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German chancellor Merkel will visit Greece in an effort to mend strained relations. She accepted an invitation from Antonis Samaras, the prime minsiter of Greece after recent elections. It gives Merkel an opportunity to show her support for Greece and makes it more likely that Greece will remain in the eurozone.

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Arne Duncan, U.S. Secretary of Education, on the flaws in the No Child Left Behind Act that need to be corrected.

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Bundesbank President Axel Weber told German lawmakers that Greece may need as much as 80 billon euros to avoid default. He said Greece's situation is deteriorating and "the numbers are changing all the time." Weber is a member of the ECB's governing council and a leading candidate to succeed Trichet as ECB President. So far Greece has 30 billion euros approved by the eurozone countries and 15 billion euros expected from the IMF.

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China expands the trading range of the yuan to 1%. The yuan is set by the People's Bank of China, China's central bank, at 6.2879 yuan per U.S. dollar on March 14, 2012 or 15 to 16 U.S. cents to the yuan. The yuan rate is set daily by the PBOC, called the parity rate, and was previously allowed to trade in a 0.5% trading range.

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The steps taken at a meeting of Europe's leaders in March 2011. The European Financial Stability Facility will be allowed to disburse its entire 440 billion euros if needed, and it will be allowed to buy bonds in government auctions but not on the secondary market. Interest rates were reduced on loans to Greece and repayment terms were extended. But this fund can only buy bonds of countries receiving bailout money, which means Portugal will not see a decline in its interest rates for benchmark government bonds. Interest rates on Portuguese 10 year bonds remained high at 7.4%. Greek bonds saw a lowering of interest rates, but Ireland saw no change. What is needed now is a plan that will bring interest rates down for these countries, say analysts. And they say the plan agreed on by EU leaders fall short. If interest rates do not go down for these countries the debt keeps piling up, especially when austerity measures lower the economic growth rates of Greece and Portugal. Both Greece and Portugal do not have a competitive export industry, which places the burden entirely on austerity measures and revenue raising steps. The perverse scenario analysts fear is that debt continues to grow because of high interest rates at low or declining growth rates. While some relief was offered to Greece the situation is still precarious, and analysts estimate Greece's debt increasing to 160% of GDP from 127 % of GDP by 2013....

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John Cochrane of the University of Chicago points out that slight deflation of 1-2% may not be pernicious in 2014-2015.

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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.

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The situation in urban areas of Iran- which experienced popular protests in an earlier election- before the elections in 2013.

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High on the agenda for the G-20 Feb. 2013 meeting in Moscow is how to fund infrastructure projects in emerging market countries. About $191 billion in infrastructure investment is needed annually in South Asia alone, according to the World Bank. India's Economic Affairs Secretary, Arvind Mayaram, points to the need for finding innovative ways of funding and reducing the risks for private companies by some kind of joint effort from developed and emerging market countries. The needs are extensive especially in transportation, water, electricity, sanitation. Growth lower than potential is facing India- with estimates of growth at just around 5% for the fiscal year ending in 2013. This affects Europe and the U.S. as there is less demand for exports of developed countries. Transportation projects critical to easing congested overloaded rail lines in Jakarta and Manila could not get financing under existing arrangements, making this problem a serious priority.

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Krugman says that Obama better warn the Chinese that they are playing a dangerous game with their currency. He says month after month of the suffering of unemployed workers in the USA is going to look very bad for the Chinese, at the same time as the trade deficit numbers soar again. He asks for urgency from the Obama administration in telling the Chinese to let their currency appreciate . See the related article by Niall Ferguson.

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Citigroup remains extraordinarily leveraged, with tangible leverage at 47 times tangible common equity. JP Morgan's is 26 times and Goldman's is 21 times. The government's two preferred shares capital injections of $45 billion does not reinforce the common stock, which fell 20% on the 14 January, 2009, and the discarding of the universal bank structure this week does not adequately address the root problem of problem mortgage related assets and excessive leverage. The government's agreeing to to take a large share of losses on $306 billion of problem assets helps, but with the leverage being so high significant problems remain. So what are the options. Reducing leverage to where J.P. Morgan Chase is would take $35 billion in common equity, something that would make the government the owner of Citibank, as Citibank's market capitalization on January 14, 2009 was $25 billion. The risk of doing this would be that other large bank stocks also fall steeply as the market prices in a similiar outcome. And there are political considerations as giving capital to banks is not popular with so little bank lending to show constituents. The capital needs of Bank of America as it completes the acquisition of Merrill further complicates the picture. But stopgap moves like additional loss sharing agreements will leave Citbank's problems still unresolved. ...

