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How will countries like India generate jobs when technology enables manufacturing and other activity to do work with fewer and fewer people. Even Hon Hai in China is shifting work to robots. Technological progress is leaving more people unemployed and widening income gaps with the benefits going to a few people, says the Economist in this research based essay. It will require carefully managed governance to invest in infrastructure, raise skills of less skilled workers through education, and wage subsidies for those left behind to ensure our current system works in the future.

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Pessimism about the pace of democratization in China with the continued dominance of the Communist party in the business and economc structures of the country. The interrelationships of the party with state owned companies and the role of its 80 million members in running all aspects of life in China. Experts in China say the 18th party Conress showed no signs of change in the party's control and no sign of experimentation to allow for change comng from within the system so that China could establish a constitutional democracy with the rule of law. Experts in China say the new leaders Jinping and Keqiang may not be able to make changes even if they wanted to, because of the party's control and the earlier presidents and prime ministers from the last two decades who still retain a strong influence on the direction of the country.

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John Taylor on the dual mandate for inflation and unemployment and discretionary policies by the U.S. Federal Reserve that ended up creating booms and busts in the U.S. economy. He advocates replacing the dual mandate of "maximum employment" and "stable prices," which was inserted into the Federal Reserve Act in the 1970's, with a single mandate for "long-run price stability." Taylor points out that this will still give the Fed flexibility, as it is focussed on long run price stability. The Fed does not have to overreact to short run increases in inflation. And he points out that this actually will work well for unemployment as the booms caused by an overextended period of low interest rates such as that in 2003-2005, have led to booms followed by busts with high unemployment.

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A recent study by the IMF shows that China has accumulated foreign exchange reserves that are twice what would be needed for traditional purposes such as supporting the economy in a financial crisis. China is still very much a developing country with per capita annual income of $3000, low consumer spending, and rising inflation. This makes the policy of accumulating reserves and preserving an undervalued exchange rate to support export companies counterproductive. There is growing debate about this as inflation is becoming difficult to control. Yu Yongding, an advisor to the PBOC monetary policy committee says China as a developing country should not be exporting capital, which should be used to raise living standards. A rising exchange rate would increase spending power of people throughout China. Fan Gang, head of China's National Economic Research Institute, was a member of the central bank monetary policy committee. He wrote in a recent essay arguing for a higher exchange rate, and societal, tax and other changes that help increase China's household spending. Central Bank governor Zhou Xiaochuan said recently that China's foreign exchange reserves have exceeded reasonable levels that the country needs, adding to inflation risks and making it difficult to conduct monetary policy. The reserves are now over $3 trillion, pasing that mark in March 2011 after increasing 25% in the last year....

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JP Morgan Chase CEO Jamie Dimon's confidence in Ina Drew was based on her hands on abilities, especially demonstrated during the 2008 financial crisis. Current and former bankers in this account by the Times Silver-Greenberg and Schwartz, say things changed in the years that followed. In 2010 Ina Drew was ill with Lyme's disease. The conflicts between the risk taking propensities of traders at the London trading desk under Mr. Macris, and the more risk conscious New York trading desk under Ms. Duersten, had already led to shouting matches under Ina Drew. After her illness and her absence from the office for long periods this spilled out into the open. In early 2011 Ms. Duersten left Chase after 16 years. Her replacement who would be new to Chase could not restrain the risk taking propensities of Mr. Macris and the London trading desk, the way Duersten and Ina Drew had done earlier. Macris and a trader reporting to him, Mr Iksil (referred to as the "London Whale" for his massive trading positions and bets), were free to operate without any restraint in this environment. Ina Drew returned in 2011, but she was not the same hands on person after the illness. She moved to the corporate offices on the 48th floor, instead of being on the floor above the New York trading desk. In 2008 she had held daily meetings with traders required to defend their trading positions. This did not happen in 2011. Jamie Dimon learned about the London Whale in the Wall Street Journal, April 6, 2012. Dimon's efforts in pushing back against stricter regulation, stress tests, and other issues were to lead to the CEO of the 2008 crisis becoming a much more distracted person in 2011. He was taken unawares by the breakdown in the relationship between the London and New York offices of the Chief Investment Office, the changed situation of Ms. Drew, and that risk management controls at the bank were not in place. Risk management overly depended on one person and the trust of the CEO in that person, and was not institutionalized. At the same time it should be noted that Jamie Dimon became CEO of Chase after the acquisition of Bank One in 2005, and Ina Drew was hired in that year, only three years before the crisis of 2008. The merger of other banks into JP Morgan Chase created a bank with $360 billion investment portfolio- even Ina Drew had never previously handled a portfolio of this size and the complex risks brought in with the Washington Mutual portfolio....

