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Energy sector loans with risk of default at U.S. banks reach 50% by March 2016.

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In the centenary year of the Lincoln Memorial, America's and the Free World's most iconic monument, the Washington Post gives this story on how it went from conception in 1867 to the cornerstone being laid in 1915 to its opening in 1922. In 1939 it acquired new meaning as Marian Anderson sang "My Country I sing of thee," a video of this being shown here. By the 1940's it symbolized the struggle to bring all races and peoples of north and southern US together as it had done up to that time, but also the struggle of the Free World in the newly decolonized countries of Asia and Africa. This is an aspect of the Lincoln Memorial and its inscription that has not been told. The words of Jefferson in the Declaration of Independence combined with the words of Lincoln to strike a chord in the countries of Asia and Africa struggling for freedom.  The words of Jefferson- We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain inalienable Rights, and among these are Life, Liberty, and the pursuit of Happiness. The inscription on the Lincoln Memorial- In this temple as in the hearts of the people for whom he saved the Union, the memory of Abraham Lincoln is enshrined forever.        ...

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This report in NYT looks at the Barbados debt crisis. Barbados spends 55% of its budget to pay interest on debt (servicing the debt). That leaves about 5% for health and climate change. Years of borrowing that ignored basic rules of financing have created serious problems that were compounded by the pandemic and hurricanes. This report shows that the total deb of Barbados was not known to the central bank. Borrowing was approved at exorbitant interest rates. One loan with Credit Suisse for $150 million is shown here with interest rates that lead it to become a catastrophic amount owed. Many such loans without any checks and supervision of total loans taken, lack of financial prudence rules followed, lack of transparency and alerts on borrowing and spending tend to create this kind of situation in many poor countries. About two thirds of developing countries are in this situation owing one third of their budget for debt service or paying interest on the loan. The situation is unstable to begin with. Then on comes along a hurricane or natural disaster such as the pandemic and the unstable situation becomes a catastrophe. Sri Lanka, Pakistan, the Caribbean nations, nations in Africa, face debt crises that are getting worse. It is not inevitable or destiny for nations today, consider the examples of large nations such as Japan, China, South Korea and India, Malaysia, Indonesia, and one can see that development finance can be prudent and responsible, so that situations such as the pandemic can be handled without going into disarray. ...

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Ukraine was one of the poorest countries in the European Union in the last decade and was not growing as fast as other countries in Eastern Europe. One of the reasons it was looking to the west, the EU and the US, was to increase growth and boost incomes. A policy opposed by Russia.  This report in WSJ looks at the effort of a 41 year old economist Mr. Marchenko who heads the central bank. Ukraine's revenues only support 40% of government spending. Ukraine needs $3 billion in aid every month. The currency is down 20% in value and the GDP is expected to be 30% lower in 2022. He says every day and night it is a constant headache. The US and Britain were quick to help and provide steady aid. The EU and Germany with internal wrangling have not come up with $8 billion of the $9 billion in aid promised to Ukraine to rebuild the infrastructure that is being destroyed by Russia, and support the war effort to defend Ukraine. Even with $3 billion a month in aid Ukraine depends on printing money and risking further decline in the currency to pay soldiers, war needs, and meet basic spending needs. The plans are not just for 2022 but extend into 2023. Grain a key export is only now making its way out of Odessa with the UN and Turkey arranging the way out for grain ships. ...

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Happiness in Finland may be more about expectations for contentment being more reasonable, says this report on Finland. Colston and Michaels talk to Finns in different parts of the country to get a sense of how Finns look at life and why the country is rated so highly on a happiness index put out by the UN Sustainable Development Solutions Network. For one thing Finland has a small homogenous population of 5 million people spread out over a vast densely forested region with a strong sense of identity and mutual help. It is also a technologically advanced country. This has enable Finland to maintain a state that provides an extraordinary amount of public services in education, health care, culture, that promote a sense of well being. Its participation in winter and other sports and sports facilities open to all also factor into this. This is true also of Denmark with 5 million people another country in the same region. Consider that the greater Mumbai region alone has over 20 million people, Shanghai 29 million and Tokyo 37 million. Just the pressure on space in homes is different. The long dark winters have an impact for Finns yet the people have adapted with a persevering quality that helps them deal with it. And having a peculiar Nordic version of mindfulness, a Buddhist quality, that brings contentment by understanding the nature of happiness which is mixed with tinge of sadness. Qualities that are shared throughout the Nordic region including Sweden.   ...