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Citigroup is bleeding even as the government has ringfenced $300 billion in bad assets and its not likely to go under. The next step may be to get these bad assets into a bad bank as Bernanke has suggested. Citigroup is now divesting many of the assets like Smith Barney that were hastily put together by Sandy Weil as some kind of financial supermarket. None of the companies with their separate cultures melded together, and managing this was a huge undertaking which never really got off the ground. Now its all coming apart and Citigroup will go back to its core assets.

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Even after receiving 5000 complaints over ayear and half about aggressive short selling that amounted to market manipulation, the SEC did not bring any enforcement cases, according to areport by the SEC's inspector general. Of the 5000 complaints between Jan 2007 and Jne 2008 only 123 were investigated, and no cases were brought.12.5% of emails alleging insider trading prompted an investigation. About 1.38 million emails were handled by 4 staffers, showing horrendous understaffing. In a written response SEC enforcement staff played down the likelihood of naked short selling abuses. It noted that alarge number of cases settle over time. The SEC staff said that the agency needed to "intelligently leverage" its resources and alarge number of complaints provide "no support for the allegations". Morgan Stanley, Citigroup and other frims came under extreme pressure from short selling, and short selling has led to near collapse of many firms during the crisis since the middle of 2008, so its strange that the SEC takes this position. But it is not surprising as in recent years enfocement has been lax, regulation has been neglected almost by design, and resources and staffing are severely short of needs for the SEC's mission to be performed with some degree of confidence....

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Merkel's leadership as Germany goes through the economic crisis. There is not much enthusiasm for further reforms among the Social Democrats or the Christian Democrats. Other than raising the retirement age to 67, the mood is not for any changes in that direction. The economy will contract by 6.1% but Merkel's decision is not to go in for a big stimulus under pressure from the US, and instead stay with the status quo combined with help to workers for unemployment benefits and for retention of workers by companies. As elections approach Merkel is considered favorably, and according to a recent poll by Forschungsgruppe Wahlen nearly 60% are satisfied with the grand coalition of the CDU and the SPD, 78% think Ms Merkel has done well as chancellor, and 58% want her to remain on the job. Actually Merkel's popularity is behind the CDU's prospects, the CDU itself is popular among only 35% of voters. Her analytical habits from her training as a physicist show in the way she is governing, which is thoughtful, and connects well with voters. Merkel benefits from the reduction in unemployment. Unemployment fell from around nearly 5 million in 2005 to around 3 million in 2008. The risk is that Merkel's popularity may be affected by an increase in unemployment to 5.1 million from the averaage of 3.3 million in 2008, according to an OECD estimate. Merkel stands behind a German response to the crisis which is to support the priciples of a social-market economy, make unemployment as least painful as possible to the jobless, to keep every job that can be saved in the nonfinancial sector with a 115 billion euro "Germany fund" providing guarantees and credits to companies that are in trouble because of the credit crisis. Stimulus packages of 64 billion euros supported the auto industry with subsidies to car buyers, and subsidies to keep workers intheir jobs. The idea was to come up with a German version of the response to the crisis by balancing the need to respond based on German conditions, and the concerns for inflation and the budget deficit, that is shared by most Germans. THe vision offered by Merkel is that of a physicist daughter of a protestant minister in East Germany, who is low on the rhetoric and good on substance, and willing to make decisions based on careful study and discernment rather than ideology, without sharp swings in any direction. Her vision comes from her days as environment minister, which is quietly pushing Germany into the forefront of countries developing renewable energy, moving ahead in energy efficiency, with anational goal of cutting emissions by 40% by 2020. The other areas are immigration and education, both key to the future of Germany because of the huge demographic change happening there. She has afamily minister Ursula von der Leyden, who introduced "parents pay", a14 month stipend for parents of newborn children linked to salaries, and to to improve daycare by providing places for 35% of children aged three or less by 2013. And Merkel has approved 18 billion euros of additional funding for research and universities. Says Leyden Merkel has made "daycare" an acceptable term in the CDU, and made Germans accept that they are an immigration country. Which tells you that you have to look closely to find the reasons for Merkel's popularity, which does not carry the rhetoric of an Obama, but is just as effective in German conditions. There are deepseated demographic changes going on in German society, which require a cultural change, and change in mindset, such as that for daycare, immigration, and blending the best of the old in the social market economy with the new like the changes in the educational system. The Economist says that in big cities today nearly half of the children under 15 are immigrants or their children and grandchildren, who are more likely to be poorer, unemployed and with less education. ...

