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WSJ Original article ›
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This WSJ report looks at the state of manufacturing in India in 2023. Foreign companies in renewable energy from Denmark, Apple Computer, and local companies such as Ola in electric scooters, are building factories and expanding manufacturing capacity in Sriperumbudur and other special economic zones in Tamilandu state of India. BMW and Nissan are also located in the state. It comes as friendshoring from the US is encouraging foreign companies to invest in India. There is a definite acceleration in the growth of electronics and machinery exports under the Indian government's Make in India plan. This report shows that India is in a learning curve in developing its manufacturing base. Not shown here are how the goals and execution of a sound overall plan is envisioned by the government. The Gati Shakti plan put forward by Mr. Modi is intended to bring together all agencies of the government to work together seamlessly to provided an overall execution of infrastructure development for logistics, airports, fast rail, roads and bridges, and modern housing. It is a National Master Plan for Multi Modal Connectivity that brings together 16 ministries for building state of the art infrastructure. The national plann ing agency NITI Aayog says it recognizes the multiplier effects plus spillover effects of infrastructure development for  Indian manufacturing, and understands how the US, Japan and China accomplished this going back to the New Deal in the US in the 1930's. It can also pioneer in new ways learning from the experience of these countries. This will bring results in demonstrating how India is learning and developing its own model of the best way to build excellent infrastructure, and do this with renewable energy, and environment inclusive efforts.    ...
Wall Street Journal Original article ›
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The countries that would be affected the most from a slowdown in China are the commodity producer countries- Australia, Brazil, S. Africa, Chile. Other countries include Thailand, Indonesia and Vietnam. Currencies such as the Australian dollar, the South African Rand, the Brazilian Real and the Chilean peso would decline in value. South Korea, Taiwan and Japan which supply large machinery for construction and manufacturing would be affected. Oversupply of steel and other products in China would mean higher exports causing a drop in steel prices and prices of other items. There would be a decline in commodity prices. Germany which provides the high tech machinery for China's industrialization will be affected. Exports growth to China from Germany increased by 44% in 2010. It has been pointed out that China is the seventh largest export market for Germany, coming after France, the U.S., the Netherlands, the U.K., Italy and Austria, exports to EU countries being the largest market for Germany. A global economic slowdown, with the Chinese slowdown as a part of this would impact German exports, leading to a slower growth in Germany. The U.S. would be affected also because exports were picking up in 2010-2011, and remain the one bright spot for the U.S. economy's recovery....
WSJ Original article ›
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The story is an encouraging one as the president and bipartisan Congressmen persevered with courage and patience to invest in America. The story is told by Biden adviser Gene Sperling in the WSJ today Feb 16, 2024, and is on this page. The US federal Budget deficit rises to 6.1%  in 2025 from 5.6% in 2024, then slows to 5.2% in 2027 and 2028, going back to 6.1% in 2034. Because these projections depend on assumptions inflation, interest rates, wages, which may be different in actual numbers in future years the broad guage one can get is that the extra surge in investment of five tenths or six tenths of a percentage point of GDP help the US make the investments in an aging or crumbling infrastructure and in manufacturing, better technologies, not replaced since the 1950's or 1970's, is needed for economic growth and better living conditions for the American people. It is this investment that in trillions of dollars of spending under president Biden that has generated growth of 3.1% in the last 2 years compared to the recession in Germany, UK, France and otehr European countries. UK is the latest to fall into recession this month. Sluggish growth can also be seen in China with a bloated construction center hindering growth. The US is in abetter position after the pandemic than any other country with the exception of India. ...
Wall Street Journal Original article ›
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The unemployment rate drops to 7.8% from 8.1% in September according to the Labor Dept. The decline partly comes from people taking part time jobs because they are unable to find full time work. The establishment survey shows 104,000 jobs added in the private sector in September, and revises the figures for July and August to show 86,000 additional jobs created. Of the 104,000 jobs added, jobs increased in health care and transportation. Government added 10,000 jobs. Manufacturing jobs declined by 16,000, a cause for concern. A more accurate measure of unemployment is the underutilization of labor called U-6 by experts, this includes part time workers who would prefer to work full time- this has remained at 14.7% for Sept. 2012. The overall picture is that the job market remains sluggish. Because Labor Department numbers are prone to revision this could change in coming months. The slowing economy in China with the new stimulus in China coming in at one eighth the size of the old stimulus (1 trillion yuan over 4 years compared to 4 trillion yuan over 2 years 2009-2010) because of inflation concerns and risks of aggravating a property bubble, and the declining growth in the eurozone- France with zero growth in 2013 and Germany at 0.9%, Italy and Spain declining growth- means the prospects for U.S. economic growth will be lower in 2013. U.S. GDP growth was 1.3% in the second quarter according to the Commerce Department, and Macroeconomic Advisors predicts GDP growth of 1.5% in the third quarter in downward revisions. ...
New York Times Original article ›
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Why polluting industries and colluding local government officials who are judged on the rate of economic growth achieved have come together and become entrenched to thepoint where its hard for the central government to implement pollution control measures. Deng's response to a sluggish socialist bureaucracy was to give power to local government officals to promote growth and to be judged on that basis. The environmental ministry and the environmental protection departments are very small and lack the resources to control these industries. And NGO's and the informed public and citizens are powerless to demand change as they are seen by the government as risking social stability by risking growth. After the East Asian crisis China anticipating a slowing down in competition with recovering Asian economies pushed harder for more economic growth. As a result production of steel set new records and the addition of power generating capacity each year surpassed the total power generation of countries like Britain and France.But this power generation does not use the modern technology available as it is costlier and takes longer to build. So a lot of short run decisions are being made in the interests of growth. An effort to introduce Green GDP backed by President Hu Jintao was dropped after it ran into a lot of resistance. Using this about 3 points of GDP were deducted from the 10% growth as environmental cost. This was based on modest environmental costs estimates and did not take into account the entire cost of pollution to health and the environment. China's own environmental experts think that Western estimates of environmental costs are if anything on the conservative side as they are based on models used in the west and conditions in China have little precedent in the scale and range of environmental degradation. Coal is burned to produce two thirds of the energy and uses older technology for power generation, it is a big polluter of the environment. And the modest energy efficiency goals set by the central government are not being met as a result China is already expected to be consuming as much energy in 2010 as it was expected by its own planners to be consuming in 2020. To informed outsiders it appears that the polutting process is systemic in its nature and only political change that allows people who are suffering the worst effects of this pollution to make their voice heard, can lead to reversing the trends that have been set in place from the Deng period of economic change that started in the 80's. ...
