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Much of China's strong GDP growth year after year of 9-12% was generated through large fixed investments in manufacturing. More than 40% of GDP is from factory construction or fixed asset investment in housing and infrastructure. And this spawned suddenly on its own a whole generation of new small business bootstrap entrepreneurs, as if from nowhere, who were good at adapting and seeking out new opportunities as new factories and exports shot upwards. GDP multiplied 14 fold from 1980's. And created 5 million businesses of over 8 employees each, according to the State Administration for Industry and Commerce. In the processs creating 75 million jobs for university graduates, workers from state companies and fro migrants from the rural areas. These private companies and their investment spending make up half of the 2008 GDP of $4.42 trillion. But with the export model heavily dependent on overseas markets especially the USA, the collapsing export markets is shrinking production and investment. Industrial production which went up by 16% annually for 5 years, dropped to 3.8% for Jan-Feb 2009. Mr Yu and his company GenTech, profiled here, was an engineer who studied engineering in Beijing, then at Newcastle University in the UK, worked for Cargill in Iowa, and looked for opportunities away from agricultural engineering. Adapting to China's needs in first semiconductors and then solar equipment assembly lines, he provided the high tech tubing for the gases and chemicals used in manufacturing assembly lines, competing with the likes of Air Products and Chemicals of the USA....

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German government will cut taxes by 24 billion euros in 2009 and 2010, and run a deficit of 6.5% of GDP- higher than Italy's 6.2%- to help the economy.

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Foreign investors make up only 7% of Russia's domestic bond market compared to 30% for similiarly rated Mexico. Russia is rated BBB by Standard & Poor's. Moody's Investors Services rating is one notch higher. The yield on Russia's 10 year government bond is about 7%, compared to 4.35% for Italy and 1.8% for U.S. Treasurys. Russia's deputy finance minister, Alexei Moiseyev, says he hopes changes will raise the foreign holdings to about 33%. Martin Gilman, a former IMF representative to Russia in 1998, and now a professor at Moscow's Higher School of Economics, says rates will go higher because of appreciation in the ruble and large monetary easing in Europe and the U.S. The situation has changed completely from the 1998 Russian default on debt payments of $160 billion. The IMF estimate is for overall debt to be about 11% of GDP by the end of 2014.

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Vanguard economists using the work of Stanford Unversity economists Bloom and Baker and University of Chicago economist Davis have developed their own estimates of the cost of overall uncertainty to the U.S. economy. Bloom, Baker and Davis show the level of overall uncertainty in 2011-2013 is about 50% higher than the level seen since 1985. Vanguard's estimates are for a drag on the U.S. economy of about $261 billion in deadweight losses from this uncertainty- uncertainty in monetary policy, uncertainty in deficit reduction, uncertainty in business investment. Their estimates show 1 million jobs not created, job growth per month lower by 45,000 in the last 2 years, and gdp growth of about 3% per year in 2011 and 2012 in place of the 2% average recorded, in the absence of these uncertainty shocks experienced by the U.S. economy. McNabb points out that the market gains of the S&P 500 are based on an unstable foundation as long as this overall uncertainty is not lifted and create a serious disconnect....

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Local investment companies were allowed to borrow beyond their limits after the financial crisis of 2008. There are about 8000 local investment companies (LIC's) and they were used during 2008-2010 to get funds quickly to projects. The LIC's borrowed for local governments, and borrowed extensively to build roads, railroads, power plants, and other infrastructure and buildings. Northwestern University Professor Shih has followed this carefully, and estimates LIC debt owed to banks at $1.68 trillion, or 34% of China's GDP. Some of the banks have collateral in land, but many banks are relying on the ability of the local governments to pay back the loans. And some of this is in money losing projects.

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The Christian Democrats have their best results in 20 years in the 2013 general elections. The Free Democrats had about 4.5% of the vote, below the 5% threshhold required for representation in parliament. The Alternative for Germany party was close to but missed the 5% threshhold for parliament. The Christian Democrats received 42% of the vote. The Social Democrats won 26% of the vote. The CDU/CSU won 311 seats, the SPD 192 seats, the Left party 64 seats, and the Greens 63 seats in preliminary results. Because the CDU missed an absolute majority by a thin margin in parliament it will have to form a coalition government with one of the other parties, the Greens or the SDP.

