LyrArc Article Gist
The situation in Guangdong province in 2012, with older factories unable to compete with the rising wages, stricter environmental enforcement, and lower export demand. Many Taiwanese manufacturers are closing factories. The growth in Dongguan, a manufacturing hub in Guangdong, is estimated at 3.5% for the first three quarters of 2012, half the overall rate for Guangdong province. A researcher in a Chinese think tank says China's manufacturers are in a kind of "sandwich trap" with competition from Vietnam and India in lower wage production and competition from Germany and the U.S. in higher wage technology intensive products. This is especially true in 2012-2013, now that U.S. and German manufacturers have reduced costs and increased competitiveness.

LyrArc Article Gist
Jim Dwyer discusses proposed legislation in the New York City Council in November 2011, to set a "living wage" of $10 per hour, plus benefits, for workers at new developments receiving more than $1 million in public money. Under this legislation employers who do not include benefits would pay an hourly wage of $11.50. Discussion in the City Council has led to questioning this legislation on the grounds that the developments would not be built under the new rules. Dwyer points to San Francisco, which has set the minimum wage at $10.24 for January 2012, plus mandatory contributions to health insurance funds. The number of low wage workers in New York City with some college education has increased by 70%, according to the Fiscal Policy Institute. Wages at the bottom were $10.85 an hour, adjusted for inflation in 1990, in 2010 the wages were $10. What this does is further increase the income disparities and inequality in the U.S. Because of the demographic changes in America with Hispanic children representing a large proportion of young children, and the high rate of dropouts from highschool in the Mexican American community in New York, this means more children in New York City growing up below the poverty line....

LyrArc Article Gist
Mario Draghi faces his first test as head of the European Central Bank as Italian bond yields approach 8%. Draghi has limited purchases of bonds of troubled EU countries to 5-10 billion euros each week. This has been sufficient to keep Italian bond yields from going out of control, but high enough to keep pressure on governments in Italy, Spain, Portugal and Greece to make necessary changes. France, Germany and other countries in the EU are working on new rules for making strict budget discipline legally binding, with enforcement sanctions by a EU budgetary authority. Germany is pushing for the new rules. France's Sarkozy with a legacy of Gaullist reluctance to surrender sovereignty in such matters had resisted such calls in the past, but is moving in the direction of convergence of fiscal policies as the only way to preserve the euro currency and the EU idea alive. Draghi is taking a flexible stance on inflation and lowering rates compared to his predecessor, Trichet. He sees signs of slowing manufacturing activity and credit tightening in Europe as signs that inflation will come down from above 3% to something closer to the 3% target set by the ECB. Economists expect him to lower interest rates for the eurozone to 1% from 1.25%, when the ECB meets in a week. The manufacturing purchasing manager's index went down to 46.4 in November, below the breakeven point of 50, which signals a contraction. Output and orders were down across all of Europe, including Germany. Economists say Draghi has left open the possibility of larger bond purchases if the new rules are made legally binding on eurozone members....

LyrArc Article Gist
Volcker says that even with all the fuss about the length of the Volcker Rule, its important to remember that the regulation itself is only 35 pages. And he says that lawyers for the banks are not honest when it comes to this, because they spent a lot of time finding holes in the rule and were working to add complications to it, and now they are turning around and saying that the Volcker Rule is too complicated. Asked about Dodd-Frank, Volcker says that it does make the U.S safer in a financial crisis because of the crisis resolution process set up under Dodd-Frank legislation. A bank fails and the resolution is clearly laid out- the government takes over and liquidates it, or merges it or sells it. Stockholders don't get a bail out, management is fired, and creditors have to take losses. A lot still depends on having vigorous and alert regulators. He sees two large problems, the Euro crisis and the U.S. deficit, which need strong action. Volcker remains perplexed by why the situation of huge disparities in income growth has not been expressed to a greater extent- on one side the lack of growth in income for the average family in 10-15 years and the other side having the huge increase in incomes at the top end. He does not know of any years when this was as big as it is now- except 1928, 1929....

LyrArc Article Gist
Experts say there may not be much difference whether a voluntary deal is reached between Greece and the Institute of International Finance or a deal is forced on private bondholders by Greece for the 93% of Greek bonds that are based on Greek laws. Most of the large banks that hold Greek bonds will be subject to persuasion by European authorites (EU, ECB) to accept the deal offered by Greece that brings debt down to 120% of GDP by 2020. The remaining holdouts are the hedge funds that will want to opt out of a voluntary arrangement anyway, because a forced deal by Greece would allow them to collect payments on their credit default swaps. Adam Lerrick, an expert on sovereign debt restructurings, says the hedge funds and other private bondholders are framing the discussion into one of a voluntary agreement that is orderly and an involuntary agreement that is disorderly, as a tactic to scare the European authorites (the EU, ECB) and Greece. He says not only can forced restructurings be orderly, but in this case the improved prospects for Greece with serious debt reduction would lead to a ratings upgrade for Greece. Some hedge funds have said they will sue if forced into the deal. Michael Waibel, at the Lauerpacht Centre for International Law at Cambridge University, says the case would first go to Greek courts where it would be received without much sympathy, and then to the European Court of Human Rights. Only the small number of bonds under Swiss and English law with pari passu clauses insisting on equal treatment of bondholders have any prospects, and even then legal enforcement of any awards is uncertain as shown in the case of Argentina. The 93% of bonds under Greek law have no such clauses and this gives Greece the option for special treatment of bonds held by the ECB....