NYTimes.com Original article ›
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The US needs good manufacturing jobs for the jobs and income that it brings into communities, and also because of the tax revenues from the companies making products in America that provide the basis for local governments to provide good public services in healthcare, education, and transportation. To say comparitive advantage that helped first Japanese and now Chinese manufacturers is real and how society gains is to deny some basic facts that are self evident from observation that contradict textbook ideas in economics. Comparitive Advantage is a textbook economics concept that says countries are proficient in what they make best and should specialize in that product. But it is a static concept that exists only in textbooks. If Japan in 1960, China in 1980 and India in 2000 were each presented with this idea they would have turned down the idea of making steel and remained makers of lower end products such as footwear and textiles. If Japan in 1980, China in 2000, and India in 2020 were each presented with this idea they would have turned down the idea of making semiconductors and remained makers of lower end products such as steel. A senior vice president of US Steel in the late 1960's even told this writer a graduate student at Northwestern in Chicago- as the US can make steel better than India or China let us keep making it for you. He and much of the business faculty at Northwestern also could not understand in 1970 why Airbus was being setup to compete with Boeing who by the concept of comparitive advantage should have had the whole market to itself for commercial aircraft . By this kind of thinking Airbus would not exist today because it did not have the lowest cost or the manufacturing technologies Boeing had through its vast manufacturing operation. America would be still the only one making aircraft in 2023 if textbook concepts ruled the day. By indirect methods such as hidden preferential arrangements, provision of inputs such as land, capital and labor, tax relief, the costs can be represented in a way that shows it is cheaper to manufacture overseas. The lack of a level playing field is what president Biden is correcting by doing what first Japan, then South Korea, then China and now India are doing since the 1960's. By 1974 in four years after its founding in 1970 Airbus came up with its first model the A-300 using advanced technologies. America will regain its leadership in the cost and manufacturing of many products through Biden policy and the efforts of American companies by 2030, and do this in a transformative way that will benefit the world as a whole.  It is an enormous error to say the US does not need good manufacturing jobs, that local governments do not need the tax revenues from manufacturing plants to build services for communities where manufacturing workers live, and the US does not need the manufacturing experience curve that leads to reduced costs. It is this loss of the manufacturing experience curve that is the most vital aspect for understanding the need for the US government to compete effectively with the governments of Asian countries to keep manufacturing healthy and strong at home. Economics experts ignorant of how important this science and engineering principle is fail to grasp this. Related to this is the idea of a virtuous cycle in manufacturing- whoever braves the hard years of moving up the learning and experience curve gets rewarded because once that country has mastered that skill it gets better an better as the technology advances- making it harder and harder to prevent a new monopoly in manufacturing by the country (Japan, China or Taiwan) that had the highest costs and the least advantage ten or 20 years earlier but just persevered through it all with the government's help to gain cost competitiveness. This part does not make it into the economics textbooks which are mostly theory and much of it outdated by the time they are written. Observation is the best teacher and guide as it is in science, to guide policy and action. Obsessive attachment to theory that ignores observation becomes the enemy of progress. Comparitive advantage is one concept that needs to be retired even from the textbooks. Overseas manufacturing then is a piece of the overall picture that fits into what is good for the US. Macroeconomic principles determine microeconomic outcomes as opposed to microeconomic principles with companies out on their own being forced to compete without a level playing field, or handing out technology for special status in a recipient country as some do putting the US at a macroeconomic disadvantage. This is also healthy for the recipient country overseas, as recrimination with loss of manufacturing jobs in the US inevitably leads to the kind of recrimination that does not serve either country well as in the case of China today, and worse still can lead to conflict, even war. After the egregious situation of loss of manufacturing communities across the US leading to destabilizing the social fabric, it is hard to see such thinking prevail about the US not needing manufacturing as a vital part of its social fabric and industrial strength. China, it can be said, would have developed, and developed well over the past two decades without overconcentration of US and EU manufacturing in China. Without aggravating the problems of climate change and contamination of air, land and water, and destabilizing the social fabric in the US hurting workers and communities across the US, if macroeconomic policy was made to manage this process in the US government without it being left entirely to individual companies to decide. Instead China faces today a difficult situation through events such as destabilizing the social fabric in the US (the Trump tariffs), advanced economies in G-7 resistance to sharing of technologies, the damage to its environment from microeconomic locally determined policy at individual companies, and the global effects of climate change from climate unsustainable levels of growth since 2000.  ...
Wall Street Journal Original article ›
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Productivity as measured by GDP per hour worked was $44 in Italy in 2009. It has remained the same as in 1999. In the EU-15 (first 15 members of the EU) the GDP per hour worked increased from 47.9 in 1999 to 49.0 in 2009. For the U.S. this GDP in the same period went up from $56.0 to $58.0. This shows the lack of productivity growth in Italy. With the current focus on Italy's slow economic growth efforts are underway to make changes that would increase growth. GDP growth in Italy was 1.3% in 2010, compared to 1.8% for the eurozone, according to Eurostat. Italy's Minister for Public Administration Renato Brunetta says he would like to cut that gap in half. Some of the measures in the recently passed $40 billion spending cuts package, include efforts to help the underdeveloped southern region. This includes cutting red tape for real estate developers, and streamlining accounting for business. Italy's growth comes mainly from exports that make up about one fourth of GDP. But this comes from lower tech sectors such as textiles, chemicals and machinery, where it must compete with China and other countries. In May 2011 industrial output was up by 1.8% in Italy,compared to 7.5% for Germany. Another problem is the large and inefficient public sector and the gap between protected state workers and a younger generation- with one in three Italians 15-24 unemployed....
