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Ilan Berman, vice president of the Foreign Policy Council in Washington D.C., cites former finance minister Alexei Kudrin about capital flight from Russia reaching as high as $160 billion in 2014. This is a result of Russian policies in Ukraine that are creating a high degree of uncertainty and investor fears about the Russian economy. The result Kudrin says would be a stagnating economy. This follows the emerging market crisis in the beginning of 2014, which hit Turkey, Argentina, and Brazil. Kudrin is respected for his efforts to strengthen Russia's finances in Putin's first term in office, and left the administration over disagreement with prime minister Medvedev on damage to finances from higher defense spending. This suggests Putin and Medvedev in their first terms as president conducted more prudent policies for the economy than they are doing in Putin's second term. A certain recklessness seems to have crept in as many respected advisors from that period have left over differences in policy, including how protests and the opposition's views should be handled. This includes Medvedev's early efforts after elections for dialogue with the opposition parties which were set aside by Putin. The danger with having a Bolivarist class of tycoons as in Venezuela and some developing countries, instead of wiser heads around him for Putin, is that he will lose the advice and counsel he so badly needs to conduct policies without letting emotions getting the better of a sound judgement. A large foreign exchange reserve is a buffer for Russia, but this needs to be used to diversify the economy away from dependence on oil and commodities by investing in technology industries to create jobs in other fields, and not wasted in higher defense spending and fighting investor sentiment for the value of the ruble. It also shows that there is an inherent value in having a "loyal opposition" and "shadow cabinet," and these institutions were not invented over centuries of practice in government without a reason, in that they actually help the governing administration pursue prudent policy without arbitrary actions. The irony is that the very fears of 1998 repeating itself with the "chaos" of western style democracy and politics and manipulation by oligarchs- a Putin complaint- is reversing the gains made by Russia since then, with another set of tycoons and vested interests in place. Russians, like the Germans can learn to make democracy work without a centuries long history of democratic traditions, elections and free media. Czarist traditions can be overcome just as the Prussian traditions were overcome, and Russians can come up with their own Wily Brandts and Gaucks, leaving behind the old history of suppressing contrary opinions. For this to happen Russians including Mr. Putin need to leave their own fears behind, and trust the Russian people for the right instincts and values and maturity of judgement, just as the Germans have done and succeeded. ...

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The slowing growth in China is reducing growth and depreciating the currencies of iron ore producing countries Brazil and Australia. China makes 50% of the world's steel and imports 1.2 billion tons of iron ore traded annually. Australia exports 80% of its iron ore to China valued at $67 billion in 2013. Brazil sends 50% of production to China. For the first time in 15 years China's steel use declined 0.3% to 500 million tons in the Jan-Aug. 2014 period. The mining companies have invested heavily in ports and railroads for expanded production. BHP CEO Mackenzie says the strategy is to maximize production because reducing production increases costs on a unit basis. The result is a decline in price from $135 a ton at the beginning of 2014 to $69.80 on Nov. 28, 2014. Prices could decline to the $50 range in 2015, according to Citigroup analysts, because of an estimated iron ore surplus of 300 million tons by 2018. As China expands recycling of older cars and washing machines to produce steel this will reduce future iron ore demand in China. JP Morgan forecast for Australia reduces GDP growth to 2.8% from 3.3% for 2015, and Brazil reduced its forecast for 2015 to 0.9% from 1.8%....

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Wallsten describes the tense and now frayed relationship between Obama and immigration groups and the way this has evolved from idealism to frustration to mere coexistence amid loss of faith. Obama's frustration expressed in words such as "I am not a king." And the immigration groups voicing their concerns about Obama's loss of credibility, as minorities especially Hispanics have fared poorly during his adminsitration, hit by rising deportations, foreclosures and the impact of high unemployment in construction and other sectors.

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Browne describes the excessive focus on "hard" GDP targets in China and the results in wasteful spending and neglect of other vital indicators of development such as healthcare, education, environment.

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Factors making Russia different from other emerging markets are the foreign exchange reserves of $497 billion. From mid 2009 to the end of 2012 portfolio inflows were only 1% of GDP, according to Morgan Stanley. Problems in Russia include growth slowing to 1.5% and higher inflation with reliance on oil revenues. Russia is still dependent on oil and gas revenues and has not diversified the economy. Foreign investment is limited.

