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In China since 1981 the poorest people making below $1.25 a day fell to 207 million in 2005 from 835 million in 1981. In India the number of people below $1.25 a day increased to 455 million in 2005 from 420 million people in 1981. The share of the people in poverty fell to 42 percent from 60 percent during the same period. Corresponding figures for East Asia including China show a drop from 80% of the people in poverty in 1981 dropping to 18% in 2005. The proportion of people living below the $1.25 a day poverty line worldwide fell over the nerarly 25 year period from 1981 to 2005 from 52% in 1981 to 26% in 2005. In subSaharan Africa, now the poorest region half or 50% of the people live under the poverty line of $1.25 a day in 2005 almost where it was in 1981. In absolute numbers the region had 380 million people living below the poverty line in 2005 compared to 200 million people in 1981. Note that the World Bank this year changed the poverty line from $1 to $1.25 a day, to make allowance for the inflation that is hitting the poorer countries. Is China a rich nation after the Olympics? Some parts of China, the coastal regions and the regions around big cities like Shanghai and Beijing are relatively affluent with pockets of poorer people but in the rest of the country there is poverty as defined perhaps in terms of deep poverty, poverty, poor middle class without health insurance or any kind of savings for emergencies. With 200 million people in 2005 below the poverty line a question could be asked how many people in China below say $2.00 a day which could be seen as being poor at a time when inflation in food and fuel costs has been significant in developing countries. If its somewhere in the range of 300 and 400 million people in China this explains why in relative terms China would identify with India and the rest of the developing countries and it also explains its stand in the WTO trade talks acting as a developing country protecting the rights of agriculture and farmers within China. And it also explains the reasons why China sees a long transition before it ceases to be a poor developing country and why there is real concern that these 300-400 million people as well as others adversely affected by the rapid industrialization and exercize of state authority, corruption and increasing gaps between rich and poor, adverse effects on environment, that these people adversely affected are listened to and accomodated in the interests of stable progress and fairness. Much of recent history has shown that countries open to foreign trade have done better given the right conditions and careful policy measures. China opened up around 1981, and India around 1991. Also progress and gains are more significant in infrastructure building and in poverty reduction in the latter phases of development as the synergies increase, capital pool increases, and the development accelerates, this shows why China's gains look significant compared to India's at this point in time. In ten years or fifteen years a better assessment could be made and then some points may favor China and some India, and the results will be a result of different history, experiences and problems faced and routes taken because of prior developments in each region and varying complexity. ...

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U.S. S&P 500 index stocks now show a correlation of 80%, based on one-month trailing movements, according to Credit Suisse. This exceeds the correlation of 73% reached during the crisis in 2008, and shows the large influence of macroeconomic factors on stock movements.

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The pressure on the ruble as it reaches 40 to the dollar by Oct. 2014. The increase in inflation with higher import costs affects the Russian economy.

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Its clear from the task force's rejection of the plan GM submitted in March 2009, that the restructuring at GM was moving too slowly, too many brands, too many dealerships, no clear idea of what the new GM should look like. And a wistful look back to the past that clouded every decision. Wagoner and his team could not leave the old GM behind and clung onto too many brands, plants, dealerships, and sales numbers that were too optimistic at every turn of the economy, even as they were lowered. The task force said GM was "far too slow" to adapt and that "a substantially mmore aggressive restructuring plan" was required. That GM was just a year ago 2008 about this time still thinking in terms of sales numbers that would match Toyota's, as the largest carmaker in the world, shows how this wistful looking back at the past may have blinded GM to all the potentially dangerous bets that it was making, wihtout realizing it. Bets that the huge gap between the US carmakers and the Japanese and the Europeans in fuel efficiency and the technologies that went with it, would not someday come to hurt GM. Bets that the numbers game could be played without huge risks, that incentives related sales couild simply be inflating the market now with bigger risks ahead. That simply relying on sales revenue to support unsustainable retiree and union costs would be another dangerous bet on unsustainable sales numbers of a16 million market. The other large industrialized societies were seeing shrinking car sales, Japan, Germany, are prime examples, where sales are nowhere what they were at the peak in the postwar recovery of these industrialized countries. See the links/groups to these two countries car markets. Had GM considered the prospect of similiar declines in the US? Even if the car sales had remained at levels much lower than 16 million without the consumer buying spree and incentives, the market would be shrinking, the sales inflation simply made the sales fall that much steeper, hitting the 40% range. ...

