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The weaker dollar has given a boost to U.S. exports. The dollar has dropped by 9.1% compared to the prior year against a broad basket of currencies. U.S. exports have provided 1.4 percentage points of the 3.0% annualized growth since the 3rd quarter of 2009. The U.S. dollar is now 5% away from its all time low in March 2008, when tracked using the dollar index. Before the 2008 crisis the dollar had over a six year period lost about 40% of its value. Low interest rates in the U.S. and concerns about the deficit have contributed to the dollar's decline in value. While the decline helps boost exports, it also increases the price of oil in dollar terms and increases inflation. A Gallup poll in April showed 42% of Americans had no confidence in the Fed's policies for the economy, and 43% had no faith in Treasury Secretary Geithner. The decline is taking place even as Japan is recovering from the earthquake, and Greece is likely to have to restructure its debt obligations with European banks taking losses....

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Tom Keene of Blomberg BusinessWeek talks to a panel of experts about the future prospects for the US and the global economy. The discussion was spurred by Carmen Reinhart's paper at the central banker's Jackson Hole, Wyoming, conference. This paper forecasts high unemployment, low housing prices and very low growth in the US upto 2017. Shiller, Calomiris, Orszag, Kaufman and Bill Gross are part of this panel. Shiller's to do list main item is to get help to local and state governments by restoring general revenue sharing arrangements. Gross would focus on jobs that can hold up in a competitive economy, and put back some of the production that is taking place in the developing countries back into the developed countries, as part of a rebalancing; through a currency realignment. Kaufman would like to see a capital expenditure program by the US government, including infrastructure and education. Calomiris would like to see a setup of a new Republican Congresss to set the stage for post 2012 efforts. Calomiris favors cutting entitlements, cutting payroll taxes, but is not clear how this would help lower the deficit. Orszag points to feedback from business leaders suggesting a lowering of payroll taxes will not spur hiring, as the real reason for not hiring was low 1-2 % expected growth. Shiller, Kaufman and Gross see government efforts as realistically needed in the current situation....

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Huruhiko Kuroda, the new Governor of the Bank of Japan, Japan's central bank, told parliament in confirmation hearings: "If I am confirmed as governor, I will clearly communicate to markets that I am prepared to do whatever it takes to beat deflation... The Japanese economy has suffered from deflation, for over 10, almost 15 years, which is a global anomaly of the most extreme. As prices have fallen, corporate profits and wages have shrunk, depressing consumption and investment and triggering even lower prices in a vicious cycle." Kuroda also emphasized that the weakening of the yen was a side effect not the goal itself- "There is evidence that currencies tend to fall for countries that ease monetary policy on a large scale, but the BOJ's policy is not targeting currencies... The important thing is to ensure price stability and achieve the 2 percent price stability goal, although it could affect currencies in that process."

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Bernanke's defense of the action of the Fed's monetary policy making committee, on November 3, 2010, (with a vote of 10-1) to buy an additional $600 billion of Treasury securities over the next 8 months. His defense focusses on the prospects of deflation- how low inflation can morph into deflation (falling prices and wages), that can create a long period of economic stagnation. In addition, with low and falling inflation, Bernanke sees spare capacity in the US that can be utilized to reduce the number of jobless people. He points to the rise in stock prices and fall in long term interest rates in anticipation of the Fed's action, as evidence that this Fed move would improve financial conditions. Lower mortgage rates would make housing more affordable, higher stock prices would increase consumer wealth, confidence and spending. Spending would lead to higher incomes and profits for economic expansion, from this viewpoint. The situation in November 2010, was a deepening housing slump anticipated for 2011, gridlock after the 2010 midterm elections and no agreement on additional stimulus for 2011, the need to rebalance the global economy lacking cooperation from China (with China increasing imports and reducing exports and the US increasing exports and reducing imports). Fed's Bernanke does not mention these factors, and only hints at the gridlock towards the end of the statement. This Fed action will push the dollar lower, just as efforts to improve exports and the trade balance are underway. The Fed's committee sees the risks of commodities inflation as an acceptable risk in the current situation, and the use of a cautious approach assessing the purchase program regularly as sufficient measure of safety. As to difficulties of the unwinding of these policies, the Fed sees present danger outweighing the risks of no action. For emerging markets such as Turkey, India, Australia and other countries seeing even more inflows of capital, the risks are left to these countries to manage. The central banks of India and Australia moved to increase interest rates at the same time that the Fed made its move....

