
August 12, 2015 marks the change in shareholding structure at The Economist. Pearson, which sold its stake in the Financial Times newspaper to Japan's publisher Nikkei, sold its stake in The Economist, as it shifted its focus to the education industry. Pearson had a non-controlling 50% stake in the magazine since 1928. Three fifths of these shares are being sold to a minority shareholder, Exor, the holding company of the Agnelli family in Italy. The rest of the Pearson shares are being bought by the parent company, The Economist Group. In this editorial the magazine's editors describe the background in which this takes place, and the reasons why this will be good for the magazine and its independence. The shares held by The Economist Group are controlling shares, which ensure the independence of the publication.

LyrArc Article Gist
A passenger hears aloud noise near the overhead bin, then sees ahole not far from his head in the fuselage of the plane. This is Southwest flight 2294, June 13, 2009, on a 30 minute 737 Boeing airplane flight from Nashville to Baltimore. outhwest inspected all of its 181 737 planes and found no problems. The National Transportation Safey Board, the FAA, and Boeing are investigating what caused it to happen. In March, the FAA ordered Southwest to pay a$7.5 million fine for aseries of safety violations in which its jets were flying with undetected fatigue cracks. The investigation also uncovered efforts by managers to cover up reports of maintenance problems at Southwest. Two inspectors filed whistleblower complaints aginst the FAA claiming that they were threatened by the superiors after warning that Southwest was flying planes too long between inspections.

LyrArc Article Gist
The dangers to Turkey from external short term borrowings to finance its current account deficit. Turkey's current account deficit reached 10% of GDP in 2011. It is 8% in 2012 and is considered high by experts. The problem is short term borrowing from overseas which is sent through its banks for increasing levels of personal and housing loans. Were this flow to dry up because of a sharp downturn in the Eurozone economies it would damage Turkey's financial position. Bank short term external debt has doubled in 2011-2012 to $70.3 billion, or 9% of GDP, according to Capital Economics. The U.S. Fed and the ECB have eased global liquidity concerns, but risks are high as long as Turkey relies on short term borrowing. An escalation of the conflict with Syria also poses risks with fears of scaring away investors.

LyrArc Article Gist
Mervyn King, governor of the Bank of England, says growth is expected to be "sluggish" with higher inflation. Inflation increased to 2.7% in October from 2.2% in Sept. 2012, with rising costs of university fees. The growth of 1% in the third quarter he described as a one time situation because of the Olympics in Britain. The strength of the pound relative to the euro and the GDP decline in the eurozone also hurt Britain's exports. Economsts at IHS Insight expect the Bank of England to keep the benchmark interest rate at current level of 0.5% for at least 2 more years and increase asset purchases by 50-79 billion pounds in Jan-March 2013. Some economists see the need for other approaches because of tight bank lending. King says the central bank committee retains faith in asset purchases as a policy instrument.

LyrArc Article Gist
The Netherlands, home of the Maastricht summit, is seeing public opinion shifting to negative opinions about the euro and supporting countries such as Greece. Some experts say the idea was right but the method was wrong. Some polls show a majortiy supporting going back to the old currency, the gilder. An EU survey in 2009 showed 80% of Dutch people supporting the euro. Frits Bolkestein, former EU commissioner for internal markets, points out that Chancellor Kohl insisted on Italy which had not met its debt criteria becoming a founding member of the monetary union, something that made it possible for over-spending Greece to join the euro only 2 years after the 11 founding members. Bolkestein led the party that now runs the Dutch government. His view is that political romanticism overwhelmed sound economic thinking and realities in the formation of the eurozone.

LyrArc Article Gist
ECB president Draghi tells the European parliament on Jan. 16, 2012: "I cannot underline these points enough. Only a well-coordinated, coherent and properly timed strategy will yield the desired results." He made his comments as head of the European Systemic Board, which oversees systemic risks to the banking system in Europe. Speaking after a series of downgrades by S&P, Draghi said there should be "much less mechanical reliance" on ratings agencies. On Greece's debt burden and servicing costs he pointed out that the evaluation of Greek debt made in October 2011 "needs to be clarified whether its realistic," given the deteriorating economic situation in Greece. On Greece's talks with bondholder Draghi wants to see new servicing of debt conditions make it possible for Greece to bring down its current debt level of 190% of GDP to 120% by 2020.

