LyrArc Article Gist
The Guardian makes a serious point that the German miracle 70 years ago after World War II, was based on giving debt relief to war torn Germany. Half of Germany's borrowings accumulated after two world wars were written off. Germany was allowed to repay a large part of its debt in its national currency. The cost of servicing the debt was kept at 5% of export revenues. In 2021 the comparable figure is 16% for poor indebted countries. Yet the generosity extended to Germany is not extended to poor indebted nations in 2023, says The Guardian. There is no space for them to gain industrial strength or control, says this editorial. Big powers are not in a hurry to let poor nations develop away from sectors such as agriculture and mining. Private bondholders would be the biggest ones to pay for international debt relief- institutional funds and investors lent 250 billion dollars to 55 most climate vulnerable countries, China 46 billion dollars. It calls on US and UK to pass legislation requiring private bondholders to take part in international debt relief, as bonds are covered under English or New York law. ...

LyrArc Article Gist
Mitt Romney states the case for supporting free trade both in principles and practice. Acceptance of the staus quo allows China to game the world trading system, says Romney. In the end accepting the status quo may do more damage to the world's trading system than any efforts to correct the misalignment in currencies and failure to rebalance the world economy. He questions the passive approach of some members of Congress and the Obama administration on the grounds that starting a trade war makes them nervous. China with $273 billion more in exports than imports to the U.S. has reason to see this issue objectively, even with all the noise it is making about trade retaliation, suggests Romney. Other experts have pointed to the problems the misalignment creates for China's economy. A New York Times editorial on October 15, 2011, cites figures from the Peterson Institute of Economics showing this costs China $240 billion a year through trade surpluses in dollars that are declining in value. For years China's fears are that this would lead to higher unemployment. This New York Times editorial points out that jobs have increased by about 1% a year since 2004, even with 10%+growth, because many of the manufacturing jobs use advanced manufacturing technologies. A firm response today also makes it possible to avoid the kind of sudden response that could take place later on if public opinion overwhelmingly shifts away from trade with China under status quo conditions. ...

LyrArc Article Gist
Efforts to boost the share of national income that goes to rural households and workers in China. The share of income taken by state owned enteprises and taxes paid by the enterprises would have to change for reducing the gap in incomes and reducing inequality in China.

LyrArc Article Gist
David Brooks says the Paul Ryan Budget proposal is a bold step forward that is badly needed in this debate on health care, even though it has some grave weaknesses which need to be corrected. It is a bold step forward because he says Democrats say they want no middle class tax increases, or are not willing to say what kinds of tax increases they support, and yet they believe the Medicare and Medicaid and Social Security programs are worth preserving. This is'nt based on reality. He cites the weaknesses, beginning with the one discussed in David Leonhardt's column in the New York Times on April 7, 2011. Too many Americans pay too little into Medicare taxes and expect to collect several hundred thousand dollars more in Medicare benefits. The example given in Leonhardt's column is from a study that shows 56 year olds with average earnings pay about $140,000 in dedicated Medicare taxes over a lifetime, and then go on to collect $430,000 in benefits. Middle class and affluent boomers can't get off paying their share like everybody else. Its just the right way for their children and the nation's children. Ryan's plan excludes older people reaching retirement in ten years. The other major weakness is that the cuts are too deep. Things like the Pell grants which Ryan proposes to cut back to 2008 levels need to be preserved, and more money has to go into science, education and research and early childhood education for the U.S. to be competitive with China and India. The Ryan proposal places cuts that would be required so that tax revenues need to be at 18% of GDP. The number where a larger consensus exists is for tax revenues at 20% of GDP (also supported by business and the Wall Street Journal's editorial columns). This would preserve programs that are most productive for the economic future of the U.S. Ryan's proposal lets the hope for reducing costs of medical care rest entirely on future retirees deciding how much medical care (tests, procedures etc) they consume through larger cost sharing. Yet a structure and framework is needed to manage these costs effectively, and some combination of incentives to retirees to control costs and an effective structural framework is needed. ...