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Foxconn announces salaries for workers would increase by 16-25% to about $400 a month before overtime. Foxconn plans to reduce overtime. Foxconn is a major supplier in China for Apple Computer.

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The appointments to key economic positions in the Jinping-Keqiang administration in 2013 reflect continuity and importance given to experience. Zhou Xiaochuan continues as head of the central bank PBOC, to keep an experienced person in the the event of a financial crisis. Lou Jiwei, chairman of the sovereign wealth fund, is now the new finance minister. Xu Shaoshi, minister of land and resources, is the new head of the National Development and Reform Commission, the economic planning agency. Xiao Gang, chairman of the Bank of China, one of four state owned banks, will be the new head of the securities regulator, China Securities Regulatory Commission. Zhang Gaoli, a member of the Political Standing Committee of the Communist party, and Wang Yang, party chief of southern Guangdong province, also join the economic team. Li Keqiang, the new prime minister emphasized the agenda for the next decade telling a press conference: "Talking the talk is not as good as walking the walk. We need to pursue market oriented reforms." This means giving the private sector and consumers a signficant role in the Chinese economy....

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Larsen says the EFSF should get the funding it needs to recapitalize troubled European banks, as the first step to solving the eurozone financial crisis. Banks in Spain and Italy that failed stress tests would get funds to build up their capital. Creditor haircuts should be part of the effort to reduce the debt burden of troubled eurozone countries.

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Julie Creswell and Graham Bowley look at the history of setting ratings for Greece at Moody's credit rating agency. Greece always had a history of problems with its credit standing including two defaults in its history. In 2004 Greece admitted to providing false statistics to enter the eurozone, saying that it had run deficits for each year since 1997. Before joining the eurozone Greece was assessed an interest rate of 15% on Greek bonds, after joining the eurozone borrowing rates dropped to 5%. Was such a large differential justified purely on the basis of the assumption that the eurozone would back Greece. Moody's held onto its A rating on Greek debt right upto December 2009, two years before the country faced certain default. Pierre Cailletau, Moody's head of sovereign debt ratings till the spring of 2010 admits that Moody's assessment was "mediocre" and that this is a very, very steep fall to see in a ratings- something had gone very, very wrong. The ratings agencies say bankers were selling the idea that the Greek growth story was real. This suggests bankers did not read Greece's financial history of defaults, did not understand the lessons of the recurring Latin American debt crises that countries such as Argentina could only absorb capital upto the point of productive capabilities. And the euro currency founders had left a weak gap - the perception through an implied guarantee that the whole eurozone would ante up the money for the failings of individual countries- into which bankers and Greece's political class rushed in. ...

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Volcker says that even with all the fuss about the length of the Volcker Rule, its important to remember that the regulation itself is only 35 pages. And he says that lawyers for the banks are not honest when it comes to this, because they spent a lot of time finding holes in the rule and were working to add complications to it, and now they are turning around and saying that the Volcker Rule is too complicated. Asked about Dodd-Frank, Volcker says that it does make the U.S safer in a financial crisis because of the crisis resolution process set up under Dodd-Frank legislation. A bank fails and the resolution is clearly laid out- the government takes over and liquidates it, or merges it or sells it. Stockholders don't get a bail out, management is fired, and creditors have to take losses. A lot still depends on having vigorous and alert regulators. He sees two large problems, the Euro crisis and the U.S. deficit, which need strong action. Volcker remains perplexed by why the situation of huge disparities in income growth has not been expressed to a greater extent- on one side the lack of growth in income for the average family in 10-15 years and the other side having the huge increase in incomes at the top end. He does not know of any years when this was as big as it is now- except 1928, 1929....

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Chinese government data show that inflation was 3.1% in May 2010. The spread of wage increases in manufacturing after a series of strikes at Hon Hai and Honda Motor suggest that price pressures will grow even further. Analysts warn that China's central bank will have to raise interest rates to control the boom in the economy and property markets; that merely reining in credit will not work. They also suggest the need for swifter action in revaluing the yuan. As wage increases spread throughout manufacturing, this will eventually be reflected in higher prices of end products.

