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We find it hard to talk about China without talking about India. Sometimes, for the sake of economic comparison, we pit the two against each other. Other times we pit the two, often along with South American kindred spirit Brazil, against the developed economies of the West. india and China seemed to zag while the rest of the world zigged during the global economic crisis, and were able to grow while the US, China, and Europe stagnated. But as 2011 ends, the two growing powerhouse economies are showing some vulnerability. At Project Syndicate , Stephen Roach warns us not to carried away by concerns that China and India will struggle in the coming year. He is a little worried about India's ability to avert crisis. As for China, Roach says not to expect a "hard landing," as China's policymakers have taken necessary action to ward off any major downfall: That is particularly evident in Chinese officials’ successful campaign against inflation. Administrative measures in the agricultural sector, aimed at alleviating supply bottlenecks for pork, cooking oil, fresh vegetables, and fertilizer, have pushed food-price inflation lower. This is the main reason why the headline consumer inflation rate receded from 6.5% in July 2011 to 4.2% in November. Meanwhile, the People’s Bank of China, which hiked benchmark one-year lending rates five times in the 12 months ending this October, to 6.5%, now has plenty of scope for monetary easing should economic conditions deteriorate. The same is true with mandatory reserves in the banking sector, where the government has already pruned 50 basis points off the record 21.5% required-reserve ratio. Relatively small fiscal deficits – only around 2% of GDP in 2010 – leave China with an added dimension of policy flexibility should circumstances dictate. India, however, "is more problematic," Roach notes: India is more problematic. As the only economy in Asia with a current-account deficit, its external funding problems can hardly be taken lightly. Like China, India’s economic-growth momentum is ebbing. But unlike China, the downshift is more pronounced – GDP growth fell through the 7% threshold in the third calendar-year quarter of 2011, and annual industrial output actually fell by 5.1% in October. But the real problem is that, in contrast to China, Indian authorities have far less policy leeway. For starters, the rupee is in near free-fall. That means that the Reserve Bank of India – which has hiked its benchmark policy rate 13 times since the start of 2010 to deal with a still-serious inflation problem – can ill afford to ease monetary policy. Moreover, an outsize consolidated government budget deficit of around 9% of GDP limits India’s fiscal-policy discretion. Read Why India is Riskier than China here .

Want to see what five years of global micro-lending looks like in the form of a war games map of the world? Kiva Microfunds , the San Francisco based organization that facilitates Internet lending of small scale loans to students and entrepreneurs with the aim of alleviating poverty. In five years Kiva has facilitated over $240 million in loans, and attracted more than 620,000 lenders. For details about Kiva's lending and many of the projects Kiva loans have funded, click here . To get a sense of all the activity Kiva has sparked, take a look at the animated map Kiva has produced to mark five years of micro-lending: Intercontinental Ballistic Microfinance from Kiva on Vimeo .

If you're looking for a banker who is relatively optimistic about the direction in which the US economy is heading, Robert Wolf may be your guy. Wolf is CEO of UBS Group Americas . He is also part of the White House's Economic Recovery Advisory Board. And while he recognizes that the growth over the last three quarters has been small, he nevertheless sees that growth, along with the stock market's rise, as important signals. He explained his "glass half full" view on economic recovery, and shared his thoughts on the prospects for investment banking in this interview with Knowledge@Wharton :

It remains unclear whether Congress will push through financial regulation reform anytime soon, and what exactly that reform might look like ( Reuters outlines key differences between current House and Senate proposals ). Christina Romer , chair of the President's Council of Economics Advisers , spoke with Charlie Rose about some regulatory reform that she thinks would help, and about why she thinks regulatory reform is necessary now. Here's an excerpt from that interview: Watch the full interview here . Some Wall Street bankers are making it clear that they expect tighter regulation will drive up costs for consumers. Marketplace 's Bob Moon reported on JP Morgan Chase's anticipated cost adjustments and how it might affect shareholders and consumers. Here is his report :