LyrArc Article Gist
About 400 million or one in 4 people people smoke in China. State ownership of the tobacco industry only makes this worse. Enforcement of bans on smoking is lax. Experts warn that this would become a major healthcare problem in China.

LyrArc Article Gist
Changes to China's five year plan to include critical social goals, reduce income inequality, and provide a social safety net. The influence of local governments in distorting central government policy.

LyrArc Article Gist
Figures from the European Commission and the ECB show that the ECB's balance sheet reached 32% of eurozone GDP in March 2012. Comparable figures for the U.S. Federal Reserve for March 2012 are 19%, Bank of England 21% and the Bank of Japan 30%. The ECB's balance sheet in March 2012 is at 3.023 trillion euros. ECB president Mario Draghi says this is high but "it will be managed very well."

LyrArc Article Gist
The growth in U.S. GDP was 1.7 % in 2011, yet unemployment dropped by 0.7% in the last 12 months to 8.3% by Feb. 2012. A pickup in hiring is seen in job figures. Christina Romer gives as an explanation to the rise in unemployment in 2009 to 10%, more than expected, and the drop since then, to the overreaction of companies to the financial crisis by laying off workers and freezing hiring- with hiring picking up as conditions return to normal levels. The unemployment rate as defined is also not an accurate measure of the jobs situation, as it reflects only workers who are looking for work, and many workers drop out of the jobs market when they are discouraged especially the long term unemployed. Taking into account people who have dropped out of the labor markets the unemployment rate was 11% in Nov. 2009, according to Luce in the Financial Times- in Ezra Klein, Washington Post 12/12/2011, Wonkbook: Real unemployment rate 11%. Lawrence Katz, Harvard Labor economist also cites this as one of three jobs crises in unemployment today that need to be addressed, the other two being: foreclosures and debt, and the low number of jobs added because of automated manufacturing- in Friedman, NYT, 12/10/11, The Next First 100 Days. Explanations for the low GDP growth as unemployment declines is a likely productivity slowdown. Prof. Robert Gordon of Northwestern University, sees a slowdown in productivity. Worker output for every hour worked, how productivity is measured, increased only 0.4% in 2011 and 0.9% in the last 7 quarters, and is trending downward in the longer term. A more likely explanation is that unemployment is still at higher levels but is understated in unemployment figures....

LyrArc Article Gist
Former finance minister, Rodrigo Rato, resigns as executive chairman of Spain's Bankia bank. Spain's Bankia bank is believed to be one of the banks mentioned by the IMF that will need government help to address 32 billion euros in bad loans. Bankia bank is the result of consolidation in 2010 of seven of Spain's Cajas savings banks in a government led restructuring. Bankia is expected to get 7-10 billion euros from the government in the form of convertible bonds. The government gave $4.5 billion to Bankia to absorb some of the losses in 2010. Bankia made an IPO offering in 2011 in 3.3 billion euro listing. Since then the shares have lost one third of the value. Experts are uncertain about the extent to which this will restore confidence.

LyrArc Article Gist
Dart Management, a vulture fund based in the Cayman Islands, received 90% of the 436 million euros bond payment by Greece on May 15, 2012. Dart is one of the holdout investors who did not participate in the Greek debt restructuring deal. It planned to sue the Greek government. This has implications for the other holdout investors with about 6-7 billion euros of Greek bonds. The reason given by the Greek government was that this caught Greece at a bad time- suing Greece could have tied up European bailout funds that Greece needs to make interest payments on its debt. The timing is bad from another standpoint, as it will further exacerbate voter discontent with the parties associated with the government just before the second Greek elections in June 2012.

LyrArc Article Gist
This Reagon Memo from 1980 was written by his advisors George Shultz, Milton Friedman, Paul McCracken and others before his first inauguration in 1980. It provides the new president with prudent advice on policy and methods to deal with soaring inflation and a stagnant economy. Its relevance today lies in the emphasis on charting out a long term plan for growth by encouraging private investment in the economy and providing a sure framework for the private sector to generate expansion.

LyrArc Article Gist
Over 50% of respondents in a Pew Research center survey conducted in December 2014 view with disapproval president Obama's handling of race relations, only 40% approve. This includes a steep drop among African-Americans of 16 points since the previous polling in summer 2014. Obama's statement that change is "hard and incremental" comes up short for many Americans who look for leadership in race relations. A cautious presidency fails to speak up for ideals it espoused, for human rights overseas and building a better future for minorities at home, losing precious opportunities at every turn.

