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One foreign policy expert says president Trump tried to reverse everything in Obama's foreign policy almost to the point of an obsession. He visits Saudi Arabia before visiting Mexico and Canada, close neighbors, as other presidents have done. The relationships with Mexico and Canada deteriorated. Yet Mr. Trump has a good personal connection with Trudeau of Canada and Macron of France.  Taking the advice of advisers including Commerce Secretary Wilbur Ross, president Trump despite tough talk on the North American Free Trade Agreement, takes a moderate approach on NAFTA renegotiation. Trump also softens some of the rhetoric on China as he seeks Chinese help to restrain North Korea. An international coalition of states supported by the U.S. reverses gains by Islamic State, with Iraq and Iran gaining over Islamic State. President Obama's policy of not taking decisive action, reversed towards the end of the second term, had led to the rise of Islamic State and the refugee crisis in Europe as refugees left Syria and Iraq. NATO or the South Korean defense was not significantly weakened as feared at the beginning of the first year. Missile defense proceeded in South Korea with U.S. missile systems. The appointment of a senior senator from Texas, Kay Hutchinson, signaled that the NATO policy had not changed significantly. As a result it could be said that the year 2018 began with a bang about the risks internationally with president Trump's unconventional approach, and ended without some of the worst fears being realized. Relations between North and South Korea improved as Koreans decided to work together for peace in the peninsula- with North Korea agreeing to participate in the Winter Olympics in South Korea.   ...

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A look at the history of the founding of Pakistan and the 60 years since, looking all the way back to Muslim League's activities in the 1930's under Jinnah, and the failure of politicians and the military to help build Pakistan and improve the lives of its people. One by one the generals and the politicians, including Ms Bhutto and Sharif, have all failed and the dim prospects that it would be different this time with a new elected government.

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How 13% unemployment is affecting Lawrence, Massachusetts, with a heavy Latino population, heavier concentration of foreclosures and poorly managed finances, and high rate of unemployment that affects those with high school diplomas, and younger people. Unemployment nationwide is 7.3% among whites and 10.9% among Latinos. And places like Lawrence have a young and undereducated population, with the unemployment rate for teenagers at 21.6% and for those without a highschool diploma at 12.6%. Surprising as it may sound the town was going through a revival before this happened suddenly without warning. It was a fading industrial city 25 miles northwest of Boston. A new $110 million high school, three new grade schools, and a renovated city hall. And a developer refurbished several abandoned mills along the Merricmack River, and leased out 1.4 million square feet to some 200 companies employing 2000 workers.

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Ivan Rogers, UK ambassador to the European Union for three years till 2017 was sharply critical of the British government and forecast some of the Brexit problems. He has a book "9 Lessons in Brexit," which appeared in Feb. 2019. Here he is interviewed by Der Spiegel. He says he expected some of the problems but is still surprised that 4 weeks before the deadline the political class in Britain has not yet figured out what kind of Brexit they want. Here he points out that Cameron and Blair represented the centre in British politics. But that centre has now collapsed after the financial crisis and the period of austerity led to widening gaps between the different parts of British society. The public is now deeply alienated from both major parties. In both parties the populists on the left and the right have gained a bigger influence, as a result there are no centre right or centre left figures who command public influence. Rogers is a civil servant of high rank who has worked with several prime ministers including Blair and Cameron. His comments are worth listening to.  Was Theresa May the right person to tackle Brexit? Her problem says ROgers is that she started with a hardline position of reducing the number of people entering the UK from inside or outside the EU. Once you do this you cannot have free movement of goods, services and capital, so you have to leave the single market. And if Britain wanted a fully autonomous trade policy then it cannot stay in the customs union. Rogers thinks Theresa May never really understood what this meant- that it was going much further out of the European Union than Norway or Switzerland, or even Turkey. Now as she is trying to go back her right wing cries betrayal. Do British prime ministers understand the single market, the customs union, or how the EU really works? Rogers worked on European issues for a long time and he says after working very closely with British prime ministers that none of them had a deep understanding of how the European Union works. Plus they lack any emotional attachment to the EU, because of the mercantile relationship Britain has had with its neighbors. About the relationships in Europe between the Germans, the French, the British, what is it and what will it be like? Rogers says he has not seen a thinner relationship in his lifetime. He thinks the European political elites are not talking to each other anything like what was done 20 or 30 years ago. He says the Brits have to take a lot of the responsibility because the British political class lost interest in Europe. What could the Europeans have done? Rogers says the chaos continues because the British don't really know where they want to go. It opaque about the relationship on purpose. Have the Europeans thought about what kind of a continent they want to see after all this is over? This interview tells you more about the Brexit problem that many reports and opinions, bringing a thoughtful way of looking at the problem. ...

