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Krugman says France is getting a lot of attention, but it is Germany where attention needs to be focussed. German long term bonds are yielding 0.7%, a yield level associated with Japanese deflation. He says Greece's problem was a fiscal mess limited to a small country, and Italy has a problem of low productivity that is unique to Italy over several decades. Loss of French competitiveness is overstated, as France has only a small trade deficit, and some of that lack of competitiveness comes not from excessive growth in cost and prices but from policies pursued in Germany. He points to France's GDP deflator (the average price of French goods and services) since 1999 when the euro started, as rising 1.7% a year, and labor costs rising 1.9% annually. By comparison German price growth was 1% and labor cost growth was 0.5%. France is close to the ECB target of 2% inflation. Germany falls way short of the 2% inflation target.

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The annual report on China by the IMF points to a diminishing margin of safety and higher risks for delays in needed economic changes from earlier infrastructure and construction focussed policies which neglected Chinese consumers and savers. The IMF pointed to risks from the shadow banking system and the real estate bubble that need to be addressed.

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A report by the Longevity Science Panel for the UK says the life expectancy gap between the richest and poorest neighborhoods in England has increased since 2001. In 2001 this was 7.2 years, by 2015 this increased to 8.4 years. The government points to cancer rates, the Longevity Science Panel report authors say income inequality was the main factor. To do this report LSP looked at data from the Office for National Statistics for 2015, which divided England into 33,000 residential areas and rated them on factors ranging from income levels, health, education and crime. This report points out that men and women from the bottom fifth were 80% more likely than the top fifth to die in any given year. 

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In an effort to calm unsettled global financial markets ECB president Mario Draghi said in a speech on July 26, 2012: "Within our mandate, the ECB is willing to do whatever it takes to preserve the euro and, believe me, it will be enough." Yields on Spain's government bonds reached 7.5% as investors shunned Spanish bonds fearing the need for a government bailout.

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CEO's of more than 80 large U.S. companies have come together behind a plan that would reduce the U.S. federal deficit with tax revenue increases and reduced spending. The CEO statement was organized by the Fix the Debt campaign, a bipartisan effort inspired by Republican Alan Simpson and Democrat Erskine Bowles of the 2010 Simpson-Bowles Deficit Commission. The CEO statement calls for an overhaul of the U.S. tax code to eliminate or reduce deductions, credits and loopholes (reduction of tax expenditures also referred to as "broadening the base"). The CEO statement says any fiscal plan to succeed has to control increases in health care spending, make Social Security solvent, and include "comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit." This is the first time a large group of business leaders have supported raising taxes as part of an overall solution. This puts together elements of the Bowles-Simpson plan, reduces deductions and loopholes, lowers rates as part of overall tax reform and cutting spending. The CEO statement says the Simpson Bowles recommendations for $3 in spending cuts for every $1 in tax increases was an "effective framework" for tackling a problem that affects the economic well being and security of the U.S....

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Mario Draghi, President of the ECB, turned down proposals to let European central banks send money to troubled European governments through the IMF. Draghi said- "we should't try to circumvent the spirit of the treaty, no matter what the legal trick is." The ECB also opposes large government bond buying to bring down yields on Italian and Spanish government bonds. The ECB by majority vote reduced interest rates in the eurozone by 0.25%, bringing interest rates down to 1%, and reversing rate increases under the previous president Trichet. It also made medium term funding available to European banks on better terms. According to a person in the room, German Chancellor Merkel opened the summit saying Germany opposes a plan to let the European Stability Mechanism (ESM) borrow from the ECB. The ESM is the bailout mechanism for future bailouts.

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This WSJ editorial points out that the lack of action from the Obama administration has led to the current situation in the Middle East with Russian intervention, the wave of refugees from Syria, and the increasing sectarian conflict. It cites from president Obama's address to the UN General Assembly that "the nations of the world cannot return to the old ways of conflict and coercion," yet failing to take action in the Middle East to prevent this from happening.

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The largest U.S. bank holding companies, including Bank of America, J.P. Morgan Chase and Citigroup, and two foreign banks Deutsche Bank and Barclays PLC must submit initial plans for "living wills" by July 1, 2012. The Dodd-Frank legislation requires financial firms to develop plans that lay out how they could be liquidated if they went under in a crisis. This legislation gives the FDIC and other regulators the power to seize and dismantle a failing financial firm, to help mitigate the problems of "too-big-to-fail" firms. The FDIC and U.S. regulators lacked such powers at the time of the collapse of Lehman Brothers in 2008. The FDIC and the U.S. Fed co-wrote the living will rule for "comprehensive and coordinated resolution planning." In all, 124 banks, including 100 foreign banks with U.S. affiliates, which have over $50 billion in assets worldwide, must submit plans and update on a regular basis. Smaller banks will have the deadline extended to December 2013.

