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The Indian economy grows at 6.3% in the third quarter of 2017. The demonetization, and new GST tax plan, had slowed the economic growth to 5.7% in the second quarter of 2017. Higher economic growth is important to generate the jobs needed as 10 million young people join the workforce each year. The Modi government responded to the slowdown by accelerating spending on infrastructure- a $100 billion spending plan on roads and highways, and $32 billion cash infusion for state run banks with the effort to clean up the bad loans in the banking system. 

Elections in prime minister Modi's home state of Gujarat are coming up and this will give some indication of voter sentiment in 2017. The Pew Research Survey in 2017 shows Modi's personal popularity is high and continues to bolster the government's prospects.

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Russian economy is faltering under the strain of the global financial crisis. The stock market is plunging, with the RTS Index down 19% on October 6, 2008, and the market down 60% since the high in May, 2008. Construction spending is winding down. Th economy growth rate was 8.1% in 2007 but its slipping. If oil prices hit $50 and they were already at $78 on October 10, 2008, then says Anders Aslund at the Peterson Institute for International Economics in Washington, there will be a sharp decline in the growth rate. Moscow analysts say the growth rate could drop to 4%. For Americans Russia may seem remote excpt for investors. But in a global economy there are connections to emerging markets and Russia is one big emerging market, next to China, India and Brazil. When General Motors shares dropped 31% and Ford's 22% on one day on October 9, 2008, the news that spooked the markets was ofcourse a credit watch and questions about liquidity from Standard and Poors rating agency, but alsoimportant was that the one bright spot for GM and Ford in Europe and in Russia in particular was disappearing as GM sales declined in Europe and in Russia. In the prior 12 months GM had seen sales jump by 40% in Russia giving it 10% of a car market that passed Germany recently as the largest car market in Europe. Couple of important things about Russia. Russians today are big spenders, savings are small and Russians do not trust their banks so bank deposits are very low. Household deposits are equivalent of 17% of GDP, compared with 45% in the USA. Only 4% of Russians trust commercial banks according to a poll by National Financial Research Agency in Moscow. So Russia depends on the outside world for much odf the cash flowing through its financial system. Foreigners purchased two thirds of the $170 billion in bonds isued by Russian companies and foreign banks put up half of the accumulated $900 billion in bank loans including almost all longterm debt estimates Moscow investment bank Troika Dialog. With global credit markets in a lockdown mode Russia is simply running short of cash. The government has $560 billion in foreign exchange reserves from years of high oil prices plus $160 billion in two sovereign wealth funds with most of this money in fixed income securities abroad as a rainy day cushion should oil prices tumble. On October 7 the governmet announced $36 billion in emergency loans to Russian banks following earlier pledges in September of $150 billion in loans and relief for Russian companies in danger of defaulting on international debts. One danger here is that about 55% of outstanding corporate loan are of maturity less than 1 year. One of Russia's largest developers Mirax Group is putting 50 projects on hold as bank financing for developers has almost ceased. On the other hand Russia's financial sector is relatively small and the credit crisis cannot hurt Russia as much as it will USA ad Europe. Bank loans account for 10% of corporate finance and the bond market is only a decade old, so about half of all capital investment by companies comes from retained earnings. And Russia has huge needs for investments in infrastructure after years of underinvestment, a stable political structure, an educated workforce, and an economy that is just getting started. As Secretary Paulson answered questions after the G7 meeting October 10, this was another point on the minds of the secretary and questoners, the hope that emerging markets like Russia, India, and China would continue to grow though slower than before, even as the US and Europe slipped into a long recession, and provide a little cushion to the global economy....

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The sudden collapse of Thomas Cook, and the immediate layoff of its 20,000 employees comes as a shock as it is an old company trading since 1841 on the stock exchange. The name was synonymous with travel in Britain and in British Commonwealth countries. The analysis in the Times of London shows management was to blame. First with overexpansion under one CEO, even though online travel booking was taking off. He was fired, and followed by sharp cutbacks with another CEO who was fired, followed by last minute efforts to save the company as it faced huge debt loads and interest load even though its revenues were up by 6%.

