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China's zero Covid strategy is being tested with a huge lockdown in Shanghai in March 2022. The price of the zero Covid policy is significant for China's economy and people.

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President Mauricio Macri of Argentina loses badly in a nationwide primary in Argentina. Peso and stocks dropped after the defeat and a sense that Macri's policies have not worked. The economy declined 5.8% in the first quarter of 2019 from a year earlier, with some recovery in recent months.  Following the defeat by Peronist party candidate Alberto Hernandez, Macri announced measures to help Argentine workers and middle class. He raised the minimum wage, increased public sector salaries, and put a freeze on fuel prices.  The Peronist party's Alberto Hernandez now looks likely to succeed Macri. Inflation is at 56% in June. Hernandez is a former cabinet chief under Christina Kirchner and Nestor Kirchner, former presidents. Christina Kirchner is running as Hernadez's running mate for vice president.  Under Christina Kirchner the government ran large deficits and defaulted on the national debt. Drop in commodities prices hurt Argentina and it also hurt Brazil during that period, worsening state finances. Macri provided an alternative but his market friendly policies have failed to help ordinary Argentines through errors in policy making and much of the early enthusiasm is lost. High inflation hurt ordinary Argentines the most. In the past week the Argentina stock market has lost about a third of its value and the peso has dropped by about 22% to 59 pesos to the dollar. Argentina is unique in the way it has swung back and forth for four decades.between market friendly administrations that did well initially and then failed dismally, and socialist Peronist party administrations with the same pattern. High inflation and dropping currency reserves were typical in downturns.  Brazil has suffered from crumbling state finances and collapse in essential services such as sanitation and health. Showing a deterioration of finances across Latin America. ...

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A Peterson Institute of International Economics study on the TPP trade agreement shows it would reduce growth in the U.S. manufacturing sector by a fifth, according to this report in the NYT. Workers incomes and job losses in manufacturing are a key concern for voters and account for the surge in polls for Trump and Sanders in the U.S. presidential election of 2016. All four leading candidates Clinton, Sanders, Trump and Cruz oppose the TPP agreement. Congress will wait till after the election to decide. This is a big issue today because about 5 million jobs have been lost in 1977-2014, according to the Alliance for American Manufacturing. The Peterson study predicts job losses of 50,000 a year, yet another study by Tufts University predicts job losses of 450,000 a year. Another study by the Economic Policy Institute study shows other damaging effects such as labor's share of national income declining from the TPP.

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Germany is adjusting its requirements for residency permits and work permits for refugees. It will let asylum applicants take temporary jobs by 3 months after applying for asylum. Current law bans migrants from working through temp agencies for the first 4 years in Germany. The government will lower hurdles for job applicants who are refugees. Government policy of Angela Merkel's coaltion is- "people who have the right to protection and stay in Germany permanently should find employment rapidly and earn their living themselves." This is critical to the large effort to absorb about 1 million refugees in 2015, as it will meet the needs of companies and not cost the government additional outlays for social payments to refugees. The initial response from companies such as SAP, Thyssen Krupp, and smaller companies has been very positive, and shows why Germany is uniquely positioned of all EU countries to be able to take on this challenge on both humanitarian and mutually beneficial basis.

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Jack Hough points to other important factors that affect the Dow Jones Industrial Averages and the S&P 500 Index. The quality of earnings, the relationship between wages and corporate earnings, and macroeconomic factors, all affect the level of the indexes. The historical average of wages relative to earnings would leave shares at 24 times earnings says Hough. This would mean a further decline of 40%. As U.S. companies earn more of these profits overseas compared to the past, they could sustain a higher level of earnings relative to wages says Hough, but this may not be the level at which they are today. In Hough's view the earnings numbers are made to look better than they actually are, which should be taken into account. He does not mention macroeconomic factors which add to the volatility, and policy decisions which create higher levels of uncertainty affecting decisions on consumption and investment in the economy.

