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The new Australian budget is designed to generate a slight surplus from the A$44 billion deficit for the fiscal year ending June 30. This prepares the Australian government of Julia Gillard for elections in 2013. The budget depends on the mining boom to generate the tax revenues for planned economic growth of over 3% in 2012-2013. This is based on the large number of projects planned for investments in oil, gas and other energy projects, valued at US$456 billion. GE as supplier of turbines and other products to the Chevron-Total gas project and other projects in Australia, has sales in Australia match its sales level in China in 2012-2013. This gives an idea of the extent of the boom in the mining and energy sector. Even the widening trade deficit to A$1.59 in March 2012 reflects large imports for the mining sector. The weakness of this approach is that too much is dependent on the mining and offshore gas boom. Retail spending is weak and Australia is increasingly looking like a two tier economy, subject to the boom and bust cycles that its mining companies have experienced in the past. A bubble in Australia's housing markets and uncertainties in the global economy pose other risks....

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India's crude oil imports were sharply higher in 2011 and 2012. India's imports of crude oil for the first 11 months of the 2012 fiscal year ending March 31, show a 40% increase over the same period in 2011 fiscal year. India's import bill was $128 billion for crude oil imports for the 11 months of fiscal year 2012. Indian subsidies to lower prices for fuel are $30 billion annually. The higher prices for crude create inflationary presssures in India and restrict economic growth.

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EIA figures show U.S. stockpiles of crude oil, refined fuels and other petroleum products increasing to 1.149 billion barrels in the week ending Jan 2, 2015, excluding the strategic petroleum reserve. This is the highest ever since 1990, except for June 2013. Brent crude drops below $50 a barrel.

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Former prime minister Nawaz Sharif's PML-N party wins 125 of 269 seats in Pakistan's parliament. The Tehreek-e-Insaf party of Imran Khan won 31 seats and the PML-N party of the current president Asif Zardari won 32 seats mostly in Sindh province. Independents won 31 seats and some of these independents are likely to support Sharif in forming a new government. Election turnout of 60% showed a large degree of enthusiasm in this election and hopes for economic revival in Pakistan. The focus of Sharif will be on improving the economy, tackling electricity shortages, and building infrastructure. Sharif promised to pursue peaceful relations with India and Afghanistan, and keep the focus on the economy. Sharif and his advisers are bringing a new deftness in the dealings with the Army, the Pakistan Taliban, saying he would call for a halting of drone strikes, limiting the role the U.S. plays in the region, both positions popular in Pakistan, separating differences with former president Musharraf from the institutional role of the military. Small business owners and large business support Sharif's efforts to tackle electricity shortages, with an estimated loss of $12 billion in idled factories alone. The long period of political conflicts between the military, the judiciary and the political parties have led to neglect of Pakistan's economy, as neighboring countries in Asia surged ahead. The realization that popular pressure for improving standards of living and the economic opportunities are both huge has led to an extraordinary election, and put Sharif at the centre of an important new beginning for Pakistan. ...

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Friedman reviews Acemoglu and Robinson's new book, "Why Nations Fail." Acemoglu says that nations fail when wealth and opportunities are concentrated in the hands of few people, that a condition for societies to succeed is to create opportunities for more people. For this to happen it is important to create inclusive political and economic institutions. This is an important insight, but for Western society this is an insight as old as Adam Smith when he pointed out the importance of this aspect of western societies after the feudal period in his "Wealth of Nations." For Smith it was the failure to create inclusive societies that led to the gradual unravelling of societies in the river valleys of the Yangste and the Ganges, in China and India, of increasing poverty and the gradual disappearance of what constituted the middle class in India and China. Chapter 8 titled "Of Wages and Labor" in the "Wealth of Nations" makes specific reference to this.

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Brazil's currency, the Real, moved up to 1.7 per 1 US dollar, on the eve of the Presidential election in the first week of October 2010. Brazil's overnight interest rate of 10.75% attracts speculative foreign capital in the carry trade, where investors boorow cheaply in the US and Japan and invest it in Brazil. The central bank has kept these rates high to finance a current account deficit of $46 billion in 2010 -which is forecast to hit $60 billion in 2011- and to finance a high level of government spending. This spending is likely to continue with Ms Rousseff as the new President, as Rousseff plans to invest in infrastructure such as bullet trains and river dams, as well as the FIFA world cup and the Olympics. Government spending has increased by 18% so far in 2010. Exporters are affected by the artificially high value of the Brazilian real. Goldman Sachs economist, Alberto Ramos, says the real is overvalued by 55% compared to its fair value of 2.65 to 1 US dollar, based on a computer model that incorporates factors such as trade, inflation and productivity. Sao Paulo is already the most expensive city in the Americas, according to one survey....

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The problems of a growing underclass or unskilled workers in Britain, and people who dropped out of school early. This is is found not just in isolated places but in the Midland cities also. Britain has a higher rate of dropouts, and a less developed apprenticeship program to find good work for these young people, compared to countries such as Austria and Germany.

