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Hilsenrath cites Robert Hall, a Stanford University professor whose research shows three fourths of American households do not have two months worth of income put away as cash or other liquid assets. The Federal Reserve researcher Karen Pence says 41% of households can borrow less than $3000 on their credit cards and 23% have been turned down or discouraged from applying for credit. This shows the general financial weakness of overly indebted American households and the overlayed effects of the housing crisis, and higher unemployment. It suggests the margin for consumers to weather difficulties and increase spending is thin.

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The Economist view is that the USA, the Euro-zone, and the emerging markets, are all moving in different directions. The US has failed to address deficit concerns in the recent Bush tax cuts deal between Obama and the Republicans. The Euro-zone faces the prospect propping up its weaker members facing a debt crisis. and slowing growth from spending cuts.The monetary conditions are too loose and the flow of capital into emerging markets risks increasing inflation. This increases the chances of a macroeconomic shock if the govenments and central banks in emerging markets don't get the adjustments right- either doing too much or too little. The US faces the prospect of problems in the bond market with current management of public finances.The Economist views the risks compounding as a result of these divergences between these three regions, with the prospect of 2011 becoming a year of damaging shocks.

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Fears that another crisis like that of 2008 could emerge with asset bubbles in China and other countries. Also fears that policies of austerity in southern Europe and the UK, combined with Germany's tight control on spending, could lead Europe to years of slow growth or stagnation. It is a tricky situation especially in Europe, trying to avoid a Greece type situation, and at the same time not cutting spending to the point where it would lead to stagnation. Criticism of the German government's policy to cut spending and fears that the European Central Bank might follow Germany's policy to focus purely on the deficit. Lower US bond yields give the US some room for dealing with the deficit. The need for swift action in China to move the economy towards domestic consumption, and let the yuan strengthen so that China can absorb more of the world's exports.

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Hispanics expected to make 20% of the US electorateby 2020 up from 9% today. In California efforts to deny social services to illegal immigrants alienated Korean and Chinese voters who are mostly small business owners. Thus it creates an anti immigrant bias. Another point made here most of the Latino illegal immigrants here are related to legal immigrants so these are mothers brothers, sisters and relatives so this issue and poor treatment of these immigrants sparks protest in the minds of legal immigrants as well. As the USA demographics change how will this issue develop and play out. By 2042 the Census Bureau projections stated that the ethnic and racial minorities will comprise a majority of the US population thanks to higher birth rates and the media has focused on this and the Republican platform has according to this editorial called for walling off Mexico.

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The U.S. jobs added for Dec. 2011, are 325,000, according to ADP figures, but the reliability of these figures has been questioned because of the different methods used in calculating the number. For Nov. 2011, the ADP number for private sector jobs added was 206,000. The same number from the Labor Department was 140,000. For June 2011 there was wide divergence- the ADP showed private sector jobs added as 157,000, the same number from the Labor Department was 57,000 jobs. For December 2010, ADP reported private sector jobs increased by 297,000, and official numbers showed 113,000. For December there are seasonal issues as well that affect the figures. Other factors affecting the jobs picture is the loss of jobs inthe government sector, and the gains in jobs predominantly coming from poorly paid retail and restaurant industries and fewer job gains in the better paid construction and manufacturing industries.

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Economists at the IMF estimate that the public debt of the leading 10 industrialized countries would reach 114% of GDP by 2014, from 78% today. The governments then owe about $50,000 for each person in the country. Unlike World War II this situation is not temporary, because of the pension and health care costs of a population that is getting older. So what is to be done? Without the stimulus, the deep and prolonged recession would lead to greater damage to the finances of these countries. But continued in this manner the government would crowd out private investment and lead to lower economic growth. In some countries, Greece, Ireland, Italy Portugal and Spain it might lead to default, in other countries the real cost of the debt may be reduced through inflation. In the USA yields on 10 year Treasuries reached about 4% on June 10th, in December it was about 2%, a consequence of the economic recovery. If interest rates are allowed to rise too fast, it might abort the economic recovery. A rise in taxes is also not the answer, because in Europe the taxes are already at 40%, in America they are around 30%. But raising consumption taxes at the time when the economy was fragile, aborted a recovery in Japan during Japan's earlier crisis decade. A caution signal that says fiscal tightening can backfire, especially some years after a banking crisis when things are still in a weak condition. Some steps that can be taken are raising the retirement age, which would cut pension costs as people work longer and would boost tax revenues, and eliminating the tax deduction for home mortgage payments in the US. Its important to build credibility that the government and the legislative bodies are serious about controlling the finances and acting with prudence. In America wasteful health care spending is a priority, as this would reduce the burden on public finances considerably , and should be as much of a priority for the new Obama administration, as providing universal health care. With today's finances its not something that can be put off....

