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At the height of the market a year ago Citigroup acquired Nikko Cordial for 1.6 trillion yen ($17.7 billion). Now in a reversal of an earlier decision, after announcing a loss of $8.3 billion on Jan 16, 2009 for 4th quarter 2008, Citigroup will consider Nikko Cordial a non-core asset, meaning that it would be sold if a buyer can be found in Japan. Japanese banks are relatively healthy and there are propects for finding a buyer there.

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William Dudley who spent 20 years at Goldman Sachs and was its Chief Economist, before his position as executive vice president of the Fed's markets group, will now head the New York Federal Reserve Bank.

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Joe Nocera talks to experts like Simon Johnson at MIT. Johnson says that when he talks to other experts, after a two minute discussion, they say we should just nationalize the banks. Here Christopher Whalen, a veteran bank analyst, of Institutional Risk Analyst, and Joshua Rosner of research firm Graham-Fisher, say the same thing, with the phrases, lets get on with it or just do it. Says Simon Johnson, thats what we told emerging market countries, Thailand in 1997, or Russia in 1998, when he worked at the IMF. He says we told them to close down some of the banks, and take over the others, and inject government capital. He adds its the best practices, and its straightforward. So asks Nocera, is Geithner talking about the stress test banks will be subjected to, as first step preceding nationalization, more of a calculated approach to gradually introduce the idea of nationalization. But he isnt sure, as Geithner also told David Brooks of the NYT, that governments were not so good at managing banks. No one knows for sure. But says Nocera thats exactly what the government did to solve the S&L crisis. And the man who was former chairman of the FDIC, and helped run the program for the Resolution Trust Corporation, says the government did a pretty good job of it, taking over banks, replacing top managers and directors, and stripping out the bad assets and selling off the now healthy banks to private buyers. So can it be done again and will it be that hard? Yes, its been done before, and its not that hard say these experts. Every month that the administration and Geithner procrastinate puts the banks in a deeper hole, and will mean more layoffs and a worse crisis, even years taken to recover. What he has'nt mentioned is that even if after some procrastination the government gets around to doing it to clean up the mess, there is one added complication this time that is different than what happened with the S&L crisis or with the Swedish cleanup, or the Japanese cleanup after 2003, this time the global economy is caught up in the crisis which makes recovery that much tougher....

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This Washington Post editorial following the New York primary points out the misstatements, exaggerations, and extreme statements that have characterized the Trump campaign, about women, minorites, the media, and other candidates.

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Sanford Weill built Citigroup into a mega bank through repeated acquisitions. He was the strongest voice for the repeal of the Depression era Glass Steagall Act banning banks from risk taking activities in investment banking. The Glass Steagall Act was repealed in 1999, and repeal legislation was given the name of "Citigroup Authorization Act." On July 23, 2012, Weill told CNBC: "I am suggesting that they (the big banks) be broken up so that the taxpayer will never be at risk, the depositors won't be at risk... Mistakes were made." Weill said that the housing bubble and the financial crisis has proved that the repeal was a mistake.

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Charlie Hebdo weekly is part of a long tradition of satirical magazines that poke fun at leaders and organized religion including Catholicism and Islam. This dates back to the days of the French Revolution. The magazine received many threats from Islamists. In January 2015 attacks by 3 young terrorists killed 12 journalists, a policeman and a police woman.

