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Ian Talley provides this excellent account of how this drop in oil prices is likely to add to economic growth in major world economies, removing any ambiguity about the positive effect on the global economy. West Texas Intermediate crude dropped to about $65 from $105 between June and December 2014. The IMF estimates growth in 2015 will increase from 3.1% to 3.5% largely because of the lowering in energy costs. JP Morgan Chase economists see an addition of 0.7% points in global growth in the first half of 2015. ECB president Draghi sees the lower oil prices as an unambiguous positive. Estimates from Rhodium Group show major oil importing countries seeing import bills cut by $500 billion if prices remain low for 6-8 months, with $90 billion going into the U.S. economy. IMF estimate is that only 20% of the drop in oil prices is from lower demand, about 80% from higher fuel efficiency, increased supply using new technologies, decisions by OPEC to lower oil price, increases in supply. Based on estimates by the Rhodium Group, IEA and the IMF, the extra money flowing into the economies of the U.S., Asia and Western Europe from reduced oil import bills, as measured in percentage of GDP is: the U.S. 0.5%, Germany 0.8%, Japan 1.2%, China 0.8%, India 1.8%, South Korea 2.4%. Italy and France and other oil importing countries benefit. The impact comes at a time when Japan, China, India and eurozone economies badly needed a boost after significant slowdown in growth in 2014. It could not have come at a better time and because it is technologically driven as in the case of highly fuel efficient automobiles and new oil exploration technologies, a self sustaining process. The corresponding impact for oil exporters is: Russia -4.7%, Nigeria -5.4%, Venezuela -10.2%....

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Tourists from China went up by 20% in 2015, going over 1 million. Foreign enrollment at Australian educational institutions was up significantly in 2015, going up to 645,000, up 25% over 2012 with the weaker Australian dollar. Australia's services sector including inbound education and tourism exceeded in value the minerals and metal ores exports in the last two months of 2015. This enabled the Australian economy to grow by 3% in the 4th quarter of 2015 over the prior year.

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Compared to the situation in 2008-2009 during the global financial crisis with the excess supply of labor, China in 2012 faces an excess in demand for labor. In 2009 about 20% of migrant workers were unemployed when the crisis hit, and wages dropped 10% for migrant workers, according to the Chinese Academy of Sciences and Stanford University. The situation three years later is one of tight labor markets and higer wages. A large stimulus in not only not needed today in the way it was in 2008-2009 as a way to maintain social stability, it would reduce the benefits of the anti-inflationary steps taken in 2011-2012, by putting more pressure on wages and prices. Manufacturing sector wages increased by 20.1% in 2011, according to China's statistics bureau. This may be why the Chinese government is taking measured steps to avoid creating more bad loans through indiscriminate lending, and being more selective in accelerating development projects in the pipeline. According to Hong Kong's new Chief Executive Officer China plans to have about 7% growth. This shift in approach would help China refocus on growth strategies recommended in the recent Development Reform Commission and World Bank Report on China....

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Ford plans to reduce the weight of its F-150 pickup truck by about 700 pounds, a 15% reduction in weight, by switching parts of the body from steel to aluminium. The new F-150 pickup truck is designed to be introduced in 2014 and capable of meeting new fuel efficiency standards through 2020. This would enable a 25% increase in fuel efficiency and help meet the Obama administration fuel efficiency standards of 2011, which require the U.S. vehicle fleet to average 54.5 miles per gallon by 2025.

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An August survey by Japan's Ministry of Economy, Trade and Industry, shows 40% of the country's manufacturers saying they would shift production and R&D facilities overseas if the yen remains at 85 to the dollar. It has dropped below that. Nissan will make 71% of its cars overseas in 2010, compared to 66% in 2009. Murata Manufacturing plans to double its foreign output to 30% by March 2013. By buying Dutch printer maker Oce NV in March, Canon Inc., saw its overseas output jump to 48% for the first half of 2010. Toyota is on track to produce 57% of its output overseas in 2010 , compared to 48% in 1995. The popular Prius will now be built at a plant in Bangkok, Thailand. Sony did 20% of its television manufacturing in Japan in 2010, it is aiming to do 50% in 2011. As a result Sony showed a profit for the April-June quarter, after 6 straight years of losses. Its also important to note that when inflation is taken into account the yen has not strengthened the way it appears, which reduces domestic pressures to dampen the yen's rise. Tohru Sasaki, head of foreign-exchange research at J.P. Morgan Chase & Co. in Tokyo, says that in inflation-adjusted terms, the yen is 30% below the rate it reached in April 1995. U.S. consumer prices have risen by 69% since 1990, in Japan the prices rose only 8.5% during the same period. In inflation adjusted terms the April 1995 exchange rate of 80 yen to the dollar would be 56 yen to the dollar today. Japan's exporters can also benefit from the fact that a large part of Japanese trade is denominated in yen- according to Japan's Ministry of Finance 48% of exports to Asia were paid for in yen in 2009. Like China and Germany, Japan remains highly dependent on exports for growth- which provide two thirds of its growth. The yen's strength increases the outflow of production facilities. In July 2010, 10.3 millon workers were employed in manufacturing in Japan, down from 12 million in 2002. Japan's unemployment rate was 5.6% in 2009....

