LyrArc Article Gist
The global impact of the credit and housing crisis as it extends from USA to the rest of the world. Heavy machinery makers such as Japan and Germany are doing better than consumer goods exporters like China, and Asian countries like Thailand and Malaysia. And countries that borrowed heavily like Hungary are being watched by lending institutions. Commodities producers like Australia and Russia and Brazil are continuing to do well. For Middle Eastern countries the bigger danger is overheating in their economies as inflation soars. But while the crisis spreads the forecasts have only been taken down a notch displaying the conservative wait and see instincts of forecasters so that China and India still continue to grown near double digits which is not likely to hold up as one goes into 2008 and 2009 and actually might slip considerably from the high growth rates of the past as a number of factors converge especially in the case of China but also for India.

LyrArc Article Gist
What changed asks the Economist between the summer when the stimulus was petering out and analysts sniffed deflation for 2011, and today with the euphoria for stock markets and estimates of 4% growth for 2011? Much of the reason for the change is a second round of quantitiative easing for $600 billon announced by the Fed- buying bonds with newly created money to push down rates and stimulate lending. And the December 2010 compromise for across the board extension of the Bush tax cuts. But even though this improves the prospects for 2011, the situation after that is still in the medium term as treacherous as ever, even more so, says the Economist. High interest rates and shaky business confidence can be fixed with strong stimulus, but households and banks have to work off the excessive debt taken on in the last decade. And this deveraging has years to go. So expect more difficult patches where investor euphoria quickly turns to gloom. One other aspect of the current situation is worrisome. The bipartisan deal for the Bush tax cuts was not real bipartisanship, as each side agreed to the others huge giveaways. Real bipartisanship must mean more painful decisions in spending and taxes. The US government's failure to sort out its finances will continue to cast a shadow over the future of the economy....

LyrArc Article Gist
Van Dam says its not that great being a worker in the U.S. because it is hard for the unemployed resulting from competing with workers in other countries with lower wages, and for those who are unemployed harder because worker collective bargaining is weakened over 3 decades. He cites a 296 page OECD report showing very little government support for unemployed and at risk American workers. It says this has contributed to higher income inequality and larger share of lower income people than almost any other advanced a nation. Only Spain and Greece are shown as having more households earning less than half the median income- showing large numbers of people are poor or close to being poor. In the U.S. an average of 1 in 5 lose their jobs each year, and 23% of workers 15 to 64 are in their job less than a year in 2016. The job churn hurts workers because of firing and layoffs being frequent, more than is healthy for a economy. The U.S. and Mexico are the only two countries not requiring advance notice before firings. And fewer than half of workers find a job within a year in the U.S. Two in three families with a displaced worker fall in poverty for some time. Unemployed workers with typically 26 weeks support get less support than any other country in the study. Only 12% of workers in U.S. are covered by collective bargaining. ...

LyrArc Article Gist
Jay Powell, a former US Treasury official, now a scholar at the Bipartisan Policy Center, says the fears of budget problems in US states are survivable, even though they will be difficult and painful. He does not see widespread defaults, the way Meredith Whitney has predicted. Kenneth Rogoff of Harvard University, says a major default would cause serious macro-economic dislocations. It would have impact beyond the US, in the European economies with serious budget problems such as Greece, Portugal and Spain. Analysts cite the following reasons why a widespread debt default by states and local governments is unlikely. Municipal bonds are held mostly by individuals, who own about two thirds of US municipal bonds, directly or through mutual funds. Most state and local government debt is long term, and does not rely on short term borrowing the way a Lehman Brothers did in the recent financial crisis. The states can raise revenues, as Illinois did recently. With the economy improving state tax revenues were up 6.9% in the fourth quarter of 2010, compared to a year earlier, according to preliminary data from the Nelson Rockefeller Institute of Government, Albany, New York. That said, the following reasons show that life will be difficult and painful for states and local governments. State budget gaps total at least $125 billion, as they look to the coming fiscal year, according to the Center on Budget and Policy Priorities. And no federal help is in the works, as it was in 2009. Far less of newly issued muni-bonds are insured today - 6% compared to 57% in 2005- according to the Bank of America Merrill Lynch. Insurers are still recovering from losses in the recent financial crisis. A massive supply of new bonds has depressed the market just as Dec 31 expiration of a federal program, Build America Bonds, which provided help to states that were borrowing. Investors withdrew $23.6 billion from muni-bonds mutual funds since November, 2010. Moody's Investor's service has listed the states that will need to issue bonds to fund current operations. California will borrow billions to cover cash flow needs, and Illinois is considering an $8.75 billion 'debt restructuring bond' to pay past due bills, and a $3.75 billon bond for contributions to its pension system. Because banks have only 1.3% of assets in muni-bonds any defaults will not affect their ability to lend. But the impact will be felt in the US economy and overseas. In the event there was a default, some analysts believe the federal government would find it hard to say no when the federal government said yes to AIG....