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Barley points out that the Euro-zone austerity plans in Greece, Ireland, Portugal, Spain, the U.K. and other countries are coming in the context of a potential global slowdown. This will make it even harder for these countries to reduce debt and deficits. Greece had to make cuts and tax increases equivalent to 8% of GDP just to reduce the 2010 deficit by 5% after GDP declined more than expected according to the IMF. To reduce debt ratios nominal growth has to be higher than the average interest rate on debt. Its hard to see this happening and debt not increasing in some Eurozone countries.

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Unemployment is at 13% in Ireland. The economy shrank 7.1% in 2009. The budget showed adeficit of 14.3% in 2009, and debt is expected to reach 77% of GDP in 2010. Ireland is facing severe cuts and austerity measures, in its effort to cut the deficit to 3% of GDP by 2014. Nearly $37 billion is being used to support banks like Anglo-Irish. A former chief economist at the IMF says its a pathway that avoids default, but it has its own costs. An export revival that the government hopes will occur, will not reduce the jobless rate by much. And young Irish people are immigrating to other countries.

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Denmark's central bank sells $16.3 billion in Kroner in January 2015 alone to protect the peg to the euro at 7.46 Kroner. The move is designed to avoid deflation and preserve export competitiveness. Similiar moves were made by the Swiss central bank till it sold Swiss francs for about 80% of GDP, finally abandoning a peg setup in 2011. Denmark has sold Kroner for about 30% of GDP in comparison to the Swiss. The Danish situation is different from the Swiss, say analysts, as the Danish Krona may be slightly overvalued and should be closer to 8 to the euro, as the Swedish Krona is about 9.4 to the dollar.

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Orlik says higher inflation means China's gdp growth in 2012 was actually about 5.5%. Stephen Green of Standard Chartered Bank includes rising prices of health care and education in an alternative measure of inflation and based on this GDP growth is 5.5%. This is lower than the official estimate of 7.8% for 2012. Labor markets are tight suggesting China can still manage at this slower level of growth without risking the problems from high unemployment. The additional flexibility gives China's new leaders room to address problems of inequalty, rural-urban disparities, pollution, healthcare, education, and the need to refocus development away from state owned companies, for a balanced development approach.

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The results of a Wall Street Journal analysis of 11 countries shows the risk of a stretched out period of stagnation in the economies of the USA, the UK and Japan. Jobs is a critical area in which this is apparent. In Japan employment is down 3.3% from December 2007, in the UK 2% lower, and in the USA 4.8% lower from December 2007. U.S. household debt is down from 131% in early 2008 to 122%, and poses a big burden. In the UK the household debt is larger than in the USA. And Japan's deficits are over 200% of GDP, creating an overhang that depresses jobs and growth. S. Korea, Taiwan and Australia have benefitted from the recovery since 2008 in China, India and the rest of Asia.

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This report in the WSJ  shows that president Xi is pulling back from his signature economic policy to reduce wide gaps in wealth and opportunities in China. In 2021 this was a policy that Xi pushed to reduce inequalities that have built up over decades of hypergrowth. One tenth of the population owns 68% of the wealth in China creating an highly unequal society. Concerned about the future of the Communist party as disparities kept widening and 40% of the population was left behind, Xi early on in his first and second terms made tackling corruption and inequality part of his policy.  Yet the way China's economy is structured, its dependence on the construction industry for growth, and on local governments for investment, it is easier to tackle infrastructure projects than address widening gaps in society. Xi's efforts have led to slowdown in growth to 5% or less. With the US and Europe moving to shorter supply chains and moving supply chains to less integration with China, slowing growth to less than 4-5% presents a major challenge for China. Leading to a pull back from the Common Prosperity policies that Xi initiated and which are part of Communist party policy in its early period after 1949. A major problem for China says WSJ is that social security contributions revenue is 6.5% of GDP compared to 9% for advanced countries in the OECD, the Organization for Economic Cooperation and Development. Personal income taxes are 1.2% of GDP compared to 10% in UK and US. This prevents the better funding of programs for maintaining a better safety net and social support for the less well off in society. The pandemic followed by Ukraine war have added new urgency to the acceleration of the effort to build new supply chains, leading to new manufacturing innovation and manufacturing leadership in the US and European Union, and in countries such as Japan, India, and other parts of Asia. This too has made the goals of reducing inequalities and addressing the wide disparities in Chinese society more difficult with sharply slowing growth in China. This was also the experience of Japan and South Korea with decades of fast growth followed by sharp slowdown with unanticipated problems. ...