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US foreign direct investment to China goes down 40% in 2020 to 2022 compared to the period 2015 to 2020, for India this was up by 20%, according to IMF. India was the only G-20 country that received this level of foreign direct investment. Prashant Jha of the Hindustan Times correctly points out that the IMF paper and the model on which this paper is based are flawed. The paper sees countries based on alignment and India as a so called non aligned country not part of friendshoring, even though Treasury Secretary Janet Yellen has openly called for friendshoring in India alongside finance minister Nirmala Sitharaman. IMF experts have not caught up to Mr. Biden's remarks about the US- India relationship that it would be "the closest on earth." Closer even than America's relationship with Britain or Europe. On oil imports Biden and Jake Sullivan believe that after the pandemic India should import oil at the lowest possible cost to meet the long time denied aspirations of 1.2 billion people, and build the infrastructure that will make it a critical part of America's new supply chain. Every time there are military drills and blockade of Taiwan by China the people of America are moving a step further away from American companies that have overconcentration of manufacturing in China and closer to calling for a new supply chain that reduces concentration in China and builds new manufacturing in India.  ...

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In new developments German chancellor Scholz visits London and European Union president Von der Leyen visits Bucha and Kviv in Ukraine. Von Der Leyen is accompanied by Joseph Borell, the EU commissioner for foreign and security affairs. For the first time the European Union offers membership in the EU to Ukraine. In handing a document with a questionnairre to Ukraine president Zelensky she says- "This is where your path towards the European Union begins." Adding "It will not be, as usual, a matter of years, but rather a matter of weeks" to complete this step. The questionairre forms the basis of an opionion she said that gets passed on to the European Council this summer. Ukraine now becomes the first country in Europe to have fought a war and suffered from millions of refugees just to join the European Union. It also shows how much has changed since Angela Merkel left office with her policies that offered Ukraine no such prospect even as it integrated the German economy with the Russian economy and China's economy during 4 terms in office. Leyen said "Ukraine is marching towards a European future." Chancellor Scholz addressed the German parliament after the invasion and hundreds of thousands of people turned out in Berlin that day.  Europe is voting with its emotions having been completely shaken by this experience. Leyen writes " It was important to start my visit in Bucha. Because in Bucha our humanity was shattered." ...

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There is a connection between crumbling infrastructure in Europe,US and India and tax evasion. Because it is massive with many large corporations not paying taxes in fair sharing of tax responsibilities, and some tech companies paying no taxes, it is how we got to this situation of crumbling infrastructure and not enough funds to rebuild our economies. In India digital solutions and a unified GST tax system,  introduced by the prime minister, are some solutions. A wider solution is a minimum corporate tax that is supported by US, Europe, and India. The Pandora Papers is just one more set of revelations of this problem of tax evasion. The more open and within the law insidious form of tax evasion is that of large corporations not taking on their fair share of responsibilities. Only a culture change where it is considered a case of honor and respect to take on a fair share of the tax responsibilities as citizens would work. For this to make sense money cannot be wasted in distant lands and foreign wars, in corrupt practices, or wasted expenditures, every dollar has to go into infrastructure so that citizens can see their dollars at work as soon as they step outside- new bridges, new roads, new childcare facilities, social services that work, climate change investments, competitive technology investments such as the one in semiconductors built at home. This requires measurement of infrastructure dollars spent, results, and grading of the work done, deficiencies spotlighted. ...

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Wang Yi, a senior adviser for China's decarbonization strategy and 5 year plan has this to say about China's approach to climate change. Yi says it is more important to focus on what actions are to be taken between now and 2030. Here he says China has outlined concrete steps that it will take that the world media has not covered in its coverage of COP26 Glasgow. Yi says China is making changes to its entire system not only its energy sector, across the whole society and the economy. Yet he says "nobody knows this." The working guidance document for carbon control China has put out says it will peak coal consumption by 2025.  Yi says it is unfair to ask China to close all coal powered plants, saying that if these plants with a life of 10 years were closed now who will pay for stranded assets and who will hire the laid off workers. He called attention to western nations failure to provide climate finance to China, India and developing countries. And he called attention to the the plans that by 2030 Chinese investment is to have 1200 gigawatts of installed solar and wind energy, more than the entire installed electricity capacity of the US. He says we are all in the same boat yet in different cabins, with some living in bigger space and consuming too much. ...

