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On the way the majority of people in China's rural areas live, and how their lives have worsened with the market system. A lack of democracy makes it harder for them to get a fair allocation of resources. Lack of press freedoms and no constraints on authorites at the provincial and county levels makes the situation even worse.The support systems for health, education have collapsed in the rural areas. Even though life was drab in the Maoist period, basics such as health care and education were free or nearly free. Efforts are to throw more money at the problem are being made. The government has allocated an higher amount of 340 billion yuan or $42 billion for agricultural development and rural services. But as the Economist points out the money is only about an additional $7 per person for the 800 million in the countryside. A large part of the problem is that the lower levels of the government are run incompetently. The lack of democracy means that these officials are not accountable to the people they govern. No effort has been made to make these officials accountable by having elections at the township, county and provincial level. The Communist party is placing all its hopes of keeping a monopoly of power on its ability to spend and manage its way. The Economist's prediction is that this will fail because only democracy can bring the kind of accountability that is needed in the rural areas. ...

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Sales of automobiles in China in July 2012 declined 12.6% from the prior month according to the China Association of Automobile Manufacturers. There are two parts of China's automobile sector, the foreign brands of GM, Toyota, VW, Ford and others, and the Chinese brands. There are 48 Chinese domestic carmakers for 30% of China's automobile market, with sales of 87,500 per brand on average, according to J.D. Powers. Many of these carmakers will not survive even with subsidies from local governments. China's car buyers prefer foreign brands because of the better quality and reliability. Foreign carmakers face an oversupply of cars as GM, Honda, Ford, VW have continued to add capacity. Total automobile manufacturing capacity is about 28.5 million cars and commercial vehicles. This is 9 million more than the expected sales in 2012, according to J.D. Powers. The most recent company adding large capacity is Ford Motor Company, which was relatively late in the Chinese market, and decided to boost capacity from 450,000 in 2011 to 1.2 million in 2015, to make it the largest manufacturing location outside of its home base of Michigan. This creates the prospect of foreign carmakers having to offer larger incentives and discounts to manage inventory and operating with higher levels of unused capacity, reducing profits in future years. Most of the plans to increase capacity were made when China's GDP growth was over 10%, it is now slowing to 7.5%....

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Peter Schiff says home prices are still too high. They would have to decline another 20% just to fit the long term trend line indicated by the Case -Shiller index of an average 3.35% increase each year, based on long term historical data. He says economists underestimate how distorted the housing market has become, and how little it has normalized since 2008. This is based on average increase in home prices of 3.35% per year for the 100 years between 1900 and 2000, as determined by Yale economist Robert Shiller, which is just a bit above the average rate of inflation. Taking the January 1998 10 city index of 82.7 and following the 3.35% annual trend line, he says the index would be at 126.7 in October 2010. Case-Shiller showed that it was 159.0 for October 2010. Schiff uses this to show that the market needs to drop by 20.3% from the current level to get back to the trend line. He says that the home buyers tax credit, record low interest rates, and the increased presence of Fannie Mae and Freddie Mac and the Federal Housing administration have for now put a floor on housing prices. Conditions in the US housing market with high inventories, the high unemployment, savings depletion and debt, point to this overshooting by 5-10% on the downside. See Roubini, who points to housing losses in 2011....

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The Reagan Memo released by WSJ and the June op-ed in WSJ by Glenn Hubbard, a Romney economc advisor, point to the way an economc recovery like that accomplished under Reagan could be achieved if Romney takes office. Krugman points out that contrary to thinking Reagan actually increased spending, partly through defense programs and partly achieved by federal transfers to state governments that increased spending when the deficit had not reached the levels it has today. Also important is the cause of the economic slump when Reagan took office, which was deliberately caused by Federal Reserve increasing interest rates to control surging inflation. The Federal Reserve reversed policy and lowered rates during Reagan's term in office and supported the other growth inducing policies of the Reagan administration. Improving business confidence by promoting expectations for consistent growth and stable policy was part of the game plan of the Reagan economic team led by George Shultz, as is evident from the memo. Krugman says the situation is different this time as interest rates are approaching zero and the U.S. is recovering from a housing bubble at the same time that spending by local and state governments is declining as the Stimuus spending of 2009 fades. Under Reagan in the first quarter of 1984, and for Obama in the first quarter of 2012- compared to 4 years earlier, real per capita government spending was 14.4% higher than previously for Reagan and 6.4% for Obama. ...

