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China's vice premier, Li Keqiang, wil visit Spain Jan 4-6, 2011. In an editorial page article for El Pais, Li wrote that China will continue to purchase Spain's public debt in the future. China is a large buyer of Spain's sovereign debt, owning about 10% of the total foreign holdings. Spain's central government will need to raise 170 billion euros in 2011, and its regional governments an additional 30 billion euros. Natixis expects 824 billion of eurozone government bonds to be auctioned in 2011. For China the eurozone is its largest market and it is concerned abou the impact of a eurozone crisis on imports from China. A declining euro would make Chinese exports less competitive and costlier in European markets. And China is wary of the impact on its export industries at a time when its economy is trying to make a soft landing, and strains are showing with an asset bubble in real estate, too much bank lending and high inflation.

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Wall Street Journal reporters Walker in Berlin, Forelle in Brussels, and Meichtry in Rome, reconstruct the events during critical days after the indecision and failure to reach agreement during the July summit of eurozone countries. This took the form of intervews with leading players and over 25 policy makers. What emerges are accounts of how Germany's Angela Merkel, daughter of a Lutheran pastor, and protege of Eurozone founder, former German chancellor Helmut Kohl, handled the crisis. Merkel was widely criticized in the media for indecision. What emerges is an account of a leader who took decisive action at key moments in the crisis- leading to the formation of new governments in Greece and Italy taking action to improve finances, and negotiations with banks represented by the International Finance Corporation leading to acceptance by banks of a 50% loss on loans to Greece to reduce Greece's unsustainable debt burden. Merkel also worked with the European Central Bank's departing president Frenchman Claude Trichet and new president Italian Mario Draghi to resist French president Sarkozy's efforts to have the ECB assume responsibility for the crisis through large scale buying of Italian and Spanish bonds; which was opposed by German public opinion as a backdoor way of having German taxpayers assume responsibility for European debt. Shown are three critical moments when Merkel intervened. In October 2011, after Italian prime minister Berlusconi reneged on promises to make pension and other reforms to improve Italian finances because of political resistance. He survived a parliamentary no-confidence vote by one vote. Merkel took the lead on October 20, by directly calling Italian President Georgio Napolitano on the phone, to urge him to take action for forming a new government in Italy. The result was Napolitano talking with all political parties to form a new government, leading to the formation of a government by a non-political figure respected in Italy, former EU commissioner Mario Monti. A day earlier, on October 19, French President Sarkozy met ECB president, Trichet, at an event honoring him as departing ECB president in Frankfurt's Alte Oper concert hall. Trichet, Merkel and Sarkozy met in a side room. Sarkozy asked for decisive help from the ECB for large scale buying of Italian and Spanish bonds to lower yields, which had reached 7% on Italian bonds. Trichet responded that the ECB's charter did not allow it to finance governments, with the meeting ending in a shouting match between the two leaders. On October 21, EU and IMF inspectors warned that Greece's debt was reaching unsustainable proportions and austerity measures alone would not work, unless the bondholders, the European banks, took losses of 60% on their excessive lending to Greece. At this point France agreed to the German position arguing for this level of bondholder haircuts or losses, fearing the prospect of large future bailouts that would jeopardize France's triple AAA credit rating. The July 2011 summit accord had only provided for 10% in losses for bondholders. On October 27, at a meeting that went past midnight, Merkel and Sarkozy called IIF head Charles Dallara, who headed negotiating for the banks, to EU headquarters in Brussels. Merkel handed Dallara an agreement containing the 50% bondholder loss demand, and told Dallara- "This is the last offer." Merkel was saying banks would be left with nothing if they rejected it and Greece defaulted. Dallara called bankers and the IIF accepted Merkel's agreement. The final moment that October came on October 31, when Greece's prime minister Papandreou said he would call a referendum on the bailout provisions and austerity measures demanded by the IMF, the EU and the ECB. Bond markets reacted negatively to the announcement fearing a rejection and a Greek default. The Group of 20 leaders was meeting in Cannes, France on Nov. 2, 2011. Papandreou was asked to come to Cannes for a pre-summit meeting. Here Merkel told Papandreou- "the real question" for the referendum was, "Do you want to be in the euro, or not?" Days later Papandreou, lacking support in Greece from political parties and opposition inside his party, submitted his resignation. A non-political figure respected in Greece, former ECB vice president, Lucas Papademos, was appointed prime minister to head a Unity government. Polls after the appointment showed three fourths of Greeks said that this was "a positive step for Greece," with Papandreou's party getting only 11% support and the opposition led by Samaras about 20%. The criticism leveled at Merkel is that Germany should take responsibility for debt throughout the euro area through the issuance of eurozone bonds or the ECB buying large amount of bonds of Spain and Italy. Merkel faced strong opposition inside Germany and from the Bundesbank to this idea. The other criticism was based on austerity measures worsening the finances of Greece because of a lack of growth in the economy, which is true; yet Germany may see the situation in Greece as taking a long time to be resolved in any event because of excessive and faulty financial management. For Italy and Spain putting finances in order was a necessity, and austerity measures should lead to short term sacrifice but improve prospects for the long term by returning the economies to growth. Another criticism is the installation of governments that lack popular or electoral support. As the polls in Greece showed the Unity government there has far greater support and public opinion blames the politicians for the huge mess. In Italy, Berlusconi was widely seen as losing popular support when he resigned. And in Spain Mariano Rajoy, the newly elected prime minister, was elected with a huge majority in parliament following winning in local government elections. Merkel also held her own party, the Chrisitian Democrats together at the recent Leipzig convention. Mario Draghi, was elected with German support to head the European Central Bank. He has long argued for better management of Italian finances as head of Italy's central bank. Draghi was able to support Merkel with carefully planned and managed actions. First to reduce interest rates to support economic growth in a slowing eurozone. Following this with the ECB's Long Term Financing Operation in late December 2011, to provide unlimited loans to European banks at 1% interest for three years in exchange for a broadened list of collateral deposited at the ECB. In a final twist in this drama, Charles Dallara, who was a key negotiator for the U.S. Treasury in setting up the Brady Bonds- that converted bad Latin American government debt owed to U.S. banks in the 1980's into long term debt with large reductions in principal owed and lower interest rates. This was in exchange for guaranteed repayment with 30 year U.S. zero coupon bonds. Dallara was now a negotiator for the banks to reduce the chance of the very same bondholder haircuts that he had negotiated in an earlier period to solve the Latin American debt crisis. Other players in the drama were Axel Weber, head of the Bundesbank, Germany's central bank, who resigned after strong and outspoken opposition to the ECB's large scale purchase of bonds of Greece, Italy and Spain. Jens Weidmann, his protege, who replaced him. And Jurgen Stark, German representative at the ECB, who also resigned in opposition to Germany assuming responsibility for eurozone debt. ...

