29 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. It’s almost impossible to believe the anti-Obama rhetoric emanating out of the US “business community.” It’s unseemly in its personal animus, bordering on the racist, emboldening the more extreme and violent elements of American politics in a totally negative direction. Even more, it’s just flat out wrong. With the possible exception of the Cheney / Bush regime, Obama has consistently been one of the most pro-business Presidents in modern US history. Indeed, as we have pointed out time and again, he’s not just pro-business. He’s almost militantly pro-BIG business, notably his nearly unconditional support for the Too Big To Fail banks, the health insurance companies, and the other titans of the corporate world. Yet all he seems to get for it is a lack of respect shocking in itself, and disturbing in what it says about the continuing deterioration of public discourse in America – which is probably the most upsetting thing of all.

28 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The scale of the new markets in China and India unleashed by the pace and scale of their urbanization is staggering. But businesses still need to be able to serve these markets in practical terms. The way cities are run—and the productivity that results—is a major factor for companies. Here, China is in much better shape than India. While India has barely paid attention to its urban transformation, China has developed a set of internally consistent practices across every element of the urbanization operating model: funding, governance, planning, sectoral policies, and the shape, or pattern, of urbanization, both across the nation as a whole and within cities themselves. India has underinvested in its cities; China has invested ahead of demand. But all that can change, as legendary developmental economist Arthur Lewis made clear.

27 July 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Sadly for him, and the US, former Federal Reserve Chair Paul Volcker is a perfect example of how keeping your mouth shut when you know something is wrong can lead not just to disaster for your country, but a deep well of inner regret towards the end of your own life. At 82, he knows his time has passed – quite apart from what even he considers the joke of the “Volcker Rule.” Like many powerful people, he now finds himself sorry for unleashing certain forces, here those that created the catastrophe of Black September 2008. But at least he’s, finally, willing to admit publicly he consistently made huge policy mistakes – with near-apocalyptic results, whose long-term effects are far from over.

26 July 2010. Countries, even whole regions, a few years ago dismissed as perilous – to both body and bourse – have now come into stock market vogue. Big investment companies have rolled out mutual funds and exchange-traded funds that put all or at least a big chunk of their money in frontier regions. The frontier pitch resonates at a time when US & EU economies are struggling and interest rates are sagging. Plus returns in several of the leading emerging stock markets, Brazil, China and Russia, have faltered this year, after surging in 2009. “We view frontier markets as attractively valued compared with emerging markets,” according to one heavily-invested executive. But frontier investing is a new-enough phenomenon that professionals don’t even agree on which countries make up the sector. Still, “they’re relatively diverse, populous and growing fast,” said another. “They’re not fully established, but people were saying the same kinds of things about emerging markets 15 years ago.” Others, however, are skeptical: “A lot of these trends are true, but you can go through periods of sharp volatility.”

22 July 2010. With Build America Bonds, the federal government pays 35% of the interest costs, a huge potential saving for states, municipalities, counties etc. But questions about the multibillion-dollar program are piling up. Wall Street banks are charging larger commissions for selling them than normal municipal bonds, increasing costs to states and cities. The new bonds may also be priced too cheaply, enabling unscrupulous speculators to turn a fast profit as prices climb, while raising interest costs for taxpayers. And now Wall Street banks — which have pocketed hundreds of millions of dollars in fees from the program — are releasing research reports warning states’ financial woes may make the bonds less attractive.

21 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Much of the lending through off-balance-sheet channels is fueled by trust companies, mostly privately owned, that partner w banks, & engage in complex deals that repackage loans into investment products — an informal type of securitization: the deals are essentially disguised loans, as GS did w Greece. The China Banking Regulatory Commission supposedly ordered banks to stop working with trust companies to securitize or repackage loans. But the regulator made no official announcement - eerily reminiscent of the AIG "bailout." One analyst estimated trust companies raised hundreds of billions of dollars in 2009 and first five months of 2010, partly since depositors disdained low interest rates at banks, & trust companies were willing to offer double that amount - with principal guaranteed. “There’s limited transparency, so obviously that’s a red flag.”

20 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Put bluntly, the more money bankers have, the less there is for everyone else. If we don’t insist on transparency and basic justice in the banking system, we run the very real risk of creating economic systems – at both national and global levels – that reward the most cunning and devious, rather than most ingenious and inventive. That is not only tragic in itself, it also leads to precisely the kind of insane situation the world is going to confront for the next two years, as so-called leaders / bankers / regulators et al try to deal with the tsunami of “short-term” banking obligations that are about to come crashing over everyone’s heads between now and 2012.

19 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The Goldman settlement — both its size and its legal implications — brought a palpable sense of relief on Wall Street. After two months of strident claims and equally strident denials, the matter was finally settled, and for a price Goldman could easily afford. The penalty amounted to about 15 days of profits – if that. And that nearly useless result seems all too typical of the way the Obama administration handles just about everything.

15 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Standard economic theories – neo-classical, monetarist, and even Keynesian – have shown themselves unable to explain stagflation: a dreaded combination of slow / low / no growth AND rising prices – a situation the universally taught, but totally irrelevant, Phillips curve is SUPPOSED to “prove” is impossible. And, yet, as the King in Amadeus says, “there it is”, or WAS, at least, during the 70s – for reasons conventional economists have never been able to explain – and may be now rearing its ugly head in the UK, where a serious debate has broken out in policy and “intellectual” circles over a) whether it can actually be happening, and b) if so, why. And it’s an issue to which both the US and EU should be paying careful attention - since they too may soon experience it.

14 July 2010 – Happy Bastille Day !!! Latin America, beset in the past by debt defaults, currency devaluations and the need for bailouts from rich countries, as well as consistent domination by US corporations and officials, is experiencing robust economic growth that is the envy of its northern counterparts. Strong demand in Asia for commodities like iron ore, tin and gold, combined with policies in several countries that help control deficits and keep inflation low, are encouraging investment and fueling much of the growth. The World Bank forecasts the region’s economy will grow 4.5 percent this year. And while Brazil is the current powerhouse, nations like Peru may not be far behind.

13 July 2010. Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes - the type of austerity measures financial markets now pressing on most advanced industrial nations. Rather than rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus, the Irish economy shrank 7.1 percent last year and remains in recession. Joblessness is above 13 percent, and the ranks of the long-term unemployed — out of work for a year or more — have more than doubled, to 5.3 percent. Now, the Irish are being warned of more pain to come.

12 July 2010. Turkey is a fast-rising economic power, with a core of internationally competitive companies turning the youthful nation into an entrepreneurial hub, tapping cash-rich export markets in Russia and the Middle East, while attracting billions of investment dollars in return. For many in aging and debt-weary Europe, which will be lucky to eke out a little more than 1 percent growth this year, Turkey’s economic renaissance — last week it reported a stunning 11.4 percent expansion for the first quarter, second only to China — poses a completely new question: who needs the other one more — Europe or Turkey?