WSJ Original article ›
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The US economy is growing at a much faster pace than Europe or China in the last quarter of 2021- at 7% annualized growth in the fourth quarter up from 2% in the third quarter, according to Federal Reserve Bank of Atlanta. This compares to 2% in eurozone and 4% in China. Major US ports such as Los Angeles are processing 20% more container volume in 2021 than in 2019, while Rotterdam and Hamburg are almost flat compared to 2019 level. Consumption of durable goods has jumped 45% above 2018 levels in the US, only 2% in eurozone, according to ECB data. The factory gate prices in China are far outpacing the consumer prices in China, suggesting weak domestic demand and strong foreign demand. Lars Jensen, head of network at container ship company A.P. Moller-Maersk says the global supply bottlenecks were started by this surge in US demand with more ships headed for the US taking ships away from other places. The US economy will grow at 6% in 2021 and 4% in 2022, with wages growing 4% a year above the pre-pandemic trend rate, compared with 1% in eurozone, according to Bank for International Settlements. This is pushing inflation up in other countries by pushing up the value of the dollar. In Mexico hitting 7.4% and the central bank raising interest rates 0.5% point to 5.5%. In Russia inflation up to 8.4% and central bank raising interest rates by 1percentage point to 8.5%. The equipment investment in the US is up by 13% this year according to JP Morgan Chase, only 3.6% in eurozone, 0.1% in Japan. All this is creating a large gap between the US and Europe, US and China in economic growth and demand growth, and in income growth. ...
The Times Original article ›
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Forecasts from French bank BNP Paribas show Britain's national output or GDP is expected to grow 5.4 percent in 2022, faster than economic growth in China of 5.3%. China's growth is slowing sharply because the manufacturing sector is facing energy shortages, and the construction sector is faced with decades of buildup of debt that cannot be paid.

WSJ Original article ›
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No country benefited more than first Japan and then South Korea till 2000, and now China till 2022 from the trade and sharing of industrial technology enabled by the American backed system of trade and industry. Walter Russell Mead says in WSJ that China has chosen to challenge the system through which it developed into an industrialized nation with the US running huge trade deficits, sharing its technology and letting Chinese manufacturing displace American local manufacturing. China is seen as challenging the system. Yet what has happened is that this process of displacing American manufacturing and industry was not sustainable anyway and continued for a decade longer than it would otherwise have lasted because American industry could not easily reverse a course it had set of setting up manufacturing in China, once that manufacturing base had already been transferred from the US to China and American companies had grown accustomed to a new state of affairs of making overseas in China. Not much thought was given to how American workers would react to that situation as companies and industries making that transfer made independent decisions. This led to the election of Trump with wins in midwestern states that had suffered from loss of manufacturing communities.  The Trump tariffs on Chinese goods and the Biden administration lining up completely behind American workers and families for the first time for Democrats has sent the signal to China that it finds the situation of China's dominance in the trade system unacceptable. The document of "China 2030" of the Chinese Government with planned dominance in key sectors and industries was met with alarm across America in all parties. The paradox of Apple as a key sector in Chinese manufacturing and the largest American company is the result of policies pursued by America without realizing the true cost of shipping manufacturing out of the country. That process is now being reversed with change of management starting at Intel Corp. and other companies to bring the manufacturing base back to the US. This policy is being resolutely pursued by the US and will speed up following the pandemic which has further demonstrated how much of a mistake the policy of sending out manufacturing in critical areas such as health could be. This is the reality behind the rhetoric and verbal exchange between China and the US. With the rapid growth of Chinese manufacturing countries such as India were put in a difficult situation  as this was preventing the local industrial base developing in India with Chinese imports in the same way as it had damaged that of the US and the EU. Worse it led to the use of US and European technology in China's defense industrial base including aviation and other sectors that threatened India's borders with repeated Chinese incursions in the Himalayas, from the Pakistan western Himalayas to Ladakh and the eastern Himalayan mountains. That situation existed long before the Trump and Biden administration and the Modi administration called for a return to America of its industrial manufacturing base and its technological leadership. Both the Bush and Obama administrations and the Indian Congress administrations failed to realize the dangers of letting the US, European and Indian industrial base wither. India is not just a country but a culture that extends from the Himalayas all the way across Bangladesh to the Indonesian islands which shares a common cultural history of Buddhism and the Vedanta. This is a region that has a population of about 2 billion people. In a larger sense the cultural history extends to  Vietnam and Japan with its Buddhist culture whose origins go back to India, and also of China itself. In the larger sense this is a population of close to 3 billion people. The economic development of this region and learning from the parliamentary traditions and scientific discoveries of the modern period since 1700 is a task for both the US, Europe and the people of the region.   ...
The Economic Times Original article ›
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Prime minister Modi's visit to the US comes at a time when US president Biden is eager to show the US is fully engaged in the Indo-Pacific region with its allies in the Quad 4 countries- Australia, Japan and India. The recently announced Aukus defense agreement brought together 2 members of the Quad 4 the US and Australia, plus the UK. Aukus is designed to strengthen US presence as a naval power in the Indo-Pacific region in the Indian and Pacific oceans around India, Southeast Asia, China, and across the Pacific. After a futile engagement in Afghanistan the US is reorganizing its presence where it is strongest- in the oceans. In a way that Britain once did in the eighteenth and nineteenth century, the US is dominant in the high seas. US naval power far exceeds that of all navies in the world combined. This is meant to reassure India, Bangladesh, Sri Lanka, Thailand, Malaysia, Indonesia, Philippines, Vietnam, Australia and Japan, which together have close to twice the population of China, that the US has not diminished its presence in any way from that it had in the 1950's following the Second World War. With this new framework India enters discussions that will focus on health to deal with the pandemic and its after effects, with security and rule of law in the Indo-Pacific region, with trade, technology, new supply chain manufacturing structure in which India plays a key role. With this new focus and clearing past engagements made by other US  presidents, including some mistaken policies, the US emerges as a new force in the Indian ocean, China seas and Pacific ocean region.  On September 23 Modi meets Tim Cook for what could be new supply chain arrangements that Apple could be preparing as it and other US corporations build new supply chain structures to rebuild US manufacturing technologies capabilities that were lost to China over the period 2000-2020. During that period manufacturing technology knowhow was shifted out of the US in a mistaken policy that assumed design and invention were sufficient for the US to keep. The first step in this direction was a change of CEO's at Intel Corp with US president Biden pushing for new US technology reclaiming policy. Following that the new CEO at Intel Corp, Patrick Gelsinger, completely reassessed Intel's mistaken policies of ceding its entire semiconductor manufacturing technologies capabilities to Taiwan and China. Intel made a U turn and is now investing all or most of $50 billion in the US instead of in China or Taiwan.  On September 24 Modi meets Mr Biden to discuss trade, investment, defense, and security. On the same day the leaders of Japan, Australia, Mr. Suga and Mr. Morrison join Modi and Biden for the Quad 4 talks. Indian infrastructure capabilities and Indian economic growth would be key goals to strengthen India along its land borders along Tibet occupied region and Himalayas as part of the overall effort to build a new US and allied presence in Asia.  On September 21 Modi attends a Covid Summit that will look at the way forward in the aftermath of the pandemic and ways to vaccinate the remaining unvaccinated population in the world, as well as vaccination passports.  ...