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The creation of a two tier wage structure in Japan with different pay and benefits for Temporary workers is holding back consumption in Japan as temporaryworkers feel tooo insecure to spend much. And there are a substantial number of temporary workers, from 18% in 1987to 23% in 1997 and now 33% in 2007 about a third of the work force, with some workers as at Hino Motors making a mere $10 an hour.

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In a complete reversal of the situation in 2012 when Spain's and Italy's bond yields reached about 8%, Spain's 10 year government bond yields declined to 2.579% on June 8, 2014, according to Tradeweb. The ECB's efforts to fight deflation by injecting money into the financial system in 2014, and investor search for higher yields, is driving up the price of Spain's bonds and reducing yields below that of U.S. Treasurys for the first time. The period it took for this to happen- just 2 years!

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One of the first questions by moderators in the Univision debate in Florida focussing on immigration issues related to the anti-immigrant sentiment fostered by Donald Trump. Trumps statements on Hispanics and Muslims came under withering criticism from Clinton and Sanders. Hillary Clinton stated in reference to the Trump campaign slogan "Make America Great Again" that you can't make America great by doing things that do not reflect America's values. She said she would continue to speak up against the anti-immigrant sentiment created by Trump's derogatory statements about immigrants.

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Martin Caparros describes the deadlock in Spain with no two parties on the right Ciudadanos and Partido Popular, and on the left, Podemos and the Socialist party, able to have enough seats i parliament to form a government. An agreement between Ciudadanos and Partido Popular of prime minister Mariano Rajoy, has brought the 2 parties close to 170, 6 short of a majority in the 350 member parliament. New elections will have to be held for the third time in December 2016 as a result of this impasse. The two main parties in Spain the Partido Popular and the Socialist party, alternated in forming a government during the period since the restoration of democrati government after Franco's dictatorship. Following the deep recession in Spain since 2012 two new parties have been formed Podemos on the left, and Ciudadanos a centre right party. Both parties are critical of corruption, and the cuts in spending for education and healthcare following the financial crisis in Spain and bailouts by the European Union. Caparros describes the cynicism that voters express about not just the two main parties, but also for Podemos and Ciudadanos, as voters voice their rejection of politicians and parties on the left and the right. A similiar process is taking place in other countries, in Britain most recently with Brexit and the departure of prime minister Cameron. In the U.S. with the Sanders and Trump movements, and the Beppe Grillo movement in Italy.  ...

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To get the agreement of the 27 countries engaged in the talks to set new banking rules, the new Basel III banking rules are being phased in over a protracted period. Some changes go into effect in 2013, but others will be put into effect by 2019. The focus on the new rules is how much capital, or "common equity" banks will be required to hold as a cushion to absorb losses in a crisis like that of 2008. Large banks will be required to hold 7% of their assets in common equity. By 2015, banks will have to begin building a 2.5% buffer of capital, which must be in place fully by 2019. No action was taken on issues such as requirements for banks to have access to ample liquidity, what systemically important banks should hold in capital, and establishing a counter cyclical capital buffer.

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Th Basel Committee on Banking Supervision set strict financial guidelines for capital and liquidity that banks have to hold, but failed to implement early compliance. Banks get 8 years to comply for most of the banks, and 13 years for some of the banks. Increasing capital requirements by triple the current levels in the form of current equity, as required by the new Basel rules, gives banks a larger buffer in a situation that some of their assets lose value in a crisis such as the one in 2008. The US argued for stronger requirements and early implementation. Germany held back the implementation timetable mainly because its regional banks are saddled with bad loans; which might require $100 billon capital infusion by the German government, if early compliance was set in the new rules. The result is that the Basel rules have not grasped the opportunity to act quickly to strengthen the banking system, according to Prof. Jeremy Stein of Harvard University, a former advisor to the U.S. Treasury Department. In Stein's view the timetable is so far out, that another crisis will probably take place before the implementation. In the event, regulators from the U.S., Germany, and other countries let fears of tightened lending by banks prevail to an extent where the new rules timetable is stretched way out for 8-13 years....