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Rachel Reeves is Shadow Chancellor in Britain, that is a way of saying Finance Minister when Labor currently in the Opposition forms a new government. Speaking at the Peterson Institute for International Economics in Washington DC she says how Labour will bring about a transformation of Britain's economy with ambitions that borrows from and matches what Biden is doing in the US, and Scholz in Germany. This is very different from anything Britain has seen in its history. The Labour government of Clement Attlee made some institutional changes such as setting up the Bank of England as Britain's central bank in 1946, creating the structures that would help workers and families and the British economy recover from the war, and declaring in parliament that Britain would leave India by June 1948. Blair's response to the Thatcher government did not rival the changes brought by Attlee by any comparison. What Britain following the US is facing today is an FDR or Attlee moment because of the scale of changes needed to create an American or British economy that matches the aspirations of the people, and creating a meaningful role in the world economy and supply chains. Investments have to be made in public goods such as renewable energy, health, education and transportation infrastructure that have no parallel in history including that of FDR or Attlee. Biden is investing on a scale that is designed to overcome two decades of neglect of infrastructure and public goods such as education, health care, and public services. The same is true for Britain. The same is true for Germany and for the European Union.   ...

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The Russian economy will contract by 10% and the Ukraine economy by 20% in 2022, says the European Bank for Reconstruction and Development. The bank was setup to revive Eastern European economies after the collapse of the Soviet Union. In 2023 the Ukraine economy is expected to rebound by 23% with assistance from US and EU. The Russian economy faces long term challenges with lack of access to technology from EU and US and the loss of well educated workers leaving Russia, and is expected to face a long period of stagnation. The war has affected 60% of Ukraine's economic output and electricity consumption is down by 60%, with one third of Ukraine businesses closed, factories shutdown. Ukraine will be a much poorer country because a lot of stock has been destroyed, says Beata Javorcik, EBRD's chief economist. For Russia the drag on the economy will be present even if a peace agreement leads to lifting of sanctions says EBRD. Central Asian countries such as Uzbekistan and Armenia will also feel the effect of the slowdown with loss of remittance from workers in Russia. The faster shift to renewable energy and LNG in Germany, and a similar boost to renewable energy with COP26 Glasgow getting a boost in EU and the US, will result in loss of value of oil assets in Russia. With loss of technology access from US and EU Russian conversion away from a energy based economy will be slowed. All this is likely to lead to a difficult period for Russia. This means there are no gainers from this war, including China, which could see a further acceleration in US and EU restructuring of the supply chain away from China, leading to further slowing of growth. ...

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Spain's central bank was lauded for macroprudential supervision before the housing bubble burst. Will China's central bank and financial authorites which have managed the housing bubble upto this point face similiar problems? Can China be the sole exception even as housing bubbles burst with wide repercussions in the U.S., UK and Spain? Nicholas Lardy, of the Peterson Institute of international Economics, says urban housing stock makes up 41% of Chinese household wealth in 2011. The same figure for the U.S. is 26%. Chinese buyers invest in homes because low interest rates on savings accounts cannot keep up with inflation. Real estate investment was 13% of GDP in 2011. Home ownership is a recent development in China, only since 1990, Chinese have never experienced large price declines. Household debt as a percentage of disposable income has increased significantly in recent years, up to 53.6% in 2011 from 31.3% in 2008, according to Lardy.