In a situation similar to that faced by Jet Airways, an Indian airline, which also had overexpansion and debt load problems, the banks had second thoughts and turned down any new financing to support the company as being too risky.

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India agrees to an immediate ceasefire after a call from Pakistan's head of military operations for a ceasefire. The conflict started with attack on tourism that was reviving the Kashmir economy after three decades through a terrorist attack killing 26 tourists in Phalgam, Kashmir on  April 22, 2025 in the mountains near the Pir Panjal range. 24 million tourists visited Kashmir in 2024. Indian response was swift on May 7 early morning hours attacking 18 terrorist camps inside Pakistan occupied Kashmir and inside Pakistan. India called it a act of self-defense to Pakistan sponsored state terrorism going back to 1947. What is different in this brief 4 day war is that India made it economic with efforts at IMF to make terrorism an issue for loans to Pakistan, and ending the Indus Waters Treaty on water sharing. Pakistan economy is struggling with no debt relief from China, making it turn to the IMF, a politically split population with Opposition leader Imran Khan in jail, and continued domination by the military over civilian govenrment. On May 9 drone attacks were launched from Pakistan using Turkish made drones in large numbers on cities and towns in Gujarat, Rajasthan, Punjab. Blackouts were placed in India by May 8 in all cities in the north and in Pakistan. India responded with its own drones and missile attacks on three military airbases as the war broadened to military targets on May 10. US mediated a ceasefire through Saudis and Turkey. Earlier Saudis and Iran were in New Delhi with whom India has good relations to get a ceasefire. Mr. Trump's efforts behind the scenes secured an agreement. VP Vance had cut short an Indian trip in Jaipur on April 22. India and the US are allies in the Indo-Pacific, and India and Russia have decades of friendly relations. China now uses Pakistan as a proxy state, but does not provide the economic aid it needs, for which it has turned to the IMF.    ...

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This editorial in the Hindu- after encouraging news from Moody's and the World Bank on India's economic future- says that the Modi government should not be distracted by the upcoming elections as it focusses on the task ahead. After a gap of 14 years Moody's raises India's credit rating one notch. Moody's cites steps taken by the Modi government as creating a better environment for future growth- the implementation of GST goods and service tax, efforts to clear some of the bad loans in the banking system so that capital can be freed up for infrastructure investment, and reducing bureaucratic hurdles for clearance of projects. Moody's cites the high public debt burden as a constraint for growth. General government debt is at 68% of GDP in 2016, higher than the 44% median for economies in this range. On the plus side the better targeting of welfare measures to help the poor including steps in the banking field, bringing more businesses into the formal sector to improve tax revenues, and the large pool of private savings, are cited by Moody's. Critical is timely implementation in the future. As the discussion in the media on bullet trains and other new infrastructure shows, there is not enough momentum for stretch goals as China has done over the last 2 decades.   ...

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U.S. president Trump's statement calling for a list of goods for tariffs on $200 billion of Chinese goods leaves China without a clear response and facing new risks. The U.S. exports about $150 billion in goods to China so that China would have to impose penalties to respond at the same level. Placing restrictions on American firms on access to China's market, and imposing other penalties would have the effect of reinforcing the perception of unfair practices targeting American business and lead to hardening of U.S. response.  The U.S. sees itself as being in a better position with the U.S. economy experiencing a growth trend. China with large local government and bank debt faces a difficult situation. President Jinping's policy of reducing the risks of bad debt in the banking system involved sacrificing some growth to stabilize the system. China's GDP growth in 2017 was 6.9%, the target at 6.5%. Future targets and actual growth now look to be much lower.The trade war with the U.S. has the effect of dampening growth leading to calls for the central bank to loosen its monetary stance. In response to Trump's announcement the People's Bank of China pumped $31 billion into the nation's banks. China is studying Japan's response in the 1980's and 1990's when the U.S. took strong action against Japan's growing trade surplus. Japan responded by appreciating its currency and using stimulus to cushion the effect of lower exports on the economy. The stimulus led to the housing bubble and over time a period of low growth and stagnant economy. The large China stimulus in 2008-2009 has compounded the problems in the banking system. Not deleveraging and controlling financial risks in China's banking system because of the trade war would bring a new set of risks. ...

