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US antiship missiles Nmesis are placed in the Philippines islands to protect parts of the Pacific region in 2025. During the period of US engaged in wars in the Middle East under Bush and then Obama, the US Navy lost time and China built up its Navy. The lack of foresight of US business and focus on profits of firms like Apple shipping manufacturing to China meant loss of the manufacturing knowhow as other companies followed Apple for 2 decades. The result is that it takes long lead times for the US to build the ships the US Navy needs, a repeat of the situation the US faced with Japan by 1935 when the US was focused on tackling the Great Depression under FDR. At that time at a Naval Conference in London in 1934 the Japanese walked out rejecting the Washington Naval Agreement of 1924-25 that limited Japan to 60% of the US and British Navies ships tonnage. By 1941 the Japanese Navy was its main reason for its efforts to control Asia. FDR who had been Secretary of the Navy was not far behind so that America launched its own efforts in 1937- in an 18 month period 1942-1943 the US destroyed the Japanese Navy and protected China, India, from the worst Japanese Kwantung army elements that ran the government leading to 14 million lives lost in China. ...

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To preserve and protect the industrial base of America that was shipped overseas starting with Tim Cook and Apple in 2000, and without this industrial base the consequences not just in jobs and manufacturing knowhow lost forever but in loss of leadership of the Free World  which depends on industrial strength, the US president has to decide in 2025. A decision that comes after 25 years of deindustrializing America. DJT says- “I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else." “When they build their plant here, there’s no tariff, so they’re going to be building plants here. But I had an understanding with Tim that he wouldn’t be doing this. He said he’s going to India to build plants. I said, ‘That’s okay to go to India, but you’re not going to sell into here without tariffs,’ and that’s the way it is,”  “The iPhone, if they’re going to sell it in America, I want it to be built in the United States.”  ...

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Russian rights activist Navalny wins over a quarter of the votes in Moscow's mayoral election. The search for pluralistic democratic system in Russia and a truly functioning multi party democratic system continues.

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Seen as a rural urban divide, less educated and well educated and tech workers the situation in France looks similar to that in the US in the elections of 2016 and 2020. With business in the US and European Union shifting manufacturing to China and the governments neglecting rural areas, decline in standard of living for people on pensions that have not kept up with the cost of living, the situation in France as in the US is decades in the making. Bernie Sanders and Melenchon were appealing in different ways to younger people yearning for change and a system that would correct these changes.   Melenchon coming this close to less than one percentage point of Le Pen in the first round of French elections shows that a straight Macron Le Pen version of what has happened is an oversimplification, just as seeing the changes in America under president Biden vs Trump would be a simplification, as voters for Sanders who voted for Biden are changing the Biden agenda and setting America on a new path. A path to reshoring jobs that were sent to China, rebuilding American manufacturing, increasing workers wages and restoring workers leverage for higher wages, investing $2 trillion in child care, housing, supporting worker incomes and families, supporting older Americans on pensions. In the same way beneath the idea that nothing has happened after the yellow vest protests for cost of living, that has not only not gone away- but increased in the concern for cost of living in this election with the surging inflation - new developments are happening.  Even as Germany under Merkel appeared not be changing in 2020- 1 year after Merkel the situation will have changed completely to address social concerns that were ignored earlier and to invest in infrastructure in a big way. Behind this is a fundamental change that is taking place. Facing a challenge from totalitarian states the fabric of society in the free world, the US, Germany, France, other EU states, India, and nations in the free world will have to respond with changes that restore the fabric of society to what it was before this kind of fracturing, bringing all parts of society together to bring all the energies in place for rebuilding, investing in infrastructure, restoring local manufacturing and renewal. It requires a unified effort to be put in place to respond in the right way.     ...