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How much room is there to raise interest rates. Patrick Minford of the University of Cardiff says a lot more. At the rate of 9-10% inflation in Britain more interest rate increases are likely. Minford is advising Liz Truss who is candidate for prime minister. Minford's main ideas are- Get interest rates back up to what was considered normal in previous decades- 5-7% for mortgage rates is what it used to be. At that rate it protects people's savings something that did not happen in the last 2 decades of ultra low rates worsening the wealth gap for Britons in different classes. Cutting taxes is about providing the economy a boost as rates go up. It is not about huge cuts, just modest cuts like the 30 billion pound cuts proposed by Truss. Minford is not talking about low taxes. He is simply talking about having taxes at levels that will promote growth- "the key to growth is not having high taxes. We're not talking about cutting them, just talking about not having them at catastrophic levels." Here is what Liz Truss is proposing- Reverse the recent rise in national insurance. Scrap the increase in corporation tax. About this plan Minford says- "If we raise corporation tax we will kill off growth." Minford dismisses concerns about borrowing. " It's crazy to begin to try to drop the debt to GDP ratio 5 minutes after Covid." With higher rates Minford also think there will be fewer "zombie" companies eating up the nation's capital, while protecting the savings of hard working ordinary people in Britain which hasn't happened in the last two decades of ridiculously low rates, worsening wealth gaps in British society. Minford calls Sunak's policies "puerile" and too much beholden to Treasury thinking. Liz Truss says Sunak's policies are for Brexit in name only, not taking advantage of Brexit to rid Britain of cautious policy that does not capitalize fully on cutting the bureaucratic and regulatory burden to get growth, and trade that favors Britain. ...

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Reaganomics, trickle down economics, it is clear don't work. James Mackintosh says in WSJ, the latest version of Reaganomics, in the form of the LIz Truss budget in September 2022 with cuts in corporate taxes, no relief for vulnerable populations in the cost of living crisis as in all other major European countries and in the US, is already getting a bad reception in financial markets with the tumbling of the British pound.Times have changed there is nothing to be gained in its approach as there are no trade unions strangling growth as in Thatcher's time that need to be restrained, and not that much red tape to increase business flexibility. Most of the privatization has already been done and some of the state run companies are operating much better today than privatized companies handling water and other services.   Instead the problem is one of much needed investment in infrastructure and public services, and social protections after the pandemic. Businesses are not being crippled by high corporate taxes. Instead the opposite is the case, with windfall profits, so that the opposite approach taken by president Biden to use the higher tax on profits of Tech, oil and other companies to finance social protections and a huge climate energy initiative made more sense, leading to the passage of the $369 climate bill  and Inflation Reduction Act of 2022.  The WSJ makes these points- Britain has a higher current account deficit and higher debt at over 100% of GDP compared to the period of Thatcher in the 1980's when debt was only 40% of GDP. Most important is what the WSJ says about what has happened since the 2009 financial crisis and the austerity policies pursued after that crisis that were worsened by the pandemic so that public services in Britain are actually crumbling. Politically this lacks popular support and little backing at a time of a recession in the British economy, because such policies require public support to go through a tough period . And taking this trickle down economics today when Britain faces a cost of living crisis may be an unwise act of taking an approach that is no longer relevant or shown to be working at the worst possible time, says the WSJ. ...