LyrArc Article Gist
Amazon's revenue for 4th quarter 2011 increased 35% to $17.4 billon. Profit for the 4th quarter 2011 declined by 57% over prior year quarter, as Amazon increased hiring, and invested in warehouses, technology and in Kindle electronic promotional sales. Operating expenses were up 38% from the prior year quarter. Operating margin was 1.5%, declining from 3.8% in the prior year quarter, but up from 0.7% in third quarter 2011. Analysts estimate that Amazon sells the Kindle at a loss of $15 per unit. Kindle Fire sales were up to an estimated 6 million units for the 4th quarter 2011. Hiring jumped and employee count was up 67% for 2011 over the prior year, up to 56,200 employees. Forrester Research estimates that overall internet sales growth for 2011 was 10%, showing that Amazon sales growth was much faster.

LyrArc Article Gist
About 6% of textbook sales are forecast to be digital in 2012, up from 3% in 2011, according to MBS Direct Digital. The $14.99 price for a digital copy of a textbook for 1 year announced by Apple is designed to increase sales. Apple's Phil Schiller, senior vice president of worldwide marketing, says there are 1.5 million iPads in use at schools and colleges. Future price reductions on the iPad below the current $499 level would make the device more accessible and affordable for students. Apple iBooks are designed to work only on the iPad. Other device manufacturers are Amazon and Barnes & Noble, and Apple is in third place for digital books according to Forrester Research. Over time digital copies digital textbooks will dominate the market. MJB Direct Digital sees 50% of textbooks being digital by 2020.

LyrArc Article Gist
The size of the municipal CDS market is about $50 billion. Five large derivatives dealers- Bank of America Merrill Lynch, Citigroup, Goldman Sachs, J.P. Morgan Chase, and Morgan Stanley- met in November 2010 to discuss standardizing paperwork for "muni CDSs" to attract more buyers and sellers. The biggest banks are hoping to profit from the deteriorating finances of US cities and states. The CDSs or credit default swaps require swap sellers to compensate buyers if a municipal issuer misses an interest payment or restructures its debt. This makes states nervous and they are suspicious of CDSs, believing that this encourages speculators to bet on, and worsen states' financial situation. California is about to require all 86 of its underwriting banks to disclose what CDSs they have traded on the states' debt, for customers or for their own accounts.

LyrArc Article Gist
President Sarkozy on what the euro means for France. Sarkozy told employees of the Airbus plant in Toulouse, France, that the euro was good for France. The single currency had protected France during the economic crisis. "Alone, France cannot resist outside pressures. France is going to borrow 180 billion euros in the financial markets this year to finance 35 years of accumulated budget deficits. Thanks to the euro we can borrow at 3% or a bit more; at the beginning of the 1990's we were paying 10%," he said. He added that "dismantling the euro zone would be like dismantling Europe... I will do everything I can to preserve the euro. He also emphasized that "we can't share the same currency and have different economic strategies," and called for macroeconomic and structural convergence in economic policies.

LyrArc Article Gist
The severe drought in China is affecting the provinces of Shandong, Jiangsu, Henan, Hebei and Shanxi, which produce about two thirds of China's wheat. China's Xinhua news agency is reporting that the drought in Shandong province could be "the worst drought in 200 years." China's retail wheat flour prices were up 8% over the two months to January and up 16% from the same month in 2010. The drought puts at risk the winter wheat crop harvested in June, according to the FAO. The FAO provided figures showing that 5.16 million hectares of a total of 14 million hectares of wheat producing areas are affected. China maintains large stores of wheat, estimated at 53 millon tons in Dec 2010, by Ma Wenfeng, an analyst with Beijing Agribusiness Consultant Ltd. The reserves act as a buffer for shortages.

