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The Bank of International Settlements warns that China's "credit to GDP gap" is 30.1. A figure of 10 normally is considered to be high and needs watching. The People's Daily carried an article presumably by president Xi Jinping warning about the consequences of the debt that had been growing "like a tree in the air." The debt to GDP ratio was at 255% at the end of 2015, and is up 107% since 2008 when the financial crisis led to a huge stimulus that has accelerated debt growth. The corporate debt is at 171% of GDP. The article in the People's Daily warned about reflexive stimulus every time growth slows and said that China cannot any longer "force economic growth by levering up." Cross border liabilities is one area of progress falling by a third to $698 billion, as companies cut debt quickly before the U.S. Federal Reserve raises rates. In the future China is more likely to roll over debt as Japan had done following its debt surge and bad debt with zombie companies, which would in turn lead to lower growth. In the past the government was able to absorb the growing debt because it was not as high as it is today, and the economy was growing rapidly. This is no longer the situation, the reason for alarm at the situation facing China. A spike in interest rates of 250 basis points is cited as one situation which could affect China adversely. ...

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Jennifer Rubin of the Washington Post says the Republican candidates Rubio and Kasich have the best chance in the 2016 presidential election because they are seen as truly concerned about the problems of working class Americans. Coming from aspiring working class families they are familiar with the problems of working class whites and minorities, and understand the significance of upward mobility in America's future.

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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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Under a new program to increased spending on healthcare from 1.3% of GDP to 2.5% the Indian government plans to provide free pharmaceuticals at state run hospitals. This is expected to cost $5 billion over 5 years. Initially 350 drugs would be on a list of essential medicines and would be purchased from generics manufacturers in India. Dr. K. Srinath Reddy, heads the committee advising the Indian government on healthcare. He says this will help improve access to medicines for the vast majority of the people. Estimates show 70% of out of pocket medical costs for Indians come from spending on drugs. About 40 million people are pushed into poverty each year because of the high cost of medicines, says Dr. Reddy. He said that in 1984 31% of the medicines at government run hospitals were provided free to admitted patients, dropping to 9% in 2004. For outpatients this dropped from 18% to 5%. The free medicine program would be part of a larger universal health care program to be introduced over the next decade. India's large generics pharmaceutical industry makes the provision of free medicines on a large scale a feasible option in India because of the lower prices, with additional pricing advantages when purchased in larger volumes by the government. This would also have a major impact on the quality of healthcare in the country of 1.2 billion people for a relatively small investment. It also promotes a sense of fairness and equal access because the benefits of decades of modernization have been unevenly distributed and because of widespread poverty....

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Efforts to bring the textbook industry under state control by selling the firm "Enlightenment," which had a 30% share of the market, to Putin ally Rotenberg. "Enlightenment" has now received further support as other competitor's textbooks were not given approval by the Ministry of Education and Science. Apparently Putin sees western ideas introduced in some textbooks as harmful to the development of Russia's youth. All schools will now be given state inspections, and where textbooks are not on the approved list the schools will see cutoff of state funds. Putin was chairman of the publisher "Enlightenment" when it was under state control, Rotenberg is the new chairman. During Soviet times "Enlightenment" as a state publisher controlled all textbook publication. The industry was opened up after 1990, resulting in a large number of new publishers. Now many small publishers are being pushed out as the industry is being consolidated under the state's private sector allies with an educational agenda being set by Mr. Putin....

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Retirement and close to retirement planning for 2015 from Jonathan Clements of the WSJ.

