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WIth India's oil imports at four fifths of the country's oil needs, the depreciation of the Indian currency, the rupee, is especially painful. The rupee exchange rate has declined from 55 per dollar at the end of May 2013 to 64 per dollar in August 2013, a 14% decline. India provides full subsidies and this accounts for a large part of the current account deficit. Government cuts in fuel subsidies to reduce the current account deficit are diluted by the depreciation of the rupee, with a fall of one rupee in the exchange rate equal to 4 months of cuts in subsidies, according to Moody's analyst Vikas Halan.

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Lee describes the problems the Russian economy faces with the depletion of the Reserve Fund following collapse of oil prices. Finance minister Siluanov says the Reserve Fund could run out by 2017. The National Wealth Fund hols $73 billion and is used for infrastructure projects and bank bailouts, and pensions. The defense budget is expected to decline by 5% in 2016 as the military buildup slows from a slower economy. The World Bank predicts a poverty rate of 14.2%. The 50% decline in the ruble has hurt imports. The lack of access to international capital markets has also hurt growth, even though Russia has only small debt.

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Lawrence Katz, Harvard labor economist, talks to Friedman about the jobs crisis in the U.S.. Katz identifies three jobs crises occurring at the same time today. One is the drop in the demand for goods and services that resulted from the longer term effects of the financial crisis of 2008, with rising foreclosures, weak housing markets, bad debt on the balance sheets of banks, and interest rates at close to zero reducing the scope of action by the Federal Reserve bank. The second, is the widespread long term unemployment with workers dropping out of the labor market. The third, is the nature of new factories and hiring. Work in new factories is done through increased automation, information technology and fewer workers. As a result job creation is a fraction of what it was in the past. Not mentioned here is the shrinking of the public sector under the strain of budget deficits for local, state and federal government. This leads to the question of how America will create jobs in the future. Katz believes the answer is creating more "hubs," networked urban areas like Austin, Silicon Valley, and Raleigh-Durham, by bringing together universities, high-tech manufacturers, software providers, and startup companies, to cooperate in creating new products that enhance people's lives worldwide. This has to be done by the private sector and government working together to build the infrastructure and make the investments in education, training of workers, and equipment for new job creation....

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A bill in the U.S. Senate in October 2011, which has bipartisan support, would push for China to correct an unfair trade advantage from keeping the value of the yuan low. The bill requires retaliatory tariffs for countries that have "misaligned" currency. This makes it possible for the U.S. Treasury Department to take action even if it finds no currency manipulation by China. This is a new approach as the U.S. Congress struggles to restore a level playing field in international trade.

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The U.S. Senate voted 63 to 35 passing legislation that forces the U.S. government to seek tariffs and other action against countries with "misaligned" currencies."

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U.S. exports reached $2.34 trillion in 2014, increasing by $760 billion over the figure in 2009, according to the Commerce Department. Exports accounted for one third of the U.S. economic growth since 2009, say Pritzker and McNerney. Goods and services for exports supported 11.7 million U.S. jobs in 2014, and a Commerce Department 2010 paper shows these jobs pay 18% higher than jobs unrelated to exports. Commerce Department Secretary Pritzker, and McNerney, chairman of the President's Export Council, say free trade agreements and investment by private business is critical to supporting export promotion, but make no mention of the effect of the stronger dollar on future exports. In a period of a few months in 2015 the euro is approaching parity with the dollar and the yen is now 120 to the dollar, giving European and Japanese business a significant advantage, and raising questions about the strength of the U.S. recovery going forward.

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Krugman points out that some depreciation in the value of the dollar is welcome because it would make US exports more competitive and reduce our trade deficit. He says China's policy of keeping the yuan pegged to the dollar actually devalues the Chinese currency and makes it possible for China to siphon off growth from other countries. So what should America do. By putting pressure on China to revalue the yuan upward would America be risking China responding by selling some f its $2.1 trillion in dollar assets. This would not be such abad thing if the Chinese sold some of their dollar assets says Krugman, as lowering the value of the dollar at this time is not such abad thing. Malpass and Alan Meltzer of Carnegie Mellon, point out the importance of maintaining the value of the dollar in a separate piece. There the idea is not to have sharp fall in the value of the dollar that could economic disruption because of loss of confidence in the currency as opposed to a gradual decline.

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In an interview with the Wall Street Journal, Mark Carney, the head of Canada's central bank and the head of the Financial Stability Board, says China is falling behind in its earlier committments made at G-20 meetings to move towards rebalancing the world economy. He pointed to the fact that consumption in China has moved from about half of China's GDP to about a third, in the last ten years. China's investment has also declined from half of GDP to about one third. Carney also raised concerns about the strength of the Canadian dollar for Canada's competitiveness. The report "China: 2030" by the World Bank and China's Development Reform Commission also calls for changes in the way China's economy has increased its dependence on state run companies.

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Workers ended a 3 month strike at Caterpillar's Joliet, Illinois plant, essentially giving in to reduced healthcare and pension benefits and wage freezes for older workers. Under the deal workers hired before May 2005 receive no hourly pay increase, workers hired after that date get a one time 3% pay increase with future pay increases decided by Caterpillar management. Hourly pay at the plant ranges from $13 to $28. About 25% of the older workers are eligible to retire. A $7.8 million fund to supplement incomes of laid off workers will now be used for retirement bonuses. Caterpillar persuaded workers to ratify the contract by increasing the bonus for ratifying to $3100 per worker from $1000. During the strike Caterpillar continued operations by using managers and temporary workers and using 100 workers who crossed picket lines.

