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The 3 week old government in Italy, led by former EU commissioner, Mario Monti, announced a three year plan of 30 billion euros in tax increases, spending cuts, reform of pension plans, and efforts to boost growth. Monti said at a news conference that "Italians are to blame for our public debt, and we risk compormising everything we've accomplished in the past 60 years." Under the new plan retirement age for women in the private sector would be increased from 60 to 66 years by 2018, bringing it in line with retirement ages for men. Italy's Labor minister, Elsa Fornero, broke down in tears as she described the change, saying it was necessary to avoid "collective impoverishment." Italy faces the difficult task of refinancing $400 billion in short term debt coming up for renewal in 2012, just as bond yields for Italy have spiked to over 7%. Because Italy lacks an extensive day care system, women helped raise grandchildren after early retirement at age 60. Other changes were to impose a 1.5% one time tax on money repatriated back to Italy under a tax amnesty scheme setup by former premier Berlusconi. Action was taken against widespread tax evasion by banning cash payments above 1000 euros. Stimulus measures of 10 billion euros are designed to boost small business and reduce high youth unemployment running at 29%. Companies get tax breaks of 2 billion euros if they hire young people....

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Comedian and politician Beppe Grillo, from Genoa, who leads the Five Star Movement party. This party has increased its support from 4% in 2011 to about 18% in recent opinion polls. Grillo is a moderate liberal who has benefitted from the unpopularity of austerity measures taken by prime minister Mario Monti and the rapidly declining support for Berlusconi's People of Freedom party after recent coruption scandals. He has opposed traditional politics of established parties since 2005 when he pulled together people over social media and the internet. Support for political parties in Italy is rapidly fragmenting with Berlusconi's party dropping to 17% in polls and no party having significant support. In this situation business leaders support a continuation of the Mario Monti government beyond the April elections if no party gets a mandate from voters. Grillo says his movement is similiar to other movements that oppose the euro and austerity measures such as the Marie Le Pen movement in France. It is against this background that the Social Democrats in Germany have united behind Peer Steinbruck, a former finance minister, who has the best chance against Merkel in 2013 elections for chancellor in Germany. Most of the difficult and necessary actions that Merkel and the German public have supported are already taken- the changes in labor laws in Italy, France's 2013 budget that targets 3% deficit in 2013, efforts of Italy, France and Spain to improve competitiveness- and capital markets continue to provide vigilance in this direction, creating a situation where Merkel may have exhausted her effectiveness. This creates an opening for a change in policy in the eurozone that offers more German flexibility on stabilizing the eurozone and supporting the embattled governments of Monti in Italy and Rajoy in Spain facing popular protest and not enjoying the kind of support Monti says France has from Germany....

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Increasing supplies of natural gas in the U.S. will play out over 3 decades and reshape industry and manufacturing in the U.S. A new study by the University of Texas and funded by the Sloan Foundation of the Barnett shale rock formation shows that large quantities of natural gas are available that can be drilled at a cost of $4 per million BTU. This is only slightly higher than the current price of $3.43. This makes the increasing supply of lowcost natural gas a multi decade development, according to the Bureau of Economic Geology at the University of Texas.

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Samuelson discusses the differences between the Bureau of Labor Statistics figures for June 2014 using the Payroll Survey and the Household Survey, each telling a different story. According to the Payroll Survey 288,000 jobs were added. The Payroll Survey is a monthly survey of 554,000 business locations, with firms asked to give the number of people on payrolls, pay and occupations. The Household Survey of the BLS asks households in monthly interviews with 60,000 Americans whether they have a job, is it part time or full time, are they looking for full time work, or jobless and for how long. The Household Survey showed June 2014 job increase at 407,000, using an estimate of 1,115,000 increase in part-time jobs and a loss of 708,000 full time jobs. Of the two the payroll survey is larger and considered by economists to be more representative. Other statistics show the parttime workers at about 3 million higher than 2007 before the 2008 financial crisis, suggesting the shift to part time jobs has been one negative result of the crisis....

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China's assembly work accounts for just $3.70 of the Apple I Pod's value, The display module costs$20 made by Toshiba-Matsushita and of the $224 wholesale price $80 consisted of Apple's gross profit. This is from a study by 3 economists of the University of California at Berkeley and Irvine, Linden Dedrick and Kraemer. Out of electronic and IT exports of $300 billion China's value added was about 15% or $45 billion according to Leo Branstetter of Carnegie Mellon University. Foreign firms account for the largest share of exports and all of the top ten are overseas firms. In India mostly the IT business is a services business and it has not made the breakthrough to create original software products that are marketed worldwide.. In this sense there are a lot of missing pieces in both countries efforts and a lot remains to be done.

