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How Martin Feldstein weighs the risks of inflation and of moral hazards in helping those who fueled the subprime crisis with their mistakes with the risks of a sharp downturn, and what thoughts he has on the issue of lowering rates just as the Bernbanke Fed prepares for its policy meeting September 18, 2007. He looks for a cut starting from the current 5.25% to 4.25% or even less depending on the situation as it evolves. Feldstein gives a measure for household wealth that will be lost and what will be lost in consumer spending as a result. His measure is for a 20% cumulative fall in house prices that would reduce household wealth by $4 trillion which would impact consumer spending by about $200 billion, thats about 5% consumers would spend more if they had that $4 trillion. This works out to about 1.5% of GDP which he suggests would tip the US economy into a recession. This is not counting the loss of access to spendable cash that the consumer has used for the last decade in terms of mortgage equity withdrawals which totaled $9 trillion this last decade and financed a lot of the sustained consumer spending, these mortgage equity withdrawals to finance spending would decline significantly in the new conditions. In addition with more defaults and falling prices in a vicious circle the process could accelerate quickly, further impairing the portfolios of banks and financial institutions causing some to collapse. ...

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The Fed acts to stabilize the credit markets till the current administration and Congress or its successor can think of the best way to inject money into the USA banking system and in helping homeowners in the housing crisis. One fact remains between 2000 and 2006 Americans took on about 3 tillion dollars of additional debt than if they had followed the earlier trajectory of spending, so they owe $3 trillion dollars more than they would have if they followed earlier spending patterns, accordingto Business Week estimate. It is this debt that will depress consumption spending for 3 to 4 years according to BW estimates till this debt can be worked down. The other estimate by BW in Street of Fear in the same issue is for $285 billion in total amount of subprime writedowns expected with only $150 billon accounted for so far in early April 2008. This means another $135 billion in writedowns will come probably this year. One anlayst Meridian of Keefe, Bruyette & Woodsfor example points outan additional $15 billion of subprime writedowns expected for Citigroup on top of the $21 billn already taken and in the worst case the writedowns could reach $60 billion. So clearly we are only half way through these writedowns. With consumption spending due for a big hit, and more big hits in the credit markets, the worst may still be ahead in 2008. ...

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Paul Krugman, Nobel prize winning economist points out an astonishing fact about the 2016 U.S. presidential election- U.S. television networks nightly news devoted only 32 minutes in 2016 to all policy issues combined. And these networks devoted 100 minutes to Clinton emails. He calls this "disgraceful."  For weeks at a time in September and October the main television networks lacked the integrity and courage to ask questions and persist on the major questions facing the country of the economy, correcting income distribution that has been skewed away from the middle and working class, infrastructure rebuilding, education and healthcare, and what the policy proposals of each candidate would do for the country. Krugman does not mention this but the media devoted hardly any time to the economic plan devised by Trump that respected economists and economic analysis showed would increase the deficit by $5.3 trillion, and lead to a short term temporary increase in growth followed by a sharp decline. The worst thing that could happen to middle and working class families struggling to recover from the blow to their finances from the last recession.  The cyber hacking of a U.S. presidential election by a foreign power never received the unanimous rejection that it deserved from the television networks, not just Fox News as Krugman points out, but by all the networks. The future landscape of the media needs assessment to bring in new ideas and new entrants to bring constructive improvements, and for older media organizations to rebuild after the loss of confidence among young people. Only about a quarter of young people in the U.S. have confidence in the large media organizations news coverage according to surveys done recently. There are other pressures coming from the tech world that make it imperative to do this. Many experts point to the destructive effect of social media in spreading rumors or information disguised as facts, which are spread instantly by Twitter and Facebook, without any obligation to check the facts. This is also dangerous with a public that is now divided between better educated and less educated along political lines, older more settled in their views people, and younger people quicker in looking for the facts and checking things out before believing them. ...

