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Krugman points to the need for action on revaluation of the yuan, and sees the vote in the House of Representatives sponsored by Sander Levin as a necessary step to get China to act. He sees China as dragging its feet on this issue for many years, and the need to keep the heat on US policy makers, who have acted very passively on this issue. He describes the US policymakers as being infuriatingly, incredibly passive in the light of the Chinese inaction and stalling on currency appreciation. China he says denies manipulating the exchange rate, even as $2.4 trillion foreign currency was purchased by China. Krugman says China is not letting what is a natural process to unfold that would help the world economy as a whole to recover. Its manipulation of the exchange rate, is in effect subsidizing its exports at the expense of other countries like the US. See the link to Roubini, who shows how this is bad for China. Roubini says China will see a growth collapse in 2-3 years, if it does not change direction and let the yuan appreciate. He says it is in effect a large transfer of income from Chinese households to Chinese state owned companies which is dangerous because of increasing misallocation of resources and real estate speculation. See David Barboza for information on the real estate speculation of these Chinese state owned companies. When all this information is added up, it shows China's serious need to act. This would make possible a transition to a new model of development that relies on domestic consumption, and bettter allocation of resources and investment. ...

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The ratification of the European Union's Fiscal Treaty of Dec. 2011 will require a two thirds majority in both houses of parliament. The coalition government of Angela Merkel lacks such a majority. This means the support of the Social Democrats and the Greens party will be needed to pass the treaty in Germany. The Social Democrats parliamentary leader Frank-Walter Steinmeier, says he cannot "picture an approval of the pact without growth-boosting measures." The Merkel position of strict austerity policies in tackling the eurozone debt crisis has come under intense criticism for lack of growth boosting measures. Recent economic performance clearly in Greece and Portugal, and to some extent in Ireland, Spain and Italy, shows the decline in GDP with austerity cuts alone will worsen the deficits or lead to a prolonged period of economic stagnation.

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Ariana Huffington of the Huffington Post recalls her days growing up in Athens. She says from her own personal experience that the children should not be penalized for the mistakes of their parents, that the next generation should not have to live desperate lives for the next decade under ECB policies that leave no room for growth. She adds her voice to voices in France, Spain, and other countries in the eurozone about the impact of current EU and ECB policies on Europe, and says exiting the eurozone is a difficult option, but like the Argentine example offers more hope for growth for the young generation in Greece.

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Friedman points to the need for workers to have a Curiosity Quotient or C.Q., and Passion Quotient or P.Q., in addition to Intelligence Quotient I.Q. to compete in a digital hyperconnected world. The ubiquitiousness of tech devices, instant access to information, learning and knowledge, for people in remote cities to smaller towns everywhere, reduces the span in which a particular knowledge subset is relevant. New developments take place faster creating continual obsolescence and need for constant learning and curiosity.

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A big hurdle for local brands in China is the Chinese consumer's interest and respect for foreign brands. Asked about local brands buyers say they can't think of any, or say Chinese brands are shoddy in quality and value. Brands such as Haier in consumer appliances and Lenovo in tech are an exception. During the big surge in consumer sales in the last two decades Chinese companies producing local brands thought it adequate to simply imitate foreign brand names rather than take the difficult route of establishing the credibility of their own brand- an effort which might take years. Often the foreign name was changed slightly to keep the resemblance but mean something positive to Chinese consumers in the local language. Common are names such as Adidos, Hike, Cnoverse and Fuma for sneakers. Clio Coste keeps the connection to Lacoste with its crocodile logo. Coca Cola in Chinese is Kekoulele, translated to mean Tasty Fun. Only now are local companies giving serious attention to creating long term brand entity and image. The serious attention to brand names and branding comes at a time when China increasingly depends on consumer sales to power the economy with the decline in real estate and slower manufacturing. For the 11 months of 2014 retail sales were up 12 percent over the prior year period to $3.8 trillion, according to the National Bureau of Statistics. ...

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The memo to U.S. president Reagan written by his economic advisors in November 1980 before his first inauguration. Inflation was running at 13% and the economic problems looked as intractable as they do today. Advisors included Milton Friedman and George Shultz. The memo called for setting steady policies for the long run to encourage investment and growth, and at the same time steady monetary policy. This is different from the repeated quantitative easing efforts by the Federal Reserve responding to financial markets, and the Obama administration's stimulus efforts that have not led to long term growth. On the long term perspective the memo said: "The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success." The memo was released by George Shultz.