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Reflecting the volatile nature of the global economy with systemic risks remaining, impact of sharp cuts in spending, and the danger of oil prices exceeding $150 with a mideast crisis, the IMF provided a wide range of possibilities around its basic forecast. The IMF says it expects the global economy to grow 3.5% in 2012, up 0.2% from a Jan. forecast, and a forecast of 4.1% for 2013. But the IMF says this depends on the eurozone crisis, which could take off 2% from global output and 3.5% from output in the eurozone if things went wrong in Europe. Higher oil prices above $165 with supply disruptions after Iranian sanctions are another danger. Its forecast for Europe is 0.3% contraction in 2012 and 0.9% growth in 2013. Because of the risks in the outlook the IMF cautions countries from cutting spending too quickly, and says the best approach is to reduce deficits gradually over the long term and not to move too fast in the short term. This word of caution applies to Spain, the UK, France and Germany. To maintain enough funding in a crisis the IMF plans to increase its lending capacity from $380 billion by an additional $280 billion, with pledges of $60 billion from Japan, $26 billion from the Nordic countries, and $200 from other eurozone countries. ...

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Public sector layoffs in Spain in 2012-2013 under the governments deficit reduction plan- as mandated under fiscal compact rules agreed to in the December 2012 eurozone meetings- will worsen Spain's severe unemployment rate of 25%. These public sector layoffs are only now taking place. Upto now local governments had helped offset rising layoffs in the private sector by preserving employment. The result will be a further increase in unemployment in Spain, creating a crisis of large proportions.

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Britain's Chancellor of the Exchequer, George Osborne, says "the integrity of the City matters to the economy of Britain," as he takes strong action to safeguard financial benchmark rates set in the City of London. Following the manipulation of LIBOR for which banks paid heavy fines this is a major issue. New legislation will make it a criminal offense, punishable with 7 years in prison. Manipulation will be determined based on the intentions of traders to place trades or share information so that their interests are served above a client's interest. Not just LIBOR, other benchmarks such as London foreign exchange benchmark rate, key gold and silver rate, ICE Brent index and Sterling Overnight Index Average (Sonia), ISADFix, are also included in this legislation.

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The Economist cites estimates from the Bank of England showing Britain's national output peaking at 1.5 trillion pounds in 2007 and not likely to return to that level till 2015. It points to fears of a lost decade. Meanwhile debt is rising from 600 billion pounds in 2008 to 1.1 trillion in 2012, making reducing the debt to GDP ratio by 2017 even more difficult. Lower growth affects tax revenues even as social benefit costs increase. Part of the problem is that from 2009-2010 to 2011-2012 public sector net investment declined from 48.5 billion pounds to 28 billion pounds. The Economist suggests Chancellor Osborne take up an additional investment in infrastructure of 28 billion pounds, even borrowing 14 billion pounds in the bond markets if needed, as a prudent step to revive growth. Small improvements in rail, roads and bridges could make up for a lack of large projects. Other suggestions include expanding the "funding for lending" scheme with banks to get capital to small business, finding more savings in the National Health Service, and changing the way Britain taxes development land that remains undeveloped. Britain, now joins, Portugal, Spain, France and Italy, in the failure of austerity measures alone creating a return to economic growth and lower deficits. In 2013 improving competitiveness and boosting economic growth become critical following years of austerity measures....

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Nouriel Roubini on what the Fed needs to do in the closing months of 2009 and in 2010, especially for the exit strategy on the massive monetary easing of 2009, supervising banks and financial institutions and requiring adequate capital at banks to cover crisis needs. See the actions by the FSA in Britian to require larger capital cushions for banks.

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There is over $150 billion of additonal spending on education in the Obama stimulus plan being worked on in January 2009. There are several important aspects of this plan. One action will prevent literally hundreds of thousands of layoffs of teachers, according to Education Secretary Arne Duncan, as revenues of local districts drop. In a response to requests from Democratic party governors Congress has allocated $79 billion to help states facing large fiscal budget gaps to maintain government services, and especially to prevent cuts to education services fro kindergarden to college. Another aspect is the effort to reinforce Title 1, a program of specialized classroom efforts to help educate poor children, by increasing 2009 fiscal year spending from $14.5 billion to $20 billion, and raise spending for disabled children from $11 billion to $17 billion. This helps meet the unmet needs of the No Child Left Behind program. Another effort on the stimulus side which would create jobs for construction activity and do this with spending that will bring benefits in future years for along number of years in the future, is the federal government now taking abig role in the building and renovation of schools. The federal government will now spend $14 billion for the renovation and modernization of elementary and secondary schools, and $6 billion for the same for higher education. The stimulus also has tax provisions under which the federal government will pay the interest on construction bonds issued by school districts. The Education Secretary says that the $20 billion for this will create a huge number of construction jobs because so much of the school system building infrastructure needs repairs. In the area of higher education the allocation for Pell Grants used for student aid is increased to $27 billion from $19 billion. These aspects of the stimulus program are ones that will pay off over a number of years into the future. ...

