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The U.S. Federal Reserve Flow of Funds report for 2011 shows Fed purchases of 61% of total net Treasury issuance. Goodman points out that the net issuance of Treasury securities for covering U.S. budget deficits is normally 0.6% to 3.9% of GDP on average for the last six decades since 1950, compared to on average 8.6% of GDP today. A big jump in Fed purchases with a corresponding steep fall in the participation of foreigners and the private sector. Foreign purchases declined from 6% of GDP in 2009 to 1.9% of GDP in 2011. U.S. private sector- mutual funds, banks, corporations and individuals- purchases declined from 6% of GDP in 2009 to 0.9% of GDP in 2011. This helps keep interest rates low and funds U.S. government needs. Lawrence Lindsay pointed out in the WSJ in 2011 that Fed has itself boxed in being forced to keep interest rates low for years. If the government borrowed at a more normal rate of 5.7%, instead of the Fed induced rate of 2.5% today, Lindsay estimated the U.S. government would face an additional $800 billion in interest costs by 2021....

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India's growth rate is slowing and the government will be taking all the fiscal and monetary measures to keep growth at 9%. Wholesale price inflation is above 5% and is expected to rise higher for food and fuel making it harder for the central bank to cut interest rates, at hte last monetary policy meeting the Reserve Bank of India, India' scentral bank kept a key interest rate at 7.75%. Companies revenue and profit increases are healthy at this time but some impact is seen from the US downturn.

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Matt Miller's stump speech as an independent candidate and his 7 proposals for Renewing America.

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The eurozone economy has grown by 3.6% and created 4 million jobs since the start of the bond buying program by the European Central Bank in 2015, according to the ECB. This means that the program has largely accomplished what it set out to do to revive the eurozone economy.

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The private sector ignores health insurance. And state coverage in China is inadequate. More than two thirds of China's 1.3 billion people have no health insurance at all. If you have insurance you still pay up front in cash, if you do not have the cash up front you cannot get a surgery, treatment of any kind or any drugs, even if the insurance will later reimburse you. The Chinese health care system is dysfunctional and in a crisis because of the way it is structured, and the faulty policy incentives. It caps prices for basic drugs and procedures at below market rates, yet it lets hospitals profit from everything else from advanced drugs to sophisticated diagnostic tests. So hospitals invest heavily in technology and expensive testing. and drug sales account for 45% of revenues. And enforcement is lax. Doctors in Shanghai make monthly incomes of about $400, about what a taxi driver makes, so they supplement their income with bonuses earned by prescribing more expensive tests and drugs. There is no utilization review so the state reimburses for whatever the hospitals charge regardless of whether the test was needed or not. So the system is dysfunctional and lurching towards a crisis. In fact heavily burdening the middle class. The private outlays and burden of total health care spending has increased from 20% to 60% of total health care spending from 1978 to 2003, as the the health care system got the same dose of unfetterred capitalism as the rest of the system. The Government's share of total health care spending has dropped sharply. In addition there are design flaws that push expensive care and build in incentives for expensive care at the expense of good medical care. The government recognizes this problem and sees it as athreat to social stability. It has committed to increase spending on healthcare. ...

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Martin Feldstein on the U.S. economy in 2014 and the risks of the U.S. Federal Reserve tackling the economy on its own with monetary policy, without Congress taking on the task of policies to promote economic growth. Feldstein points out the 3.6% GDP growth estimate for the third quarter 2013 does not look that good considering that half of this is from buildup of inventory. GDP growth is about 2% as net result. With paralysis of Congress and the Executive branch the Fed's policy of huge buildup of long term bonds to reduce short term interest rates to zero and stimulate stock and home prices, he describes as the only game in town. The problem is that the size of the effect of increase in consumer spending from this increase in household wealth is small and not enough to contribute to significant GDP growth. The risks of this approach are that it contributes to destabilizing the economy as investors buy risky securities and bid up prices. He suggests a five year $1 trillion infrastructure development program, including defense, as a stimulus Congress should consider. Not the kind of stimulus that happened after the 2008 crisis. If not enough investment ready projects are available as in 2008 that will contribute to future growth, Congress should take another one year to prepare for this before moving forward. Debt reduction is key, and debt as a percentage of GDP should be reduced and set on a path to go where it was before 2008 to about 40%, deficits to below 2% of GDP. This should be done by slowing growth of Social Security and Medicare, and increasing revenues by limiting subsidies in the tax code that Feldstein as pushed for since 2010....