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A new West Coast Model is emerging with ballot measures in the states of Washington, California and Oregon. The model is to make up for decades of faulty income distribution which favored tech communities in west coast states leaving behind people from minority communities and the working class outside tech hubs such as San Francisco, San Jose and Seattle. During this period budgets for education and healthcare, social services and essential infrastructure suffered as budgets were squeezed for local governments. Minimum wage also lagged behind and communities struggled to keep up. Washington votes for a ballot measure that raises the minimum wage to $13.25 statewide and mandate paid sick leave for workers. In California a ballot measure makes permanent an income tax surcharge on millionaires to use these funds for education. In Oregon measure 97 places a gross receipts tax on corporations with annual sales in Oregon over $25 million, raising $3 billion a year for schools, health care and other programs. The California and Washington measures are likely to pass, Oregon uncertain, say experts. And even in Oregon supporters have learned from the experience to put forward new proposals on the ballot. The Washington measure is supported by Nick Hanauer, and Zach Silk, president of Civic Ventures in Seattle, who say it is essential to put more money in workers wages to increase growth and to bring better lives outside the tech hub areas. Most of the tech booms of the last two decades have not touched the areas outside tech hub metropolitan areas. The conservative approach adopted in Louisiana and Kansas of reducing taxes first and then when holes in state budgets developed to cut education, health and other service expenditures has not worked, and it has led to the backlash in the form of the new West Coast Model, which is expected to be brought up in other states in the east and midwest. The tech hub areas have grown with the boom in tech but this has largely ignored the rural areas, communities just outside of the tech cities, and led to uneven and distorted growth shortchanging the working class and the middle class, and hurting investment in education and healthcare across each state. Bill Whalen, a research fellow at Stanford University's Hoover Institution conservative think tank ,says that its hard to deny that the balanced growth for all communities across the state has lagged far behind as the tech booms boosted growth in the economies of California, Oregon and Washington. An article in the German online site Zeit on Silicon Valley described this vividly showing how this can happen in communities sitting side by side in the San Jose area, with minority Hispanic communities and working class communties seeing very little of the benefits of growth. ...

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Slowing car sales are expected for Detroit auto manufacturers as Japanese sales recover after the tsunami and earthquake. A major reason for higher sales was pentup demand. Sales reached an annualized 14 million level for 2012. Research firm Polk says the average time a new car was owned went up to 71.4 months, and used cars 49.9 months, in Feb 2012. This is 23% above the level of the third quarter of 2008.

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A study by Bank of Japan's Research and Statistics Department in the Feb. 2013 Bank of Japan Review paper titled "About the Real Effective Exchange Rate," shows how Japan maintained international price competitiveness during the period of the strong yen at 80 to the dollar. It found that with deflation the cost inputs of labor, factory equipment and materials in Japan were reduced, even as the price in overseas markets for finished products went up. It found that while the yen went up against the dollar in nominal terms, in price adjusted terms accounting for deflation it has actually fallen. Nomura economist Kiuchi says the Japanese yen had to go to 54 to the dollar before it matched the level of the 1995 priceadjusted high of 79 to the dollar.

