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The Bureau of National Labor Statistics in China says China's GDP growth for 4th quarter 2008 was 6.8%. Private economists expect growth to slow to something like 5% in 2009 as the full brunt of the housing downturn and the drop in exports manufacturing is felt this year. Housing and exports were the two engines that helped China to reach 12-13% growth rates for 2007 and 2008. 2008 was also the year of the Olympics, and it now appears that by excessive growth and production capacity in many industries and increasing exports China may have created severe imbalances in the world economy. One way this happened is through the huge and ever increasing trade deficits with the US. By reinvesting the money in US Treasurys, China made a huge wave of liquidity and cheap credit possible in the US creating a bubble economy. The other is through the inflated demand in commodities like oil from the Middle East and countries like Russia, and demand for iron ore and other metal commodities from places like Brazil and Australia. This put upward pressure on the prices of commodities, creating a bubble in the price of oil. With the bursting of these bubbles the economies of Russia, Brazil and Australia and other countries are in a deep nosedive. The effects have operated in myriad ways, including a circular effect of the bursting of the credit bubble in the US leading to a collapse of demand in the US market for Chinese goods. In turn the collapse in demand for German and Japanese goods in China with declining demand, as the effects moved through the channels of the international trading system. The decline in Chinese demand also affects the US ability to make a export driven recovery....

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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 probe into corruption at Petrobras, is known as "Operation Car Wash," because some of the payments were routed through a car wash company in Curitiba, Brazil, which caught the attention of a young federal prosecutor in that city. The investigation took a new turn with the arrest by Brazilian police of the heads of two large construction companies, Marcelo Odebrecht of Odebrecht SA, and the CEO of Andrade Gutierrez, on June 18, 2015. Investigators say construction executives in collusion with Petrobras officials inflated the price of contracts and made payments to politicians and political parties including the ruling Workers Party. The alleged amount is about $2 billion. The construction companies are active in shipbuilding, defense contracting, oil and exploration related work, and building the stadiums for the World Cup Soccer and the Olympics. This has damaged the credibility of the ruling Workers Party, former president Da Silva, and current president Dilma Rousseff, in power during the last decade. The companies and the Workers' Party denied any involvement. Federal prosecutor Carlos Fernando dos Santos Lima told a news conference in Curitiba- "We have no doubt that Odebrecht and Andrade Gutierrez headed the cartel scheme within Petrobras." Adding that the two companies "cannot pass themselves off as innocent given how much evidence we have."...

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Mr. Eike Batista's EBX Group companies were one of the prime beneficiaries of huge government investments in mining, oil and other commodities. The fading of the commodities boom is resulting in large losses for these companies. Street protests in Brazilian cities shows the weakness of the Brazilian economic model that neglected public services in transportation, health care and education and concentrated on infrastructure and mining projects.

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Faces of the street protests in Rio de Janeiro, Sao Paulo, and other Brazilian cities.

