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The unemployment rate for young people 16-24 years old is 18% in the USA in 2009, up from 13% in 2008. This has serious consequences, creating a lost generation as happened in Japan in the last decade.

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Mervyn King, the governor of the Bank of England, is coming under increasing criticism for supporting the Conservative-Liberal coalition government's austerity plan, and for lack of efforts to fight inflationary pressures. On a major issue on which King has taken a clear stand- that the largest British banks should increase capital levels exceeding the international standards- not much has happened. Consumer prices in Britain were up at a 3.7% annual rate in December, and the government's austerity policies will also cause pain. In a recent speech King said that the Bank of England had limited ability to fight the higher unemployment and increased inflation. It was an admission of the limits of central bankers in the current situation. King said "a squeeze in living standards is the inevitable price to pay for the financial crisis and the subsequent rebalancing of the UK and world economies.

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Berlin based China studies center MERICS experts say China's weak spot is domestic consumption, as it is too reliant on export demand. These experts say overseas demand from Europe and US has held up in recent months, but where would China pick up manufacturing production when this demand slows down? Stimulus is seen as risky by experts and contradictory to efforts by the Chinese government to reduce debt based financial risks, with the debt built up in hypergrowth of two decades since 2000. Much of this hypergrowth itself has resulted in trade tensions with US and today puts China in what MERICS calls this "tricky situation." This situation resulted from growth since 2000 that was was unleashed from local governments in China with failure to control it from the central government in Beijing to reduce its impact on deindustrialization of towns and communities in the US and Europe. A lesson that China's planners may be looking at as they look to the future for more balance and quality of life,  and dignity of life for rural, town and city communities across China. Politburo CCP's standing committee has put forward the idea of a "dual circulation economy" to reduce dependence on foreign demand, and balance it with growing domestic demand, yet experts at Berlin base MERICS say this has not happened. A report from the Atlantic Council says without domestic demand picking up the pace of China's growth, China would have difficulty growing beyond 3% annually by 2025.  ...

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Denning uses the Brazilian government's scrapping of a 6% tax on foreign purchases of bonds to slow the slide in the value of the Brazilian currency, the Real, to point to the changed situation today for Brazil, India, Turkey and S. Africa. Current account deficits in these countries are high, and foreign investors sentiment about emerging markets may be affected by the street protests in Turkey, reducing inflows of capital. The mining worker protests in S. Africa and the street protests in Turkey, have led to a decline in the currencies of the two countries. The Fed's quantitative easing program may be coming to a close, which would reduce the flows of capital to emerging market countries. Turkey has seen a boom in domestic credit supported partly by foreign capital inflows. The current account deficit to GDP ratio for Turkey is expected to be 7.28% in 2013, for S. Africa 6.46%, and Brazil 3.25%, according to IMF forecast.

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Uchitelle of NYT says it may be years, 3-7 years, before all the idle capacity that is created gets used again. Only 68% of the country's manufacturing capacity us being utilized at this time and the numbers will keep dropping.

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The People's Bank of China's decision to reduce the reserve requirement for deposits at banks by 0.5% is not likely to have much impact, as banks already have enough money to lend. The problem is more a lack of demand for loans as the economy slows. Inflation fears restrict the use of growth tools such as lowering interest rates and the housing bubble limits the use of construction spending to increase growth. Political uncertainty with a leadership transition, and economc uncertainty in Europe also limit options.

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Haruhiko Kuroda, 68 years old, a senior finance ministry expert who ran the ministry's currency policy as vice finance minister for 4 years in the early 2000's, is prime minister Abe's nominee for central bank chief. He lectured at Hitoshibashi University for two years before becoming the head of the Asian Development Bank. His book "Success and Failure in Fiscal and Monetary Policy," is critical of the Bank of Japan for mistakes in being first too accomodative in monetary policy to set up the 1987 crash, and then tightening too quickly leading to the deflation and recessions of the last two decades. By choosing an expert with a long experience in the field of monetary policy and a vigorous advocate of getting things right to shake off the deflationary trends, Abe is sending a strong signal to financial markets. Kuroda says he is looking at a shorter time frame to achieve a 2% target for inflation- about two years. In essence Kuroda is taking a page from the policy book of a small group of MIT trained economists, Bernanke at the U.S. Federal Reserve, Draghi at the European Central Bank, and Mervyn King at the Bank of England to boost domestic economies in the context of increasing global growth. The yen weakened to 94.77 to the dollar on Feb 25, 2013, after the announcement. Abe's nominee for one of two deputy governor appointments is Kikuo Iwata, a 70 year old economist who was also critical of Bank of Japan monetary policy since the 1990's. The Abe administration has also carefully communicated this message. Speaking at the Centre for Strategic and International Studies in Washington D.C. Abe said Japan's goal was to increase exports, but at the same time it will increase imports which should benefit the U.S., China, India and other countries. He described a recovery in Middle America from the Dakotas to the Carolinas and sees something like this happening also in Japan. Even the appeals to nationalist sentiment are also coupled with the message to China and S. Korea of not climbing up the escalation ladder and seeking good relations to promote mutually beneficial development. Abe's focus is on building the U.S.- Japan relationship....

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Jeremy Grantham and Jason Zweig share the view that this market has gone up too fast too quickly. Stocks that went down the fastest of companies in industries like finance and banking, insurance and autos, went back up with government support. And many of these companies that have poor earnings prospects are issuing more shares to raise capital now that the credit markets are working, so that they have some cushion if credit markets tighten again. Grantham thinks this dilution of shares spreads future earnings thin over a larger number of shares. Zweig says whatever was garbage has done good, which suggests that what is seen as a recovery in the stock markets is not perceived as a healthy recovery. Grantham's comment that "the junky companies may be diluted to hell just to keep them alive," and Zweig's comment that these "garbage" stocks are hot, but can be expected to sink for precisely that reason, do not offer a reassuring view of this kind of fragile recovery. Companies with stable businesses and stable earnigs prospects haven't done as well as these so called "garbage" businesses to use Zweig's term. Companies like Microsoft, Procter and Gamble and Johnson, and Wal-Mart which have low debt and stable returns. Grantham sees them as offering value in today's market. ...

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The performance of the PIMCO Total Return Fund is 1.22% year to date. PIMCO's Bill Gross sees Japanese investors investing in 10 year U.S. Treasury bonds.

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David Stockman, Director of the Office of Management and Budget under President Reagan tells Tom Keene that the first step to deficit reduction is to means test the 2 milllion to 5 million or 10 million people who are very affluent, and have the benefits of some part of this population eliminated entirely. The next step he suggests is for spending much less on defense. A defense budget at $800 billion he says does not make sense today, because it is 35% larger in real terms than the budget when Reagan was President and the U.S. faced the Soviet Union. The U.S. does not need to be the world's policeman.