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Signs of a serious bubble in house prices in Canada. Home prices in February 2011 rose 8.8% from the year before, to 365,000 Canadian dollars. This is more than double the average home price of C$158,145 in 1999, according to the Canadian Real Estate Association. A comparison with the U.S. shows home prices going up 58% between 1999 and 2006, according to the National Association of Realtors, and falling 18% after the subprime mortgage crisis. By contrast home prices in Canada went down in 2008-2009 during the global financial crisis but are now back up and surpassed the previous high. This suggests the Canadian real estate market is facing a serious bubble comparable to or exceeding the bubble in the U.S. Trends that have supported the market such as Chinese buyers in Vancouver and Toronto, depend largely on the strength of the high economic growth in China and overseas buyers. Other weaknesses- the Canadian Association of Accredited Mortgage Professionals pointed out in a study in January that of the 400,000 first time home buyers during 2010, about 50,000 would have high-debt service ratios if interest rates, now at between 2-4%, were to rise to 5%. The Canada economst at Capital Economics, David Madani, says he expects a correction of 25% in the next 3 years, as this boom unwinds. He points out that house prices are now 5.5 times disposable income per worker, compared to an historical average of 3.5....

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China's leading online retailer with its own warehouses and delivery similiar to Amazon is JD.com. It has 118 warehouses in 39 Chinese cities, and 1045 smaller pickup centers in 500 smaller cities. Its online service and infrastructure to support it has been built carefully since 2006. It can now deliver by 3pm the next day and handles 2 million orders per day. The company raised $1.78 billion on the NASDAQ in the U.S. in 2014. Hong Kong venture capital firm invested $10 million in 2006. As it added new systems and software other investors including Tiger Global, Yuri Milner, and the Waltons invested in the firm. JD focusses on low cost and reliable fast delivery using motorbikes for 20,000 couriers for China's congested traffic in cities. It is a unique combination of Amazon, UPS and Wal-Mart in its innovative way of running its retail operation. Liu is the son of a cargo shipowner from Jiangsu province who studied sociology at Renmin University in Beijing, before starting an electronics store in Beijing's high tech zone Zhongguancun. The online retail idea took off when he setup an online store in 2004. He says a lot has changed since the early days when delivery was slow with many customer complaints, and says logistics is important because of user experience. Because JD charges little for delivery margins are thin, and the company has focussed on growing the user base over profitability....

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Prices of Cheerios cereal up 17% on a per ounce basis, General Mills has simply taken out the 10 ounce box and put in an 8.9 ounce box. Kellogg cereal company is doing the same thing as the input costs of grain for its cereal went up by 9%. And retail stores are taking advantage of thhis situation by adding an increase of their own on top of this. And this is going on in many places from icecream cartons to beverage containers, smaller sizes and higher prices. Food prices inflation estimates vary from 4.5 to 5.5% in 2008, and 4-5% in 2009 from Department of Agriculture to Well Fargo's estimates of 6% in 2009 and Farm Sector Economics estimate of 7.5%. Not only are companies raising prices but they are doing so frequently, Alpha Baking Company is paying twice as much for wheat flour from a year ago to make bread and buns, now it changes prices quarterly. This poses an interesting question for the Fed's fight against inflation, does an increase in interest rates mean these companies faced with rising costs of inputs are going to respond by not increasing prices that much? Its the shortage of grain supplies that is driving this food price increases and how would increasing rates make a difference? And most of the inflation is in food and crude oil prices, wage inflation is modest with rising unemployment and a slowing economy....

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Skepticism about Nardelli, will Six Sigma work, depends on what it means, what it means as stated here is optimizing revenue per worker and this means cutting the workforce as at Home Depot under Nardelli. Isn't Six Sigma about quality? Is there some misunderstandig about Six Sigma or was it distorted in implementation? Writer questions Nardelli's record with labor and asks about the talks with the UAW.

