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China cranks up the export machine

Facing a slowdown at home, China turns to its factory workers.
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A worker assembles small soccer balls at the production line of Ball Star Toys Co., Ltd. in Guangzhou on Sept. 4, 2007 in Guangzhou, China. (Feng Li/AFP/Getty Images)

If you're obsessed with the Chinese economy — and let's face it, if you're reading this blog post then you've got more than a passing interest in the topic — then Sunday was a particularly interesting day.

That's because the Chinese government announced that exports surged 15.3 percent in May from a year ago.

That's double what economists were expecting.

It's also the biggest month ever for Chinese exports.

The announcement comes as China's domestic economy continues to slow. The export boom could help preserve the jobs of millions of workers who toil in Chinese factories. 

Think of it as China using its secret weapon: factories that have been well-tooled to outcompete others around the world in terms of labor productivity and efficiency, even as Europe tanks and the US economy shows new signs of weakness.

The New York Times has a smart overview today of the situation, which highlights long-term investments in productivity measures and short-term currency movements as the catalyst for the export surge.

The US has been the main market for Chinese stuff. Exports to America rose 23 percent from a year ago.

They were up a paltry 3.2 percent to debt-ridden Europe.

As the Times reporter Keith Bradsher points out, the export surge is likely to play a role in the race for the White House:

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Macro chatter: Trouble in China, trouble in Europe, and trouble in the US

Around the world in business: The world’s economies are so troubled that even porn stars are having to get second jobs.
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Taxi cabs pass an adult video store in Times Square. (Spencer Platt/Getty Images)

Need to know:
China’s quarter point interest rate cut has the world worried about just how bad May might have been for the Chinese economy.

The rate cut is the first in four years and has investors worried economic data due out of China this weekend could be uglier than anyone had been expecting, Reuters said.

Chinese growth has been slowing for six consecutive quarters, and China is on track for its slowest year of growth since 1999. 

Want to know:
Fed Chairman Ben Bernanke must have a great poker face.

While his number 2 suggested on Wednesday that QE3 could be the way ahead for the US economy, during a hearing on Capitol Hill Fed Chairman Ben Bernanke failed to give a clear signal of what the central bank might do when it meets later this month.

Bernanke did however say he doesn’t endorse breaking up the nation’s largest banks even though the six largest US financial institutions hold assets equal to about two-thirds of US GDP. 

He also told Congress he sleeps “pretty well” since he does “lots during the day” and needs to be well-rested.

Dull but important:
Europe seems to be taking steps toward creating some of type of centralized banking union. The European Commission has proposed a framework for dealing with failing banks that calls for countries to share the costs of recapitalizing cross-border banks, the Economist said.

This comes as the Cyprus is expecting it may need $2 billion to rescue its second-largest bank and has Portugal is embarking on a $8.2 billion bailout of three of its largest banks.

Spain’s bank also are in need of what could be a $50 billion bailout, according to Reuters.

Spain already has made plans to bail out its fourth-largest bank but the European Union isn’t a fan of the plan. German Chancellor Angela Merkel told Reuters Europe is ready to do whatever it has to keep the euro stable in the wake of the latest cuts to Spain’s credit rating.

Just because:
Fitch cut Spain’s credit rating to a BBB Thursday, and if the US doesn’t get its finances in order the ratings agency said a ratings cut could be in its future.

Fitch Ratings is planning to cut the credit rating of the world’s largest economy next year unless Washington can get its deficits under control, Reuters reported.

Fitch also plans to cut credit ratings for Cyprus, Ireland, Italy, Spain and Portugal if Greece makes a Grexit. 

Strange but true:
Porn is having trouble, too.

Like the music, movies and journalism, porn has been under siege by a proliferation of free content that’s driving down wages and leaving profits limp, BBC reported.

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Estonian Rhapsody: Did Krugman cherry-pick data?

Master austerity-slayer Paul Krugman dismisses Estonia's economic progress. Here's the bigger picture, and the back story behind one of the most entertaining Twitter wars in euro zone history.
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The big picture: Despite a sharp drop, Estonia's economy is humming again. (GlobalPost)
Master austerity-slayer Paul Krugman dismisses Estonia's economic progress. Here's the bigger picture, and the back story behind one of the most entertaining Twitter wars in euro zone history.
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Macro chatter: Now it really might be time for QE next

Around the world in business: A top Fed official talks about doing more for the US economy, China cuts interest rates, and Europe gets a lot of bad and a piece of good news.
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Although Germany had enjoyed record-breaking exports in earlier in the year, the end of 2011 revealed a less optimistic reality. "It was a bad December through and through," Ulrike Rondorf ,an economist from Germany's second largest bank, Commerzbank, told AFP. Commerzbank was downgraded by Moody's on Wednesday. (DANIEL ROLAND/AFP/Getty Images)

Need to know:
The QE next talk is growing louder.