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Denning provides a reminder of the growth but also real risk in emerging markets. The weighted average score in Transparency International's 2010 Corruption Perceptions Index for BRICs countries is 3.3 out of 10, compared to 6.7 for the Eurozone, and 7.1 for the U.S. Russia needs an oil price of $120 in 2012 to balance its finances, and the consensus is for oil price to be $103. China has a bad loan problem at its banks. Brazil and India have inflation problems and growth constraints from poor infrastructure. There is aneed to be grounded in realities when it comes to emerging markets. The IMF underscored this weakness in its recent report. Sudden capital outflows could reveal serious weakness in some countries.

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Arvind Panagriya, Prof. of Economics at Columbia University, points out the key initiatives of the Modi government in its first four years which will show results in future years for development of the country.  He mentions the Swachh Bharat Mission and cites results that show rural households with toilets are now 84% up from 38%.  By 2019 the whole country will be defecation zone free on the 100th anniversary of the birth of Mahatma Gandhi. The Dhan Jan Yojana DJY accounts opened for rural households are up to 316 million. Aadhar cards for identification are up from 650 million to 1.2 billion. The Aadhar and DJY work together to enable direct transfer of benefits to poor households, eliminating the leaks in benefits transfer and ghost accounts of the period since independence in 1947. Not mentioned by Panagriya is the Health Insurance scheme for lower income households that enable families to survive a sudden medical expense that could put them in dire straits.  These efforts work in a way to change India from the ground up from its villages and rural areas as envisioned by Mahatma Gandhi in the struggle for independence. The land acquisition law amendments were put on hold till farmers concerns could be better accomodated, an area of concern for industrial development cited in an editorial in the Hindu newspaper. Fiscal consolidation and inflation targeting have resulted in an average inflation rate of 4.3% for the 4 years of the Modi government. Inflation was over 9% in the last 2 years of the previous Congress UPA government with GDP growth dropping to 5.9% for the last two years. Average GDP growth for four years for the Modi government is 7.3%, even after the changes to implement GST taxation for one national tax eliminating state barriers in interstate commerce and demonetization to fight corruption and black money. Rate of GDP growth should be higher after the gains from the initiatives and the new GST integration of the country are felt, with increase in investment and FDI, after infrastructure improvements and land acquisition arrangements are made. Transportation infrastructure modernization initiative pushes ahead with the first bullet train in the pilot project for Ahmedabad- Mumbai set to start in 2022. This is a $17 billion project financed for $13 billion by the Japanese government at 0.1% loan for 50 years, moratorium on repayments for 20 years, using E5 Shinkansen series technology. Implementation of this project on a sound financial basis should lead to transformation of the Indian rail network, raising the level of technology implementation across the entire Indian rail system. Such an achievement would rival the first introduction of railways into India in the nineteenth century under the British. A new bankruptcy law is intended to free up capital for investment by putting behind the large number of non performing loans in the Indian banking system. Changes made by the central bank RBI are designed to speed up this process so that loss making enterprises are absorbed, consolidated or shut down, a legacy from the earlier period.     ...

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Th situation of poor farmers borrowing at 150% for seeds and fertilizer and 942 suicide deaths in Vidarbha region alone this year. Small farmers with less than a hectare of land account for nearly 80% of the country's hundereds of millions of farmers. World bank estimates that 87% of marginal farmers and 70% of small farmers have no access to credit from a formal financial institution like a bank in india. In 2004 the government cut in half the interest rates on farm loans and commercial bank have since increased farms loans to reach a target of 2.24 trillion ruppees triple what was loaned 3 years earlier. Cooperative banks haven't done much because of lbad loans and lacking funds as they would be expected to do in rural areas. And commercial banks don't have as much of a presence in the farming rural areas with only one for 22,500 people or about 31,000 branches. Better credit would improve living conditions, increase support for political parties that support for good rural credit, and experts say would help increase farm production of grains. India recently banned export of some grains of rice and is having to import wheat. ...