WSJ Original article ›
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The Sri Lankan economy, jobs and growth are affected by economic relations with India, loans and assistance from India, and from investment from India in the 2025 period. USAID plays very little part in jobs and growth. This is true of other countries.  In the past the USAID was seen as part of the activity of the State Department overseas yet kept separate so that aid would not be based on US diplomatic activity. Over time it became a place which supported what critics call bureaucrats pet projects in developing countries. Many developing nations have advanced in their development and no longer need USAID projects, this includes India, Indonesia, China, Vietnam, Brazil, Chile, and parts of Africa. Because development aid was at one time critical as in the period when John Kennedy came to office in the Cold War with the Soviet Union, many nations in Asia and Africa were just becoming independent there was a sense from that time that its acitvity and budget was somehow both independent of the State Department and sacrosanct. As a result it became a target of critics and did not advance the US interests overseas as the US Information Service, the VOA Voice Of America and other agencies have done. A country's development no longer depended on USAID. Why does it need to be separate when it should advance US goals and interests around the world which are benevolent- consider that it is the US that helped build up the Chinese economy and still provides it with a large market. ...
DW.COM Original article ›
The Times Original article ›
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Following Brexit on January 31, 2020, Britain's government led by Boris Johnson prepares to negotiate new trade deals with the U.S. and other countries. The freedom to negotiate these trade deals was a key part of the plan of Brexit supporters and Mr. Johnson. The Times, Britain's leading newspaper, looks at the prospects of trade deals with each country- the U.S., Australia, New Zealand, Japan. Facing re-election Mr. Trump is seen as favorably inclined to work out a trade deal that he can show during the campaign. Trade discussions have taken place between the UK and Australia, Japan. Mr. Morrison in Australia and Mr. Shinzo Abe want to see strong trading ties and investment with Britain. Japan or Australia could be the first countries that work out a trade deal with Britain as discussions are at an advanced stage.  Britain has a small deficit with Japan in trade. It has a small dollar surplus in trade with the Australia and New Zealand. With the U.S Britain has a large surplus, it exports 121 billion pounds and imports 76 billion pounds. The prospects of trade deals are enhanced by the similarity in outlook of the governments of the U.S., Australia, and Japan, which share views on jobs expansion, economic growth and are centre right in economic philosophy. They also share a strong connection with working class voters under Johnson,Trump and Morrison. Mr. Trump is seen as a strong deal maker so that any deal would involve some concessions from Britain that increase U.S exports, including farm exports. Difficult issues with the U.S. are -pharmaceutical drug imports that could increase Britain's NHS cost for drugs, the digital services tax from Britain on U.S.  companies such as Google and the Trump retaliatory threat to impose tariffs beyond the current 2.5% on car imports of $11 billion from Britain. On agricultural imports Britain's natural foods preference conflicts with imports of genetically modified (GMO) foods from the U.S. Experts say this could lead to a partial or Phase 1 deal that does not need approval from the U.S. Congress, similar to the Phase 1 trade deal with China which sidestepped the thorny issues on trade. This is something both sides can show their support base as a win. ...
NYTimes.com Original article ›
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This NYT report looks at the 20 counties within 5 battleground states in the midwestern states of Wisconsin, Michigan, eastern state of Pennsylvania, southern state of North Carolina and western state of Arizona. It shows the percentage of votes gained by the Republican and Democratic parties in the last 3 presidential elections. A look at the trend and direction of vote percentages gained by each party in each of the 20 counties in different states may be a better indication of the final result than polls alone as both parties are pushing hard in the 2020 election down to the last day. The Republicans strong in the ground game and organized effort, and Democrats in television advertising outspending the Republicans. Because of the clearly delineated positions the Democrats and Republicans stand in sharp contrast to each other both in image and substance.  Because of the Electoral College and states assigned electoral votes based on size the U.S. system is not based on the total vote count in the country. Who wins each state by vote count and gets the assigned electoral college votes assigned to that state, an builds up more than 270 Electoral College votes wins the election for president of the USA.  In Michigan there is the impact of the resurgence of the auto industry, with president Trump pulling out of TPP agreement and renegotiating NAFTA in favor of the U.S. auto industry bringing back jobs from Mexico. This puts the union vote in the auto industry- with Ford, GM and Chrysler located in Michigan- favoring these auto friendly policies from the current administration. The resilience of the auto industry sales during coronavirus is part of the economic story in Michigan. The renegotiated NAFTA treaty also helped dairy farmers of Wisconsin increase sales to Canada. In Pennsylvania the coronavirus and economic impact has hit harder than in Michigan with the decline in oil prices and effect on fracking industry. Closure of coal plants is also having a negative impact on the state. Tariffs on Chinese steel by the administration are helping the steel industry. Offsetting these economic stories is perception of how the coronavirus pandemic has been tackled by the administration. Added to this is the suburban women's vote and the shift of out of state liberal voters to suburbs in North Carolina (Wake county), and in Arizona (Maricopa county and Tucson area). States not covered here but also relevant are Minnesota which could be a battleground state in the midwest and Iowa. Racial protests in Minneapolis add another dimension with controversies about the policing in cities such as Minneapolis and recently Philadelphia. The sharp contrasts in image as well as policy, the coronavirus pandemic and the handling of the pandemic as well as the way rallies are being conducted differently by both candidates, and the economic stories, present an election like no other since the 1960's. The contrast is as sharp as between Gen. Dwight Eisenhower of the wartime allied effort and Adlai Stevenson a liberal and humanist in the 1952 election. That election saw some of the highest turnouts since the second world war, and this is now happening today. That election also determined the direction of postwar growth and dominance of American industry, the setting up of the National Highway system and important changes that were later continued under the Kennedy administration. It also marked the beginning of the Cold War following the Korean War under the Truman administration, a situation that is emerging in a different way today with the free world and the tension from relations with China. ...
