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A local government vehicle in China, Sixth Division of XPCC fails to make a bond payment in August 2018. This is the first such instance of failure to make a bond payment for a local government vehicle in 2018. Economists estimate China's total debt at 242% of GDP in 2017, and government efforts to tighten liquidity and reduce support for overextended local government investment vehicles.

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Ingram says Obama's 2015 budget is more of a wish list for Democrats, because 2015 spending levels are already set and House Republicans will put together their own budget putting forward the Republican views. Obama's budget includes new taxes on busiess and the wealthy to reduce the deficit. Other ideas- raise tobacco taxes to pay for universal pre-K education, a "Fianncial Crisis Responsibility Fee" on big banks, overhaul immigraion laws to increase tax revenues, limit itemized deductions for the rich, force drug companies to give large rebates on Medicare prescriptions. Another proposal is a $56 billion "Opportunity, Growth and Security" Initiative, for spending on early childhood education, job training, and medical research. To pay for this he would cut the amount wealthy people can save tax free for retirement, cut crop insurance and raise airline security fees.

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Equity markets in Europe and the U.S. are likely to see some of the 62 trillion yen, or $630 billion, which the Bank of Japan plans to add to holdings of banks and households in two years 2013-2014. A senior advisor to Deutsche Bank, Thomas Mayer, says equities of Germany, France and Britain are likey to see interest from Japanese investors, as are bonds and equities of the U.S. Japanese companies such as Toyota and consumer product companies such as Sony and Panasonic will now be able to better compete on price against their S. Korean, American and European competitors.

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Supply chains are unraveling in many industries with the tariffs imposed by president Trump on imports from China, and renegotiated trade deals with South Korea and other countries. The growth in the value of foreign value added was possible with cuts in tariffs in the period after 1990 and the emergence of China as a low cost manufacturer with cheap labor. Foreign value added increased from 20% in 1990 to 30% in 2011. The impact on factory towns and communities in the U.S. of trade in which the U.S. manufacturing declined as it shifted to China resulted in the surge in support for president Trump. The tariffs war with China is an effort to correct this imbalance. The result is a shift in supply chains away from China in some industries and gradual shift in others. Rising wages in China had already resulted in early shifts and the the environmental costs adding to this trend. President Trump temporarily suspended a threatened imposition of duties of 25% on $325 billion of Chinese imports. A renegotiated Nafta agreement with Mexico for automobile production and determination of U.S. based content and wages was designed to reset the relationship with Mexico and the auto supply chain for production in Mexico. A threat of tariffs on European auto imports to the U.S. is set for a decision in November. The trade dispute between Japan and South Korea and threat of tariffs also shows the effect this is having in other countries. With the U.S. looking at its own interest in the global supply chain and its advantage or disadvantage, industries and companies are not free to make decisions based on which country offers the best arrangement and deal for manufacturing. Notions of competitive advantage in the tech race with China are affecting the way the U.S. and European nations are acting. ...

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How career officers in the intelligence services helped bring about a reversal in the perception of Iran by the U.S. government. The result was to give diplomacy and other means a chance to work and reduce tensions in the Middle East.

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Taiwanese contract manufacturer Hon Hai is moving quickly to address higher costs for workers at its manufacturing sites in coastal regions of China. After extensive media coverage of conditions at Foxconn factories, a number of suicides, and Chinese government policy that encouraged higher wages for workers in foriegn owned plants, Foxconn has moved to sharply increase wages at its plants. By the end of 2011 production in cities in the interior of China- Chengdu, Chongqing, and Wuhan, where costs are one third less- will be 25% of production, up from 10% in 2010. By 2012, this will be up to 50% of Foxconn's production, according to Yuanta Securities of Taipei. Hon Hai is lowering dividends to finance the shift. Fourth quarter 2010 earnings of Hon Hai were $742 million, down 26% over the prior year, even though revenues went up by 56% to $33.1 billon- reflecting the higher costs. Hon Hai's stock is down 20% in the past year on the Taipei stock exchange. Other locations being considered by Hon Hai are Brazil, Turkey and Slovakia. Brazil's President Dilma Roussef, said that Foxconn is considering a $12 billion plan for Brazil. Hon Hai is the only manufacturer of Apple iPads and one of two manufacturers of the iPhone....