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This report in the WSJ looks at the war in Ukraine in July 2022 as seen from the Ukrainian side. Ukraine has 12 million people displaced or refugees, about a third of the population, particularly in the east. Most of the refugees are women and children. Cities in the east and the south face artillery attacks and airspace over Ukraine lacks the air defense systems that would help Ukrainians live lives not constantly under threat of bombs going off. In this situation and with the massive damage, there is also a breakdown of trust on both sides. Not just the leadership but 93% of the population is against negotiating a peace till the territories lost in the south and the east are regained, says this WSJ report. This report shows Zelensky describing his typical day, his yearning for peace, but serious fears after the failure of the 2014 peace agreements with Russia that Russia is simply negotiating agreements so that it can consolidate its control over territory till it launches another attack. This means that the war will go into a counter offensive phase in the south where Ukraine has its economic links on the Black Sea around the port of Odessa. Ukraine will want to recover the territories in the south so that its future on the Black Sea is restored to what it was before. The eastern part of Ukraine in the Donbas region is being integrated into Russia and Ukraine may seek to improve its position in that area around major cities that it controls and controlled till losses in June.  The lack of air defense systems over Ukrainian airspace that would protect civilians and people of Ukraine in the countryside and cities is what hurts Ukrainians the most. It is the reason why there are so many refugees and displaced people. The US and European countries have failed to provide the air defense systems that would have protected the civilian population and created the worst aspects of this war in the number of refugees having to flee their homes and seeing them destroyed. Years from now people may look back and say this is the worst aspect of this war apart from the claims of either side. As Lincoln said during the civil war in the US in his annual message of 1862 the land is there for ever, and this generation will pass away. The conflicts and tearing apart that this generation of Russians and Ukrainians have experienced, may not be the feelings of future generations.  ...

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The Russian economy had GDP decline of 2% and was relatively not affected by the shutoff of imports of oil and gas from Europe in 2022. Gas exports to Europe began declining in the summer. The EU ban on seaborne oil from Russia and price cap went into effect in December 2022. Russia made a huge stimulus of 4% of GDP in 2022. The result is that only now in 2023 is the full impact being felt on the Russian economy.  WSJ reports that in January and February Russian exports of oil and gas revenue which makeup half of the budget fell by 46% year over year, while state spending jumped 50%. Analysts estimate that it would take a price of $100 for Russia to balance its books. Yet the Group of Seven price cap on Russian oil has brought it down to $50- the price the Ministry of Finance says Urals crude sold in February. This is a deep discount to the $80 price of Brent Crude, the US benchmark.  A bigger problem is the downward trajectory the Russian economy faces in future years. Worker shortages are severe for industry and a shift to wartime production does not add to productivity or productive capacity. The cut off from access to western technology and western financial markets will have a severe impact in the productive capacity for the economy, for oil and industrial production in the years to 2030. Russia needed to protect against the gradual shift away from fossil fuels to fight climate change by shifting the economy in a new direction using its access to western technologies not just China's technologies. Instead it now finds itself in a period of 1 year in 2022 when oil revenues surged with prices jumping from the war, and then a steady slump in all the inputs of development- supply of labor, capital and technology declining rapidly after 2023 as the costs of the Ukraine invasion are absorbed into the economy. As this report points out it is the social contract that similar to China's social contract of growth and improvement in standards of living that led to people having a large measure of confidence in the government. It was not fully grasped but it was the access to American and European Union plus Japanese technology, manufacturing, capital and markets that made this possible. With this absent the situation changes to put Russia, and China to a lesser extent as long as it trades with the west, on a different trajectory.  ...