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A shift in priorities away from focussing on high growth to lower sustainable growth was announced by China's premier Wen Jiabao at the National People's Congress, China's parliament, in March 2012. This shift will reduce investment in infrastructure, power generation and exports, which will affect the level of imports of commodities from commodity producing nations in the Middle East, Australia, Canada and Brazil. It should increase imports of software, computers, entertainment, tourism and high tech goods from the U.S. and Europe. Chinese leaders have said they would make this kind of shift for some years now but growth has consistently increased more than the target rate, and domestic consumption as a percentage of the economy has actually decreased in the last decade. Now 9-10% growth rates may be a thing of the past and the target of 7.5% set this year may be actually closer to the real figure. The Chinese leaders have belatedly realized the need to make these changes now because slowing markets in Europe -which is seeing declining growth and high unemployment- and in the U.S., make the issue impossible to avoid. Wen told the Congress: "Accelerating the transformation of the pattern of economc development... is both a long term task and our most pressing task at present... Domestically it has become more urgent but also more difficult... to alleviate the problem of unbalanced, uncoordinated and unsustainable development." This is his way of saying that its unavoidable and better to start in earnest now, and at the same time recognizing the resistance to change from the stateowned companies and the other interests who have benefitted from surging growth, and now occupy a central role in the power structure. An opinion article in the People's Daily, China's official newspaper, said: "imperfect reforms are to be preferred to a crisis caused by no reforms." The World Bank's president Zoellick is respected by the Chinese leaders. He also urged them to make changes now. The recent report of the DRC, China's planning research arm, and the World Bank, also laid out the new direction away from a focus on infrastructure to domestic consumption. The fear is sudden deceleration in the absence of policy action. The impact of this will be negative for commodities over time, leading to slower growth in Australia, Brazil, and Canada. It should boost imports from Europe and the U.S. of high tech, consumer, pharmaceutical goods over time....

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Honda plans to move more of its manufacturing to the U.S. as the value of the yen drops below 80 to the dollar in 2011. Honda faces problems from parts shortages after floods in Thailand, and U.S. market share down 1.5 percentage points to 9% in 2011. Honda's profit declined by more than 50% for the third quarter of 2011. The yen trading at 77 to the dollar in Dec 2011 is making it impossible for Honda to make a profit from vehicles made in Japan and sold in the U.S. Honda plans to double the capacity of the Civic plant in Greensburg, Indiana, increase capacity at its other assembly plants. It will build a new plant in Celaya, Mexico, in 2014, to manufacture the Fit subcompact. This will raise North American production from 1.29 million vehicles to close to 2 million. About 200,000 to 300,000 of these vehicles will be exported to other international markets. Profits on small subcompacts are small, making manufacture of the Fit more economical in North America than in Japan. In 2011 Honda manufactured between 30-40% of vehicles in Japan, the new plans are to reduce this to 10-20% in the next 10 years, a major shift....

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Jan Hatzius, economist at Goldman Sachs, says the May 2012 jobs report of only 69,000 jobs added, and 49,000 fewer jobs added in March and April after revisions by the Labor Department, should be seen in the light of higher hiring in the winter months because of warm weather. His estimate is that the warm weather added 100,000 extra jobs in the 3 months through February 2012, taking jobs from the March to May 2012 period which averaged 96,000 jobs per month. The underlying job growth if these weather related effects are taken out would be 120,000 to 130,000 jobs added each month in the March through May 2012 period. Macroeconomic Advisors draws the same conclusions, and adds that reductions in energy prices should offset any negative effects of slower job growth by boosting real disposable personal income and supporting real consumer spending.

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Prof. Scott Kennedy of the Research center for Chinese Politics and Business, voices concerns of experts who think that the $585 billion stimulus and the doubling of lending this year, increase in exports by a third last month, all point to an economy that is expanding too quickly. Kennedy says that no one defies economic laws, that eventually endless growth can get get you in trouble. The concern is whether the overexpansion of credit and the size of the stimulus may have led to overreaction in stimulus spending. People's Daily newspaper of China said that China's leaders are moving much faster than leaders of developed nations. But the flip side of this is that in the rush to increase spending there may be a lot of wasteful spending resulting in many bad loans a few years from now.