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Reaganomics, trickle down economics, it is clear don't work. James Mackintosh says in WSJ, the latest version of Reaganomics, in the form of the LIz Truss budget in September 2022 with cuts in corporate taxes, no relief for vulnerable populations in the cost of living crisis as in all other major European countries and in the US, is already getting a bad reception in financial markets with the tumbling of the British pound.Times have changed there is nothing to be gained in its approach as there are no trade unions strangling growth as in Thatcher's time that need to be restrained, and not that much red tape to increase business flexibility. Most of the privatization has already been done and some of the state run companies are operating much better today than privatized companies handling water and other services.   Instead the problem is one of much needed investment in infrastructure and public services, and social protections after the pandemic. Businesses are not being crippled by high corporate taxes. Instead the opposite is the case, with windfall profits, so that the opposite approach taken by president Biden to use the higher tax on profits of Tech, oil and other companies to finance social protections and a huge climate energy initiative made more sense, leading to the passage of the $369 climate bill  and Inflation Reduction Act of 2022.  The WSJ makes these points- Britain has a higher current account deficit and higher debt at over 100% of GDP compared to the period of Thatcher in the 1980's when debt was only 40% of GDP. Most important is what the WSJ says about what has happened since the 2009 financial crisis and the austerity policies pursued after that crisis that were worsened by the pandemic so that public services in Britain are actually crumbling. Politically this lacks popular support and little backing at a time of a recession in the British economy, because such policies require public support to go through a tough period . And taking this trickle down economics today when Britain faces a cost of living crisis may be an unwise act of taking an approach that is no longer relevant or shown to be working at the worst possible time, says the WSJ. ...

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Brexit and Scotland's referendum both have similar consequences economically for Britain and Scotland. This hurts both countries in unwinding relationships built over many years, unwinding 44 year membership for Britain, and 310 year union for Scotland. Britain exports to EU are 45% of total exports, and for Scotland the number is 63% for exports to the rest of the UK.  Scots benefit about 1200 British pounds more for average citizen than a average citizen of UK, and pay 400 pounds less to the government. Scotland would start with a 90% debt to GDP ratio if it takes a proportionate share of UK government debt from the beginning of independence. Fidler correctly points out the economic risks to Britain and Scotland which are being ignored or not fully taken into account by politicians.

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The IMF loans of $18 billion approved in March 2014 are conditional on structural reforms in Ukraine which will be painful. This includes a 50% increase in the price of natural gas on May 1, tax increases and spending cuts, flexible exchange rates. About 10% of the state officals will be cut and decreases in pensions for judges. Higher taxes will be placed on alcohol and tobacco products. Prime minister Yatsenuyk, says without the reforms and IMF-EU loans the economy woud contract by 10%, with the package GDP would decline by 3%. Ukraine's 10 year dollar denominated government bonds had a yield of 8.94%. Years of large state subsidies for natural gas, mismanagement and corruption have left Ukraine's finances in bad shape. Ukraine now faces austerity measures similiar to that in other Eastern European countries and Greece, leading to continued political unrest.

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Spain's prime minister Mariano Rajoy, says his government's 2012 budget will reduce its deficit to 5.8% of GDP. This is higher than the 4.4% target that the previous government of Jose Luis Zapatero had committed to. Rajoy took into account the deteriorating economic situation in Spain in setting the new target, especially how this will affect Spain's local economy. Part of the problem is also that the actual 2011 budget deficit was 8.51% of GDP compared to a target of 6%. Rajoy said Spain is still committing to the 3% of GDP target set for 2013 by the EU. In making this decision Rajoy said at a press conference: " This is a sovereign decsion made by Spain, that I am announcing now, to you." Rajoy is basing the new budget on a 4.7% reduction in spending in 2012. The assumptions in the new budget will be for a 1.7% contraction in the Spanish economy, down from the overly optimistic 2.3% forecast for growth of the previous Zapatero government. Spanish Feb. 2012 jobless claims went up to 4.7 million, and unemployment in Spain was at an high of 23.3% in Jan 2012. The 4th quarter contraction for Spain was 0.3%....

