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Areas in the "too big to fail" part of Dodd-Frank U.S. financial reform legislation where work remains to be done to prevent a future crisis include: the creation of living wills by the largest banks so that they can be dismantled in an orderly fashion, and the designation of which banks are systemic risks by the Financial Oversight Stability Council. The FDIC and the Federal Reserve have yet to finalize the rules for creating "living wills" for large banks. The rules are expected to be finalized by fall 2011. The FOSC is working on the designations and what criteria to use for selecting the non-bank firms that pose systemic risks. Progress has been made at the FDIC by finishing several rules for implementing a new system to wind down a large failing bank. The FDIC is hiring staff for a new office that focusses specifically on large complex financial firms. Fed Governor Daniel Tarullo has led the effort for higher capital reserve requirements for U.S. banks, requirements that would be closer to 14% for capital reserves. In an editorial on June 16, 2011, the Wall Street Journal said that if the Federal Reserve is serious about controlling systemic risk then it should support capital reserve requirements of 14%....

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Prince Mohammed bin Salman, son of the Saudi king Salman, oversees economic policy. He says stock sales of 5% of Saudi Aramco will be used to create a sovereign wealth fund of about $2 trillion that would help create the jobs with income from overseas investments and projects at home. About three times the jobs created in 2003-2013 will be needed with the demographic changes, according to McKinsey consultants. This will act as a diversification away from oil income dependence.

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The U.S. "quit rate" reflecting job churn in the economy with workers leaving for better job opportunities increased to 1.8% in Nov. 2013, increasing from 1.2% low in Sept. 2009, according to the Labor Department. 2.4 million workers resigned in Nov. 2013. This includes workers retiring and choosing not to work. The quit rate was about 2.1% betwen 2000 and 2006. About 20% of the churn is from the lower paying hotel and restaurant sector. As the U.S. population ages and workers look for more stable jobs the number of workers leaving jobs is declining since the 1990's.

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European Central Bank president, Mario Draghi, addressing the European Parliament in Brussels on April 25, 2012, supported both sides in the issues facing the eurozone, calling for continued vigilance on structural reforms to improve competitiveness of countries in the eurozone such as Spain and Italy, and at the same time saying it was imperative to generate economic growth. He told the European parliament: "The uncertainty about the present situation is very, very, high... Any exit strategy is premature given the current economic situation." Saying that the fiscal compact had been negotiated recently to control spending, yet what Europe needed was also a growth compact- "but my most present thought right now is to have a growth compact." He emphasized that it was now upto governments and banks to pick up the ball. The ECB's achievement was buying time with its 3 year loans to banks in Spain and Italy and other EU countries in Dec. 2011-March 2012, which he described as no ordinary achievement. Francois Hollande and Angela Merkel seized on Draghi's comments to show they were doing the right thing. Merkel conceded that growth was needed, saying sustainable initatives would be good for Europe, that what Germany was opposing was simply stimulus spending that would increase debt without the structural reforms to improve competitiveness. Hollande for his part said he would call for eurozone bonds to pay for industrial and infrastructure projects, and a financial transactions tax....

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"The best port in the storm," is how officials in Brussels described Greek prime minister Samaras in October 2012, as Samaras negotiated terms with the EU/ECB/IMF team for the next instalment of funds from the EU.

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Greece passed what prime minister Samaras called the last of the austerity cuts in November 2012 and called for action by lenders in the EU. The EU's Rehn says it is time to dispel the notion that Greece has not made progress in making the economic changes needed. Finance ministers of the eurozone meeting in Brussels agreed to give Greece two more years to reach deficit reduction targets. The cost of this to the eurozone will be 32.6 billion euros. A $40 billion payment to Greece is still on hold till Nov. 20, 2012. The cuts passed in parliament in November 2012 by the Samaras government will raise 17 billion euros over 4 years. The 2013 budget passed in parliament has cuts of 9.4 billion euros to salaries pensions and benefits, and raises the retirement age from 65 to 67. As of Nov. 2012 the bailout packages to Greece from the eurozone countries are at $240 billion.

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Yannis Stournaras, macroeconomics professor at the University of Athens, takes over as finance minister in Greece in June 2012 in the new administration of Antonis Samaras. He brings vast expertise and fresh ideas.

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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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Polls after prime minister Papademos assumed office show nearly three fourths of Greeks see his appointment as a "positive" step for Greece. The popularity of the Socialist party of Papandreou has suffered the most in public opinion. One poll shows only 11% of Greeks would vote for the Socialist party, compared to 21% for the New Democracy party. The New Democracy party has widened its lead over the Socialists.

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Two Harvard economists, Lawrence Summers and Lant Pritchett, say China is likely to revert to the mean of average long term growth of developed countries after this spurt of growth is over. Growth is likely to slow to 6% by 2016, and revert to the mean of 2% for industrialized countries in the long term. Goldman Sachs banker Jim O'Neill, says the growth at a higher rate could be sustained because of urbanization. Summers does not rule out this outcome as he accepts a range of outcomes, with the most likely outcome being a reversion to the mean. The factors often cited for slowing growth are lower of productivity of capital as corruption and close connections determine where capital is allocated, misallocation of capital, large increases in credit in the economy since 2009 leading to bad debt in the financial system, aging society and demographics with increasing numbers of older people. Other reasons are the choices being made by Chinese leaders for slowing down to address the problems of air pollution and contamination of water supplies, inflation in housing prices, overdependence on exports, need to shift to increasing domestic consumer spending but unable to do this with the lack of spending power of large parts of the population because wealth is excessively concentrated in the upper ranks of society. The need to manage these forces ensuring some measure of stability depends on finding ways to reduce the growing concentration of wealth and power, in itself a challenge for the Communist Party elite. A combination of different factors with some still unknown factors are likely to play a part in this reversion to the mean for China, a situation encountered by every country so far in North America, Europe and Japan. This makes it even more important that each developing society structure its development around the most optimal goals with the least costs attached to the development....

