LyrArc Article Gist
China's growing foreign investment to meet fast growth in energy needs.

LyrArc Article Gist
The Permanent Court of Arbitration in the Hague, Netherlands, rules in favor of the Philippines and rejects China's claims of sovereignty in the South China Sea over some islets in the Spratly archipelago. The claims were made by China on a historical basis. The Hague Court looks at it on the baisis of the UN Convention on the Law of the Sea and on whether these are islands or land submerged in the sea, or reclaimed reefs.

 

LyrArc Article Gist
The automobile market in the U.S. showed strong sales for Chrysler, Ford and GM in November 2011. As a result automakers expect to sell 12.7 million vehicles in 2011, 10% higher than 2010. The average age of vehicles in the U.S. is 11 years, and this is leading to more buyers coming into showrooms. Some of this demand was for prickup trucks and SUV's. Ford Explorer sales tripled from the prior year. Ford sold 26% more trucks and 9% less cars compared to the prior year November sales. Sales of Jeeps went up 50%. GM sold 31% more pickup trucks. In the past sales of trucks and SUV's slumped with rising fuel prices and a slower economy.

LyrArc Article Gist
Mexico's domestic market is growing and compacts are about half of Mexico's 1.13 vehicle market. The San Luis Potosi plant will be able to make 160,000 compact cars a year, an investment of $650 million. Some of this could go to Mexico's own need for compacts in the domestic market. Also this could supply the U.S. market where GM needs compacts to compete with Japanese and Korean models. One of the reasons Mexico is able to compete with the Southern United States is is its high quality work force at a fraction of the cost. See the link to Mexico's turning out a large number of engineering graduates. When companies look at where to put a new plant, Mexico is starting to compete a lot more with Detroit, said Gabriel Renero, a consultant at Deloitte in Mexico City. They are finding a very attractive work force in this country. In the last year, American automakers have all introduced a variety of new models from their Mexican assembly plants. Being able to produce any kind of vehicle looks good in the global market, says Renero....

LyrArc Article Gist
Kyle Wingfield meets up with Robert Mundell, Nobel winner in 1999. What does he have to say now? He thinks the oil prices are on track and would reach $130 by 2020 with 3.5% inflation, starting with $34 a barrel in 1980 doubling to $68 in 2000 and doubling again to $136 in 2020. Today its already at $136 but he thinks it will settle down lower to about $100, so hethinks were not so far off track. On inflation he looks at the price of gold at$850 an ounce , and now its still about the same, with high inflation gold should be at $1500, so he does not see the public thinking high inflation is coming. He was in favor of the Reagan tax cuts and set the groundwork for this and aslo supported the euro. He believes the Bush tax cuts should be kept as it would be disastrous for the world economy. Mundell has always believed that there is a link between economic growth and lower tax rates. He advocates corporate tax rates of 25%. Tax rates went down to 28% under Reagan back up to 40% under Clinton and down to 35% under Bush. Hewould like to see a ceiling on marginal rates of 30%. He would like to see a fixed exchange rate so that there are not these large currency rate swings, the euro should be valued somehwehere between 90 cents to the euro to $1.30. The US has a growing population and better adoption of innovation with a younger population than Europe so he sees the USA as a leader in innovation and growth and the dollar or some new global currency should be formed for a global economy. Just as he supported the euro he supports a currency for Asia. He does not see overvaluing the Chinese currency as doing much good as he sees the Japanese economy hurt by the overvaluing of its currency after a period of Japoan bashing. He is an advisor to China on currency issues....

LyrArc Article Gist
Bill Ford answers some very pertinent and good questions with confidence and clarity in a meeting with Maria Bartiromo of CNBC and Business Week. His answers are direct and show his thinking today and throughout his difficult experience of the last few years struggling to establish his presence at Ford Motor and then struggling to get the right person to run the company. "It hurts us to see the employees of the company suffer," and this has made this experience at Ford have a personal impact as Ford traumatized over the layoffs of employees with many years of service. And he himself was not easily accepted in the prevailing culture of the time at Ford, and asked to drop his contacts with environmentalists when he joined the Board, which he says he told them he had no intention of doing. He knows his managers had foresight in borrowing a "ton of money" just before the credit crisis struck, and which will be a key to going through any further deterioration of the market in the next 2-3 years. Much clearer than any of the other manufacturers is Ford's new vision under, Bill Ford, Mullaly and Farley, with the finance guys in the background, of Ford as a car company and focused on smaller fuel efficient automobiles. And Bill Ford's vision and aspiration has a lot do with it, who he helped bring in and what he supported and pushed for in the old Ford culture helped Ford to grasp a vision of its future with clarity and purpose like a new beginning. Ford will continue to make trucks but it believes as Bill Ford does that the market will never go back to its old ways, that the absolute price of oil will have less to do with it than the psychology which will push for smaller more fuel efficient cars. And as he points out its European cars are" extremely well appointed and very, very succesful and extremely profitable"....