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A critical part of the Affordable Care Act is the setup of marketplaces or exchanges to let people without insurance buy individual health plans. Some states setup their own exchanges, and some states let the federal government step in and run them. To help the lower middle class and poor the Act provides health subsidies to buy insurance in the exchanges, and 85% of customers in the exchanges qualify for this benefit. The U.S. Supreme Court voted 6-3 in 2015, compared to a tight vote in 2012 on the Affordable Care Act, to maintain the health subsidies. Justice Roberts wrote the majority opinion, saying "Congress passed the Affordable Care Act to improve health insurance markets, not destroy them." Justice Scalia dissented calling it "interpretive jiggery-pokery." Justices Clarence Thomas and Samuel Alito Jr. dissented. Voting in favor were Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, Elena Kagan, Justice Kennedy dissented in the 2000 case. The challengers petition to the courts was based on a reading of phrases in the Affordable Act which had not occurred to the writers of the law. The reading suggests only people enrolled in state setup exchanges are eligible for subsidies. If the Supreme Court ruled in favor of the plaintiffs the 6.4 million Americans who are enrolled in the federal exchanges would lose the subsidies provided under the law and lose health insurance. And the economic foundations of the Affordable Act would be undermined with insurance companies required to provide insurance to all regardless of pre-existing conditions and subsidies removed, leaving the companies with sicker pool of customers resulting in destabilizing the exchanges and higher premiums. The court ruled in favor of an interpretation that is compatible with the whole law and the intentions of the statute to help the middle class and the poor buy health insurance. The chaos in the insurance markets that would result in going with the plaintiffs because of a careless writing of a phrase, was uppermost in the majority's mind. Chief Justice Roberts emphasized this, saying- "The statutory scheme compels us to reject petitioners' interpretation, because it would destabilize the individual insurance market in any state with a federal exchange and likely create the very 'death spirals' that Congress designed the act to avoid." This case originated with 4 plaintiffs from Virginia who challenged the IRS regulation that said subsidies were allowed regardless of whether the exchanges were run by the state or the federal government, arguing that this was at odds with the particular phrase in the law that was ambiguous about federal exchanges eligibility for health subsidies. Judge Roger Gregory of the Fourth Circuit Court of Appeals in Richmond, Virgina, ruled that the phrase was indeed ambiguous, but the IRS was owed deference in its opinion. Chief Justice Roberts made it clear that this was not a case for the IRS, saying "it is instead our task to determine the correct reading." ...

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Hon Hai has about 800,000 workers. About 400,000 are employed in the southern industrial town of Shenzhen. After a number of worker suicides (13 people have committed or attempted to commit suicide in 2010 so far), the company has announced that it will give 20% raise to its workers. Workers at one plant in Longhua are paid 900 yuan or $132, the legal minimum wage in Guangdong province, though many workers work overtime at 1.5 times the standard rate. The company is secretive about its activities and uses the trade name of Foxconn. It makes personal computers and other products for Apple, HP and other companies. The company uses a military style discipline and it is reported that there is excessive stress in working conditions.

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China's National Bureau of Statistics made an announcement in Beiijing that 51.27% of the Chinese people now live in urban areas. In 1949 the figure was 10.6%, in 1979 it was 19%. In the space of three decades China has urbanized rapidly. This has brought with it economic growth, infrastructure development and increased employment in the manufacturing sector as new workers moved from rural areas to the cities. With it also come major problems for the country and the leaders of the Communist party led government. Of the 691 million urban residents, 253 million are migrant workers- 37% of urban residents and 19% of the population are in this grey zone described as the "hukou" or household registration system. Under "hukou" these migrants from rural areas cannot access public services in the cities, and have rights to access them in their own villages where they are registered. Integrating these migrant workers who are different than their more affluent and better educated neigbors in the cities so that they become truly a part of the urban areas will remain a huge challenge for China. One of the ways China is addressing this is with the plan to build 36 million units of affordable housing for these migrant workers by 2016. Ever so gradually Chinese officials are relaxing the restrictions on migrant workers- such as Shanghai Mayor Han Zheng's announcement for allowing all migrant workers to rent subsidized housing in the outer parts of Shanghai and committing to "increase the migrant population's involvement in the community affairs, cultural life and show genuine care for them." Food security is another issue as more development on prime agricultural land means less land available for agriculture. Appropriation of agricultural land for industrial use is bringing the country down to the limit of 120 million hectares of agricultural land needed for self sufficiency in food, according to the Land Ministry. At the same time China's leaders want to avoid what the World Bank calls "the middle income trap," where a country reaches a level of modernization and urbanization, and then stalls at that level- the level being around $3000 per capital GDP, which is China's GDP per capita today, according to the National Bureau of Statistics in China. Li Keqiang, who takes over from premier Wen Biao, sees the building of affordable housing for migrant workers as a critical way to continue the urbanization process, and shift the country from its export focus by increasing consumption and the development of industries that support this. A slowing economy dominated by state owned companies focussed on a decelerating export model and an aging but still growing population- NBS says China's overall population was up by 4.8% in 2011 over 2010 and has reached 1.35 billion- presents a tougher set of challenges to the new leadership in China than was faced by the current leadership....