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Anglo American responds to declining commodity prices and the slowdown in China with deep cuts of 53,000 jobs from its 151,000 workforce. Some of the jobs will be layoffs and other job cuts will be through sale of mines. In Australia mining employment is down 13% in the 2d quarter of 2015 over prior year. Anglo American plans to sell over a quarter of assets in the downsizing. BHP has spun off over ten mines into a separate company called South32. American Pittsburgh based company Consol Energy says it will no longer provide guaranteed health insurance to retired workers. Anglo American is one of the hardest hit companies. It had losses of $3 billion for the first half of 2015, and needs $1.5 billion in cost cutting to become profitable again.

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This piece in the Economist provides useful insights in the efforts to repair relations between Japan and China by October 2014, following a series of incidents and disputes. Some experts say China's slowing economy is one reason for mending relations. Japanese direct investment in China has declined sharply by over 40% in 2014 compared to 2013. In 2013 there was a decline following other incidents, and Japanese business has experienced difficulties in operating in China. As a result there is a shift to other parts of Asia including Vietnam and India, that is underway. Volatile relations with China has given the Japanese business and diplomatic community pause about the future of Japanese business investments in China. This is also the background as Chinese Communist leaders face a critical decision on how to handle the protests in Hong Kong over universal suffrage- errors will only add to the image of a China volatile in its relations with the outside world. It is not just North America and Europe, China has to interact with, it has to interact with Japan, Australia, S. Korea, South East Asian nations (Vietnam, Malaysia, Thailand, Philippines), and India, all these countries not sure what China's intentions are after territorial waters or land disputes. Along with Indonesia and Bangladesh, this is a region with about twice the population of China and representing most of Asia, a fact usually omitted as western business rushed into the Chinese market. Chinese Communist leaders are faced with huge challenges and success in the next phase of development, and it is by no means certain under a ossified system of government which cannot change with the times, as technology and foreign investment will now be much more critical drivers of development than in the first phase. ...

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China limits the activities of the Carter Center. Contacts for village democracy are discontinued. Xi Jinping, China's president tells former U.S. president Carter to limit activities to U.S.-China relations.

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Analysts and experts says Turkey faces a debt bubble like that facing Spain and Ireland. The budget deficits in Spain and Ireland were considered manageable before the banking crises in the two countries. Turkey's short term borrowing- most of the $221 billion in outside financing needed for the private sector in 2013 is in short term loans. The large current account deficit and rate of growth in credit approaching IMF warning indicators are a problem. Volatile capital inflows could reverse as investors look for safe havens with the continuing street protests in Istanbul. Earlier currency crises in 1993 and 2001 were currency crises from volatile capital inflows. Turkey's central bank is trying to manage this situation and has $100 billion in currency reserves. But it is the hidden buildup of external debt by banks and companies in Turkey that worries analysts like Richard Segal at Jefferies bank in London. A $400 billion public spending plan, over 50% of Turkey's $770 billion GDP, is being prepared by the Erdogan government for the 100th anniversary of the founding of the modern Turkish state in 1923, showing that the scale of public spending is not under control. Analysts say at some point the huge credit bubble will burst, as it has in other countries including Spain, where the central bank appeared to have things under control. The street protests add political risk to the increasing risk for emerging markets with the U.S. Federal Reserve's policy shift to increasing interest rates....

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Somini Sengupta reports on the Green Revolution and its aftemath from Jalandhar (Jullundur in Hindi) in the Indian Punjab wheat belt. Problems facing farmers here are the shrinking water supplies as more of the table water is exhausted through pumping from tube wells, lack of government investment in agriculture, the low grain prices paid to farmers by the government, and poor storage and transportation to market. Also affecting the suuply of grain and lentils and agricultural produce is the progress of industrialization as more farmers either grow crops that are in demand in the cities like baby corn instead of wheat, and the farmers who sell of land for industry or commercial use. Only 40% of the land is irrigated so too much depends on the monsoon and other rainfall, which is why India's large agricultural component in the economy affects the growth rates depending on the monsoon rains. What happens here affects food supplies worldwide and prices. When India is self sufficient or able to export there is less pressure on prices. Two years ago the situation deteriorated and India imported about 7 million tons for its grain stockpile. Since then the government raised prices for grains the situation has improved, farmers planted more wheat and sold more supplies to the government for building up buffer stocks of grain. Now the emphasis shifting to USA-India cooperation in the field of agriculture for a second Green Revolution. Agreements for the agricultural improvements were signed as part of the agreements signed for cooperation during President Bush's vist to India. The government of Manmohan Singh was elected for another 4 year term and is committed to helpiong Indian farmers. A more organized funded effort is needed especially with the economic crisis. The rural areas are the fastest growing part of the Indian economy. See link. ...

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China's Shanghai stock market declined by 6.9% on the first day of trading Jan. 4, 2016, with trading triggering circuit breakers. The central bank plans to inject $20 billion in short term funds as a signal to investors that it will continue easing.