LyrArc Article Gist
Even though U.S. president Trump has singled out countries such as Mexico, South Korea and China for trade practices, the U.S. today faces stronger competition in trade from Germany. The trade surplus with Germany for 2016 was $297 billion for Germany compared to $245 billion for China, according to Ifo economic institute. China's trade surplus according to the World Bank was down from 10% of gross domestic product or GDP in 2007 to 3% in 2016, while Germany's has gone up to 8.5%. The Chinese currency is seen as not being undervalued by some experts, while the euro has lost a quarter of its value in the last 3 years, giving Geman exporters an edge. The U.S. also competes with Germany in nine of the 10 export categories such as machinery and electronic equipment, according to the Peterson Institute. Then why is the focus under U.S. president Trump not including Germany? One reason is that China's products have put a downward pressure on U.S. manufacturing wages, and the the speed with the Chinese manufacturing has grown in certain industries. Germany has very few of the manufacturing subsidies that China provides to its industries. And the depreciation in the euro is not favored by the German government as it opposes the policies of the European Central Bank. Germany also has a higher propensity to save about 10% of GDP compared to about 3% for the U.S., according to OECD. As a result Germany is accumulating foreign assets at a faster rate than any other nation, while the U.S. is borrowing capital from overseas. Ways to change this are minimum wage regulations introduced by the government, but larger measures such as increasing government investment in the economy are not supported as the country prepares for the future with an aging population.   ...

LyrArc Article Gist
Voter fatigue with the Conservatives under prime minister Harper is showing up in the province of Ontario. The area around London, Ontario, and Toronto is critical in the 2015 general election. A large loss of manufacturing jobs has left this key manufacturing region of Canada so weakened that the recent 20% decline in the Canadian currency is not leading to a rebound in the manufacturing sector. The Liberals under Justin Trudeau have promised to run a slight deficit to invest in infrastructure that would help the manufacturing sector, while Harper's Conservatives plan to keep the status quo. The vigorous campaign run by Trudeau, the son of a former prime minister, is also helping the Liberals, who are moving ahead in the polls.

LyrArc Article Gist
Bjorn Lomborg of the Copenhagen Consensus Center says about the decision by the Obama adminisration to stop contributing to World Bank financed coal power plants- including one in South Africa- does not take into account the simple fact that 1.2 billion people living in sub-Saharan Africa and Asia have no access to electricity. In the sub-Saharan region of Africa (excluding S. Africa) the entire electricity generating capacity is about 28 gigawatts, or about the same as Arizona with a population of about 9 million compared to 860 million in the region. He says China was able to lift 680 million people out of poverty with urbanization and industry powered by coal. There is no alternative to low cost fossil fuels for the poorer regions of the earth. This is why the International Energy Agency esimates fossil fuel generated energy to remain about the same percentage in 2035 as it is today- 81%. Shale based naural gas can make a difference for air pollution and China is begining to make the shift away from coal- for sub-Saharan Africa, South Asia, this goal will take time. ...

LyrArc Article Gist
This report by Goodman in the NYT shows that the ANC has lost most of the moral authority it had under Mandela. After 9 years under president Zuma, and after the term of his predecessor Mr. Mbeki from 1999-2008, South Africa remains stuck with stagnant economy, and about two thirds of young people in the townships being jobless. The challenge is how to change the economy to where growth is generated and benefits go to a broader section of the population. Problems the new president Ramaphosa faces are how to change the protections given to conglomerates that dominated the economy under Apatheid, and the patronage network that evolved with the ANC in the post Apartheid era. Growth performance of the South African economy is dismal. According to the World Bank the South African economy in 2016 was about the size of the economy in 2009. Many warnings about the economy and the operation of the state run electric utility appeared during Mr. Zuma's presidency, including one by former president De Klerk. Growth in 2018 is expected to be only about 1.1%. The economic gains by the largely black population have suffered with lack of growth and mismanagement of the economy. Official unemployment is at 27%, with about two thirds of the young people in the townships being jobless.  ...