LyrArc Article Gist
Speaking at a banking conference, advisors including the head of Russia's largest retail bank Sberbank, German Gref, minister of the economy, Aleksei Ulyukayev, and head of the central bank , Elvira Nabiullina, express deep concern about the economic prospects in 2015. Foreign investment is down from about $90 billion in the 1st quarter of 2013 to a negligible amount in the 3rd quarter of 2014. Capital outflows following the Ukraine crisis are estimated at about $110 billion by former finance minister Alexsei Kudrin. The ruble dropped to its lowest level against the dollar since the 1990's. And the sharp decline in oil prices with Brent crude at about $90 is another risk factor as 50% of the budget comes from oil and gas revenues and 60% of exports are still oil and gas, with no serious or effective effort to diversify under the Putin adminstration. Putin told the banking conference that a deficit free budget and reserves of $460 billion are "fundamental factors supporting stability." Advisors and leading bankers remain unconvinced. The problem is that even at the beginning of 2014 before the Ukraine crisis foreign investment had slowed to a trickle, similiar to what India experienced in 2013. The central bank head says her effort to open up the bond markets in Russia to foreign investors is now in vain because there are few foreign investors. Instead of reversing the situation as is happening in India with the new Modi administration, policy under Putin and the Ukraine conflict may have scared investors away with the increasing western sanctions and stagflation (estimated 8% inflation and about 0.5% growth in 2014). The head of Sberbank Mr. Gref told the banking conference- "The Soviet Union broke apart because of the mind boggling incompetence of the Soviet leadership. They did not respect the laws of economic development." The problem with sovereign reserves is that it can protect a sovereign currency such the Russian ruble or the Brazilian cruzeiro to some extent, but today's vibrant economies need foreign investment and foreign technology for growth. Even a country such as China with a trillion dollars in reserves needs the reserves in its special case because of its billion plus aging population, and is no exception to these laws of economic development about the need for foreign technology and foreign investment. ...

LyrArc Article Gist
Petrobras and the discovery 200 miles offfshore of the Tupi field with estimated reserves of 5-8 billion barrels of light crude oil. As Brazil is self sufficient in energy with its own ethanol industry helping substitute ethanol for oil at the pump, it can become a major exporter with this find. However even with Petrobras technology and expertise in offshore drilling its a challenge as the oil is 4.5 miles below the oceans surface, and involves drilling through 7000 feet of water and 17000 feet of sand rock and massive salt layer. Cost could approach $20 billion according to analysts with current inflation in oil drilling rig costs. It involves challenges like building floating liquefied natural gas plants. Gabrielli, the Petrobras CEO thinks Petrobras has the expertise to develop it on its own. If oil majors are given the chance to join in the development the investment terms will be ones that favor Brazil. Gabrielli pointed this out saying that Brazil had already incurred most of the risk in exploration offshore so the oil majors have far less risk and Brazil should invite them only on its own terms if needed. The Tupi field puts Brazil ahead of Canada in oil reserves and in the leagues of China and Nigeria, with new Brazilian reserves at 17.2 billion from the 12.2 billion barrels currently. Brazil has invested in refineries with 2 new refineries coming up in 2010 and 2014 to increase refining capacity by 40%. It is also investing to convert heavy crude oil into diesel and $8.6 billion to reduce sulfur at 11 refineries. The Tupi field will take about 7 years to develop. Similiarly the Kashgan field in the Caspian in Kazakhstan is also in difficult in this case icy and gases filled environment that will take years for a Eni led consortium to develop. When oil does come will the demand situation have changed with new conservation taking hold in the developed world and the cars in developing countries more like the Tata Nano at 54 miles per gallon consuming less gasoline? Even with increase in energy needs of developing countries, improved efficiency and new technology for conservation brought into developing countries could if not significantly reduce, at least moderate demand. To the point where prices drop from $100 a barrel to something more affordable to developing countries....