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The G-20 statement for the meeting in Washington D.C. in April 2013, says: "Japan's recent policy actions are intended to stop deflation and support domestic demand." Bank of Japan Governor Haruhiko Kuroda's response was that this will help the BOJ implement its monetary expansion program in an orderly way. Kuroda said: "Now that we have obtained the support of the international community, we will be able to implement our program with confidence." These moves come with a call for Europe to proceed with banking union and giving more time for austerity programs to reduce the slowdown in Europe. This happens as fears emerged of a global slowdown in April 2013.

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Prof. Calomiris of Columbia University, says the U.S. Federal Reserve should increase the cash reserve requirement for U.S. banks to prevent a surge in inflation. He points out that excesss reserves at banks stand at about $1.5 trillion. He suggests the Fed should take early action to prevent a jump in lending and credit creation- a pattern seen in the past after several years of dampened credit and lending.

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The risk premium for investors in the U.S. stock market is about 5.4%. The risk premium is the higher return investors expect above the return on less risky government bonds to assume risks of a volatile stock market.This is the finding of researchers Fernando Duarte and Carlo Rosa at the New York Federal Reserve. It is the weighted average of 29 models used to calculate the average over the last 50 years. This is close to what it was after the bear market of the mid 70's and when shares were in a slump in 2009, and suggests a positive outlook for stocks. A separate indicator is the cyclically adjusted price earnings ratio of the American stock market developed by Robert Shiller of Yale, which averages profits over 10 years. This is at 23.2 in May 2013, and above the historical average, suggesting the U.S. market gains may not be too much higher from this point. Inflation is low, and commodity prices are lower which gives central banks in the U.S. and the eurozone more room flexibility in monetary policy. Japan's central bank is increasing the money supply to fight deflation and other central banks are cutting rates. This adds to the positive picture for U.S. share prices and stock market....

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Inflation in India is at 9.1% in May 2011, compared to the prior year. GDP growth for the first quarter of 2011 slowed to 7.8%, from an annual rate of 8.3% in the fourth quarter of 2010. Other figures show the same trend. Local investment growth for the second half of the fiscal year ending March 31, 2011 was at 4.1%, a decline from 14.7% at the beginning of the year. Foreign investment in the first quarter 2011 declined 32% from the prior year, down to $3.4 billon. Car sales have also declined to the lowest rate in two years.

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Martin Feldstein believes the dollar's decline will strengthen US competitiveness and because the economy is likely to stay weak its a good time to gain in exports. Ronald McKinnon at Stanford University warns of higher inflation with the dollar devaluing further. The G7 finance officials want to see a gradual adjustment for the dollar. Feldstein's view tempered by the need for gradual adjustment with allowance for the need to keep in mind the Europeans concern of a weakening dollar vs. the Euro, seems to be the view the G7 are taking. There is also the feeling that the euro may overshoot in value at first and come back to a more reasonable rate after the US improves its trade balance by 2009 or thereafter.

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Bernanke's plan to address the deep downturn is very aggressive and he is pulling out all the stops. This includes the purchase of mortgage backed securities, Fannie Mae and Freddie Mac corporate debt and other assets, Since it stated its intention in late November to buy such securities, the 30 year mortgage rates have fallen to 5.2% from 6%, and refinance applications have tripled. Now the purchases will be greatly expanded. See the related link to this in Hubbard and Mayer article based on their research paper, in the WSJ, that shows that at a mortgage rate of 4.5% the housing market prices could stabilize. Next step the Fed will, starting early 2009, pump money into markets for student, auto, credit card ansd small business loans in hoping to bring life to those markets. How much money is involved? Quite a bit. All told the Fed's assets could add up to $5 trillion says Ed Yardeni of Yardeni Research, up from $2.2 trillion now. Its these sweeping moves and decisions that have overshadowed the December 16 announcement cutting the target federal funds rate to a range from zero to 0.25%, the lowest in its history. Whats the thinking behind this? Coy of BW points to Bernanke's research on the depression years and the lost decade years in Japan. In 1999, in a book he contributed to, Bernanke referred to Japan's monetary policy and passive approach as a self induced paralysis, including all the zombie loans that were allowed to continue on company books and no effort to clear up the bad assets quickly. He always thought highly of the aggressive approach taken by Franklin Delano Roosevelt, and felt that more tools available and a better understanding of the market system since FDR's day enabled a lot more actions to be taken to reverse the kind of steep global downturn that might occur. Yardeni's view is that even though this huge asset buildup could lead to inflation down the road, the economy in the medium term faces a deflationary environment, and the only way to cope with this series of bubbles bursting is to create another bubble, rather than risk anything going seriously wrong. Basically Bernanke is making an assessment of the current situation, and he sees bad credit situation getting worse, bad unemployment situation getting worse, consumer spending falling off and getting worse, continued home foreclosures and falling prices, the transition between administrations and lack of policy direction for a few critical months complicating things, and he sees the economies of all trading partners in Asia and Europe weakening in great speed, and sees very tough years for 2009 and 2010 no matter what the administration and the Fed do. Not enough aggressive actions to forestall the worst is as bad as inaction in Bernanke's view. And with all the aggressive moves, including the $1 trillion stimulus and infrastructure spending to create 2.5 million jobs that Obama administration plans, the US and global picture for the next 24 months will still be a long uphill climb. So the risks for Bernanke are all in the region of not doing enough and not doing it vigorously and speedily to get the best results. ...