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Pollock's interview with Geroge Shultz, Reagan's senior economic advisor and Secretary of State, at his office in the Hoover Institution, Stanford University. He says the U.S. can find its way out of the current economic crisis the way it did during the early Reagan years. On the Fed's loose monetary policy he says the Bernanke Fed's contribution to the economic crisis was very easy money. Now that we have it we realize that its going to take something different from easy money to get the economy moving- not just more money. Three quarters of the debt issued by the U.S. in the last year was bought by the Fed, and the Fed is monetizing debt when it buys debt because at some time this ends up getting out into the economy. Shultz sees the tax rules as being about more than rates. Corporate tax rates should be lowered by cleaning up preferences. But what is most important is predictability and an environment where business feels there is less uncertainty when investing. Shultz says Romney should read his memo to Reagan before Reagan assumed office, excerpted in the WSJ, "Advice to a New President," May 26, 2012. He also recommends John Taylor's new book- "First Principles: Five Keys to Restoring America's Prosperity." ...

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Ireland and Portugal both have debt to GDP ratios of more than 100%. Still Ireland is better positioned to weather the eurozone crisis. Foreign investment attracted by low taxes and an educated labor force gives Ireland signficant advantages to return to growth. Citigroup forecasts show a 5.5% decline in GDP for Portugal in 2012, and large probabilities that the deficit will overshoot. Ireland expects 0.5% growth in 2012. Ireland's exports are 60% of GDP, compared to 24% for Portugal. Yields on Portuguese bonds due 2020 are at 13%, compared to less than 7% for Ireland. But funding Portugal through the end of 2015 is expected to cost 40 billion euros, according to Capital Economics estimates, or only 0.4% of eurozone GDP, making the problem in Portugal very manageable for the EU.

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Brenner of McGill University and Fridson of S&P say the Bernanke Federal Reserve in the U.S. is doing what President Truman and Treasury Secretary Snyder did in the war and postwar years- paying down the U.S. debt as cheaply as possible by inflating the money supply. There are no new monetary insights here, and even though the policy is maintained outwardly as one to promote economic growth and employment, the main focus is to keep the cost of paying down the debt as cheaply as possible with low rates. This hurts savers and retirees earning very little on savings. They cite Bernanke's writings that show he is imitating the policy of the war years when the U.S. held down interest rates and succeeded in doing this for a decade.

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Akio Toyoda of Toyota Motor praises prime minister Abe's "tremendous leadership," as Abe takes a drive in the hydrogen fuel cell Toyota Mirai in the front lawn of the premier's residence in Tokyo, Japan. Toyota benefits from the yen at 110 to the dollar as this generates higher profits from exports. Sales in 2014 were $230 billion, and net profit $18 billion. Prime minister Abe's economic program depends on companies and their suppliers increasing wages, especially companies with a supplier base as large as Toyota with estimated 1.35 million employees at suppliers in Japan. Toyoda says "both the government and the private sector are of one mind in fighting deflation." Toyota's wage increases in 2014 were only 0.8%. In 2015 hope are high that Toyota will take stronger action. Toyota has refrained from asking suppliers for price cuts in fall 2014, and is likely to do so in spring 2015, so that its suppliers can raise wages. Toyota's 65,000 employees are pushing for a 1.7% monthly base salary increase in April, with bonuses and seniority adjustments bringing the wage increase up to 4%....

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The skills to navigate different personalities and work patiently on the issues surrounding changes to the U.S. tax system of Rep. Dave Camp (MI), chairman of the U.S House of Representatives Ways and Means Committee, will be immensely useful in the effort to make changes to the U.S. tax system. Camp works well with fellow House Republican leaders Boehner, Ryan, Cantor, and his Democratic counterpart in the U.S. Senate Max Baucus. Camp is a good listener, refuses to engage in partisan criticism, and has the patience to work through difficult issues of achieving savings and keeping fairness in the the tax changes. Earlier efforts to achieve consensus in late 2011 failed, making it even more important to have leadership which can create productive debate and bridge the differences. The tax changes are part of the overall effort for U.S. economic recovery by reducing the deficit.