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The story of Rajat Gupta, quiet with a soft manner, who headed McKinsey consultants from 1994 to 2003. What eventually happened with Gupta showed another side which the Economist described in an article on McKinsey in July 1996. His relationship with hedge fund manager Rajaratnam, and his other business dealings have come under investigation by the S.E.C. and federal authorites in the U.S.

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Meg Whitman, H-P CEO, repeated her statements that a recovery was four or five years away. She sees little sales growth till 2015 and predicts losses. H-P's share price fell by 13% on Oct. 3, 2012. Whitman said in an interview that H-P has failed to invest in research and development. She was critical of lack of R&D investment under Mark Hurd. But says many of the problems go back to when Carly Fiorina was CEO in 2005 and made the acquisition of Compaq. The acquisition approach has worked poorly for H-P, with lack of R&D within H-P. H-P's financial position also worsened with the $10 billion paid by Leo Apotheker, Hurd's successor, for Autonomy Corp. Internal software systems disconnected costs from revenue, so that in 2011 field selling costs increased by $1 billion even as revenue decreased by $5 billion. A series of management changes made things worse through poor decisions, inconsistency and lack of focus, all of which will take years to correct.

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As a result of provisions in the bailout, GM won't have to pay about $45 billion in taxes on future profits. In a little noticed ruling in 2009, the federal government decided that companies receiving TARP bailout money won't fall under the rule which restricts their tax benefits. The rationale was that the tax credit would make these companies more attractive to investors, and the value of the benefit is greater than any lost tax payments.

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Best Buy sales increase by 3.4% in U.S. stores for the nine weeks of the 2014 holiday season through Jan. 3, and online sales increased 13.4%, with the improving U.S. economy. Sales were higher for newer flat screen televisions and smartphones as customers made replacement with new models. The outlook for 2015 remains uncertain because of volatile exchange rates and declining electronics prices.

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Microsoft has done poorly in anticipating and developing products for the internet and mobile devices. On the enterprise side the server and tools business has done well. Microsoft's Server And Tools business made operating profit of $8.2 billion in the year ending June 2013, up 13% from the prior year. Office 365 sold on a subscription basis to accomodate the shift to cloud computing, and other cloud products are expected to make up for decline in Windows revenues with decline in PC sales. Satya Nadella, who ran the Server and Tools business from 2011 till he was shifted to head the cloud computing effort in the reorganization of 2013, is a candidate for the CEO position.

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Sony has lost its focus, it is in so many lines of business, that its brand identity has been lost. Especially in Japan where it is in cosmetics, massage, mailorder shopping club, insurance, finance, robots etc. It has 1000 subsidiaries and affiliates worldwide, of which a third are unrelated to its core electronics business. How does this hurt? It hurts because management is distracted, and when top management is distracted then its not focussing on customers, changing business trends, creativity in its business pioneering new products. In a big company this problem is just magnified by the bureaucracy that develops. Problems similiar to the ones faced by IBM and General Motors. The analysts and Howard Stringer talk about restoring the Sony premium. What is a premium, its not just the brand, its the innovation or something special behind the brand that enables it to command the premium. Stringer probably understands that its the innovative edge that Sony as lost. See the other piece "Howard Stringer, Sony's Road Warrior" by Siklos and Fackler in the Sunday NYT, May 30, 2006 with Stringer shown in a large picture imagining him as a Sumo wrestler. An unforgettable picture. In that piece it becomes clear that Stringer is keenly aware about Sony's and Japan's weakness in software which is increasingly driving success in products when combined innovatively with new bold concepts. He says there that Sony takes great pride in its hardware, and this is true of Japanese creative spirit in innovative and miniature gadgetry, but its capabilities in software are very modest. As one action step Stringer has hired Tim Schaaf , a senior Apple executive to lead that effort at Sony. The other part, getting the focus back by focussing on customers of electronic products is evident in this piece. Ryoji Chubachi, head of electronics and co-head of Sony with Stringer, regularly visits large retailers to offer incentives for making Sony products more visible, something the prior management failed to do. The prior management failed to focus on customers, and thought it beneath their highflying ways. One of the decisions by Chubachi in TV's is to price HDTV sets close to the price of Panasonic, Samsung and Sharp at large retailers in Japan. This makes sense to gain market leader status, as it shows Sony is living in the real world and taking decisions appropriate and relevant to a premium free environment in television sets. You a manufacturer cannot imagine a premium, a premium is a perception in the minds of customers and most likely reflects a perception of uniqueness, creativity, fashion and some other attribute, which can include engineering. Sony's philosophy has stated in Akio Morita's book "Made in Japan", was to be a pioneer, to walk the untrodden ways, break new ground. One aspect of this in comparison to Matsushita, Sharp and other competitors, was going to be its individuality, something Morita borrowed from his days in the US, because it is typically American and sort of unJapanese in a way. Though this is a generalization and many American companies merely follow and some Japanese companies have their own way of doing things even if it is thought of as being very Japanese like, witness Toyota in its Aichi prefecture surroundings. In this light the surveys show Sony significantly deteriorating in "conspicuous individuality." The New York Times cites a survey from BP Nikkei Consulting in Tokyo that the number of consumers saying that Sony showed "conspicuous individuality dropped to about 25% from about 40% the year before. ...

