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Humor about how BMW and Mercedes completely missed the nature of this economic downturn in their forecasts, of continuing upbeat sales forecasts till about a month ago even though a lot of bad news has been coming in for some time. Is something like this happening in the Chinese economy, where things have been going strong for so long that forecasts have been toned down to 9% for GDP growth, even though car sales are flat for recent months and are expected to be flat or declining for 2009. If there is a decline in sales next year in auto sales is it possible that 9% GDP growth may be too optimistic for 2009. Would it somehwhere in the range of 6-9%?

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A former U.S. Treasury Secretary reflects on the backlash against free trade in the 2016 U.S. presidential election, and calls for a shift towards putting more emphasis on how trade affects individual workers who are laid off or work part time. In the light of tax evasion following the Panama Papers Scandal he says the time has come for the emphasis to shift in trade policy and capital movements to tax havens, so that ordinary workers do not feel their interests are being ignored as elites frame policies for elites. He says the period when it was enough to defend global integration has been exhausted, and this is unlikely to succeed without a nation like the U.S. supporting it and global institutions. A new approach is needed, and this means shifting from international trade agreements to international harmonization agreements, where labor rights, environmental protection move to the top of the list, and enabling foreign producers becomes secondary. The whole overall emphasis must shift, says Summers, to creating hope and opportunity for middle class parents that their children can live better lives....

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Even though exports are gaining in Iowa and overall it has benefitted from free trade, the wages in Iowa as elsewhere have suffered as companies pressed hard by global competition are reducing their wage. This is one way globalization is hurting workers in Iowa as it is hitting workers in other states. The two tier wage system at John Deere provides for lower wages for new younger workers. This is hurting incomes in the state. Because of these changes politically free trade is not very popular in the state and this reflects feeling acrss the country. The trend is to argue for protecting the wages of American workers by changing free trade agreements to include environmental and labor protections for oveseas workers so that this closes some of the gap between the wages here and overseas. The advantage to American workers of lower prices at a Walmart is more than offset by the lower wages as products are manufactured overseas and wage pressures are felt at home is the feeling reflected in some of the opinions expressed in Iowa....

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OECD released a study that shows losses in mortgage sector in the United States, the amount that banks and companies have to writeoff as losses could reach $300 billion. The study points out that only some of these losses are reflected so far and more will be seen when the mortgage rates reset upwards in May 2008. The study assumption is for a default rate on mortgages of 14% on subprime mortgages. Loans made to borrowers with poor credit amount to $125 billion. When you include losses on loans on Alt-A mortgages given to people with better credit the losses reach $300 billion. Banks are exposed to the subprime mortgage market through securities of housing loans and the writeoffs could be in excess of the actual amount on defaults as the writeoffs may be made in the next 6-12 months even though given time the housing market should stabilize. Over time the OECD sees the situation stabilizing after the worst of the losses are seen in 2008.

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Chinese are saving for the future as there is no safety net, no social security and no welfare or food stamps.And this means there will be a strong cutback in consumption and in sales of most products in China. Even before this global economic crisis China was becoming even more export oriented. In the last decade consumption as percentage of GDP actually declined from 47% to 37%. And the $586 billion stimulus has some measures to boost consumption but most of the money will go to infrastructure like new highways, railroads and airports. Housing construction is coming to a halt with home prices down 15% in Shenzen. And layoffs among exporters in the area north of Hong Kong like Li Kai which made 9 million sneakers for New Balance in 2007 will make 7 million in 2008, and is laying off 22% of its workers. Migrant workers are headed back home. The sales of foreign firms will be affected. GM's Buick brand saw sales decline an estimated 12% this year and JD Powers estimates decline in 2009 by 21%. Researcher BDA China sees cell phone sales down to 9% growth each year for next 5 years, down from 30% increases in the past 5 years....

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 Tom Suozzi is elected to the US House of Representatives from New York for the seat vacated by Rep. Santos. After Suozzi is sworn in Feb. 28 Republicans will have 219 seats to Democrats 213. The majority is so slim that when 3 Republicans opposed the impeachment of Homeland Secretary Mayorkas for immigration issues Speaker Johnson could get the impeachment passed only on the second try and that only by one vote. President Biden has called for a vote immediately in the House on an Ukraine aid bill after it passed in the US Senate 70-29 with 22 Republicans joining Democrats. 