LyrArc Article Gist
The stock market rally appears to have legs with the increase in revenue growth for the fourth quarter. But what supports this other than the Fed's bond buying, which suppresses the true cost of capital, is a question posed by analysts. Add to that transfer payments such as unemployment and other benefits which help sustain consumer spending levels, but are temporary measures. Charles Dumas of Lombard Street Research says GDP growth for the fourth quarter of 2011 could be more than 5% year on year. The question is whether this is pulling growth forward from later years, so that larger dips could be expected ahead? Brokerage firm LCM Commodities says transfer payments from the government to consumers were 16-18% of personal consumption expenditures between 1995 and 2007. This has jumped to 22% by the end of 2010.

LyrArc Article Gist
New film by Fabio Barreto on the life of Luiz Inacio Lula Da Silva, President of Brazil. Lula Da Silva has a 70% popularity rating in Brazil and the Barretos, a Rio based filmaking family, are strong supporters of the President. It shows the difficult childhood of Da Silva growing up in a one room house in a rural area of Brazil, his rise as head of the steel workers union, an automobile factory worker who becomes President on his fourth try. Lula himself says he started to cry at a screening of the movie when he saw the image of his mother. Says Barreto: the vast majority of poor Brazilians are portrayed as inferior and lazy, and less than what they are, and no one has has told these Brazilians that their people are strong.

LyrArc Article Gist
According to the China Association of Automobile Manufacturers 99.7% of cars made through November 2009 were sold. According to Trade Minister Chen Deming demand in the rural areas now exceeds that in the urban regions. And demand is also growing in smaller and mid sized cities compared to Beijing and Shanghai. Demand surged 46% to 13.6 million vehicles in 2009 according to the Association. For example 55-60% of Nissan sales come from middle and small sized cities according to a Nissan dealer. Nissan with 2009 sales at 756,000 is now the largest Japanese auto manufacturer in China. Government new bank lending and $732 million in subsidies, sales tax cut, all helped auto sales. But Chen Bin who oversees regulation of the auto industry at the National Development and Reform Commisson says automakers face possible overcapacity in China.

LyrArc Article Gist
GDP growth in the second quarter of 2010 was at 6.2% annual rate. GDP growth in 2009 was 4.5%. Foreign Direct Investment was $3.7 billion in the second quarter of 2010, according to the Investment Coordinating Board in Indonesia. This year foreign direct investment is expected to exceed the $14.87 billion of 2008. Indonesia still faces problems ranging from the lack of infrastructure building, a weak university system and corruption. The government of President Yudhoyono was reelected to a second five year term in 2009. Yudhoyono has made changes with more power going to local governments and efforts to reduce corruption. Indonesia has a large consumer market which is about two thirds of GDP. With a young population of 240 million, government policies for stimulus and popular cash transfer programs for the poor, the consumer market continues to grow.

LyrArc Article Gist
Vegetable prices in China went up by 22% in July 2010, from a year earlier, and grain prices went up by 12%, eggs by 8%. About a third of household budgets go to food in the budgets of people in India and China. Wheat prices are climbing on world markets after the ban on Russian exports, and rice prices are also climbing with the floods in Pakistan ruining the rice crop- Pakistan being the No.3 world's rice exporter. Personal spending accounts for 36% of overall GDP in China and 57% in India. Food prices in China were up 6.8% in July, 2010. Industrialization in China, and agricultural land freely taken over for factory sites with the consent of local authorites, may be a complicating factor. See the link to BYD's acquisition of agricultural land for factory site.

LyrArc Article Gist
Adidas took a one time charge of 125 million euros for irregularities in its Reebok India Company, and expects an additional charge of 70 million euros. Adidas expects net profit to increase by 12-17% in 2012. Net profit for the first quarter of 2012 increased by 38% to 289 million euros, mainly on higher sales in China and Japan and its TaylorMade-Adidas Golf sales. Revenue increased by 14% to 3.8 billion euros on a constant currency basis. Profit results reflected lower financial expenses and a lower tax rate. The 2012 Olympics and Euro 2012 soccer will offer additional marketing opportunities for Adidas. Adidas is increasing its distribution in China and plans to have 2500 stores in 1400 cities by 2015. It will use its NEO brand at lower price points for entry customers in the smaller cities of China.