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Problems of declining production at the Cantarell oil field in Mexico have been known for some time. Now President Calderon is trying to take on this issue. Brazil's Petrobras reached an impasse also some years back but was able to make the reforms, see the link to Petrobras. See the link in the WSJ for 8/30/07 on Petrobras . In 1995 President Cardozo of Brazil pushed through reforms after a oil workers strike at Petrobras. Upto that time Petrobras had problems similar to Pemex with underinvestment, state meddling in its affairs and finances, and too much bureaucracy and inefficiency. Can Calderon get reform for Pemex. Which amount of Pemex revenues should go to the government, how much should Pemex have so that it can adequately fund investment in new oil field exploration offshore, how to overcome bureaucracy and inefficient management, and how to arrange board representation so that Pemex can transform itself like Petrobras did. Some of the answers to these questions are emerging. Calderon wants to prepare his political position as the reform of Pemex is something that previous Presidents have failed to tackle. To do this the Senate's Energy Committee is holding a private debate on the issues. Calderon may try to forge a consensus with the Institutional Nacional Party, as he did with pension reforms if an all party consensus eludes him. Already in reforms of public finances that Calderon has pushed through Pemex will pay 71.5 centavos on every peso of oil extracted by 2012, instead of 79 centavos as royalty payments to the government. One reform being considered is to givePemex control of its own budget. At this time $10 billion a year goes back to the government on top of the royalty tax payments. Another reform would open up refining, transport and distribution to private enterprise. A think tank expert at CIDAC in Mexico City thinks that this can be done without reforming the constitution as was done to allow private investment in electricity generation in the 1990's. The same methods could be used to promote risk sharing contracts with other companies to bring in new technology for oil exploration, including companies from emerging countries like Petrobras, Petrochina and others, given Mexican's bias against the western oil majors. Especially because Petrobras has proven expertise in deep water drilling offshore. There is no question that Mexico is falling behind. One energy expert at the National Autonomous University estimates that the density of drilling rigs in the American portion of the Gulf of Mexico is 20 times greater than in the Mexican part, with Mexico having drilled only 20 exploratory wells in water deeper than 980 feet. in other areas like refining Pemex has not built a new refinery in 20 years, and imports 40% of its gasoline from US refineries, and its 7500 gasoline stations need expansion as Mexico's economy expands. Cardozo's transformation came with setting up an independent Board of Directors and putting an investment banker in charge. International oil companies were allowed into Brazil as a way to get Petrobras to compete with western oil companies and increase efficiency. And Cardozo got Petrobras listed on the New York Stock Exchange selling some 16% of Petrobras in the capital markets. This listing ensured transparency and improved corporate governance, as about 50 analysts now tracked Petrobras. ...