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Gabriele Steinhauser's interview July 16, 2015 with the chief of eurozone finance ministers, Dutch finance minister Dijsselbloem. He tells Steinhauser the lowest moment in the crisis came on the night of July 5 when the referendum results were announced. He expected a "no" vote as he knows this is the way this sort of referendum turns out. He was present in all the critical moments of the crisis. And this moment gave him a sad feeling because of his conviction that it would take tough measures to sort out something like Greece, and the Greek people had been given the idea that this vote could change things. He says Tsipras heard a lot from European leaders on July 7 about lack of trust. Following an ultimatum to Greece about Grexit or acceptance of the measures to be taken, and Greece's acceptance on July 9, more hurdles emerged on July 11, 2015. One came from the IMF with an estimate of 86 billion euros as the cost of new loans to Greece, and possible writedowns on 180 billion euros already loaned. He says Greece's new finance minister, Euclid Tsakalotos, a Oxford educated economist, who was Alternate Minister for International Economic Affairs in the Syriza government from Jan to July 5, 2015, showed a remarkable ability to absorb the criticism as a lot of the bad news surfaced. A Wikipedia note on Tsakalotos shows a similiar background 10 years apart for George Osborne, Britain's chancellor of the Exchequer, and Tsakalotos- both educated at St. Paul's school and Oxford, and Tsakalotos's wife Heather Gibson also from Britain. Tsakalotos was seen as being at ease with the EU ministers, who thanked him for his attitude, of grace under a lot of pressure, and the way he handled the matter. Another piece of difficult news, says Dijsselbloem, was the insistence of German finance minister Schauble on a default scenario of Greece opting out of the euro for a number of years being included in a eurozone statement. After 17 hours of drafting, the final statement left this scenario out. It included a 50 billion euro privatization fund with half to be setup to help capitalize Greek banks, quarter to pay down debt, and a quarter to generate economic growth. Compared to the day following the referendum, Dijsselbloem says he feels it will be a difficult road with many problems, but he feels now that it can be sorted out. Stangely he does not make any mention of the role of the French under premier Valls and president Hollande between July 6 and July 9, including sending advisors to Greece to help draft proposals, in turning the situation around. Only saying he is relieved- possibly of not having some of the burden of the failure to resolve the crisis falling on the Dutch finance minister....

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A report released by the Organization for Economic Cooperation and Development (OECD) shows growing income inequality in 34 OECD countries. OECD Secretary General, Angel Gurria says: "The social contract is starting to unravel in many countries. This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that the greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, income inequality will continue to rise." Countries with the largest ratios between incomes at the top and the bottom, are the United States, Turkey and Israel, roughly 14 to 1. Germany, Denmark and Sweden have ratios of 6 to 1, with their ratios up from the 1980's. Gaps in Chile and Mexico are at 25 to 1. The study covers the period from 1980 to 2008. Overall inequality went up by 25% in the U.S. from 1980. In 2008 the top ten percent in the U.S. earned $114,000, 15 times than incomes for the bottom 10%. The top 1% of Americans saw incomes go up from 1980 to 2008, increasing from 8 percent to 18 percent. The richest 1% having $1.3 million in after tax income, and the lowest 20% making $17,700. The trends have accentuated an increase at the highest end- the top 1% and top 10% of the people- and a sharp decrease for the bottom 20%, which can be grasped from the $17,700 and the $1.3 million, both at extreme ends. The study attributes the rise in inequality to a growing gap in wages for highly skilled workers as technology advances, a surge in foreign direct investment and a looser regulatory regime that reduces employee protections leading to wage premiums for financial jobs and smaller incomes for workers at the bottom. Income groups and professions and sectors that had the greatest influence in government were able during this period to get the greatest protection for incomes, and able also to maximize their incomes. Incomes in the financial sector increased dramatically in the last decade, as a result of deregulation leading to higher risk and speculative activities in the financial sector, leading to the financial crisis of 2008-2009. Financial crises further depress incomes at the lower end. Similiar income inequality trends can be seen for India and China. China has a Ginni coefficient of 0.5 according to researchers at Beijing Normal University, up from 0.3 three decades ago- a Ginni Coefficient above 0.4 is considered destabilizing. Another factor that played a part in these countries is corruption and lobbying by special interests for favored treatment of sectors or groups. Austerity measures taken in Europe and in the U.S. are likely to widen income gaps by depressing the lower end income groups, creating social unrest, especially in the absence of efforts to stimulate growth....