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Issues of inequality and lack of upward mobility came up in the last presidential election. A Federal Reserve Survey for 2018 shows the financial fragility facing many Americans. One quarter of working individuals say they do not have any retirement savings. About 17% of households say they cannot pay all their monthly bills. About 40% of Americans say they do not have enough cash to cover an unexpected $400 expense, and would have to rely on credit cards balances or loans from family to make the payment. This survey by the Federal Reserve is done each year since 2013, after the financial crisis hit in 2009 it became more important. Still Americans are showing unusual resilience and upbeat spirit. About 75% say they were doing Ok or living comfortably up from 63% in 2013. And two out of three described lovcal economic conditions as "good" or "excellent."  This shows that the financial vulnerability resulting in the loss of jobs in the U.S. both from jobs lost in manufacturing going overseas,  jobs lost through automation or industrial decline in some sectors, and the hit from job loss during the financial crisis and its aftermath years of 2009-2014 is still leaving a lot of families financially vulnerable. Low interest rates and stagnant wages also meant savings growth for ordinary Americans was less than it should be in a healthy economy without booms and busts. This is also the environment in which the U.S. is tackling challenges to its technological leadership in 5G following a decline in sectors such as autos and electronics, with job losses to Japan and South Korea. New trade agreements are focussed on correcting the imbalance, first with Mexico, South Korea, and now with China. Focus is also on fair wages and labour overseas to raise American wages in key sectors. The damage done by a low interest rate to savings of ordinary Americans outside the stock markets is also being seen as a downside in the boom bust cycle, that includes loss of jobs for vulnerable American families. The rise of the tech sectors has diluted the traditional protections of working class Americans with the shifts and realignment of the major parties. ...

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The Bureau of National Labor Statistics in China says China's GDP growth for 4th quarter 2008 was 6.8%. Private economists expect growth to slow to something like 5% in 2009 as the full brunt of the housing downturn and the drop in exports manufacturing is felt this year. Housing and exports were the two engines that helped China to reach 12-13% growth rates for 2007 and 2008. 2008 was also the year of the Olympics, and it now appears that by excessive growth and production capacity in many industries and increasing exports China may have created severe imbalances in the world economy. One way this happened is through the huge and ever increasing trade deficits with the US. By reinvesting the money in US Treasurys, China made a huge wave of liquidity and cheap credit possible in the US creating a bubble economy. The other is through the inflated demand in commodities like oil from the Middle East and countries like Russia, and demand for iron ore and other metal commodities from places like Brazil and Australia. This put upward pressure on the prices of commodities, creating a bubble in the price of oil. With the bursting of these bubbles the economies of Russia, Brazil and Australia and other countries are in a deep nosedive. The effects have operated in myriad ways, including a circular effect of the bursting of the credit bubble in the US leading to a collapse of demand in the US market for Chinese goods. In turn the collapse in demand for German and Japanese goods in China with declining demand, as the effects moved through the channels of the international trading system. The decline in Chinese demand also affects the US ability to make a export driven recovery....

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U.S. president Obama says at a rally in Philadelphia that Donald Trump is a fradulent champion of the working class, saying that Trump is simply exploiting the populist mood, that for 70 years he has shown no concern for working class people. Obama told the crowd he understood the public's mood for change and that he himself had benefitted from it. Yet he said that it did not add up. Obama said: "This guy is suddenly going to be your champion? I mean, he spent most of his life trying to stay as far away from working people as he could, and now this guy is going to be the champion of the working people. Huh." "I mean he wasn't going to let you in his golf course. He wasn't going to let you buy in his condo. And now suddenly this guy is going to be your champion." 

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A bill in the U.S. Senate in October 2011, which has bipartisan support, would push for China to correct an unfair trade advantage from keeping the value of the yuan low. The bill requires retaliatory tariffs for countries that have "misaligned" currency. This makes it possible for the U.S. Treasury Department to take action even if it finds no currency manipulation by China. This is a new approach as the U.S. Congress struggles to restore a level playing field in international trade.