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Elizabeth Rosenthal looks at Obamacare's contribution to cost containment in 2013-2014. Rosenthal says its is a kind of delicate maneuvring at the edges, because serious work needs to be done. The fee-for-service and many of the drivers for increases in medical costs, the old system of pricing, are still in place. In 20 years at the current rate and after Obamacare health care will still take 25% of the U.S. budget if nothing is done. Healthcare costs are about half that of the U.S. in some of the advanced European countries. She calls Obamacare a trickle down theory of cost containment becaue it leaves most of the drivers for cost increase in place and works at the margins. Princeton economist Uwe Reinhardt calls it an ugly patch on a somewhat ugly system. Rosenthal cites the armies of consultants anticipating every move to reduce prices, and working on "strategic billing'' to increase revenues for hospitals and doctors. For those who say the prices are now up more slowly than in the past, Michael Chernew of the Harvard Medical School, has this to say- its like a diet, reminding us that that we haven't even lost weight, just gaining weight slower than before. ...

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The BW Economics editor Peter Coy loks at what economist have to say and finds Akerloof (Nobel 2001) and Robert Solow (Nobel 1987) in favor of strong stimulus, with Solow saying that it is too small. Prescott of Arizona State (Nobel 2004) favors tax cuts and roll back of regulation for growth. Most economic forecasters who are more concerned about being right rather than some ideological bias say stimulus is necessary. Coy's view from years of watching the markets at work is that the risk of doing too little now are way too great, and this is no time to think in terms of ideological bias of any sort. Misdiagnosing this downturn could have devastating consequences and lead to something like the Great Depression. Its in this context that comments by Prescott that "people are now a little more hungry for jobs, its great I can get some work done on my house," implying that now they would work for less, and show a cavalier disregard of what is happening in the factories, in the streets and neighborhoods, in the workplaces, inthe country, and is too casual for a crisis of this magnitude. Which may be why one fourth of Republicans have more confidence in President Obama's economic plan than in the Republican approach in a CBS/NYTimes poll taken at beginning of April 2009. Adam Smith in the Wealth of Nations cites this type of comment by employers in his day, in the Wealth of Nations, and says that this is a shortsighted approach not what would make England as a nation prosper and grow. ...

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Difficulties facing a Obama administration, taking over in the middle of a huge economic crisis, with so many high expectations aroused by the lofty rhetoric that a letdown would occur for the faithful and young people energized by his candidacy were these expectations to remain unfulfilled. Two wars and their conduct could raise controversy as they cannot be abruptly be wound down and the Afghan war could present surprises as it has for all foreigners. And there are no easy solutions to the economic crisis which could be stubborn and prolonged like the one faced by Japan and its lost decade. Japan had a leader in Koizumi who energized the Japanese during their economic crisis years, some changes ocurred but Japan still labors on and its a different country now without the same hardworking ethic and cando spirit among the young. And there are no easy solutions like investing heavily in infrastructure and energy and providing healthcare to all working people, because with the one trillion dollars going to shore up the financial system and the banks there is only so much Obama and Democrats can do with public spending without much higher deficits and other difficulties. Not delivering on these promises or delivering inadequately could lead to a letdown for supporters. And for black people and Hispanics in the working class, and workers who have lost jobs as unemployment rises especially in the auto industry in the midwest where he got much of his crucial support, the conditions are tough with jobs scarce and rising home foreclosures, for which the government may be able to help but only in a limited way as the economic crisis may take a long time to unwind. ...