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Vannis Varoufakis, Greece's feisty finance minister in the debt negotiations with the IMF and the EU, dispels the notion that the Argentina default is an example for Greece to follow, both in his blog and talking to James Stewart of the NYT. He says in his blog, that this is "profoundly wrong." Greece's economy is dependent on the euro, its banks and private sector borrowings tied to the euro, and going back to the drachma would be harder than Argentina removing the peg to the dollar and devaluing sharply in 2001. Even then half of the purchasing power was gone in conversion from dollar denominated deposits to pesos. In December 2001 Argentina defaulted on $93 billion in debt, sharply devalued the peso, resulting in a economic depression, riots and demonstrations. The economy stabilized in 2002, and paid back debt owed to the IMF by 2006, only because of export demand for Argentina's main products of soya beans, and corn, soya oil with high demand from China and Brazil. Greece's exports of cotton and fish cannot provide the basis for such a recovery, says Varoufakis. Arturo Porzecanski at American University, and Daniel Gros, Director of the Center for European Policy Studies have written 2 separate papers on Greece following the Argentine example, and agree with this conclusion....

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With inflation running at 6.7% in Russia, the central bank has decided not to increase interest rates following the U.S. Fed's bond purchase tapering decision in Jan 2014. The ruble declined by 6% in Jan 2014 and 15% for the last year. With the economy slowing the central bank finds it difficult to raise interest rates, and with inflation the bank has less flexibility to lower rates and increase credit availability. The ruble's lower value is a result of a shrinking current account surplus, with the added effect of capital flight from markets seen as riskier by investors. Currency collapse is a sensitive issue for many Russians after the 1997 crisis and collapse of the ruble. Central bank chief Ms. Nabiullina was on television explaining the decline to ordinary Russians, saying- " It's not that the ruble is weakening but the dollar and the euro are rising in price." Economists say the ruble's weakening won't add as much to inflation as slowing demand will make it harder for retail chains to raise prices....

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Inflation in China and rising wages are pushing up costs for American manufacturers. The pressure on China, most recently in Congress, is helping to push up the value of the yuan. This combined trend is making it attractive for some manufacturers to bring factories home to the U.S. A trend in the U.S. towards non-unionized labor and the new trend to a two-tier wage level- with lower wages for entry level workers- and the shedding of legacy health care costs, is creating a more cost competitive labor force in the U.S. This extends from older industries such as furniture and auto components to newer industries and technology. The new factories setup in the U.S. use technologies that require a smaller number of workers, in most cases less than half the number of workers that were employed earlier. This adds another element in cost efficiency, though it means fewer jobs are created with new plants.

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Bernie Sanders points out in this NYT op-ed the idea that Donald Trump could benefit from the same discontent among working class voters that helped the Leave campaign is a wake up call for the Democratic Party. He calls for global trade and a global economy that works for working class, middle class Americans.  Sanders is pushing for a Democratic Party that embraces the concerns of working class Americans, that understands the impact of factory closings and loss of jobs, of economic uncertainty, of declining incomes and shrinking opportunities.

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Wages in emerging markets such as Indonesia, Thailand and Malaysia are rising following an increase in wages in China. Malaysia's government announced a minimum wage for the first time. China increased its minimum wage by 8.6% to 1260 yuan ($199) in January 2012. Shenzen region minimum wage was raised 14% to 1500 yuan, and Tianjin region's by 13% to 1310 yuan, according to Xinhua news agency. Rise in minimum wage has ranged from 40% in Thailand to 20% in Indonesia. The new minimum wage proposed by Malaysia's government is about 900 ringgit ($264-$297). In Thailand the new minimum wage is set at 300 baht ($9.78) a day, an increase of about 40%.

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The shortage of labor will make the transition to a workweek of less than 60 hours for existing factory workers in China difficult, say experts. The transition to better working hours will take some time to be implemented as required by China's new labor laws and public pressure in the U.S. and China.

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The boost to investor perceptions for India with Modi's election, and to Indonesia with Widodo's election are major changes in the second half of 2014. The first half saw the dented confidence in Argentina, Venezuela, Turkey and South Africa. To this can be added Russia with Putin's response in Ukraine and western sanctions. China with Jinping's response to pro-democracy protests in Hong Kong for restoration of the pledge of free elections by 2017, appears to be losing investor confidence, especially with investors seeing this as adopting the Putin Way. This is happening with a gradual movement towards restoration of trade relations with Iran.