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Oil supplies are not expected to go up with Mexicio and Russia's aging fields crimping production, non opec production barely budging with 1% increase this year according to IEA. Indonesia production down by half from its peak. Countries in the middle east like Iran are consuming more and have less available for export. And the Saudis plan to build huge chemical aluminium and other plants as well as cities in the desert, and increase electricity production. This will take up some of the oil production and make less available for export. Militant strikes have shut down over 25% of production of Nigeria's 2.5 million barrels a day of production repeatedly in the last few years. And Saudi Arabia has according to CERA only 2 million barrels a day of spare capacity or 2.3% that it can add, all of the safety cushion in one country according to Daniel Yergin. Yergin sees prices up to $150 barrel based on the supply constraints. The demand side is showing declining consumption in the USA but not by enough to compensate for growing consumption in China by 5% this year, and the increase in consumption in India, Russia, Brazil and other developing countries including Middle East. The reason for continuing consumption increases in the rest of the world is that price impact has been less severe in Europe because of the strong euro and oil priced in US dollars, and in China because Petrochina is required to put price caps so gasoline price increases are not that harsh. And India also cushions the price impact to some extent to protect consumers. And autos are just taking off in large numbers in China, Russia, India, Brazil and other countries. The drop in consumption in the USA has to be large enough to have an impact. And the shift to fuel efficient targets in the new fuel efficiency regulations in the USA are too modest and over a number of years to have any impact in the short term or in the next 1-3 years. In February US oil demand dropped to 19.7 million barrels a day, down 1 million barrels a day from the US average for 2007, but this insufficient conservation to impact price. Even though new cars are shifting to higher fuel efficient small cars the impact on the total fleet is gradual as cars on the road purchased in the last 5-10 years are still on the road. Even as the consumption falls in the US the offset is occurring in the other countries like China, Russia and India. Some of this is due to the euro and some to speculation but the supply constraints are real and demand momentum is still there in China, Middle east, Russia and India to keep offsetting savings elsewhere and keeping supplies tight. The euro increased in value by 2% while oil prices increased by 10% since the 1st week of April so there is more than the weakening dollar and some speculation to this surge, which may be why the normally cautious Yergin says the price rise to $150 is realistic and says, its not just that the genie is out of the bottle, a hundred genies are out of the bottle. That is to say for the immediate future of demand momentum and supply sluggishness which could run 6-24 months, to the Olympics and maybe a year or so from then. This ties in with the thinking behind the Goldman's estimate and CERA's estimate. ...

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The growing middle class in Brazil, new aspirations and the demand for better public services in transportation, education and healthcare. Alexandre Peppe, a 29 year old from the outlying parts of Sao Paulo, is a new member of the middle class, being the first to go to college in his family and finding a job in the state government. He was one of the protesters on the streets of Sao Paulo. The growing middle class has new hopes and aspirations that see serious shortcomings in the corruption of political leaders, neglect of public services such as transportation and overspending on the soccer stadiums for the FIFA and World Cup championships. Economic growth is slowing to about 1% in Brazil for 2013, creating new constraints for public spending just as demand for infrastructure and services is growing for the now large middle class.

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Growing protests in Brazilian cities of Sao Paulo, Rio de Janeiro, Salvador, Curitiba, Belem, Brasilia, over inflation and the cost of living, government lavish spending on soccer stadiums even as public services of transportation, education and health care are being neglected. Tens of thousands of demonstrators gathered with one estimate of 100,000 for protests in Rio. The protests started with the Free Fare Movement in Porto Alegre, which calls for lower transportation fares, organizing demonstrations against an increase in fares.

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The northeastern region of Brazil, the poorest region of Brazil, has benefitted from the economic expansion in Brazil. The region's GDP went up by 4.2% a year for the last ten years compared to 3.6% for Brazil. Bolsa Familia, President Lula's anti-poverty programme has benefitted the northeast, but the Getulio Vargas research institute shows three quarters of growth coming from earnings and expansion of export based agriculture in soyabeans and other products and from mining export industries. Projects in the northeast include development of the port and industrial area around Suape. A petrochemical plant, a shipyard and a Petrobras refinery, are under construction. A new railway will link Suape to the interior. Much of the development is for export industries in soyabeans and iron ore, and for the rail and port infrastructure that supports these exports to China. As a result the development looks similiar to what is happening in Australia with the huge expansion in rail and port infrastructure in that country to support iron ore and other mining exports to China. Any slow down in China will affect Brazil as the IMF has recently warned, because of an overdependence on commodity exports to China. Alexandre Rands of local Datametrica consultancy points to this when he says that infrastructure booms while helpful are not enough to sustain development. Big firms train the workers they need which is how Brazilian companies cope with a weak educational system. Schools in the northeast are however not getting the financial support to improve education, a situation that affects Brazil as a whole, but is even more evident in the northeast....

