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The benchmark price of U.S. crude oil dropped to $31.41 a barrel on January 11, 2016, as oil prices continued to drop sharply following a slowdown in China, appreciation in the U.S. dollar and no cuts in production from Saudi Arabia. Analysts expect a crisis for energy producers that is deeper than ones in 1986, and five plunges in oil price all the way back to 1970. With the oil prices at $30 and expected to drop below $30, the companies that took on a lot of debt have no choice but to keep up production. In the process many may find themselves in bankruptcy. Private equity with capital of $100 billion is likely to come in at this point to buy cheap assets without the debt, say analysts. U.S. banks energy portfolios are small, with Wells Fargo energy exposure only 2% for oil and gas loans in the third quarter of 2015, or about $17 billion. Loans that are rated "sub-standard. doubtful or loss," are projected at 15% of loans to energy producers, about $34.2 billion, in a biannaual review by banking regulators. The unusual aspect of this energy price slump is that production is not declining with falling prices- oil production in the U.S. was estimated by the government at 9.2 million barrels a day in Jan 2016- 1% higher than at the beginning of 2015 when prices were over $40 a barrel....

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Brazil faces a debt crisis in 2015-2016. Between 2010 and 2015 foreign debt of local governments and Brazilian firms increased from $100 billion to $250 billion, and dollar debt in local currency from 210 billion reas to 655 billion reas, according to Bank of International Settlements data. State banking institutions BNDES and Caixa Economica Federal financed 35% of loans in 2010, by 2015 this increased to 55%. Subsidized loans at 5.5% by BNDES to firms make Brazilian banking a fiscal operation, requiring additional funding. Petrobras increased debt issuance enormously during this period, and now needs government support as its debt is now one notch above junk status. Interest payments on Brazil's debt is 6% of GDP in 2014. Public sector debt is 66% of GDP, and credit to the private sector is 55% of GDP up from 25% in 2005. It will take Brazil years to recover from a huge borrowing binge.

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The new J.D. Powers Quality Survey put out in Feb 2013 showed the Lexus, Toyota, Mercedes, Buick, Chevrolet, Lincoln and Dodge Ram brands performing at the top level in number of problems reported by owners of 3 year old vehicles. Land Rover, Jeep and VW brands did poorly. Most of the Chrysler Dodge cars performed poorly. The redesign of vehicles initiated by Fiat Chrysler CEO Marchionne does not show up in this study. The redesigned Jeep and other vehicles will show in next years study. The study also showed buyers of economy vehicles were likely to switch easily when buying another car. New models are showing fewer problems and are more dependable compared to previous years, with the average number of problems declining from 170 per 100 vehicles in 2009, to 132 in 2011, and 126 in 2012.

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Japan's economy grows at an annualized pace of 3.5% in the first quarter of 2013 after aggressive monetary easing by the Bank of Japan under Haruhiko Kuroda.

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The Labor Department figures showed the U.S. added 157,000 jobs in January 2013. The unemployment rate edged slighly higher to 7.9%. Government jobs declined by 9000 in January, and the risk remains that drastic job cuts under a sequester of government spending cuts supported by some in Congress would hurt the job market.

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John Taylor, says Obama and Alan Krueger (Obama's new head of the U.S. Council of Economic Advisors), said some of the same things in early September, 2011, that were part of Obama's old plan to revive the U.S. economy. And the old plan has failed to produce results. The part that puts construction crews to work on the roads, railways and airports was tried earlier in the stimulus plan. Because of a lack of showel ready projects, and the state governments putting most of the money in their state coffers, this only increased infrastructure by a miniscule 0.05 percent of GDP, according to research by Taylor and John Cogan. Taylor's sees the moves by the Obama administration and the Bernanke Fed as not only being ineffective, but having the opposite effect of lowering investment and consumption demand through increased concerns about the federal debt, another financial crisis or the risk of inflation or deflation. The U.S. private sector has the money to make the investments that create jobs but their concerns have led to holding back. Taylor points to the need for a comprehensive economic strategy to replace these temporary interventions. The debt limit agreement of 2011 is a part of this strategy, and he agrees with reducing spending in a gradual way in a weak economy. The other parts of this strategy he says are entitlement reform, tax reform, regulatory reform, monetary reform, including a reappraisal of the role of government in the economy. This should lead to a more stable and predictable economic environment and reduced uncertainty about the future, which is critical to improving supply and demand....