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The Federal Reserve Open Market Committe voted 7 to 3 to carry out "Operation Twist." This does not involve printing new money as was done for the $600 billion QE II Fed program. This time the Fed will shift its holdings to hold fewer short-term Treasury bills and notes and increase holdings of Treasury securities with longer maturities. The overall impact would be to increase the average maturity of its Treasury securities portfolo to 8 years from the current 6 years. The idea is to put pressure to reduce long tem rates. The Fed says the impact on short term rates is expected to be small because of its conditional pledge made in August 2011 to hold short term rates near zero until mid-2013. The impact of the Fed's move is likely to be modest considering the fact that the average rate on 30 year fixed rate mortgages is already low. It is at 4.09%, according to the latest Freddie Mac survey.

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Taylor on the Bernanke Federal Reserve's quandary over its exit strategy from a loose monetary policy. He points to the consensus among leading economists, Rajan, Meltzer, Feldstein, who share his view that the costs of a loose monetary policy outweigh its benefits, that the Fed's policies are not working, and the need for a more rules based monetary policy.

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Large capital outflows from the eurozone to the U.S. and currencies of smaller nations as the U.S. dollar strengthens in 2015.

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Reeves says Reagan ever the imaginative politician seized on the idea of "supply side " economics of a not so well known economist Arthur Laffer. Ideas that were simple and appealing- you reduce marginal tax rates and generate higher revenues. This worked for some time with higher economic growth for a number of years, but the arithmetic of higher spending and borrowing and lower taxes would eventually lead to large deficits at the end of Reagan's term, just as price controls worked for awhile and then led to a surge in prices at the end of Nixon's term. When Reagan became President the deficit was 2.5%, when he left office eight years later the deficit was 5% of the economy. Interest payments on debt jumped to $169 billion in 1988, from $69 billion in 1981. Reeves says American politicians know so little about economics, to which it could be added, winning presidential and congressional elections is always a big part of the picture when it comes to economic policy. Which is why Nixon even with Milton Friedman as an advisor shifted to Keynesian policies of higher fiscal spending in 1971, and why Reagan turns to intuitively appealing and effective in the short term policies of having it all- higher spending, growth, and lower taxes. During the years of the two Bush presidencies and the Clinton administration the success of Reagan policies leads to a general sense as Vice President Cheney put it referring to Reagan and Treasury Secretary Baker's belief, that "deficits don't matter." Which leads us to the current situation where 2012 presidential election politics again frame the terms of the debate on deficits and budgets, only now the deficit is much higher and on a unsustainable path. ...

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Hon Hai chairman Terry Gou told corporate employees that Hon Hai plans to increase the number of robotic arms in its manufacturing plants from 10,000 to one million by 2013. He says the move will "improve working conditions and provide a better career path to employees." The improvement of working conditions is a major concern after a number of suicides. The plans to automate dangerous and monotonous tasks is intended to migrate workers to other work. Hon Hai has about 1 million employees in China. It is moving plants to the less costly interor of China where wages are lower- to Chengdu, Wuhan and Zhengzhou from the coastal areas.

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China's goal of creating 10 million new jobs each year.

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Efforts to boost the share of national income that goes to rural households and workers in China. The share of income taken by state owned enteprises and taxes paid by the enterprises would have to change for reducing the gap in incomes and reducing inequality in China.

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Krugman points out the gains on three fronts evident from the Census Bureau report of 5.2% gain in median income of households in the U.S. He says the first is the growth in incomes of ordinary working class and middle class families, second the large decline in the poverty rate, and third the further rise in insurance coverage in 2015 for people without health insurance. He points to the steady efforts of the Obama administration to improve lives of ordinary families as working based on the Census report though results have taken time, and could have been better. The Stimulus, says Krugman could have been larger following the blow of the 2009 financial crisis and increased unemployment at the time. Janet Yellen at the inequality conference of the Boston Fed in 2014 pointed out the problems of 62 million households having net worth of about $10,000, and why this was running against the American idea of a better life for all Americans. In that sense the Census report is a movement in the right direction but a lot remains to be done.   ...