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After 2 years of the pandemic's devastating effects on health, governments around the world decided to protect ordinary people from the effects of higher prices for staples and food with the increase in inflation. This WSJ report takes a detailed look at different countries and how they after coping with the effects on total debt and debt servicing needs of moves such as subsidies and tax cuts. The situation is exacerbated by the Ukraine war which affects wheat exports from Ukraine and Russia, and the high oil prices as a result of the war. The effects shown by country are- China- consumers are protected from high oil prices by regulated retail gasoline prices. As oil prices keep going up state owned refineries will bear a disproportionate share of the burden of high prices. India- The government has set aside $40 billion in aid as subsidies for oil and fertilizer. This will support farmers and consumers for fiscal year to March 2023. It will make it harder to cut the budget deficit from 6.9% of GDP to 6.4%. Pakistan - A subsidy of $1.5 billion was given for diesel, gasoline and electricity by the Imran Khan government. This did not have IMF approval and talks are taking place on the IMF program between the government and IMF for it to continue. Rampant inflation has led to reduced popularity of the Imran Khan government. Argentina- A new program to refinance $44 billion in debt with IMF assistance is being affected by the subsidies for oil and electricity. About 800,000 tons of grain are being diverted to the domestic market from exports. Agricultural producers such as Argentina have better protection from higher food prices. In Argentina 40% of the people are living below poverty and the country has 50% inflation.  Malaysia and Indonesia- Both countries are exporters of commodities and higher prices could provide additional revenues to meet higher import prices, says the WSJ. Egypt- higher prices for wheat imported from Ukraine and Russia where Egypt gets 70% of its wheat needs have increased cost of subsidies by $1 billion. Kenya- Fuel subsidy costs will increase by $500 million over 2 years. Europe- In France 400 million euros relief package and in Spain 500 million euros relief package for energy price increases. In Germany cash payments to taxpayers, heavily discounted transportation tickets, and price caps on gasoline and diesel.   ...

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About 14 million people are in poverty or slipping below the poverty line according to Paritatische Wohlfahrtsverband, umbrella organization for welfare organizations. German per capita wealth is about 52,000 euros but there is growing inequality in wealth and incomes.  A household with 2 parents and 2 children is at the poverty line at 2410 euros a month or about 29000 euros a year. Social safety net under Hartz IV does little to help because it is set at 449 euros a month with 285 to 376 euros for each child. This is expected to go up to 503 euros a month per person in 2023. Even though experts say at least 650 euros are needed per month to live  with dignity. Under this system only 5 euros per day is set by Hartz IV for food, says DW.com, which is shocking. It means food of lesser quality or less food goes to the less well off. About 2 million people use food banks. Prices are up 12% in 2022 for basics such as bread, vegetables, milk and cheese. One study shows old age poverty is likely to affect 20% of Germans by 2036. The situation is bad for elderly, students and women. Women have worked part time reducing their income.  A student with federal funding gets 934 euros a month which is well below the poverty line. A new program for 200 billion euros is planned by German government to protect against inflation for households. Minimum wage is 12 euros per hour so that someone who works 40 hours a week makes 1480 per month in net income. After inflation this is close to the poverty line. Such is the situation for Germans today even after decades of growth and being seen as an export powerhouse. Compare this to the situation in India where the food program of the Modi administration continues to support food supplies that are adequate for feeding a family right through the pandemic for 800 million people and one sees that the idea of what is a rich or poor country is turned on its head. It is simply the will of the culture of a people and a country and its leadership that makes its limited or larger national wealth available to all its citizens, for the basics to fulfill the idea that "all men are created equal and they are endowed by their Creator with some inalienable rights to life, liberty and the pursuit of happiness," enshrined in the minds of Asia borrowed from America. ...

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International Atomic Energy Agency (IAEA) chief, Yukiya Amano, answers questions in a closed door 90 minute meeting with the U.S. Senate Foreign Relations Committee. The IAEA chief says he cannot disclose details of his investigation into Iran's earlier weapons activities, or the agency's agreement with Iran for the inspection of nuclear facilities. Senator Corker who heads the committee said most senators left the meeting with greater concerns about the inspection process. The IAEA chief cited as reasons for the secrecy, independence of the agency, and what he called "a legal obligation" to protect confidential information. Senator Barroso described the process as one in which an NFL player or athlete is asked to mail in his own urine sample. Of particular concern to senators is the Parchin site where testing ocurred in the early 2000's, which Amano has said Iran is trying to sanitize, and which is not part of this agreement. Iran has not agreed to IAEA requests to interview a Iranian scientist Mr. Fakhrizadeh or other top Iranian military officers and nuclear scientists as part of its probe into past Iranian nuclear activities, Yukiya Amano told the WSJ in an intervew. ...