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US differences with Pakistan are based on two different perspectves that are not reconcilable. Recent events and the relationship between the US and Pakistan's army chief have confirmed that this is not going to change. US sees militants and Taliban inside Pakistan as havens for the short term as the US disengages from Afghanistan, whereas Pakistan's army sees them as useful elements in Pakistan's security interests in relation to India for the long term. Whe Kayani met with Obama in Washington, he handed Obama a 13 page document showing Pakistan's strategic perspective and emphasizing the gap between short term US interests and Pakistan's long term interests. The Wikileaks cables show Kayani discussing with US officials a possible removal of President Zardari and his preferred replacement. This made Kayani, normally reticent, to rant for hours on the irreconciliable differences between the US and Pakistan with a group of Pakistani journalists. He described Pakistan as the US's "most bullied ally," and said the frames of reference of the US and Pakistan regarding regional ssecurity "can never be the same," according to news accounts. And added that "the real aim of US strategy is to de-nuclearize Pakistan." Holbrooke and Admiral Mullen had hoped to reverse "a trust deficit" between the two sides. But this has not happened. General Petraeus is taking a tougher attitude and patience is thin on both sides. According to a Kayani friend, air marshal Chaudhry, Kayani is always asking Petraeus what the strategic objectives are in Afghanistan. US officials say they have given up on changing Kayani's thinking and that Kayani has told them: "I don't trust you." Kayani's position makes sense when one looks at the strongly anti-American public in Pakistan. Pakistani military and intelligence officials say a campaign against militants inside Pakistan incites domestic terrorism and uproots local communities. And by following Pakistan's own interests and frames of reference Kayani sends signals that win esteem among the Pakistani public. Opinion polls now show the military held in higher esteem than the Zardari administration. This puts the US in a no-win situation in Afghanistan with no clear objectives for the long term. This leaves the US in a time of tight budgets stretched thin to meet the needs in other defence areas that need attention, such as modernization of forces, trouble spots such as Korea, Iran and elsewhere, and resources needed for modernization of US infrastructure and supporting new technologies and industries. The lasting solutions that will take time, careful thought and preparation would be to integrate South Asia as a whole into an economic zone, extensive infrastructure building, and bring India and Pakistan closer through diplomacy and negotiations. See the articles by Richard Haas and others on the need to redirect resources. ...

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The median household headed by a person 60-62 years of age with a 401(k) account has less than one fourth of what is needed to maintain a standard of living at retirement, according to data from the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for the Wall Street Journal. Including Social Security and any pensions or other savings, the savings are way short of what is needed for retirement. Households used in this data had a median income of $87,700 in 2009. The 85% needed for a decent standard of living upon retirement is $74,545. Social Security would provide an estimated 40% of pre-retiremment income, or $35,080 for that median family, leaving $39,465 that has to come from other sources. The median 401(k) account has $149,400 which would only provide a fixed income each year of $9,073- only one fourth of the $39,465 needed. To generate that $39,465, households have to have $636,673, and only 8% of American households approaching retirement have that amount. Half of the families have other pension income of $26,500 a year, which added to $9,073 in 401(k) income gets the total income up to $35,573. Other studies using different data by the Employee Benefit Research Institute show results that are largely similiar. The Employee Benefit Research Institute, is supported by 401(k) providers. Its estimate of the median person is based on individuals in the 60's who have worked at the same company for more than 30 years. This data shows an estimated median person having about $158,754, not much different from the Fed data. Why is the amount in most Americans 401(k) savings so low? There was a mistaken sense that a 6% annual contribution, with a 3% company match would be enough. Vanguard Group says the current median amount that people contribute is 9%, counting the employer contribution. Now Vanguard is advising people to contribute more, 12 to 15%, including the employer contribution. Other problems for the low savings is that saving started late, or contributions were suspended after a job loss, or medical emergencies, other debt. The stock market collapses of 2000-2002 and 2007-2009, added to the problems, by wiping out a portion of the savings. The low rate of interest on savings for most of the last decade hurt even conservative investors and lowers the kind of retirement account income used by seniors. The way people are coping with this is to work longer, in some cases into the 70's, cutting down on spending for food, travel, and taking greater risks for higher returns, risks that could make the situation worse....

