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WSJ reporter Bob Davis writes this report on the end of the China economic miracle in 2014 as he completes a 4 year assignment covering China. He says China's economy is slowing rapidly and he is pessimistic abou the future. Construction cranes visible across China's skyline says Davis, can no longer be interpreted as growth inducing. With rows upon rows of empty flats in third and fourth tier cities which account for the bulk of the increase in housing construction, the consequences of a debt fueled construction boom are easy to see. Davis cites the IMF on the dangers of credit fueled growth in China- only 4 countries have experienced as rapid an increase in credit to GDP ratio in 5 years. Each of the 4 countries Brazil, Ireland, Spain and Sweden experienced a sharp decline in GDP growth and banking crises following the credit bubble. Estimates of debt to GDP are as high as 250% for China. Krugman, Roubini and other economists have warned about the credit bubble, saying China is no exception to the rule for the risks posed by such a bubble. ...

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Questions are being raised about the lack of fairness in the cuts imposed in Greece - and the IMF acknowledges this- where the minimum wage was cut by 22%, but the most highly paid civil servants had their salaries cut by 10%. Germany's finance minister Wolfgang Schauble told the German daily newspaper Der Tagesspiegel: "I really feel for the people of Greece. The vast majority now hard-hit by reform and austerity measures... can do nothing about the backup in reforms, the loss of competitiveness and the unproductive use of funds in the past." In Greece there is a separate wage scale for the highly paid public sector employees such as doctors, diplomats, professors, and uniformed personnel in the military and police. This is different from what the ministry bureaucrats, hospital support staff and local government administrators get paid. This group took only a 10% cut, even though it makes up one third of the payroll according to IMF and EU estimates. The cuts to the minimum wage were made to improve Greece's competitiveness and because in Greece during the last decade wages went up much higher compared to Germany. Brian Carney pointed out in a Journal article Feb. 14, 2012, that nominal private sector labor costs went up by 62% in Greece from 2000-2008 compared to 15% in Germany. Showing the nature of the fight to make the cuts more equitable, is the resistance to the IMF-EU insistence on cuts to the highest pensions which amounted to $178 million. In the end prime minister Papademos said the monthly pension of $1975 was reduced by $32 or 1.6%. The lack of fairness creates more uncertainty about the cuts as elections are expected in April, only 7-8 weeks from now, and fears that this may not hold when a new government is elected. For this reason the IMF-EU officials are considering putting the $170 billion bailout money in an escrow account....

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Russell Shorto, director of the John Adams Institute in Amsterdam gives a detailed account of lives of different people he visited in various parts of Greece in January 2012.

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U.S. GDP growth is 1.5% for the second quarter after 2% growth in the first quarter. The slower growth shows that much of the productive capacity of the U.S. economy is not being utilized. See the graph showing the growth during the recovery after the recession of 2009 compared to the recessions in 2001, 1991, 1980, 1975, 1970. The curve is much flatter this time. Every recovery except the recovery in 1980 shows a faster rebound. Economic recoveries have taken longer over time since the postwar boom period.

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After the debt swap of old bonds for new bonds with private bondholders for an estimated 53% haircut, the IMF's March 2012 report on Greece says a lot remains unresolved. It predicts a "disorderly exit from the euro" without further help. The April 2012 elections may result in a dilution to committments to austerity policies in Greece, as these policies are highly unpopular in Greece. Greece is still "accident-prone." And competitiveness issues may take over a decade to resolve.

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On Mercedes Chryslers efforts to bring new diesel technology to the United States. Diesels account for half of all cars sold in Europe can they make enough of a dent in the US to affect oil imports and oil prices? "Bluetec " is the European competitor to Japanese hybrid technologies, if it can be made environmentally friendly (with urea and other additives to reduce bad emissions) the its a real competitor to hybrids. The remaining task is marketing which is the challenge facing the Europeans. One bit of encouragement the new bluetec meets California emission standards.

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Resistance within Angela Merkel's coalition government to enlarging the funding for the European Financial Stability Facility. Resistance comes from the FDP's Economy minister, Phillip Rosler, and from Horst Seehofer, the Bavarian state premier and head of the Christian Social Union.

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Paul Ryan brings an inclusive stye to his job as Speaker of the U.S. House of Representatives. He has shown a sharply different approach to his predecessor Boehner who preferred to keep matters close to himself and his inner circle. Ryan has put drafting legislation into the hands of members of the House, organized meetings where moderate Republicans get to meet conservative Republicans so they can agree on common goals, shared information with Republican members on meetings with Democrats, and communicated with the media at frequent intervals to keep the public informed. The approach is welcomed by Republican members of the House after the divisions and disagreements under Boehner.