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About 19% or one in five do not have access to books at home in Britain, new research shows. A recent report shows 51% of parents find books just too expensive. The National Literacy Trust Report shows 64% of parents say the amount of money they have to spend on books has decreased. The findings are alarming as 1 in 13 children do not read at all, and only half of the children read daily.  This has serious repercussions on children's futures- in school, in college and in the job market. Reading habits develop with access to books at home and at libraries. Owning books encourages children to develop reading habits. The very basis of the fair societies and democracy of the UK, US and Europe is the access to books and reading for all parts of society and people at all income levels. Without this democracy cannot be sustained as the population is less and less literate and unable to preserve and protect its freedoms or misled by political leaders. The current threats to freedom Mr Biden has pointed out at Independence Hall in Philadelphia arise from this neglect that opened up with the neglect of manufacturing communities in the US and Europe which gradually eroded incomes and access to the goods and services that were opened up through the improvements of the last half of the 20th century. And improvements then lost in the "free markets" period of the last three decades that shifted manufacturing and jobs overseas, and reduced incomes of ordinary people.  ...

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One third of UK junior doctors and trainee doctors are at high risk of burnout. After a 22% pay increase under Labour the junior doctors say more needs to be done about the stressful conditions junior doctors face. Junior doctors feel like they are doing multiple jobs, and the culture of blame can be toxic, a sense that things can deteriorate at any time.

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On April 21, 2022, US president Biden talks to Americans in a live television address and says US will send an additional $800 million in military assistance to Ukraine. And an additional $500 million in economic assistance that takes the total economic assistance to $1 billion. He asks Congress to approve additional requests so that an uninterrupted flow of aid to Ukraine can be maintained to deter Russian aggression. He also opens up a path for direct entry into the US for some of the 5 million Ukrainian refugees. He calls attention to the 5 million refugees and to the millions of displaced children. He says about two thirds of the children in Ukraine are displaced by the war which he found to be shocking.

Biden said "you've got to admit- be amazed at the courage of the country, and of the young men and the young women." 

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The cost will increase the longer the effort for cleanup of PFAS chemicals used in military bases is delayed and could also lead to increased contamination of water in surrounding areas. In 2025 the cost is about $31 billion for 50 US military installations says The Guardian.  The Environmental Working Group policy analysis group senior analyst Jared Hayes is cited in The Guardian- "The DoD is facing a ticking cleanup time bomb as funding falls dramatically behind cleanup costs.” “The DoD has an obligation to its service members, the families living on bases, and the surrounding communities that have already been contaminated, so they need to clean up their mess." The adjoining article in Le Monde shows the awareness being created by Le Monde and its partners and The Forever Pollution Project in Europe about PFAS cleanup in France, and in Europe. ...

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Economists at the IMF estimate that the public debt of the leading 10 industrialized countries would reach 114% of GDP by 2014, from 78% today. The governments then owe about $50,000 for each person in the country. Unlike World War II this situation is not temporary, because of the pension and health care costs of a population that is getting older. So what is to be done? Without the stimulus, the deep and prolonged recession would lead to greater damage to the finances of these countries. But continued in this manner the government would crowd out private investment and lead to lower economic growth. In some countries, Greece, Ireland, Italy Portugal and Spain it might lead to default, in other countries the real cost of the debt may be reduced through inflation. In the USA yields on 10 year Treasuries reached about 4% on June 10th, in December it was about 2%, a consequence of the economic recovery. If interest rates are allowed to rise too fast, it might abort the economic recovery. A rise in taxes is also not the answer, because in Europe the taxes are already at 40%, in America they are around 30%. But raising consumption taxes at the time when the economy was fragile, aborted a recovery in Japan during Japan's earlier crisis decade. A caution signal that says fiscal tightening can backfire, especially some years after a banking crisis when things are still in a weak condition. Some steps that can be taken are raising the retirement age, which would cut pension costs as people work longer and would boost tax revenues, and eliminating the tax deduction for home mortgage payments in the US. Its important to build credibility that the government and the legislative bodies are serious about controlling the finances and acting with prudence. In America wasteful health care spending is a priority, as this would reduce the burden on public finances considerably , and should be as much of a priority for the new Obama administration, as providing universal health care. With today's finances its not something that can be put off....