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Einer Elhauge, professsor of law and founding director of the Petrie-Flom Center in Health Law Policy at Harvard University, says there are limits to Congressional powers under the Commerce clause such as enacting a law requiring Americans to eat broccoli. If the health care law required all Americans to subject themselves to health care this would be the case. But the law only requires all to buy insurance so that insurance can cover the costs of healthcare for all. He points to the "necessary and proper clause" as also authorizing the health care mandate. That clause gives Congress the power to pass laws that are "rationally related" to execution of constitutional powers, such as criminalizing the interference with mail, on the basis of the constitutional power to setup post offices. In this case the health care law mandate is related to the constitutional power to regulate premiums and prohibit rejecting the sick, says Elhauge.

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This Journal editorial talks about the role GE Capital has played in generating profits for GE under CEO Welch, and then leading to a need for government money to help GE Capital survive. It describes as hollow the claims GE makes about leading a drive for US renewal through jobs growth and innovation when earnings were driven by a finance division for many years during the financial boom in mortgages. Capital was then massively misallocated from productive uses to speculative investments. The claims about investment in jobs in the US rings hollow says the Journal, because GE continues to cut jobs in the US- employment in the US for GE fell by 34,000 between 2000 and 2009. By inviting "government to be a industrial policy champion, a financier and a key partner," as stated in a 2008 letter to shareholders, GE CEO Immelt, says the Journal, is simply inviting the same kind of capital misallocation that led to the housing bubble.

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Simon Johnson and Peter Boone say not taking forceful action with the large banks- taking them through bankruptcy and restructuring procedures as advocated by senior Federal Reserve officials like Peter Hoenig- will only lead to irreversible damage. The current Geithner-Summers policy being followed by the Obama administration is simply to hope that by fiscal stimulus and economic recovery the banks may be brought to sustained profits and be able to muddle through their financial problems. This Johnson argues is not likely to happen and the cost will be higher debt levels for America, irreversible damage as America faces low debt and financially stronger countries in Asia and sees its position in the world weaken. The muddle through policies for banks of the Obama administration have little prospects in the face of an IMF estimated $275 billion shortfall in capital on balance sheets at large banks (from the IMF Global Financial stability Report). Without aggressive action on the banks America's recovery and renewal will only delayed....

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President Hollande of France appoints Jean-Marc Ayrault, as the next prime minister. Hollande plans to set the priorities and direction of policies as President and work with Ayrault in getting this implemented. Ayrault, 62 years old, is a professor of German for 13 years. He was a three term mayor of Nantes, a city in western France, which is the 6th largest in the country. He is a member of the French parliament since 1986, experience that will be important to get legislation passed. Elections to the National Assembly will be held in June 2012. His German skills will be useful in reaching out to Germany to forge a common policy for the eurozone. The tone for this was set by the SPD Social Democratic party chairman, Sigmar Gabriel when he said about Ayrault: "He speaks excellent German and understands our political culture very well. This is a strong signal to Germany."

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The Fed's quarterly Senior Loan Officer Opinion Survey, says U.S. banks have relaxed lending standards and more businesses looked for loans in the first quarter. Yet the demand for loans is sluggish. While auto loans increased, credit cards and other instalment loans were flat, and mortgage demand is decreasing. The sluggish demand for loans is holding back the growth in the profits of banks. This is also why the KBW Bank Index fell by 7.9% this year and bank stocks are not doing well. Lower revenue reduces the Net Interest Margin, a key measure for bank profitability- the difference between what is earned on assets and the cost of deposits and other laibilities. NIM went up to 3.77% in 2010 with the Fed's low interest policy. Since the first quarter of 2010 NIM is falling. NIM at 2.67% is flat at Bank of America, fell for Citigroup and Well Fargo, and only rose slightly at J.P. Morgan Chase.

