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Bilateral trade between China and Russia is down 31% for the first half of 2015, and Chinese investment in Russia down by 20%, according to Moscow Carnegie Center. This is a result of the fall in oil prices, declining demand for commodities in China, and the economic downturn in Russia. After the western sanctions on Russia Chinese investors are cautious about making investments. This means Russia's large expectations that this would act as an offset for economic relations with Germany and other western nations is not working out in reality. The contract for the second gas deal for gas from western Siberia, for which a memorandum was signed with China in Nov. 2014, was not signed during Putin's visit to Beijing in September 2015. Experts say the economic environment is not favorable for gas deals with the uncertain economic outlook in China.

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Compared to precrisis peak in GDP for 2006 the economies of Germany and France are up about 3%, and 1% respectively, with Italy down by close to 10%, and the eurozone down about 2%. Inadequate demand is the largest problem for eurozone companies as the GDP for eurozone increased barely in the 3rd quarter 2014, increase of 0.6%.

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Russia faces inflation of 7%, and the central bank policy is to fight inflation by increasing interest rates to 7% in March 2014. The crisis in Ukraine and Russian intervention in the Crimea has worsened the prospects for the economy at a delicate time after Russia's growth rate was slowing rapidly in 2013. Capital flight in 2013 accelerated in the 1st quarter with the Ukraine crisis- with about $60 billion in capital outflows in the 1st quarter 2014. Speaking at an investor conference in Moscow, the former finance minister Alexei Kudrin, who strengthened Russia's finances in Putin's previous term continued to warn about taking risks with the economy and Russia's finances. He had earlier warned about higher defense spending. He now says the sharp economic slowdown expected with a possible contraction of 1.8% in 2014, is the price Russia is paying for an independent foreign policy. The policy is popular in Russia now with Putin's rating at about 80% in April 2014, but Kudrin says this does not reflect the situation if the contraction leads to falling real incomes. As investment spending stalled in the 1st quarter, only consumer spending supports growth for the remainder of the year. Russia's Economics Ministry favors stimulus to support growth, but the central bank is concerned about keeping inflation of 7% in check, and the Finance Ministry favors current policy of building up the rainy day fund from higher oil prices. As a result no stimulus is planned even as the economy slips into a risky contraction phase. For emerging markets in 2014 political problems have exacerbated slowing growth first in Turkey in 2013, and now in Russia in 2014, with the reverse taking place in India and Indonesia where elections and a change in government lead to more optimism....

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Ilan Berman, vice president of the Foreign Policy Council in Washington D.C., cites former finance minister Alexei Kudrin about capital flight from Russia reaching as high as $160 billion in 2014. This is a result of Russian policies in Ukraine that are creating a high degree of uncertainty and investor fears about the Russian economy. The result Kudrin says would be a stagnating economy. This follows the emerging market crisis in the beginning of 2014, which hit Turkey, Argentina, and Brazil. Kudrin is respected for his efforts to strengthen Russia's finances in Putin's first term in office, and left the administration over disagreement with prime minister Medvedev on damage to finances from higher defense spending. This suggests Putin and Medvedev in their first terms as president conducted more prudent policies for the economy than they are doing in Putin's second term. A certain recklessness seems to have crept in as many respected advisors from that period have left over differences in policy, including how protests and the opposition's views should be handled. This includes Medvedev's early efforts after elections for dialogue with the opposition parties which were set aside by Putin. The danger with having a Bolivarist class of tycoons as in Venezuela and some developing countries, instead of wiser heads around him for Putin, is that he will lose the advice and counsel he so badly needs to conduct policies without letting emotions getting the better of a sound judgement. A large foreign exchange reserve is a buffer for Russia, but this needs to be used to diversify the economy away from dependence on oil and commodities by investing in technology industries to create jobs in other fields, and not wasted in higher defense spending and fighting investor sentiment for the value of the ruble. It also shows that there is an inherent value in having a "loyal opposition" and "shadow cabinet," and these institutions were not invented over centuries of practice in government without a reason, in that they actually help the governing administration pursue prudent policy without arbitrary actions. The irony is that the very fears of 1998 repeating itself with the "chaos" of western style democracy and politics and manipulation by oligarchs- a Putin complaint- is reversing the gains made by Russia since then, with another set of tycoons and vested interests in place. Russians, like the Germans can learn to make democracy work without a centuries long history of democratic traditions, elections and free media. Czarist traditions can be overcome just as the Prussian traditions were overcome, and Russians can come up with their own Wily Brandts and Gaucks, leaving behind the old history of suppressing contrary opinions. For this to happen Russians including Mr. Putin need to leave their own fears behind, and trust the Russian people for the right instincts and values and maturity of judgement, just as the Germans have done and succeeded. ...