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Risks to the economies of western Europe through the banking system and its lending to Eastern European economies are growing. The Easter European economies that are collapsing are Europe's version of the sub prime crisis in the USA. This may ricochet back to the United States as European institutional investors pull money out of the US stock market. Europan banks could suffer a further increase in nonperforming loans, and need further recapitalization from their governments, which are already hardpressed by demands for shoring up the social safey nets, stimulus spending and bank rescues. Big institutional investors in Western Europe, the banks, pension funds and insurance companies, hold large amounts of Eastern European debt, and further infusions of capital from western governments would put increasing pressure on the Euro.

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Economist Paul Krugman says Gordon Brown does good. Gordon Brown Britains Prime Minister has taken the lead and the initiative to give a proper direction to the rescue efforts of the USA, and the G7 countries. His plan to inject capital into financial institutions and a host of initiatives was done speedily, intoduced Wednesday, October 8, 2008 and to be executed starting today, Monday, October 13 with some of the first capital infusions and other steps. In giving direction to Paulson who has agreed to take the direction of Gordon Brown after some faltering and missteps and in properly guiding the whole of the G7 Gordon Brown has done a lot of good. Which goes to show that the British public may have underestimated and underappreciated the quality of leadership Gordon Brown can show in a crisis, (considering his low poll ratings), which is where it really matters and where its sorely needed, especially when its for the global financial system.

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Important year end reveiw of the oil price forecasting work of so many anlaysts and where they failed . The IEA and the US Enery Dpt forecast have year after year underestimated this pirce by over 20%. Analysts change the price forecasts within a couple of weeks based on changing information and assumptions. Of all this the Saudi Arabian forecasts have ben within 12 % of what has actually ocurred according to a study by Ronald Berger Strategy Consultants of Muich, Germany. And whats their forecast for 2008. By extrapolating from the Saudi budget and the assumptions, used such as giving a wide margin to avoid a deficit in the budget if oil prices undershot by a wide margin, one gets $75 for US benchmark crude. Forecast by experts are in the neighborhood of $80 average for the whole year 2008. Goldman recently revised theirs upwards from $85 average for 2008 to $95 within a 4 week period. How good is the Goldman forecast. No one really knows. Lehman has a forecast of $84 average for 2008 and bases it on the opacity of the market because no one knows what OPEC will do with supply and China does not provide good information on demand. So basically anlysts are adding an uncertainty premium to the price of oil. And this is especially so because as the Chief Economist at IEA says global space capacity is so thin and any event can influence price. Last year the rhetoric about Irans nuclear intentions was enough to stir up the price, as were other smaller events disrupting supplies. But the Iranian situation has since cooled down and diplomatic solutions are in the works. So what to expect in 2008 in the way of political uncertainty. Iraq, Iran, Palestine, Lebanon have all seen a cool off in the ast couple of years and the Bush administration rhetoric has become outmoded as has other rhetoric from Iran so that does'nt look like it will stir up oil prices in 2008. Still there will be some uncertainty premium about supply from OPEC and demand from China and India. And demand from the Middle Eastern oil producing countries themselves as well as the increasing demand in India and China will mean that lower demand in the US because of a recession will still mean an increase in global demand over 2007 of 1.5 million barrrels a day over 2007's 85 million barrels a day. What will change the dynamics of this situation is the government mandated fuel economy for all vehicles on the road with Europe more aggressive in this area under the pressures of global warming. If this impacts India, China and Russia as these fuel saving technologies are transferrred there overall consumption should see an impact. Europe's targets are only 4 years away for 2012. And the environment may cause China to bring in newer technologies that both contribute to improving environment and conserving energy. Because China's environmental record is almost catastrophic one could see some of this happen much sooner than expected after the Olympics in 2008. All that might change the way the world looks at oil and its use, and all energy sources and their use. ...

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This piece by Jonathan Martin in the NYT says some Republican party establishment donors and leaders now agree with Ted Cruz's assessment of the 2016 U.S. presidential election- the critical element will be rallying the Republican base to win in 2016. As Tom Hamburger points out in the Washington Post, Cruz is using technology to advantage in the campaign effort to rally evangelical base support, and working to build support from the ground up.

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Alan Simpson of the Bowles-Simpson Commission describes the task the super-committee faces in coming up with $1.2 trillion in savings for deficit reduction under the recently passed legislation.

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According to researchers at AARP and the Economic Policy Institute women over 50 years have a harder time than men of the same age in finding good jobs since the 2008 financial crisis. Older women who were laid off have a very hard time finding employment and steady jobs, as this report by Patricia Cohen in the NYT shows. Age, lack of internet skills, shifting networks, caregiving responsibilities and time off taken to care for children, all have worked against older women over 50 years. A study by the Federal Reserve Bank of St Louis shows that compared to 2006-2007 before the financial crisis hit when about a quarter of the unemployed for women over 50 years were unemployed over 6 months, by 2012-2013 the jobless women for more than 6 months had gone up to about half of the unemployed women in this age group.

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Municipal yields are back up. The Center on Budget and Policy Priorities says states in the USA will have to close budget gaps of $140 billion in fiscal year 2012, ending in June, down from $160 billion this year. But real shortfalls will increase because federal stimulus funds that helped state and local governments will fall from $59 billion this year to $6 billion next year. Local governments depend on states for one third of their revenue, according to a Congressional Budget Office report, which makes them vulnerable. Property taxes account for a quarter of local government revenue and this too will be declining with declining assessed values. The Federal Reserve Act limits open-market purchases of munis to ones with maturities of less than 6 months, which reduces the scope for help from the Fed.