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This report in the WSJ says about Evergrande and China's housing boom that it was a risky race against time in which developers took in billions of dollars of borrowed money from buyers in cash to launch project after project in every Chinese province. The 25 year old company founded by 37 year old Hui Ka Yan in Guangzhou was setup in 1996. Its name stands for "constant" and "big" in Chinese and during the rapid expansion of the Chinese economy after 2000 it played a part in meeting dream of home ownership. It did this by taking in full cash payment for apartments that were delivered years later. It is the largest symbol of debt for housing developers in China $89 billion in outstanding debt and millions of unfinished properties, 42% of debt due in less than 1 year. Today Evergrande is collapsing, unable to pay creditors, and paying creditors in construction with unfinished properties, says this WSJ Report. Capital Economics estimates that Evergrande has presold 1.4 million apartments valued at $200 billion that are not yet finished. Typical is a woman in retail sales in Shenzen who invested 1.4 million yuan or about $217,000 in 2018 for one 400 square foot apartment in a high rise building.  The Chinese government is unlikely to stop Evergrande from collapsing. Its only interest is in protecting the people who paid in cash for unfinished apartments. ...

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A win-win for Toyota with more room for hybrid sales and the Biden administration showing it is listening to Americans worrying about the cost of living, by making change to EV's more realistic. New Biden EPA rules that allow for slower acceptance of EV's in the early years till 2030 and accelerate in 2031 and 2032 to reach climate goals  create more room for hybrids . This vindicates Toyota Motor's strategy to put emphasis on hybrids in the transition to all EV's. Toyota has a significant presence in the hybrid market which has picked up in 2024 as the lack of charging station infrastrucure and cost of EV's limit growth till cost comes down and EV charging infrastructure is put in place. Ironically Akio Toyoda planned the transition to a new CEO in the belief that he had not changed Toyota's strategy fast enough to match competitors in development of new EV's when sales of EV's boomed in prior years before this years slowdown. The Biden administration coming around to the view that climate goals could be reached by accelerating in the latter part of the years to 2032 when new technologies cut cost and investments in charging infrastructure made it realistic. Its a win-win for all as it also meets Biden base support labor and auto union concerns about jobs with a too quick transition, and shows the Nation that Democrats are listening to voter concerns about cost of living. ...

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The failure of three layers of quality checks Boeing are shown here in the WSJ video after failure events on airline flights. Two CEO's step down. What is the real problem? It is that the company is run by executives trained in finance and accounting and have too little of a background in the workplace where the manufacturing and assembly components is taking place or grasp of what it takes to turn out quality products by workers on the line. The basic approach is flawed because it is not quality checks that build in quality into a product but the workers on the assembly line who have to be trained and the investment made in quality processes to turn out a quality product. This has long been a focus in the earlier days of America's industrial revolution till the focus shifted to finance in the US and the focus on manufacturing shifted to Asia, to Japan, China and now India. It will take a complete shift in America's company leadership to hands on CEO's who are with and understand the workers on America's assembly lines, who can live some days and nights with workers on the production line to see and feel the problems first hand. This will take a decade, and for America as Jake Sullivan said at Brookings for president Biden and his team- this is a fight we must, and we will achieve. ...

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Indian PM's address to the Rajya Sabha (upper house of parliament) in February 2024. The prime minister covers the changes that have happened in the last decade to lift 250 million out of poverty and the plans for the future for Vikshit Bharat, Developed India. He covers the long period after 1947 when after over 60 years the economy had stalled by 2014. India was not able to break free from underdevelopment and lacked the investment effort the country desperately needed. He gives the example of public sector corporations that were left to languish as loss making enterprises. Projects were not completed on time and suffered from mismanagement and leakages.The PM says in that period if one rupee left the nation's treasury in New Delhi only a small fraction reached the needy because of leakages in the system. British laws were left on the books and the nation suffered from a colonial period mindset about what India could or could not achieve. The Indian Budget was put out at 5pm last day of February till 1999 because this was the time the British budget was put out. The PM says India was barely able to reach No. 11 in the size of its economy in that period. In a decade the economy is now No.5 today, and plans to be the third largest by 2030, transformed into a modern economy for 1.4 billion people.  ...