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Problems with the rural development and agriculture projects conducted by USAID in Afghanistan include overspending in 2009, followed by sharp cutbacks in 2010 and 2011 as budget cuts were made. In 2009 USAID made a grant of $300 million to Arlington based International Relief and Development (IRD) to help farmers in Kandahar and Helmand improve productivity over just one year, at the insistence of Richard Holbrooke. The focus was on paying for day labor jobs to clean canals, offer subsidized seeds to encourage switching from opium poppies, distributing tractors, and building gravel roads. Because many districts of the two provinces were considered unsafe for work, much of the money was concentrated on a few districts and in one year. As a result farmers in Kandahar got more seed than they needed and they in turn sold tons of seed and tractors in Pakistan for cash. A senior program official at IRD says it wasn't realistic to pour so much money in one year. But USAID officials say overspending and poor oversight made the program seriously flawed. There was also a difference in the views of the military and USAID on the value of day jobs. The U.S. military sees this as away of protecting its efforts, of literally protecting its flanks, as this keeps unemployed youth from joining the Taliban. At the same time senior USAID officials wanted to see multiple companies bid for the next $350 millon on a follow-on project. When the USAID team of specialists again awarded it to IRD, senior offficials at USAID decided to cancel the program. The program was then redesigned in the expectation that other companies would bid for it. In the meantime USAID gave IRD 3 quarterly extensions, the last expiring June 30, 2011. The US military sees the day labor program as crucial for its military efforts, so there is kind of an impasse with USAID reluctantly giving in. IRD meantime is shutting down activites in Helmand and will do this also in Kandahar probably by the end of May, as its contract has not been renewed because of problems with the program. USAID has a high staff turnover rate of 85% a year in Kabul which complicates things with the shifting priorities of different officials. Some programs are being scaled back- a job retraining program seen as requiring $125 million over 18 months is being scaled back to $40 million. Others such as a USAID project for coordinating disparate rural rehabilitation projects for $140 million is held back because of lack of agreement with the Afghan government about how it should proceed. In parts of Kandahar USAID had found several contractors doing the same work. See the groups on Dexter Filkins, and on Commander Adams, which touch on serious development issues and the war....

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King Salman appoints Mohamed bin Nayef, 55 years-old, as the deputy crown prince in Jan. 2015. The crown prince is Muqrin Abdulaziz, 69 years-old. Mohamed Bin Nayef is the son of the Interior Minister, who worked under his father from 1999 till he became the new Interior minister in 2012. Nayef has pursued an aggressive program to remove Al Qaeda in Saudi Arabia. By taking action against all dissent inside Saudi Arabia Nayef has also jailed human rights activists, including the flogging of a blogger critical of the government. The defense minister Prince Mohamed bin Salman, is a son of King Salman. King Salman was defense minister till he succeeded his half-brother Abdullah. Ali al-Naimi continues as Oil minister, a position he has held for decades. Saudi Arabia established a panel in 2006 to work with future kings after King Salman to appoint an heir to the throne. Even with the appointment of Nayef, a grandson of Saudi Arabia's founder, Abdulaziz ibn Saud, as deputy crown prince, the leadership of the country remains within a small number of princes of the royal family. Under the Obama administration the relations between U.S. and Saudi Arabia have become strained with president Obama's failure to intervene in Syria. The Saudi have pursued their own policies since then, in first Bahrain and then Egypt the Saudis supported the monarchy and the military respectively to maintain power in the face of the Arab Spring. The danger is that Saudi policies may be contrary to the U.S. position supporting freely elected governments and basic rights, particularly when it comes to suppression of all dissent including peaceful dissent and normal criticism of government, and yet with the rise of Islamic State the U.S. puts itself inadvertently behind these very policies. The Saudis would say this has happened because U.S. president Obama failed to support the effort for freedom in Syria and a transition in Libya and Iraq (with the added complication of Maliki's sectarian policies), creating a war torn neighborhood in which the Saudis had to act on their own. These are the hidden costs of the policy of the U.S. president for the U.S. and for the Middle East- more sectarianism with Shiites and Sunnis openly in conflict, reversal of hard won gains in Iraq, reversal of the Arab Spring except in Tunisia, war torn Libya and Iraq- with a withdrawal that never truly happened because it required a firmly guided transition period of support in the region with lower cost and involvement of an extended period leaving no room for reversal of gains. It leaves both the Saudis and the U.S. in a more precarious position than a decade ago....