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Considering the fines and sanctions by the Financial Industry Regulatory Authority, during the time Mary Schapiro headed the organization from 2007 -2008, it did not take a serious watchdog role over the brokerage business that it was expected to supervise. NASD which she formerly headed, and FINRA, did several examinations of the brokerage business of Mr Madoff who ran a$50 billion Ponzi scheme, but failed to find anything wrong. Her agency in 2007 concluded that Madoff's firm had only violated some technical rules. Also fines and sanctions assessed by FINRA declined during the time she headed it. Fines levied by FINRA declined from $148 million in 2005, the year of her predecessor, to $40 million in 2008. Ms. Schapiro headed NASD regulatory arm in 1996, NASD itself in 2006, and FINRA after its creation in 2007. FINRA is a private agency set up by Wall Street to regulate itself. As the prevailing opinion at the time, with the SEC severely understaffed, was that Wall Street could regulate itself, agencies like FINRA had a bigger responsibility than was realized by Ms Schapiro and others. One securities lawyer who represented firms examined by FINRA, says FINRA should at least have asked more questions about the Madoff operation. In a November 2006 speech to the Securites Industry and Financial Markets Association, Mary Schapiro says, "we remain utterly committed to our regulatory mission but we should be also committed to doing no unnecessary harm or restriction to innovation in the industry and markets". Some of the stuff that went on in the name of innovation went against some basics and commonsense, and the failure to follow tested old good financial practices to separate sound innovation from unsound innovation, was a failure of that period. Schapiro's statement seemed to be a contradiction of a severe nature when examined closely, because how could she remain committed 100% to the regulatory mission if she made strong exceptions for innovations whose true logic and effectiveness only time could tell. The element of caution that should be a key part of the regulator's temperament and mental build was entirely missing. See the link to financial regulators in India, and of how this task was handled with that element of caution and skepticism of prevailing opinion. Other failure of FINRA is that it lagged behind state regulators in catching upto the mess resulting in afreeze up of auction rate securites markets. In June and July 2008, Massachusetts and New York securities regulators filed fraud charges against big firms in that matter. Another failure was the failure to look into the mortgage securites that were held in brokerage accounts and see that the valuations of these securites are sound. Finra only filed small cases against Lehman Brothers, with a fine of only $125,000 for failing to keep accurate books and records. As late as May 7, 2008 in speaking at the Financial Services Institute meeting, Schapiro was asked about what FINRA was doing to regulate complex packaged products like mortgage securites. And even though credit rating agencies had by this time been exposed as having failed, Ms Schapiro would only say, according to a financial advisor who asked the question, that "we have credit rating agencies that rate them." A pretty hands off view for a regulator when the cracks in the system were already exposed in mid 2008. Another facet of this is the high levels of compensation especially for a regulator. For her job at FINRA she received pay of $3.1 million a year including $2.5 million in compensation and $615,000 in benefits and deferred pay. In 2007 she also earned $449,000 in cash and stock grants as director of Duke Energy and Kraft Foods. All of which means that it is straining credulity for Obama to suggest that Mary Schapiro is the best person the Democrats could find for this critical job, in which the record has been severely impaired....