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The UN-Turkey arranged Black Sea corridor has enabled shipping of Ukraine grain to poor countries and countries depending on such supplies to feed their people. About 1 million tons were shipped in August and in one week to Sept 4 another 1 million tons were shipped. Russia says only small shipments are going to the poor or poorest countries. The figures provided by Ukraine are as follows:  54 vessels to Asia carrying 1 million metric tons of foodgrains 16 vessels to Africa carrying 469,000 metric tons. 32 vessels to Europe carrying 853,000 metric tons. Turkey is the largest recipient according to UN data. Also receiving largest shipments are Iran, South Korea and Egypt. EU makes up 23% according to UN data. Un says the first shipments were for the backlog of ships trapped in Black Sea ports that could not leave after the invasion in February of Ukraine. These are determined by international markets for grain. The UN says priority will be given to shipments to poor countries once a steady flow of ships from Black Sea ports takes place. Turkey which arranged the shipments and is closes to the Black Sea ports and Egypt have depended on Ukraine for grain supplies and rising inflation had become a major problem in the two countries. The two are also some of the most populated countries in the region. Turkey for this reason has a major interest in keeping this route open.   ...

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How a tightly interconnected community such as tech startups can quickly fall apart in a crisis is the subject of this WSJ report by Christopher Mims. He says on the way up this meant positive leveraging that exceeded 150% and this is also true in the other direction on the way down just as fast. Most startups depended on Silicon Valley Bank and First Republic for financing. Venture capital moved from inside to unravel the SVB bank. The US government simply wants to stabilize the economy and is not intending to make the uninsured depositors whole except in the way that it is self contained and does not spread to other parts of the banking system. Tech startups will now find it difficult to get new financing, if not impossible, says this report. About 8% of total jobs in the US economy are dependent on tech. When it comes to work that is dependent on tech the number is higher closer to 20%. Some of the tech layoffs will be offset by new kinds of tech and with government private collaboration in the new frameworks coming up, such as for EV vehicles with manufacturing in the US, and the $53 billion for the  CHIPS and Science Act of president Biden. Solar and wind have new frameworks of a similar type as the focus shifts to fighting climate change. These networks are interconnected with the EU which is creating its own parallel networks of this type. ...

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Of NYT's decades old indifference, an almost Churchill like distance and indifference to the aspirations of the people of South Asia it can be said- indifference to the aspirations of 1.4 billion people to modernize the country with the same infrastructure that Europe and the US, Japan, and now China take for granted. Indifference to the problems in creating a nation  with 13 languages and 1.4 billion people that has a freely elected parliament never before done in history, one which also delivers on banking accounts, health care, infrastructure, for all its  people, of all races and religions. This indifference runs counter to everything that Indians admire about America. And a lack of awareness of what Indians admire today about the Biden administration's promise to make the words of Jefferson true in America as the Modi administration does in India- "We hold these truths to be self-evident that all men are created equal, (created equal) and that they are endowed by their Creator with certain inalienable rights, among these are life, liberty and the pursuit of happiness." The NYT's indifference to this inequality both in the US and in India run counter to the founding principles of Jefferson and of India's saint from Wardha, Mohandas Gandhi, who both fought the British empire at the height of its prominence.  ...

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Mortgage and other loans taken out at lower interest rates, before the US central bank the Fed started raising rates  in March 2022, is a big part of US household debt. This fact is helping to soften the impact of the Fed's increase of rates by 5% over 16 months. The increase in rates helps savers and retirees earn more on savings kept in CD's. The cut in inflation from 9% in 2022 to 3% in July 2022 helps increase the purchasing power of money. It also helps keep the US economy stronger than other world economies, with the Biden economic plan of increased business investment underpinning strong economic growth of 2.4% in the second quarter of 2023. Wars are not a distraction or cost burden for the economy, with Biden shutting down 2 wars in the Middle East and South Asia. Lessons were learned and Biden has been resolute about this, also giving a singular focus to his plan for rebuilding and renewing America on multiple fronts, infrastructure, fighting climate change, inflation, business investment, and fair taxation so that the fruits of labor are shared equally by all of America's people. Doing this required a clear vision, resolute purpose, and a path to action for each step. Biden has done that in ways that only a few presidents have done in the past. In doing this he has shown that America stands for hope and a better future, a land as he never fails to repeat, a land of possibilities. ...

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Biden's hard work and going into details and seeing that projects are delivered on time and in quality for the $1.2 trillion infrastructure law will make him an enduring president in the 21st century. Tyler Pager gives this report on the Biden style of making decisions and of getting things done on time that are making a big difference for the ease of living for all Americans.  Of Biden using his 36 years of negotiating in the Senate more than any Congressman including LBJ who only had 12 years, and the hard work from someone who commuted by Amtrak for all those years and attended to every detail. For the president who started out as county councilman in Delaware details matter, he looks into the details of rebuilding infrastructure by delivering projects on time and on scale. In late 2022 Tyler says Biden checked into the details of delays and wanted specifics which projects were not delivered on time for the $1.2 trillion infrastructure law passed a year earlier. Seeing this only one leader comes to mind prime minister Modi of India who is faced with a huge task of infrastructure projects and investments that are intended to make India the third largest economy in the world. Modi like Biden uses his experience of getting into details and checking that work is delivered on time, putting in the hard work in earnest, from Modi's work with state projects in Gujarat when he led the state for 15 years as chief minister. ...