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The warning light is again on for Greece in the beginning of 2012, as the rapidly deteriorating economy makes a 50% loss by private creditors insufficient to help it meet repayment or refinancing of bonds coming due in 2012. Additional funds will be needed from EU countries unwilling to do this. 14.5 billion euros in Greek bonds come due on March 20, 2012. Greece also faces a public increasingly resistant to austerity cuts. A vountary exchage of existing Greek bonds by private creditors for new bonds at 50% face value and maturing over a longer period will be done under English law. This will be harder to change in the future. Most of the existing bonds were issued under Greek law which can be altered by Greece's parliament.

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Frank Rich on the ticking bomb in the banking system and the bank lobbying that has kept reform from happening. Phil Angelides leads the Financial Crisis Inquiry Commission which is due to begin hearings soon. But says Rich, Angelides who is following in the footsteps of Ferdinand Pecora who investigated the 1929 crash as chief counsel of the Senate committee that did the investigating, will have to deal with a lot of resistance as he tries to alert the public to the need for action before a new crisis develops. For this to happen there will be aneed for more awareness of what happened, and a serious investigation, and prosecutions where necessary. Interestingly National City Bank was investigated then by Pecora. It is the predecessor of today's Citibank. At the time National City repackaged bad Latin American debt as new securities which it sold eaily to investors who later lost badly. Weill and Rubin at Citigroup made a series of bad decisions at Citigroup leading to huge losses at the bank, for which they have not accepted responsibility....

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The IMF's Managing Director Dominique Strauss-Kahn, says the Fund is taking a very pragmatic view of capital controls. Because of large capital outflows from developed economies in the West to emerging market countries, this has become a much discussed issue. In the past the IMF has supported open flows, but this has created serious problems for some countries. Strauss-Kahn says that with the right economic policies in place, it can be a good idea on a temporary basis to use the tool of capital controls and prevent damaging economic distortions.

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Too big to run is where the banks are today. Excellence in management would help, but banks have just grown too big, bigger than even before the crisis. Bank of America's 2.3 trillion dollars in assets is 10 times the size of Exxon says the Econmist, and they need to shrink and simplify things. And even with the deities at Goldman Sachs the bank remains a black box.

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As expected Iran boycotts the talks in Doha of 16 major oil producers seeking to stabilize oil prices. Saudi Arabia, Russia, Qatar and Venezuela sought to stabilize oil production at January levels to support oil prices. Wth the Saudia and Russia producing all out, Iran seeks to do the same, effectively closing the door on any agreement to freeze production levels.

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Wal-Mart is expected to announce a five year plan to meet specific targets for lowering sodium, trans fats and aded sugars in a whole range of foods- including rice, soups, canned beans, salad dressings and snacks foods- in packaged foods sold under its house brand, Great Value. Other moves towards healthy foods are to move to eliminate the extra cost to consumers for healthy foods made with whole grains. It will also lower prices on fresh fruits and vegetables. This plan is similiar to other plans announced by companies such as Con Agra Foods which set a target of reducing sodium content in foods by 20% by 2015. New York City also has a public health initiative for healthy foods. another move by Wal-Mart is to get major food suppliers like Kraft, to follow the example set by Wal-Mart. Kraft sells 16% of its global sales through Wal-Mart. The move will be gradually introduced over five years which makes for slow progress, and the targets set for sugar reductions are much less than they should be, says Michael Jacobson, executive director of Center for Science in the Public Interest. Another serious drawback is that Wal-mart has not proposed to tackle the major cause of childhood obesity, which is the added sugars in soft drinks....

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At the current rate of reducing the 10% current account deficit by the central bank, it will be the end of 2013 when it could be brought down to 6%. This may not be fast enough as Turkey could face an external shock if sentiment of foreign investors changes before that. As Turkey partly depends on foreign investors for short term funding of the deficit, this is critical for Turkey's economy. Only one quarter of capital inflows are in the form of long term direct investment. As the situation in the eurozone worsens in 2012-2013, Turkey is in serious danger of a sharp downturn in the economy after years of growth. The IMF has cited Turkey in the list of countries where the credit growth to GDP has increased to the level of a warning light indicator. Other countries cited by the IMF are China, Vietnam, S. Africa and Brazil.