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Americans loaded up with debt may be turning to older thriftier ways of an earlier generation. This this will affect consumer spending, have an impact on Chinese exports, and on the Japanese economy which is dependent on China for growth. Some argue that there is a culture of consumer spending that runs through recent American history. Even after one boom was over the stock boom was replaced by a housing boom, each boom and easy credit offering free spending and borrowing lifestyles. Is it going to change now? But it could be that a point has been reached where the finances of households and of the nation's credit system can only go so far, and culture won't matter if banks tighten up credit. There is a limit for the Fed to act to lower rates, and household debt has reached highly serious proportions. The savings rate went from one tenth of income in 1984, to 5% in 1994, to slightly negative in 2008. Today for those who borrowed against their homes in 2003-2007, 34 million households or one third of the US households, savings rate was negative 13% in 2006 June. Thhis came down to 7% in end of 2007, according to Moody's Economy.com, which suggests that the cutback in consumer spending from this group of people had already begun. What will this mean for consumer spending in the USA? It means that even though the top fifth of American earners who generate half of all consumer spending according to Barclay's Capital, will continue spending though a bit more carefully than before. The rest of the American people will be cutting back, especially the one third of the nation that is heavily in debt, and the unemployed if job numbers aren't that good. Which could be why Goldman Sachs predicts that Japan is already in recession using the Japanese definintion of decline in output, and China may be slowing down more significantly than is understood because of the poor data that is coming out of China. The Chinese economic activity too chaotic to accurately measure, and with large time lags before what is actually happening is detected and quantified correctly. ...

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Shigeru Ishiba was reappointed LDP party secretary-general in Japan. Ishiba served three terms as defence minister, is popular with the rank and file and the public. He has a good grasp of security issues. He will be the No. 2 person in the cabinet after prime minister Shinzo Abe. Ishiba was the first LDP official to give a specific trading range for the yen by publicly calling for a range of 85 to 90 yen to the dollar. The yen closed at about 85 yen to the dollar on Dec. 25, 2012. Two women join Ishiba and Abe in the leadership positions. Seiko Noda is now chairwoman of the party general council. And six term parliamentarian Sanae Takaichi is policy chief for the LDP.

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This Wall Street Journal editorial says the Balanced Budget Amendment (BBA) currently being put through the House is unlikely to pass especially with a supermajority tax limitation. It raises questions about the advantages of BBA considering that the 1981 Reagan tax cuts may not have survived the BBA, a period when the U.S. experienced robust growth for 7 years. Unintended consequences could put defense spending at risk such as the Reagan spending on defense that helped end the Cold War, which may not have survived the BBA. The editorial calls instead for a repeal of the Nixon administration's 1974 Congressional Budget and Impoundment Control Act, a law which tilted control of spending in the favor of Congress after Nixon's impoundment battles with Congress over spending. This would mean getting rid of budgeting that uses baselines and increases the budget from one year to the next automatically, restoring the President's impoundment powers, and requiring a two thirds majority for tax increases. The editorial supports the House Republican majority's plan to cut spending in fiscal 2012 by $111 billion and cap spending as a share of GDP in future years....

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The European Stability Mechanism made its first short term debt auction Jan. 8, 2013, by selling 1.927 billion euros of treasury bills. Japan remains a key investor. Japanese finance minister, Taro Aso, said Japan plans to to be an active investor in the ESM bond sales. He told a news conference: "Japan will purchase some ESM bonds using its foreign exchange reserves as it monitors progress in efforts to stabilize the European situation." Japan holds $1.27 trillion in foreign exchange reserves. The move pushed the yen lower. Investors pay the ESM to keep cash for three months- the ESM treasury bills had an average yield of minus 0.0324%. The ESM fund will be used for aid to Spain's banking sector, Greece, Ireland and Portugal. Plans are for the ESM to issue three month and six month bills twice a month to reach 18.5 billion euros by the end of 1st quarter 2013. The ESM fund rating is Aa1 by Moody's Investors Service, and AAA by Fitch Ratings.