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The U.S. unemployment rate drops from 5.8% in Nov. 2014 to 5.6% in Dec. 2014, according to the Labor Department. But hourly earnings failed to register growth. Average hourly earnings declined in Dec. 2014 from the prior month, and increased by only 1.7% over the prior year, just a little bit above the inflation rate of 1.3%. Overall 2.95 million jobs were created in 2014. Yet 8.7 million Americans looking for a job could not find one. The U.S. Federal Reserve officials see tepid wage growth as a sign of slack in the labor market. The Dec. 16-17 Fed meeting minutes show that "most participants saw no clear evidence of a broad based acceleration in wages." The labor force participation rate is also stuck at a low level- 62.7% in Dec. 2014. The U-unemployment rate that includes involuntary part time workers and workers marginally attached to the labor force was at 11.2% in Dec. 2014. This includes workers too discouraged to look for work and people working parttime because they could not get full time work. It is steadily dropping from 16.6% in 2010 to 14.4% by 2012, 13.1% by 2013, and now 11.2% in 2014, showing steady improvement but still high....

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Germany will give 16 state authorites 2.5 billion euros to support a6 euro monthly rail pass that can take you to anywhere in Germany for a month. About 7 million tickets have already been sold. Deutsche Bahn is operating at 80% of capacity at this time. Inflation is up 7.9% in Germany last month and this is a result of the war in Ukraine.

In other aid the German government has given-

Cutting the fuel tax by 30 cents a litre for gasoline to keep prices below 2 euros.

Those in work will get a one time 300 euros energy rebate for energy costs in autumn.

A 100 euros child benefit bonus per child.

People on other welfare benefits will also receive 100 euros.

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The US stock markets show stocks displaying a herd behaviour, with stocks going up on good days and going up on bad days in a flock pattern. This leaves little room for individual stock picking. Institutional investors with strategies to buy a broad range of stocks in large blocks, trading in and out based on indexes, now dominate the market.

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Martin Feldstein says China is gaining control of three problems it faces of shrinking export markets, the effects from a large stimulus in response to the 2008 financial crisis, and inflation especially high real estate prices. The economy is shifting to higher role for services and less dependence on exports under the new five year plan. The real estate prices are levelling off after steep increases. And inflation is under control. New investment will go into infrastucture needs such as power development and low income housing. As the economic problems are being tackled, the political problems remain. China faces an aging population under its one child policy, and it will have to support an increasing number of retired people in the future. Inequality and corruption are two problems that continue to grow and present challenges to the new leadership taking over in 2013.

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The U.S. Agriculture Department cuts its estimate of corn crop yield per acre in the U.S. by 15.5%, as a result of the severe drought in 2012. Agriculture Secretary Vilsack, says the situation for farmers is better this time than during the last drought in 1988. Now 85% of farmers have crop insurance compared to 25% in 1988. The Agriculture Department estimate is for a 3-4% increase in prices in 2013. Capital Economics says the impact on GDP in the U.S. will be about 0.1%. Because 40% of the corn crop goes into ethanol production there is renewed debate about the 2005/2007 Renewable Fuel Standard, which requires 13.2 billion gallons of corn based biofuel be made in 2012. Worldwide the bad weather conditions in Brazil, India and Russia are worsening the outlook for food supplies. The U.N. Food and Agriculture Organization says global food prices increased by 6% in July 2012, with corn prices up 23%.