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This New York Times editorial says a smaller Wall Street and growing jobs in other fields will be good for New York as well as good for the country. It says New York politicians should focus on finding new ways for New York to broaden its tax base and get new businesses and new opportunites in fields such as media, advertising, entertainment, health care and tourism. Especially welcome are initiatives such as the science and tech campus of Cornell University promoted by Mayor Bloomberg. Tighter financial rules and higher capital requirements are good for the country and for New York the editorial emphasizes, because they help control reckless banking practices that destroy capital and opportunities for growth elsewhere in the economy. It points to Kevin Rose's Nov. 21, 2011 account in the Times showing a healthy culture shift in New York and the country with the status jobs being seen not at Goldman Sachs but at Google, Apple and Facebook. Rose's account shows that in the last 3 years the number of Wall Street employees of ages 20-34 declined by 25%....

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The German and French positions on solutions to the eurozone debt crisis are in conflict. As a result the negotiations between France's Sarkozy and Germany's Merkel are deadlocked. The basic differences revolve around three basic issues. Germany wants to see a lasting solution in which Greece debt is restructured so that banks and other creditors that loaned money to Greece voluntarily take losses so that Greece's debt can be reduced to a sustainable level of no more than 50% of what it is now. France, the ECB and the French banks do not want to restructure Greek debt in this manner beyond the 21% reduction in value of debt under the July 2011 agreement. The voluntary reduction in Greek debt by the banks would prevent a default by Greece and unsettling of the financial markets. France fears market contagion from the restructuring of Greece debt that would place pressure on French banks as the value of the Greek, Spanish and Italian sovereign debt French banks hold declines in value. That would require a major recapitalization of French banks and additional cuts to the French budget. Additional twists to the negotiations are that Sarkozy is unpopular in France with elections six months away. For this reason Sarkozy would prefer to recapitalize after 9 months. A way to get around the need for more deficit cutting (austerity measures) in France, is for the European Financial Stability Fund to be able to borrow money from the European Central bank. The ECB can print euros in that situation. Germany's chancellor Merkel has to consider German public opinion and experts from the German central bank, who are adamantly against using the ECB to print money and Germany committing itself to bankrolling most of the effort. Germany wants France to use its own money to recapitalize French banks, with Germany only responsible for recapitalizing its banks. Merkel told her parliamentary caucus in Berlin that "the path is closed for using the European Central Bank to ease liquidity problems." Because of Germany's insistence on financial soundness for any solution, France being in the more difficult financial position and Sarkozy facing elections willing to come up with a short term fix, and the unwillingness of French and German banks to take the losses necessary for a lasting solution, the Germans see a real solution taking a long time. ...

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Alexis Tsipras, leader of Syriza, Greece's second largest party, is interviewed by WSJ's Bret Stephens. Tsipras describes the problems inside Greece. He describes the bribery in healthcare, tax evasion, burden of taxes on the middle class and honest citizens, a large and inefficient bureaucracy. In its current state Greece would build up debt and deficits all over again if the debts were forgiven tomorrow, says Tsipras. He is for Greece remaining in the eurozone. Tsipras understands the problems Germans have with putting money into Greece with the current state of economic management and lack of conscience of its elite, and why they see this as not fair. He suggests as a model for solving the Greece debt crisis, the London Conference of 1953 forgiving half of Germany's debts and putting the rest on a 30 year scheduled repayment. This would have to come with results in cutting bureaucracy, reducing corruption, and efficient tax collection for Greece democracy to work.

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Drew Western, a professor of psychology at Emory University, asks the question about Obama that is on many people's minds- who is this man who wrote the book "Dreams of My Father." And what happened to him? It is as if he is asking did they conjure up something that didn't exist, was there really too little about the man in a book written when the young Obama was still in law school- about his experience growing up between two races, except a remarkable effort to grapple with that experience. It would say little about the man himself, the choices he would make, the decisions he would face as he entered his thirties, and forties, a period that provides the crucible and the formative experiences in the development of character. It is as if readers had appended their own chapter at the end of the book and conjured up many things that really did not exist. And which would serve as a kind of Rorschach test experience where readers were free to read into the picture whatever they wished to see- and something Obama could use to be all things to all people. Drew Western draws from his knowledge of psychology and his direct or virtual conversations with about 50,000 people to reflect and make some hypotheses about what has happened to Obama, or what Obama was always about. He starts by pointing out what was missing in the inauguration speech and has been missing ever since- a clear sense of narrative and a vision, a story about what had happened and how it could be made different in the midst of the global financial crisis of 2008-2009. Western provides several hypotheses for what has happened. Obama simply lacks the experience to handle the presidency -having been merely a community activist and not run a city, a state or a business, and had accomplished little before becoming president, and had an unremarkable career as a law professor having published nothing during his 12 years at the University of Chicago except an autobiography. And remarkably says Western voted 130 times in the Senate as "present" instead of "yea" or "nay," suggesting a tendency not to take a stand on difficult issues. The auto fuel efficiency standards issue may be the singular exception. The challenges of a presidency are much larger, and the challenges in 2009 were even greater. Obama could not measure upto the task. A related hypothesis is that given the lack of experience and the inability to make the narrative because of an unresolved identity, Obama is willing to do whatever it takes to dial for dollars and get re-elected. ...

