LyrArc Article Gist
Most of the problems in Eastern Europe follow from overborrowing by the privae sector , consumers and corporate borrowing, in foreign currencies. According to David Roche of Independent Strategy, private sector foreign currency debt rose to 126% of foreign exchange reserves between 2002 and 2007. Roche is former head of research and global strategy at Morgan Stanley. As a result he says, 50% of household debt is in foreign currency in Hungary, 30-40% in Poland and Romania, and over 70% in the Baltic states. The debt in lowcost foreign currencies like Swiss Frances, Euros, and even yen, also expanded in the corporate sector. BY mid 2008 non-financial corporate debt in foreign currencies reached over 45% of corporate laibilities in Bulgaria, over 30% in Ukraine and Baltics, and over 20% in Hungary and Russia. To get an idea of the way the foreign subsidiaries of major western european banks expanded their lending, note that lending to homeowners between 2002 and 2007 doubled each year in Romania, rose 60-80% in the Baltics and Bulgaria, rose 20-30% in Poland and Hungary. And lending to corporations grew 20-30% a year. There is aclear suggestio of reckless lending and reckless borrowing in these numbers just as was seen in the way mortgage lending ocurred in the USA. The history of this kind of lending goes back to the reckless lending in Latin America in the eighties that led to lost decades many years before, and is a recurring story. Now Roche sees loss of GDP of 5%-6% for Turkey, Russia, Romania, Czech Republic and Poland, and 8-10% in Hungary, Bulgaria and the Baltic states. That would take 40% of foreign exchange reserves in Turkey,Czech Republic, Poland, Hungary and Ukraine. And this will have a human cost in jobs lost, crime, poverty, and years of progress lost in these countries. And it will ricochet back to the parent companies of the European banks that did a lot of this lending, with $130 billion additional losses, and a loss of 10% of tier one capital (equity capital plus disclosed reserves) of Western European banks....

LyrArc Article Gist
The Congressional Budget Office report in 2011 shows after tax resource flow that a family has to pay for consumption, a better approach to measuring the growth in incomes since 1970 including government help to lower income people and gains in the stock market for upper class Americans. This report shows after tax resource flow for the top 1% in the U.S. tripled from 1970 to 2011. For the middle fifth of the distribution families experienced real net income gains of 36 percent, and the bottom fifth of the distribution real net income gain of 50 percent.This suggests gains of about 10 percent a year if averaged over 30 years for the top 1 percent compared to 1% a year for the middle fifth and 1.5% for the bottom fifth. The report was done in 2011 and this could skew the results. Between 2011 and 2015 the stock market recovered and this would suggest a much higher gain for the top 1% of incomes and the top 10%, while also providing improvement in incomes for the middle fifth and the bottom fifth as unemployment decreased. Working class and minimum wage slowly recovered, and interest income on savings extremely low, with large student and other household debt, so that even at 10-12% gains per year for the top 1%, and 1-2% for the middle fifth of the distribution and 1.5-2% for the bottom fifth the last three decades have not been good for working class and middle income Americans compared to the the period 1950-1970 early postwar period recovery....

LyrArc Article Gist
Wages remain stagnant, labor participation rate declines, and U-6 at 11.8%, as unemployment rate declines to 5.9% in U.S. labor market.

LyrArc Article Gist
Janet Napolitano, president of the University of California, says the Obama plan for ratings of colleges in the U.S. will not add much value because much of the information is already available. More important she says is to tackle the bad actors in education leading to high student debt. She says she will cut costs by a couple of hundred million dollars in the next few years, and will keep pushing on costs as there is a natural tendency to revert back. With less state support the UC system is admitting a larger number of students from out of state who pay higher tution.