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The U.S. Senate voted 63 to 35 passing legislation that forces the U.S. government to seek tariffs and other action against countries with "misaligned" currencies."

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With Obama's popularity rating in 2016 similar to Reagan's in his last year in office at 51%, he announced his endorsement of Hillary Clinton for president. Obama is likely to campaign in 2016 for Hillary to reunite the Democratic Party, bring Bernie Sanders and Sander's supporters behind the Democratic nominee, including younger women.

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A recent study by the IMF shows that China has accumulated foreign exchange reserves that are twice what would be needed for traditional purposes such as supporting the economy in a financial crisis. China is still very much a developing country with per capita annual income of $3000, low consumer spending, and rising inflation. This makes the policy of accumulating reserves and preserving an undervalued exchange rate to support export companies counterproductive. There is growing debate about this as inflation is becoming difficult to control. Yu Yongding, an advisor to the PBOC monetary policy committee says China as a developing country should not be exporting capital, which should be used to raise living standards. A rising exchange rate would increase spending power of people throughout China. Fan Gang, head of China's National Economic Research Institute, was a member of the central bank monetary policy committee. He wrote in a recent essay arguing for a higher exchange rate, and societal, tax and other changes that help increase China's household spending. Central Bank governor Zhou Xiaochuan said recently that China's foreign exchange reserves have exceeded reasonable levels that the country needs, adding to inflation risks and making it difficult to conduct monetary policy. The reserves are now over $3 trillion, pasing that mark in March 2011 after increasing 25% in the last year....

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This NYT editorial on Nov. 23, 2012, points out the importance of a forward looking Britain that has a needed voice in the affairs of the European Union, and positive engagement with the nations in the eurozone that make up its largest trading partner. Roger Carr, head of the British Confederation of Industry, made just such a call saying British engagement with the rest of Europe was "the linchpin of our wider global trade ambitions." The danger now is that because of missteps in the managing of affairs in the EU, including the hasty setup of the euro currency without proper safeguards for debt of individual countries and the strict fiscal arrangements imposed by Germany that stifle the chance of growth, the mood in Britain is now shifting towards exit from the EU. An Opinion/Observer poll suggests a referendum held today is likely to win an yes vote for Britain to leave the EU, a huge mistake for British interests. A referendum is expected to be scheduled for 2015.

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The yield on Italy's two year bonds reached 7.269% on November 9, 2011. Italy needs to rollover $300 billion in debt over the next 12 months. And liquidity is becoming a serious problem as investors become cautious about buying Italian bonds. Investors who were attracted to the higher yields on Italian bonds now see the market as too unstable to make purchases. Peter Schaffrik, head of European rates strategy at RBC Capital Markets in London, says that the Italian bond market, the third largest in the world, was quite liquid, with investors buying or selling 500 millon euros of Italian bonds at a clip. Now, he says, its hard to trade more than 50 million euros. The only hope is to get enough stability and confidence back into the market, as Italy is too large for any rescue effort by the ECB, IMF or the EFSF. With some stability Black Rock's Fundamental Fixed Income portfolio's chief investment officer, Rick Rieder, says Italian bonds are something he would buy.

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Inflation in China and rising wages are pushing up costs for American manufacturers. The pressure on China, most recently in Congress, is helping to push up the value of the yuan. This combined trend is making it attractive for some manufacturers to bring factories home to the U.S. A trend in the U.S. towards non-unionized labor and the new trend to a two-tier wage level- with lower wages for entry level workers- and the shedding of legacy health care costs, is creating a more cost competitive labor force in the U.S. This extends from older industries such as furniture and auto components to newer industries and technology. The new factories setup in the U.S. use technologies that require a smaller number of workers, in most cases less than half the number of workers that were employed earlier. This adds another element in cost efficiency, though it means fewer jobs are created with new plants.

