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Vernon Smith asks the question why when $10 trillion in losses were experienced in equities in 1999-2002 the financial system did not collapse, and in 2008 losses of $3 trillion in mortgages held by homeowners resulted in a collapse of the financial system. In the 2002 period the losses, he says, were borne largely by institutional and individual investors who largely owned the assets outright. In the 2008 crisis homeowners purchased about 90 to 100% of the housing assets on margin, and declines in value of 50% or more in the low price tier were seen for homes bought at the peak of the bubble. These losses were transmitted to banks and lending institutions. The consumption binge added to the debt of households. The result is that lending went down sharply for durable goods consumption, and this is seen in the decline of auto sales of 41% from Feb. 2008 to Feb. 2009. The collateral damage then occurs in retail and labor markets. This is similiar to how Ben Bernanke viewed the Great Depression crisis in an important paper- the inability of the financial system to perform its economic role of lending to households for durable goods consumption and to companies for production and trade. This understanding is different from the Friedman view of a contraction of the money supply, and the view that excessive speculation caused it. Bernanke's experience studying the causes of the Great Depression uniquely qualified him to address the causes of the global financial crisis of 2008....

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This report in the Guardian says U.S. Vice President Mike Pence supported the decision to recognize Jerusalem as the capital of Israel. Pence had hoped to use this to focus attention on the situation of evangelical Christians in the Holy Land. Instead it has backfired as Christian leaders are refusing to meet Pence in Jerusalem and Bethlehem. Pence is now seen as not welcome at the Nativity Church in Bethlehem, the major pilgrimage place for the Christian world. Jerusalem is such a sensitive issue that instead of gaining help for evangelicals in the U.S. who supported Mr. Trump, it may have damaged relations with Christian leaders who do not want to further aggravate tensions in the Holy Land. 

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While growth will be closer to 3% for 2008 and next half of 2007, inflationary impact of any spurt in growth will be higher from now on as higher food and energy prices are expected Productivity isn't going to contribute much and corporate profits will grow only by around 5% in 2007 and 2008 compared to 21% in 2006. If the Fed raises rate because of the inflation pickup being a significant factor to consider then the spurt in growth would be at risk. And ofcourse the fall in housing prices will have an impact into 2008 and affect consumer buying.

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The new head coach of Real Madrid is Spanish player Xavi Alonso. He follows Carlo Ancelotti who leaves to coach the Brazil national team.

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Scott Shane of the NYT provides this exceptional account of how the ideology of Wahhabism on which the Saudi monarchy is based has influenced the evolution of Islam, but not in the way other religions have evolved into more moderate and open religions. Christianity evolved from the period of religious conflict, and evolved to the point that the basis of progress was based on education and technology in most of northern and southern Europe. Where the evolution did not take place because of more intolerant behaviours such as in Spain with the Spanish Inquisition and ideas from the medieval period, this development based on education and technology lagged severely behind.  Wahhabism developed as a result of a sect started by a religious cleric Wahhab in a poor desert region around Mecca and Medina, now the Saudi Kingdom, who sought the help of a tribal chief Ibn Saud. They used the religious-political alliance to gain tribal dominance in the region. Wahhabism sought to change Islam by banning worship and religious rites at tombs common in that period. It also as Brookings scholar William McCants cited here says, drew "sharp lines" and intolerance between believers and non-believers- all non-believers including other sects of Islam, Shiites, Christians. The movement spread throughout the region, but was crushed by the Ottoman Empire based in Istanbul, Turkey, by the 1850's, only to be revived in the 1920's following the collapse of the Ottoman Empire. A Norwegian expert Heggenhammer cited here says clearly Islam did not benefit from the evolution that other religions had, and Wahhabism has slowed this evolution into and open, tolerant religion because of its "sharp lines" and intolerance of other faiths and ideas with the Wahhabism from a medieval perod. In India the British rule brought enlightenment thinkers (John Stuart Mill for example was a clerk for the British East India company). But no such change happened under Ottoman rule to inspire leaders like Gandhi and Nehru to setup a new constitution that made changes from medieval Hindu beliefs such as caste and religious practices based on superstition.  The development of an oil rich state in Saudi Arabia with the discovery of oil, and the dependence from 1950-2010 of the global economy, has led say experts to the export of the Wahhabist kind of Islam to other countries in Middle East and South Asia. This they say made the evolution to democracy and peaceful coexistence difficult or impossible in the region. ...