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Robert Stavins of the environmental economics program at Harvard is cited in this NYT article by Coral Davenport. Stavin says that even with the change in policy favoring fossil under Trump administration the trend is towards using less fossil fuel and this trend is unlikely to change. This makes the claims of Trump that half a million jobs can be created with less regulation of the coal industry and shale oil industry, less likely. Industry is shifting away from coal for economic reasons and investors preferences, say experts. At the same time the progress away from fossil fuels is likely to be inadequate to avoid the worst effects of global warming, says Stavins. The change by industry is reflected in the decisions made by executives such as Nicholas Akins at American Electric Power, Ohio based electric power company. Akins tells NYT that he is making decisions for power generation 20, 30 and 40 years from now, and this assumes some form of carbon control. He says no question but that industry will move forward with cleaner energy and that means closing large coal facilities. The incoming Trump administration does not affect his policy. Another factor away from coal is dictated by economics- the availability of cheap natural gas from hydraulic fracturing. Incentives for renewable sources such as wind, solar, are not likely to change either say experts, because the solar panels and wind turbines are made in Republican and Democratic favoring districts and have support of Republicans in places like Arizona, Texas and Kansas. ...

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The U.S. initial jobless claims for unemployment estimate for March 21 is about 3 million. How to keep layoffs of workers to a minimum and keep businesses from closing. These are the questions lawmakers and governments are addressing today. The British, Dutch and Denmark governments have plans to pick up most of the wage bill for businesses, that do not layoff employees, for as long as 3 months, and if needed longer. The U.S. government has a similar plan. Of the $1.6 trillion aid package being discussed in the U.S. Congress, $350 billion is allocated as loans to businesses which may be forgiven if used for payroll for workers.  The idea is to build a safety net quickly for workers. The U.S. plan is to give families direct aid of $1200 per person and $500 per child with checks sent to each home. A separate allocation in the package increases unemployment insurance from 26 weeks to 39 weeks. The direct aid to large industries and business is a way for these companies to avoid layoffs. Direct aid should be based on how much companies do to retain employees, a move that is in the interest of large companies which will need to have experienced employees once the situation returns to normal by the third or fourth quarters of 2020. This will also help companies return to normal activity quickly. ...

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In depth interview with Kyohei Morita, chief economist of Barclays Capital, Finance Asia explores different aspects of the Japanese economy and developments after 1987 and under Koizumi, the role of exports and how ordinary households are affected. He points out a few important things about the Japanese economy that are not generally recognized. One is that Japanese banks are vulnerable in the way the subprime crisis has exposed banks in the USA. Their vulnerability comes from owning 15% of the shares on the stock market which came down from a higher number after years of reducing stock holdings. When the Nikkei drops below 9000 this reduces the bank's capital and leads to credit tightening. Morita points out the risk of turning a moderate slowdown from lower exports into a severe slowdown if banks are reluctant to lend. The other point he makes is that small nonmanufacturing companies in Japan have to thrive for Japan to thrive, but he is bearish about private consumption. In a revealing statement he says that in his research he has found that the path connecting corporate profitability to households is seriously eroding. This is due to globalization as Japanese companies are offshoring aggressively, and 30% of the Japanese market capitalization in held by foreigners. His point is that Japanese managers now tend to see wages as costs just like American managers do and not the way they did in the past, so salary costs are suppressed in favor of shareholder dividends which flow out of Japan. Finance Asia referred to an OECD study that shows Japan's ranking in terms of per capita income fell from fifth highest in the OECD in 1992 to 19th in 2002, a fact that Morita recognizes as strange as western economies have tended to follow relatively stable long term income growth, and which he attributes to Japan's terrible demographics with population shrinking since 2006 and more elderly and retired supported by a smaller percentage of working age people. In an exceptionally revealing statement Morita points out that Japan has globalized from the outside but not from the inside. Japan he says needs more foreign direct investment and ideas, and more immigrants, fresh labour and fresh taxpayers. Which is remarkably true as Japan tends to be rather insular as a country and tends to keep out immigrants. The influx of Polish and Eastern European immigrants to the UK under the Blair-Brown Labor government years would be unimaginable in Japan. In the meantime Japan's estimated $15.7 trillion in financial assets held by households or three time national GDP is something that makes it possible for now for Japan to sustain the upward trend in the debt to GDP ratio....