Menzie Chinn taught Macro at the University of Wisconsin this past semester. It was the first time he taught the course since the Great Recession. The last time he taught the course, the "key topics were inflation, the possibility of stagflation, and the possibility of containing the ongoing housing slowdown." This time: "the two big concerns were (1) dealing with the Taylor rule, and (2) dealing with the banking sector. A less difficult-to-deal issue is the consumption function." Over the past ten years, the trend in macro textbooks has been to dispense either partly or fully with the IS-LM construct, where the quantity of money enters into the determination of GDP, and substitute in a monetary reaction function, where the arguments are the output and inflation gaps, i.e., the Taylor rule. This was a useful innovation, but was difficult to apply to Japan (as I stressed in my lectures) and as of late 2008 as the zero interest bound became a reality for American policymakers. And heading into next semester, Chinn is planning on addressing the long term implications of the recession: One important macro factor involves the implications of the financial sector turmoil for the capital accumulation, and unemployment and the decline in asset values for labor force participation rates. In my seminar on the Great Recession, I discuss the recent OECD Economic Outlook Chapter 4 on this subject. You can read his full post at Econbrowser . And if you are teaching macro, let us know how you have changed your course since the global economic crisis hit (click on comments).

Richard Thaler , professor of economics at the University of Chicago's Booth School of Business , studies behavioral economics and finance. So perhaps it isn't surprising that he wants banks to consider building stronger relationships with consumers based on the way consumers behave, rather than making a profit off of consumers' misbehavior (overspending, tardy bill paying, etc.). Building trust with customers likely means lower short-term gains for the banks, but it might also mean longer relationships with better customers. He explains his idea in this BigThink video:

A group of researchers at the Cleveland Fed have a new idea for how to deal with the so-called "too big to fail" institutions. In language more suited to a Fed researcher, James Thomson --Vice President and Financial Economist at the Cleveland Fed--calls them " Systemically Important Financial Institutions ," and he writes in a paper that the first step is better defining these institutions: The purpose of creating a practical definition of systemic importance is to enable supervisors to discipline systemically important financial institutions. Understanding the nature and causes of systemic importance is the foundation for creating regulations, supervisory policies, and infrastructure that will rein in the associated systemic risk; in some cases, doing so sufficiently mitigates an institution’s potential systemic impact so that it would no longer be considered systemically important. Because any two firms could be deemed systemically important for unrelated reasons, a one-size-fits-all designation such as “too big to fail” is inadequate. Consequently, the approach taken here is to propose a means of classifying systemically important financial institutions (SIFIs). And the economists at the Cleveland Fed tout a three-tiered approach to regulating SIFIs. You can more about the approach here , and watch this helpful Drawing Board video: (Hat tip to Caitlyn Kenney at Planet Money)

The Banker has released its list of the Top 1000 Banks around the world. The top banks are all familiar names: JP Morgan, Bank of America, Citigroup, Royal Bank of Scotland, and HSBC make up the top five. Of course, any cursory reading of the front page these last 10 months would help one realize these banks have had a tough stretch. And indeed the The Banker's report reinforces that notion--this is the first time in four decades that the top 25 banks on the list have registered a loss. While the Top 1000 as a group brought in $780 billion in profits for last year's report, they made a combined $115 billion in this year's report. That's a drop of over 85%. The losses were built up by banks in the West, while banks in Asia primarily propped up the Top 1000's profits. The Banker's Geraldine Lamp writes: US banks made an aggregate loss of $91bn, the EU 27 an aggregate loss of $16.1bn, and the UK’s banks lost, on aggregate, $51.2bn. In terms of return on capital (ROC), the disparate fortunes of the world’s banks is equally as startling. On aggregate, China’s banks in the Top 1000 chalked up an ROC of 24.38%. This compares with an aggregate ROC of -15.32% for UK banks and -10.32% for US banks. Japan’s banks in the Top 1000 achieved an ROC of 4.43% and Brazil’s 15.98%. The inexorable rise of Asia, excluding Japan, is also played out in the composition of the Top 1000. The number of banks in the rankings from Asia has risen from 174 two years ago to 193 this year, as the number of banks from the US has dropped from 185 to 159, and from the EU 27 from 279 to 258. But Lampe adds that this does not mean that the top banks--Western banks--are ready to hand over the reins to banks from emerging economies yet: With next year’s profits largely determined by the ability of Western economies to emerge from recession and generate growth, it may seem axiomatic that China’s banks – and those from other emerging economies that are weathering the downturn a little more smoothly – will climb even higher up the Top 1000. This cannot be taken for granted. For one thing, the very creativity that got the West’s banks into this mess will be the thing that gets them out of it. Over and over again, Western banks have displayed a remarkable ability to reinvent themselves to keep pace with global change. You can read the report here . And watch Lampe discuss the Top 1000 with Brian Caplen , editor of The Banker, below: