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Krugman says that the Democratic party will have to look elsewhere for its leadership needs than the Obama administration. He faults the administration for its pay freeze for federal workers, when the issue of the extension of the Bush tax cuts for higher incomes is the much larger issue in terms of savings for deficit reduction.

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China's shift in emphasis from heavy manufacturing and the auto industry to other technologically advanced and less environmentally sensitive industries including new energy sources. The National Development Reform Commisson lists industries in 3 categories- encouraged, allowed, and restricted. The auto industry is now in the allowed or permitted category, and is no longer encouraged for the purposes of foreign investment and the granting of preferential tax or streamlined approval processes. Alternative energy cars, internet equipment and some service industries are moving to the encouraged category. The growth in the auto industry has slowed to about 3% in 2011 from 32% in 2010, with the change hitting the domestic Chinese brands the most. As a result more laws are expected to help technical know-how flow towards Chinese auto companies, according to IHS Automotive.

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Dexter Filkins says corruption in the Afghan government may prove more dangerous than the Taliban. Western officials may say is alright and have low expectations, but this may not be true for the ordinary Afghan people. Filkins points to this as a reason for the people turning to the Taliban.

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In private conversations, Paul Volcker has advised administration officials, that in implementing the Volcker Rule, regulators should follow the practice in money laundering laws. There the government bans a certain behaviour, and then the burden is on the banks to screen for red flags and to ensure compliance. His advice is to ban banks from trading with their own funds if they benefit from any kind of government guarantee. Banks would be required to police their own actions, and the Fed examiners ensuring they are in compliance. The recently passed regulatory reform bill left a lot to the regulators, who have to fill in the blanks. Volcker's concern is that narrow rules would invite gamesmanship from the banks to evade the intent of the law. At one Congressional hearing Volcker suggested a Potter Stewart type of approach- Stewart as Supreme Court Justice said about pornography: "I know it when I see it." For Volcker bankers know what proprietary trading is and is not, and he does not want to let bankers tell anybody anything different. Thw new Financial oversight Stability Council is charged with the task of coming up with a course of action by January 2011, and then writing the rules by October 2011. The fear among a group of 18 senators is that bankers will weaken the Volcker rule protections. A letter pointing this out was sent by the group to the Oversight Council last week....

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The Fed gets tougher on "too big to fail" but how tough? Does it have the guts to go after this problem asks Peter Eavis. If he does Bernake would go down in history as a hero says Eavis. Meanwhile Fed Governor Tarullo clearly point to the utterly inconceivable fact that after a crisis of these proportions with large banks being bailed out, the remaining banks and financial institutions are larger than before the crisis. And the banking lobby has stalled regulation to control the problems in derivatives trading and other areas. Splitting up or downsizing the banks and separating their social function as deposit takers in the economy from their trading desks and investment activity, is being advocated by central bankers from Volcker to Mervyn King. See links.

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A decision by management of the Ginori porcelain tableware company near Florence, Italy, to compete at the low end leads to its bankruptcy. Ginori was considered a prestigious maker of porcelain tableware since 1735, and hired top designers. The decline in formal dining led to a decline in demand. The decision to move to the low end is considered by workers to have been a mistake as low end Chinese imports have dominated the market in Italy. The difficulty of competing at the low end and the need to come up with a product and technological advantage that commands a higher price is a challenge facing Italy's manufacturing industry.

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The Aam Aadmi anti-corruption party led by Arvind Kejrival won 67 of 70 seats for the Delhi legislative assembly. The BJP won 3 seats. In the natonal parliamentary elections of 2014 the BJP led by Mr. Modi won in Delhi and the rest of the country. The Aadmi Party won the election by gaining the votes of ordinary people who were willing to give Kejrival another chance after an earlier stint at governing that lasted a few months. Kejrival's platform is for giving better access to electricity and water to the people of Delhi, and limiting corruption. In 2011-2012 Kejrival was part of the Anna Hazare anti-corruption movement in India that conducted nationwide protests against corrupt officials in the Congress Party led government. Following this effort which led to the election losses of the Congress Party in parliamentary elections, he setup a political party to contest elections on an anti-corruption platform.

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The NYT editorial says the negative feedback loop of foreclosures begetting falling house prices, which beget more foreclosures, and further weaken banks, is well under way. One way to have broken this, was to enable good types of loan modifications, which reduce the principal for homeowners and reduce payments significantly. Sheila Bair at FDIC says 32% of prior payments is about the right amount. The bad types of loan modifications that lead to no reduction in principal, and put homeowners back in redefault because of large payments that homeowners "under water" or a lost job cannot afford, have so far been the dominant kind of loan modification. At present 14 million homeowners are "under water," in that their homes are worth less than what is owed on the mortgage. One of the crucial measures which would have enabled this, has not been pushed by the Obama administration through Congress. This was to pass an amendment that allowed bankruptcy judges to modify troubled mortgages. Banks which have taken billions of dollars in loans from the federal government were allowed to lobby aggressively to kill this amendment, and the Obama administration did little to push this amendment in Congress. 12 Senate Democrats joined 39 Senate Republicans to block a vote on the amendment. Says the NYT editorial "when the time came to stand up to the banking lobbies and cajole yes votes from reluctant senators-the White House did'nt. When the measure failed there wasn't even a statement of regret." This could turn out to be a major mistake, because as the NYT points out voluntary loan modifications have shown poor results. The administration's plan to provide incentives for loan modification is untried and tested, and may not produce significant results. With 14 million homeowners under water, and spiralling foreclosures, the situation may get out of control and seriously damage the economy. After the moratorium in home foreclosures ended there is expected to be a big surge in foreclosures, with estimates of 290,000 to 341,000 foreclosures in March, 2009. If this is allowed to continue it will undo all the good work in other areas, the stimulus spending, rebuilding the auto industry and other steps. It will also be more difficult to reverse as valuable time passes and the cost of the crisis escalates. A consensus among many experts was that stronger action in connection with the banks was required, and Martin Feldstein has warned about the danger posed by foreclosures since early 2008, see links....

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Corruption in the election and democratic process in India.

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Stanley-Becker of the Washington Post looks at the story of Horst Kasner, Lutheran pastor in East Germany, Angela Merkel's father. In 1954 when Angela was born, her father moved the family to East Germany, then called the German Democratic Republic. The family settled in 1957 near the town of Templin in the Brandenburg countryside. He had an idealism based on the Lutheran faith and believed at the time that it was possible to build a East German Protestanism that reconciled with the professed socialist ideals of the GDR. Over three decades that faith was tested and by 1990 Kasner was known for his dissent to the state repression practiced by the GDR limiting free expression and religious beliefs. He worried about the domination of economic thinking even in the churches after the reunification.   Angela Merkel was close to her mother, Herlind Kasner, who joined the Social Democrats after reunification. Her brother joined the Greens. Merkel joined the movement called the Democratic Awakening in 1989, which merged with the Christian Democrats after reunification. Horst Kasner died in 2011 about 6 years after Merkel became chancellor. Speaking at a church in Templin in 2014, Merkel said what she believes- "God created every human being. We should strive for perfection. But we can make mistakes." To some Merkel remains inscrutable, hard to make out. This may be because she retains some of the thoughtful way her father meditated on what life was about and how best to live it.  ...