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Investors compare Goldman Sachs which has retained its trading commodities business with Morgan Stanley which has shifted focus to wealth management and other less risky business. Morgan Stanley's share price has increased more than Goldman Sachs since the 2008 financial crisis, showing the different approaches taken by financial institutions that were battered during the financial crisis of 2008. Morgan Stanley had a change in management after the crisis, Goldman is still being run by CEO Blankfein, showing a key difference between the two banks. Morgan Stanley was battered during the crisis as its share price plunged on rumors in a way and extent that Goldman was not. Goldman was relatively better managed and avoided the frequent egregious errors made by other banks such as Deutsche Bank, UBS, Citigroup, taking fewer risks, leading upto the financial crisis of 2008, though it faced increased public scrutiny in the Abacus case for mortgage securities. It also helped with regulators that Goldman has a tradition of public service with executives working in government- Treasury Secretary Rubin worked in fixed income trading at Goldman, Treasury Secretary Paulson was former CEO at Goldman with strong China connections, and Gary Gensler at the CFTC. Now Goldman gets a larger share of its revenue from trading than competitors and was affected by the sharp commodities price swings in the 4th quarter of 2014. Revenue from fixed income, currencies and commodities trading declined by 29% in 2014 to $1.22 billion. Since the low reached in share price during the 2008 financial crisis, Goldman is up 267%, Morgan Stanley is up 291%. Even as tighter regulation is squeezing returns and banks are required to set aside more capital as buffer for riskier assets, Goldman continues to maintain its focus on commmodities business and trading. Mr. Blankfein and another senior executive Cohen, both got their start in commodities trading which generated about 8.2% of revenues in 2006 when Blankfein became the new CEO. Blankfein and president Gary Cohn worked at J.Aron & Co., a coffee importer, when it was acquired in 1981 and the location moved to Goldman's former headquarters in New York. The commodities business took off with China's surge in demand for metals and other commodities. Goldman's traders buy and sell aluminium, crude oil, natural gas, soyabeans, sugar, and derivatives. Goldman's revenue of $34.53 billion in 2014 has declined from $45.17 billion in 2009, and Goldman has reduced its balance sheet by a quarter. Net income increased in 2014 by 5% to $8.1 billion. But other than these changes Goldman unlike Deutsche Bank, Morgan Stanley, Credit Suisse, Barclays, has not let its commodities trading business shrink. Goldman's commodities division is headed by Gregory Agran and co-chief Guy Saidenberg in London. Goldman says CEO Blankfein, "remains unabashedly an investment bank," and is waiting for economic conditions to improve....

