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For the Jan. to Nov. 2011 period Japan shows a trade deficit of 2.3 trillion yen. Analysts expect a trade deficit for the full year- the first since 1980 and setting a new trend as long as the yen stays at a high level. The yen is at 77 yen to the dollar in Jan 2012. Japan still maintains a current account surplus because of returns from investments overseas. The Bank of Japan reports that the economy is expected to contract by 0.4% for the current fiscal year.

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Glen Hubbard, who was Chairman of the Council of Economic Advisors under President George W. Bush and is now Dean of Columbia University Business School, Hal Scott professor of International Fiancial Systems at Harvard Law School, and Luigi Zingales professor of finance at the University of Chicago Booth School of Business, say a different plan of action is needed from what the Obama administration is doing to tackle the banking crisis. They are really skeptical about the the Public Private Investment Program and other plans put forth upto now for several reasons. First, in every case they say there is a lot of carrot but very little stick, and this won't work. TARP program was mostly carrot, with Treasury getting back securities worth $78 billion less than the $254 billion invested, as pointed out by the Congressional Oversight Panel.The FDIC's guarantee of short term debt was worth $100 billion just for the original nine TARP participating banks, and the mortgage related asset guarantees offered Citibank and Bank of America were worth tens of billions. They see anew round of TARP injections with the conversion of the government's preferred stock into equity after release of the stress test results. Then there is PPIP the Public Private Investment Program, and its plans to subsidize the purchase of bank's"toxic assets" by hedge funds and other investors. They estimate the government will spend $2 for every $1 the private sector puts up. And even with this subsidy their thinking is that the probability of succes is low for the same reason that has prevailed since the earlier efforts by Treasury Secretary Paulson- there is just too big a gap between the bid and ask prices on the toxic assets, and add to that the reluctance of investors to partner with the government. Its time for more stick say these experts as the problem of toxic assets, and of credit and lending in the economy, will hang like a large shadow over the economy, as long as these tough problems are not wrestled with. This is the Hubbard-Scott-Luigi Plan: 1) The FDIC should announce that its guarantees of short term debt set to expire in October will not be renewed. Insolvent banks, defined not by stress tests but as those that cannot fund themselves in the private market, will be taken over by the FDIC under aclear and credible action plan. 2) The FDIC lacks the resources to run several large and complex banks which may become insolvent. And waving the idea of nationalization the creditors may try to get the government to bail them out. The authors of this plan say the FDIC should solit each bank into a "bad bank" and a "good bank." The "bad bank" would carry all the residential and commercial real estate loans and securitized mortgages as assets, and all the long term debt as liabilities. THe "bad bank" would obtain along term laon from the good bank to fund the assets of the bad bank. Al the remaining assets including the derivative contracts and the loan to the bad bank would be assets of the good bank. It would also have all the insured deposits and the FDIC guaranteed short term debt as liabilities. With the split accomplished the good bank can be released from FDIC receivership. 3) The long term debt holders would be compensated by receiving all the equity of the good bank. The old shareholders would get the equity in the bad bank. And in any restructuring bondholders should do better than equity holders. If banks are not really insolvent as some say and just facing temporary dislocations, then the bad bank will eventually surge in value, and the equity holders will do alright, and if not they will receive nothing as they should. 4) For this to work legislation needs to take effect before October for FDIC procedures for handling failed banks to be also applicable to bank holding companies. And this new legislation puts no new cost on the taxpayer....

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Peter Morici is interviewed by Maria Bartiromo. He says the dollar should be devalued against the yuan by 40-50%. China by keeping the yuan undervalued has provided its exports with the equivalent of an export subsidy. China will only allow imports of solar panels with 75% domestic content, the US does not. The other problem is the banks and compensation. Morici says banks compensation should be like that of a regulated public utility. Can one imagine the head of Con Ed making the kind of compensation at the banks?

