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Dow Chemical CEO Liveris says he sees signs of recovery in China in 2013. He says small and medium sized businesses in China have better access to financing in Dec. 2012 after a period of destocking and hard times accessing credit.

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The growth in U.S. GDP was 1.7 % in 2011, yet unemployment dropped by 0.7% in the last 12 months to 8.3% by Feb. 2012. A pickup in hiring is seen in job figures. Christina Romer gives as an explanation to the rise in unemployment in 2009 to 10%, more than expected, and the drop since then, to the overreaction of companies to the financial crisis by laying off workers and freezing hiring- with hiring picking up as conditions return to normal levels. The unemployment rate as defined is also not an accurate measure of the jobs situation, as it reflects only workers who are looking for work, and many workers drop out of the jobs market when they are discouraged especially the long term unemployed. Taking into account people who have dropped out of the labor markets the unemployment rate was 11% in Nov. 2009, according to Luce in the Financial Times- in Ezra Klein, Washington Post 12/12/2011, Wonkbook: Real unemployment rate 11%. Lawrence Katz, Harvard Labor economist also cites this as one of three jobs crises in unemployment today that need to be addressed, the other two being: foreclosures and debt, and the low number of jobs added because of automated manufacturing- in Friedman, NYT, 12/10/11, The Next First 100 Days. Explanations for the low GDP growth as unemployment declines is a likely productivity slowdown. Prof. Robert Gordon of Northwestern University, sees a slowdown in productivity. Worker output for every hour worked, how productivity is measured, increased only 0.4% in 2011 and 0.9% in the last 7 quarters, and is trending downward in the longer term. A more likely explanation is that unemployment is still at higher levels but is understated in unemployment figures....

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The Australian government forecasts lower GDP growth in 2012- dropping to 3.25% fro 4% earlier. The government plans spending cuts of 11.5 billion Australian dollars over the next 4 years, which will further affect economic growth. The mining and resources sector boom is leading to an overvalued currency which is affecting growth in manufacturing, tourism, and retail sectors. Australia has two economies and this limits economic policy options.

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GDP growth in the eurozone was 0.3% for the 4th quarter 2014. For 2014 eurozone GDP growth was 1.4%, according to Eurostat. Growth in GDP for Germany was 0.7% for the 4th quarter and 2.8% for 2014. Retail sales in December were particularly good in Spain and Germany, with sales up 2.8% for the eurozone over the prior year. Italy's GDP growth was stagnant and France's was 0.1% for the 4th quarter, showing that Germany and Spain are leading the way for eurozone recovery.

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Mr. Eike Batista's EBX Group companies were one of the prime beneficiaries of huge government investments in mining, oil and other commodities. The fading of the commodities boom is resulting in large losses for these companies. Street protests in Brazilian cities shows the weakness of the Brazilian economic model that neglected public services in transportation, health care and education and concentrated on infrastructure and mining projects.

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The Economist points to a second hit from bad debt in the post 2008 stimulus binge of spending in China. This is after an earlier hit, that was absorbed as a result of high growth rates and high savings. About $420 billion was injected into 5 state owned banks since 1998, according to one estimate, as a result of the first hit to China's banks from bad debt. In this second round of bad debt, covered in more detail by David Barboza in the New York Times, and merely alluded to here, many bad loans to infrastructure projects were rushed through by local governments. The Economist considers this one of the successes of the state directed banking system, that loans were quickly made and projects started in the post 2008 crisis period; and expresses the view that this hit will be absorbed just like the last hit. However the more detailed account by David Barboza and in Business Week, points to the working of a system of incentives gone astray in a capitalist system without the necessary controls or regulation. Local governments used investment companies to take on loans, which were then used to prepare properties to be auctioned off at a profit and speculative prices to state owned companies in different industrial sectors. This is part of rampant speculation in China in real estate markets. Can China with its high savings and growth absorb a second hit? This depends on the magnitude of the hit and the size of the bad debt, which depends on how long this speculative market continues to operate, and how bad debt is hidden in the books. The difference this time is that large state owned companies in different industrial sectors are engaged in this speculation. The other difference is that the high growth rates in China depend on continued large trade deficits with the USA and Western Europe, something which is not likely to continue for long, as consumers in Europe and the USA with high debt are becoming cautious spenders. This suggests that China, like the US with the mortgage crisis, faces the same effects of unregulated or uncontrolled speculative behaviours, that can endanger the banking system....