WSJ Original article ›
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This story in the NYT showing America's GE building a wind turbine three times as large as the Statue of Liberty in New York harbour, comes after a decade of bad news from GE, beginning with its role in the mortgage financial crisis when its stock dropped to new lows. Bad bets on conventional power generation in its power division are leading to the change at GE where it is now investing in renewable energy. Under CEO Immelt GE did not anticipate the surge in growth of renewable energy powered by government subsidies. Now GE is pursuing an aggressive strategy by building larger wind turbines than its competitors Vestas in Denmark and Senvion in Germany. A 12 megawatt turbine is planned by GE called Haliade-X, to be built at a cost of $400 million for demonstration in 2019, shipping units in 2021. Competitors are looking at building a 10 megawatt wind turbine. Vestas SA and Mitsubishi Heavy Industries have a 9.5 megawatt wind turbine in operation as prototype in Denmark. The bit of good news comes with the backdrop of big changes at GE as its power division falters badly. GE under Immelt badly misjudged the market for gas and coal turbines, building inventory and resorting to aggressive pricing, not anticipating the push evident in Germany and in China towards renewable energy. The shift to renewable energy reduced demand for conventional power in Germany and the U.S. In Germany. Electric companies in conventional power generation are struggling. At GE orders declined by 25% and profits by 50% in the 4th quarter over the prior year. 12,000 job cuts are planned in the power division, 18% of its workforce. Older board members at GE are expected to leave, and GE under new CEO/Chairman John Flannery plans to shed $20 billion in assets in a major restructuring and shift to renewables.   Larger wind turbines of 10 megawatts or larger are the next stage in wind energy as the Netherlands and Germany move to build wind farms free of subsidies. The economics of larger wind turbines are critical as less geographic acreage is needed with larger turbines. ...
Wall Street Journal Original article ›
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Kyle Wingfield meets up with Robert Mundell, Nobel winner in 1999. What does he have to say now? He thinks the oil prices are on track and would reach $130 by 2020 with 3.5% inflation, starting with $34 a barrel in 1980 doubling to $68 in 2000 and doubling again to $136 in 2020. Today its already at $136 but he thinks it will settle down lower to about $100, so hethinks were not so far off track. On inflation he looks at the price of gold at$850 an ounce , and now its still about the same, with high inflation gold should be at $1500, so he does not see the public thinking high inflation is coming. He was in favor of the Reagan tax cuts and set the groundwork for this and aslo supported the euro. He believes the Bush tax cuts should be kept as it would be disastrous for the world economy. Mundell has always believed that there is a link between economic growth and lower tax rates. He advocates corporate tax rates of 25%. Tax rates went down to 28% under Reagan back up to 40% under Clinton and down to 35% under Bush. Hewould like to see a ceiling on marginal rates of 30%. He would like to see a fixed exchange rate so that there are not these large currency rate swings, the euro should be valued somehwehere between 90 cents to the euro to $1.30. The US has a growing population and better adoption of innovation with a younger population than Europe so he sees the USA as a leader in innovation and growth and the dollar or some new global currency should be formed for a global economy. Just as he supported the euro he supports a currency for Asia. He does not see overvaluing the Chinese currency as doing much good as he sees the Japanese economy hurt by the overvaluing of its currency after a period of Japoan bashing. He is an advisor to China on currency issues....
Wall Street Journal Original article ›
LyrArc Article Gist
Joe Parkinson of the WSJ gives a in-depth account of the emergence of Recep Tayyip Erdogan in Turkey's politics, with contributions by Emre Peker, Ayla Albayrak, Yeliz Candemir. Erdogan grew up in a poor neighborhood of Istanbul, and became the head of a local youth branch of the Islamist National Salvation Party in 1976 after an adolescent period steeped in mosque culture and Islamic ideas. In 1994 he is elected Mayor of Istanbul amid voter discontent with corruption and problems with infrastructure and public services. He served for four years making improvements. After reciting a poem publicly that said "the mosques are our barracks, domes our helmets, minarets our bayonets and faithful our soldiers," he is jailed for 4 months by a military backed secular government in 1999. During this period Erdogan, described by friends from his youth as having a unique ability to adapt to difficult situations, makes a transformation. He moves to the centre, coming out in favor of stronger ties to the EU, and works hard to attract support from the secular and nationalist voters to add to his conservative religious base. In 2003 he is elected prime minister as head of the Justice and Development Party. This begins a period of ten years in which Turkey sees remarkable period of economic growth during which Turkey's GNP nearly quadruples from a little over $200 billion in 2002 to $794.5 billion in 2012, according to the IMF. It may be partly coincidence and partly good management of the economy under Erdogan. Turkey's previous banking and currency crises before 2003 created a better understanding and discipline for managing the economy. Emerging markets such as Brazil, India, China, Russia, Indonesia, and other parts of Asia and Latin America were able to achieve high rates of growth during this 10 year period. Competitiveness in Brazil and Turkey has not improved significantly in this period according to experts, and large capital inflows into Turkey partly supported the credit boom in Turkey. And just as growth is slowing significantly in all emerging markets, Turkey under Erdogan faces a new test. Especially now that Erdogan is seen as autocratic in his effort to suppress protests to build an Ottoman era army barracks in Taksim Square, Istanbul. The fears of secularists in Turkey are that this is the Erdogan of the period in 1999, after serving as Mayor of Istanbul. Just as Turks turned away from the overreaching actions of the military, the public sentiment may be shifting beyond the overreaching actions of the religious parties in Turkish politics. The protests in Brazil against the Rouseff administration after the popularity of the Lula administration, show that slowing economic growth and missteps by the elected government can alienate younger voters. The parties still retain a majority but face an uncertain future in which lower economic growth and missteps lead to a search for alternatives. At the same time Turkey's efforts for accession to the EU are beng put on hold as Germany opposes the actions to suppress protests of the Justice Party in Turkey. ...