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What Kamala Harris stands for on behalf of the workers and families of America, on behalf of the American people, for in Carl Sandburg's immortal poem "The People, Yes!" and for people struggling to make a living with food and housing costs, in the words of Tim Walz at the Democratic Convention- "So this is the part — clip and save it, and send it to your undecided relatives so they know: If you’re a middle-class family, or trying to get into the middle class, Kamala Harris is going to cut your taxes. If you’re getting squeezed by prescription drug prices, Kamala Harris is going to take on Big Pharma. If you’re hoping to buy a home, Kamala Harris is going to help make it more affordable. And no matter who you are, Kamala Harris is going to stand up and fight for your freedom to live the life that you want to lead, because that’s what we want for ourselves, and it’s what we want for our neighbors." ...

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Much of the growth in 2022-2024 was a result of Biden administration government spending on infrastructure supported by private sector spending. With efforts to cut waste and set new priorities in government spending, growth in 2025-2026 has to come from private sector spending with the DJT administration. The tariffs in the first 100 days are seen by business as a bargaining chip. Scott Bessent has described the tariffs as domestic policy, and president DJT has stated clearly that the tariffs against CMC countries, Canada, Mexico and China, is intended to stop the flow of fentanyl into the US. The scale of the fentanyl issue can be seen from the 490,000 American deaths over 12 years from fentanyl.  It is incumbent on CMC countries to take action on fentanyl. It is also incumbent on the CMC countries and on the EU, on opinion in business and the Silicon Valley in the US, to grasp the real dimensions of this crisis destroying so many lives, that is so unprecedented in the history of the US.   ...

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There was some element of reckless behaviour when Britain tossed aside misgivings to let Tories let in private sector investing into companies in the water sector. The WSJ now calls it the world's largest failure in private sector water investment. Today there is eColi in the water in River Thames so much so that in the Oxford Cambridge rowing race rowers were advised not to make contact wih the water. It goes back to Victorian sewers which was a problem not tackled by companies interested in profits in areas that wiser men had decided is best done by public sector investment. These are the hidden failures of the Thatcher/Reagan years that are only now coming to light. The company Thames Water loaded up on debt to pay investors dividends while the company failed to upgrade London's sewer system, which has spilled what amounts to 34,000 Olympic swimming pools of raw sewage into the river since 2020. The US has not been so reckless as most water and sewage systems are still publicly owned. Near central London a matted mountain of wet wipes and sanitary products along with sewage washed into River Thames is called Wet Wipe Island. Thames Water took on so much debt $23 billion that it defaulted on its debt. How could this be in a modern developed nation, and what about all the other infrastructure investments in Britain rusting  from the Industrial Revolution that need investment? Tories have let Britain down. There are lessons for the US and Germany, France, India and China. ...

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Sperling shows how Biden's economic plan rescued America and set the stage for America becoming the leader in the G7 economies. Gene Sperling is adviser to president Biden, coordinator of the America Rescue Plan, and had 8 years as adviser in 2000 and 2011 after the financial crisis to previous presidents. Here he says the arguments made that the trillion dollars investment spending Biden and a bipartisan group of senators have supported with legislation in Congress were causing inflation have proved not to be true. Inflation caused by bottlenecks in the supply chain, the pandemic shifts, and the Ukraine war, has come down to 3.4% in Dec 2023. By investing in the US economy, in US manufacturing and US jobs, the US under Biden now has the best economy of the 7 advanced economies with higher growth and unemployment below 4% for 24 straight months, lower inflation apples to apples. Sperling says there were 4 lessons learned during his work with the White House. The first to avoid harm to workers whose lives get scarred by loss of jobs. This happened in 1982 and again in 2008 after the financial crisis. Unemployment took 6 years to recover after 2008. And he says the unemployment rate was 15% for younger workers. For the first time economists like Sperling and Treasury Secretary Yellen have grasped what workers feel and have gone through. Sperling cites the devastation to people's lives - the mental health, the divorce, the loss of earnings and depression. The new policy after 2020 resulted in the fastest drop in longterm unemployment ever with black and hispanic unemployment reaching record lows by 2023. A first ever national eviction prevention policy led to 20% less evictions than prepandemic. Second Sperling says 650,000 jobs were lost by state and local governments in the three years after 2008 financial crisis. State and local budget cuts and mass layoffs seriously hit the economy. This time in after 2020 1.2 million jobs were added with the money in the Rescue Plan and lost jobs recovered in one third the time it took in 2008. Third state and local governments need to deal with the harm coming from the downturn and after 2008 the cupboard was empty. Whereas after 2008 only 154 cities and counties got help to tackle commericial blight, effects on communities, foreclosure and long term joblessness in 2020 Biden was able to send direct funding to all 20,000 local governments and 15,000 school districts. This helped tackle learning loss, crime, and address mental health needs. What a difference it made. Lastly one needed to anticipate something unexpected to happen that flattened projections of recovery. In 2011 3.7% growth projected was flattened when Sperling was senior adviser, and this was flattened by Fukushima nuclear disaster, Arab Spring spike in oil prices, and debt default negotiations. This time there was cushion in the plan so that when covid variants and unexpected Ukraine war happened the rescue could withstand and deliver with resilience. Growth was 3.4% average for the first 3 years of Biden's term and unemployment went down from 8% to 4% for 24 months. Coming from someone who had seen mistakes happen and corrected them, who had served three presidents and the last Biden ,this is a story of how Sperling, Yellen, with the help of Powell at the Federal Reserve, and the bipartisan support put together by a US president in Congress , one who has served the country in the Senate more than any other recent Senator and led the nation with courage, patience and determination. ...