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JP Morgan Chase disclosed that traders in the Chief Investment Office may have tried to avoid showing the full extent of losses by placing inaccurate prices on their positions. A trader named the "London whale," may have been asked by his boss to mark positions more aggressively. CEO Dimon said this has "shaken our company to the core."

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The Supreme Court upheld the provision under an Arizona state law that requires police to check the immigration status of people stopped for traffic and other offenses. By a vote of 6-2 the Supreme Court voided the provision that made it a state crime to fail to carry federal registration papers. By a vote of 5-3 it voided the provision that provided for jail time for immigrants not carrying federal registration papers. Justice Anthony Kennedy wrote the majority opinion that includes Justices Roberts, Ginsburg, Breyer and Sotomayor, and said: "The government of the United States has broad, undoubted power over the subject of immigration and the status of aliens... Immigration policy can affect trade, investment, tourism and diplmatic relations for the entire nation." At the same time Justice Kennedy said " the problems posed to the State by illegal immigration must not be underestimated," saying that "unauthorized aliens, were responsible for a disproportionate share of serious crime." Unauthorized aliens are only 8.9% of the population of Maricopa County which includes Pheonix, but caused 21.8% of the felonies. The part of the Arizona law SB 1070 that stated the illegal immigrant seeking work was commiting a crime, was struck down on the grounds that this "would interfere with the careful balance struck by Congress" for the labor market in which only employers are committing a crime. Justice Kennedy reminded the country that it was still a nation of immigrants....

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The limited options the US has to get China to appreciate the value of its currency, the yuan. Some of the options depend on getting the IMF or the WTO to prod the Chinese, others depend on a Plaza type Accord.

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The yuan is up 5.5% since the peg to the dollar ended in 2010, reaching 6.469 to the dollar. But this is not helping the U.S. trade deficit. The U.S. Bureau of Labor Statistics shows the price of imports from China are up 2.8% in May over the same month prior year. And the trade surplus for China in the first four months of 2011 is higher than the same period in 2010. What is happening? The improvements in productivity of Chinese manufacturers and the acceptance of lower margins is reducing the effects on trade balance of a small appreciation of the yuan, so that only a fraction of that appreciation is showing up in higher prices for Chinese goods. Also significant is that the yuan's small appreciation against the dollar is not enough to make up for the dollar's fall against other currencies. The yuan is down 8.3% against the euro and has actually declined 3.7% on a trade weighted basis in the last year.

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This report by Juan Montes in the WSJ shows how much Lopez Obrador has changed since he lost by a small margin in the 2006 Mexico presidential election. His campaign manager, Tatiana Clouthier, says broadening his appeal to women, evangelicals, middle class Mexicans, rich and poor, is needed for Obrador to win in 2018. In elections in 2006 and 2012 Obrador continued to be seen as the candidate only of the working class. An effort is being made to change this image. Obrador, 64 years old from the party of the left, formed his own party in 2010 after leaving the PRD party. He is a former mayor of Mexico City. Five recent polls show Obrador leading by an average of 7.5 points over Ricardo Analya, the PAN candidate for president which now has the support of the PRD. PAN on the right and PRD on the left are other opposition parties. PAN party formed the government under Felipe Calderon before the current PRI president Nieto now tainted by corruption scandals became president in 2012. If he were to win Obrador would change the way Mexico was governed for 5 decades. His first step would be to review the 91 exploration contracts given by the government under the Nieto administration to check for signs of graft. Corruption is a key platform of the parties running against the current government of president Nieto, for both Obrador and the PAN/PRD alliance candidate Anaya. Obrador says he would keep balanced budget deficits and respect the central bank's autonomy. The shift would be from the current export model that Mexico has supported for 35 years, to one based on import substitution policies, higher salaries, and more government spending for education, jobs programs, healthcare, new oil refineries. With the Trump administration's stance on trade and immigration Mexicans are now showing anger and frustration, with 75% of Mexicans in a Reforma poll looking for change. Both the PAN/PRD and its new face in Ricardo Analya, 38 years old, and the Obrador party see corruption and with it in the Mexican context the rule of law as a key issue.  ...