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Lessons from the Mexican financial crisis of 1994-95 with the collapse of the Mexican peso, and a massive government bank bailout and Mexico's biggest slump since the Great Depression. Guillermo Ortiz, now central bank governor, was finance minister at the time. He discussed things with Fed Reserve chairman Ben Bernanke, about the Mexican experience which could be seen as the first financial crisis of the global economy. What lessons can be learned? Ortiz says there comes a moment when something happens that leads to a general loss of confidence. Once this happens things can deteriorate fast. This happened when Mexico could not successfully manage the devaluing of the peso. For the USA this might have happened with the collapse of Lehman, which may have triggered a sequence of events leading to a general loss of confidence and banks fear of lending to each other and credit markets getting frozen. At that point Ortiz says its better to do too much than to do too little, as it takes a lot to restore confidence. "And don't be ruled by ideology, stay flexible and act decisively. Help those with mortgages they can't pay. Take stakes in troubled banks. Don't expect to turn a profit on government investment." How do you tackle mortgage workouts or modification. Vicente Corta who led Mexico's bank bailout program says "we tried fancy scemes that did not work. We ended up saying 'OK you pay half your mortgage, and we'll pick up the other half." Sounds similiar to what FDIC's Sheila Barr is doing on a small scale at IndyMac bank, basically " making mortgages affordable." And take stake of ownership in banks in exchange for injection of capital. Paul Krugman says the Bush administration earlier was reluctant to do this, thinking oh that is socialism, because they let themselves get into an ideological bind. Until Gordon Brown did just this in the UK with RBS and HBOS banks on Monday October 13, 2008. In that case because no on else came forward Britain took a majority stake. British finance Minister, Alistair Darling, stated that the British government was not in the business of running banks and that this was taking a necessary step to restore lending. The Mexican experince in this context is very instructive. It cost Mexico dearly in terms of political warfare about this, because once Banamex for example- to which the Mexican governmet gave money without any ownership stake- became healthy it was sold to Citigroup for $12 billion and the government got nothing. In Mexico Lopez Obrador and other politicians have created a running debate about this as totally unfair and it has been divisive for Mexican politics, making passing even basic legislation difficult. Ortiz now says take ownership stakes and if you don't forget about socialism you will have political fallout of a different kind when banks once healthy and profitable are on their own owing little to the government; just when the government falls short of financing the basic programs for the elderly, for children, for schools, for health care,and for collapsing bridges and roads that are falling apart, not to speak of funding shortfalls for Medicare and Social Security. So Guillermo Ortiz has some very useful advice for Ben Bernanke and the Fed and for Treasury and for the next President. Edmund Phelps of Columbia University was interviewed on Bloomberg today, October 13. He is a recent winner of the Nobel prize in Economics. He also believes capital injection into the banks- like other economist have suggested -is the key to getting the banks to lend. He thinks the auction process and buying up toxic assets is way too complicated and would take way too much time. He thinks keeping homeowners in their homes and reducing foreclosures is critical and thinks Martin Feldstein has some good ideas on this. See the links to Martin Feldstein. What if things still deteriorate? The government may have to nationalize or takeover some of the banks, he says. Gordon Brown has already taken over RBS and HBOS. What are some of the ways to improve things. One is that credit ratings firms he says have become almost oracular. Do they know what can happen in the future he asks. We have to rethink what it means to give a rating he says. And the U.S. financial institutions have to go back to doing what they should be doing in the first place, which is to finance investments in companies and business, and not homes and residential construction. ...

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Homeowner Nicolle Bradbury of Denmark, Maine, and Thomas Cox, lawyer for Pine Tree Legal Assistance, challenge a foreclosure eviction in court. The lender GMAC, was found to have used a "limited signing officer," who had little or no knowledge of the case. GMAC had continued to follow faulty procedures, two years after it was asked to correct these procedure. Judge Stephens cited this situation in rejecting the foreclosure.

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Ireland and Portugal both have debt to GDP ratios of more than 100%. Still Ireland is better positioned to weather the eurozone crisis. Foreign investment attracted by low taxes and an educated labor force gives Ireland signficant advantages to return to growth. Citigroup forecasts show a 5.5% decline in GDP for Portugal in 2012, and large probabilities that the deficit will overshoot. Ireland expects 0.5% growth in 2012. Ireland's exports are 60% of GDP, compared to 24% for Portugal. Yields on Portuguese bonds due 2020 are at 13%, compared to less than 7% for Ireland. But funding Portugal through the end of 2015 is expected to cost 40 billion euros, according to Capital Economics estimates, or only 0.4% of eurozone GDP, making the problem in Portugal very manageable for the EU.

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Louis Gallois, CEO of EADS gives his views about reviving European industrial competitiveness.