LyrArc Article Gist
What is Antifa. during the protests this term keeps coming up, yet no one is really sure what it is.  It started in Germany in the 1920's and basically means anti-fascist or in German antifaschistisch. Most Germany parties from the SPD, CDU and the Greens to other parties accept this as a point of view considering Germany's Nazi past.  Yet DW.com asks is it only referring to all those opposed to fascism in Germany or to black clad anarchists and leftists facing police on German streets. The last such confrontation with police happened in Germany in Hamburg during the 2017 G20 summit. A famous scene from that time is pictured in DW.com. There the meaning becomes complex as the Communist Party of Germany (KPD) adopted the phrase and the disinctinve two flag logo for the 1932 election campaign, in Weimar Germany's last free election, which the Nazis could not win fully but with the left parties split emerged as winner. After the formation of the GDR, the German Democratic Republic in East Germany, the interwar KPD party veterans like Walter Ulbricht came to power in GDR. GDR became part of the Soviet bloc countries during the Cold War and used antifascist in a way that was synonymous with anticapitalism. This same movement then langusihed in the Germany of the early post war years under Cologne's former mayor, Korad Adenauer. In the 1970's and 1980's the left movement revived in Hamburg and Berlin, coalescing with a antinuclear movement and widespread protests against president Reagan's stationing of nuclear missiles on German soil aimed at the Soviet Union bloc. After the reunification the protests against coal, for climate change action, and for anti-globalization. There is even an overlap with anti-Zionism. Germany's internal intelligence agency says the antifa movement is the "main field of agitation" for autonomous leftist groups, with some groups supporting "militant actions." Yet when there are broad uncontroversial protests there can be people from all walks of life, not just the anarchist or far left groups.  So that the protests in the U.S. were met with comments of antifa - Saskia Esken of the SPD saying "58 and atifa. Obviously." To which the General Secretary of the CDU said "Against fascism, and for democracy and human rights. Without violence. Obviously, for me. It's sad that the chairwoman of the SPD lacks the strength to differentiate."  To which Esken says it is only a point of view that antifa refers to, not some action. To which the the youth organization of the Angela Merkel CDU/CSU alliance the Junge Union (founded 1947) replied: " 73 and appalled" getting the final word.  Search for a dictionary and you are left with no clear meaning either. DW.com says Germany's duden dictionary only says antifa refers to the " entirety of the movements and ideologies, which oppose fascism and national socialism."    ...

LyrArc Article Gist
Bradley and Nabhan of the WSJ report from Quara Tepe in Iraq and the weak Iraqi military unable to control parts of the country from attacks by better armed and trained ISIS militants, some from the old Iraqi army before the U.S. invasion and others from the war in Syria. The failure of the Maliki government to bring together Sunnis, Shiites and Kurds, as a new election apporaches and Maliki is likely to be elected for a third term. A divided parliament and the lack of U.S. presence after the withdrawal in 2011 at Malik's insistence. The U.S. has refrained from supplying the Iraqi military for fear of aggravating ethnic tensions, with the Sunnis saying Maliki is practicing ethnic cleansing under the guise of fighting terrorism. Under Maliki Iraqi airspace has been used to supply the Assad regime from Iran, according to some reports, making the U.S. wary of supplying the Iraqi military as it has little influence left.