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Nathaniel Taplin of the WSJ says the tariffs put on $50 billion high tech products by the U.S. and retaliatory tariffs on $50 billion products are not about a trade war but a way both countries will negotiate setting out their two positions.  A look at the role of foreign firms in China shows China has access to new technology using these firms as a conduit and these firms are also generating more jobs, being highly productive. These firms Taplin says will set back their investments if no agreement is reached or if it is harder to bring Chinese made products into the U.S. At this time China badly needs this investment and technology access because of their dynamism compared to inefficient state run firms as it struggles under a massive debt load with very high debt to GDP ratio.  A major issue is job growth as companies getting foreign investment are much more effective in jobs generation, delivering 10% of all urban job growth from 2007 to 2016, using just 5.5% of total investment. Return on assets at 9% compares to 4% at state run firms. If this dynamism is reduced or affected in some way China could have to provide more unproductive debt buildup stimulus.  For these reasons China has good reason to make concessions, says Taplin. Trump administration will ask for greater semiconductor purchases, much looser joint venture or foreign ownership requirements, higher Chinese payment for U.S. intellectual property. For all these reasons this is not about a trade war but about serious negotiations taking place so that there is a level playing field in the next phase of competition in high tech between the U.S., China and the E.U. changing the dynamics of the trade relationship in ways that reverse the trends of the past. ...

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This wonderful report in the DW.com looks at what may be the defining game of the Nations League Soccer in 2020- the Germany loss to Spain, Spain winning with 6 goals. It shows pictures of moments for each of 6 goals by Spain and detailed descriptions of each. Coach Joachim Low's strategy for his players of sitting deep in his half so as to remove the possibility of inviting space backfired says DW.com. Toni Kroos of Real Madrid team who was one of the few seasoned players on a new team for Germany put together by Low, says that they tried both being more aggressive in the second half after sitting deep in the first half, and both approaches failed. The Spanish team was well coordinated, faster and tougher throughout the game.  At key moments the Germany defenders were nowhere near the Spanish players as they moved the ball one way and quickly the opposite way the next moment. Ferran scored a hat trick with 3 goals and some of his goal kicks were very quick and fast. As it says here Ferran reacted faster than anyone to score. In three consecutive moments Germany was slow to react to the speed of the Spanish players. For most of the game the Spanish players controlled the ball with pinpoint passing in the midst of many of the German players. It was not that Neuer the German goal keeper was not quick enough, he was beaten by the speed and angles, and the movement of the ball from different directions with Spain's rapid passing. For Spain Ramos, Morata, Ferran, Koke and Rodrigo, Olmo, played a critical role with a German team not looking like this since the 1930's, even though coach Joachim Low had put together a new German team. This could be a formative moment for Germany and coach Joachim Low as the German team looks for its form that eluded it completely this time.  ...