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The demand for ships went up so steeply that shipping rates hit the roof, and the prices of ships went up accordingly. Between the end of 2006 and July 2008 , shipyards received enough commissions, says the Economist, that this would double the world's fleet. Just as demand has collapsed and international trade has gone down, about 9000 ships are coming onstream. Now 11% of fleet capacity justs sits on the water, in the seas outside the harbors of Singapore, Hong Kong and other southeast Asian ports. A 150 tonne cape class ship that sold in 2003 for $18.5 million in the used market, when rates for charter were $15,000 a day, had risen by summer 2008, to $85 million with rates of $175,000 a day. These rates went up even more to $300,000 a day, which is 20 times what it was in 2003. And rates today are back down to $15,000 a day, where they were in 2003. This ship, cited by a broker, to give some idea of the extent of this boom and its collapse, was sold for scrap at $7 million. And South Korean shipyards are taking this into account, in their pricing and collection of payment, with 20% demanded upfront, 60% during construction, and 20% upon delivery. The backlog in shipyards is estimated by Clarkson Research, a maritime research firm, at $526 billion, even as banks are leery of lending and concerned about the value of the collateral in the event of default. Some smaller Korean shipyards are closing. Steve Mann, analyst at HSBC, says that half of the orders for delivery in 2010 will be delayed, so that there is work for 2011 and inventory or excess capacity does not pile up on the oceans. Even in this situation China, India and Vietnam continue to support the expansion of their own shipyards. This suggests additional losses for shipbuilders, shipping lines and the banks that lend to shipyards. All this also goes to show that the rush to industrialize, once it gets a firm footing- like it has in the Chinese model of increasing investment and local governments pushing infrastructure, industry and export factories with officials judged on GNP growth numbers- can exacerbate a boom-bust cycle. This is one industry, others include machinery manufacturers, commodity producers, and manufacturers of parts that go into finished products assembled in China for export. This means it would take the world economy down with it, if some external factor like the drop in export demand suddenly slows everything down. Machinery manufacturers in Germany, commodity producers in Brazil, Argentina, Chile, Australia, and manufacturers of the high tech parts in Japan and Taiwan that are shipped to China for assembly, all go down in this boom-bust cycle, in a dramatic manner. ...

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Tankersley points to the broken links between economic growth and growth in jobs and incomes since 1989, which have created a shrinking U.S. middle class. In the postwar period before 1989, a one percent increase in economic growth generated a six tenths of one percent increase in jobs growth during economic recoveries. During the 1992 recovery under George Bush this was down to 0.4%. In the 2001 recovery under George W. Bush this dropped to 0.2%, during the current recovery under Obama this is at 0.3%. Income growth also showed a similiar pattern. Median household incomes declined from 1990-1992 and from 2002-2004, after adjusting for inflation, even with economic growth of 6% during this period. For the 2009-2011 recovery period the economic growth was about 4% yet real median incomes increased barely at 0.5%. By contrast from 1982 to 1984 with economic growth of 11%, real median incomes went up by 5%. The result workers median wages are lower now in the beginning of 2013, after inflation adjustment, than at the end of 2003, and real household income lower in 2011 than in 1989, says Tankersley. Why were the recoveries of 1990 and 2001 for the most part jobless? U.S. Federal Reserve studies show employers mindset had changed, instead of hiring back laid off workers during recoveries, employers did not add many jobs. Automation in factories requiring fewer workers, global outsourcing and supply chains, manufacturing overseas, lack of union-management cooperation on wages and jobs in industries such as the auto industry, increase in temp workers, all played a part in creating fewer and fewer good paying jobs. Some of this is playing out worldwide. In Japan the economic recovery has also come with similiar costs- moving jobs overseas for the auto and electronics industries, increase in temporary worker jobs with lower pay and benefits to about one third of all jobs, and depressed consumer spending as a result lowering the economic growth potential. Even the recent German economic recovery has come with an increase in lower paying temporary jobs and driven by exports to Asia. For the U.S. the situation was worsened by three additional factors- housing foreclosures and the hit to savings from the 2008 financial crisis, high cost of college tution and resulting debt, and the high cost of medical care. The Obama administration's effort to increase the minimum wage would help the poor, but do little to address the broken links between economic growth and jobs growth/income growth. The push for college education does not address affordability and neglects jobs training. Most of the questions raised by the changing patterns remain unanswered, which may be why Obama calls this a generation's task, not that of one administration....