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The Treasury and Fed's handling of the financial markets crisis on Tuesday, Wednesday, Thursday and Friday as it unfolded Sept 17, 18, 19 and 20, the worst since the 1930's. With the credit markets battered, the collapse of Lehman Brothers investment bank and the rescue of AIG right on the heels of the rescue of Fannie and Freddie the previous week, and all these moves barely improving the general loss of confidence and increasing fragility of the financial markets worldwide. Steps like the ban on short selling by the SEC to stem two 400 point declines in the last few days, and the Fed setting aside $50 billion to shore up money market funds by making them whole where needed, and providing about $200 billion through the European Central Bank and the central banks of Japan, Britain, Canada and Switzerland, were tactical moves so Paulson and Bernanke had to address the real problem of removing the highly illiquid assets of risky mortgages from the financial markets. This would require working with Congress to put together the necessary legislation which is what Congress, Treasury, the Fed, and others will work on this weekend of September 21, 22, so that the legislation could be drawn up the following week and passes into law creaing some Federal agency that will buy up the illliquid mortgage assets owned by banks, investment banks, and other financial institutions before there is another series of collapses in the financial markets necessitating rescues by the Fed. Meantime Treasury has raised another $200 billion last week through sale of Treasurys and provided this money to the Fed to use as needed. The result of the most recent chaos in the financial markets has resulted finally in agreement among all parties about the need for committing taxpayer money in hundreds of billions of dollars to be used to buy up the risky illiquid mortgage assets at steep discounts to be resold later to bargain seeking companies so that the banking sector can repair their balance sheets and recover, as being much safer and less costly route than the cost of rescuing financial firms with systemic risk on an individual basis after a run on these firms or their imminent collapse. Which is why people like Laurence Meyer of Macroeconomic Advisors himself a former senior Fed official believe that this is the first serious effort to tackle the crisis by getting to the root cause of the problem and removing the illiquid mortgage assets and the Government an taxpayers spending the hundreds of billions of dollars but at the same time finally seriously tackling the crisis in a manner that will restore confidence to the markets and to the industrial economy of the USA. His comment, "the markets voted and they liked the proposal", as the Dow Jones went up 610 points at one point and ended up the day Thursday September 19 at 410 points gain for the day....

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Raghuram Rajan, Professor of Finance at the Graduate School of Business, University of Chicago, was appointed chief economist at the IMF in 2003. He presented a paper, titled "Has Financial Development Made the World Riskier," at the annual Jackson Hole meeting of economists and central bankers for 2005. Rajan says he had planned to write about how financial developments during Greenspan's 18 year old tenure had made things safer, but the more he looked the more evidence came up that the risk reward relationships in a normal functioning financial market had been terribly distorted. Market participants were being rewarded for wins but were not being asked to take on commensurate risks and impacts on their bonuses and rewards. He also cautioned about the use of credit default swaps which acted as insurance against bond defaults, and said insurers were generating big returns on this but with the appearance of little risk- even though the pain could be immense in a default. Banks were carrying credit securties on their books that posed risks to the whole financial system if things went wrong with the credit securities. Reaction from the gathering was unfavorable. Lawrence Summers, a former Treasury Secretary said, "the basic, slightly lead eyed premise of the paper was misguided."...

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Brazil's growth in 2011 is expected to come in at 3%, much lower than expected. This is a sharp decline from 7% growth in 2010. A modest stimulus of $1.5 billion through tax cuts was announced by the Brazilian government. Brazil's central bank made three successive cuts in interest rates to counteract the slowdown in the economy.

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The falling revenue to the government should lead to a $50 billion deficit for Australia in the coming year. Falling commodity prices exacerbate the situation for Australia. THe export price index fell 4.3% for the first quarter 2009 from the previous quarter. And Australia's central bank expects the terms of trade by 20% in the coming year.

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The Spanish government agreed to open the books of Spanish regional governments and the regional savings banks to reduce concern in financial markets about Spain's debt. Spain's government debt is 53.2% of GDP in 2009, which is lower than Greece at 127%, Italy at 116%, Portugal at 76%, Ireland at 65%, and Germany at 73%. Spain's problem is the a large amount of private debt accumulated during15 years, in the low interest rate environment after joining the eurozone. Joining the euro sent interest rates in Spain down because it removed the risk of devaluation. The government was restrained by the Maastricht treaty criteria but private investors and regional banks could borrow freely, and they borrowed extensively, with money going into home building and construction. The fear is that the Spanish government will end up taking on much of this debt. The other problem is that Spain needs to refinance much of that debt in 2011, at a time when investors are nervous about eurozone debt. Spain's central government will need to raise 170 billion euros in 2011, regional governments another 30 billion euros, and Spanish banks another 90 billion euros. The government has set up a special facility for Spanish banks to draw on of 99 billion euros....