The Fed’s no. 2 official suggested it might be time for the US central bank to do more to support the world’s largest economy.

Janet Yellen, the Fed’s vice chair, suggested continued trouble in the housing sector, a lackluster job market and generally worsening financial conditions could force the Fed to act. 

“It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest," she said at a speech in Boston.

Fed Chairman Ben Bernanke is scheduled to appear on Capitol Hill today.

Want to know:
For all the bad news there is about Europe’s economy these days, there may be at least one bright spot. Chinese investment in Europe tripled to $10 billion last year, according to a study cited by the Associated Press.

The Rhodium Group expects Chinese investments outside its borders could grow to $2 trillion by the end of the decade.

Of course, Europe will face stiff competition in courting China. The US and other governments also are clamoring for more investment yuan from China, which is battling its own economic slowdown. 

Chinese officials cut interest rates for the first time in four years to spur growth.

Dull but important:
It’s been yet another tough week for European banks, and this time its Germany that’s in trouble.

Moody’s has downgraded six German banks, including the country’s second-largest lender Commerzbank.It also cut ratings on three Austrian banks.

Moody’s is worried about what the ongoing euro crisis could do to the banks’ financial positions. 

Just because:
AIG CEO Robert Benmosche may think Europeans should work longer before retiring, but France doesn’t agree.

French President Francois Hollande is planning to lower the retirement age to 60 for some workers, which could make things tougher for the French economy.

French people, though, are probably pretty happy. They protested when former French President Nicolas Sarkozy increased the retirement age from 60 to 62 in 2010.

Strange but true:
Will Smith and Tommy Lee Jones aren’t the only Men in Black.

Apparently, international financial officials also wear black when they parachute in to push budget trimming at bailed out countries.

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Joseph Stiglitz: Romney economic plan would "significantly" up the odds of recession

Nobel Prize-winning economist Joesph Stiglitz has some harsh words about Mitt Romney's brand of economics.
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Would this guy wreck the US economy? (Patrick Smith/Getty Images)

Mitt Romney shouldn't be expecting any checks in the mail from Joseph Stiglitz.

The Nobel Prize-winning economist — formerly chairman of President Bill Clinton’s Council of Economic Advisers — has just destroyed Mitt's economic plan.

In a wide-ranging interview today with Bloomberg, Stiglitz said a Romney presidency would be very bad news for the world's largest economy.

Why?

Romney's economic vision would mean less government spending, which in the language of Europe is currently pronounced "austerity."

Here's the rationale:

Less spending by government is a dangerous proposition when consumers and businesses — the main drivers of economic growth in the US — are unable or unwilling to do it themselves.

The austerity approach is also what happened ahead of the 1929 stock market crash and the Great Depression, the noted economist drearily pointed out.

But Stiglitz didn't stop there:

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Macro chatter: Could QE3 be on the way?

Around the world in business: ECB leaves interest rates unchanged, the US Fed thinks QE3, and Elmo won't get to hang out with his Pakistani friends much longer.
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The Paycheck Fairness Act which would have made it illegal for companies to retaliate against employees who asked about their colleagues' salaries failed in a Senate vote on June 5, 2012. President Obama and Senate Democrats were strongly supporting the bill. (STAN HONDA/AFP/Getty Images)

Need to know:

The European Central Bank kept a key interest rate unchanged today, but noted that growth in the euro area remains weak. 

The ECB's key interest rate is currently at 1 percent, and some economists were expecting it would cut rates to spur growth in the struggling euro zone. 

Want to know:

Women across America are not happy, this one included. 

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India economy: From bad to worse

As a former high-flying economy stumbles, the economic pain spreads.
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Indian women work at a construction project in New Delhi on Feb. 1, 2010. (Daniel Berehulak/Getty Images)

Things are only getting worse for India's sputtering economy.

GlobalPost's superb Senior Correspondent in India Jason Overdorf has been all over this story in his excellent On India blog.

Today, he filed this great report that examines the human impact of the ongoing problems in the formerly high-flying Indian economy.

Jason introduces us to several worried actors in the current economic drama now unfolding in Delhi:

“There's no more cutting back for me,” says Ram Samujh, a soft-spoken, gray-haired man who carefully takes out a pair of rimless reading glasses. “I'm already down to only the absolute necessities. I'm a daily worker,” said Samujh, whose skills give him a leg up on most Indian laborers. “One day I might get three jobs. But then I might go a week without any.”

But as Jason also reports, it's not just India's poor who are being hit.

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Macro chatter: G7 worries but not about Estonia

Around the world in business: G7 is extra worried about Europe (again), and Ikea isn't translating so well in Thailand.
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A Estonian woman gives change to a customer in Euro in a supermarket in Tallinn on January 1, 2011. Estonia has become an oasis in the euro zone and is now the only euro zone country running a budget surplus. (Raigo Pajula /AFP/Getty Images)

Need to know:
The euro just can’t seem to catch a break this week. First George Soros gave it about three months to live, and now Standard & Poor’s is saying there’s a pretty good chance Greece will have to make a Grexit.