POLITICO Original article ›
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DJT 1.0 was led on the tariffs policy by USTR Robert Lighthizer, who had experience negotiating with the Japanese negotiators in the Reagan era. He is today respected by  Republicans, is seen in an important role in economic policy and to prepare the tariff policy actions of the new DJT administration. Lighthizer prefers to get Congress to take action with legislation. He also believes that domestic manufacturing will make gains with new and higher tariffs on Chinese imports. Lighthizer policy is falsely compared with Hoover Tariffs Act of 1930 when world trade was 9% of world GDP, today it is 63% of world GDP, and where under Hoover in 1930 the tariffs were across the board all countries 20,000 goods. Under Lighthizer on specific products where dumping is happening -steel, aluminium, autos, with Japan in 1960-70 or China 2000-2020 targeting American industries + technologies for takeover. And falsely when it comes to raising costs to each American family on average by $4000 a year by economists. The conventional view for business for 2000-2016 through Bush and Obama favoring free trade did not take into account the unusual experience of China which entered WTO in 1990, then expanded in a way unprecedented in history at 10-12% growth rates for 15 years destroying American manufacturing with dumping, having support of outshoring by companies in the US, and not giving reciprocal treatment for exports from the US to China. China also had unrestricted access to US technologies in this type of trade. Lighthizer's approach was to specifically address this problem not a general across the board tariffs on all goods (20,000 goods) on all countries as with the Hoover Tariffs Act in 1930. Lighthizer's approach adopted by DJT called for reciprocal trade response with China as the US had already done with Japan, not unilateral across the board tariffs, and when world trade had advanced to about zero tariff rates. And falsely compared to Hoover 1930 Act because under Hoover tariffs were 29-40%. raised to 60% when world trade was small, was 9% of GDP. The Biden administration has tacitly agreed with Lighthizer's vision by not reversing DJT tariffs. A new higher tariff will probably be selective based on the industry, country and what goals the US has set under the new administration for that industry. Some of the tariffs revenue may also be used for tax cuts. ...
WSJ Original article ›
LyrArc Article Gist
Much of what is written here about Xi Jinping pursuing Chinese socialist vision was known since he became president in 2013 when China's Communist party was losing its appeal, and efforts were made to seize power within the communist party by a leader in the western province of Chongqing. Bo Xi Lai attempted to take advantage of the situation with appeals to the working class and without any genuine commitment beyond a power grab. It was well known that Xi Jinping is a son of one of the veterans of the Communist party under Mao, Xi Zhongxun, unlike leaders who followed premier Deng Xiaoping such as Jiang Zemin. Zemin was a relatively unknown figure who was in university during the crucial period of 1947-49 when Mao came to power in mainland China. It would not be correct to say that little was known about Xi's own ideas about socialism as the long term answer to China's problems. Xi also came in as president at a time when the Communist party was losing its appeal to working class people after three administrations that followed premier Den Xiaoping. These three administrations followed a form of state capitalism that allowed companies to pollute the environment, compete without any regulations, and allowed to operate without any controls as long as they pursued growth aggressively and expanded the economy.There was an effort by Communist party regional leader in western Chinese province of Chongqing, Bo Xi Lai, to use this as an opportunity to grab power in China. During his first year as president Xi had to resolve this issue by having a court trial after revelations of corruption and misuse of power by Bo Xi Lai.  Xi's father Zhongxun's role in the revolutionary movement offers clues to Xi's own convictions and faith in the party. Zhongxun was a communist soldier who set up the revolutionary base areas in Shanxi-Gansu northwest border region of China that provided a refuge for Mao's army following the Long March. Other clues come from Zhongxun's role as head of propaganda during the period after 1944 and in 1952. Xi's family background particularly on his mother's side shows a fervent commitment to Chinese socialist vision during the chaotic years when the Japanese invaded China and Chiang Kai-Shek's nationalist forces failed to defend China's sovereignty. One reason Xi has been less understood is that little attention is paid to Xi's mother, Qi Xin who was highly educated and fervently believed in Chinese socialism and nationalist spirit during the Japanese invasion in 1938. In fact Qi Xin had to leave middle school after the Japanese took over Beijing. She joined the Counter Japanese Political and Military University to continue education and in 1941 attended the Central Party school. She met Xi's father Zhongxun in 1944. In 1953 she enrolled in the Marx School of Communism, and it was her position at the school that offered her husband added protection during the Cultural Revolution that affected Deng Xiaoping and others. With such a history in the 1930's, 1940's, and 1950's it is likely that Xi was profoundly influenced by his father's role in the revolutionary movement, and his mother's faith in socialism with national spirit as the way to protect against the foreign invasions. It would now appear that by the time Xi joined the Politburo in 2003 there was no question about the future course China would take given the role of his parents, and the events of 1938 the fall of Beijing, his mother having to flee, and the events that followed. Xi showed resilience during the period of the Great Proletarian Revolution when he was sent to the villages at a time when he would be studying in school and college. He was sent to an agricultural commune in largely rural Shanxi province where he worked as a manual laborer alongside other people and developed a relationship with the local farmers. Unlike other leaders during that period which could even be said about premier Deng Xiaoping in 1989, Xi took a different lesson from this experience largely because his father and mother were committed to the socialist vision for the long run. His father was still not fully rehabilitated by premier Chou en-lai when Xi was allowed to enter Beijing's Tsinghua University in 1975. He studied chemical engineering at Tsinghua graduating in 1979. Upon graduation he worked as a assistant for 3 years to a vice premier who was minister of defense. He then left Beijing for Hebei province to work as a deputy secretary of the provincial CCP. He was made Mayor of Xiamen, then governor of Fujian province in 1999 where he tackled environmental conservation before moving to Zheziang province. His father passed away in 2002 and it would appear that he was carefully trained in different provinces instead of staying in Beijing, for a position of national leadership. Xi got his break in 2007 when the upper leadership of Shanghai city was tainted in a wide ranging pension fund scheme. He was made party secretary for Shanghai. This was the position Jiang Zemin had held before he succeeded premier Deng Xiaoping. In only a few months in October 2007 Xi was made one of the 8 Politburo members, ready to succeed Hu Jintao as president. Xi's perception of being sent to the villages and making it to university education was that it was part of the long run socialist struggle, with pain that his father had also endured as simply a phase in which things would be right in the end. Xi's mother comes across as a resilient figure and one who had herself gone through the struggles of the 1930's and aided her husband on one occasion. Some of this resilience could have been passed on to the son. Xi's wife is a zealous participant in Chinese dance and music performances that created enthusiasm for the Chinese socialist revolution from the 1930's period. In his conversations  with colleagues in the party, in culture and temperament, Xi has been forthright about this background and his style of work.  