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Former U.S. Secretary of Defense, William Cohen, on what the automatic spending cuts from the sequester- after the failure of the Supercommittee in Congress to reach agreement- will mean for the Defense Department and defense preparedness.

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Lt. Gen Trainor and Michael Gordon describe the situation during the last months of U.S. presence in Iraq. President Obama is ambivalent about the size of the military presence he would like to leave, settling for 3000 troops and a few F-16's from a inital figure of 10,000. Obama sees the presidential election approaching and sets an objective of keeping it minimal. The military cooperation treaty with Iraq has to be approved by a Iraqi parliament with different factions in parliament not likely to approve it. Prime Minister Malliki decides not to move ahead. In the end no military cooperation treaty is signed after 8 years of war and a date is set for a complete withdrawal. Iraqi airspace is used by Iran to ship supplies to Syria's Assad regime, and the U.S. has less leverage in the region as the Arab world goes through a transition to popular government and elections. The Obama administration shifts most of its attention to Afghanistan where the U.S. has no vital stake in the long run compared to the Middle East region, with its large population, growing economies, move towards democracy and meeting the aspirations of hundreds of millions of young people. One Middle Eastern leader says the U.S. had no long term policy under the Obama administration for Iraq, and this applies also to the rest of the Middle East region, and mostly reacted to events as they happened. The Obama administration's committment to the war in Afghanistan, just as it focussed on winding down the war in Iraq, responded to the American public's waning support for the war in Iraq. It did not reduce the total cost of the conflicts because of the initial escalation of the war in Afghanistan and later slow progress towards a negoiated settlement to that conflict. A negotiated settlement is the best the U.S. could achieve, and the best desired objective considering the limited interests in Afghanistan. In Afghanistan most of the dynamics would be determined in the long run by the situation in Pakistan, and India-Pakistan relations, which the U.S. could influence constructively only through dialogue, promoting cooperation between the two countries, and economic relations....

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A new generation of younger leaders takes over at the European Central Bank under Mario Draghi. Belgian economist Peter Praet succeeds Peter Stark of Germany in the Economics Department. Portugal's Vitor Constancio is vice president. Jorg Asmussen, 45, from Germany is on the ECB executive board, so is Benoit Coeure, 42, from France, and Klaas Knot, 44, from the Netherlands. Asmussen will head the ECB's International Division. Jens Weidmann,43, is the new head of the Bundesbank. The result experts say could be a reorientation of the ECB's outlook away from the rigid anti-inflation stance of Draghi's predecessor, Claude Trichet, and a willingness to try new approaches to help Europe tackle this recession.

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In an interview with the Wall Street Journal Deutschland, Hans Werner Sinn, head of the Ifo Institute in Germany, says Greece's bondholders are overly exaggerating the effects on the eurozone of an exit by Greece. He sees it in the best interests of Greece to improve its competitiveness and return to growth by going back to the drachma. Just to get to the level of Turkey Greece would need to reduce prices by 31%, which is impossible to do within the eurozone without risking a complete breakdown in civil order. The best way to use the 130 billion euro second bailout package is to use it to recapitalize its banking system, says Sinn. Sinn says Portugal's faces the risk of a debt crisis following the crisis in Greece.

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Russia's leading business paper Vedemosti summed up the situation on Dec. 17, 2014, in its editorial- "This is a very dangerous situation; we are separated from a fully fledged run on the banks by just a few days..If the currency market is not reassured right now, the banking system will require large external support." Warning signs were evident at a banking conference in Moscow in October 2014 when the Economy minister, the central bank head Nabiullina, and the head of the largest bank Sberbank, German Gref, expressed skepticism about the economic policies and the risks involved. Not until Dec. 17, was a decisive response evident and the risks of a collapsing ruble openly addressed with economic actions by the Putin administration. A collapsing ruble would have repercussions on the global financial markets and slowing global economy, increasing potential geopolitical risk, and adding to risk of contagion for other emerging markets, which was reflected in the nervousness of global financial markets on Dec 15-16, 2014....

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Historian David Kennedy points out that Franklin D. Roosevelt was a fiscal conservative. On Social Security which FDR signed into law in 1935, he insisted that it be self-supporting, saying "no dole." Deficits of the "New Deal" Roosevelt would say were a result of the "emergency budgets." Only in 2 of the New Deal Years 1934 and 1936 did the federal deficit as a percentage of Gross National Product exceed the 4.6% of Herbert Hoover's last year in office. The 1936 absolute deficit of $4.4 billion or 5.3% of GNP was largely because of the $2 billion Bonus Bill passed by Congress over Roosevelt's veto, which awarded the money to World War 1 veterans.

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A study by Sentier Research from Census data shows people in the U.S. age 55-64 years make 10% less in June 2012 compared to June 2009. Every demographic has suffered income losses in this period. Median household income declined by 4.8% in these three years. Using December 2007 as astarting point shows a decline of 7.2%- $50,964 vs. $54,916. Blacks, those with some education like a high school diploma but no degree, the older Americans, and younger Americans were hit hard. Long term unemployment was the cause of the decline among older Americans. Even college graduates suffered a decline of 5.9% from $88,570 to $83,378.

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ECB president Draghi reiterated the ECB's committment for 2015 to support the eurozone economy to bring inflation to the 2.0% level. For the eurozone annualized inflation declined to 0.4% in Oct. 2014, and growth in GDP declined to 0.6% annualized rate in the 3rd quarter 2014. Financial markets responded favorably to Draghi's comments before the European parliament: "We need to remain alert to possible downside risks to our outlook on inflation, in particular against the backdrop of a weakening growth momentum and continued subdued monetary and credit dynamics." He added: " If necessary to further address risks of too prolonged a period of low inflation, the governing council is unanimous in its committment to using additional unconventional instruments within its mandate." To skeptics citing the low growth issues, Draghi said the monetary policy of the ECB has been "extraordinarily successful," pointing to the low bond yields for Spain, Italy and France. He emphasized "we need time for this monetary stimulus to go and carve its way through the economy."...

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Copper supplies are expected to be constrained in 2015-2016. Copper demand was up 18% in China in 2014 even with the slowdown in housing. This suggests the future for copper prices may be brighter than it is for other commodities such as crude and iron ore.