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Pearlstein touches on the main issues raised by Obama's regulatory reform proposals. A thorough and independent analysis by a panel of seasoned regulators and independent experts would have done better, Pearlstein says. It would take more time, but the regulatory reforms need to be thorough, considering the damage that has been done to the financial system, and considering the opportunity to do something serious about this. It would have also shielded the administration from criticism if tough action was needed in some areas. Hearing all sides of the matters at hand, and weighing the pros and the cons on each issue is helpful, but there are gaps in this approach when some of the key actors like Geithner and Summers have worked too closely in the past with the financial firms that are being regulated, and may have a tendency and bias in that direction. The President's lack of expertise in these areas, and a desire to keep the regulatory hand as light as possible, and intense obying by financial firms, can tilt things away from serious regulatory reform. The danger is that the opportunity to fix things with major structural changes where necessary, and some tough actions where needed may be lost. Some of the obvious gaps are mentioned by Pearlstein. There is no measure to tackle the situation with the ratings agencies. There will be more transparency than before but complex derivative trading can take place prettty much like before. Credit default swaps will continue as before. If you set up acouncil of regulators, then why not bite the bullet and consolidate them into a single agency, asks Pearlstein? Banks will continue to have their proprietary trading desks, from where they ran up huge losses, these act like in-house hedge funds. Ultimately a lot depends on who is running these agencies, or the Fed, and what is the prevailing opinion about markets in the country. The prevailing opinion that the less regulation the better for free markets, and the lack of independent regulators, and poor appointments, had a lot to do with the capture of the regulatory agencies by the the firms they were supposed to regulate. And on this point the President is on safer ground, as he can ensure that he appoints tough regulators and create a new culture that puts regulation right where it should be, as a necessary ingredient for free markets, just like rules of the road. And in one area the President has created a new structure, a new agency with powers- this is where consumer protections are at stake- so that the abuses that took place with mortgages do not take place....

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Hangzhou, hard hit by closing export focussed factories, is trying a$100 million voucher program to increase spending. Since January, a fifth of the residents of this city have received $30 vouchers, and more vouchers are being issued. Taiwan just tried a voucher program with $102 going to each Taiwanese citizen. Taiwanese President Ma says 50,000 retailing jobs were saved and about two-thirds of one percent addded to GDP. The problem in China is the lack of a safety net and poor access to health care, that is making average Chinese to save over one fourth of incomes. Consumer spending is 35% of GDP. The government has focussed on exports, and used export generated revenues for huge infrastructure spending. With exports down by over 25% in January, the export model is fading away quickly. Japan and Taiwan have seen much higher drops in exports, and China should see even more deceleration in exports, with a lag of some months, as a lot of products made in China use parts made in countries like Japan and Taiwan. The China Development Research Foundation says one fourth of the population have no health insurance at all. Though by some estimates this number may be about two thirds of China's 1.3 billion people. Hundreds of millions of people have huge bills for treatment of serious illness that are not covered by even the most basic insurance. Public pensions cover less than one third of the workers. And an estimated 130 million migrant workers have no unemployment insurance. Even payments to the poor reach only a fraction of people eligible. The government has only tentatively moved to correct his. And outside economists say that something needs to be done in abig way to build this safety net. The government has announced a $123 billion 3 year initiative to deliver basic, universal health care and health insurance. This follows a 3 year drive to provide compulsory and free education to students through 9th grade. David Dollar, the World Banks's country director, described ameeting with Finance Ministry officials, and wrote in areport on the Bank website that the government had the resources to expand these programs quickly. Instead the government has taken a piecemeal approach when action on a large scale is needed. One of the problems may also be that to make universal health insurance, the current health system may need to be examined and rebuilt, so that economical cost effective treatments are encouraged and costs are managed effectively. This would make universal health care affordable by keeping costs manageable, in the same way that the Obama administration is trying to do in the USA. ...