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As OPEC members met again in June 2015 for the first time since the meeting in November 2014, there is a sense that OPEC no longer exerts the same influence on oil prices. There are 4000 oil companies in the U.S., says one U.S. State Department official, even if OPEC were to cut production the cuts could be matched by shale oil producers in the U.S. quickly increasing output. This is the new reality, say experts. OPEC expects to keep production at the same level of the current production ceiling of 30 million barrels a day in place for the 7th meeting in over 3 years. Algeria and Nigeria, both hurt badly by the drop in oil price, have called for cuts but failed to persuade the Saudis. With Russia unwilling to join a coordinated production cut, there is not much talk about doing this. The Saudis and Iraq have continued to pump more oil, with April 2015 production of 30.84 million barrels a day the highest monthly average since 2012. Other factors also remain in the minds of the Saudis and other producers such as the United Arab Emirates, Kuwait, Qatar- policies on climate change, use of less energy and more from friendlier sources for the same amount of economic output demonstrated by countries such as Germany, advances in technology, energy saving transitions in emerging markets such as China and India....

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Cars rated high for quality made by U.S. automakers include the Dodge Dart, Chevy Traverse, Buick Enclave and Ford Fusion, Dodge Durango, GMC Yukon, according to the 2013 Quality Index of Strategic Vision consulting firm. Foreign carmakers had Kia Soul, Honda Accord Crosstour, Volkswagen CC, Hyundai Genesis, Audi A4 sedan, Lexus LS, VW Tiguan. Strategic Vision uses 442 variable in its study and ties the customer response to emotional atributes such as "I Love it," a new approach which combines the conventional counting of reported problems with how people feel about the vehicle. This Total Quality Index is based on responses of 17,658 people who purchased 2013 models from September to November 2012.

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Su Liping, professor at Tsinghua Unversity, says there were 180,000 protests, riots and other incidents, protesting economic injustice in 2010. Most of the incidents were against land grabs, corruption and abuses by local officials, and unpaid wages. Inflation has hit the poor, migrant workers and people with low incomes hardest. Food prices were up 13.4% in August over the same month prior year. Pork prices were up 52.3%. Other problems are now meshed in with inflation. Local government debt in China, according to the National Audit Office, was 10.7 trillion yuan in June 2011. The National Audit Office estimates 23% of this, or 2.5 trillion yuan, depends on land for repayment. Analysts say China's local government made repayment in 2010 using the 2.9 trillion yuan in revenue from land sales. The same amount of land has to be sold in 2010 to make repayment. At lower prices even more land may have to be sold. The danger say Orlik and Jie, is that inflation and the pressure to acquire more land- and consequently more land grabs- will pose severe risks to the social contract in China....

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After over two decades of focus on GDP growth targets, China under prime minister Li Keqiang is giving more emphasis to job growth and problems of air pollution, education, and quality of life indicators. Premier Keqiang tells a news conference in Beijing in March 2014 that China needs to create 10 million new jobs each year. More bond defaults can be expected as the financial system is being changed with new rules. Li says China will no longer be "preoccupied" with GDP growth targets. Li made the new priorities clear-"The GDP growth we want is one that brings real benefits to our people, helps raise the quality and efficiency of economic development and contributes to energy conservation and environmental protection."

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Easwar Prasad, Cornell University economist, and a former head of the IMF's China division, says the new report by the World Bank and the Development Reform Commission (DRC), is part of an effort by government officials in China to push the agenda for change forward during the transition to a new leadership. This includes Premier Wen. There is pushback from large state enterprises. The DRC and the World Bank had called for a change from the current situation to allow more private sector involvement in the economy, which means restricting the growth of the large state owned companies and letting the private sector operate in more parts of the economy. The alternative is to see growth slowing quickly and -some economists- say suddenly without warning. The role of Zhu Rongji, a former prime minister during the period Jiang Zemin was president, in pushing for changes appropriate to the period, is also cited. The last decade under prime minister Wen Biao is seen as one in which China relentlessly pursued its currrent export led model of development with large state run companies and state run banks dominating the economy. This has made change even harder to achieve because of the pushback to preserve the status quo....