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Some of the crude rhetoric at Donald Trump rallies, and use of coarse language, according to the NYT. Working class and older Americans show their anger at a system that appears to have left them behind with slogans, stickers, T-Shirts. The idea of the wall figures in much of this and shows that the wall has become not jut about Mexico but a metaphor that captures this anger, that reflects this anger. Another aspect of the 2016 campaign is that those most vulnerable and most in need of help have not sought the comfort of knowing about programs to improve middle class and working class wages, incomes, to build infrastructure, create jobs, stop companies from shifting jobs overseas, plans for improving accesss to health care and education, to ask for specifics and delivery. This is the supreme irony of the 2016 election campaign that not enough attention is going to what will be done for the middle and working class, and what specifics will be delivered, in what time frame- which is essential for restoring the condition of the American middle and working class to where it was in the 2 decades after the Second World War. ...

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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 constructive contribution made by the G-20 meetings of leaders towards building agreement on economic and other policies for peace and progress in the global economy. The meetings were especially useful for coordinating policy and addressing issues arising in the global economy after the 2008 financial crisis. Here Li Baodong, China's vice minister for international organizations and conferences, international economic affairs, describes the path ahead: IMF reforms implementation, better coordination of macroeconomic policies, pursuing the anti-protectionist and free trade policies with further support to the WTO and ministerial MC9 meeting in Bali in Dec. 2013, and infrastructure financing proposals for developing countries on the agenda at the St Petersburg, Russia, G-2- meeting in Sept. 2013. Baodong says the mechanism called the Framework for Strong, Sustainable and Balanced Growth as part of the G-20 meetings is a major achievement. Each G-20 economy submits it macroeconomic policy plan for a Mutual Assessment Process under this arrangement. The progress from the Bretton Woods financial architecture to the new arrangement- from the G-6 to the G-20 to include developing countries from India to Mexico and Brazil- is another major achievement, not fully recognized by the public, says Baodong. Interestingly Baodong makes particular mention to global rebalancing, rather than pushing what he calls the impossible task of increasing demand to get growth. This is a realization coming to China's economic policymakers under the new Jinping-Keqiang administration after the overly aggressive effort to stimulate demand in the 2009-2011 Stimulus, and the ensuing financial problems in the banking and credit system. It is indicative of the policy shift and its implementation underway in China in 2013-2015....

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New York city Mayor Bloomberg, says President Obama and Republicans should stop promising a free lunch, or something for nothing. He points to Obama's reelection strategy of higher taxes for the rich- by taxing those earning over $1 million at minimum of 30% in federal income taxes- as generating $1.1 billion, according to Congress's Joint Committee on Taxation. This would make little difference on a federal government with $1.2 trillion gap in spending and revenue. And he says Republicans who say making the Bush tax cuts permanent while at the same time cutting the deficit are promising a free lunch, with no connection to reality. The answer says Bloomberg should be to eliminate the Bush tax cuts for all groups, for shared sacrifice, and for Congress to pass the Simpson-Bowles deficit reduction plan with $4 trillion in savings on an up or down vote.

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Two Harvard economists, Lawrence Summers and Lant Pritchett, say China is likely to revert to the mean of average long term growth of developed countries after this spurt of growth is over. Growth is likely to slow to 6% by 2016, and revert to the mean of 2% for industrialized countries in the long term. Goldman Sachs banker Jim O'Neill, says the growth at a higher rate could be sustained because of urbanization. Summers does not rule out this outcome as he accepts a range of outcomes, with the most likely outcome being a reversion to the mean. The factors often cited for slowing growth are lower of productivity of capital as corruption and close connections determine where capital is allocated, misallocation of capital, large increases in credit in the economy since 2009 leading to bad debt in the financial system, aging society and demographics with increasing numbers of older people. Other reasons are the choices being made by Chinese leaders for slowing down to address the problems of air pollution and contamination of water supplies, inflation in housing prices, overdependence on exports, need to shift to increasing domestic consumer spending but unable to do this with the lack of spending power of large parts of the population because wealth is excessively concentrated in the upper ranks of society. The need to manage these forces ensuring some measure of stability depends on finding ways to reduce the growing concentration of wealth and power, in itself a challenge for the Communist Party elite. A combination of different factors with some still unknown factors are likely to play a part in this reversion to the mean for China, a situation encountered by every country so far in North America, Europe and Japan. This makes it even more important that each developing society structure its development around the most optimal goals with the least costs attached to the development....