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900 million eligible voters in India means this is the largest election ever. The election will take place in 7 phases in April and May from April 11 to May 19. Votes will be counted on May 23. The election is for 543 seats in parliament, the Lok Sabha. Turnouts are high with 66% turning out in the last election that brought Mr. Modi and the BJP to power.  Unlike elections in Britain a lot is spent in each election, about $5 billion in the last election and double that this time. The U.S. elections in 2016 had spending of $6.5 billion as a comparison. Women vote at about the same rate as men and more women than men are expected to vote this time. Prime minister Modi won the last election with promises of development and infrastructure. He is delivering on infrastructure but building manufacturing and generating jobs in the formal sector remains a tougher task for any administration in 4 years. During the first term Mr. Modi made needed changes including introducing the GST tax to integrate India's fragmented market and get rid of a patchwork of regional state taxes. He introduced a whole range of projects and yojanas which are setting the stage for widening the middle class, and improving living conditions. Some of the problems such as the bad loans in the banking system date back to previous administrations and the government has taken steps to clean up this problem by refinancing banks and introducing a bankruptcy law. This has slowed GDP growth to about 7%. However this would have happened under any administration.  The brief war with Pakistan in February 2019 has added another dimension to this election with questions about whether this may help Mr. Modi because of his strong stand against terrorism camps in Pakistan.  In the end it all comes down to whether the public still believes the BJP party under Modi is best qualified to develop the infrastructure to modernize the country and improve services, and whether it can create enough of the manufacturing capabilities to generate jobs needed. It may not be that the BJP under Modi has  not made mistakes in the process of learning how best to tackle development, but whether a patchwork of regional parties led by the opposition Congress party is in a position to provide the strong decisive direction to make quick decisions on development. Getting the agreement of a number of regional parties such as the party in West Bengal state or the Uttar Pradesh state when it was under a previous administration of Mrs Mayawati means an even slower rate of decision making as it leads to lack of speedy decision making. Whether voters have short memories and forget the slow rate of infrastructure development under previous administrations or have a willingness to give the BJP a chance to show what it can do under Modi for development can eventually decide this election. An example of what this means is in how the Mumbai Metro is being pushed through to timely delivery- Metro Rail's head Mrs. Ashwini Bhide simply says she feels for the people of Mumbai who have suffered from delays in development of needed infrastructure for so long, with millions doing appalling rides in a creaky old rail system. In her view it should have been done yesterday. It is this attitude that can make or break the current administration, and whether it can get this message through to voters one more time. Most who have this attitude are aware that China is now laying enough concrete every two years than America did in the whole 20th century, as reported in the Guardian newspaper, and are equally passionate about delivery of services and rapid development of badly needed infrastructure.         ...