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The U.S. and China presented conflicting views on trade and security in Asia-Pacific region at the APEC summit in 2018. Vice President Pence said "we don't drown our partners in a sea of debt," in a criticism of the China Belt and Road Initiative. The U.S. has 1500 new projects and $61 billion in new investments in the region. Mr. Xi Jinping stated " confrontation in a Cold War, hot war, trade war will produce no winner." 

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After a 90 minute meeting with Putin in Hangzhou, China, president Obama wonders aloud whether Putin " is willing to live with constant, low-grade conflict." Richard Haas of the Council of Foreign Relations, says its affirmative, that low grade conflict is Putin's thing. Other experts say Putin's intention is largely to build up his image at home at a time when the Russian economy is facing problems, and to create confusion through cyberattacks. In the case of cyber intrusions into voter rolls of Arizona and Illinois, FBI Director Comey says it  may be intended to just sow seeds of doubt on the whole election process."

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Fiat's Marchionne's decision to focus on the Fiat 500 and the Panda city car in the price sensitive European market. Fiat has no success in selling its Bravo larger car. In 2011 sales of the Bravo model were only 32,036 compared to VW Golf model sales of 522,370 in Europe, according to IHS Global Insight. Sales of the Fiat 500 were 119,836 units vs. sales of 83,150 for the BMW Mini in the first half of 2012. Fiat has suffered more than other automakers in the European market with sales decline of 16.7% compared to 7.2% decline for the overall market, for Jan-Sept 2012. Fiat's new plans are for five new Fiat models and three new Fiat light trucks in Europe between 2013-2016. Fiat launched the 500L minivan in Europe in Sept 2012. Fiat's European factories are running at 45% of capacity on average, and the European operations are likely to burn through 700 million euros in 2013, similiar to 2012, unlikely to breakeven before 2015 or 2016. This makes getting the product decisions right critical for Fiat. Fiat's chief in Europe, Gianluca Italia talks of the functional and emotional soul of Fiat cars for Europe in a emphasis on making Fiat's models in the price sensitive segments more distinctive and commanding a premium in the European market. Fiat's 500 has about a 25% premium over a similiar Ford Ka in its segment. The new Fiat 500 models will be exported to Asia and Latin America in an effort to increase capacity utlilization in its Italian factories....

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Whirlpool shifts 80-100 jobs from its Monterrey plant to an Ohio factory producing machines for laundromats. The Monterrey plant will not lose jobs because it is making more washing machines for the expanding Mexican market. Electricity is cheaper in the U.S. than in Mexico which provides some of the savings. Transportation from Mexico also offsets the higher wage costs in the U.S. of $18-19 at Whirlpool plants. According to Reshoring Initiative- which supports shift back of offshored jobs, the loss of jobs to offshore locations continues but is now being offset by job inflows to the U.S. Some of these inflows that receive less attention are manufacuring facilities being setup by foreign corporations in the U.S. as costs of energy decline and labor become more competitive.