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Krugman points to some striking facts about China in 2011. Consumer spending in China is only 35% of GDP and has declined over the years. There are no signs of rebalancing the economy away from exports by increasing consumer spending. China's dependence on exports for trade surpluses is greater than ever. Beyond this there is another disturbing fact. With weak consumer spending and heavy investment spending at about half of GDP, Kugman raises the question where is all that increase in spending going? Real estate investment takes up about half of the increase in investment spending, as the share of GDP of real estate investment almost doubles compared to figures for 2000. Much of the rest of the increase Krugman attributes to firms selling to the construction industry. The speculative fever, the corruption at the local level, the shadow banking system which is not protected and unsupervised, the poor quality of statistics, suggest a bubble phenomena that may not be under control of policy makers, and risks damaging China economy and the world economy in 2012-2013. After all China's economic and financial planners and banks are no better than America's or Japan's, where asset bubbles burst causing serious damage....

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Kessler in the WP corrects Obama's claim that he created 800,000 jobs. He says this is clever arithmetic as it takes a low point in Feb. 2010 following the financial crisis. Kessler points out that according to the Bureau of Labor Statistics, U.S. manufacturing jobs were 12.56 million in Jan. 2009 when Obama became president. In Nov. 2016, early estimates show there were 12.26 million manufacturing jobs, a loss of 300,000. This loss does not reflect the problems in the U.S. auto industry and older industries in the midwestern states as a result of trade and globalization that speeded up with the rapid industrialization of China. And led as Greg Ip pointed out in a recent WSJ report to a rapid acceleration of job losses in a decade that did not happen in the same scale during Japan's industrialization and urbanization in the sixties. This aggravated the situation in Michigan, Ohio, Wisconsin, Indiana, and Pennsylvania, and was met with a feeble response from Democrats. Even a economist like Krugman favoring the Obama administration's efforts came to the conclusion that TPP did not add much to gains from trade as most of the gains had already been realized. More of the gains went to tech and IT in California, at the expense of the auto industry based in the midwest. A report in WP show a president too close to IT in California and failing to grasp the situation in the midwest. Voters punish whoever is in power, regardless of being Conservative or Liberal, in Canada the hollowing out of manufacturing under Harper in Ontario and Quebec led to the win by Trudeau's Liberals.  ...

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France's president Hollande says about Greece during a visit by Greek prime minister, Antonis Samaras, that the Greek government must move forward with economic reforms, "while making sure that it is tolerable for the population." He also said he was "saluting the Greek people for their painful efforts of the last two and a half years." Samaras says in an intervew: "Greece is like a swimmer who is underwater for a long distance and needs to come up from time to time for some air, we need to be able to take a breath."

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Macroprudential policies of central banks in S. Korea, Indonesia, China, Canada, and other countries, as concerns grow about a housing and credit bubble.

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Christina Romer, Prof. of Economics at the University of California, Berkeley, was chairwoman of the Council of Economic Advisors under U.S. president Obama. Here she discusses the different aspects of the debate on raising the minimum wage. Romer says the negative effects on unemployment are small. The impact on consumer spending is also limited. The anti-poverty effects are real for raising the minimum wage from the current $7.25 an hour, says Romer, as over half the families earning a minimum wage make less than $40,000 an hour. President Obama called for raising the minimum wage to $9 an hour in 2013. Studies show 13 million U.S. workers earning less than $9 an hour. Raising the incomes of these families by about $3500 an year under the president's proposal gives workers badly needed income to cope with rising cost of gas, food and other basic necessities. The effects on consumer spending are small, estimated at between $10 to $20 billion. Its main virtue is keeping the principle of fairness and maintaining social cohesion at a time of increaing inequality. Romer says there is competition for workers which makes it possible for workers at the lower end to get a fair wage, but does not account for the effect of high unemployment which takes pressure off raising the minimum wage in the market economy. Another benefit for countries of keeping a fair minimum wage is that other actions can be taken to improve competitiveness for business and manufacturing and reducing the deficit and be seen in a positive context of overall improvement. This is part of the case made in Europe for boosting the mnimum wage as austerity measures are taking place....