LyrArc Article Gist
With 40% of the unemployment shown as longterm unemployed, U.S. Federal Reserve policies are focussed on bringing down these levels, which pose a risk to the productive capacity in the U.S.

LyrArc Article Gist
Manufacturing in the US is adding jobs for the first time since 1997, according to government data. Job growth in 2010 was 1.2%, or 136,000 jobs. IHS Global Insight expects total manufacturing jobs in the US to increase in 2011 to 12 million. Manufacturing will be a modest contributor to job growth according to economists. Economists projections show a gain of 2.5% or 330,000 manufacturing jobs in 2011. Moody's Analytics estimates job growth of 2% a year through 2015. Government incentives, need to replace aging equipment and rehiring in the automobile industry will help manufacturing. At the same time manufacturers are cautious about hiring and increases in automation reduce the need for workers compared to earlier periods. Overall the loss of about 6 million manufacturing jobs since 1997 will not be made up. Yet the improvement is a positive sign as the US faces high unemployment and companies make investment in new factories overseas to meet growth in emerging markets.

LyrArc Article Gist
Shipments of LG phones were up 54% in the 1st quarter of 2008 from a year ago, about 4 times the average growth of 14% in the industry., according to Strategy Analytics. The market share goes up to 8.6% from 6.4%. This puts it near overtaking Motorola for 3rd place ater Nokia and Samsung. Its biggest hit so far is the Chocolate, a skinny phone that looks like a chocolate barwith a dial pad that glows red. About 18 million have been sold worldwide sine introduction in May 2006. It also developed a pricey handset called Prada designed with the Italian fashion house and introduced in March of 2007. What is interesting is the way LG has approached product development. The Chocolate's creator Skott Ahn got the top job at the LG cell phone business unit in early 2007. And he has been put in charge of all areas of design developmet with the authority to make decisions in the way he would run this business. Ahn doubled the headcount of designers to 150 and engineers to 4000. He launched an inhouse design competition. The winner of the 2008 competition is the Secret, made from sleek yet sturdy carbon fiber and tempered glass and with a 5 megapixel camera and software to let users create their own music videos. This phone was intorduced in Europe this month. LG's profits on cell phones are expected to double to $2 billion according to Mirae Securities in Seoul, with a 50% jump in sales, and the stock is up 57%....

LyrArc Article Gist
Max Fisher of the NYT points out the unique approach taken by Canada in the U.S.-Canada relationship - to cultivate a grassroots network of Americans in legislatures, business, and at different levels of government. This has enabled the Trudeau government to build a relationship with president Trump, and at the same time have relationships at different levels of government and with business in the U.S. to tackle issues where the Trump administration has acted in ways unfavorable for Canada. Provincial governments in Ontario and Quebec lobbied against a New York state government provision for Buying American on state contracts worth over $100,000. By emphasizing the $10 billion in exports from New York to Ontario this lobbying persuaded the New York legislature to cancel the provision. Premier Trudeau's popularity helps and the proximity to the U.S. means Canadians can visit quickly and understand the U.S. as a close neighbor. Still Premier Kathleen Wynne of Ontario says Canadian businesses are nervous about the uncertainty from the Trump administration.   ...

LyrArc Article Gist
The month of August 2011 ranks as the 10th worst month for U.S. stocks in 75 years. Or to put it another way of the last 900 months, the month of August 2011 ranks the 10th worst month in terms of volatiltiy. The average up and down movement each day in August was 1.%. In August the Dow Jones Industrial Averages were down 529 points, or a drop of 4.4%. This is not what worries investors as much- as their are months like May 2010 which had a 7.9% drop. The impact on investors is in the increased uncertainty that this creates about how an investment will perform in the future.