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Robert Doll, equity strategist for Black Rock, the world's largest money manager, says the growing population of the U.S. will drive economic growth in the next decade compared to Japan and Europe. He says that over the next two decades the U.S. work force will grow by 11%, Europe's will decline by 5%, and Japan's will decline by 17%. China's population growth will be only slightly more than that of the U.S. during that period and Doll expects China's growth to slow. He sees America as the best bet in a bad neighborhood. Higher immigration in the U.S. is a huge positive, as he points out economic growth is simply the product of the change in the size of the work force multiplied by its productivity. And America's productivity is good enough compared to other nations, is how Doll sees it. In 1995 the U.S. produced 25% of the world's goods and services, it was still 25% in 2010 says Doll. Other economists have pointed to this and observed a similiar pattern for most of the twentieth century. Doll sees this pattern continuing. India's population will show signficant growth and he sees greater opportunity there for long term investing. Doll sees a decoupling between U.S. stock markets and high unemployment. Most of the large U.S. companies generate a large portion of their sales and profits overseas. He estimates 40% of the business of these companies is overseas. Doll's estimate is for 70% of the incremental earnings growth of the S&P 500 companies coming from overseas markets. He also expects higher inflation with the Fed keeping it from getting out of control, and deficit cutting efforts to cut some trillions over the years. He sees favorable prospects for equities based on the money growth being strong and credit markets being good....

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Three NBC reporters talk to people in areas in southern France, including Cogolin, which voted in a National Front mayor. This report describes the contrast between the National Front under Jean Le Pen and his daughter, Marie Le Pen. Marie took over the party leadership in 2011, and has downplayed her father's more racist ideology, even calling her self Marine dropping her last name. About 22% of French women are expected to vote for Marine, according to Elabe polling agency. In previous elections only 12% of French women had supported Marine's father because of overt racism. Yet recent remarks by Marine about Vichy regime shootings have revived some of the old memories of the National Front among some women. High unemployment and sense of neglect has led to a search for alternatives, and the terrorist incidents in Nice and Paris have added to the momentum for the National Front that calls for tougher measures. The Republican Party candidate Fillon, now has the support of Alain Juppe of Bordeaux, and former president Sarkozy. Fillon is also advocating tougher measures, and it is not clear how many votes would shift from Fillon on the right to Le Pen.  ...

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The problems divergence between developed and developing economies creates for companies- in slow growth on one side and fast growth with asset bubbles on the other side.

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The economic effects of US and German-French sanctions on Russia ar shown here in this Guardian article by Jim O'Neill, who helped coin the term BRICS that include Russia. The sanctions are likely to make the Russian economy even less significant than its current role in the world economy.  Renewable energy development and alternative use of LNG through new super terminals will likely be speeded up with new investments in Germany and the US. The result could be even faster depreciation of oil based assets for economies dependent on oil and gas exports. This would also contribute to the COP26 pledges for accelerated response to global warming. Western oil companies will also be put in a situation where an accelerated shift to renewables is seen as connected to less dependence on outside sources and so enhancing energy security. Productivity gains and gains in technology are also dependent on good relations with the economies of Europe and the US, Japan, for the rest of the world. This leaves economies that are left out in some form or other failing to grow up to their potential, a situation that accelerates over time and could be seen clearly in the next 5-10 years. This would impact growth rates and economic development in these countries and reverse years of gains in the last two decades.     ...

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A waning boom and lower growth rates in Brazil, and improving economic prospects for Mexico- diverging emerging markets and policy mix in 2013.

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Here Posen of the Peterson Institute and Jeffrey Garten of Yale speak in favor of nationalization. Nancy Pelosi also supports nationalization as away to protect taxpayers. The bad bank option is considered, but one of the drawbacks is that the taxpayers may not be sufficiently protected as bad assets become ever larger. Geithner and Summers made the case in the financial crisis in Asia in the 1990's that the government makes lousy financial managers. But is it more a political issue as charges from Republicans would be that the government is going socialist. Yet its more the way the word has negative connotations, more than what is to be done in this situation. The reality is that the banks are pretty much in government hands anyway with the amount of taxpayer money at risk, and without any way to get rid of the problem of valuing these toxic assets which nationalization effectively eliminates. The U.S. government has put in its own managers and gone through the cycle of owning and later privatizing banks successfully in the S&L crisis in the 1990's. Its very probable that its not the ideological thing that will carry the day, but the decisive action and the confidence it can build for the financial system. See the link to the Economist view on this. ...