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Brazil's economy is forecast to contract by 2% in 2015, the currency has lost about one third its value and the stock market is down 22% in the last year. This follows the decline in demand for Brazil's commodities exports as China growth slows down. Experts say Brazil is now seeing another boom bust cycle similiar to boom-bust cycles in the past, such as the 1966-73 boom followed by years of hyperinflation and stagnation. Brazil's exports to China declined 17% in the first 7 months of 2015. The crisis is in many ways similiar to crises in other emerging markets dependent on commodities exports. The resources boom leads to overvaluation of the currency, and decline in development of manufacturing away from dependence on commodities exports. Other errors rise from complacency and politics prevalent in such periods. These errors include mismanagement of resources with poor resource allocation decisions such as spending on soccer stadiums in cities in the northeast while basic bus services remained underfinanced in large urban areas, large overspending by the government using state owned bank BNDES to offer rates at below market rates, a credit fueled boom and credit card binge for households, and a reversal of capital flows from the U.S. and Europe with the sharp decline in investment climate. There is a severe loss of confidence in the government of Dilma Rousseff with her approval rating as low as 8%. Corruption scandals at Petrobras show close links between the Workers Party of Rousseff and executives, with about $2 billion in misused funds. Brazil, like other emerging markets such as Russia and India, have taken some lessons from the 1997 financial crisis by setting aside large foreign exchange reserves for a crisis. Brazil's reserves of $397 billion help it cushion the effects with funding of the safety net and support to industries to avoid large layoffs. Other problems not tackled as in Mexico, India, and other emerging markets, are the weak educational system, and poor infrastructure, that create bottlenecks for growth. Brazil could face a lost decade after the debt overhang, decline in foreign investment and commodity export generated revenues. ...

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The commodities boom allowed Brazil under president Lula to commit to heavy state spending, subisidies, protection of favored sectors with large tariffs, that led to inefficiency and high debt. The policies continued under president Rousseff. Corruption scandals in the latter part of the Lula administration led to more populist policies for the Workers Party to stay in power, says Porter. Compared to Mexico and Chile, Brazil and Argentina under presidents Lula and Kirchner moved in the direction to closing up their economies to trade and foreign investment that would make corporate sectors more competitive and less dependent on the state for subsidies and favors. Mexico's economy other than the automobile sector is struggling, as mismanagement also plays a part as with the handling of Pemex and huge capital injections needed. Mindfulness and thoughtfulness is needed in setting policy direction, aware of the risks free of illusions about rosy scenarios, knowing that ideology plays less of a part than exercizing good judgement....

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High inflation and depreciating currencies in India, Turkey, Brazil, Indonesia and South Africa in 2012-2014.

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Former World Bank chief Zoellick points to the need for investments in human capital and productivity improvements in emerging markets such as India, China and Brazil to overcome the problem of slow growth in 2013.

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Individual investors reacted strongly to declining prospects for emerging markets with slowing growth, depreciating currencies, corruption and political uncertainty in 2013. As of the beginning of June, retail investors pulled $18.1 billion from emerging market bond funds, about one third of the amount that went in to emerging markets since the financial crisis in 2007, according to fund tracker EPFR Global. Institutional investors have pulled out less, about $9.3 billion, or 10% of their investments in emerging markets bonds since 2007. A similiar pattern is seen for investment in the stock markets of emerging market countries. The U.S. Federal Reserve's monetary expansion helped pull more money into emerging markets such as India, Indonesia, Brazil and Turkey. As the Fed shifts away from these policies in 2013 emerging market countries have large current account deficits and less money to finance imports and debt.

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Prof. Peterson of Harvard and Hanushek of the Hoover Institution, authors with Woessmann of the book "Endangering Prosperity: A Global View of the American School," offer some startling reminders about the importance of education to economic growth and incomes in countries. Simply by raising the math standards in the U.S. to the higher standards in Canada would raise GDP by three fourths of one percentage point. One advantage that the U.S. enjoys comes from its good university systems, open markets, rule of law, tax rates, and open immigration policies, which give it about two thirds of a percentage point in higher GDP growth per year. The estimates are from the authors calculations. For the period 1960-2009, a period of rapid growth in Asian countries Korea, Taiwan, Singapore and Hong Kong, higher test scores in math and reading compared to the wrold average as measured by NAEP test and PISA, have led to 2% higher GDP growth. NAEP shows only 32% of U.S. high school students proficient in math compared to 45% in Germany and 49% in Canada and 63% in Singapore. By contrast to Korea and Taiwan, Peru, Argentina, the Philippines and S. Africa have about 2% less in GDP growth because of lower scores compared to the world average....