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See the important link to Keith Johnson, 7/9/2007, WSJ, on the economics of wind energy, suppliers, and the industry in the US and Europe, and the shortage of turbines because of some 800 parts that go into the turbines and blades making it a complicated supplier issue to get more turbines. We can make only more turbines as fast as we can access the last of some 8000 components says a Vestas executive. Windmill generated electricity was only 0.4% of the electricity generated in the US compared to 0.1% for solar and 0.4% for geothermal but of the new energy added in the US in 2007 it was 30% of the new energy generating capacity added. So it has a disproportionate share of the increase in generating capacity starting from an insignificant base. Its a new industry but with many companies the largest being Vestas of Denmark, GE Energy, Nordex of Germany and Accoiona of Spain. Germany, the US, Spain India, and China are countries at the forefron of the wind energy business. Because the business is relatively new manufacturers were not providing the installation and maintenance required in emerging market countries in 1995 when Suzlon which had powered its yarn business in Surat, Gujarat with 2 wind energy turbines from Vestas entered the business seeing an opportunity. Mr Tanti of Rajkot, Gujarat, Suzlon's founder saw the opportunity and used European firms to design his turbines and blades and provided energy to Bajaj Auto and large Indian companies that have an erratic supply of electricity because of chronic electricity shortages. Starting with a tax break which allowed Suzlon to deduct windmill costs against its sales tax bill enacted in 1999 and retracted in 2002 Suzlon took advantage of lower manufacturing costs in India. Its main plant is in Pondicherry, India. By 2002 sales had increased to $131 million in India from $32 million in 2000. The company entered the US market in 2003 and in 2004 with the boomin stock market in India Citigroup took a 9% stake in Suzlon for $22 million. By 2005 Suzlon because of lower manufacturing costs had margns of20% compared to 8% for European companies and Suzlon raised $340 million in an IPO. With loans from Barclays and Deutsche Bank Suzlon bought European parts makers Hansen Transmission in 2006 and set up a factory in Tianjin, India. Early on in the 1990's it had set up an R&D center using engineers in Germany of a supplier company in wind energy Sudwind that had exited the business, this R&D center now designed its largest turbine for US and European markets of 2.1 megawatts and blades 50 yards in length. Today Tanti and Suzlon are faced with problems accessing the world class technology of the western companies as its technology has not kept up with the technological advances especially in addressing the needs of western markets. It has about 8% of the US market and about $1.8 billion in global sales. Its pricing to Edison Energy in 2006 for 1.2 megawatt turbines was 20% below European and American manufacturers. Its latest designs have flaws because Edison Energy of Irvine , California, has seen cracks in the blades at 3 windmill sites in the midwest USA and Suzlon has withdrawn 1251 blades, the majority of the ones sold in the US. Deere and Company another customer has experienced the same problem. And even though it has moved to acquire technology by taking over 33.6% of REpower which has advanced technology and makes 5 megawatt turbines. its mired in its efforts to get the blueprints of advanced designs from REpower because German law considers minority shareholders like Suzlon as competitors, other shareholders Areva of France and Martifer of Portugal have to be bought out and minority shareholders also bought out before Suzlon can access the designs. Speed, funding, tax breaks, and timing to attract capital, and most of all insight and courage to see a growing opportunity from its own experience of using two 2.1 megawatt turbines from Denmark's Vestas, and looking deeper into problems with maintenance and support in Asia and lack of technology for homegrown development that hamstrung development of energy alternatives in dire and chronic electricity short Indian companies, this has helped bring windpower to India and a new company in a new industry from scratch. ...

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Sri Lankan High Commissioner Milinda Moragoda, is interviewed in Indian Express in Idea Exchange, with Shubhajit Roy, moderating the questions. Moragoda explains what happened over the last three decades and how Sri Lanka got to this point. About politicians he says Sri Lanka has too many politicians, and the violence of the JVP in the south and LTTE in the north and northeast set the country back by decades. Leaders from J Jayawardene, Kumaratunga to the Rajapaksas all failed to understand the spiral downwards of the economy, says Moragoda. Debt increased and 80% of the government revenues goes to pay pensions and government employees, leaving only 20% for debt service and little for investment in the economy. He says there are 1.5 million government employees and 500,000 pensioners, for a country of 22 million people. Of the population of 22 million about one million Tamils left the country during the civil war, and another 1 million people are in West Asia. Moragoda says most of the borrowing came after 2009 as the civil war ended with $12.5 billion borrowed or 40% of the total debt. About 80% of government revenues goes to pay pensions and government employees and another 70% goes to pay interest on debt, but he does not elaborate or explain this. What one can say from the experience of other countries in debt spiral is that at some point the interest accumulates to create a vicious cycle of interest on the cumulative total which includes interest from earlier years. Argentina is a recent example. And he makes no effort to say how he sees Sri Lanka is finding a path out this situation with a $2.9 billion IMF loan on debt of $51 billion.  Of the $12.5 billion borrowed since 2009 Moragoda says "that's  40% of our debt." Yet the total debt on which Sri Lanka defaulted is shown at $51 billion. $12.5 billion is 25% of the $51 billion. He does not provide any details about the financing terms on which Sri Lanka borrowed. It is clear that the interest rates were high over 6% in many cases which can be very burdensome for poor countries dependent on commodity exports. Countries such as Greece with debt crises had very large numbers of pensioners and government employees in Europe during the eurozone crisis, but nowhere does it show that it took up 80% of the government revenues in Greece. The number of government employees range from 1 to 1.2 to 1.5 million according to different figures for Sri Lanka. Even in Greece the number of public sector workers in government were 616,000 by some estimates during the severe eurozone debt crisis years around 2015. They are now estimated at about 369,000 in 2020.  Without a clear idea of these figures and transparency it is hard for any economy to be managed in a prudent way. See the related report "Fallacies of Sri Lankan Debt Patterns," a report by the Observer Research Foundation, on this same page today which say that Sri Lanka borrowed at exorbitant interest rates for a poor country.  Moragoda has worked for administrations in different portfolios including in economic affairs. He says Sri Lanka's economy is too small to get attention and investment it needs from India, and that the Adani investment shows that this can still be made to happen. India remains Sri Lanka's key partner as it grapples with this crisis. ...