LyrArc Article Gist
The contrarians not just then, but still today, as many economists shrug off facts about the new savings rate and predict a bounce back in 2009. Jeremy Grantham, co-founder of Boston money mangement shop GMO LLC, got the date right, predicting real risk to the financial system in October 2008. He pointed out for years since 2000 that the Fed's moves and the government's fiscal actions (including 2 costly wars) after the 2001 terrorist attacks, had simply postponed "a sensational bust". Its useful to see how these three, Peter Schiff, President of EuroPacific Capital, Bob Rodriguez of the FPA New Income Fund, and Jeremy Grantham agree and where even they disagree, and where the common thread of logic runs. Currency valuations including the US dollar, are the hardest to predict, and the predictions in this regard are also hardest to state for their timing. When separated from the rest of the picture, they give a better sense of what this common thread of logic in most of the crisis picture is. Grantham saw this crisis coming, but its not clear that he sees this running for a long period of a decade. He agrees with Rodriguez and Schiff about another 30% fall in the S&P 500 stock index, but at the same time he predicts over the next 7 years returns in the US stock markets will be 7.5% annually. Rodriguez sees this going on far beyond periods 1 and 2 to periods 3 to 10. And he sees government efforts to jump start the economy leading to some progress and then sputtering out because consumers are turning frugal. The savings rate will grow eventually going up to 10% by 2010. What this means is that as 70% of the US economy depends on consumption spending, and consumption spending has been too deeply damaged to recover in a few years, the downturn will only deepen in 2009 and 2010. This is his central point, and the analysis free of clutter and controversy. Basically he says the policy makers do not fully grasp that the US consumer has turned into a saver, and while the Obama administration puts one foot on the accelerator to stimulate spending, consumers will be pushing on the brakes. Schiff sees difficulties in financing the debt leading to higher interest rates and a serious drop in the value of the dollar. The views on the dollar face a lot of uncertainty as to timing, the relative strength of currencies in countries in Europe which have weak economies (UK, Ireland and Spain), and the rapidly weakening Chinese economy. But the common thread of logic runs through Rodriguez's argument about the savings rate and consumption spending, with debt and the overstretched consumer in the US running through every discussion about a weakening economy. Something much like what is happening to the auto industry because of its extraordinary degree of oversupply (with capacity reaching 94 million vehicles worldwide and demand inflated by the boom years and easy money now deflating) playing out in a few quarters, is likely to happen across the whole economy. In a gradual pattern playing out over a few years, as consumers postpone purchases of retail goods. Already this is showing up in the inventories of electronic goods that is building up. See links. Kelly Evans in the WSJ front page on January 6, 2009, confirms the signs of a seriously frugal American consumer....

LyrArc Article Gist
This report shows an alarming trend in China which is fueling a real estate bubble similar to the one that Japan, and more recently the U.S., experienced. State owned companies are actively speculating in real estate, and are buying real estate from local governments eager to profit from the real estate boom. Local governments obtain land and build infrastructure on it to raise the price that they can get for it in an auction. In many cases one state owned company outbids another state owned company from different sectors such as oil, chemical, military, telecom and highway. Land records reveal that 82% of land auctions in Beijing in 2010 were won by state-owned companies up from 59% in 2008. The National Bureau of Economic Research in Cambridge, Massachusetts, has estimated that land prices leaped by 750% from 2003, with half of this happening in 2008-2010. In many cities housing prices have doubled in the last 2 years. The National Bureau estimates that on average these state owned companies paid 27% more for the same piece of land than other bidders. China's $586 billion stimulus and its aggressive lending program by state owned banks may have helped in other ways after the 2008 economic crisis, but in this area it has fueled a real estate speculation boom, with the local government and state owned companies being the key participants in this speculation. Local governments earned an estimated $230 billion in land auctions in 2009. The demolition of older neighborhoods and poorly compensating residents are all part of the effort by local governments to profit from this speculative boom. The implications for the banks are serious. Local governments use other companies created for the purpose to engage in this investment in land. And off-balance sheet accounts create the danger that China's state owned banks may have enormous amounts of debt that is not showing up in the regular accounting. Analysts say that the $1.4 trillion in loans made by state banks in 2009 was twice that in 2008, and a large portion of this was diverted into real estate speculation with records set in land bids and booming prices. All this is happening as China's Ginni coefficient has deteriorated rapidly. And the simple fact remains that even as apartment prices exceeded $200,000 in Shanghai, the average disposable income is about $4000 per year. Prof. Shih of Northwesten University has followed the investment companies of the local governments closely and comes to similar conclusions about the size and implications of this real estate bubble in progress. Shih estimates LIC (local investment companies) debt owed to banks at $1.68 trillion or 34% of China's GDP. See the link to BW's Dexter Roberts. ...

LyrArc Article Gist
U.S consumer spending declines by 0.9% in Dec. 2014 over the prior month, according to the Commerce Department. Consumer spending was up in Nov. 2014 by 0.4%. Excluding auto sales and falling gas prices the Dec. 2014 decline in consumer spending was 0.3%. This shows that consumers are saving most of the money saved as a result of gasoline at about $2 a gallon, or using it to pay off debt. Analysts had estimated a significant increase in retail spending which turned out not to be happening.