LyrArc Article Gist
This report in the WSJ points to Democrats having won consistently 18 states plus District of Columbia adding upto 242 Electoral College votes in every election since 1992. Democrats need 28 more to cross the needed 270 votes. Republicans consistently having 13 states with 102 electoral College votes. Demographic changes in recent years have shifted to where Hillary Clinton may not need to devote resources to Colorado and Virginia because of a more favorable position there.  Carrying Pennsylvania with these 2 states would put Clinton over the 270 required. Vice Presidential candidate for Clinton, Senator Keane is from Virginia and is popular in the state.  Pennsylvania has a long history favoring Democrats. North Carolina has also seen demographic changes favoring Democrats. The Clinton campaign is focussing ads on these states as well as the swing states of Nevada, Iowa and New Hampshire, as well as Georgia, Arizona and Utah which are becoming competitive for Democrats. By keeping up the effort in Georgia, Arizona and Utah, Clinton hopes to make Trump divert resources there. Other two swing states are Ohio and Florida, but this WSJ report says Clinton has to win only one of the four swing states of Pennsylvania, Ohio, Florida, and North Carolina to go over 270 and Trump needs all four. Of the 20 media markets Clinton or her super PACs have focussed their ads on 16 are in these 4 states. The Clinton campaign is looking at several alternative routes to 270 Electoral College votes, which gives it more flexibility to plan the campaign.  ...

LyrArc Article Gist
This article in the NYT provides a look at the features of the Republican House Health Care Plan- Both the Affordable Health Care Act and the House Plan provide incentives for buying insurance- the ACA bases these incentives on income levels whereas the House Plan does not provide additional help for low incomes or elderly. Incomes at $20,000 would see a loss greater than  $2000 under the House Plan and as many of the elderly poor living in high cost areas may not have the resources to make up for this loss of subisidies they may forgo buying insurance or have insurance coverage that protects only in a limited way. President Trump has given assurances that all will be covered. For people with incomes of $50,000 or $75000 the loss of $2000 subisidies would also have some impact. At larger incomes or the well to do the subsidies are not handed out under either plan. Under the ACA the emphasis was on income levels and high cost insurance areas the subsidies were greater, under the House Plan the subisidies would be higher for the elderly compared to the young but very low income levels are not given additional help.     ...

LyrArc Article Gist
Aaron Back cites U.S. Bureau of Labor of Statistics figures showing hourly manufacturing wages in 2011 for Japan at a level 89% higher than in South Korea. The decline in the value of the yen to 100 to the dollar is expected to improve the competitiveness of Japan's manufacturing companies in relation to competitors in S. Korea and Taiwan. The higher manufacturing costs in Japan offset some of that advantage. Much depends on Japanese companies recovering in the area of innovation, and improving competitiveness in other ways.

LyrArc Article Gist
High inflation and depreciating currencies in India, Turkey, Brazil, Indonesia and South Africa in 2012-2014.

LyrArc Article Gist
As Washington Post writer points out from personal experience- he is one of those who put up 15% to buy ahome inDenver at the top of the market and now has negative equity as prices drop- negative equity is one of the most serious problems facing the US economy. It has the potential to undo many of the encouraging things from the stimulus, as rising foreclosures continue to act as adrag on the overall economy. As he says about one fourth of Americans with home mortgages, or about 11-15 million people, owe more money on their homes than the market value of their homes. As Hoffman says the administration's approach has been a Band-Aid at best for a serious injury. The Obama administration set aside only $75 billion to get banks to modify loans and also made this voluntary for banks to modify loans. Treasury Secretary Geithner testified in Congress: "This is a conscious choice we made, not to start with principal reduction. We thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness." But making it voluntary means very little of this $75 billion has gone to help achieve modifications- banks had no incentives to do this. Only 31,000 permanent loan modifications have been made. Of the 750,000 temporary loan modifications made as of Dec 2009 only 4% of homeowners signing up have qualified for permanent federal relief. See the links to Martin Feldstein's proposals for this on the pages of the Wall Street Journal in 2008 and 2009 which called for aggressive program of relief for the sake of the economy. With 2.4 million Americans likely to lose their homes in 2009 according to Moody's Economy.com estimates, following the 2 million in 2009 and 1.7 million in 2008, this may be a serious mistake of the Obama administration and drag out this recovery....