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The wounds left behind in S. Korea from the 1997 Asian financial crisis when the IMF imposed conditions for $21 billion in loans as part of a $60 billion loan package to prevent a sovereign debt default. The conditionality imposed for loans led to layoffs and economic hardship for the working class. S. Koreans remember the crisis as the "IMF crisis." It also has a particular stigma in S. Korea which the IMF is now trying hard to erase. One laid off employee from an automobile plant describes the period as a hard hitting IMF typhoon. So struck are S. Koreans with the term that it has become synonymous with financial hardship. In the 12 years since the crisis the IMF itself has changed. It is now trying to provide help to countries on better terms and is conscious of the problems of austerity policies. During the 2008 financial crisis Seoul stayed away from the IMF. Seoul is host to the G-20 in 2010 and now has a participatory role in international meetings. The IMF has created a emergency loan facility that could be useful for Asian countries and wants to change the perception of the IMF in Asia....

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Economist John Spence on advice to the Chinese government to tackle problems of shifting from an export based economy to one more dependent on domestic spending. And managing the shift upscale to sophisticated technologies from basic consumer goods.

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A recent book "The Spirit Level" has become popular in Britain. It says that countries with greater disparities in income also do worse in a number of social indicators, from higher murder rates to lower life expectancy. It also affects the consensus in society which is a necessary underpinning for sustained economic development and economic growth. Inequality when it affects the middle class and reduces the size of incomes in the middle, or creates stagnation in incomes, poses large risks for society and affects economic growth. In the US the home foreclosure crisis and the lack of bargaining power of wage earners in the middle class has created this problem. This is exacerbated by the banking crisis and bad loans in the banking system. Studies show that slow growth in college graduating rates in the USA after 1970 compared to the period 1900-1970, has increased inequality, especially with today's knowledge economy. Germany is also affected by this problem as wages for workers have remained stagnant with the labor reforms. Interestingly a combination of economic growth and payments to the poor have increased the size of the middle class and its incomes in Brazil. The austerity policies in Britain will affect incomes and income growth in Britain for the middle class. In China the gap is widening quickly between the urban areas and the rural areas. And the policy of residency permits- the hukou system-which limits internal mobility from rural areas to the cities and towns, makes the inequality all the more glaring. The lack of democratic election makes the situation worse in China compared to Brazil, because free elections in Brazil enabled leaders from the working classes such as Luiz Inacio Da Silva and Ms. Rousseff to emerge as heads of government. These leaders pursued policies that would explicitly bring a more shared prosperity in Brazil compared to the leadership in China. In China policies are determined by entrenched interests in its model of development- the state-owned companies and banks and their managers, local and government officials of the Communist party, and businesses with the networks and connections with the Communist party and local governments. This is why the ginni coefficient which measures inequality has dropped significantly in China, putting it in the rank of developing countries with poor records in equality. Inflation in China, India and Africa also affects the poor and lower middle classes to a greater extent. Current trends suggest that rebuilding the middle class in the developed countries and providing fairer distribution in developing countries will be of serious importance in coming years. Especially with the likelihood of more economic crises which tend to adversely affect the middle and lower classes disproportionately....