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Japanese prime minister Naoto Kan says he has requested the suspension of operations of all reactors a the Hamaoka nuclear plant in Shizuoka prefecture. This plant is operated by Chubu Electric. Another plant on the Japan sea coast has been shut temporarily to investigate above normal radiation levels. With the government moving away from its policy of cooperating with the industry, there are questions whether other nuclear plants that are on earthquake fault locations may face similiar restrictions. This move will further restrict electricity supplies to companies in the local areas supplied by the plant. The Hamaoka plant has been described as "the world's most dangerous" by Japanese media because it lies near an active fault zone. Government estimates are for an 87% likelihood of a magnitude 8 earthquake in the next 30 years. Pressure is growing on premier Kan to take action to show he is listening to public opinion and not following old practices of collusion between bureaucrats, politicians and the nuclear power companies....

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Readers of the NYT reflect on the Syria-Iraq conflict and the experience in Vietnam. Stuart Gottlieb, who teaches American foreign policy and international security at Columbia University, describes Logevall and Goldstein's Vietnam analogy for Syria as a situation on how one can go wrong by relying on historical reference when new thinking is required based on existing challenges. Others point to the situation in Vietnam as Kennedy's war with 16,000 advisors already on the ground. Kennedy's words "let every country know whether it wishes us well or ill, that we will support any friend, oppose any foe...," were part of the Cold War in the early sixties that Kennedy inherited from Eisenhower and Truman starting with a Communist Iron Curtain falling over Eastern Europe and threatening Western Europe. The situation today is quite different in a Middle East with little to do with Russia and China, at the same time sectarian with Sunni and Shia, and aspirations of Arab people for freedom from dictatorships....

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Putin's reaction to the falling ruble with declining oil prices adding to the impact of sanctions on the Russian economy is to blame the Western countries for a "civilizational" conflict against Russia that is centuries old. President Obama speaking about the same time to a Business Roundtable meeting says Putin was taken by surprise during the changes in Ukraine and has improvised his way since then, using Russian nationalism in a way that is taking the country backwards in history. Merkel makes the same point and says the Federal Republic of Germany has taken a new positive direction, learning from past history. This has led to a loss of credibility for Putin as seen at the G-20 meeting in Australia in 2014, as the opening of the Russian economy and the efforts to improve Russia's standard of living in an atmosphere of trust and international cooperation is replaced with distrust and misgivings by these policy improvisations.

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The increase in immigrants in German society is creating new tensions especially with immigrants who fail to integrate into German society. A large increase in refugees from the wars in the Middle East in 2014 is creating new tensions. Asylum applications went up from 127,023 in 2013 to 181,453 for 11 months of 2014. According to the OECD the 1.2 million immigrants admitted to Germany in 2014 make it the second largest destination for economic migrants in the world. Immigrants have also come from Greece and other countries experiencing economic difficulties. The protests in Dresden, drawing 10,000 people, show a significant minority opposes the current immigration policy. Similiar opposing views were expressed in the recent elections in Sweden and at the elections for the European parliament. The CDU Interior minister Maiziere says the Pegida movement cannot call itself as "patriots," as the acronym Pegida stands for "patriotic Germans against the Islamization of the West."

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Uki Goni writes from Buenos Aires, Argentina, describing the chaos and poverty of the years 2001-2003 following Argentina's default on its debt. At one point half of the population was below the poverty line. Argentina eventually recovered in 2004 under a new government of Nestor Kirchner, but had already incurred a terrible cost. This was especially hard on the lower middle class who had only their savings to live on and could not access their accounts at banks which were closed. Barter stores were common in those days as the barter currency gained wide usage for exchange of services. It is not clear whether this was due to badly implemented economic policy or defaulting on the debt. Goni says Greeks should seriously consider the cost of such a steep decline in the economy as they consider exit from the eurozone, and carefully evaluate the policies of Syriza politicians who risk a break with the EU.