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Chinese companies are executing plans to put them at the forefront of new technologies and innovation in many fields. Example of BYD which plans to make a hybrid by the end of 2008. It is already the second largest battery producer and started up less than 10 years before. And BYD has built a 16 million square feet assembly plant in Shenzen to make the hybrid on a large scale. And Hasee a computer maker is focussing on innovative computers and laptops that now sell for just $370 , and hopes to become the top computer maker in the next 10 years . It is already selling 100,000 laptops a month in China and is now the second biggest computer maker in China. It is Chinese government policy to support innovative technology companies to take leadership positions in worldwide industries and products. Speaking at the Chinese Academy of Sciences in June President Hu said : "we are ready for a fight to control the scientific high ground and earn a seat on the world's high technology board. We will make some serious efforts to strengthen our nation's competence."...

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The government bailout of Fannie and Freddie was expected to cost hundreds of billions of dollars according to some estimates during the financial crisis in 2008-2009. The costs peaked at $187 billion in 2011. The transfer of $59.4 billion by Fannie Mae to the U.S. Treasury in 2013 lowers the net cost to $60.5 billion. The net cost of the Troubled Asset Relief Program or TARP has decreased to less than $23 billion. At one point the cost of TARP reached $419 billion for the U.S. Treasury. The government sold the last of its shares in private insurance company AIG and made $22.7 billion in gains. Treasury and Fed loaned $182 billion to AIG and at one point owned 90% of the company. Chrysler exited the TARP bailout program in 2011 at a net cost to the U.S. government of $1.2 billion. So far in May 2013 the GM bailout cost $19.6 billion, this would come down to about $11.82 billion if the U.S. government sold its GM shares at the price in May 2013. The U.S. Federal Reserve says it has not lost money in any of its emergency lending facilities, even though some loans are outstanding. The FDIC says its fees from rescue programs exceed losses....

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Admiral Mullen and General Petraeus have grown impatient with Pakistan's and the ISI's support for the Haqqani network, a Taliban ally that works as a proxy for Pakistan's military and intelligence services. Recent disclosure of Pakistan's military and civilian leadership's effort at a Kabul meeting to have the Afghanistan government distance itself from the U.S. have added to concerns. The appointment of Gen. Petraeus to lead the CIA, including direction of the drone campaign, is expected to continue the tension in the relationship.

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Eric Bellman's intervew with Rajiv Lall, chief executive officer of Infrastructure Development Finance, India's largest infrastructure financing company. Lall says the conditions are right for power development to be the next telecom of India's growth story, with some of the same impact that telecom has had bringing mobile phones to hundreds of millions of people in India. IDFC expects 20% growth in net profit in 2010 and 30% in 2011.

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Rising food prices in China have pushed China's consumer price index to a two year high of 5.1% in November, 2010. Rising prices of cooking oil have hit Chinese who live on small incomes the hardest. Food represents about one third of the CPI, but it accounts for 75% of the index's rise. Chinese housing prices have gone up significantly making it hard for new homeowners, now that food and fuel prices are following. The National Developmment and Reform Commission announced a 3.77% rise in retail gasoline prices, to about $3.50 a gallon, an increase of 11% in about one year. Wholesale soyabean oil rose 23% in 2010 to about $1451 a metric ton, with most of the rise since July. China's government response was to impose price controls, asking the largest producers to cap retail prices through March 2011. It also quintupled the fine to 5 million yuan, or $750,000. And the government auctioned off millions of metric tons from its strategic national reserves in Xinjiang and Shandong. But price controls are discouraging production. One mid-size producer in Shanghai, says he has deactivated half his plant, instead off maximixing output ahead of the Lunar year in February. His warehouse is filled with 20,000 boxes of unsold oil, with the production date Nov 23, around the time price controls went into effect and a large grocery distributor halved his order. Edible oil is the third biggest packaged food outlay for ordinary Chinese, after yogurt and milk, and it has a big impact on the lives of the average family....

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A landmark ruling and a huge win for consumers and for the country, as the Supreme Court says states can enforce fair-lending laws and other consumer protection measures against the largest banks in the USA. The Suprem COurt said that the rules issued by the federal banking regulators like the Comptroller of the Currency under the NationalBank Act - a law passed in 1864- could not block sfforts by the states to enforce their laws. For the country its a win because the lack of enforcement of state laws only allowed abuses in the subprime area to continue and helped create the subprime mortgage crisis. The case began with letters by the New York Attorney General Eliot Spitzer in 2005 to several national banks including CItigroup, JP Morgan Chase and Wells Fargo inquiring about lending practices to minorites. The letters referred to "troubling" disparities that suggested black and Hispanic borrowers were being charged disproportionately higher interest rates on mortgages compared to whites. THe letters asked for information "in lieu of subpoena." Protection of minorities and the weak in American society is part of the moral fabric of America and that it had eroded in recent years is evident in the manner the banking sector responded. A banking trade group and the Office of the Comptroller of the Currency brought a lawsuit to block the New York Attorney General's request saying that the National Bank Act nd rules issued by the Bush administration in 2004 gave that type of authority to comptroller and prohibited such efforts by the states. And then afederal district court ruled against the states, aand the U.S. Court of Appeals for the Second Circuit Court affirmed that decision. These are instances where the system failed to protect the weak even with the laws that states had on their books. Justice Scalia voted in favor with a 5-4 vote to allow states to enforce consumer protection laws, even though his written opinion was based on an interpretation of what "visitorial powers" of a federal regulator were, and not about the importance of fair lending in the proper functioning of the American economy. Justices Roberts, Alito, Kennedy and Thomas voted against....