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The FDIC acknowledges that it has not been able to get banks interested in a pilot program called the Legacy Loans Program. That program was designed to give the banks an opportunity to sell off $1 billion of troubled mortgages. Since November with the efforts of the Troubled Asset Program under Secretary Paulson to have the banks sell off these assets in an auction or some other way, the whole issue of getting the toxic or troubled assets off the books of the banks has been effectively shelved. The Obama administration's version of this was the Geithner Public Private Partnership program, but this like Paulson's TARP never really got off the ground. Instead several things have happened that have enabled banks to show higher profits and improve stock prices. The period from March 2009 to June 2009, a period of several months has seen bank stock prices recover and banks are now able to raise capital on their own from investors. The government's "stress tests" gave the banks credibility with investors and they were designed not to be so stringent as to affect confidence. The mark to market rule has also been relaxed so that banks are no longer required to show these toxic assets at prices that reflect large losses. Bank executives also are wary of the new executive compensation rules of the government. All of these things have combined to create asituation where some confidence has been restored, but at the same time experts are pointing out that the underlying problems of an estimated $1 trillion in troubled assets remains. Banks are even less likely to want to part with these assets at lower prices now that some semblence of confidence is returning, as they would then have to show large losses. What this implies is that if the economy suffered a setback, these problems would return and be just as intractable as ever....

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The US economy is growing at a much faster pace than Europe or China in the last quarter of 2021- at 7% annualized growth in the fourth quarter up from 2% in the third quarter, according to Federal Reserve Bank of Atlanta. This compares to 2% in eurozone and 4% in China. Major US ports such as Los Angeles are processing 20% more container volume in 2021 than in 2019, while Rotterdam and Hamburg are almost flat compared to 2019 level. Consumption of durable goods has jumped 45% above 2018 levels in the US, only 2% in eurozone, according to ECB data. The factory gate prices in China are far outpacing the consumer prices in China, suggesting weak domestic demand and strong foreign demand. Lars Jensen, head of network at container ship company A.P. Moller-Maersk says the global supply bottlenecks were started by this surge in US demand with more ships headed for the US taking ships away from other places. The US economy will grow at 6% in 2021 and 4% in 2022, with wages growing 4% a year above the pre-pandemic trend rate, compared with 1% in eurozone, according to Bank for International Settlements. This is pushing inflation up in other countries by pushing up the value of the dollar. In Mexico hitting 7.4% and the central bank raising interest rates 0.5% point to 5.5%. In Russia inflation up to 8.4% and central bank raising interest rates by 1percentage point to 8.5%. The equipment investment in the US is up by 13% this year according to JP Morgan Chase, only 3.6% in eurozone, 0.1% in Japan. All this is creating a large gap between the US and Europe, US and China in economic growth and demand growth, and in income growth. ...

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Like Japan China is looking to wean its exporters away from dependence in the export markets- one of the steps agreed on at G-2- in Pittsburgh- and increase spending by Chinese consumers to buy more of the same products at home. Bicycle manufacturer Tandem has lost 40% of the American sales, now it is looking to the Chinese market as incomes are rising in China. As Tandem's general manager puts it in the US the shift is now to buying cheap things. Chinese exports after rising 20% each year for years, recorded a drop in August 2009 of 23% down over August 2008. In China urban household spending was up 9.2%. THe savings by American households jumped to an annualized $566 billion in the second quarter of 2009, quadruple the rate at the start of 2008. Batson gives this account from Shunde in Chinawhere Tandem has it head offices. He talks with managers at Tandem and sees the struggle within the company to some up with anew mindset, and organization, to sell bicycles in the domestic market where other bicycle manufaturers like Giant Manufacturing Company of Taiwan already have a large share in the high end market. Mr Tseng had to convince his fellow managers and the board that it was a good idea, as the domestic market is tough to pentetrate, kickoffs are common, and competition is intense. Tseng says Tandem will approach first the children's market where competitors haven't focussed, and treat as atoy for kids. Tandem will bring higher quality better built bikes into this market. And this is similiar to what it sells to American kids with lots of colors and funny names. Tandem managers aren't sure Chinese distributors or retailers will pay enough attention to their bicycles so they decided to open astore in Shunde and start small and scale up. Tseng says that Tandem will have to pay its tution first and learn about the market. This means it will still continue selling to America and Europe. Chinea's government is now encouraging these efforts to target the domestic market with tax breaks and coupons. But as China and Japn also become more inward looking economies and trade inside Asia increases, the domestic demand is not enough to make up for the loss in the American and European markets. The US and Europe each put in $9.5 trillion into the global economy, even at their current recession diminished pace, compared to the $1.5 trillion spent by Chinese households. Per capita incomes tell the story. In the US $35,486 and in China $2,270. T...