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In an interview with the Wall Street Journal Deutschland, Hans Werner Sinn, head of the Ifo Institute in Germany, says Greece's bondholders are overly exaggerating the effects on the eurozone of an exit by Greece. He sees it in the best interests of Greece to improve its competitiveness and return to growth by going back to the drachma. Just to get to the level of Turkey Greece would need to reduce prices by 31%, which is impossible to do within the eurozone without risking a complete breakdown in civil order. The best way to use the 130 billion euro second bailout package is to use it to recapitalize its banking system, says Sinn. Sinn says Portugal's faces the risk of a debt crisis following the crisis in Greece.

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The shocks to the UK banking system resumed Monday with the announcement on January 19 that RBS faced losses of a huge magnitude, of 28 billion pounds for 2008 with fresh losses in 2009. RBS shares went down 66%, and at closing on on January 21, 2009, were at 12.5 pence. Lloyds Banking Group shares are at 45.1 pence, at 66 pence. Barclays which has avoided taking government money saw its shares drop 25% on January 16. The government is hoping that its plan to provide insurance that would limit bank's losses on bad loans and investments will work, but uncertainty on how the insurance will be priced is raising doubts about the plan's effectiveness to restore confidence. Especially when RBS is collapsing. The government owns 70% of RBS and 43% of Lloyds. The next step would be nationalization of the banks. According to WSJ nationalization would mean that taxpayers have new liabilities of about $3 trillion or $4 trillion, an amount far exceeding the UK's entire annual economic output.

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Biden's student loan cancellation plan is targeted at low income people who are struggling to make a living and for whom it means putting less food on the table. The plan eliminates the debt of millions of borrowers because about one third of borrowers owe about $10,000. The plan cancels $10,000 in debt for people making below $125,000 and extends this to $20,000 for the poorest borrowers who received Pell Mell grant loans. A Columbia University study shows that the loan default rate for borrowers without a college degree is 40% and that for borrowers with a college degree is 8%. Biden said when unfolding the plan that these people have the worst of both worlds no college degree and student loans to pay off. College degrees give borrowers a much higher income. Biden's plan is to also cap payments on loans to 5% of discretionary income as opposed to 10% or 15% that it is today. The effects are also not understood by most economists. For a society to do well over the next 10 years to 20 years, 2030 or 2035, it has to increase opportunities for all its citizens. Young people with these burdensome loans grew up in a period when unrestrained so called "free markets" distorted markets and manipulated public opinion to favor a small segment of the people, leading to a false concept that 12 years of universal instruction were enough. Biden pointed this out and the importance of higher education beyond these 12 years to compete in the world in manufacturing and technology. The income and wealth generated by this investment in the people is what made America what it was in the early post war years. The income and wealth created will more than pay for not just removing a big part of this burden but also extending universal instructiuon beyond 12 years in future legislation. Rerouting some of the waste in capital allocation of so-called "free markets" alone could more than pay for most of these investments, with extra for additional investments in science and technology that would make the US what it was, the most advanced and highly educated society in the world. ...

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The government bailout of Fannie and Freddie was expected to cost hundreds of billions of dollars according to some estimates during the financial crisis in 2008-2009. The costs peaked at $187 billion in 2011. The transfer of $59.4 billion by Fannie Mae to the U.S. Treasury in 2013 lowers the net cost to $60.5 billion. The net cost of the Troubled Asset Relief Program or TARP has decreased to less than $23 billion. At one point the cost of TARP reached $419 billion for the U.S. Treasury. The government sold the last of its shares in private insurance company AIG and made $22.7 billion in gains. Treasury and Fed loaned $182 billion to AIG and at one point owned 90% of the company. Chrysler exited the TARP bailout program in 2011 at a net cost to the U.S. government of $1.2 billion. So far in May 2013 the GM bailout cost $19.6 billion, this would come down to about $11.82 billion if the U.S. government sold its GM shares at the price in May 2013. The U.S. Federal Reserve says it has not lost money in any of its emergency lending facilities, even though some loans are outstanding. The FDIC says its fees from rescue programs exceed losses....

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Bondholders and the Greek government are stalled in talks and waiting for Germany and the IMF to come up with the 14.5 billion euros that is due on March 20, 2012. It may suit the bondholders holding out for a higher interest rate in the 4-5% range for the new bonds to be issued at 50% of face value with long term maturities, but is bad for Europe. This Journal editorial points out that this is bad for European taxpayers and points to other steps that can be taken which are being discussed in European circles. One step is for acollective action clause to be inserted for the existing Greek bonds under which all bondholders have to accept losses if two thirds of the bondholders agree to accept losses. To ensure the safety of the Greek banking system Greece would restructure the bonds held by Greek banks so that they continue to be acceptable as collateral with the ECB, and issue new bonds to the ECB with face values, interest rates and maturities matching existing holdings. The idea is to make it possible for Greece to reduce its total debt and its debt servicing costs- which is really the only way out of the crisis. The ECB and Greece would use the collective action clause to restructure the Greek debt to reduce interest and debt servicing costs on new bonds to be issued. The Journal editorial says it should also mean Greece and the ECB are not required to put up the 30 billion euros in up-front cash that was agreed to in a poorly devised agreement in 2011....

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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. ...