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Leaders of Germany's federal states agreed on cost sharing to settle refugees from Ukraine. Chancellor Scholz said that Germany will provide $2 billion in federal aid to German states for accomodating and integrating Ukrainian refugees.  Refugees from Germany will be able to receive basic welfare benefits similar to the welfare aid received by Germans of 400 euros per month under Hartz welfare program. By integrating them into Germany's social security system the refugees can integrate and stay in Germany, Scholz added. This means access to more resources, to job centers, health care and German language courses.

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Median paycheck at Amazon is $28,000 compared to $50,000 at IBM, and much more at Google. Most of the half million people at Amazon work at fulfillment centres and logistics centres and make much less than computer software coders. The median pay works out to be about $14 per hour- the kind of pay for warehouse workers. Even though software is at the core of what it does Amazon is a retailer and is shown as such on the S&P 500. Logistics engineers make $50,000 in average pay at Amazon, and software development engineers make $107,000.

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After 5 years at 130,000 miles per hour, the NASA Juno spacecraft enters Jupiter's orbit. Jupiter is the largest planet in the solar system. An earlier spacecraft Galileo spent 8 years over Jupiter, but lacked the technology to survey the planet that Juno has. Information about Jupiter could reveal the origins of the solar system. A titanium valult protects Juno's critical systems from the volatile atmosphere around Jupiter. On the 37th orbit in Feb 2018 Juno will dive into Jupiter ending the mission but providing critical information on Jupiter.

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In a factory the size of 5 football fields located in Gurnee, Illinois, Abbott Labs makes its BinaxNow Covid-19 home tests. Abbott turned out 1 billion tests in 2021 and at one point had 80% of the market. Along with Pfizer vaccine, BinaxNow Home covid-19 tests are a dominant product during the pandemic. Abbott generated a fifth of its $43 billion in revenue from these home tests. Abbott faced several hurdles along the way. It gained when the US government authorized it to make the test. Yet after vaccination took off by mid 2021 the demand for tests declined and Abbott nearly idled its giant factory in Gurnee. Delta and Omicron variants led to a sudden reversal and surge in demand. Abbott developed its test based on an existing design it used in the US for flu tests, by a company it inherited by acquisition called Binax. To do that test one sends a swab up the nose, add that sample and a liquid mixture to a rectangular paper card, and close the card shut. The liquid then travels up the paper strip, revealing one or two pink lines, one for negative, two for positive. This is done in 15 minutes and the simple design described as a lollipop shape, put Abbott far ahead of competitors. The US FDA authorized Becton Dickinson and Quidel to make the tests before it authorized Abbott, but these rival companies had a poor and complex design. The Trump administration gave Abbott a $760 million contract to buy 150 million tests for distribution to health departments, long termcare facilities, nursing homes, and schools. And by October 2020 Abbott was already making 50 million tests a month. When it comes to distribution Abbott tapped into its pharmacy connections for baby products such as Similac baby formula. This gave it an advantage over Quidel and others who also lacked the manufacturing knowhow for large scale ramp up. The BinaxNow in pharmacies was sold at $24 for a box of two tests, while government paid $5 for one test. Abbott says it makes $ 7 per single consumer test. Yet there was one problem waiting to hit Abbott in 2021- demand dried up as the vaccination campaign took off. In fact the plant manager, Mr. Rodriguez, planned to move to another job inside Abbott as production declined. Then came the Delta variant and he was asked to ramp up production again. With Omicron demand soared. The Biden administration committed $3 billion to help boost test production and asked Kroger and Walmart to sell over the counter tests at cost for 3 months. Abbott had to lure workers from Amazon at $25 an hour for the Gurnee plant expansion. What was learned by the government and Abbott from this experience? The US government now looks for ideas in meeting demand volatility, supply challenges and production needs,. Sustaining production capacity is important for future virus flareups- a new government-industry partnership is required for maintaining test making infrastructure. With government help Abbott plans now to keep the facility at Gurnee operating indefinitely. ...