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Applebaum talks to two researchers at the University of Chicago and Princeton, Prof. Sufi and Prof. Mian, on the record of U.S. president Obama and Fed chairman Bernanke in helping homeowners facing foreclosure and underwater borrowers, comparing that record with their record in helping the banks. The issue is relevant as the policy and handling of homeowners had to be part of an overall effective plan for recovery in the U.S. economy, because ultimately without the U.S. consumer any recovery would be weak in the long run- a situation the U.S. faces in early 2014. The response to the issue of irresponsible homeowners borrowing beyond the limit without an equally robust response to irresponsible bank management that allowed wildly excessive leveraging of assets, and successful aggressive lobbying by banks in a shortsighted policy of going through with a wave of foreclosures; besides creating questions of fairness and equitable handling of the problem, also had major ramifications for the future of the U.S. and global economic growth. Here Christina Romer and other administration advisors say Bernanke was right in tackling the problem from the perspective of the banks needing to be recapitalized. Thoughtful advisors looking at the entire problem, Martin Feldstein and Sheila Bair strongly pushed for providing the same help to homeowners without getting caught up in the issue of who was responsible home buyers or the banks, and looking at the interests of the U.S. economy and the U.S. people. Proposals by Feldstein and Bair were equally robust in helping banks as they were in helping homeowners, only the banks understood their interests narrowly and had more access to policymakers in the Bush, as well as the Obama administration, Paulson as well as Geithner. This leaves us with the ultimate irony of the Obama administration pushing for the minimum wage, even to the point of electoral posture, when lasting damage had been inflicted on homeowners from the weaker portions of America's middle class by a policy that went against what two respected financial and economic experts from the Reagan period, Sheila and Bair had strongly advocated. See links and groups on Feldstein and Bair. Applebaum has followed most aspects of this problem closely and continues to provide exceptional reporting including the piece on the thinking of new Fed chairman, Janet Yellen. Private enterprise rules that require management at banks just as for other companies to take responsibility for failures, and be replaced with new management, was largely avoided leading to a fundamental failure in how a free market economy such as the U.S. and western European economies are supposed to function. Rules aggressively pushed by Geithner's mentor Treasury Secretary Rubin for a vigorous cleanup at banks in South Korea during a similiar situation in 1997, were not followed in any way here, also setting wrong precedents for the long run. ...

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Israel's ambassador to the U.S., Michael Oren, describes Iran's efforts to make weapons grade nuclear material, escalating the enrichment process from 3.5% to 20%. He says Iran now has 225 pounds of 20% uranium and 11,000 pounds of 3.5%, enough for 5 nuclear bombs, and points out that 20% uranium can be enhanced to weapons grade in weeks. During the initial negotiations the P5+1 nations demanded suspension of enrichment acitivites at a time when the enrichment process was at 3.5%, and transfer of stockpiles abroad. As negotiations dragged on Iran escalated to 20% enrichment. current demands of the P5+1 are for cessation of 20% enrichment and removal of the 20% stockpile, and closing the facility at Qom, as a first step. This has been rejected by Iran. In this op-ed Oren says Israel alerted the world about the Iranian nuclear program 20 years ago, and as this has continued to what it is today, Israel's view is that much of that time was wasted and the window for international efforts to cease and dismantle Iran's nuclear program is almost shut. ...

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Nouriel Roubini has proven correct on global financial issues. He said in an interview on the sidelines of a symposium in Malaysia, that China needs to revalue its currency for its own sake. China will see a growth collapse in the next 2-3 years if it fails to do so. His point is that China can still maintain growth by shifting to domestic consumption and less infrastructure spending and exports. In his view growth should not be affected if China exports less and consumes more. He points to the decrease in consumption as a share of GDP from 45% to 36% in the last ten years- this ratio is 70% in the USA. A cheap yuan keeps foreign goods unaffordable and protects state owned companies which also get cheap credit, as keeping the yuan low requires China to keep interest rates artificially low. What this does is make a massive transfer of income from the household sector to the state owned companies, just at the time when China needs to do the very opposite of this. And compounding the problem is that the 25% of China's GDP that is made up of retained earnings of mostly state owned companies, goes into real estate and production facilities. See the link to David Barboza in the New York Times who points to the wasteful spending and real estate speculation by state owned companies. Roubini cites the automobile sector where capacity has doubled in the last year to 20 million, when the domestic market increased by 50% to 10 million vehicles. The stimulus only increased the effect of surplus capacity and misallocation of investment, with highways to nowhere and brand new airports that are three quarters empty. The Chinese leadership is beginning to grasp this, but the state owned companies and other interests who benefit fromm the old model, may make it difficult to reverse the trends. A lot is at stake in this, as it affects the U.S., as well as countries dependent on China's imports such as Australia, Canada, Brazil and Germany. ...

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Jim Dwyer discusses proposed legislation in the New York City Council in November 2011, to set a "living wage" of $10 per hour, plus benefits, for workers at new developments receiving more than $1 million in public money. Under this legislation employers who do not include benefits would pay an hourly wage of $11.50. Discussion in the City Council has led to questioning this legislation on the grounds that the developments would not be built under the new rules. Dwyer points to San Francisco, which has set the minimum wage at $10.24 for January 2012, plus mandatory contributions to health insurance funds. The number of low wage workers in New York City with some college education has increased by 70%, according to the Fiscal Policy Institute. Wages at the bottom were $10.85 an hour, adjusted for inflation in 1990, in 2010 the wages were $10. What this does is further increase the income disparities and inequality in the U.S. Because of the demographic changes in America with Hispanic children representing a large proportion of young children, and the high rate of dropouts from highschool in the Mexican American community in New York, this means more children in New York City growing up below the poverty line....