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As the USA and Europe move into a deep and prolonged recession China loses some of its biggest export markets and faces a significant slowing down of its economy. China's leaders are pondering how to respond to the crisis which will affect China, and meet the challenges of lower living standards of a neglected rural countryside and farmers compared to the urban coastal areas. This is still where some 800 million of the Chinese people live by official count, so something needs to be done to improve prospects and help generate higher incomes and opportunities for people in the farming countryside. Making land use rights of farmers able to be bought or sold for the first time would generate additional income for farmers, and help consolidate farmland into larger plots, which can use technology and improvements for better yields to keep China self sufficient in agricultural production. Keeping the situation the way it has remained for the last two decades, where local party officials and local leaders controlled the land and where farmers rights were ignored leading to suppression of farmer's protests for illegal land seizures and corruption, may have made it easier for plants to be setup across China and attracted foreign investors. But it has not been good for China's farmers. Chinese party officials at the local level who realized the advantages to them by controlling land and making it easier to set up manufacturing plants with foreign investors may have steered state policy in this direction from the early days after Deng's opening to capitalism and trade. Now with a success in the urban coastal areas and in building infrastructure Chinese leaders in the central government must be faced with a difficult issue of how to move on from here with the loss of China's export markets for its heavily export dependent economy. The need to generate a domestic consumer driven economy must not be lost on the Chinese leadership in Beijing. Something that will keep China's economy moving in the new situation. This is the context in which land use rights may be extended from 30 to 70 years and able to be bought and sold to improve farm incomes and generate internal momentum in the rural areas where most of China's people live. It also offers a contrast to the situation India faces where even the Nano plant of Tata Motors had to be moved from W. Bengal state to Gujarat state over farmers rights to land which in that case was also used as an issue for political agitation. The move by China accelerated industrialization and setting up manufacturing plants as land was taken over by local officials for use with foreign investors but also ended up neglecting the countryside, and created too big a dependence on exports....

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China's slowdown may be much worse than is generally thought. Germany went through this thinking that it was relatively safe as it had no housing bubble and no consumer debt like the US and the UK. But the drop in demand from China and other countries has led already to a contraction in the German economy by 0.5% in the third quarter of 2008, expected to worsen to 0.8% in 2009. China's National Statistics Bureau announced a 4% decline in electricity output inOctober from a year earlier. This is a result partly of factories manufacturing for export cutting back as their orders decline. There was a 17 drop in production of pig iron and crude steel in October and a 0.7% fall in output in the output sector. From all this it appears that even without the beggar thy neigbor policies of the 1930's, even without the protectionism of that period and even with the global coordination of the G20 and the G7 countries, its hard not to see the impact in one place flowing through to other places. The loss of export markets in the USA for Chinese export factories leads to this slowdown in China which in turn now needs much fewer machinery imports from Germany leading to a contraction in Germany. See the link to German economy in WSJ November 14, 2008. These effects show up in an exaggerated manner with economic contraction because of the heavy dependence on exports in Germany to China, and heavy dependence on exports in China to the USA, and the heavy consumption of Chinese exports in the USA, all ocurring in an exaggerated unsustainable way considering the American spending binge and the zero savings rate in the USA, the pressures on the environment with runaway growth in China, and the lack of any domestic led consumption in Germany. China's infrastructure spending can provide some growth along with the stimulus spending but much of the export led growth may disappear. The stimulus spending could help prevent a contraction in the Chinese economy but may deliver only a few points of growth, way off from the runaway over 10% growth of two decades which was heavily dependent on manufacturing exports. How badly Chinese exports are affected depends on how badly the US market is affected for Chinese imports. Higher unemployment in the US if the auto industry sees a collapse in its market in 2009, would lead to lower consumption in the US as laid off workers cut their purchases at Walmarts and Targets and at other retailers, and this would drive imports from China to even lower levels, wiping off a couple of percentage points of China's GDP growth rate. ...