LyrArc Article Gist
The WSJ responds to president Biden ramping up renewable energy plans and linking Republicans with Senator Rick Scott's plan for sunset provisions on federal legislation every 5 years that Biden says would include Medicare and Social Security. WSJ is critical of Biden's renewable energy plans and calls for increasing production of oil and gas to meet energy shortages and price increases. It is also against a wealth tax, Biden's $2 trillion Workers and Families Plan, and Biden's plan for Medicare to negotiate drug prices. WSJ says real disposable personal income increased $4205 under the Trump presidency 2017-2020, and has since declined by $374 with high inflation depressing purchasing power. The impact of climate change requiring brave choices and strong action is missing in the Republican plan as Republicans focus on attacking Democrats controlling the presidency and Congress on the issue of inflation. The issue of remaking supply chains are on both the Republican and Democratic agendas with president Trump giving more rhetoric against China's role in dominance of supply chains and Mr. Biden taking stronger action in Theodore Roosevelt's style of carrying a big stick and quiet posture in restoring America as a manufacturing powerhouse. The impact of climate change is short term rather than long term as seen by the heat wave in South Asia today, the fires in North America and Europe. Republicans are losing sight of the importance of making the shift on renewable energy quickly with some short term pain, as they push for oil and gas solutions and a less effective program for renewable energy. Mr. Biden is taking on bigger risks in the short term in the midterms and beyond but following a sound policy of aggressively pushing renewable energy. This can also be seen in the importance renewable energy is being given even in countries with a need for coal and natural gas such as India. Modi's plans in India are to buildup renewable energy capacity with aggressive targets for 2030. ...

LyrArc Article Gist
Ed Finn, president of Barron's for 19 years from 1998 has observed the economy for decades and comes to the conclusion that the 2007-2008 banking crisis from Reagan style deregulation was the one principal factor the US economy and the people suffered from a lost decade that was extended to 15 years by the pandemic. This has ended under president Biden says Finn, with he says about 10% growth in S&P 500 every year since 2020 and expects growth at that rate for another 4 years under president Biden. What this says about ultra low interest rates is that it was bad for America and a result of the need for tackling the 2009 financial crisis. Interest rates need to be at the moderate level of about 4-5%, the level today, where savers are rewarded, retirees are rewarded, bondholders are rewarded, and excessive risk taking is penalized, says Finn. Moderate interest rates help mortgage holders and new companies start businesses. In short says Finn- this is the way a economy should be run. We were sold the idea of ultra low interest rates because no one wanted to talk about the bad effects of Reagan style deregulation that inevitably lead to lack of the financial oversight of regulatory authorites. Financial oversight by regulatory authorites needed for modern economies to run, whether this is the US, India, China, or any large European economy, it is an essential condition for stable long term growth that serves the needs of the people of every major economy in the world. The idea must be cast aside that economic policy must be determined by the swings in sentiment  every few decades in one direction to too little government from to too much government or reverse, and be determined by essential truths of how a sound and good economy is run. As the US enters 2024 what Powell a Republican, and Biden a Democrat, and the bipartisan group of Senators in the US Congress are saying is that we get it, and are with single minded determination making it happen. ...

LyrArc Article Gist
This report in the WSJ on the Indian economy says the impact of growth in India's largest state of Uttar Pradesh with 240 million people will play a big part in the growth rate of the Indian economy. It fails to say why. The answer is good governance, investment in infrastructure, logistics and manufacturing, a huge pool of tens of millions of engineers and hundreds of millions of factory workers. The lack of a large enough investment pool of investment funds and  failure to eliminate leakages from corruption, the lack of a plan such as the current Master Plan Gati Shakti for the whole Indian economy, lack of governments at the state and federal level combining setting targets and delivery dates for infrastructure roads, bridges, airports, logistical hubs, factory for advanced industry, lack of governance entirely focussed on delivery and timelines, were the missing pieces in development in India for 5 decades since the 1960's, a period in which as Mr. Modi says repeatedly Japan, Korea, China moved ahead and India fell behind. Does this potential exist only for Uttar Pradesh? India's industrialization model started in Gujarat, population of 72 million under Modi as head of the state government from 2001-2014. It now covers the western region of Gujarat, Maharashtra population 128 million and Rajasthan population 82 million  the region around Mumbai, Ahmedabad and Jaipur of about 282 million people. This will be the fastest growing region and the engine that will propel the Indian economy in the years ahead. Uttar Pradesh in the north is integrated into this development. So is another region Bihar population 104 million and Orissa 46 million, Assam 35 million states in the northeast of the country with a total of 185 million people. What do all 3 regions of over 700 million people have in common? The answer is state and federal government working using the Gujarat tested and proven model for development, rapid delivery, good governance, government working with industry, large investments in infrastructure and modernization, Make in India hubs for manufacturing, digitization. ...