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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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The Brazilian Real drops to 2.9836 to the U.S. dollar in March 2015. The year to date March 2015 decline for the Real is 10.9%. Increase in interest rates will depress growth even further.

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Ishaan Tharoor provides a brief history of Russia's intervention in Syria and its role in the Middle East since 1950. This does not mention the Dulles period under Eisenhower in U.S. politics when the U.S. engaged in the Cold War withdrew support for building the Aswan High Dam, thinking that the Soviet Union would not come up with support. The Soviet Union under Krushchev provided $1.2 billion at 2% interest in 1958 for building the Aswan High Dam- constructed from 1960-1970- which helped increase irrigation and crops in the Nile river region and reduced the damage from droughts and floods. Soon after the dam was built it provided about 50% of Egypt's electricity. This was the high point of Soviet Union's economic engagement, latter support was defined by military arms supplies and led to the Six Day War, and the economic stagnation of the economy under Nasser's successors from the military. The Soviet Union was actively engaged in Iran with a Russian and British zone in the country in 1907, soon after the flowering of an effort to write a democratic constitution 1900-1907 for Iran with the help of British intellectuals, similar to the failed effort of the Arab Spring today. In neighboring Afghanistan the Soviet Union fought a long war under Brezhnev, contributing to the unravelling of the economic structure of the Soviet Union before the fall of the Berlin Wall. The British were primarily focussed on protecting oil interests in Iran in the period 1900-1950, yet contacts with British civil society led to the first grasp of democratic constitution and processes in Iran during this period. The American intervention funnelling arms support to the Saddam regime in Iraq in a war Iraq initiated against Iran 1980-1988, marks a low point in American intervention similiar to the Russian intervention in Iran-Iraq-Syria today. It may also define some of the problems of today because of the length of that war, the entrenching of military in the government in Iran, suspicions of the U.S., and the possible sense of a need for nuclear weapons to prevent attacks on Iran, as Pakistan has done in its conflict with India, though this is rarely brought up in discussions. The American arms support intervention, led to a series of cascading conflicts since 1980 with the invasion of Kuwait by the Saddam regime in 1990, the destruction of Shia in the marshlands of Iraq after a flawed peace agreement, and the follow up to that conflict with George Bush's invasion of Iraq on grounds of WMD development in 2003 for the 2003-2011 Second Gulf War including the Surge. The arms support of the Saddam regime in the war it initiated against Iran, was policy designed under President Reagan 1980-1988 following the hostage crisis and the Islamic revolution in Iran in 1979. The cascading crises with Iran and Iraq may not have led to this level of conflict and disruption, refugees and deaths in the Middle East, if American policymakers had heeded George Washington's advice during his presidency, that your enemy's enemy is not your friend when it comes to framing policy- for this reason Washington as president did not see it in the national interest to get involved in conflicts between Britain and France beginning in 1793, France having aided the American side against the British in the War of Independence. In the Proclamation of Neutrality, Philadelphia, April 22, 1993, he says: "Whereas it appears a state of war exists between Austria, Prussia, Sardinia, Great Britain and the United Netherlands, on the one part, and France on the other; and the duty and interest of the United States require, that they should with sincerity and good faith adopt and pursue a conduct friendly and impartial towards the belligerent powers.." And in a letter to Patrick Henry offering him the position of Secretary of State from Mount Vernon, October 9, 1795, Washington says: "My ardent desire is, and my aim has been, to comply strictly with all our engagements, foreign and domestic; but to keep the U States free from political connexions with every other Country. To see that they may be independent of all, and under the influence of none. In a word I want an American character, that the powers of Europe may be convinced we act for ourselves and not for others, this in my opinion is the only way to be respected abroad and happy at home and not by becoming the partizans of Great Britain or France, create dissensions, disturb the public tranquillity, and destroy perhaps for ever the cement which binds the Union." At a time of passionate political debate, it is time to step back and reflect on lessons that can be learned from the founding fathers about the way they tackled the important issues of their time....

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Damian Paletta of the Washington Post says that credit goes to Gary Cohn a former Goldman Sachs president, and head of the president's National Economic Council for the way he has quietly built up a group of leading experts on major initiatives of the Trump administration such as tax reform, infrastructure plans. Compared to the infighting and other problems in the first 100 days of the Trump presidency, Cohn is credited with building a core of ideas and experts that bring Trump more to the centre and with the prospect of winning Democratic party support. He has helped shift the president to set up a more balanced approach, less confrontational with China and not calling China a currency manipulator, getting support for the Export Import Bank, and more receptive to the Federal Reserve led by Janet Yellen. This report says an alliance of moderates is centering around Adviser Jared Kushner, Cohn, and in other reports Tillerson in foreign affairs is seen as being part of this group. On NAFTA the president has moved to a less confrontational approach with Mexico, which has helped the Mexican peso recover and improved prospects for the Mexican economy.  On infrastructure new ideas to find financing are needed and a plan to tax carbon emissions is intended to draw Democratic support as well as provide some of the funding. About $200 billion in taxpayer money and $800 billion from private investors is being discussed at the National Economic Council. This report says Cohn suffered from dyslexia in childhood, graduated from American University, and joined Goldman Sachs in an unconventional way. He shares a passion for deal making with president Trump, yet at the same time values the views of experts he has brought to formulate concrete plans for the way ahead. About 25 experts with extensive experience in government helped put together new tax changes, infrastructure plans, and international trade deal plans. His predecessor at the NEC, Gene Sperling, gives him credit for quietly pulling together the experts and doing the planning that the Trump administration now depends on. ...