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Migrant workers in China are not allowed to bring their children with them when they move to work in factories located in urban areas. This is the large price being paid for the rapid industrialization in China for 2 decades 1990-2010 by the 61 million children of migrant workers. Lixin Fan's documentary "Last Train Home" documents the life of children of migrant workers separated from their parents for long periods of time. Analysis from the All China Women's Federation shows 75% of the 61 million children left behind by migrant workers have parental visits once a year mostly during the national Spring holiday. 82% of these children want their parents to come back home and 42% say they have no one to talk to when they feel bad. A large proportion of the children are missing parental attention at the most sensitive age when they most need it- 38% left behind are ages 1-5, 32% ages 6-11.

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Frederick Harris of Columbia University says there is a price to be paid for a black president and it may just be too much for the average black person. There is a difference betwen symbols and substance, betwen a role model and accountability in a representative democracy, which is sadly lacking when the black elites, clergy and politicians fail to debate the issues about the problems facing the black community. Problems related to the increasing poverty among black Americans, and the 14% unemployment for black people. There is he says a strange reticience among the black elite to hold the president accountable on these issues just as they would have done for any Democratic president, even one who was as popular with blacks as Mr. Clinton. He says the experience with Obama is not even remotely comparable to the transformative nature of the work of Rev. Martin Luther King in the black community. It may stem from Obama's multiracial background, growing up in many countries, his elite education and being part of a liberal elite more than of the black community. The price is too high in economic and social terms for the poor or average black person and it has created a divide between the average black person and the black elite, with different concerns and different priorities. Harris points out that poor and poverty are words not mentioned often by Obama. Related to this is the foreclosure crisis in which ordinary black people were hardest hit with no effective help from the president to homeowners badly needing relief. Sheila Bair of the FDIC and Martin Feldstein advocated aggressive help for homeowners under water which did not come from the president. Showing not just the limits of a black presidency, but false hopes, inexperience and lack of leadership in issues that mattered to all Americans in the housing and foreclosure crisis. A populist from Kansas, as Sheila Bair describes herself, had the right instincts and courage of convictions which the president lacked and the entire country needed....

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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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Prime minister Modi cites the successful Mars mission "Mangalayan" as showing India's technological capabilities and its ability to do things speedily at very low cost. For foreign investors India offers a stable politcal climate because his party has an absolute majority in parliament and controls many state governments, as well as being a democracy with a vibrant and internet connected young generation. A young population with 55% of the people under age 35 makes India the manufacturing powerhouse of the next two decades, said Modi. And the consumer base of over 1.2 billion people an attractive market. It was a rare combination of hands on salesmanship rarely seen ever on television from a prime minister. In one exceptional response about the condition of women, Modi said he personally led his ministers and legislators through Gujarat state's rural areas house to house in 45 degree centigrade summer heat on June 11-13 school opening days. He did this urging parents to send their daughters to school with the slogan "Send your daughter to school, Save a Girl." The result he said was 100% school enrollment in these rural areas for girls. A rare person at a special moment in India's history pushing the goals of development with uncommon tenacity....

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Spain's cabinet announced new changes to labor laws to provide incentives to business to hire. Spain has some of the most restrictive labor laws in Europe and high unemployment. The unemployment rate reached 23% in December 2011, and about half of the people under 26 are unemployed. The cost of downsizing is so high in Spain that Spain's representative on the executive committe of the European Central Bank, Jose Manuel Gonzalez-Paramo, says companies prefer to close rather than downsize. The World Bank has singled out the labor laws as one of the main reasons for Spain's rising unemployment rate. New rules will reduce severance payments to 33 days per year of employment from 45 days. Severance packages will be reduced to a maximum of 24 months from 48 months. To encourage companies to hire permanent workers and depend less on temporary workers the new rules say employers must switch temporary workers to permanent contracts after two instead of three years. As an incentive for companies with a maximum of 50 employees to hire young people the rules give a 3000 euros corporate tax break for each new person hired under age 30. If the hired person was jobless he can still collect 25% of previous unemployment benefits for a limited period with 50% of the unemployment benefits going to the employer. Companies having losses for three consecutive quarters are allowed to pay less in severance payments- only 20 days per year of employment. Companies will now find it easier to leave collective bargaining agreements and make deals with their own staff. Luis Garicano, a professor at the London School of Economics, says this is a good step forward. He finds missing from the new rules subsidies to train young and unemployed people given the high dropout rates in Spanish schools. The government approved the rules by decree, but they will be discussed in the Spanish parliament. The government of prime minister Mariano Rajoy was recently elected with an overwhelming majority in parliament. This makes making major changes different from the process in Italy where a consensus has to be established....