LyrArc Article Gist
Under Mette Frederiksen immigration which reached 21,000 in 2015 was down to a little over 1000 a year. She is a strong fighter for workers and families and labor rights and yet tough on illegal immigration. She has been proven right about this as Britain and the US under Biden are seeing illegal immigration as a threat to workers and labour, are seeing the risks of distraction from illegal immigration doing a serious disservice to workers and families by making it hard to fight for workers and families on wages, cost of living and other issues.  Even with a strong record of fighting for workers and families, Frederiksen was one of the first European leaders to see the dangers of illegal immigration to society. It gave parts of the political spectrum that had no interest all along in workers and families doing well, an issue to run on that would come to cause grave harm to workers and families. This turned out to be the error of Angela Merkel a CDU leader brought up in Communist East Germany, who had no idea of the risks of her approach for open immigration. As Merkel let this chapter unfold it created fissures in Europe, with Tories and Nigel Farage taking Britain out of the EU and laying waste to its economy for 5 years till Labour's Starmer adopted a tough immigration policy and became prime minister in 2024. That danger then spread to the US in 2016 which also suffered as Republicans and Trump did the same in the US around rhetoric but without serious action on immigration till the Lankford- Biden legislation.  That bill would have closed the border with Mexico and ended immigration as an issue forever if passed into law in December 2023, as Senator Lankford says would have happened. Ending immigration as an issue forever alongside foreign wars as an issue, so that a concentrated effort could be made on improving badly damaged lives of workers and families. And on rebuilding badly damaged manufacturing in the US, rebuilding collapsing infrastructure, and competing with better education and healthcare with the large Asian countries China, Japan/ South Korea, India. ...

LyrArc Article Gist
Strikers at a Honda transmission factory in Hoshan, 100 miles northwest of Hong Kong are asking for raises of $117 or 800 renminbi in cash above the $132 a month or 900 renminbi that they are now paid. About 950 of 1900 workers at the plant are trainees, young people from vocational schools or high schools earn $132 a month. Older employees earn upto 1500 renminbi or $220 a month. The significance of this strike is that the Chinese government is tacitly encouraging the strike as it begins making moves to increase domestic consumption and make the economy less dependent on exports. This requires consumer's having larger purchasing power and higher wages. It also means that China will not remain the low cost manufacturer for manufacture goods makers around the world for very long. Consider the size of the increase and the policy change of the government and this implies a significant shift by China.

LyrArc Article Gist
in Areddy's piece yesterday the 24th in the WSJ he cites 100,000 accounts opening on average this month. NYT here cites 300,000 accounts opening each day. At 300,000, there would be about 50 ,illion new accounts in 6 months and 100 million new accounts in 12 months. Using the 100 million accounts currently open in the Areddy peice we have adoubling to 200 millon accounts in 12 months. What is the right number, and does anybody really know for sure. Anderson of UBS is quoted as saying only 10% of household wealth is tied up in the market, but at something like 200 million accounts, and speculative fever for another 12 months, this could end up with a big chunk of urbanized Chinese the ones most likely to be in the market. If we double the figure of $50 billon in daily stock trading we could see $100 billion in daily stock trading a year from now. The hidden part of the picture is whether Chinese banks have lent heavily to stock market speculators who would be unable to repay the loans in an adverse event and leave the banking sector in worse shape than it is now. Shang, and Guo at the Chinese Securities Regulatory commission and the China Construction Bank are likely to follow Zhou as Governor at the Central Bank. ...