Xi is unlike premier Deng and the presidents who succeeded him such as Hu Jintao mentored by a former mayor of Shanghai Jiang Zemin who came to power in 1989. Xi is more in line with the leaders around Mao like his father in his outlook and thinking, with a cautious temperament that comes from years going through ups and downs of political struggles. He is once said to have responded with dismay about being in a top position in the government knowing how precarious this had been for his father. The education at Tsinghua, his engineering background, and his easy familiarity with farmers in the provinces, mean that he understands China and its history well enough to have the confidence to shape Chinese policies in a way that none of his predecessors had except Mao, premier Chou-en-lai, Liu Shao Chi and a few veterans from that time in the 1930's. That Xi waited patiently for so long to gradually assert his ideas about socialist vision for China may be the surprising part of his behaviour till 2021.  It may be that he wanted to make the changes only after he could persuade party leaders and colleagues of his vision and long run goals. And because the Chinese economy had grown so large that it would take time to steer the ship in a different direction for the long term. In most of the negotiations with president Trump he cautiously let trade negotiators handle the situation, all the time learning about how to tackle problems of China's relationship with US and Europe. US president Biden also has a vision that is veering towards a socialist perspective in terms of bringing gains of progress to workers and families. So does Mr. Trump, Mr. Boris Johnson in UK, and Social Democrat's Scholz in Germany. It is both economic and political as Mr. Xi is quoted as saying in this WSJ report. The necessities of such action are both economic, social and politically driven as capitalism has veered way off course.  In this report it is mentioned that Soho China 40% stake was taken by a large capital markets firm in New York in the hope of large gains, as Soho China developer was a tycoon who wanted to leave China. Seeing it as not favorable to his company following events in Hong Kong. This behaviour of capital markets groups in New York and tech companies in Silicon Valley, driven by profits and not aware of the social and economic problems of working class American families is a problem in the US and in Europe. It is also what has driven so many large tech companies to expand manufacturing operations in China, that hurt US manufacturing capabilities and American workers jobs- an issue raised by president Trump and taken up by president Biden. Biden has already moved to make Intel Corporation change its plans and invest in American manufacturing technologies in a quietly implemented U turn. US president Biden is left with the unenviable job of solving this huge problem during the pandemic. He has also committed to a somewhat socialistic vision with a $3.5 trillion plan for workers and families, as has vice chancellor Scholz in Germany with his own version of programs, after the failures of unregulated forms of capitalism. Scholz goes so far as to say his mission is to show that there is really no such thing as a self-made man, that it is help from society, his fellow citizens, and government, that makes it possible for him to do his work. In a sense the world is shifting away from Reagan forms of capitalism without regulation after seeing disastrous results during the pandemic. Not just China. Some form of government guidance and regulations are now seen as essential in China, the US, UK, Germany and India for a better society and a better, healthier life, and for opportunity for all in each country.   ...
New York Times Original article ›
LyrArc Article Gist
Steve Lee Myers reporting from Moscow and St. Petersburg, Jo Becker from Washington and London, and Jim Yardley from Nicosia, Cyprus, provide this extraordinary and exceptional report on the rise of a small group of friends, mostly from Mr. Putin's time in St. Petersburg, into a new sort of oligarchy replacing the old one under Mr. Yeltsin. This includes more familiar names such as Sechin at Rosneft, but also less familiar names such as Mr. Kovalchuk, chairman of Bank Rossiya, which owns major television and radio stations and newspapers in Russia. M. Kovalchuk is described as having acquired many of these media properties at a fraction of their real value. Bank Rossiya assumed management of assets of Gazprombank, and Gazprom bank purchased Gazprom Media with five television and a number of radio stations for $166 million, when Medvedev, a Putin associate put the value at $7.5 billion 2 years following the acquisition, according to this report. Other assets acquired in this manner include Channel 5 and Ren TV, giving Putin's inner circle control of the media and reducing any critical or different views on issues facing Russia. Many of Gazprom's assets were transferred to Bank Rossiya, say critics, including insurer Sogaz which was acquired for $100 million, later valued at $2 billion, says the report. Names on the this inner circle also include Yakunin, head of Russian Railways, also include names like Fursenko and Timchenko. Most of the people in this inner circle are now targets of western sanctions. Missing in this report is mention that that this inner circle of the second term as president replaces the larger circle of the first terms as president and prime minister, with Putin benefitting from experts and advisors in the first terms. That circle included Finance minister Kudrin known for his successful management of the economy, and others who left the administration after flawed parliamentary elections. Even prime minister Medvedev is not mentioned as part of this inner circle, suggesting a degree of isolation which could be perilous for the Russian economy as it deprives the Russian president of different opinion and useful advice. This is a pattern seen in many emerging market countries which experience corruption during the period of industrial development. A pattern seen also in China under the Communist Party. And in Venezuela where a new Bolivarist class was created. In emerging market democracies such as India and Turkey the problem is also present, except that in India the recent open election led to the ouster of the Congress led government with many cases of corruption in its second term. A similiar election led to a new government in Indonesia, showing that there is another way beyond the Putin Way. Behind the protests in Hong Kong and in Russia, as well as in India, were the huge gaps in wealth and the growing inequality, corruption, lack of responsiveness of ruling governments. In Russia this takes another dimension with efforts to control the internet and media, and efforts to spread this style of democracy. This has created problems in the Putin government's relations with western nations having open societies and free media, and unwilling to accept a distorted model of democracy. Another less noticed aspect of the evolution of these emerging markets is that upto a point development proceeds even accelerates even in the presence of corruption, and then reaches a point where development and growth slows with problems of corruption, mismanagement of resources, declining productivity, economic and political errors, or unfavorable external environment. India faced this problem in 2012-2013, Russia is likely to face this in 2015, and China faces the prospect of growth slowdown by 2016. This feature of emerging markets also reminds one of the frequently quoted old English saying by Lord Acton- "Power tends to corrupt, and absolute power corrupts absolutely." An idea also attributed to William Pitt the Elder who said- "unlimited power tends to corrupt the minds of those who possess it." ...
