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Paul Krugman points out that the Bush tax cuts if continued in the US for all income levels will cost $680 billion over the next decade. This estimate is from the Tax Policy Center.

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China Investment Corporation, China's sovereign wealth fund is expected to issue upto 28 billion in bonds to help recapitalize China's state owned banks. These banks face the prospect of increasing bad loans as a result of the hectic pace of bank lending in 2009-2010. Loans guaranteed by muncipal governments are estimated at 7.7 trillion yuan, or 17% of overall lending, about 50% of these loans face uncertainty in the event of falling housing prices, and 25% are bad loans. The recent IPO of Agricultural Bank of China raised funds, but the environment for raising money in this way does not look good, as information is spreading that these banks face large loan losses. The bonds from CIC would be picked up by state controlled companies. Yet these state controlled companies are engaging in the real estate speculation, as reported by David Barboza of the New York Times and Peter Coy of Business Week. In a down cycle things could get much worse as a state sovereign fund is selling bonds, state controlled companies would buy these bonds, and state controlled banks are expected to be recapitalized making a complete circle....

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Zhang Juwei of the Chinese Academy of Social Sciences believes that the overall fertility rate is at most 1.6. A recent report by CASS says the figure of 1.8 used by the government is an overestimation. CASS says its data shows the fertility rate for migrant workers is about 1.14, much lower than people think. The policy for one-child only was introduced 30 years ago, when the fertility rate was close to 3, having fallen to that level from close to 6 in 1960. Does the policy serve China well in the future as China's population ages and there are more older people for younger workers to support, is a question raised by critics in the Chinese media. China's government family planning officials say it applies to 40% of the people, considering the two child policy operating in some areas of the country.

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Problems that may be unfixable for the Afghan national army, and for which no increase in foreign trainers could make a difference. About 3% of the army recruits are from the Pushtun south, the main part of the country, where the Taliban are strongest. Officers from the northern areas have to use translators in the Pushtun south, a bad sign. And there is a shortage of officer talent. Gereral Caldwell who is working on training the army, says he was appalled at the emphasis on quantity not quality- the Afghan army has reached 134,000 in numbers. The ratio of instructors to recruits ranges from 1 to 80 to 1 to 466. It will cost $11 billion to maintain compared to an estimated $1 million per American soldier each year. Even if training problems are fixed, having 3% of recruits from the major Pushtun part of the country where the fighting is being done, simply makes the overall problem unfixable. See the group - Defense Department biannual report on Afghanistan, for related insight.

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The first of a series of quarterly reports put out by the Federal Reserve Bank of New York, on the subject of household debt and credit. It shows that the process of unwinding consumer debt in the US is a slow and painful one. The figures tell the story, which touch every aspect of the US economy and business, with ripple effects through the world economy. Total consumer debt is $11.7 trillion as of June 30, 2010, which is down 6.5% from the crest reached in the third quarter 2008. Credit card accounts are down 23% from the high reached in second quarter 2008, and mortgage obligations down 6.4% from 2008. By mid 2010 11.4% of consumer debt was delinquent, and this was up from 11.2% in 2009. $1.3 trillion of consumer debt is delinquent, and $986 billion is seriously delinquent- that is 90 days late. Serious delinquencies are up by 3.1%. Other figures fromt he Fed report: Half million people in the USA had a foreclosure added to the credit reports for the period March 31, 2010 to June 30, 2010. This was up 8.7% above the figure for first quarter of 2010. New bankruptcies showed up in credit reports for 624,000 people during that quarter, an increase of 34%. Another major problem stacked on top of this for consumer spending- the Fed's interest rate policy according to Todd Petzel, chief investment officer of Offit Capital Advisors, burdens consumers with a tax of $350 billion in income lost from low to zero interest rates. This creates two problems of its own. Not only does it depress consumer spending. It also makes consumers reach out for riskier investments. This figure was calculated by taking $14 trillion in debt issued by Treasury, federal agencies and municipalities. Rates are near zero on short term Treasuries compared to 3% average over the years. Taking 2.5% on $14 trillion, the figure of $350 billion was arrived at. Or 2% of gross domestic product. Analysts say that it would be better not to save a few zombie banks at the expense of consumers and pension funds. It lowers the cost of the deficits through the lower interest rates the government pays on its debt, but lower consumer spending and a limping economy hurt tax revenues and increases the deficit....