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Research from Australian National University shows steadily improving conditions for migrant workers in China. Migrant workers were able to spend more time in cities- an average of 8.9 years. The hukou sysem ensures migrants return to rural areas when they have to raise a family. About 252 million migrant workers work in factories and construction jobs in urban areas. Migrants with children leave them with grandparents back home. Improving the conditions of these workers is important to reduce the wage and income disparities in China and to reduce inequality. About a fifth of the migrant population now has pension and health benefits. Creating a balanced economy with domestic consumer spending making a larger share of GDP also requires improving wages and benefits of migrant workers. Incoming prime minister Li Keqiang says in a statement on a government website: China "must take migrant rural workers and gradually change them into urban residents. This requires that we push forward household registration reform." If done seriously this will create a new kind of China as these migrant workers are integrated into urban society after years of being shunned and ignored by China's educated middle class. Professor Meng's research at Australian National University of migrant workers shows the proportion of migrant workers with unemployment insurance increased from 11% in 2008 to 21% in 2012. The research shows similiar figures for health and pensions. Improving their living standards also make it attractive for more young people from rural areas to migrate to cities increasing urbanization....

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Japan's new LDP prime minister, Shinzo Abe, supports targeting the yen at around 90 yen to the dollar to support Japanese exporters. He sees this happening through monetary easing by Japan's central bank. At a rate of 85 yen to the dollar or above Japanese exporters would be in a position to become profitable and pay taxes. Abe says central banks around the world, including the U.S. Federal Reserve, are printing money to support their economies and increase exports. Switzerland and S. Korea pursued policies to keep their currencies from becoming too strong to support their exporters. China has managed its exchange rate to maintain export competitiveness. Exchange rate intervention has not been effective for Japan, and the focus now is on monetary policy and setting a 2% inflation rate target.

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Since 2004 consumer spending's share of the economy in China has fallen from 40% to 35%.

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Kessler on the futile strategies of hedge funds.

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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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Like hundreds of thousands of other young migrant workers in China's factories, Yuan Yandong is from a rural area and lived on a farm. Better incomes have brought them to the factories in urban areas. In this case travelling long distance by train from Guangdong province to Shenzhen. As living standards improved across China and the government expressed a keen willingness to encourage workers to exercize their rights to fair wages and working conditons- especially by creating increased awareness of new labor laws in the state run media- migrant workers are becoming restless with conditions they accepted a few years ago. The growing use of cellphones and access to the internet have made news travel faster. A visit to a Foxconn factory shows a young worker, age 24, sitting on a stool 6 nights a week, 12 hours a night, with a quota to assemble 1600 hard drives for American computer storage company EMC, with the pressure to work continuously against the clock for each step in the manufacturing process. Foxconn is known for its highly disciplined nature of work, akin to a military style. Behind the scenes factories like Foxconn employ methods once used in the US at a similiar stage of industrialization, with 500 technical people continuously looking for the most efficient way to organize each step in the production process. Each movement and action of the worker is measured for time taken and process efficiency, according to experts at Tsinghua University in China. This means many factories can use less automation- and so less capital intensive manufacturing- and go to extremes where workers perform like machines. Yuan's ambition is to work only for another 2 years and then use his savings to get into hotel management. His wages are 75 cents an hour, and with the overtime premium about $235 a month. Foxconn announced a 33% raise in wages as a result of worker protests. The mind numbing monotony is becoming less acceptable in a changing China, and worker turnover in such factories is rising. After the initial burst of industrialization in which young migrant workers played a signifcant role in manufacturing, a new chapter in China's development is beginning- one less likely to create the large trade deficits with the US and Europe- which is moving in the direction of a larger domestic market with higher worker wages....

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Controversy about whether bringing back a revamped Ford Explorer is a good idea. Ford's Farley thinks Americans might still consider an Explorer with high fuel economy, getting it up to 28 mpg from 15 mpg. But the evidence is that Americans have soured on SUV's. Consider that during the cash-for-clunkers program more Explorers were scrapped, and by a large margin, than any other model. Sales are down from 450,000 at one time to 52,000 today. To get buyers to look at the Explorer Ford is trying to change the looks from boxy to sleeker car-based crossover , and add high tech features. In fact it is going to be built not as an SUV, but on the same architectural base as the Taurus.

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Krugman points out that the U.S. Federal Reserve's forecasts in March 2012 show the U.S. will experience low inflation and high unemployment for many years. These forecasts are in sharp contrast to the expectations in the equity markets based on an uptick for a couple of months of unemployment numbers. The Fed's own statements suggest the improvement in hiring may be temporary and a response to the overreaction in hiring in 2009-2010 to the financial crisis, and not a lasting improvement. The Fed pointed out that the long term unemployed are at about 40% of the total unemployed and the share of the population that is working in March 2012 has barely budged from 58% in 2009.