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Japan's prime minister Abe calls a snap election for Dec. 2014.

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A shocking statistic. Of the 12 metropolitan areas in the US with over 15% unemployment, 10 are in California, and this is because the construction industry has taken a severe hit. It lost 74,000 jobs in the 12 months ending in June 2010. From June 2006 to June 2010, this industry in California lost 43% or about 402,000 jobs. And the construction industry is still shrinking there. One reason why the unemployment rate in California is 12.3%. The overbuilding during the boom makes it that much harder to rebuild. The construction industry has been hard hit in Los Angeles and Riverside metro areas and in Napa and Solano counties.

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Xi Jinping's experience as Communist Party secretary in eastern Zhejiang province, and in running Shanghai, gave him insights on how the private sector had changed the province and the weakness of state run companies; as well as how state run companies operating efficiently such as SAIC in the automobile industry in Shanghai had achieved success by diversified ownership through listing on the Shanghai Stock Exchange. Studying how Singapore's Temasek has provided efficient management of state owned enterprises, which are run like private companies and have private investors and compete in markets; has reinforced the idea in the Communist Party that state ownership in key sectors can be maintained. The idea being adopted is retaining a majority controlling interest for the state at the same time as transformation of state run enterprises to operate similar to private enterprises takes place. The new plan put out by the Communist Party and the State Council, China's cabinet, takes up reform of the large state owned enterprises in China along these lines. The enterprises will take on private investors, list on stock exchanges, and operate like private companies hiring managers at the market rate. The energy, resources and telecom sector state enterprises will be reorganized as asset investment firms, and these enterprises will be required to operate like private companies to maximize profits, hire managers, and list on stock exchanges. ...

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The WSJ's Juan Montes, in an exceptional report from Mexico City, tells the story behind a landmark achievement for Mexico- Pacto Por Mexico of Dec. 2, 2012. The major political parties of the right, centre and left forge an agreement for the way forward for Mexico- beyond monopolistic pricing and industry structures in Mexico that hurt consumers, to increase foreign investment and new technlogies to modernize the national oil company Pemex operations, change labor laws, and create a climate for higher growth. The pact is broad ranging, shows a grasp of the problems facing modern Mexico, and ranges from anti-monopoly laws to getting junk food out of schools considering Mexico's high obesity and diabetes rate. It covers 95 goals. It is hard to overstate the significance of this achievement for modern Mexico. Montes describes the initiative of the PRD leader Zambrones in rebranding his PRD party as a moderate left wing party open to new ideas. This happened after the departure of Lopez Obrador from the PRD to form his own party in September. Zambrano and PRD moderates brought up the idea based on what happened in a landmark deal in Spain in 1977, that helped transform Spain after decades of stagnation under the Franco dictatorship. Around July after the presidential election, PRD president Zambrano, and the PRD's Jesus Ortega, held meetings in Mexico City with Jose Murat, a senior PRI politician, and PRI president elect Nieto's top advisor, economist Luis Videgaray. The decision was made by president Nieto and economist Luis Videgaray to pursue the discussions for joint agreement on vital issues facing Mexico. The PAN party was brought into the discussions. By mid-September nine people from the PRD, PRI and PAN started work on a draft agreement at Murat's home. The ground rules were set for discussions to be private, to have agreement on all points or assume nothing had been agreed, and not let current events disturb the talks. The nine participants set up the broad principles, and then a group of three, one from each party was given the task of coming up with the right language for the pact. By the end of November a 34 page draft was put together. A night of intense work to 2 a.m. followed the inauguaration of president Nieto on Dec. 1, with the Pact ready for announcement on Dec. 2, 2012. The Pact is a landmark achievement in its potential for changing Mexico and creating decades of economic progress similiar to that envisioned by the Spanish parties for Spain in 1977. ...

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On Monday August 8, 2010, the Dow Jones Industrial Averages went down by 634 points and closed below 11,000 points. This is not far from the 10,165 level of the DJIA on August 27, 2010. It was on August 27, 2010 that Fed chairman Ben Bernanke made the speech at the Kansas City Fed's Jackson Hole conference about the strategy for a QE II. Its about the time for this years Jackson Hole conference and the gains in the stock market are melting away. The DJIA closed at 12810 by April 29, 2011, then went below 11,000 by August 8, 2011. With higher inflation the Fed's options are limited.