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Germans are afraid to move in public spaces after dark, especially young women. DW.com confirms this in its investigation in September 2025. It includes discussion with criminologist Susanne Karstedt that is cited here. The area around the main Frankfurt train station is a site for prostitution says this report, and this attracts crime and drug crime. This was unknown during our previous visits to Frankfurt over 15 years ago and is a result of changes in the Merkel years when infrastructure was neglected allowed to deteriorate ,and migrant populations were allowed into the country. It is astonishing for a visitor to see the Frankfurt station in such a dilapidated state as it is the commercial and banking city of Europe and Germany, where the European Central Bank is located. Chancellor Merz says Germans are "afraid to move around in public spaces due to migrants who do not have permanent residence status, do not work, and do not abide by our rules." A recent poll shows only one third of the poll participants think the chancellor is incorrect. Many people want to avoid the label of racism when asked about it,  but still know that public safety is clearly not what it was in the past in the 1980's and 1990's. The chancellor is only stating what he sees- "I don't know whether you have children. If you do, and there are daughters among them, ask your daughters what I might have meant. I suspect you'll get a pretty clear and unambiguous answer. There's nothing I need to retract." "There are a lot of people who say, see, and judge it this way. Once again: Ask your children, ask your daughters, ask your friends and relatives. They will all confirm that this is a problem — once it gets dark, if not before." For a visitor to Frankfurt this is clear to see as plain as daylight and reflects the decline of the Schroeder-Merkel years  similar to the decline in the US over the last two decades under Clinton-Bush and Obama. To see this in Frankfurt and other German cities near urban hubs and train stations is astonishing, sad and very disconcerting. ...

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Kudos to Ellen Barry for hands on reporting right from Amethi, Uttar Pradesh state in India. For years UP (Uttar Pradesh) has been seen as one of India's most backward states, even though it is the largest state in India centering around the Ganges valley. Politicians were content to use backward parts of the state as mere vote banks at the time of elections. The elections in 2014 focussed on development are beginning to change this. The Gandhi family based in Allahbad, India, had Amethi in UP as the place where family members stood for parliamentary elections. In recent years as the Gandhi family's grip on UP loosened, the same vote bank policies were employed by caste group parties led first by Ms. Mayawati and then Mr. Mulayam Singh Yadav. The elections of 2014 were about making the shift and sea change in Indian politics in the heart of the country- the north central Ganges valley region- away from vote bank politics and caste groups. The BJP under Gujarat's Modi focussed the election on development and delivery on infrastructure and jobs. For too long reporting on an important part of Asia has been laid back from metropolian centres without the hard work needed to grasp the situation in the countryside and on site. Kudos also to NYT's Bearak's report from Ladakh on the enormous logistics required for an election of this magnitude with about half a billion voters. ...

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The Indian rupee reached a low of 58.98 in currency markets on June 11, 2013. The Indian government increased the import tax on gold and the central bank RBI tightened the availability of credit for gold imports. Oil and gold imports were drivers for increasing India' large current account deficit to 6.7% of GDP in the 4th quarter of 2012.

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The Prime Minister's Economic Advisory Council in India lowered the growth rate for the current fiscal year through March to 7.1%. Growth is expected to improve in the next fiscal year to 7.5%-8.0%. C. Rangarajan, the head of the advisory group says he sees the fiscal deficit exceeding the budgeted target of 4.6% of GDP. One panel member says the fiscal deficit target could be exceeded by as much as 1%. Rangarajan emphasized the need to cut subsidies and raise some indirect taxes. India's central bank governor, Subbarao, also emphasized the need to cut subsidies and reduce the deficit in a recent interview with Wall Street Journal reporters Frangos and Jain, Feb. 14, 2012. Lower foreign investment, and reduced credit after the Reserve Bank of India (RBI, India's central bank) increased rates repeatedly, and lower exports due to the eurozone crisis, have reduced the growth rate. The panel expects inflation of 6.5% in March 2012, which Mr. Rangarajan considers to be high. Deputy Governor of the RBI, K.C. Chakrabarty says 7% growth is reasonable under the conditions, as inflation has to be lowered to below 5% to accelerate growth to 9%. Chakrabarty does not see any quick turnaround in growth rates in the next fiscal year with all the headwinds facing the Indian economy....

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India is running a large current account deficit with imports exceeding exports. The curent account deficit for the year ending March 31 was $88.2 billion, about 4.8% of GDP. With foreign investment declining remittances from Indians abroad are a major source of incoming capital. Indians overseas sent about $69 billion in remittances home in 2012, increasing from $63 billion in 2011, according to the World Bank. In August 2013 India's central bank relaxed restrictions on interest rates for overseas Indian rupee accounts and on foreign currency denonimated deposits. This has led to a sharp increase in remittances by Indians overseas, with HDFC bank reporting a 30% increase in remittance volumes in June 2013 compared to January 2013.