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Joe Kaeser, CEO of Siemens AG, meets Russian president Putin in Moscow on March 26, 2014. He also had talks with Gazprom chief, Alexei Miller. Siemen's has invested 800 million dollars in Russia in the last 2 years. Siemens sales in Russia are 2.17 billion euros, 2.9% of the company's revenue. Germany's total trade with Russia is 56.3 billion euros for 2012. Eckhard Cordes, chairman of German industry group Ostausschuss, representing German companies with investments in Eastern Europe, met with Russian officials and Alexei Mordashov, CEO of Severstal metals group. He then briefed the German government on his talks. Chancellor Merkel says dialogue is also part of government policy: "Business contacts are still taking place and I am not interested in seeing the situation escalate, but rather am working towards a de-escalation." Exxon has major investments in Russia and deals with Russian oil companies and the Russian government for oil exploration. Exxon CEO Tillerson has taken a similiar approach....

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EU leaders and proposals to limit tax avoidance by digital companies by requiring the companies to show the profits in the countries where they are made. This would require changing bilateral treaties. France is looking at proposals to tax companies by the number of clicks or user data. Large digital companies, including Apple and Google declare most of their European revenue in Ireland using legal loopholes in that country to shift profits to lower tax locations. A Senate report in the U.S. in May 2013 shows Apple using technicalities in Irish and U.S. laws to pay only a small amount in corporate taxes in four years 2009-2012 on $74 billion. Fredrik Reinfeldt, the prime minister of Sweden stated the argument for fairness in tax policy- "These companies ask for a lot of investment in infrastructure, in research and development, they want to have well educated staff members. Well, let's keep that together: Pay your taxes so we can afford all of these investments."

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Ted Forstmann thinks we are in the second innings , and just at the beginning of the pain that will happen as the country tries to clear up the financial mess from easy money and errrors of the financial industry, pain that will lead to the overhaul of the country and the economy. The crisis taht started in October 2007 is just making its way in the early stages and expect a lot more to happen. He has a story that he was told by Warren Buffett about a country and an economy like ours that first there are the innovators, then there are the imitators, and last there are the idiots who enter the scene. This is what happened here. The ofcourse a lot of stupidity takes place. Curiously he does not find fault with anybody, not Greenspan who did not seee the consequences of a to easy monetary policy, not the financial industry that got us into this bind, or the consumer who borrowed heavily.

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Mankiw is asked by astudent, why the banks lost 100% of their money if they invested in housing through mortgage securities investments, and housing prices went down only 20%. His answer was the crazy amount of leveraging the banks took on to make higher profits. He points to other changes in teaching Econ 101. The role of financial institutions, the effects of leveraging, the limits of monetary policy when interest rates are already at zero, and the challenge of forecasting. He says economists can't take the blame for missing the crisis completely. In saying this he is saying that economists have only to use what is taught in the classroom, and not use their thinking skills developed through the course of experience in the real world and their intelligence, curiosity and skepticism, all part of an educated mind. It requires some of these skills to tell a bubble when you see one.

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Keynes remark about a change of mind coming after looking at facts that have changed and Bernanke's experience last week in a similiar situation. Gertler, who heads Columbia University's economics department believes Bernanke has a good grasp of the facts, even though the markets and economy are still on a tightrope. Background about Ben Bernanke's growing up in a small farm town in South Carolina, named Dillon, and his feel for the common man, as old mills gradually closed down his area and people were without jobs. He brings a good understanding of the Great Depression, having spet much time studying the policy errors of that time. He is also not fixed about anything and willing and able to look at the facts and new facts as things change. Gertler for one does not see anything wrong with Bernankes inital perception of the situation and the change after studying things more closely, if anything he sees it as a plus, initial caution followed by quick action. time.

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Oil prices drop below $38 by mid-December 2015, as the Saudis continue to push prices down further by continuing production increases. No change is planned for 2016 and analysts expect low oil prices into 2016. At $38 a barrel it becomes uneconomical for most shale oil producers to operate in the U.S. About 50,000 jobs are lost in Texas and 250,000 jobs worldwide. This is a boost for large oil importers such as India, Japan, and Europe. China also stands to benefit from low oil prices. Nigeria, Venezuela, Iran and Russia have the most to lose from an extended period of low oil prices. Politics in the Middle East also may play a part in decisions as the Saudis oppose intervention in Syria and Iraq by Russia and Iran. Rising shale oil production in the U.S. could also be one of the additional targets of Saudi policy. One consequence is that OPEC is divided with the Saudis going their own way.