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Financial Planner Carl Richards, warns investors about relying too much on market predictions. He cites the law of small samples as one way things go wrong. Another is investment managers with good track records in one decade doing badly in the next decade- David Miller in the 70's and Bill Miller of the Legg Mason Value Fund are others. To show how ridiculous market predictions based on computer models can get he gives the example of a researcher who found that over a 13 year period butter production in Bangladesh 'explained' 75% of the fluctuations in the annual returns of the Standard & Poor's 500 stock index. Adding in U.S. cheese production and the total population of sheep in Bangladesh and the U.S., this researcher was able to forecast past U.S. stock returns with 99% accuracy.

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Interview with Gerard Kleisterlee, retiring CEO of Philips Electronics. Kleisterlee led the effort to focus on emerging markets where sales of health care, lighting and consumer products are accelerating. Second quarter sales in emerging markets went up 29% for 2010 over the prior year, and now are 34% of total Philips sales. As part of this strategy Philips is increasing its staff and research divisions in China, to capture part of the $125 billion that China plans to spend on healthcare in the next 3 years. Kleisterlee talks about local competitors in emerging markets who are trying to get a regional or global presence. How Philips is increasing local responsibility, and how it is designing, engineering and manufacturing products specifically aimed at local markets in emerging market countries- as away to compete effectively in these markets. He also points out that it is no longer sufficient to be in the major cities, Philips has to move into smaller cities and into the rural areas to increase sales. He sees consolidation opportunities in Asia where the lighting manufacturing is still fragmented. Responding to a question about Philips still being too old, too male, and too Dutch, Kleisterlee agrees that it is too male and too Dutch for his comfort. Women are a bigger part of his health-care team, but not that much progress in other areas of the company. And he would like to see more local leaders in emerging markets. He sees consumer behaviour changing in one respect- there is an increasing consciousness among buyers for value, and not just for low price points, but at all price points....

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George Will lists the shortcomings of Romney and Gingrich, as U.S. Republican presidential candidates in 2012. Gingrich is the worse candidate, says Will. Gingrich was paid $1.6 million by Freddie Mac, for services as "a historian." His response was to say "If you put people in jail," look at "the politicians who profited from" Washington's environment. He criticized government housing agency Freddie Mac for its role in the housing crisis, and at the same time profited as a lobbyist for Freddie. This shows his personal record and lack of conviction about the need for integrity in government officials. Conservatism, says Will, is about understanding that man does not fully understand the complexities of the world around him. It stands in opposition to man saying that he has grasped these complexities and assuming a hubrisitic attitude. Gingrich with his fervor for the latest idea, is the opposite of what conservatism stands for, says Will. Will sees Rick Perry and Jon Huntsman as better candidates than Romney or Gingrich. Presidential debates don't test what is needed to perform presidential duties and have become ridiculously important. Rick Perry's Texas record as two term governor, and his skepticism and distaste for Washington and Wall Street, give him assets that could prove to be vital for the job of president. Huntsman's positions on issues are closer to the conservative approach to government than Romney's. Will says it is important that Republicans don't give an Obama running as a Harry Truman did in 1948, against Congress, the one thing needed to win - someone who voters have a distaste for....

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The situation in Guangdong province in 2012, with older factories unable to compete with the rising wages, stricter environmental enforcement, and lower export demand. Many Taiwanese manufacturers are closing factories. The growth in Dongguan, a manufacturing hub in Guangdong, is estimated at 3.5% for the first three quarters of 2012, half the overall rate for Guangdong province. A researcher in a Chinese think tank says China's manufacturers are in a kind of "sandwich trap" with competition from Vietnam and India in lower wage production and competition from Germany and the U.S. in higher wage technology intensive products. This is especially true in 2012-2013, now that U.S. and German manufacturers have reduced costs and increased competitiveness.

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Will the housing slowdown impact the rest of the economy, industries like auto, airlines, oil. How much slowdown in growth is to be expected? Both sides of the picture. Oil price declines and the fact that consumers are spending less out of cash from home equity may mitigate the slump.

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Export growth, Fed rate cuts and other efforts to promote lending, some smaller growth in job creation, and the smaller role of housing investment in the economy, should offset the credit crunch. The worst hit in the mortgage crisis represent a smallpart of consumption spending and cosumption may hold up.

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With inflation at 3.6% last month for the euro zone and well above the ECB target rate of 2%, and no signs that the cooling economy will bring inflation down significantly for the next few months, it appears that ECB is not likely to lower rates till the 3rd quarter.