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Not much will change in Italy's place in the European Union, says Maria Ferraresi, editor of Italy's Domani newspaper. Italy expects 200 billion euros of solidarity aid from the European Union that is dependent on following EU rules. And coalition partner Berlusconi says he will drop his support if Meloni adopts any anti EU rules positions. Meloni's Brothers of Italy party with 26% of the vote has roots going back to the Social Movement in Italy in the 1930's. To attract support she has remained in opposition even when Matteo Salvini of the League and Silvio Berlusconi of Forza Italia parties joined Mario Draghi's unity government during the pandemic. She has turned to a pro EU stand from a EU skeptical stand. Meloni is also forming one of seventy Italian governments since 1945 such is the pace of government change in Italy making every government dependent on fickle political sentiments that shift quickly. The Italian economy has fallen into a stagnant situation with growth less than 1% in 2022, and the main concern of voters and the elected governments is the economy and standards of living, so that EU aid acts as a critical part of rejuvenating the economy. The Eu solidarity aid of $200 billion in coming years is critical for Italy's economic revival. It also shows the European Union in action after the years following World War II when it was realized that some sort of sound European economic framework was needed for the common good. Ferraresi also points out that Italy has also gone through an EU led effort to make the judiciary fully independent and able to function similar to the judiciary in France and other EU nations. Italy also has a very de.centralized government with state and local governments playing a major role in administration. This reduces the impact of changes in the capital Rome.  ...

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The deputy chief medical officer, Dr. Jenny Harries, asks people in Britain to limit themselves to what is sensible and not what is possible, to use common sense, so that reopening works. The Housing Secretary, Mr. Jenrick says the room for maneouvre is limited with the reproduction R ratio for Britain at somewhere between 0.7 and 0.9. There is also a lag period for data making it so that the current situation is not known. Germany's after reopening is now estimated by Robert Koch Institute at 1.14 so that there is some shift to be expected as the opening happens, the idea being to limit this to around the 1.0 figure. Britain reopens cautiously and in  in a patchy way with primary schools reopened, and people from different households allowed to meet in groups of six as long as they stay 2 metres apart. Outdoor markets and car showrooms are also reopening. Also stated is the need to be sensitive to geography as areas such as London which were hit early and with severity are now better off than areas in the north of England. ...

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“I would advise none of the countries to panic. I wouldn’t try to retaliate because as long as you don’t retaliate, this is the high end of the number.” This is the ceiling number Bessent told countries around the world about the Rose Garden Tariffs chart of April 2, 2025. Just don't retaliate and negotiations would work things out. Bessent said some countries say they would work with China. I have this to say to Spain about China, he said, it is like someone with brooms and a bucket of water, it keeps on going, production never stops, that is the Chinese model. What Bessent is saying is that the Chinese model is to keep doing what they have always done non stop with no intention to change- build capacity, overcapacity, and ship production overseas to saturate markets with production and destroy industrial base of other countries- from computers to solar panels to electric cars. China is also looking at it's very recent history just the last 15 years as proof of its superiority in cost and quality and efficiency in production as evidence that US and EU is in decline. Forgetting that this was possible with US assistance and desire to lift the Chinese people out of centuries of poverty. For the 19th and 20th century Britain, the US and Europe were leaders in cost, quality and efficiency. US , India and the EU are coming back using their ingenuity, creativity and talented workers and engineers. ...

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This exceptional NYT report by Noam Scheiber describes the impact of the Obama administration's new overtime pay rules requiring time and a half overtime pay for most salaried employees paid less than $47,476 a year. For a long time now firms in publishing, consulting, media, advocacy groups, and other fields have made young people work long hours for low pay without overtime pay just so they have opportunities later. This is especially true for the last decade when jobs were scarce, especially for young graduates. The rule is inspired by a need for better work-life balance, to widen opportunities to beyond the group where affluent parents supported their kids in these jobs, and by the sometimes abusive nature of the overtime work that could extend from 7 am to 7 pm or such hours at what amounted to minimum wage work for well educated but aspiring college graduates.