LyrArc Article Gist
Mexico's Nobel Laureate novelist, Carlos Fuentes's first novel, "Where the Air is Clear," was published in 1958, when he was 29. He helped popularize other writers like the Columbian novelist Gabriel Garcia Marquez, as part of the renaissance in letters in Latin America called the "Boom." This includes another Mexican Nobel Laureate, the poet Octavio Paz. Paz published "Piedra del Sol" (Sunstone) in 1957. Like Paz Fuentes worked for the Mexican Foreign Ministry as a diplomat and could see things from the outside- the Mexican experience of indigenous and Spanish culture, the ideals of change and the dashed hopes in the last two hundred years as Mexico gained independence and struggled to establish democracy and social progress. Paz published the magazine Plural, which was a supplement to the newspaper Excelsior, and later after 1976, the magazine Vuelta. Both writers, were social critics.

LyrArc Article Gist
The vote on the A.V. or Alternative Voting system based on proportional representation is causing a split in the Liberal Democrat- Conservative coaltiion government. Liberal Democrats favor the A.V. because it estimates that under that system it would have won 30 more seats in addition to the 57 it won in the last election. This was also a key condition of the Liberal Democrats to join the government. Now Liberal Democrat Vince Cable and others are saying they see a Labor- Liberal Democrat coalition as a "progressive majority" preferable to an alliance with the Conservatives, which only gives power to " a right wing clique that wants to keep things as they are." This is happening as Britain faces local elections, and the Liberal Democrat participation in the government is becoming deeply unpopular with the rank and file party members.

LyrArc Article Gist
About 570,000 Asians live in the Washington D.C. area, making it the area with the largest concentration of Asian people in the East coast of the U.S.. Chinese in the District and Montgomery County, especially in Rockville and Potomac. Filipinos in Prince George and Charles counties. Indians in Loudoun and Fairfax counties. Koreans in Centreville. The 2010 census shows a 60% increase in the Asian population for the Washington D.C. area. Washington D.C. now compares with New York, Northern California, and Boston in the number of Asians living there. Indians are the fastest growing group among Asian-Americans. In Loudoun county, near the high tech corridor surrounding Dulles International airport, the Indian population has gone up from 400 in 1990, 2300 in 2000, up to 20,000 in the 2010 census. They also make up the biggest group of Asians in Virginia.

LyrArc Article Gist
This editorial in the WSJ says Judge Hannon was right to question the wholesale suspension of immigration law by the DHS memos blanket use of discretion in impementing existing immigration law. The ruling did not address the broader constitutional issues for an executive order that bypasses the states (and Congress) completely- 26 states have questioned the order. WSJ says Obama's executive order is going beyond presidential powers, and can be done by enacting legislation under Article I of the U.S. Constitution. Hannon's ruling justifies the injunction against the executive order on the basis of unfunded mandates such as the $198.73 it costs to process driver licenses for 500,000 illegal immigrants living in Texas from a total of 1.6 million illegal immigrants in the state, not even taking up the other costs related to education and other benefits.

LyrArc Article Gist
Lee Kuan Yew, passes away at the age of 91. He led Singapore for 31 years after becoming prime minister in 1959. During this period he helped transform Singapore's economy into a centre for international trade and finance by attracting foreign investment. To do this he developed infrastructure, setup training colleges for the workforce, and provided tax breaks for investors, using Singapore's strategic location on the sea lanes in Asia to best advantage. Singapore became a export hub for Japanese electronics companies, and U.S. companies such as HP and General Electric established regional headquarters there. Strategic investments were made in high tech industries and Singapore's sovereign wealth fund took stakes in companies overseas. He retired in 2011 after opposition parties won 40% of the vote in general elections. His son is now the new prime minister.

LyrArc Article Gist
PFASs class of chemicals used in pizza boxes, carpet treatments and other consumer products. Experts describe the increased risk of cancer, asthma and other diseases from products that are everywhere in today's world. The NYT's Lipton and Abrams provide useful insights into the use of harmful chemicals in everyday life in 2015. Ms. Birnbaum, the head of the national toxicology program of the Department of Health and Human Services in the U.S. questions this widespread use in consumer products of PFASs and the need for alternatives in commentary in Environmental Health Perspectives, a NIH publication. 200 international scientists signed a statement urging countries to restrict use of PFASs. More public awareness is needed for the extensive use of chemicals in consumer products, so that consumers ask questions about which chemicals are in products and look for safer choices.