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Su Liping, professor at Tsinghua Unversity, says there were 180,000 protests, riots and other incidents, protesting economic injustice in 2010. Most of the incidents were against land grabs, corruption and abuses by local officials, and unpaid wages. Inflation has hit the poor, migrant workers and people with low incomes hardest. Food prices were up 13.4% in August over the same month prior year. Pork prices were up 52.3%. Other problems are now meshed in with inflation. Local government debt in China, according to the National Audit Office, was 10.7 trillion yuan in June 2011. The National Audit Office estimates 23% of this, or 2.5 trillion yuan, depends on land for repayment. Analysts say China's local government made repayment in 2010 using the 2.9 trillion yuan in revenue from land sales. The same amount of land has to be sold in 2010 to make repayment. At lower prices even more land may have to be sold. The danger say Orlik and Jie, is that inflation and the pressure to acquire more land- and consequently more land grabs- will pose severe risks to the social contract in China....

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Gerard Lemos writes from London about Chinese society today. He was visiting professor to Chongqing University of Business and Technology from 2006 to 2010. During this period he talked to many ordinary Chinese to find out what was on their minds -concerns that stemmed from China's one child policy, urban migration, health care needs, education and jobs were all uppermost in their minds. Lemos says even with the rapid industrial progress the lives of ordinary citizens are affected by fears and uncertainty about the future. The lack of jobs, lack of good healthcare, children who have migrated, are all part of their daily lives. For older people the one child policy in an aging society means the prospect of being alone in old age and the prospect of inadequate health care. For the young education and job concerns. Lemos points out that it is not about a choice between China's model and a Western model, it is more about a search for the Chinese soul, now that the basic material conditions are in place with the usual gaps and problems. At the same time it is a society prone to political sentiment such as the anti-Japanese protests....

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The European Stabilization Mechanism, setup this week will bailout member states but also enforce strict conditionality. This conditionality means coming in and telling a country what it must do in taxes, spending and economic policy as a price for being rescued. This is amajor adjustment to the system setup originally for the euro, which had the European central bank for price stability and the individual states handling their own finances with no bailout provision. With bailouts made part of the system, each country gurantees the others debts in the eurozone. And this comes with strict conditionality. The agreement last week makes a big change to the original Lisbon Treaty, which had no provision for a bailout. Lagarde says it was wishful thinking to think that the euro would work without something more coercive and stronger discipline. Jolis and Carney quote a former German central bank chief Tietmeyer in describing the challenge facing the euro:"it requires the degree of solidarity characteristic of a nation." They cite the violence and protests in countries from Greece to France when austerity policies are implemented on the basis of such discipline....

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New rules set by Brazil for investment in the oil industry give about 80% of revenues generated back to Brazil. The rules require 30% participation for Petrobras, Brazil's state owned oil company, in all projects and operating of oil fields. The rules also mandate sourcing of equipment inside Brazil to develop local suppliers. Shell and Total, eager to add to oil reserves, will participate in development of the Libra oil field. BP, Chevron and Exxon declined to participate. The Brazilian government faces the difficult choice of keeping as much of the benefits of oil production inside Brazil and yet making it attractive enough for major oil companies with the knowhow for deep water drilling to participate. Delaying development for years means pushing revenue generation further into the future even as the growth rate for Brazil is slowing- down to 0.9% in 2012 and expected to be 2.5% in 2013. The street protests in 2013 making it even more important to show that the benefits of oil production will stay inside Brazil and yet not delay the generation of revenues needed for investment in Brazilian education and infrastructure....