LyrArc Article Gist
The Financial Times interview with the PM of India as posted on the PM's site. It makes no mention of the efforts for Clean India Swacch Bharat, cooking gas for tens of millions of women, tap water for every household in India, access to the internet and 4G and transition to 5G at data rates that bring access to all, and the modernization of Indian Rail with new technology making transport fast and with comfort. It shows gaps in understanding that are mind boggling. The PM talks in language that the financial community understands- startups, economic achievements, and leaves out the material above that he talks to in every speech in parliament about the transformative effects in the life of India's 1.4 billion people that the financial community does not see as its first concern.  The financial community today is shortsighted and lacks a sense of history and transformations that have already happened. Japan's from the Meiji period and its phases of modernization by 1900, 1900 to 1930's, and 1950 to 1960's. China's after 1990 and between 2000-2019. And India's now underway with Indonesia following India is the largest such change in history for upwards of 1.7 billion people. It is the third phase of Asia's transformation and India is in the early phase of a massive transformation to give standards of living similar or better than the other advanced economies. It is hard for anyone to imagine what this means for upwards of a billion people in Asia. The first phase was to address the centuries old neglect of the vast base of the population at the bottom that was neglected and without hope and at the same time invigorating the drivers of industrialization in the middle class. The financial community today also lacks an understanding of the importance of not letting the infrastructure of the US and European economies deteriorate. This plays the same role as the infrastructure of India that is being built from scratch around the major cities and the second tier group of cities under a Master Plan or Gati Shakti. The financial communtiy has allowed the infrastructure of the US and EU to deteriorate when it plays a role similar to what it does in India and Indonesia. There is not even a mention of infrastructure in this interview. Gati Shakti  India's Infrastructure Plan is a main driver of India's transformation, yet it barely got mentioned in this interview of the Financial Times. At a time when president Biden with bipartisan support in Congress built from years of his hard work in the Senate has launched the biggest infrastructure building effort since the 1960's with investment in trillions of dollars in the US, it is the same effort in India that is beginning to accelerate, that is the biggest reason for hope for the people of the American continent and for the people of Asia.   ...

LyrArc Article Gist
Prime Minister Fukuda of Japan and a hot new Japanese drama TV show "Change", that centers on a 35 year old prime minister Keita Asakura. It starts with dawn rising over the Japanese prime minister's building and in one of the episodes shows people talking excitedly about Obama 46 years, and Cameron, 41 years, politicians in the USA and Britain with comparisons to older political leaders like prime Minister Fukuda of Japan. In fairness to Fukuda, 72 years old, he has improved relations with China and hosted the Chinese President in Tokyo, but he has failed to get legislation through parliament because of the opposition parties the DJP which is also unpopular. But with the TV show having 20% of viewers in the Tokyo area including the current defence minister Ishiba, 51 years old, and the youngest cabinet minister, it shows that status quo is quite unpopular in Japan and the current politicians are quite unpopular.

LyrArc Article Gist
China's GDP growth for the 4th quarter of 2012 was 7.9% over prior year, increasing from 7.4% in the third quarter of 2012, according to the National Bureau of Statistics. GDP growth for 2012 was 7.8%, down from 9.3% in 2011. Growth is stabilizing at 8% which shows China is managing the economy, slowing the growth rate with a smaller stimulus planned in 2013, and working on sustainable growth for the longer term. This is a significant positive as a new leadership takes over in China and sets priorities for stable growth, and improvements in housing and health care.

LyrArc Article Gist
Krugman says that Obama better warn the Chinese that they are playing a dangerous game with their currency. He says month after month of the suffering of unemployed workers in the USA is going to look very bad for the Chinese, at the same time as the trade deficit numbers soar again. He asks for urgency from the Obama administration in telling the Chinese to let their currency appreciate . See the related article by Niall Ferguson.

LyrArc Article Gist
Spain's central bank was lauded for macroprudential supervision before the housing bubble burst. Will China's central bank and financial authorites which have managed the housing bubble upto this point face similiar problems? Can China be the sole exception even as housing bubbles burst with wide repercussions in the U.S., UK and Spain? Nicholas Lardy, of the Peterson Institute of international Economics, says urban housing stock makes up 41% of Chinese household wealth in 2011. The same figure for the U.S. is 26%. Chinese buyers invest in homes because low interest rates on savings accounts cannot keep up with inflation. Real estate investment was 13% of GDP in 2011. Home ownership is a recent development in China, only since 1990, Chinese have never experienced large price declines. Household debt as a percentage of disposable income has increased significantly in recent years, up to 53.6% in 2011 from 31.3% in 2008, according to Lardy.