S&P is placing the odds of a Grexit in the coming months at one in three. S&P expects Greece leaving the euro zone could lead it to default on its debt.

Greek voters are set to have their say later this month. Greece is over the budget cuts the euro zone is demanding of it, and the euro zone has said it won’t budge. 

Want to know:
Here’s one reason you might not be able to retire as early as you’d hoped: Bankrate.com said the $1 million benchmark most people have had in mind as the ultimate retirement nest egg should really be about $3 million.

In the past, people were able to count on stock market returns of 12 percent to 15 percent a year, but markets in recent years have shaken that belief. Inflation also could begin to rear its ugly head at anytime, Bankrate said.

Here’s to hoping you can build that bigger nest egg before you turn 80.

Dull but important:
The G7 has scheduled an emergency meeting today to discuss the ongoing euro zone debt crisis.

Finance ministers and central bankers from the US, Canada, Japan, UK, Germany and France will hold a conference call in which they’re expected to increase the pressure on Europe, Reuters said. In G7 speak, conference call means there's a big problem brewing. 

Europe and much of the rest of the world is increasingly worried about Spain, which is mired in a banking crisis and asking for help, and Greece, which may have to leave the euro zone if it can’t cut its budget.

Just because:
Estonia has made a comeback
worthy of any sports metaphor you can think of.

The country joined the currency union 16 months ago and is now the only euro zone country running a budget surplus. It also is carrying less debt than Germany and (obviously) Greece.

Estonia’s economy grew 7.6 percent last year despite being one of the countries hardest hit by the global financial crisis just a few years ago. The Estonian economy shrank more between 2008 and 2009 than Greece has in the past five years. 

Strange but true:
The word Redalen may mean bed in Ikea speak, but in Thailand it’s more like getting to third base. And that's not a sports metaphor.

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Macro chatter: Using fried chicken to beat McDonald's in India

Around the world in business: Cyprus is on the brink. One millionaire CEO thinks you may have to work until you're 80, and Yum brands wants to export its Chinese fried chicken success to India.
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A woman eats a chicken leg at a Kentucky Fried Chicken (KFC) outlet in Beijing. (Peter Parks/AFP/Getty Images)

Need to know:
Another one could be close to biting the dust in Europe.

Cyprus is getting closer to becoming the next euro-zone country to tap a European bailout fund, the Wall Street Journal said.

The idyllic vacation island in the Mediterranean could be forced to ask for a financial rescue as early as this month as it works to stave off the spread of Greece’s financial crisis and its worsening credit reputation, the paper said.

Cyprus’ already is forced to contend with paying double-digit yields for what two major ratings agencies already classify as junk.

Want to know:
American International Group CEO Robert Benmosche won’t have to work until he’s 80, but he thinks you might have to.

In an interview with Bloomberg from his villa in the Croatian seaside resort town Dubrovnik, the AIG CEO said Europe’s debt crisis demonstrates that people aren’t working long enough to make their pensions and medical services affordable to their governments.

People around the world could need to work until they’re 70 or 80, he told Bloomberg.

Benmosche is 68, but since he earned more than $10 million in 2011 alone, he can probably retire whenever he wants. 

Dull but important:
Billionaire investor George Soros is giving the euro zone three months to figure out how to keep the euro alive.

He describes the euro zone as a political bubble on the verge of popping. Speaking at the Festival of Economics in Italy, a country that's of course struggling with its own economics, Soros said he expects that market demands of European governments will exceed their ability to pay in three months.

The euro as you know has been on the verge of collapsing for a while now.

Just because:
Yum! Brands, the corporation behind KFC, Pizza Hut and Taco Bell wants to do in India what it has done in China.

The company wants to give McDonald’s a little more run for its rupee and is trying to figure out how to copy its Chinese dominance in India, Financial Times reported. China is one of the few countries in the world where Yum stores outnumber McDonald’s locations. Yum has around 4,000 KFC and Pizza Huts in China, where McDonald's has only about 1,400 golden arches. 

By 2015, Yum expects Indians will be spending more than $1 billion a year on KFC fried chicken.


Strange but true:
The Securities and Exchange Commission may be a more dangerous place to work than you think, at least according to the SEC’s lead internal investigator.

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Macro chatter: A sad US jobs report and a slowdown in India

Around the world in business: India's economy slows down, US Treasury yields play limbo, and Bruce Springsteen rails on bankers in Berlin.
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Shoppers at the Express Avenue Mall in the southern Indian city Chennai. (Meena Thiruvengadam/GlobalPost)

Need to know:
You know things aren't good when the latest US jobs report starts getting called the payroll report of doom

The US added 69,000 jobs in May. The number is the weakest in a year, and even its silver lining — that more people are jumping back into the workforce — isn't all that encouraging. 

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