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Floyd Norris says the announcement by the ECB on Dec. 20, 2011, that 523 banks borrowed 489 billion euros under the newly created Long Term Financing Operation goes a long way towards giving Europe time to address the debt crisis. A major problem is recapitalization of European banks and the ECB's action helps address this problem. This is one of the achievements of the December summit of European leaders, though it was not the way markets had expected. Markets were focussed on large scale bond buying by the European Central Bank or issuance of euro bonds. ECB head, Mario Draghi, aware of widespread opposition in Germany to such proposals made it clear this was not going to happen. The Long Term Financing Operation of the ECB provides unlimited amounts of loans to European banks at 1% for 3 years, and accepts sovereign government debt as well as other types of securities as collateral. The result of this action was to lower the yield on a recent Spanish bond auction to 1.7% for three month bills from 5.1% the prior month. Spanish and Italian banks can now buy government debt of their countries and use the bonds as collateral at the ECB for three year loans at 1%. This Norris estimates will generate profits of about 37 billion euros for European banks from the difference between the ECB rate of 1% and the rate on two year bonds of Spain and Italy of 3.6% and 5.1% respectively for the bond purchases of 489 billion euros- calculated on a spread of 2.5 percentage points over three years. Another infusion of funds from the ECB will occur in February 2012. The new capital infusion gives European banks less reason to reduce lending in the eurozone as they work to meet the higher capital reserve requirements set under new Basel III rules. This is especially important given the austerity measures being implemented across the eurozone countries and Britain to reduce government deficits, and in light of the lower growth expected as a result....

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S. Korea and the U.S. propose limiting trade imbalances to 4% of each country's GDP by 2015. S. Korea is the host of the current G-20 meeting. Germany and Japan oppose this move, arguing that their governments cannot engineer such outcomes, as it was determined by economic activity in the private sector. Japan's representative, Finance Minister Yoshihiko Noda, said that while he was dubious about the idea of setting strict numerical goals, it would be acceptable to use them as reference numbers. Germany has traditionally opposed the idea. Germany wants to be counted as part of the European Union, rather than as a single nation, in any such reference goal. China has not commented on the target. S. Korea has presented the idea as a way to use more than currency exchange rates to achieve a global rebalancing. And People's Bank of China Deputy Gov. Yi Gang said Oct 10, that China is planning policies that could result in its surplus falling below 4% of GDP in 3 to 5 years, from about 5.8% in 2009....

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Robert Gordon of Northwestern University describes the problems in American Education and how this is the first generation which will not do better than its parents in educational attainment. The cost says Gordon comes in lower potential economic growth rates.

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Competing interests of the U.S. and China on issues such as jobs, currency and trade. Chinese stalling over currency revaluation.

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Jeb Bush on the Republican party and lack of willingness to compromise to come up with viable solutions to economic problems facing the U.S.