LyrArc Article Gist
The Chinese market for mobile phones has seen Chinese companies use their advantages of knowing local requirements and better distribution systems, especially in the rural areas and second tier cities, to establish a presence. By 2004 companies such as Bird and TCL made significant gains. Bird planned to take on overseas markets and take 8% of the global market. Ningbo Bird and TCL then had half the Chinese market. According to analysts this effort fizzled out and these two companies had sales decreasing as larger companies like Nokia started going into the smaller cities and rural areas. Now another company is using its knowledge of the special features desired by Chinese buyers and its distribution system in rural areas and smaller cities to establish a presence. Tianyu, better known by its K-Touch product introduced in 2005, started as a handset contract manufacturing company. Tianyu offers locally desired features not offered by makers like Nokia and Samsung- dual SIM card option popular because it allows keeping second generation phone numbers and accounts while keeping open the option for a 3-G line, bigger text for older users, text messages read aloud, touch screens, receiving phone calls for two numbers, and so on. And Tianyu does this for less than $200, a price that Nokia and Samsung can't match for features like touch screen. Comparison of the K-Touch E62 with a Taiwanese handset called HTC Magic using Android, both touch screen, showed a price for HTC Magic three times the K-Touch E62. The K-Touch E62 cost 798 yuan or $117. Does Tianyu rely too much on the cultural aspect of today's China which is described as "shanzai"? The meaning of this term "mountain stronghold" and has a defiant tone of local culture and tendencies fighting centralized control. It is often used to refer to the cheap knockoffs of imported products that are readily available in China. In the long run analysts believe that the larger Chinese players in telecom, Huawei and ZTE, which have smartphones appealing to Chinese consumers and 3-G technology, are more likely to have a sustained presence. ...

LyrArc Article Gist
P&G's plans for additional 4000 job cuts after the 1600 already planned for the 2012 fiscal year. This move and other actions including changes to its advertising budget are expected to generate cost savings of $10 billion by 2016. The nonmanufacturing workforce will be reduced by 10% by 2013 for annual savings of $800 millon by fiscal year 2014. $1 billion in savings comes from moving to digital and other forms of advertising. $6 billion in savings would be generated from less costly packaging materials and supply chain efficiency improvements. By using concentrated forms of detergent products less packaging will be needed. Anaysts say P&G's cost structure compares poorly with competitors- with 31.5% of revenue going to selling, general and administrative expenses, compared to 28.1% for household product companies. At the same time as these cuts are made, P&G plans to add 20 new plants in Brazil, China, S. Africa and Poland.

LyrArc Article Gist
Nestle's sales in the first quarter of 2011 increased by 7.2%, after taking out the effects of acquisitions, divestitures and currency. This exceeds its 5-6% growth target for the long term. Sales increased to 21.39 billion Swiss Francs ($23.4 billion) during the quarter- an increase of 5-6%. Emerging markets, especially China provided strong growth with 11.4% increase in sales. Nestle's strategy is to expand growth of brands at both ends of the market. For price sensitive customers it has products at lower price points, a strategy used by P&G and other consumer product companies in emerging markets. Nescafe 3-in-1 is designed for price sensitive customers. For upper class customers Nestle has the Nespresso coffee-capsule business which went up by 20%. Nestle's operating environment also includes the challenge of working with higher commodity costs and being able to pass this on through price increases through product innovations and other methods.

LyrArc Article Gist
China's central bank the PBOC lowered the reserve requirement ratio for commercial banks, the amount of deposits set aside for financial safety, by half a percentage point to 19.5% on Feb. 5, 2015. The move is intended to get banks to lend more to stimulate growth. Growth is slowing in China, with GDP up 7.4% in 2014, and expected to go below 7% in 2015. With China's debt up to an estimated 282% of GDP, the PBOC has resisted efforts for monetary easing that would make the debt problems worse. The lowering of the reserve requirement ratio by half a percentage point gives commercial banks an additional 500 billion yuan or $81 billion to lend out to customers. Another 160 billion yuan comes from measures targeted at small business and agriculture. With the soft business conditions worldwide China's manufacturers may be reluctant to borrow more at this time, making it uncertain how much actual lending will take place following the move.

LyrArc Article Gist
Unilever is facing higher prices for the vegetable oil, such as palm oil it uses for making soap and margarine. It is passing on the costs to consumers. Nestle and Danone SA are passing on the higher prices to consumers. Nestle increased the average wholesale price for all its products by 5.3%. Higher feed costs make it more expensive for Danone to keep cows, raising milk prices and with it prices of yogurt, cheese and other milk products. As a result food inflation is running at 5% in the USA and prices are higher in Europe and in other parts of the world. Because of the increasing demand for better nutrition levels and better food in diets in China and India and other parts of the world, and low grain production levels, and the increasing amount of land diverted to other uses, including ethanol production in the USA, there are food shortages and higher prices for corn and other grains.