WSJ Original article ›
LyrArc Article Gist
Even though U.S. president Trump has singled out countries such as Mexico, South Korea and China for trade practices, the U.S. today faces stronger competition in trade from Germany. The trade surplus with Germany for 2016 was $297 billion for Germany compared to $245 billion for China, according to Ifo economic institute. China's trade surplus according to the World Bank was down from 10% of gross domestic product or GDP in 2007 to 3% in 2016, while Germany's has gone up to 8.5%. The Chinese currency is seen as not being undervalued by some experts, while the euro has lost a quarter of its value in the last 3 years, giving Geman exporters an edge. The U.S. also competes with Germany in nine of the 10 export categories such as machinery and electronic equipment, according to the Peterson Institute. Then why is the focus under U.S. president Trump not including Germany? One reason is that China's products have put a downward pressure on U.S. manufacturing wages, and the the speed with the Chinese manufacturing has grown in certain industries. Germany has very few of the manufacturing subsidies that China provides to its industries. And the depreciation in the euro is not favored by the German government as it opposes the policies of the European Central Bank. Germany also has a higher propensity to save about 10% of GDP compared to about 3% for the U.S., according to OECD. As a result Germany is accumulating foreign assets at a faster rate than any other nation, while the U.S. is borrowing capital from overseas. Ways to change this are minimum wage regulations introduced by the government, but larger measures such as increasing government investment in the economy are not supported as the country prepares for the future with an aging population.   ...
Economist Original article ›
LyrArc Article Gist
A steady decline in the price of Brent crude from $115 to $92 in the period from June to October 2014. Slow or no economic growth in Europe, and declining growth in China was the main reason. A cut in oil price by Saudi Arabia in September with lack of coordination in OPEC to control supplies when prices are declining, and increasing supplies from the U.S., provided additional basis for price declines. This price decline comes as large energy companies invested heavily in mega-projects to bring more oil supplies when prices were up to $128 by mid-2012. Consulting company EY estimate is that there are 163 such mega projects worth $1.1 trillion underway, most behind schedule and over budget. The projects were based on oil prices being over $100. Oil field development costs are increasing rapidly. Douglas Westwood, a consulting firm, estimate is that productivity of upstream capital spending has fallen by a factor of 5 since 2000, declining by 5% a year, as oilfield equipment and services demand exceeds supply. Greater technological sophistication also adds to cost such as Shell's Nobel Bully platform for deep sea drilling. See link- Noble Bully. Oil majors are now cutting spending, and some planned big projects are on hold. About $300 billion in assets may be up for sale. Shell plans to cut spending by 20% in 2014, Exxon and Chevron 5-6%. Shale oil projects in America need about $57 to be profitable with an internal rate of return of 10%, by one estimate. Yet this is an average and does not reflect differing producer costs. This estimate does not reflect the high cost producers, some of whom need closer to $110....
WSJ Original article ›
LyrArc Article Gist
The U.S. Federal Reserve announced on Dec. 13, 2016, that it would increase its benchmark short term interest rate by 0.25 percentage point, to between 0.50% and 0.75%. The increase will also be reflected in business and household borrowing costs. The Fed also announced its intention to make 0.75% percentage point increase in 2017, possibly in 3 quarter percentage point moves. The Fed's forecast is for the fed-funds rate to reach 2.1% at the end of 2018, and 2.9% at the end of 2019. The Fed's policy is based on a sense of strong labor market with unemployment falling, and says it is based on discussion at a 2 day meeting, and "in view of realized and expected labor-market conditions and inflation." This reflects a view that there is now not that much slack in the labor market, that further improvements could trigger higher inflation. Fed forecasts for inflation are for it to increase from 1.5% in 2016 to 1.9% in 2017 and to the target of 2% in 2018. The unemployment rate of 4.6% in 2016 is forecast to go to 4.5% in 2017 and remain at that level till 2019. Economic growth is forecast at a median annual rate of 1.9% in 2016, 2.1% in 2017, only a slight improvement from last forecast in Sept. 2016. Support for chairwoman Yellen's policy decision was unanimous. See the link on views of NYT's Binyamin Applebaum and Neil Irwin on how Fed rate policy and economic growth under the Trump administration is likely to play out, and Ian Talley's report on impact on exports with a stronger dollar in WSJ. These views also are in line with the Fed's forecasts and policy decision as they reflect the concerns of the Fed about inflation, and also reflect the Fed's view that growth will be close to 2% in 2017-2019, and not the 3-4% stated by Trump and Treasury Secretary Mnuchin. Fed rate policies to keep inflation at about 2% tend to counter stimulus spending by the Trump administration and effect of tax cuts. The size of the stimulus and the tax cuts are also likely to be much smaller than stated because of Republican concerns about the deficit in the U.S. Congress, according to these views. The stronger dollar also has the paradoxical effect of making trade gains more difficult while increasing trade friction in tougher bargaining supported by Trump, making the higher growth targets harder to reach.   ...
Wall Street Journal Original article ›
LyrArc Article Gist
Bank of America CEO, Brian Moynihan sees economic growth at 2.5% for the U.S. in 2014, and global economic growth for GDP at 3.5%. He expects the Fed to continue its bond buying program in 2014 to prevent any backsliding in economic growth in the U.S.

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