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The issue of high youth unemployment. The bulge in demographics and the emphasis on increasing the number of college graduates without increasing the jobs available, or providing apprenticeship type training and degrees in areas where jobs can be created, has created a major problem in the Middle East. High youth unemployment in the US, Spain and the UK also poses serious problems. Former primer Minister Giuliano Amato of Italy recently told Corriere della Serra: "The older generations have eaten the future of the younger ones." Older workers tend to hold onto their jobs as long as possible as retirement ages are being raised, and they have negotiated higher retirement pensions. In Spain the younger part time workers and immigrant workers are the first to be laid off and unemployment is highest in this group, which is also why the high unemployment has not attracted as much attention there. Younger workers will eventually have to support a higher proportion of these workers in retirement because of the demographics. The shift to higher parttime employment and employment at low wages has also created a class of workers who have no future, as their incomes are low, and are easily laid off. This shift has been taking place in the US, Europe and Japan over the last decade. Germany has fared better because of its long tradition of apprenticeship training, and employers working directly with young students at universities to provide on the job training. The financial crisis of 2008 in the US slowed down many industries and created a shift in industries creating jobs, the result was a larger mismatch of skills of job seekers and new jobs created. One way to address this is more on the job training and working directly with employers, and assistance to community colleges to fill education gaps. ...

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To make custom loan modifications of the type that became necessary overnight on a large scale requires resources, investment in people and technology. On top of this a bank makes about $500 a year on a $200,000 mortgage loan, and if the loan is delinquent the bank may already have lost $2500, say experts, so there is little incentive to do much about custom loan modification. As a result, they used what a former J.P. Morgan executive called "Burger King kids." Or the banks outsourced the operation, some to law firms like David Stern, which in turn used outsourcing firms in Guam or the Philippines. The result is a largely chaotic process according to former mortgage officers of banks, and clerical staff that did not know what they were doing. Now atttorneys general in all 50 states have stated that they will investigate foreclosure practices of banks. It all started with the lone effort of Pine Tree Legal Assistance in Denmark, Maine, in succesfully challenging one of these improperly conducted foreclosures. See the NYT article on Pine Tree. In that case it was about a mother with two children who had her payment go up to $474 after loan modification, who is on food stamps after losing her job as an employment counselor....

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Honda plans to move more of its manufacturing to the U.S. as the value of the yen drops below 80 to the dollar in 2011. Honda faces problems from parts shortages after floods in Thailand, and U.S. market share down 1.5 percentage points to 9% in 2011. Honda's profit declined by more than 50% for the third quarter of 2011. The yen trading at 77 to the dollar in Dec 2011 is making it impossible for Honda to make a profit from vehicles made in Japan and sold in the U.S. Honda plans to double the capacity of the Civic plant in Greensburg, Indiana, increase capacity at its other assembly plants. It will build a new plant in Celaya, Mexico, in 2014, to manufacture the Fit subcompact. This will raise North American production from 1.29 million vehicles to close to 2 million. About 200,000 to 300,000 of these vehicles will be exported to other international markets. Profits on small subcompacts are small, making manufacture of the Fit more economical in North America than in Japan. In 2011 Honda manufactured between 30-40% of vehicles in Japan, the new plans are to reduce this to 10-20% in the next 10 years, a major shift....

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Egyptian soccer riots at Port Said and the ineptitude of the police forces on the scene further damages the credibility of the military council. Vigorous debate in the newly elected parliament and efforts by the Muslim Brotherhood to wrest the drafting of the new constitution away from the military.

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Faced with the prospects of severe hardship in poorer countries, the World Bank gives a realistic forecast for 2009 that shows the world economy shrinking in 2009. It says the neeeds of poorer countries are likely to overwhelm what the IMF and the World Bank can do. And called for seting up a"vulnerability fund". Even if the World Bank tripled its lending in 2009, it would only reach $35 billion. The combined gap the emerging market countries face it says, is at least $270 billion and upto $700 billion in the next 2 years.