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When Whitmer in Michigan said "FIx the Damn Roads" that is exactly the kind of language people wanted to hear. Harris and Walz should do the same. They should take up Border Security in a big way face the issue head on. President Biden has already used executive action to cut migrant flow at the border. The next step is take up the issue and defuse it for good. It was evident in Arizona today when Harris said she would sign into law the legislation negotiated by Republican Senator Lankford that passed the Senate and was held up by Trump for making it an election issue. Lankford says in today's NYT August 10 interview shown in this page that the bill would have passed in December 2023, once Trump became the nominee in February 2024 he realized it had no chance. Harris needs to repeat that at every rally "We will Pass the Lankford -Biden Immigration Bill" "Smash the Gangs" that is the message Starmer took from Labour Together think tank paper "Migration and Insecurity." Keir Starmer studied the issue of immigration carefully and told the public he was different - he would tackle illegal immigration head-on. He said he would "Smash the Gangs" benefitting from illegal migrants. In his first week the setup the Border Security Command. That week it was shown that Tories wasted time and money on Rwanda scheme that had deported hardly a couple of migrants. ...

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Figures from Kiel Institute for World Economy show that European Union aid to Ukraine is nearly double that of the US- $187 billion for EU to $98 billion for US aid. The American Enterprise Institute conservative think tank also confirms EU aid is significantly higher. Trump said US was $250 billion to European Union $100 billion- completely the reverse of the facts. This is one aspect of the debate with Harris that was not fact checked to reach the 67 million watching immediately similar to the FBI correction on crime rates by David Muir.   "Look, we’re in for $250 billion or more because they don’t ask Europe, which is a much bigger beneficiary to getting this thing done than we are. They’re in for $150 billion less because Biden and you don’t have the courage to ask Europe like I did with NATO. They paid billions and billions, hundreds of billions of dollars when I said either you pay up or we’re not going to protect you anymore. So that may be one of the reasons they don’t like me as much as they like weak people. But you take a look at what’s happening. We’re in for $250 to $275 billion. They’re into $100 to $150. They should be forced to equalize.”   ...

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Galston points to the study in the Economist magazine by Ray Avent showing the hugely negative effect of Tech on jobs in the last 3 decades. He calls for using the full tools kit of solutions to tackle the problem. Society will face huge problems if nothing is done as divisions in society are likely to increase with a few people doing well with a large number of unemployed and the working class having stagnant wages. He points to BLS statistics showing worker wages increased annually by 0.3% after inflation for the period 1981-2014 in the U.S. This is not just a U.S. problem. It is a worldwide problem with particular relevance for U.S., Europe, India and China. Galston was deputy assistant to president Clinton for domestic policy, 1993-1995, and holds the Ezra Zilkha chair in governance studies at Brookings Institution.

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Charlie Rose talks to Nouriel Roubini about his thoughts on the next bubble and his book- "Crisis Economics." He says financial crises don't just happen out of the blue, they don't happen at random, instead they are predictable. Excessive risk taking and leverage have undesirable outcomes which are predictable as they take shape and get overblown. What happened to all the toxic assets? Banks are still carrying these assets hoping and praying that they don't need to be written down. His view coincides with that of Jeremy Grantham and other experts who see a growing danger in a prolonged period of zero interest rates which encourage risk taking. In all the developed economies of the U.S., Europe and Japan, borrowing can be done at zero interest rates. Investment banks are back to huge profits in proprietary trading using money borrowed at zero interest rates. A new bubble is developing that could burst in 2 or 3 years. The value of most risky assets has gone up by 50-80% in the last year. See Shiller's expert view on the danger from declining confidence levels and from higher uncertainty. Roubini says the Dodd bill is not enough. It does little to addresss the "too big to fail" problem as banks actually became larger after the financial crisis of 2008, and are too big and complex to manage. He also points to the risks of not separating proprietary trading from bank holding activities, and the need for something similiar to Glass-Steagall to separate the two. See Volcker's views on that subject....