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The attack against the ill trained and ill equiped Pakistan poilce forces in the Punjab and across the country. It also resembles the attacks against police forces and suicide bombings by insurgents in Iraq. The police force of 167,000 recruits the same way as it did during the times of the British rule, which is to take poorly educated recruits and train them to protect the ruling elites and maintain order. THe Punjab police officer in charge of logistics says the force has only 80% of the weapons needed for the 167,000 men. Because police officers take bribes routinely they are also not like by the public, whereas the terrorists act like pious Muslims and mix with the people. The terrorists by contrast are very well equiped and trained making the police no match for them. Making things worse the terrorist groups that were supported by the Inter Services Intelligence or ISI of Pakistan and encouraged to operate against India are now coordinating actions in Pakistan with the Taliban. These terrorists have even more training and equipment than the Taliban, operating in places like Kashmir fighting the Indian military....

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According to a senior defense industry official Defense Secretary Robert Gates worries that counterinsurgency may not work in Afghanistan. According to the official even 40,000 troops would not give enough troop on the ground to protect the Afghns if the north and west continue to deteriorate. Gates is concerned about sending large amounts of additional US troops to Afghnistan. This is acountry with people very sensitive to occupying powers. A veteran of the soviet intervention there says they have an allergy to foreigners and attributes the soviet defeat to this. See the links in Intelilinks He is aware of the the dangers of this, if the expanded military footprint is seen as that of an occupying power especially when the government in Kabul is hugely unpopular, then this would galvanize new armed opposition to the US and draw US forces and NATO forces into aguerilla war of the type the soviet union faced there. It may do much worse if it galvanizes opposition in side Pakistan. The question Obama is focussing on is whether there is athreat to the US homeland security if other options than expanding troop strength are explored....

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In the earlier history of Japan when Japan was still a poor agricultural country, these Japanese left for Brazil to work in the coffee plantations there. Because Japan's aging population meant foreign workers were helpful to ease shortages, especially for the hard and difficult jobs left for for foreigh workers, special work visas were issued to the descendents of these emigrants. Now an estimated 366,000 Brazilians and Peruvians live in Japan. Jiro Kawasaki, an LDP leader and lawmaker, has set up an emergency program of cash payments -$3000 for airfares and $2000 per recipient- to send these South Americans of Japanese descent home, on the condition that they sign papers never to return. Many of these people are agonizing over the decision especially the one that makes return impossible. The idea is to relieve pressure on labor markets as exports have dropped by 46% and unemployment is rising. However Japan has faced labor shortages in thepast, and these people have aJapanese heritage, which makes this policy in immigration averse Japan controversial. In Britain there have been protests as companies hired foreign workers when British workers were unemployed. It appears that this trend is happening even in immigration friendly countries....

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Amy Chua interviewed in her office on the Yale campus. She relates democracy to ethnicity and has a book on this. This creates complex situations which need to be recognized and democracy has to be crafted for that special situation. As for instance Stiglitz describes the succesful effort by Malays under Tunku Abdul Rahman in post independence Malaysia to make provisons for economic protections for the native Malay peoples within the democracy crafted for Malaysia. Carothers of the Carnegie Endowment points to post colonialism experiences in some countries. " Many of the problems that countries face are the legacy of European colonialism not United States policy. Why should democracy get blamed for failed empire?" In these countries their own unique situation, history, culture, time and place requires crafting and using free markets and democracy ideas with a healthy mix of measures the state can take to protect the weaker interests in society to achieve economic progress and fair distribution of benefits to all parts of society in the same way that the US and European countries with their different situations are doing in their individual circumstances. ...