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About 4.2 million Americans will be 65 years old in 2024, and for the next six years about 4 million will be added to the 65 plus population each year making the 2030 population of 65 plus larger by about 24 million people. As America ages it will need more young people to do many jobs in healthcare, care for the elderly, in agriculture and transport. This is what we are seeing in Japan and even a country highly protective of its own culture has a policy of admitting immigrants from Vietnam and other countries to meet worker shortages. Claire Ansberry looks at the 65 plus population today and compares it to 35 years ago and finds it is more oriented to exercise, health, and has more accumulated wealth. About 20% of people over 65 years work today compared to 15% 35 years ago, says Pew Research, and of these working 65 year olds two thirds are working full time compared to half in 1987. They are wealthier having median net worth of $410,000 today compared to $282,000 in 2010 much of the 45% gain made in the last 2 years from rising house prices and stock investments. Those over 75 years have a 13% gain. Overall the wealth is significantly higher today. ...

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New rules from the Biden administration make it easier for people ages 60-63 years to make up for putting less into workplace savings in earlier years with the impact of the 2009 financial crisis, loss of jobs or working parttime for a period, and smaller savings during the pandemic. People in these ages can now put in a 14% higher amount. And a maximum of $34,750 into their workplace retirement plans. This is one of the many actions taken by Biden-Harris, including increasing the amounts for Social Security, that combined with a stronger economy and job growth, lower inflation, is correcting many of the problems of the past that left seniors without enough money to retire in dignity and safety. Small steps taken in the context of bigger steps on infrastructure and chips, science, rebuilding manufacturing by investing in old unused plants and reviving them with new products- all this is creating anew future for America and the ordinary Americans. Higher wages also pushed by Biden- Harris will enable many Americans put away more in savings that the were not able to do over the decades when government policy neglected the needs of ordinary Americans. ...

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Munich Security Conference is being organized by Christoph Heusgen, the conference chair, who was an adviser to Angela Merkel and previous German  Representative at the United Nations. It will be held Feb 14-16 at the Bayerischer Hof hotel in Munich. JD Vance will be attending for the US with alarge delegation including Keith Kellogg US DJT envoy to Ukraine and Zelensky of Ukraine. German federal elections are on Feb. 23, 2025 with CDU's Merz holding a lead. Pete Hegseth Defense Secretary is not attending the conference. Hegseth has expressed views skeptical about Ukraine. Mark Rutte, the former Dutch PM is attending as Secretary General of NATO. The Munich Security Conference Report cites DJT and says- "Indeed, the notion of 'resource scarcity' has become a central premise of Republican foreign policy thinking." Germany barely spends 2% on defense. DJT wants to see 5%. DJT's comments are published in the Munich Security Report- "We were being ripped off by European nations both on trade and on NATO." "If you don't pay, we're not going to protect you." ...

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Seantor Dan Sullivan and the WSJ say Alaska's economic potential and its standard of living was ignored with blanket blocking of any development of its resources. WSJ says under the Biden administration the state was turned into a nature museum.  WSJ says the state's leaders know that spoiling the environment would be mistake. Yet developing some of the state's resources would help the US in sourcing natural gas and rare earth minerals for renewable energy products. This would achieve a policy balance. One of the arguments North Dakota Governor Borghum and new US Interior Secretary makes is that China is building a coal plant every 2 weeks with 12 built in the first 6 months of 2024. As of July 2024 Statista shows China with 1161 coal plants operational, 6 times the 204 US coal plants and 4 times the 295 coal plants in India, 89 in Japan- and 90% of new coal power capacity added. This means climate change issues remain no matter what the US does. By using natural gas fired electricity the US gets transition time for the shift to renewables and can attack the cost of living, export to the EU.  ...