LyrArc Article Gist
David Gelernter, Yale professor of computer science, says above all things Steve Job was designer-in-chief. At his Stanford commencement address in 2004, Jobs recounts his experience in a calligraphy course at Reed College as one of the singularly important experiences of his life, and something he carried over to the the revolution in portable devices- portable Macs, iPod, IPhone and iPad. The search for and building of elegant, easy to work, fun to use devices. Job was able to grasp the potential of such devices, says Gelertner, from his very first visit to the Xerox research labs in Palo Alto in 1979. In doing this he gives credit for long forgotten pioneers of the personal computer, who were just as important perhaps even more so, Douglas Engelbart and Alan Kay. At Xerox, Kay built on the earlier innovations of Engelbart. Engelbart was first to develop the mouse, onscreen window, and the concept of computers doing more than just computing, such as controlling machinery, doing everyday stuff, and doing things with pictures. Xerox's corporate executives failed to grasp the significance of the developments in their labs. Jobs grasped this rightaway and put all his efforts into developing the Apple Macintosh in 1984 incorporating these ideas. A decade later Gates copied the Mac's eay to use features and created economies of scale, creating the personal computer that we know today. The internet was a parallel development during that decade after the pioneering work of Tim Berners-Lee on the worldwide web. Jobs took the experience one step further and created new devices like the iPhone and the iPad that brought mobility, ease, and refinement to the internet experience....

LyrArc Article Gist
Mike McNamara, CEO of Flextronics, on the increasing competitiveness of U.S. manufacturing and the return of manufacturing jobs to the U.S.

LyrArc Article Gist
Risks to stable long term growth of too much liquidity in the global financial system.

LyrArc Article Gist
This is a WSJ special report on Nissan and the failure of Carlos Ghosn's management style at Nissan leading to deep discontent in management ranks and employees, and also in Japan. Ghosn failed to invest in Japan seeing it as an aging society, and preferred the U.S. for investment. This was an affront to many Japanese, not just Nissan employees.  A big problem was that Ghosn's salary was larger than that of all nine top Nissan executives combined. Even during the 2008 financial crisis and cost cutting Ghosn's salary was understated by using accounting methods not approved by its auditor Ernst & Young. Under new Japanese rules oversight on compensation was given to Mr. Imazu who had to uncover the different shell companies that were used to shield the compensation and benefits going to Ghosn from public view. Lack of transparency and frugality was a major issue as one Nissan executive put it- "where is the transparency, and where is the frugality." New laws introduced in Japan in 2015 required release of compensation for any company executive making more than $800,000. Under these rules Japanese prosecutors were able to investigate the situation at Nissan.  In the end when the CEO of Nissan, appointed by Mr. Ghosn announced the arrest and detention of Mr. Ghosn, the Japanese audience applauded, showing how deep the discontent was in Japan. On November 19, in a carefully managed operation that would make a detective type story Japanese prosecutors arrested Mr. Ghosn as his plane landed in Tokyo, and arrested his assistant Mr. Kelly on the same day after his plane landed and his car was taken off the road to a rest area. Ghosn story has also its management lessons as this type of hard driving management with time spent jet-setting more than in contact with people and employees of the company is becoming unpopular. It is bad for employees and presents a rather unhealthy lifestyle, lacking any kind of role model for the rest of the company and society where the company is located. In this case not just Yokohama, but all of Japan, which resented the way it was treated. Recent articles have highlighted the situation at other companies. The General Electric story about the failure at GE in the U.S. - also explored this week in the WSJ -tells a story of hard driving management style of some executives that is increasingly becoming unpopular. A more thoughtful management style, with mindfulness, not based on personality or ego, is more productive leading to better decisions after taking in all views and enabling participation of other top and middle managers. ...

LyrArc Article Gist
The U.S. trade deficit widened sharply in March from February 2015, increasing by 43.1%, after the ending of a labor dispute at West coast ports. The deficit widened to $51.37 billion. This is more than expected from a strong dollar. This could make 1st quarter GDP figures show a contraction for the U.S. economy. Products imported from China were up 32%, compared with March 2014. Exports were up only 0.9%. Experts estimate GDP contraction of 0.4%- 0.5% for the 1st quarter 2015. In 2014 a similiar situation happened but growth was up for the rest of the year and experts see this happening again in 2015.

LyrArc Article Gist
The German Statistical Office reported that GDP growth in Germany was 0.1% in the second quarter of 2011. This compares with GDP growth of 1.3% in the first quarter. This is slower than Italy which came in at 0.3% for the second quarter. France had no growth in the second quarter. The German Statistical Office said the causes were: lower household consumption and construction investment, imports rising faster than exports and a buildup of inventories. Analysts at Commerzbank say the warm spring resulted in construction activity starting earlier and taking out some of the growth in the second quarter, in its absence the growth would be 0.4% for the second quarter. The statistics office said an additional 553,000 persons were added to employment compared to the prior year, with a total of 41 million employed.