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The Economist points to a second hit from bad debt in the post 2008 stimulus binge of spending in China. This is after an earlier hit, that was absorbed as a result of high growth rates and high savings. About $420 billion was injected into 5 state owned banks since 1998, according to one estimate, as a result of the first hit to China's banks from bad debt. In this second round of bad debt, covered in more detail by David Barboza in the New York Times, and merely alluded to here, many bad loans to infrastructure projects were rushed through by local governments. The Economist considers this one of the successes of the state directed banking system, that loans were quickly made and projects started in the post 2008 crisis period; and expresses the view that this hit will be absorbed just like the last hit. However the more detailed account by David Barboza and in Business Week, points to the working of a system of incentives gone astray in a capitalist system without the necessary controls or regulation. Local governments used investment companies to take on loans, which were then used to prepare properties to be auctioned off at a profit and speculative prices to state owned companies in different industrial sectors. This is part of rampant speculation in China in real estate markets. Can China with its high savings and growth absorb a second hit? This depends on the magnitude of the hit and the size of the bad debt, which depends on how long this speculative market continues to operate, and how bad debt is hidden in the books. The difference this time is that large state owned companies in different industrial sectors are engaged in this speculation. The other difference is that the high growth rates in China depend on continued large trade deficits with the USA and Western Europe, something which is not likely to continue for long, as consumers in Europe and the USA with high debt are becoming cautious spenders. This suggests that China, like the US with the mortgage crisis, faces the same effects of unregulated or uncontrolled speculative behaviours, that can endanger the banking system....

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Japan's central bank, the Bank of Japan, is under pressure from the government to do more to address deflation and the appreciation of the yen. The central bank increased purchase of government bonds to 10 trillion yen ($124.7 billion) in February 2012, and set a goal of 1% inflation. A senior cabinet ofice official attending the central bank policy meetings of April 9-10, stated that the government expects the Bank of Japan to "promptly" achieve the inflation rate of 1%.

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Australia exceeded China in total revenue for GE by $100 million, with $5.8 billion in revenues. GE now sees resource rich countries providing revenue growth of 25% in the next 2 years compared to 10-15% for China and India. The Ichthys $34 billion LNG project by Total SA and Inpex of Japan alone generated $1.1 billion in contracts for gas turbines, compressors and underwater production systems. The Gorgon project of Chevron on the northwest coast of Australia generated $1.3 billion in revenue.

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Peugeot plans to shut down its plant at Aulnay-sous-Bois near Paris in 2014. About 3000 jobs will be lost at the plant. In all Peugeot plans to cut 8500 jobs, about 8% of its workforce in France. Peugeot says the pace of losses is unsustainable, with Peugeot losing 200 million euros in cash each month, putting the entire enterprise in peril. This also raises more questions about France's competitiveness as 400,000 manufacturing jobs were lost in the last ten years according to government data. Peugeot is seeing declining sales because of slowing sales in southern Europe, a critical market for Peugeot. Overall capacity utilization for Peugeot dropped from 86% in 2011 to an average of 76% in the second half of 2012, with sharper declines in the small car segment on which the company has focussed. The Aulnay plant produced 300,000 cars 2007, by 2011 this came down to 135,000 cars. Peugeots strategy of making smaller economy style cars with higher French labor costs presents a challenge say analysts, and its slower move into Asian markets has not given it the advantage enjoyed by German manufacturer VW. In addition to the 3000 jobs lost at Aulnay, Peugeot plans to cut 1400 jobs at its Brittany plant in Rennes, and 3600 corporate jobs. To assure unions the company will build a new car at the Rennes plant in 2016, and could move 1500 jobs from Aulnay to another plant near Paris....

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China's domestic debt has surged to levels that precede a crisis, to 216% of GDP and heading for 271% by 2017 according to Fitch Ratings. As a result president Jinping has taken over control of economic policy and controlling debt, especially local government debt, is now a top priority for 2014. Jinping will head the "leading group" for overall top down reforms, reflecting the new urgency. Local government debt went up 67% from 10.7 trillion yuan to 17.9 trillion yuan ($2.95 trillion) in just 3 years from 2010 to 2013, according to the National Audit Office. About half of this debt is due by the end of 2014, according to Standard Chartered Bank economist Stephen Green. Another risk is that shadow banking with interest rates of 10% are now about 11% of new lending. The option adopted by the government to use central government funds and regulation to restrict lending could make local governments turn increasingly to the shadow bank lenders (trust companies, and informal lenders) making things worse. The other option of tackling it aggressively by letting some companies default has the risk of other lenders raising rates on loans and bonds. This makes solutions tricky and prone to problems of increasing severity. ...