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Romney says his 47% remarks were "just completely wrong." Adding "My life has shown that I care about 100%, and that's been demonstrated throughout my life. And this whole campaign is about the 100%."

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The head of the Germany Program at Institut Montaigne in Paris, France, Robinet Borgomano looks at the renewal of German society under the ideas of "respect" put forward by Olaf Scholz of the SPD party. What does Olaf Scholz see as the main issue of our time? - Borgomano says it is the disintegration of European and American societies under the combined effects of technological progress and globalization. Where does Scholz get his ideas of "respect" for workers and families? Isn't Mr. Biden sharing the same ideas in the US? The SPD party got its start at the Bad Godesberg Convention in 1959 when it embraced the idea of a social market economy as a party of the people. Wily Brandt as chancellor from 1969 to 1974, whose personal struggle against the Germany of World War II was based in the Nordic countries, embodies best this renewal aspect of the SPD. Scholz sees his role as renewal of Germany, Europe, hand in hand with Mr. Biden's renewal efforts in the US on the same basic ideas of respect of the dignity of the worker and families that in Germany were seen with Wily Brandt and in the US with Harry Truman who followed FDR. Scholz rejects the overemphasis on the of merit in German society, European society, or American society, in the way it has taken shape in the last fifty years. Scholz cites Michael Sandel's Essay "The Tyranny of Merit" rejcting it because it makes a case for inequality based on merit, on capital allocation on an implied idea of merit of free markets managed in damaging ways for personal interest. It is wrong because it robs the worker and families of the basic dignity that is the right of every individual and of every person. It is wrong because it makes a false justification for growing inequality, and makes those who do not succeed feel that it is their fault. Meritocratic elites have made the idea that those who work hard and play by the rules get all the benefits and wealth even if the rules were first set in a way that benefits them alone. When these rules become implicit they are rarely questioned as happened in the period after 2000. It is not just in Europe and America that this happens, and not just in the 20th century.  Strange but true- During the 1850's in the heyday of industrialization in Britain the Ethnological Society of Britain justified the inequality between the British and Indians in the British Empire by saying Indians were inferior in exams and did not have the motivation or the aptitude and energy to excel in the way British students did. Dadabhai Naoroji, the first Indian member of the British parliament in Mr. Gladstone's Liberals singlehandedly took up the job Sandel and Scholz and Mr. Biden are taking on today to restore the respect of workers, farmers, and families in America and Europe and in all parts of the world. Sandel goes on to say what Scholz has heard clearly- "the parties that made the offer of upward mobility to workers and families have missed the insult implicit in it to a large number of working people." In a way it is going back to the roots, to the founding fathers in America who said in the 18th century that "all men are created equal and they are endowed by their Creator with certain inalienable rights, and among these are life, liberty and the pursuit of happiness," -nothing less.   ...

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When so much of infrastructure healthcare and education still needs more funding, and when St Paul's Cathderal lacks essential funds for basic maintenance and is in danger of closing, the Greensill scandal shows how much reallocation of funds to infrastructure, health, and education to help workers, students and families is needed. How much the existing culture distorts allocation of capital in ways that are vital to the future of families, students and workers, and lobbying acts in ways that are against the national interest. Here the WSJ says the lobbying of David Cameron, former UK prime minister extended to getting access to funds for Greensill, a  company that operated in  supply chain finance, lobbying for funds from the emergency financing facility provided by the Bank of England. Treasury rejected 56 messages sent by Cameron to top British politicians over several months to have rules changed. Greensill went into bankruptcy in March 2021, stranding investors who had put in $10 billion. A parliamentary committee is now looking into this case of Greensill. The company was founded by an Australian Lex Greensill, and does little more than provide companies a cash advance to stretch out the time to pay bills. One question no parliamentary committee will ask is why when the needs for infrastructure, health and education are so great $10 billion in funds, public or private even go into something like supply finance that does so little for the country. This is an example of the kind of distortion in the uses of capital that has become commonplace today, creating societies and countries with poorly  funded infrastructure and essential services in the advanced countries of Europe and the US. ...