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Republican presidential candidate Rick Perry tells an audience in Cedar Rapids, Iowa: Printing more money to play politics at this particular time in American history is almost treacherous- or treasonous, in my opinion." He was referring to Federal Reserve chairman Bernanke when he said: "I know there's a lot of talk and what have you about if this guy prints more money between now and the election... I don't know what y'all would do to him in Iowa, but we would treat him pretty ugly down in Texas." Perry's spokesman said Perry feels strongly about printing money, and "got passionate" in his comments.

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Tourists from China went up by 20% in 2015, going over 1 million. Foreign enrollment at Australian educational institutions was up significantly in 2015, going up to 645,000, up 25% over 2012 with the weaker Australian dollar. Australia's services sector including inbound education and tourism exceeded in value the minerals and metal ores exports in the last two months of 2015. This enabled the Australian economy to grow by 3% in the 4th quarter of 2015 over the prior year.

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The Economist points out (in this cover issue on India-Pakistan relations) several fundamental facts. The first is that the current state of relations betweeen India and Pakistan hurts Pakistan the most. It makes a much smaller country and smaller economy bear the burden of defense against a large neighbor- defense takes up much needed allocation of funds for infrastructure and development, education and healthcare. It also weakens democratic institutions and their development by an overdependence on the military for governance. Poor India-Pakistan relations have significant adverse effects on the U.S. In fighting the Taliban U.S. forces are fighting a force that Pakistan's military helped create and support from its early beginnings as a way to counter Indian influence. With an Indian-Pakistani peace settlement of issues in Kashmir and other outstanding issues the U.S. would be in a significantly better position to disengage from the region, especially when the entire Middle East is moving in a new direction in 2011. Consider the difficulties in establishing peace in Northern Ireland, and between Turkey and Greece, and the difficulties of establishing peace between India and Pakistan cannot be considered even more difficult. Pakistan and India muddle along- neither side is doing much to take the initiative. For the U.S. disengagement from South Asia can be best achieved by pushing for a settlement between the two countries. Pakistan and India have much to gain from a settlement. Considering the progress made in Ireland, such places as Yugoslavia, and in Turkish-Greek relations, there is a lot more that can be done and should be done to bring India and Pakistan together. In Ireland diplomatic efforts were made by U.S. envoy George Mitchell, and in Yugoslavia U.S. envoy Holbrooke made diplomatic efforts towards the Dayton accords. Greek-Turkish relations have advanced to the point where Erdogan and Papandreou, the Greek and Turkish prime ministers, discuss solutions to the Greek debt crisis. This includes options to reduce Greece's defense expenditures in the light of Turkey's new foreign policies. The lack of such efforts to break the deadlock between India and Pakistan by the U.S,. the U.K. and other countries involved in the NATO mission in Afghanistan, the emphasis on a military solution supported first by Gen. McChrystal, and then by by Gen. Petraeus, all show a lack of understanding of the real issues that need to be tackled- issues relating to a peace settlement between India and Pakistan....