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China's limited monetary and fiscal options in 2012, with the housing bubble limiting the option of increasing construction spending to spur growth, and inflation limiting monetary policy. The central bank's decision to reduce the reserve requirement by 0.5% is not expected to do much for economic growth, as there is enough money to lend. The problem is that there is not enough demand for loans in the current environment.

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Chinese president Xi Jinping is learning from the country's Covid experience in the way Biden and Democrats learned from their initial push for tighter restrictions in 2020-2021. Most covid restrictions, quarantines, testing is being lifted in China and efforts are being made to stabilize the economy hurt by frequent lockdowns, and a new path is being taken that responds to the Covid lockdown fatigue of the people.  This will lower Chinese growth below the central bank forecast of 3.3% for 2023, yet it also offers a learning curve for the Chinese leadership and new government that was put in place after the CCP party congress in 2022. This may be experimental in the short run but offer benefits for China and the world in the long term. For the first time it means China's trade tensions with the US are turning the corner in a way no number of tariffs and rhetoric could do between the two countries. The evidence- China's exports to the US have declined by 25% already in the last few months. Exports to the EU have declined as well by 11%. China's trade surplus in November 2022 showed a drop to $70 billion from $85 billion in October. ...

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Another clear warning from Britain under Boris Johnson the failures from that time could still affect the US if it copies Johnson. Krugman looks at Project 2025 that has received the backing of the former president. He points to one aspect of this blueprint for a Trump second term, how civil service would be overhauled to remove civil servants not meeting the requirements put forth by the new administration. He says this takes America backwards. Till 1883 when president James Garfield set up an independent civil service in the US people employed by the government were routinely chosen from the winning party leading to flaws and much instability, weak administration. In Britain this type of effort of Project 2025 was tried under Boris Johnson by using an adviser who wanted to blow up parts of the British civil service for not cooperating. That experiment failed badly and the adviser was fired with much recrimination, Johnson being discredited, and administrative failures. Project 2025 would shut down the Education Ministry and the Homeland Security Ministry, for even more upheaval of the civil service. Not to mention the proposal to reverse the founding of the central bank the Federal Reserve in 1909 under Woodrow Wilson that stabilized the economy after banking panics. These are clear dangers. ...

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Local government debt is estimated to be 27% of GDP using estimates by Dragonomics and the China's National Audit Office. Prof. Shih of Northwestern University, an expert on this subject, estimates this to be $2.6 trillion or 42% of GDP. The total government debt is at 82% of GDP using the 27% estimate for local government debt. Using the higher 42% figure for local government debt of Chinese banks gives total government debt of 97% of GDP. Considering the nature of China's financial system in which state run banks and state run enterprises are a dominant feature, local government debt is likely to become the responsbility of China's central government. This also affects China's efforts to tackle inflation because higher interest rates would increase the cost of servicing this debt. As a result the government is unlikely to meet its inflation target of 4% in 2011. Large foreign exchange reserves of $3 trillion, the low interest rates, and high growth rates are expected to help China cope with this looming debt problem. Another round of capital injection to recapitalize banks is expected in 2012-2013 with the transition to a new leadership in China....

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Rupee has risen by 9% so far this year in 2007, to 40.58 to the US dollar. The Reserve Bank of India, India's central bank has so far not intervened in the markets to slow its rise. Will it affect exports? Its not expected to have much impact on outsourcing of tech and IT work as competition from Vietnam, Philippines and rest of Asia is still weak. Manufacturing exports could be affected. Merchandise exports went up by about 9% in March 2007. The RBI has not intervened because of efforts to restrain inflation, and bring it down from over 5% to drop below 5% as imports become cheaper.