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Lawrence Downes makes a road trip with singer Linda Ronstadt to her Sonoran roots in Southern Arizona and northern Mexico. They go to Tucson where Linda grew up and visit Naco, Canelo, and Banamichi. Her great grand father was a German immigrant in the 1950's who settled in Banamichi, as a mining engineer and a colonel in the Mexican army. The group including Ronstadt's friends spends several nights in the midst of cactus, agave and open blue desert skies. Beginning with a visit to the mission San Javier del Bac, Linda's spiritual center, Downes attends mass with Linda at the Church of our Lady Loreto. A colorful description of the journey, Ronstadt and friends, which shows Linda's early inspirational roots, and where her 1987 album Canciones de mi Padre comes from. The anguish bordering on tears in her Sonoran voice held back and then the release, has a deep Mexican quality abut it.

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The opening to newly elected prime minister Rouhani in Iran began after an aide to Mrs. Clinton, Jake Sullivan met with Iranian representatives in Oman in July 2012. Deputy Secretary of State, William Burns, joined the talks conducted with the help of the Sultan of Oman, so that by the time Rouhani was elected in June 2013 the effort became frutiful. In the case of Cuba the opening was made using Benjamin Rhodes, a 37 year old speechwriter for Obama who worked with him since 2008. This enabled secrecy in the case of the Cuban initiative. Rhodes was helped by Cuba expert Zuniga in the U.S. Special Interests Section in Havana. Rhodes and Sullivan also worked on the opening to Burma's rulers.

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Paul Peterson, a professor who heads the Program on Education Policy at Harvard, says that public school education has not done as well as private or charter school education. In two areas character or values, and school discipline, public schools lag far behind private schools or charter schools. Private schools score 59% and 46% in these two areas, public schools lag far behind at 21% and 17%, in the 2016 Education Next Survey, says Peterson. He says by appointing Betsy DeVos as Education Secretary, the Trump administration sees the need to think how public schools can benefit from improvement in these areas.

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Parti Tarini of WSJ covers Kamala Harris, US vice president, as she makes an abortion rights tour starting in Wisconsin. Following the Supreme Court's Dobbs decision ending the constitutional protections on abortion, Kamala Harris as a prosecutor who handled sexual assault cases involving women and children, is able to talk to women in different states about the effects on women. In Wisconsin following the Dobbs decision Wisconsin's 1849 law banning abortion was reactivated. Harris talks to women in Wisconsin and Georgia in this WSJ report. In Georgia the law now has a six week abortion ban with exceptions in rape and incest cases with a police report. Harris told women that she knew that it was a difficult conversation to have, but one had to face reality, showing what it means to get a police report in such a situation. As former district attorney in California, and as California Attorney General she was fighting fro women's rights back then, involved in legal battles about women's reproductive health and abortion, including a multistate case on the Supreme Court Hobby Lobby case in 2014. She was raised Harris says by a mother who was a breast cancer researcher, and conversations at the kitchen table were also about women's reproductive health and hormones. Harris says in this interview that this stuff should not exist in the shadows, when it happens in this way it is women who suffer. On many issues that involve women Harris is uniquely qualified. For instance the wars in Ukraine and in Gaza and Israel have a huge impact on women and children, and Kamala Harris is taking on the role of bringing and end to the conflict in Gaza by participating in Biden's talk with the prime minister of Israel. Harris has prepared for this role more than it appears and she is able to talk to women in a way that is rare for an elected official says this report, and also to the people of this country on issues that determine their future. On the Special Counsel's report Harris can also talk about this in a way that is direct, sincere and from experience. She said about the prosecutor's report : "The way that the president's demeanor in that report was characterized -could not be more wrong on the facts, and clearly was politically motivated." She called the comment on the president's age "gratuitous" and described the role of a prosecutor as "requiring a higher level of integrity."    ...