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 U.S. Trade Representative Robert Lighthizer, views China's response in trade negotiations as one of conducting extended negotiations that lead to little change. This has continued says Lighthizer for over a decade putting the U.S. at a serious disadvantage in trade. At a White House meeting in August 2017 Lighthizer convinced president Trump that China was in his words "tap, tap, tapping us along."  This confirmed president Trump's own instincts about the U.S. trading relationship with China. Lighthizer is a veteran of trade negotiations, having experience in the Reagan administration as the Deputy Trade Representative in 1983 in negotiations with Japan, when Japan was in a similar situation that China is today. At the time trade negotiations with Japan were getting nowhere. Lighthizer is said to have turned one Japanese response in negotiations into a paper plane and sent it flying right back. Lighthizer does not seek the limelight but is serious about his role having published op-eds in the NYT and WSJ since 2000 about how U.S. trading relationships were putting the U.S. and U.S. workers at an unfair advantage. Many of these op-eds are in the Lyrarc archive and a Search with the term "Lighthizer" would bring up these articles. This report in NYT shows how the role of Lighthizer was not anticipated by China when it sent Liu He to Washington in November 2017 to negotiate with the U.S. President Trump made certain Liu He and other Chinese leaders would have to talk to Lighthizer first. In a session with president Jinping laid out U.S. views that the past negotiations had accomplished little and new negotiations had to be undertaken very differently from negotiations in the past. Earlier in July trade negotiations conducted by Commerce Secretary Wilbur Ross were "shut down" by president Trump because China continued to repackage earleir offers which meant little to the U.S. As a lawyer at Skadden, Arps, Slate, Meagher LLP Lighhizer represented steel industry clients hurt by subsidized Chinese steel industry imports. Mr. Trump and Lighhizer have bonded well because their instincts have been the same- that the U.S. had not been well represented in earlier negotiations by lawyers who saw themselves as speaking for American exporters.  Lighthizer is also a seasoned trade negotiator and has waited for the right time and situation to tackle the unbalanced trading relationship with China. For 30 years Lighhizer represented American manufacturers as he practiced trade law at the Skadden law firm. His strategy has been to get the administration to unite behind a clear trade strategy. He says "I try to be friendly in trade negotiations. I am not the theatrical type. The art of persuasion is about knowing where the leverage is." At this time the leverage lies in the huge trade surplus of about $300 billion China has with the U.S. The U.S. goal is to bring this down by $100 billion through this new negotiating strategy as earlier negotiations have failed. ...

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Figures from the European Commission and the ECB show that the ECB's balance sheet reached 32% of eurozone GDP in March 2012. Comparable figures for the U.S. Federal Reserve for March 2012 are 19%, Bank of England 21% and the Bank of Japan 30%. The ECB's balance sheet in March 2012 is at 3.023 trillion euros. ECB president Mario Draghi says this is high but "it will be managed very well."

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This exceptional report by Ian Talley in the WSJ cites trade and currency expert William Cline about the prospect of a worsening trade deficit under the Trump administration. With an improving economy, says Cline, the dollar had already surged about 8% beyond its fair market value during the last 2 years under president Obama as the economy improved. After Trump's election it surged another 3%. This makes it likely that the trade deficit could approach 4% of GDP with the stronger dollar. More protectionist policy to support U.S. industry, worsening trade deficits, more trade friction could be expected in these conditions. He does point out that markets may be overestimating what will be spent on infrastructure, and how much interest rates will go up which support a stronger dollar. Yet the fact remains that under an administration that is keen on promoting U.S. exports a dynamic is underway that makes U.S. exports actually less competitive in international markets.

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Fairclough describes the experience of Poland inside the EU, but with its own currency, the zloty. Poland's per capita GDP measured by purchasing power was half the EU average in 2006, it is about two thirds in 2011. Growth is expected at 4% for 2011. Poland manufactures goods using lower to medium technological inputs, such as furniture, shoes, and processed foods. The zloty has declined in value by 25% since 2008. This gives Poland a competitive edge in exports. Additonal factors are cited by one manufacturer of furniture, Forte Manufacturing, as helping it remain competitive- ability to close one of five plants, investing in improved machinery to increase productivity, quality and just-in-time deliveries, computer guided machinery, and ability to run his plants on weekends. Central bank governor, Mr. Belka, points to competitiveness as a critical factor for comfort in the eurozone. Limiting budget deficits to 3% of GDP, and the Maastricht criteria isn't all it takes. Also needed is modernizing and improving the economy, and modernizing the banking sector, says Belka. Poland does not have the debt problems of some eurozone countries because of a constitutional limit on government borrowing and deficits. Belka says Poland benefits from having its own monetary policy, ability to adjust interest rates, the zloty able to depreciate against the euro, and not having to share in cost of bailouts. There is considerable opposition in neighboring Slovakia for having to bear the cost of bailouts. Recent surveys show declining support for adopting the euro in Poland- a Sept 2011 poll showed support at 29% compared to 38% in mid-2010, opposition increased from 47% to 53%, in a poll conducted by the Polish Finance Ministry. Risks for Poland are that 75% of the country's banking assets are owned by foreign financial firms, and the potential for a spread of the eurozone slowdown with lower demand. ...