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China is changing the way its fuel pricing and taxation system will work, that will ensure a number of goals like energy conservation, improve highway funding, protect consumers and ensure decent profit margins for oil companies. Oil prices are set by the government and oil prices have not been reduced as prices have dropped so that Chinese pay twice as much at the pump for cars than does the average American. A series of road fees which are used to finance higheway construction were cancelled and a fivefold increase made to the fuel consumption tax from 0.2 yuan to 1 yuan per liter of gasoline, ccording to the National Development and Reform Commission. Taxes in diesel which are 0.1 yuan rise to 0.8 yuan. THe changes that go into effect January 1, 2009 will also bring China's fuel prices and pricing mechnaism more in line with international oil markets. This should result in lower prices at the pump next year for Chinese filling up their cars at gas stations, because of the policymakers concern that Chinese consumers and the economy get a stimulus including the benefit of lower oil prices....

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With a low voter turnout estimated at 25% the United Russia Party which supports President Putin wins regional elections in Russia.

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Efforts to protect rights of workers with a new labor. Criticism is that it does little to protect the rights of migrant workers from the rural areas in the huge wave of urbanization that is going on in China and India as well, and does little where enforcement is weak. On the other hand cases like that of Huawei a Chinese telecom maker are attracting notice as they violate the laws protections for workers with more than ten years of employment who get job security and companies have to inform the union before firing employees. Huawei asked 7000 employees with more than 10 years of experience to resign before being hired for short term positions.

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The elections in Italy in Feb. 2013 show the centre left coalition headed by Pier Luigi Bersani with 29.6% of the votes in the lower house, the centre right coalition headed by Silvio Berlusconi with 29.2% of the votes, the Five Star Movement headed by Beppe Grillo with 25.6% of the votes, and the Civic Choice headed by Mario Monti with 10.6% of the vote. In the Senate the results show the centre left coalition with 31.6% of the vote, the centre right with 30.7%, the Five Star Movement with 23.8%, and Civic Choice with 9.1%. Election rules in Italy give the party with the highest number of votes for the lower house an automatic majority of 340 of 630 seats. The vote shows voter protest over austerity measures. This benefitted both the centre right and the Five Star Movement and hurt the Civic Choice centrist party of Mario Monti which implemented austerity measures in 2012. The centre left was affected by its role in coming to the aid of Monte de Paschi bank in Siena and failing to mount a strong campaign under Bersani. A majority in both houses is needed to provide a stable coalition government which opens the prospect of new elections. The Five Star Movement emerged as the largest single party. Its support comes from young people, internet based campaigning, and a rejection of the right and left parties from the old order in Italian politics, and offers a new dimension to Italy's political future....

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This is an interview with Columbia University economic historian Adam Tooze about the international trade and economic issues brought about by globalization. The rapid emergence of China in manufacturing and overcapacity in steel has led to action on steel tariffs by president Trump. Tooze is typical of opinion that sees action by Trump not as limited action to level the playing field  as proposed by Trade Representative for the U.S., Robert Lighthizer, but as reckless move on trade.  Lyrarc.com shows articles from the WSJ and NYT showing how opinion got to this point in the U.S., on Robert Lighthizer's views that the U.S. was not facing a level playing field, and  on how trade has hurt communities across the U.S. a long distance away from Silicon Valley. President Trump's views reflect a different perspective that says the U.S. has to balance the favorable situation obtained by China and the European Union through moves of its own to protect U.S. interests. Political commentary that the U.S. was starting a trade war is not supported by the facts showing China's response as muted and a willingness by China to negotiate a balanced trading relationship as its trade surplus with the U.S. continues to grow. The trade surplus is so large that the Trump moves do not tell the real story. They are likely to be overshadowed by the increasing value of the U.S. dollar leading to a continued favorable situation for Chinese exports and a larger trade surplus in 2018, regardless of Mr. Trump's action.  Trump's moves are more significant in other areas- limiting China's access to advanced technologies, with the European Union also taking the same action. This is now the new field of competition for the major world economies. ...

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The military and the old order in Egypt, including the lack of an imaginative Muslim Brotherhood party, remains a stumbling block for Egypt's return to democracy and the constructive channelling of the people's energy.