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Kenneth Rogoff of Harvard University, expert on debt crises, and author of "This Time is Different," says China is one of the best examples of the idea that this time is different, with the idea created that somehow China was impervious to the massive build up of debt. The debt is now over 250% of GDP, and this was possible for so long because of the high savings rate of 30% of disposable income and the millions of young migrants moving to cities to work in manufacturing. The growth of shadow banking, opaqueness in decisionmaking, unreliable data, use of local government financing vehicles, the bubble in housing with a large portion of loans tied to the real estate market, all combine to create serious problems that will take a long time to sort out. Rogoff says the crisis in Tianjin with the deadly explosions in the port area, and the government's inability to provide answers to questions from a alarmed public, only added to the uncertainty and loss of credibility. Rogoff says he hopes the trillions of dollars in reserves will provide China with the tools adequate to tackle the debt problems before they spread to other countries....

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Is the market in S. Korea reflecting the bursting of the housing bubble in the USA, or is it simply a result of the Roh government's new taxes and rules for real estate such as the capital gains taxes of a shigh as 60% and the restriction on loan size so that monthly payments do not exceed 40% of monthly income. If its the new rules then it must be true that the crisis in the USA must have made the pause from the Roh measures give the market time to reflect. One factor is the oversupply from the building boom especially since the new housing had become increasingly unaffordable to average South Koreans at 100 time average income a 3 bedroom apartment cost $2 million in Seoul. A real estate Professor at Konkuk University estimates that about 1 million units will come onto the market by 2013. 2013 thats because the construction has continued even as sales have come to a near halt. Apartment prices have gone up 3% in 2008 compared to 93% in the last 5 years according to Kookmin Bank. What does this mean for the other Asian markets such as China, India and other Asia. Its not just speculation thats disappearing, but is there a sense that the market for Asian goods in the USA, especially for export powerhouses in Asia such as South Korea, is taking a hit from the credit and housing crisis in the USA. And if thats the case what does this mean for other Asian housing markets in bubble mode, consider this a Early Warning Link. See the link to the South Korean election where even corruption charges against the favored candidate are not affecting his popularity because he is seen as a candidate to who could help S. Korea overcome fears about the economic future. Comments that the current crisis is tougher for real estate and construction than the one during the Korean financial crisis of the 1990's suggest that this is something serious. ...

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Vegetable prices in China went up by 22% in July 2010, from a year earlier, and grain prices went up by 12%, eggs by 8%. About a third of household budgets go to food in the budgets of people in India and China. Wheat prices are climbing on world markets after the ban on Russian exports, and rice prices are also climbing with the floods in Pakistan ruining the rice crop- Pakistan being the No.3 world's rice exporter. Personal spending accounts for 36% of overall GDP in China and 57% in India. Food prices in China were up 6.8% in July, 2010. Industrialization in China, and agricultural land freely taken over for factory sites with the consent of local authorites, may be a complicating factor. See the link to BYD's acquisition of agricultural land for factory site.

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Countries which ignored the lessons of the 1997 financial crisis are affected to a larger degree in the 2014 emerging markets financial crisis- Argentina, Turkey and Thailand have high government gross debt as a percentage of GDP. Investors are taking a careful look at individual countries this time and there is less contagon. Flexible exchange rates, and higher foreign exchange reserves are reducing the effects in 2014. The effects on the U.S. and Europe are limited to how this affects the global economy.