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How a major global readjustment may be taking place right before our eyes, not visible all at once but gradually taking place as growth in Europe and Asia outpaces that in the US and consumption overseas grows while the it falls off in the US from the levels seen for a decade. The weaker dollar will reduce imports increase exports and shrink the trade deficit with other countries. More expensive imports will add to the inflation in the US. The weaker dollar will lead to American companies gaining market share with higher exports and a more competitive position versus other countries. German and other European companies will complain about the higher euro. Vis a vis China and India this rebalancing will take place slowly because of the billion people in these countries rural areas that are just now becoming part of the larger global economy.

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Coordinated action by the central banks of the U.S., Canada, Switzerland, the EU, and Japan to ease liquidity problems, as Italy's borrowing rates edged up to 8%, and other EU countries faced similiar problems in November, 2011.

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Under the coordinated action by central banks in the U.S., Canada, Japan, Switzerland and the ECB, the U.S. Federal Reserve lends dollars to the ECB, getting euros in return, and the ECB in turn provides European banks with the U.S. dollars. The European banks were facing a shortage of U.S. dollars in November 2011. Money market funds in the U.S. had pulled back from investing in eurozone bonds in the third quarter of 2011, adding to the shortage of dollars. This action eases liquidity concerns.

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The U.S. Dow Jones Industrial Average passes 15,000 in May 2013. The DJIA average has increased by 130% after reaching a low in March 2009. The DJIA peaked at 14000 in July 2007 before falling 54% and recovering to the 14000 level in Feb 2013.

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Andy Street, Mayor of the West Midlands Combined Authority, says when you consider that London gets 7 times the infrastructure spending per person than West Midlands, "its not bloody surprising" that his region is not growing fast. West Midlands covers a large part of central England, including Wolverhampton, Birmingham and Coventry. Even life expectancy is lower by 8 years in Blackpool, and disposable income can be quarter in Camden compared to North London. Labor's Corbyn and Conservative's Thatcher in the British general election are both campaigning for reviving the regions outside London, that have seen investment in people and technology lag substantially behind London. Regional revival is the big issue in this election. Consider that London which accounted for about 15% of economic output in the 1980's now accounts for nearly 25% of economic output of Britain. Berlin is about 4% of Germany's economy, and Paris 10% of France's economy. A word of caution on Brexit is sounded by experts at the University of Birmingham, who say the whole process of Brexit is so complicated that it may detract from the task of reviving this region. Even though the political upheaval had origins in this discontent, was it more about shifting government attention to the gap between London and the rest of the country, and less about a complex process of withdrawal from the European Union. ...

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Galston focusses attention on the major problem facing democracies in Europe and the U.S.- that of providing decent paying jobs and improved economic prospects for lower and middle income households. He cites the surveys from the Pew Research Report and the U.S Bureau of Labor Statistics showing how middle income households median net income remains stuck at levels of 1997, and lower income households at levels of 1996. The median net worth of American households adjusted for inflation presents an alarming picture of being at $96,000 in 1983 and $98,000 in 2013 for middle income families, and being at the level of $12,000 for lower income families the level of 1975. Most of the new jobs as much as 95% are being created in the low wage service sector and the BLS statistics show the future looking much the same- with huge numbers of low wage jobs, fewer decent manufacturing jobs because of automation and jobs shifts to low cost locations overseas, remaining manufacturing jobs in the U.S shrinking by another 800,000 to 7% of the workforce by 2025. The result is the alarming rise of populist politicians like Trump in the U.S., Le Pen in France , and populist politicians in Hungary and Poland. Cultural liberals in the Democratic Party and the Republican establishment are both threatened by the rise of cultural illiberalism, xenophobia, and nationalism, as economic anxiety increases, and fears of terrorism and immigrants add to this anxiety. Progressive tendencies in the Republican party since the days of Theodore Roosevelt and of professional elites in the Democratic Party could become endangered if no serious effort is made to come up with solutions to the problems these trends present. The disconnect between the concerns of the working and middle class and the professional elites as the gap widens and the social compact in America and Europe breaks apart, means a new mindset will be required in America and Europe to deal with this. ...

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US president Trump appointed Powell in 2016 in his first year in office. DJT's advisers have told him that it is important that the Fed have autonomy, and that the Fed was structured from inception for having the independent judgement for what is best for the economy. At times DJT has wanted the Fed in his first term to at least consult with the president.

In this context remember that Powell as chair of the Fed will be till May 2026. And Powell will remain as Governor on the Fed Board till Jan 2028. Of the current 7 governors the only other terms of a Fed Governor that expires early is Adriana Kugler in 2026.

DJT tariff and tax policies could increase inflation and growth which will require the Fed to recalibrate its views on cutting rates.