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A major shift in foreign investment may be taking place as the 2014 St. Petersburg International Economic Forum takes place in May 2014. Russian policy in Ukraine and tensions with the U.S. and Germany could lead to a shift in investment to other emerging market countries. China's tensions with Japan could lead to a similiar shift of Japanese foreign investment. At the same time India has elected a new government with an absolute majority and an overwhelming mandate from young people to accelerate development. The new government under the BJP party's Modi has a decade of experience attracting foreign investment in western India. Indonesia, Vietnam, Africa and other emerging market countries, could benefit from the shift in investment. Investment could also return to the home countries with lower labor costs in Southern Europe, lower labor/energy/transport costs in North America. For Russia the debate at the St Petersburg Economic Forum was about pursuing one of three policy paths with some riskier than others, or some combination also risky and uncertain- depending on state banks and oil windfall funds, increasing ties with Asian countries, continuing on the current path with lower foreign investment and continued capital outflows. The failure to use the time wisely to diversify the oil based economy which could have been better accomplished in an economy not overly dependent on crony capitalism and centralized economy, both current characteristics, will affect future progress. A key weakness for Russia compared to China is the centralization under one person Putin, more so in the third term. In China the two man team Keqiang and Jinping is part of a larger team chosen by consensus and negotiation and part of a rotational scheme. It has senior leaders who initiated the changes to a market driven economy in the nineties determined to see China on track....

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This commentary in the WSJ says it is essential that the U.S. get back manufacturing of all technological goods back to the U.S. or its allies. The dangers of depending on China or other countries not clearly allied with the U.S. is quite clear especially after the pandemic. The U.S. and European supply chains need to be completely remade, restructured, to avoid dependence on China or countries that are not allies. This is what supply chain renewal is about. Yet initiatives alone with hundreds of billions of dollars price tag re not the answer to the problem. What is needed are specific targeted actions such government direct assistance to key sectors to ensure U.S. technological advantages in worldwide competition. Giving a hole range of incentives and direct financial support to industries making everything from electronic and computer components to high tech parts that go to defense and civilian production.   The U.S educational component in this puzzle is university students in all high tech courses which should be kept for U.S. citizens or from key allied nations at American universities. The manufacturing base would mean securing incentives and aid to manufacturing industries, component by component, part by part, to secure American leadership and distinct advantage.  Job losses have to be reversed and industries relocated back to the U.S. And only in cases where it is advantageous to manufacture overseas to relocate in allied countries India, Japan or South Korea. U.S. labor has to be brought into the picture as a key participant in the national interest and given an important role. R& D efforts have to be developed component by component, technological part by part, and technology by technology, so that a systematic plan can be followed to secure American leadership for the rest of this century, is what experts including this one say is required today. ...

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Krugman says there is cause for concern from May's U.S. jobs report of only 38,000 jobs added- low even with Verizon strike jobs added back in- compared to the 200,000 a month average since Jan 2013. One cannot read too much into one months report, yet the political uncertainty in a election year adds to the problem. The low interest rates near zero offering little possibility for rate cuts, make it difficult to come up with a policy response. Under a Clinton administration the infrastructure spending option would face Republican resistance.  It is not clear how a Trump administration would respond. Krugman says the jobs figure reflects a stronger dollar- a result partly of the Fed's plan to raise rates- that is hurting U.S. exports.

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The U.S. ranked first in an annual survey of executives rating places with favorable prospects for foreign direct investment. The survey by consulting firm A.T. Kearney has questions for executives of 302 large companies, all with sales above $500 million, about how likely they are to invest in countries over 2013-2015. It was done in October and November of 2012. On a scale of 0 to 3, the U.S. scored 2.09, China 2.02, Brazil 1.97, Canada 1.86, India 1.85, followed closely by Australia and Germany at 1.83 and the UK at 1.81. Mexico and Singapore are at No. 9 and 10 with 1.77. The survey shows the U.S., and Mexico gaining, China and India slipping, and English speaking countries UK, Australia and Singapore, as part of the 6 that are English speaking of the top 10 countries. Brazil's hosting of the Olympics and World Cup helped it maintain its position. The emerging market countries performance has slipped further since the survey, including Brazil, and the U.S. has made further gains in investor sentiment. The unrest among young people in Turkey, India, China, and Brazil as seen in street protests and credit financed booms may have further affected investor sentiment. The increase in natural gas production, revival of the midwestern economies, and a recovering housing market have boosted the U.S. economic prospects compared to emerging markets and the eurozone....