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A new report, "China: 2030," by the World Bank and the Development Research Center (DRC), has major implications for the course of action taken by new Chinese leaders. The limits to China's economic model with the dominant role of state owned companies has been pointed out in the past. It has now reached a point where China must choose to move to a modified model or face the "middle income trap" of countries like Brazil and Mexico, where income levels and growth reaches a certain level and then decelerates suddenly with little warning. The report makes some major recommendations that would modify the current system. It says the state owned companies should be supervised by asset management firms focussed on commercializing these companies, and not supervised by the State-owned Assets Supervision and Administration Commission (SASAC). The asset management firms would restrict the state owned companies on what areas they participate and sell off businesses to make it possible for private companies to compete. Zoellick says- "China needs to restrict the role of the state-owned companies, break up monopolies, diversify ownership and lower entry barriers to private firms." The state owned companies would be required to pay sharply higher dividends to the government which could then be used for social programs. Currently state owned companies invest in land which is sold by local governments for revenue helping fuel the real estate bubble. Significantly, the report had its origins when it was proposed by Mr. Zoellick, head of the World Bank, during a visit to Beijing in Sept 2010. It was supported by Li Keqiang, then vice premier, and now expected to be the new prime minister of China. The World Bank is widely respected by Chinese leaders because of its assistance during the early stages of reform in the 1980's. The DRC reports to China's State Council, a top governmental institution, and the No. 2 person at DRC, Liu He, is a senior advisor to the Politburo Standing Committee. He helped draft the current five year plan and is close to Li and Xi Jinping, the next president of China. The SASAC has opposed these ideas, especially any shift in its personnel selection of management at the state owned companies, which it shares with the Communist party's personnel department. Respected China economists say China faces large risks of a sudden sharp slowdown because the the state owned companies have largely copied foreign technology and have not generated enough technological advances, which will be needed for the next stage of growth. Lower growth rates could worsen problems in China's banking system leading to a crisis. The Conference Board, estimates China's growth at 8% for 2012, slowing to an average annual growth rate of 6.6% from 2013 to 2016. Barry Eichengreen of UC Berkeley, Donghyun Park of the Asian Development Bank, and Kwanho Shin of Korea University, say the annual growth rate will drop by at least 2 percentage points by 2015....

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Moody's Investor's Service downgrades China's credit rating to A1 from Aa3. Moody's predicts a slowdown in growth for China. GDP growth for 1st quarter 2017 was 6.9%. Total debt has grown from 149% of gross domestic product in 2008, to 213% in 2013, and is now 253%, according to JP Morgan. The problem is that ever higher levels of credit have supported growth and more of this is coming from the shadow banking sector. Higher levels of debt in future years from the already high levels will weigh heavily on growth, leading to an eventual slowdown in the economy's growth rate.

LyrArc Article Gist
The Europeans led by France and Germany demand stricter regulation and a financial regulatory system that oversees the entire financial system, and oversees all the larger countries. The US in contrast wants to see a lighter regulatory system, and lighter regulation of parts of the financial system like hedge funds. For the USA where the crisis originated, the emphasis is on larger stimulus spending. For the Europeans which have a larger safety net that they would like to see considered as part of their stimulus- and their social arrangement such as reduced hours in Germany to avoid layoffs, and the presence of a large public sector in France that is about 52% of GDP- the situation as they see it does not require breaking the EU's committment to control large deficits. The cultural and historical roots are also different. Germany was hit by hyperinflation in the period between the two wars, and there is thought there that this helped the rise of demagogic leaders and the collapse of democracy there. At that time the issue was war reparations that Germany found difficult to absorb in an economy devastated by the first war, which strained German finances. France and Germany also have no foreclosure crisis, and car sales and consumer spending are not in the deep decline that is seen in the USA. In fact car sales have increased in the two countries with the refunds for scrapping old vehicles, with no such plan in place in the USA. Making there is a credible position on the European side. Germany does see itself hit by the collapse in international trade. Germany and France face the prospect of helping their banking systems deal with the large bad loan situation facing them in Eastern Europe. At the same time Germany and France want to save some firepower for coming to the aid of key parts of the European community like Spain, Greece, and Ireland, which are facing a worsening crisis. In short both sides have credible positions, and some form of accomodation as events unfold may be a better desired outcome than some unified outcome. And little has been said of the position of the other countries in the G20, the emerging countries like Brazil, India, China, Russia, Indonesia, Argentina and others, and the position of the World Bank speaking for the poorest countries. These countries may favor stronger stimulus, and would favor the stricter regulation and supervision of global financial systems favored by the Europeans. This is because they may rightly feel that the messups in the global financial system have stolen their chance, at just the point where they were turning the corner in their efforts at bringing better standards of living to their peoples....

LyrArc Article Gist
The approval of 254 investment projects in China, accelerating investments in infrastructure and construction as part of a second stimulus plan in 2012, folllowing the first stimulus in 2009. The risks are higher this time because of the inflated housing prices in China, the increasing lack of affordability of housing for average families, and the continuation of policies that emphasize infrastructure spending at the expense of consumption and earnings on savings for ordinary families. With that kind of spending has come increased levels of corruption. The glut in the steel industry will grow worse with more spending on steel plants.