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Jorg Wuttke, chairman of the EU Chamber of Commerce in China says Germany exports 600 million euros worth of good to China every day. China exports $1.3 billion euros world of goods to Germany every day. Germany companies have heavily invested in Germany and millions of jobs in Germany depend on investments in China from engineering services to engine parts. Big companies making cars, chemicals and engineering goods make in China and have markets in China. This makes it very difficult for Germany to develop its own independent policies in relation to China for its own security following the war in Ukraine where China has supported Russia. Two decades of Merkel and CDU policies with the participation of the SPD leadership have led to this situation. Scholz is aware of this as his coalition partners Lindner of FDP, Habeck and Baerbock of the Greens oppose the dependency on China which restricts Germany from developing its own independent policies during a period when there is war in Eastern Europe with Russia. ...

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Xi Jinping in his New Year speech showed an awareness of the vast changes taking place and the need for humility, listening to different viewpoints during the pandemic. It reflects the new tone after the zero covid policies were abruptly put aside. "Ours is a big country. It is only natural for different people to have different concerns or hold different views on the same issue." Xi urged consensus through communication and consultation. He has told visiting European officials that the frustration with covid policies had caused prtoests mostly by students. Today sick workers are bringing factories to a halt, service sector activity is slowing down. Hospitals are swamped with sick patients. Xi says the policy shift is a way to adapt to the evolving virus with higher transmissibility and lower fatality rate for Omicron coronavirus. He describes China's economy as basically sound and reaching 4% growth in 2022 and GDP at about $17.4 trillion not adjusted for inflation. ...

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A question about perceptions of the  of Indian Muslim communities is asked at the Peterson Institute in Washington D.C. Nirmala Sitharaman, India's Finance Minister, responds by comparing the situation where India's Muslim communities have grown from about 10% of the population in 1947 to 15% today compared to Pakistan where Muslim communities were not protected and dwindled from 15% of the population to about 3% today. She did not mention the inclusivity in policy where sab ka vikas sab ke sath is national policy, development for all with the participation of all. And that Muslims benefit equally with other communities in the rapid growth of the economy and GDP in India. This positive story for Muslims and for all communities also stems from the ideals of Vedanta, respect for all religions in Vivekananda's idea including Buddhism, Christianity and Islamic faiths. It also comes from India being rooted in Gandhi's and Vivekananda's ideas since independence. ...

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A great transformation is taking place for 172 million people -after the grueling experience of pandemic followed by effects of Ukraine war, and climate change- in building external resilience. The quick IMF action in Bangladesh in contrast to Sri Lanka. After taking in the shock of pandemic and the war in Ukraine Bangladesh faced large drops in remittances and in export revenues. Added to that problems in foreign exchange reserve management and exchange rate management. By getting immediate access of aid from IMF $4.7 billion and additional assistance from India Bangladesh is now in a position where in less than a year it has rebounded with current account surplus reaching $2 billion in the first half of the 2023-2024 fiscal year, as reported by Xinhua. Increasing productivity, education of labor force, increasing female participation in the workforce, social investment in economy, will give Bangladesh a chance to reach from LDC to lower middle income status by 2031.   ...

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Presenting the ReARM package in Brussels the European Union president Von der Leyen says- “This is a moment for Europe and we are ready to step up.” The proposals Leyen said “could mobilise close to €800bn of defence expenditures for a safe and resilient Europe." About $650 billion comes from increasing the European spending on defense by 1.5% of GDP from numbers below 2% that reflected underspending on defense. The EU will loosen strict deficit rules. The CDU coalition government in Germany with SPD under Merz that is being setup will remove the debt brake in the German Constitution that limits defense spending to 1%.  Another $150 billion in loans can be generated from joint EU borrowing that could be given to countries. That will Leyen says- “It will help member states to pool demand and to buy together. This will reduce costs, reduce fragmentation, increase interoperability and strengthen our defence industrial base.” The European Investment Bank will participate in the lending. ...