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Maleeha Lodhi, a former Pakistani ambassador to the U.S. and Britain, has edited a collection of essays in a new book titled- Pakistan: Beyond the "Crisis State." It tries to form a new construct to move the debate on Pakistan into a future in which Pakistan can exist as a "normal country" free of a paranoia about India that affects its outlook, and free from the military connections that have shifted the focus from development that a friendly neighborly coexistence with India would provide. Intriguing essays include one by Saadat Hasa Manto who goes back to 1951, when the Cold War was at its peak and the U.S. formed a relationship with Pakistan based on military assistance, with only small fraction of aid going into development programs. Syed Rifaat Hussain, professor of strategic studies at Quaid-i-Azam University in Islamabad puts it directly: Pakistan needs to become a normal state and the only way to to do this is for the rivalry and obsession with India to be resolved and put behind it. As it now stands the U.S., India and Pakistan all stand to gain tremendously in such an outcome- the U.S. disengagement from Afghanistan and the Taliban because at its core the Taliban issue goes back to the Pakistan rivalry with India, Pakistan and India because it puts the focus on development, infrastructure building, and economic gains....

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Miller says the whole thing about the super-committee, the polemics between Republicans and President Obama about deficits and billionaires, could end up being a charade with Obama hoping to squeeze by in the 2012 presidential elections and the Republicans equally intent on getting 51%. In the end Obama's poor handling of the debt ceiling, including an unwillingness to go ahead with raising the debt ceiling even if it went to court, says Miller, shows a basic failure of the Obama presidency. In the end he thinks its not that the centre-left is going to be mad at Obama, they will be mad at themselves for believing he was going to be any different.

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Amar Bhide touches on the unpredictable consequences of devaluations while commenting on the supposed benefit of a country having its own currency vs a currency such as the euro. The euro takes away the advatantage of devaluing the national currency as a way to regain competitiveness. Bhide points out that devaluations hurt the elderly on fixed incomes and low wage workers. Protections have to be put in place for the sections of the population that are badly affected. Large union negotiated wage increases can also reduce the benefits of devaluation in terms of regaining competitiveness.

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India's inflation rate declined to 4.4% in Nov. 2014 and 5% in Dec. 2014. Price pressures are moderating throughout the economy. With lower oil prices in 2015 and long term trend for lower prices the outlook has improved for controlling inflation. The central bank governor Rajan cut rates by one quarter of a percentage point in Jan. 2015 and indicated further rate cuts are ahead to boost economic growth. The financial markets reflect a 1% decline in interest rates and the stock markets were up 2% in Jan. 2015

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Obama's comments during a visit to Greece about the challenges facing multiracial and multicultural societies such as the U.S. and the people left behind through globalization. He says "we are going to have to guard against a rise in a crude sort of nationalism or ethnic identity or tribalism that is built around an "us" and a "them."  Obama also referred to a global elite "that seems to live by a different set of rules, such as being able to avoid taxes," which he said "fuels a feeling that globalization only benefits those at the top," and leads to a push back from people who feel they are losing control over their future." The problem for workers is that fewer and fewer workers are needed in todays advanced automated factories and manufacturing moves across borders leading to anxiety. The president may have realized the extent of the damage only in the closing days of the campaign in 2016, because of his support for trade agreements without talking in this manner about the lives of workers.  ...

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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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Shiller says policy is captured and communicated by metaphors, the most effective being belt tightening for a family. However what works for a family does not work for a country in the same way, especially if not accompanied by other measures and implemented in a strict manner without looking at the real situation. Better suggests Shiller, and more real is the metaphor of "winter on the family farm," where people work to do other chores than planting and harvesting, because a lot of other things need to be done and this is a good time to do it. This would include cleaning up the place, fixing the farm and the barn, fixing machinery, building fences. The farm's members pay a tax in terms of donated labor which goes to do all the work needed and helps the farm's productiveness as the weather changes. Similiarly the Salant-Paul Samuelson balanced budget theorem from the FDR days shows an increase in national output by the amount of a tax, such as the one proposed in France by president Hollande; that would then be invested in hiring more teachers (the labor) and investing in education infrastructure....