LyrArc Article Gist
What Krugman makes of the $1.089 trillion dollar U.S. deficit for fiscal year ending in Sept. 2012. He points out that the U.S. can have a stable to declining debt to GDP ratio with $400 billion debt. He cites the Clinton years (1992-2000) when the debt to GDP ratio declined from 49% to 33% with steady growth. What about the remaining $600 billion. He attributes this mostly to temporary factors which are reversible as growth picks up. Of this remaining excess deficit he says $400 billion is from lower tax payments to Treasury because of the 2008 economic crisis and the recession that followed. This includes the payroll tax cut which is also temporary to keep up consumer spending in the recession. The $150 billion is from unemployment insurance, food stamps, and other aid which is also reversed once growth picks up. He places emphasis on restoring economic growth as early as possible and reducing unemployment and using the recession for business to continue to invest in R&D, productivity, and government to preserve the social fabric, invest in education, and provide incentives for growth. S&P Nov. 8 report says the net government debt to GDP ratio is estimated to be over 80% in 2013. It will have to stabilize at current levels for S&P to preserve the U.S. credit rating, says S&P executive Chambers. The higher debt to GDP ratio in 2013 and lower growth rates expected makes the situation different from the lower debt to GDP ratios during the Clinton period. Britain, France and other major industrialized nations with political parties at either end of the political specrum have also chosen to stabilize or reduce debt to GDP ratios rather than take on the risks of them going much higher. The U.S. has the added problem of health care costs out of control with an aging population and about 17.9% of GDP going to healthcare costs in 2010 expected to increase significantly, as Medicare actuaries estimate enrollee numbers jump to 80 million in 2030 from 50 million in 2012. Democrats and Republicans have largely sidestepped this underlying problem in fiscal cliff negotiations....

LyrArc Article Gist
The jawboning by ECB head Mario Draghi in July 2012, when he said the ECB would do whatever it takes to support Spain and Italy, has produced exraordinary results in calming financial markets.

LyrArc Article Gist
Similiarities with Japan are in the exploding monetary base growth by the Fed, just as bank lending is dropping. And as in post bubble Japan of the 1990's, all of the behaviour says Wood invites legitimate comparisons with Japan. The government has lent, spent or guaranteed about $11 trillion to the financial sector broadly defined, because of letting financial institutions remain "too big to fail," whether Fannie Mae, AIG or Citigroup. None of them have been broken up. And this is similiar to the lack of bank cleanup in Japan with regulatory forbearance for years after the bubble. He thinks there is evidence that America is already in a Japanese style "liquidity trap."

LyrArc Article Gist
The comparison of the British economy and the American economy with Japan, where debt constantly eats away at the economy, a long period of stagnation, is one possible outcome, says Buttonwood in the Economist. Central banks in both countries are allowing the banks to earn more money to replenish their capital, by letting them borrow short term at very low rates and invest the proceeds in higher yielding longer dated government bonds. Its acozy relationship where the banks are rescued by the government and they in turn finance the government by buying government bonds, but in the long run this means diverting lending from productive private sector projects and productive investment.

LyrArc Article Gist
Saudi Arabia continued to follow a policy of high oil production in 2016, and reported that it produced 10.67 million barrels a day in July 2016. Iran is producing at a pre-sanction level of 4 million barrels a day. 2017 oil demand prediction by OPEC is at growth of 1.15 million barrels a day. Experts says that the interests of Iran and the Saudis may be converging to reduce production as they face low oil prices. Iran needs to make large investments and Saudis face budget cuts with low oil prices. They point to this cooperation being temporary as there are issues of competing politics in the region, and beyond that both countries seek to expand their market share.

LyrArc Article Gist
Criticism of the EU's handling of the Greece crisis by IMF officials in a report. The report says the actions taken for debt restructuring in 2012 should have come much earlier to reduce the debt burden and the size of austerity measures in Greece. Similiar criticism has been voiced by president Hollande of France and in editorials by the WSJ. President Samaras of Greece says the sharp cuts in spending reduced potential for growth in the economy.

LyrArc Article Gist
A young socialist leader in the Sanders campaign effort asks what it is about aging socialist leaders Jeremy Corbyn, 68 years, in the UK, and Bernie Sanders, 75 years, that makes them popular with young people. She says both leaders stood up consistently for decades on issues important to ordinary working class people, when Labor under Blair and Democrats under Clinton abandoned their base to a point when one political expert could say Democrats  were the "second most enthusiastic capitalist party" in the U.S. She says under Blair Clause IV was rewritten. That clause committed the Labor party in Britain to "common ownership of the means of production, distribution and exchange." Under Corbyn, with support from young people, Labor received 40% of the vote. The party was reenergized on issues important to students such as making higher education accessible to all. A similar situation happened with Sanders in the U.S., who received more of the young people's vote in 2016 primaries than Trump and Clinton combined. ...