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Rising wages and rising production costs for Chinese exports of low tech products like shoes, clothing, toys, clothing, furniture, means a lot of these factories will shut down and move to lower wage countries like Vietnam and India or elsewhere. Elimination of rebates on more than 2000 export items raises cost of manufacturing 14-17% according to Guangzhou based American Chamber of Commerce in South China. And the the tough new labor law enforcing worker rights would increase manufacturing costs by 40% according to the Textile Council of Hong Kong. Additional costs would be incurred to meet tougher environmental controls and anti pollution laws and stricter enforcement. As a result of this Adidas wants its suppliers like Taiwan based Apache Footwear with 18000 employees in Guangdong to move as fast as they can to India where it opened a second factory. This process will unfold over several years till India and Vietnam bercome the new sources of cheaper goods because of the large supply of manufacturing labor for lower value added products, as it will take years to build the logistics and infrastructure for these plants in these countries. But because wages will also rise in India and the laws in India are more likely to be enforced than they were in the atmosphere in China where the Communist led government may have turned a blind eye to enforcement and worker rights in the interests of growth, the export of deflation to the west in the way of cheap Chinese products may be a thing of the past. China is doing this as a planned move it appears. Why? On the surface it makes sense that the heavily polluting factories making lower value added products like shoes, clothing, toys, furniture, would not receive rebates from te state and to improve living conditions and promote consumption at home the government woud pass tough new laws to ensure employee benefits and collective bargaining rights, and employee job security. It also reduces trde tensions at a time when the US economy will be in poor shape and jobs lost become a political issue in the 2008 presidential campaign. But there may bigger pressing concern and urgency in these moves after so many years of this being discussed and this may be that China finally may be at a moment when it is confronted with a sober fact that the US consumer is heavily in debt and may not support China's export growth model much longer and with it China faces a really significant slowdown in its growth rate from 11% to maybe half that if China does not develop its own domestic markets for growth. The old foreign investment model may not work anymore. See the link to Ireland where growth is falling off quickly. Higher wages and longer term jobs with benefits would enable a large middle class to develop from this huge manufacturing worker base especially as China moves to more value added products where even higher wages would be paid. This in turn creates a domestic market over time that would insulate China to some extent from the winds that would be blowing from a US economy suffering from a deep recession that may last several years. This may be evident in the words of the Governor of Guangdong when he says that the government is not abandoning the exporters but that selling domestically is good for the country and good for the people. Something deeper is at work here and one would expect an about turn in policy where instead of workers not receiving back wages and lax enforcement that went on freely in the last decade we would see an effort to build the kind of middle class that would provide the market for Chinese goods that would sustain growth at a more modest but sustainable pace. Which means in the short term all those workers at factories that make toys, shoes, clothing and furniture in provinces like Guangdong would be jobless. Some of these factories may move to provinces in the interior like Sichuan and Hunan provinces which may pickup employment. A report by the American Chamber of Commerce in Shanghai written by Booz Allen says that a fifth of the companies surveyed are considering relocating outside China, and that over half of foreign manufacturers surveyed think that mainland China is losing its competitive advantage to places like Vietnam and India....

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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 state run companies constitute about 45% of China's economy, according to the U.S.-China Economic and Security Commission. This includes banks such as Industrial and Commercial Bank of China, China Petrochemical Corp. or Sinopec Group, and China Mobile.

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There are similarities in the Republican and Democratic party platforms in 2016. One area of agreement is in the reinstatement of Glass Steagall Act. That legislation made in the Depression period to separate commercial banking from investment banking was changed  when president Clinton made changes in a deal with Senators Phil Gramm and Jim Leach in 1999. The too big to fail problems of banks and the problems of investment banks during the 2008 financial crisis are attributed to the lack of Glass Steagall protections for financial stability and safety. The result is that in the post 2016 environment banks can expect a tougher regulatory environment. Another are is in trade where both parties are expected to take tougher positions to protect U.S. interests. The Republican platform calls for "better negotiated trade agreemets that put America first."

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Strikers at a Honda transmission factory in Hoshan, 100 miles northwest of Hong Kong are asking for raises of $117 or 800 renminbi in cash above the $132 a month or 900 renminbi that they are now paid. About 950 of 1900 workers at the plant are trainees, young people from vocational schools or high schools earn $132 a month. Older employees earn upto 1500 renminbi or $220 a month. The significance of this strike is that the Chinese government is tacitly encouraging the strike as it begins making moves to increase domestic consumption and make the economy less dependent on exports. This requires consumer's having larger purchasing power and higher wages. It also means that China will not remain the low cost manufacturer for manufacture goods makers around the world for very long. Consider the size of the increase and the policy change of the government and this implies a significant shift by China.

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China's Shanghai stock market declined by 6.9% on the first day of trading Jan. 4, 2016, with trading triggering circuit breakers. The central bank plans to inject $20 billion in short term funds as a signal to investors that it will continue easing.

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International issues took on larger significance for the U.S. Federal Reserve in September 2015 as it looked at a small increase in interest rates. Schwartz points to the memories of the 1997 emerging market crisis and how fragile economies like Mexico were adversely impacted by rising rates in the U.S.. Mexico needed a large bank bailout and contagion spread to other countries. Kenneth Rogoff says the risks are real with declining commodity prices and falling currencies of emerging markets such as Brazil, Indonesia and Russia. Ripple effects would carry over to India and other countries. The sharp slowdown in the Chinese economy in the second half of 2015 was too recent for the Fed to take any sort of risk in September 2015.