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Stiglitz wants to put money in places where it will be spent immediately, unemployment compensation, in state and local governments hands to build critical infrastructure, state education budgets and environment spending for benefits in the long run, only limited help in the mortgage mess to the deserving and to reduce foreclosures, and no money to upperclass Americans who won't be spending much of it anyway.

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Egyptian president Morsi's address at the UN General Assembly as "the first Egyptian civilian president elected democratically and freely." On the Egypt-Israel treaty he said: "we are committed to what we have signed on." He defended the Syrian people, who he said were trapped in "the tragedy of our era." For Syria, Morsi has formed a contact group of Iran, Egypt, Turkey and Saudi Arabia to defuse tensions in the region. Egypt backs the initiative of the Arab League and the UN led by an experienced diplomat Lakhdar Brahimi, who recently visited Syria.

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Landon Thomas Jr. looks at the situation in Spain and finds it hard not to conclude that austerity policies are not working in the absence of economic growth, and increasing unemployment. Unemployment in Spain is at 24% and growing. Deficit reduction is likely to take longer with the deteriorating economic outlook. Spain's economy minister, Luis de Guindos has announced Spain plans to increase consumer taxes in 2013, including the VAT, which is currently at 18%. This would further depress consumer spending. Bondholders sense dangers from lack of economic growth and competitiveness, as much as they sense dangers from uncontrolled regional spending. As a result investors are leaving Spain. According to analysts at Credit Agricole Cheuvreux in Madrid, 100 billion euros (132 billion) have left Spain, including distress sales- coming from insurance companies, pension and sovereign wealth funds reducing holdings of Spanish bonds.

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Stevenson and Caselli describe the mood in Buenos Aires as negotiations with hedge fund holdout bondholders fail in July 2014.

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All sectors of the U.S. economy see an increase in hiring, including retail, transportation, healthcare and manufacturing, as the economy adds 288,000 jobs in June, according to the Labor Department. Manufacturing added 16,000 jobs, transportation 17,000 and the public sector increased jobs by 26,000. Hiring also picked up for high school graduates compared to the poor record in 2013. In 2013 one Barclays economist says the jobs for high school graduates at this point were declining by 16,000 a month on yearly basis. He says employers are now adding 29,000 jobs for high school graduates a month in 2014. The unemployment for high school graduates declined to 5.8% in June 2014, for persons with some college education or an associate degree 5.0%, for college graduates 3.3%. Barclay's estimate is that the U.S. added an average of 231,000 jobs a month for the first half of 2014. The inflation rate remains at about 2%, giving the U.S. Fed more flexibility in setting rates to support jobs growth. The lower unemployment rate of 6.1% understates the underemployment, as a more accurate measure of employment which includes people working part time because they cannot find jobs is at 12.1%. The proportion of Americans in the labor force is also at a 36 year low of 62.8%. These two indicators for unemployment, unemployment including people working parttime, and the proportion of Americans in the labor force, combined with inflation, are the main indicators Fed chairmam Yellen is looking at....

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The WSJ's Christopher Emsden and Alessandra Galloni's interview with Italy's Labor Minister, Elsa Fornero, after major changes to Italy's labor laws including Article 18. This is a major change for Italy. She describes the problems she faced and how she has tackled them to get the new labor law passed. Fornero will set up a monitoring system to ensure that the law's imprementation takes place smoothly. To make the change Fornero took apart Article 18 to its constituent elements, preserving the anti discrimination aspect and the right to appeal, but allowing employees to be terminated for economic reasons. This puts Italy on an even footing with its europartners Germany and France, and addresses one of the main reasons Italian businesses are loath to hiring new employees. It also addresses the main reason why foreign investment in the Italian economy is so scarce. In achieving this Fornero faced the lack of support from Confindustria, the business association (which does not cease to amaze her), CGIL, the labor unions, and the political class in Italy, with each side wanting to tweak the system to make gains or get special exemptions. Fornero is a pensions expert and economics professor at the University of Turin. Her ministry covers pensions, labor, welfare and equal opportunity policies....