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Three regional Fed bank presidents have expressed skepticism of the Fed plan to buy medium to long term Treasury bonds- they are Kocherlakota of Minneapolis Fed, Richard Fisher of the Dallas Fed, and Plosser of the Philadelphia Fed. There are 12 regional Fed banks, and five voting seats on the Federal Open Market Committee rotate for the 12 Fed bank presidents. Opposition to Bernanke will increase as these presidents take voting positions in the Fed Open Market Committee. The Wall Street Journal reports that there is deep skepticism about Bernanke's plan among some of his colleagues. Thomas Hoenig of the Kansas City Fed says that more expansive monetary policy was "a bargain with the devil." The Fed's plan is to take a measured approach with U.S. Treasury bond purchases with maturities between 2 and 10 years. A WSJ survey of private sector economists in October 2010 found that the Fed is expected to purchase about $250 billion of Treasury bonds each quarter, and continue till mid 2011, amounting to $750 billion in all. By pushing down Treasury yields the Fed hopes to have an impact on the federal funds rate of one-half to three-quarter percentage point impact for $500 billon of bond purchases, says Dudley, President of the New York Fed. Treasury yields on the 10 year note have fallen from 4% in April to 2.6% partly in anticipation of Fed's action. The previous Fed intervention in March 2009 was a program to buy $1.75 trillion of Treasury and mortgage bonds over 6-9 months. This time the approach will be careful and measured based on results, according to the Fed. Alan Blinder, former vice chairman of the Fed, says this is the tool less preferred and of unknown effectiveness, as fiscal tools would be the preferred choice. The deficit concerns, he says, have restricted the preferred option....

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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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Jon Gertner makes several critical points about the importance of supporting and investing in manufacturing. The U.S. private sector in new industries such as alternative energy, and electric cars is competing not just with the private sector in Germany, S. Korea or Japan. It is competing with the governments of these countries which are investing heavily to build innovation and jobs in their home countries. Innovation, design and manufacturing are woven together in these new industries in a manner that is different from the iPhone/ iPad/ Search algorithms /Facebook software type industries dominated by names such as Apple, Google and Facebook. The software industries are the opposite of jobs intensive industries with Facebook having 2000 employees and Google having 29,000 employees. By comparison the lithium battery industry could generate over 62,000 jobs in the next 10 years, and the electric car industry as a whole with its supplier networks could generate much larger numbers of jobs. Because of the advanced technology involved these are good well paying jobs. The finance industry in the U.S. is attracted to the quick returns in the software related fields, leaving a gap for the American government to fill a role nurturing these industries. This would be similiar to the manner that the German and Japanese governments do working with their own private sector. The private sector in the U.S. needs only the early nurturing and can operate on its own by innovating its way to competitiveness in manufacturing and cost after the early years. Because of missteps in failing to support manufacturing in the U.S., the U.S. may have to import some of the technology from countries such as Japan and S.Korea to make up for these missteps. This is happening in the lithium ion battery manufacturing technology and facilities, which experts say is being successfully imported from these countries to the U.S.. The Obama administration has provided $2.5 billion dollars from the stimulus investments to support projects of 30 companies operating in the advanced battery technology field. This includes companies such as A123 Systems and LG Chem Power in Michigan. As a result of these efforts the Department of Energy estimates that by 2015 the U.S. will have the capacity to manufacture 40% of the world production of lithium batteries for the autombile industry. In 2009 the U.S. had capacity to manufacture 2% of the batteries....

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Signs of a serious bubble in house prices in Canada. Home prices in February 2011 rose 8.8% from the year before, to 365,000 Canadian dollars. This is more than double the average home price of C$158,145 in 1999, according to the Canadian Real Estate Association. A comparison with the U.S. shows home prices going up 58% between 1999 and 2006, according to the National Association of Realtors, and falling 18% after the subprime mortgage crisis. By contrast home prices in Canada went down in 2008-2009 during the global financial crisis but are now back up and surpassed the previous high. This suggests the Canadian real estate market is facing a serious bubble comparable to or exceeding the bubble in the U.S. Trends that have supported the market such as Chinese buyers in Vancouver and Toronto, depend largely on the strength of the high economic growth in China and overseas buyers. Other weaknesses- the Canadian Association of Accredited Mortgage Professionals pointed out in a study in January that of the 400,000 first time home buyers during 2010, about 50,000 would have high-debt service ratios if interest rates, now at between 2-4%, were to rise to 5%. The Canada economst at Capital Economics, David Madani, says he expects a correction of 25% in the next 3 years, as this boom unwinds. He points out that house prices are now 5.5 times disposable income per worker, compared to an historical average of 3.5....