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The bottom half of all U.S. households have only recently recovered the wealth lost in the 2009 financial crisis. They still have 32% less wealth than in 2003 when inflation is taken into account. The top 1% of households have more than twice as much as they did in 2003. Wealth is defined as net worth that includes houses , savings and stocks minus any debt. The wealthy have 85% of their wealth in stocks and bonds. For the bottom 50% half of the assets are in the house or family home. Economic and regulatory trends have happened in ways that favored the people investing in stocks, and rescued people investing in stocks with policies designed with this purpose by central banks and the U.S. government. By contrast for the bottom 50% buying a home is more difficult today. The problem this WSJ report points out is that the next recession would most hurt the bottom 50%, even before they have recovered from the last one which was a result of shaky practices of banks in financial lending and not some cyclical swing in the economy. Policy was then geared to provide a recovery first for stock markets as a way to economic recovery. The bottom 50% have little stake in the stock market, the top 1% have most of their gains from the stock market. Much of the popular anger comes from the way policies by both Democrats and Republicans differed little in past administrations in the way they approached this in shaping economic policy. As a result infrastructure building and investments in public services took less priority in this period of 30 years with trade imbalances with China building up on the external front, in another side to this development. The shift to Trump and to right wing populists in Europe is only the first phase in the corrective action that has to take place to return to a fairer distribution of wealth that existed before the last 3 decades. Eventually it is not right wing or left wing factions or parties, but healthy policies, that matter to create a better balance for society.  ...

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Echoing ECB president Draghi's comments in 2013, Haruhiko Kuroda of the Bank of Japan says "we will do whatever it takes to achieve our price target." The central bank has set a target of 2% inflation to be achieved in 2 years. With deflationary tendencies and low growth estimates of 0.5% for fiscal 2014, Kuroda was taking the strong action to see that the gains made so far are not eroded. The Bank of Japan will target asset purchases of 80 trillion a year or $734 billion, increasing this from the 60 trillion to 70 trillion yen range set earlier. The Government Pension Investment Fund backed this move by saying it would increase the stock component in its portfolio from 24% to about 50%.

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Brazilians turn to pawn shops lending by government owned bank Caixa, in a regulated portion of the lending industry, as credit card rates increase. Brazil experienced a huge surge in credit card debt in the years when consumer loans were freely made in the last decade. Between 2004 and 2014, consumer credit in Brazil increased 658% to $297 bilion, according to the National Association of Executives in Finance, Administration and Accounting. Central bank figures show 6.7% of personal bank loans and 26.3% of credit card accounts being in default. As in Turkey much of the country's growth was fueled by increased spending and consumer credit. The credit binge and the lower revenues from a decline in commodity prices is leading to slow growth and a stagnant economy.

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Mervyn King, governor of the Bank of England, says growth is expected to be "sluggish" with higher inflation. Inflation increased to 2.7% in October from 2.2% in Sept. 2012, with rising costs of university fees. The growth of 1% in the third quarter he described as a one time situation because of the Olympics in Britain. The strength of the pound relative to the euro and the GDP decline in the eurozone also hurt Britain's exports. Economsts at IHS Insight expect the Bank of England to keep the benchmark interest rate at current level of 0.5% for at least 2 more years and increase asset purchases by 50-79 billion pounds in Jan-March 2013. Some economists see the need for other approaches because of tight bank lending. King says the central bank committee retains faith in asset purchases as a policy instrument.

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John Taylor on the dangers of a loose U.S. monetary policy and the effects this had in fueling a housing bubble in Spain, Ireland and other EU countries. Taylor points to the bubble ocurring in emerging market economies from low interest rates. Taylor says the ECB's interest rate moves in 2003-2005 were affected by the Fed's low interest rates. He estimates the ECB set rates about two percentage points too low leading to housing bubbles in EU countries. A similiar process is taking place today with the Fed's near zero interest rate policy. Taylor points to interest rates in a group of 18 emerging market economies- including Brazil, China, India, Mexico and Turkey, which have held interest rates on average about 5 percentage points below widely used benchmarks fueling a doubling of global commodity prices between 2009-2011. The U.S. Fed's policies make it harder for central banks in emerging market economies to take aggresssive action against bubbles developing in these countries. Taylor says his does not mean that the Fed should not pay attention to the U.S. unemployment rate and long term unemployed, but should keep in mind the negative effects of slowing demand in emerging market economies and in the EU as a result of its monetary policy of keeping rates at near zero for long periods of time. This feeds back to the U.S. economy at a critical time....

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Francesco Gurrerera, Money and Investing Editor for the WSJ points to the risks in the U.S. and global economy in April 2012- overdependence on the U.S. Federal Reserve and the European Central Bank, not enough "de-leveraging" of financial institutions after the 2008 global crisis, and the increasing risk associated with individual investors and businesses investing in risky securities in search of yield in a low-interest rate environment.