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Details of the $825 billion stimulus plan. Renewable energy does well under the plan including production tax credit for renewables, with $32 billion for a "smart" electrical grid for which GE makes components and lobbied for. Renewable energy producers win an extension of production tax credits now convertible into cash for companies whose losses leave them unable to use the credits. Transportation infrastructure green projects did not do so well, with $32 billion for transportation projects and only $10 billion for mass transit projects.The Natural Resources Defense Council had compiled a list of more than 80 environmentally friendly infrastructure and transportation projects worth about $405 billion. Only a small number of these projects made it. What is in the stimulus to create jobs and stimulate capital investment? Businesses get bonus depreciation, which speeds up depreciation deductions for companies that invest in plant and equipment. The stimulus doubles the amount small businesses can immediately write off for capital investments and purchasing new eqipment, and gives incentives for businesses to invest in renewable energy. States get help with $90 billion going to increase the federal share of Medicaid payments, and an additional $79 billion to help states avoid cutbacks in education and other services. And there is a "Make Work Pay" tax credit for $500 per worer and $1000 per couple. Experts say the effects of the stimulus will be felt in the latter part of 2009 and into 2010. Which is one reason the view of economists that there would be a second half recovery does not reflect conditions on the ground. Goldman has revised its view to 2010 and even that may be optimistic. One example of what has happened in the stimulus in this respect is that the earlier optimistic view of largeinvestments in science and technology, broadband networks, and transportation projects for fast rail and transit have all been trimmed down. Part of the reason may be that the bill for the nation's banking system revival may be larger than realized as an additional amount of $15-20 billion is being negotiated for Bank of America and more money will go to Citigroup. $6 billion is shown for highspeed internet access for rural and underserved areas. Science facilities get $10 billion. Repair of public infrastructure (read roads and bridges) gets $31 billion. School modernization gets $21 billion. And modernization of health information technology systems gets $20 billion which its hoped will provide equivalent or higher returns to pay for some of the universal health care costs, and preventative care gets $4 billion. There is a tax credit for R&D work on energy innovations and renewable energy production of $20 billion, and $32 billion for a "smart electricity grid." These are the proactive parts of the stimulus that create something new and make improvements. They add up to $144 billion. So much money goes to shore up the existing services and supplement incomes, and to relieve stresses on the banking system, and other ways to shore up the system, that the proactive expenditures are only a small fraction or 17% of the $825 billion stimulus. And all the time the federal deficit and debt increases with these huge outlays just to shore up the system. The Heritage Foundation Data Analysis Director Mr. Beach told Congressmen at a discussion chaired by Congressman Cantor (R), on January 16, 2009, that the federal debt would reach 92% of the nation's GDP in 2009 from 58 billion or 70% in 2008, with the $825 billion for stimulus. The federal deficit would go up to $1.31 trillion or 9.2% of GDP up from $541 billion in 2008. See the research paper on the Heritage website. ...

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Douthat says the record of Texas in jobs, in education, in minority achievement, in rising wages, and in preventing a real estate bubble is genuine and needs to be respected. He is uncertain as to how much of this is a result of Rick Perry's leadership in the state.

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The head of Italy's statistics agency Istat, Enrico Giovannini, says Italy's manufacturing sector has performed quite well, and the problem is with the services sector, in lagging sectors such as transport, communications, tourism, retail and social services. The manufacturing sector is only one sixth of the economy. He says productivity is poor and there is lack of investment in human capital and information technology for the services sector. IT's contribution to growth in Italy's labor productivity is the lowest in Europe, according to the European Investment Bank. Italy's total efficiency gains declined one half percentage point from 1995-2005. Retail and tourism sectors lack the needed productivity gains. This means actions taken by prime minister Monti to change labor laws and related changes will not be enough to generate confidence in the economy and economic growth. Giovannini says investment in human capital and productivity is badly needed, and shifting education and training to where there are new job opportunities....

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U.S. Federal Reserve chairman Bernanke, says the Fed will keep interest rates low till unemployment reaches 6.5%, as long as inflation remains at about 2%. If unemployment reaches 6.5%, and this is because more people are dropping out of the labor market, he will take this into account. If unemployment stays high the Fed indicated in its statement that it would tolerate a higher inflation of 2.5%, as long as the longer term outlook was for inflation to be at 2%. Bernanke said this doesn't mean monetary policy is on autopilot, because the Fed will watch conditions carefully and will leave room for flexibility- keeping an eye out for new asset bubbles that could develop, and monitoring labor market conditions and inflationary pressures and inflation expectations. If inflation falls well below 2%, or unemployment rate falls mainly because of people dropping out of the labor market, the Fed may continue to keep interest rates low. This policy was announced as U.S. fiscal cliff deficit negotiations continued in Dec. 2012 with one scenario being considered by both political parties being going over the Jan. 1 deadline before coming to an agreement. Bernanke pointed to this, saying "this is a major risk factor right now." The Fed's activist policy in economic policy has given financial markets and business a measure of stability not provided by government and Congress. Fed policy is to buy $40 billion of mortgage securities, and $45 billion of long term Treasury securities for each month in 2013. It will fund the purchases by adding reserves to the banking system, which is to say that it will print money to buy more bonds. This is a major decision by the Fed in that the Fed has shied away from unemployment targets in the past. Bernanke described this action as a new"automatic stabilizer" in the U.S. financial system- if unemployment rises investors know this pushes the Fed's interest rate increases further down the road and would drive interest rates down, if unemployment drops sooner than expected, investors anticipating Fed's rate increases would drive long term interest rates up, to keep stable growth....