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The Iraqi army takes over the Al Nuri Grand Mosque in Mosul, but what the mosque and the city itself lie in ruins. The minaret is gone in the debris, a shattered city is what is left from the Islamic State takeover of the city in 2014 and the eight month effort in 2017 by the Iraqi army to retake the city.   For more depth see links and groups or search- The problems of Mosul started with the openly sectarian administration of prime minister Nouri Maliki leading to alienation of Sunnis in Mosul. Corruption in the administration and weakness in the Iraqi army combined with alienation of Sunnis to create an opening for a militant group Islamic State in Syria and Iraq. As Iraqi units disintegrated Mosul fell, leading to a worsening of the refugee crisis in Syria and Iraq, increasing the flood of refugees to Europe, and the series of terrorist incidents in Paris, Berlin, London, rise of right wing groups in the European Union, in a chain reaction. The failure of the Obama administration to setup a "no fly zone" in Syria simply compounded the crisis into what it is today. At the root of the crisis - the failed efforts to reconcile Sunnis and Shiites in Iraq, and the sectarian conflicts in the region as a whole stretching from Saudi Arabia and Egypt to Iran.     ...

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The constructive contribution made by the G-20 meetings of leaders towards building agreement on economic and other policies for peace and progress in the global economy. The meetings were especially useful for coordinating policy and addressing issues arising in the global economy after the 2008 financial crisis. Here Li Baodong, China's vice minister for international organizations and conferences, international economic affairs, describes the path ahead: IMF reforms implementation, better coordination of macroeconomic policies, pursuing the anti-protectionist and free trade policies with further support to the WTO and ministerial MC9 meeting in Bali in Dec. 2013, and infrastructure financing proposals for developing countries on the agenda at the St Petersburg, Russia, G-2- meeting in Sept. 2013. Baodong says the mechanism called the Framework for Strong, Sustainable and Balanced Growth as part of the G-20 meetings is a major achievement. Each G-20 economy submits it macroeconomic policy plan for a Mutual Assessment Process under this arrangement. The progress from the Bretton Woods financial architecture to the new arrangement- from the G-6 to the G-20 to include developing countries from India to Mexico and Brazil- is another major achievement, not fully recognized by the public, says Baodong. Interestingly Baodong makes particular mention to global rebalancing, rather than pushing what he calls the impossible task of increasing demand to get growth. This is a realization coming to China's economic policymakers under the new Jinping-Keqiang administration after the overly aggressive effort to stimulate demand in the 2009-2011 Stimulus, and the ensuing financial problems in the banking and credit system. It is indicative of the policy shift and its implementation underway in China in 2013-2015....

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Car size shrinks as the Focus, Spark, Aveo, Cruze small cars attract attention at the 2010 International Auto Show in Detroit. The big change is that these small cars are following the European small car in being refined and sophisticated, with a lot of features. This isn't the Chevette that Americans knew in the sixties and seventies, and the perception of what is the right size and comfort is changing completely as a new generation of buyers brought up in a world of pc's, i-phones, and globalized cultures is in the driver seat.

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George Will describes the views of Richard Fisher, president of the Federal Reserve Bank of Dallas on "too-big-to-fail" risks in the U.S. banking system.

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An analysis done for the Wall Street Journal by real estate portal Zillow.com, shows the median down payment in nine major U.S. cities rose to 22% in 2010 on properties purchased with conventional mortgages. Banks favor higher down payments today because it reduces the chances of delinquencies. Median down payments were at about 20% in 1990, then the payments declined in the nine cities Zillow looked at: Chicago, Stockton, Las Vegas, Miami, Phoenix, San Diego, San Francisco and Tampa. The drop went as far as 4% in 4th quarter 2006, and in some places close to zero. Experts say these are the markets where more home buyers are under water. A 2009 study by the Federal Reserve Bank of St Louis shows that buyers with smaller down payments are more likely to default in unfavorable economic situations. A contributing cause of the 2008 sub-prime mortgage crisis was the very low down payments. Federal Deposit Insurance Corporation chairwoman Sheila Bair, says she supports minimum 20% down payments....

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Russia raises interest rates by 6.5% to 17% on Dec. 15, 2014, as Brent crude prices fall below $60 and pressure on the ruble increases. Anticipation of the U.S. Federal Reserve raising interest rates in 2015 puts pressure on emerging market currencies, adding to pressure on the ruble. All emerging market currencies, the Brazilian Real, South African Rand, Indian Rupee, Indonesian Rupiah, Turkish Lira, also come under pressure as money flows out of emerging markets in a repeat of the situation in January 2014.