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During the election campaign Obama talked about sending at least 2 more combat brigades to Afghanistan. The Defense Department is already planning to send 20,000 additional troops in response to a request of General David McKiernan, top commander in Afghanistan,including 4 combat brigades and an aviation brigade with helicopters, increasing the American troop levels to 58,000, with an additional 30,000 NATO troops already there from other countries. The timeline for this is 12-18 months but with the escalating insurgent attacks in Afghanistan this will probably be done more quickly. Obama and some Democrats talked about Afghanistan as somehow being the good war and he vowed to defeat the Taliban and militants in Afghanistan. But Afghanistan is a different place and most military experts are suggesting that a good strategy will be needed, for example winning over the tribals and some of the militants, and not trying to win militarily. However with the deteriorating situation there the only way to win over tribals and militants may be to get the situation to where the NATO and US forces are in a strong situation. The two big handicaps in this are first history, where the terrain and rural distribution of the people make it difficult to exercize any control over the vast region of mountains and deserts. So throughout history no one has controlled this region and there is no history of centralized government, with different tribes controlling their regions. The other is the problem created by the corruption and lack of any popular support for the Karzai government, which is made worse by the involvement of its officials in the opium trade with opium growing booming in the southern part of Afghanistan. How does the US and NATO create an effective Afghan army and police under a state that does not enjoy any popular support. And yet the strategy that Gates. Petraeus and McKiernan are pursuing involves preparing the Afghan army and police for the task of controlling the vast mountainous region against a rural insurgency that knows its way in the mountains enjoys rural support because of the independent spirit of the Afghan people who find it easy to see the NATO forces as white foreigners in their country. The Afghan army is small for such a vast mountainous region, only 70,000 in a nation of 32 million people, and the police forces of 80,000 mostly corrupt and ineffectual. The present plan is to build the Afgan army to 134,000 still small for such a large region. The other problems stem from the Pushtun population in Pakistan that supports the rural insurgency in Afghanistan and the support of tribal people in the border areas of Pakistan. The picture tells the story, a small number of NATO soldiers in a remote ridge in Afghanistan. And the problems actually are across the whole of the far northern region of what was once British India, of Afghanistan and Pakistan, as the Pakistan government is quite fragile, having an army that operates as a power center of its own with little accountability to the central government. And years of war during the previous military government of Pakistan under Zia Ul Haq, in which Zia with the support of the Reagan administration supported another rural insurgency in Afghanistan that drove the soviets out of Afghanistan, and the subsequent sponsorship of the Taliban movement by the Pakistan military in Afghanistan, has created a situation in Pakistan where militants now operate freely and with impunity in Pakistan itself, disregarding both the Pakistan military and the Pakistan elected government's power structures....

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Margo Oge, headed the Office of Transportation and AIr Quality at the U.S. Environmental Protection Agency from 1994-2012. Here she points out the contradiction in what automakers supported when the current fuel emission standards were set and today's effort by the Trump administration to loosen the standards. She also points to the contradiction between the trends in Europe, China, India, which are moving towards stricter standards and the U.S. reversing direction.  About one dozen states in addition to California have the power under the Clean Air Act to set their own standards. These states make up about one third of the U.S. market. What would result is a fracturing of the U.S. market. This would create problems for automakers as one expert recently pointed out in the NYT, that automakers should be careful what they wish for.  Automakers such as Ford say they support the current fuel emissions standards, yet call for flexibility. GM's CEO, Mary Barra, says she supports current standards. Toyota also says it supports the current emission standards. And diesel engines are now declining in Europe as a result of fuel emissions standards to preserve good air quality. History has shown the automakers have suffered badly from competition when emissions and fuel efficiency standards were lax. During the last decade the auto industry in Michigan faced decline as a result of poor management decisions and lack of foresight in pushing forward with new technologies in this field. The current recovery in the auto industry is a result of a reversal of the poor decisions made between 2000-2008, including fuel emissions and fuel efficiency, air quality decisions.    ...