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Alan Blinder points out that the political partisanship that has emerged in 2010 has not served America well, as it has deprived the government of the fiscal policy tools, which would be more effective than the Fed's only mildly effective tool of buying $100 billion a month of medium and long term Treasury debt. The country he says is tied up in partisan knots that prevents the use of the fiscal policy tools, and leaves the Fed with the choice of doing something only nudging the rates on government and private securites a bit (by 30 basis points for Treasury debt and 15 basis points for private securities as an example, not enough for more than a mild impact on corporate spending). The fiscal policy tools are he says of a wide variety and pack a lot more power, and he cites three as examples: offering significant lasting tax breaks for job creation, large enough to produce results (larger and long term than the HIRE program), government hiring directly onto public payrolls and government paying local and state governments for hiring at the local levels, the government offering to compensate states for a cut in the sales tax for a year to stimulate consumer spending. Would'nt this raise the deficit though? Blinder points out that the deficit problem lies in the future. Right now there is so much slack in the economy, that public spending will not crowd out private spending. And with Treasury rates at an all time low, Treasury can finance the larger deficit in the short term. A depreciation of the dollar or inflation, he says, is not a worry, because now there is worry about deflation, and the USA needs a lower dollar to push exports up and rebalance its economy. This does not slight the deficit issue and the culture of poor budgeting among both parties, as Reagan Budget Director David Stockman pointed out in an op-ed piece, but accomodates the real dangers and opportunities of difficult policy choices. This is why he laments the advertising campaign and public relations campaign against the 2009 stimulus bill, and the expected paralysis of fiscal policy from the extremely partisan 2010 midterm elections, and public opinion consumed by fear of deficits. Leaving the Fed with the unenviable choice of using only mildly effective tools. Other experts and columnists mention the risks associated with the Fed's large scale purchase of securities, if this leads to another asset bubble and subsequent collapse, and another bailout needed for financial institutions. Peter Eavis in one column in the WSJ points to the lack of effectiveness of the first round of quantitative easing of $1.7 trillion. And Kelly Evans, in the WSJ, points to the risks of "bad" inflation, if another round of quantitative easing by the Fed leads to increases in the price of commodities such as oil and food (such inflation falling heaviest on lower income households).The US Financial Regulatory Reform bill has received low grades, and recent standards for reserve capital in worldwide banking reforms are stretched out over a long period, leaving fragility in the economic system, if something were to go wrong....

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Rosa Ines Rivera, a cook at the cafeteria for the Y.H. Chan School of Public Health, Harvard University, with 2 small children, describes the protests over the increase by Harvard administration of the premiums charged on health insurance that now take up over 10% of the income. She says she lives in public housing with her parents as she lost her apartment because she is behind on the rent, and now cannot afford to pay the increase in premiums. About 750 workers at Harvard are on strike on this issue. She says dining hall workers want the current pay of $31,193  a year increased to $35,000 to provide a living wage that helps them afford medical care, because of the high cost of living in Boston.  To get some idea of the plight of workers who provide the kind of nutritious meals that a lot of students depend on for healthy living- Rivera says she takes in about $450 a week after taxes, or about $1800, rent is $1150, which leaves $650 for herself and two children for all food, and expenses in Boston. The $4000 in premiums for health insurance would be about 330 per month, leaving her about $320 for food and living expenses with 2 children. Why the need to bring up children in poverty in America, for generation after generation, after putting in a full day of work? ...

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In an interview with the Wall Street Journal, Mark Carney, the head of Canada's central bank and the head of the Financial Stability Board, says China is falling behind in its earlier committments made at G-20 meetings to move towards rebalancing the world economy. He pointed to the fact that consumption in China has moved from about half of China's GDP to about a third, in the last ten years. China's investment has also declined from half of GDP to about one third. Carney also raised concerns about the strength of the Canadian dollar for Canada's competitiveness. The report "China: 2030" by the World Bank and China's Development Reform Commission also calls for changes in the way China's economy has increased its dependence on state run companies.

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A shakeout for manufacturers in the solar industry is developing in 2011-2012, as prices of solar components drop sharply. There is slowing growth for solar products in 2012. Seven solar power manufacturers have filed for bankruptcy or insolvency in 2011, including two German companies Solar Millenium and Solon SE, and Solyndra LLC of the U.S. Debt exceeds market capitalization for the 10 largest publicly traded solar companies. A major reason is the subsidies offered by governments in Europe, the U.S. and China, which resulted in a glut in manufacturing capacity and falling prices. Chinese banks encouraged by the Chinese government have given $43 billion in credit facilities to Chinese renewable energy companies, according to Bloomberg Energy Finance. Prices of solar panels at $1.60 per megawatt in 2010, dropped to 90 cents per megawatt in 2011. Another problem is slowing demand. In Europe banks are reducing funding. Installations doubled for solar energy in Germany in 2010, and dropped 29% in 2011, according to Jefferies. Germany is the largest market for solar energy in the world....