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This editorial in the WSJ responds to Donald Trump's comments about the system being "corrupt" and "crooked" and saying there could be violence at the convention. It says the rules are transparent and long standing in Wyoming, Colorado and other states where Trump has not campaigned or sought support. It calls on the Republican National Committee not to be intimidated by Trump's statements, especially as it says the the Republican party should not nominate a candidate who has the highest negative perceptions rating of a shocking 65% with national voters in a general election. Trump never complained when he won 99 delegates in Florida with 45% of the vote and 50 delegates in South Carolina with 32% of the votes cast- securing the most delegates because of a winner take all or winner take most system. It says Trump has so far won only 37% of all votes cast and won about 45% of the delegates, a process that can be seen as disproportionately favoring Trump because of the rules. This is particularly true because Trump's core support has remained at about 35%, and the fragmentation of the remaining vote has hurt the other candidates. About 83% of eligible voters have not voted in the primaries, making the process less representative than it should be. ...

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The tensions that exist in Australian society, as a result of the large Chinese investments and imports of infrastructure building commodities such as iron ore, natural gas and other commodities. Australia's Pilbara region in the northwestern part of the country, has become one huge quarry for China, as an estimated 1 million tons of iron ore raw material is loaded onto 2 story high trucks each day- with automated driverless trucks system being implemented- and shipped by 2 mile long trains to waiting ships on the coast. Australians remember this done on a smaller scale in the 1980's by Japan. At the time Japan brought in Japanese workers. The same is true today but on a bigger scale, with China bringing in workers with lower pay. The concern now is what it was then, as one local leader put it- are we going to have towns with mines or mines with towns, he asked. The mining companies are looking at it purely as a commercial venture, and not investing in the towns. The towns now fear they will find the boom times gone someday and nothing tangible to show for it, no schools, hospitals and no infrastructure. And because the mining project companies fly people in and out, the 8000 aboriginal people in Pilbara- the original people of this land- see little of the mining expansion's benefits. Wandoan, a small place with 300 homes in the outback in Queensland, in eastern Australia, is an example of the gut wrenching change taking place in the mining areas. The lives of the people from the local pharmacy, the local supermarket, and the local ranchers, depend on the mining decisions made in China. This area was part of a planned, on again off again, $6 billion coal mine -part of a A$150 billion complex of natural gas and coal projects for exports to Asia in Queensland- and involved Xstrata buying 70,000 acres of the best grazing land for 7 coal mines. With the locals selling off, the mining uncertain, the supermarket closing, the whole town has the feeling of being up in the air, and fading out someday. Australian public sentiment recognizes this feeling, and at the same time is ambivalent about the impact. Polls conducted by the Lowy Institute for International Policy, show 73% of Australians feel Chinese economic growth has a positive impact, and at the same time 57% feel that there is now excessive Chinese investment, and 46% feel China will be a military threat in 20 years. Australians remember the same feeling about Japan's investments in raw material sources in the eighties. In 1988, polls then showed 70% of Australians saying there was too much Japanese investment, even though they also recognized that Australia had benefitted. The difference now is that there are also fears of China's influence, and foreign investment guidelines limit investments in Australian mining companies to below 50%. China's investment in Australia's natural resources comes in several ways: in the year upto July 2009 A$42 billion in export demand, A$3 billion in direct investment in Australian companies, and about A$5 billion in project financing. Iron ore sales to China amount to A$22 billion each year, and about one fourth of Australia's exports went to China, growing at a rate of 31% in 2009. According to the chief economist of Austrade, the government trade organization, Australia benefits from the economic relationship with China- this adds A$3,400 per year to every Australian household. Efforts to use some of the profits made by mining corporations for infrastructure and other public purposes, by increasing the mining tax have failed; as the mining industry launched a campaign against the government of Kevin Rudd, who was removed from office by his party. In the recent national elections, the ruling Labor party lost its majority, after losses in the resource rich states of Western Australia and Queensland. In the meantime the Australian currency has become the currency used by currency speculators who cannot use the yuan to make a bet on the currency- as the yuan is pegged to the dollar- and instead use the Australian dollar as a proxy. This makes it volatile, with the Australian dollar losing 10% of its value in a single day, when pessimism increased about China's growth forecasts. It also shows how much of the good story of employment and gdp growth in Australia is tied to the story in China, and the extent of the negative impact a reversal in this area can mean for Australians; especially now that the bad debt in the post-2008 explosion of bank lending poses risks to China's banknig system. ...

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Cohan says the average investor will be left holding the bag, once Wall Street realizes the Facebook valuation has been overhyped to suit insider investors and Goldman Sachs.