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The government controlled Securities Association of China says a fund of 120 billion renminbi ($19.4) billion is set up July 3, 2015 to buy shares in the larger more stable companies and reduce selling of shares from brokerage firms portfolios. This is not likely to have much impact because of its small size, and because the volatility is concentrated in small and medium size firms stocks which had doubled since June 2014, and were hit by the sharp decline in June 2015. The stock exchanges in Shanghai and Shenzen also suspended initial public offerings. Share prices have dropped by about 30% since June 12 on the Shanghai and Shenzen stock exchages. With the surge in the Chinese stock market prices till June 12, 2015, share prices of many small and medium sized companies doubled or even quadrupled in value. The overall index on the 2 exchanges doubled because as the smaller stocks quadrupled the large blue chips went up by about a fourth in value. The overall Shanghai market went up 149% to June 12, 2015, over the prior year. It is down 28.6% as of July 5, 2015 since June 12, 2015. A stock index of 100 large mainland Chinese companies traded both in Shanghai and Hong Kong were up about 24% by contrast. A major problem is the margin trading with loans to investors from stock purchases up nine times in 2 years and informal financial companies charging annual interest rates of over 20%. Small investors focussed on small and medium sized firms because they were going up the fastest, and many risked their life savings. Younger workers were also part of the group caught up in the frenzy of stock buying. Shares in the larger companies are only about 30% of the overall value of companies on the Shanghai Stock Exchange....

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Krugman points out the risks for the U.S. economy as the U.S. loses export competitiveness with the euro reaching parity with the dollar. The huge shift from $1.50 to the dollar at one point to parity gives Europe a sudden strong boost. Europe needs the boost to escape a deflationary trap, and there is little that can be done for capital flows and exchange rates, says Krugman. He points out that many Federal Reserve governors were clueless of the impact this could have on U.S. growth, sanguinely assuming the U.S. would boost growth in 2015. Better says Krugman for the Fed to be very careful about raising rates at a time when wage growth is sluggish, and inflation low.

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Easing of monetary policy, a reduction in interest rates by the Federal reserve probably will not prevent a serious house prices decline says Mishkin, a Fed Governor and a Columbias University economist. And a 20% decline in prices says Mishkin in a recent paper could lead to about 2% drop in consumption spending within 2 years. See the other article on Sept 17, wsj, that a rate cut or rate cuts may still not prevent the economy from suffering from the effects of the credit crunch and the housing decline, and drops in consumer spending, decline of the dollar, leading to lower growth.

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Coy cites Paul Krugman's Willie Coyote scenario for the dollar, where the famous character runs off a cliff, but starts to fall only when he starts to look down. One foreign exchange expert says there is a 40% chance of the dollar falling into a crisis point. Two forces are working in that direction. Near zero rates in the USA is making it a speculative play to borrow dollars cheaply, and then sell them to buy other currencies where stocks and bonds yield higher returns. The other is that experts feel that the US may eventually make its huge debt affordable by devaluing its currency. David Malpass does not see rising import prices and inflation as healthy for the US economy. He says the fall of the dollar in the 1980's gave the Japanese the buying power to strengthen their automakers. Coy also sees the risk of a major failure of a financial institution, as a possibility, if it made a bet that made it vulnerable to a falling dollar. At this point 88% of derivatives credit risk exposure in the USA is residing in 5 banks in the second quarter in 2009....

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How the global financial markets are changing. Note foreign exchange reserves of governments around the world are increasing at an accelerated rate. Since 2002 Treasury estimates that they are increasing at the rate of 20% a year compared to the 6% rate from 1997-2001. These reserves total about 7.6 trillion dollars. Some of this will be invested by governments in equity to buy into companies or to obtain higher rates of return. For China Developmet Bank there may be also access to expertise and knowhow in the banking field by becoming the largest shareholder of Barclays with ownership of 8% of the shares after possible acquisition of ABN Amro. Some of the funds will be raised in China's domestic market by issuing debt. See the related article in todays WSJ on the Quatar Investment Authority.