LyrArc Article Gist
Republicans coordinate efforts of economists, public official, and past economic policy makers, in their opposition to the Federal Reserve's decision for $600 billion of quantitative easing. This is perceived as an effort to print money and reduce the value of the dollar, without really addressing the problems in the economy. This includes Michael Boskin, John Taylor, Kevin Hassett, Douglas Holtz-Eakin, David Malpass, and members of a conservative think tank named e21. Liberal economists Paul Krugman and Joseph Stiglitz are also not convinced about the effectiveness of the Fed's move in the absence of other action. Failure to agree on policy restricts other policy options.

LyrArc Article Gist
This article by Jim Carlton in the Wall Street Journal in 1998, shows a different side of Steve Jobs- a relentless hard driving manager, with sheer intensity and lack of patience with people who could not keep up with him, who can be arrogant and ride roughshod over employees. Supporters say he had the right intuition about decisions facing Apple, such as not cloning the Mac because it was already too late, closing Newton and refocussing the engineers on new devices, staying out of direct competition with the Wintel alliance and willingness to work with Microsoft to include the Office suite on the Mac. These moves came at a point where Apple was rapidly shrinking in the market, and was down to 2.6%, having lost half its share in the education market. Jobs dictatorial style came when Apple was in a chaotic situation without any clear direction, and the company was simply drifting into a steep decline, a style which was as one director put it, what Apple needed in that situation. Other aspects of Steve Jobs style included a penchant for secrecy. When the news of the folding of the Newton operation was leaked to the media, Jobs fired the head of the Newton group on the spot. At other times Jobs could back off, as when the launch of the G3 line of Macs was put off because of quality problems. The Jobs who returned to Apple in 1996-1997 comes across as a different Jobs- whose main motivation now was to show these "bozos" like Sculley who ousted him in 1985, and Amelio whom he replaced in 1998, how this (Apple's revival) is to be done. ...

LyrArc Article Gist
Boeing makes the decision to make the next version of the Dreamliner, the 787-10, exclusively at its plant in the North Charleston area of S. Carolina. This is a non-union facility. Larry Loftis, Boeing's vice president and general manager of the 787 program, says the decision was made because it is not practical to ship by air the midbody section of the new plane which is 114 feet long, 10 feet longer than the 787-9. It would not fit into the modified 747 aircraft used to ship jet parts from one manufacturing facility to another. Currently this midbodysection is assembled in S. Carolina from pieces shipped by air from Italian and Japanese plants. Then flown to Everett, Washington or a S. Carolina assembly line for the final steps in the manufacturing process. Reliability and quality issues for the Dreamliner, and cost, are also better addressed by reducing shipment from one manufacturing facility to another. The decision to build this non-union plant in 2009 created strains with the labor unions. The 787-10 is 224 feet long, carries 320 passengers, one third more than the 787-8 and 15% more than the 787-9. It has a list price of 289 million. Boeing has 132 orders from airlines and lessors for this new version....

LyrArc Article Gist
This essay in the Economist magazine points out the special nature of the 2017 presidential election in France with the rejection of establishment candidates- Manuel Valls, Sarkozy, Juppe, and now Fillon. Fillon and Valls were prime ministers under Sarkozy and Hollande, from the Republican and Socialist parties respectively. With unemployment high in the areas outside the major cities their is a surge in support in these areas for the National Front. Emmanuel Macron, former Economy minister in the Hollande government, is the only candidate leading Marie Le Pen at this time. In a second round of voting he has to bring in centre right supporters and centre left voters and moderate voters, and appeal enough to working class voters, young unemployed people, offering hope for a better future to win this election against Le Pen. Economist magazine research shows support highest for Le Pen outside major cities in outlying areas, and for Macron in the major cities. There is also an education divide as seen in the U.S. election and Brexit referendum with less educated voters preferring the nationalist sentiment, church support sentiment fostered by the National Front.  ...

LyrArc Article Gist
Krugman points out that the U.S. Federal Reserve's forecasts in March 2012 show the U.S. will experience low inflation and high unemployment for many years. These forecasts are in sharp contrast to the expectations in the equity markets based on an uptick for a couple of months of unemployment numbers. The Fed's own statements suggest the improvement in hiring may be temporary and a response to the overreaction in hiring in 2009-2010 to the financial crisis, and not a lasting improvement. The Fed pointed out that the long term unemployed are at about 40% of the total unemployed and the share of the population that is working in March 2012 has barely budged from 58% in 2009.