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David Kostin, Goldman Sach's U.S. equity strategist and his prediction of the S&P 500 at 1250 at the end of 2012. The S&P was at 1421 on April 1, 2012, the highest it has been since May 20, 2008. In his research note Kostin says that over the longer term the stock market will offer opportunities after a more normal growth environment is reestablished. This is similiar to the view held by John Bogle, founder of Vanguard. For the short term- the 2012-2013 time frame Kostin sees tactical risks, and results below average. The reason he gives is low economic growth and the large degree of uncertainty. The situation in Europe shows slowing to no growth and more deficit problems, and the sanctions on Iran pose risks for oil prices.

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Laurent Berger, head of the French Confederation of Labor, C.F.D.T., is a moderating force in France as president Macron leads an effort to make a revision to France's labor code. With a large parliamentary majority president Macron is expected to push for a shift to a Scandinavian version of "flexible security," that allows companies and the economy to adjust the work force, introduce retraining and create flexibility so that new jobs can be created. His union is now the largest, after surpassing the militant General Confederation of Labor. Issues in labor changes proposed by president Macron are- direct negotiations between management and employees bypassing unions, and a cap to compensation in unfair dismissal cases. Berger's view is that though the interests of labor and management conflict, there has to be dialogue instead of constant confrontation. He is willing to see some jobs lost if business creates new jobs with improvement in the economy. Macron has summoned labor leaders for marathon talks. ...

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Russian president, Vladimir Putin, tells academics and journalists at an event called the Valdai Discussion Club, he had reservations about expanding the state sector by approving the deal for Rosneft to acquire TNK-BP assets. His motivation for doing this was the endless shareholder conflict between the Russian partners and BP. Putin says he warned British prime minister Tony Blair that a 50%-50% ownership venture would not work as nobody was in control, and described this as so bad that "sometimes they were fighting each other with their bare hands." The injection of private ownership into Rosneft with the 20% stake for BP would provide stability for the company and was the bright side to this. Foreign academics and journalists participate in three days of discussions with Russian academics and journalists in this event. Putin has no new vision for this third term beyond consolidating and protecting the achievements of the last decade. He cited as his achievements- growth of the economy, expansion of the foreign exchange reserves, and the increase in the birthrate....

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A number of issues came up at the Women20 Summit in Berlin. Annette Niederfranke, Director of the International Labor Organization, brought up the issue of family reconciliation as "one of the toughest challenges for working women worldwide," that in order to meet obligations women tended to work in "non standard forms of employment and in part time work linked to lower wages, lower social security, lower benefits, and fewer training possibilities." Childcare was also an issue that was prominent considering the lack of adequate childcare in many countries including in the European Union. With responsibilities for the elderly, babies, and small children women tend to be in the workforce for shorter periods leading to men taking up many of the higher positions. Angela Merkel pointed out that Gemany tended to take a narrow view of professions available to girls, saying- "So it is very very important that we take a broader view of things while girls are still at school." Merkel also supports a Africa compact that would help women set up small and middle size businesses in poor countries. The "Digital" aspects of this and other efforts for women were a major topic being discussed. One idea that came up was that more cooperation from men was needed to make things happen. This is the third Women20 Summit after ones in Turkey and China, and a sense of momentum was felt by women. ...

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Reflections on Spanish democracy, 34 years after free elections following the Franco regime. No new solutions to problems of high unemployment (reaching 5 million "paradores" or unemployed as a recent front page headline in extra large print in the paper Cinco Dias declared) from the Socialist party and the Partido Popular. And a sense that the country is on autopilot, as decisions are being made by the EU on recapitalizing banks and other economic issues without a significant voice from the Zapatero administration.

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Krugman points out that the inflation adjusted wages of non-supervisory workers in the retail field in America has declined by 30% since 1973. He says there are no adverse effects on unemployment because workers in retail are not competing with workers in other countries as happens in manufacturing. They are also some of the lowest paid workers to begin with, and the numbers are not small. One estimate is that here are 30 million workers who would benefit from an increase in the minimum wage from the current level of $7.25 to $10.10. State by state comparisons provide proof of this as no evidence of losses in employment are to be seen when one state has raised the minimum wage and another neighboring state has not. Germany is facing a similiar problem of low paid temporary workers and a new coalition government is planning an increase in the minimum wage in 2014 as a response to increasing inequality and disparity in incomes developing in the last two decades.