LyrArc Article Gist
The shift from non-conventional polluting single cylinder engine contraptions used by poorer Chinese called "Inkfish" to conventional fuel efficient engines will reduce oil consumption in China even as more cars are on the road. This explains the paradox of Chinese vehicle sales being up by 77% year over year in the first quarter of 2010, and still gasoline demand went up by only 3%. Kack Perkowski, founder of Chinese auto-parts manufacturer Asimco Technologies, says the shift from the low tech "inkfish" type vehicles to fuel efficient small cars popular with the Chinese and encouraged by government policies to reduce oil consumption is a big factor in this development. Perkowski says 50 million engines are manufactured in China each year and if you subtract the 13.6 million cars, trucks and buses sold in China last year, another 36 million low tech highly fuel inefficient engines including "inkfish" engines were sold. China's car buyers are very price conscious and prefer smaller cars. Smaller cars are also well suited to the crowded roads in the coastal cities. And the Chinese government wants to keep oil consumption down so it is pushing buyers in the direction of smaller engines with tax breaks. The Chinese governmet is expected to announce subsidies for plug-in hybrids worth about one third of the sticker price. The motives are environmental and energy security related, but also have the intent of enabling China's car manufacturers to gain experience and leadership in newer electric car technologies. Bottom line: some experts including Deutsche Bank's Sankey view China's oil demand growing much slower, at about 2.6% a year over the next 15 years. This would mean oil demand tapering off at 13-14 million barrels of oil per day by 2025, much higher than the 9.1 million bpd in 2010, but growth curbed by fuel efficient engines and increasing fuel efficency of the Chinese vehicle population....

LyrArc Article Gist
Michael Boskin of Stanford University, chairman of the Council of Economic Advisors under the elder Bush, on the risks of protectionism and higher taxes to the economy in the long run, and the need for the Fed to balance the need for providing help with rate cut with the need to keep inflation at low levels. He suggests workouts of the losses from subprime mortgages not bailouts is the correct answer. P.S. A note on December 6, 2008, after the crisis with Bear Stearns in early 2008, and the severe October credit crisis and a series of bailouts of banks, financial institutions and the Detroit auto industry. If one looks for the thinking that was behind the Republican Bush administration's early stand to take no proactive steps to improve things in the economy, then Boskin's article summarizes some of the thinking behind it. Lowering rates at the time except gradually,after the Greenspan moves in preceding years to lower rates and let them stay that way too long (leaving too much liquidity and loose lending in the financial markets), was not to be taken lightly with additional concerns of pushing inflation upwards. And Boskin way underestimated the losses from subprime in December 2007 when he used the estimate of $300 billion investor losses centred in real estate made by the OECD at the time, or as he puts it just one-half of 1% of American's net worth. Concluding that in a $14 trillion economy such losses could be absorbed. He anticipated delays in financing and the need to mitigate that but did not anticipate a collapse of credit markets. Part of this may stem from not realizing the impact of highly leveraged debt on the books of financial institutions and what it could do if fear gripped the financial markets, and underestimating the impact of subprime debt with mortgage securities that had no transparency and distorted credit ratings. Which is why he says that policy should be for workouts not bailouts, emphasizing that the worst idea out there is for a broad interest rate freeze for mortgage borrowers which would throw into question the sanctity of private contracts and thus deter investment. This policy of resisting loan modifications continued as policy of the Bush administration even as Martin Feldstein, another Harvard economist and Reagan administration economic advisor, advocated just that from early 2008 with repeated oped articles in the WSJ throughout the rest of the year....

LyrArc Article Gist
Alexander Van Der Bellen, a pro Europe independent candidate supported by the Green Party wins Austria's presidential election with 53.3% of the vote. The anti immigrant Freedom Party candidate Norbert Hofer wins 46% of the vote. Van Der Bellen is for an open Europe and is pro Europe. The election is seen in Germany as "lifting a great burden off of our shoulders," in the words of Sigmar Gabriel. This is important for the future of Europe as France, Netherlands and Germany face major elections in 2017.

LyrArc Article Gist
A report published by Capital Economics of Toronto, based on Labor Department data, shows the U.S. is not adding the kinds of jobs with the pay, benefits and hours of the 8.75 million jobs that disappeared during the recession. Labor Department data support this analysis. The number of food preparation and serving workers are expected to grow by 394,000 by 2018, but the pay is only $16,430 for these jobs. The good well paying jobs are continuing to be lost. Large employers such as Lowe's home improvement chain is eliminating 1700 managers, and adding 10,000 weekend sales positions and new assistant store manager positions. This use of parttime workers also reduces income levels of workers. The impact of this is to limit the consumer spending. As local government is shrinking from budget cuts, better paying jobs are being lost in state and local government, and workers are earning less in the new jobs that do similiar work.

LyrArc Article Gist
This editorial in the Economist says China faces risks of a steep fall in the currency in its management of the currency. It suggests temporarily using capital controls to stabilize the currency and later gradually lift the controls. In any case it says the exercize will not be painless because of high debt of companies and in the Chinese economy.