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Shiller points out that statistical models used by economists can't quantify the risk of a double-dip recession. Confidence indexes show gradual trends so they too are poor at picking up the dangers inherent in the increasing levels of uncertainty and the increasing vulnerability of confidence in the economy. The potential of sudden events in derailing confidence is great. He cites the 10 percent drop in the U.S. stock market on May 6, as one example. And the potential of the BP oil spill creating havoc for the Gulf economy is another such event. Shiller says his definition of a douple dip recession looks at the long term, and doesn't see the short term as a way to correctly read the economic situation. He sees a douple dip recession as a rise in unemployment to high levels, and becomes sticky after that, only nudged down insignificantly. Before unemployment can be brought down a second recession occurs, and there could be years in between. Shiller's Buy-on-Dips stock Market Confidence Index prepared since 1989 shows a steady decline in individual investor confidence since 2009....

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How U.S. -Chinese relations today parallel relations between the U.S. and Japan in the late eighties and early nineties. The dnagers of extrapolating from the enormous growth in China today and Japan then, into the future decades. The prospect say anlaysts that the model of development in Japan then, and China today, with an emphasis of state driven direction, works for several decades and then starts sputtering. At some point it becomes a model that cannot be sustained. Some analysts like Arthur Kroeber, of Dragonomics, an economic forecasting firm based in Beijing, see it as a model that is right for that stage of developmment in a country's progress from an agricultural to an industrial economy. But there are critical differences with Japan, for one China has not completed its transition to urbanization as it has large parts of the country that are rural. And industrialization has increased the level of inequality in China. See the articles citing Gini coeficcients for China which show significant deterioration. The other difference is that Japan still had a pioneering secotr of companies in the export sector from Toyota to Panasonic, whereas China's companies in most secotrs are state run or heavily financed by state run banks. Japan has one other striking difference in that it has a democratic form of government and a thriving and independent media, which makes Japan's transition to a post industrial economy with an increase in private initiative less difficult....

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Reps. Eric Cantor (Va.), Kevin McCarthy (Calif.) and Paul Ryan (Wis.) have jointly written a book "Young Guns," that completely distances the new leadership in the Republican party from the leaders of a prior generation. The book says the older Republican leadership "betrayed its principles," by not controlling spending. See the the link to David Stockman who has criticized previous Republican administrations for their attitude to spending, including President Reagan. A recent NBC/WSJ poll shows only 24% of those polled seeing the Republican party positively. The idea is to differentiate the younger leaders as new voices in the party, different from the party's previous role.

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The Post's Lally Weymouth interviews Enrique Pena Nieto, leading presidential candidate in Mexico. Nieto discusses the war on drug cartels. He says his government is commited to continuing the fight, but says Calderon's strategy has not worked, and the need now is for reducing the rising level of crime. Nieto's priorities are to open up the economy to competition by reducing the power of the monopolies and oligarchs, reduce poverty by providing social security to all Mexicans, increasing private investment in Pemex, and increasing the taxpayer base to finance new investment and programs.

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Luigi Zingales of the University of Chicago Booth School of Business, compares the growing cronyism in the U.S. and the lack of social mobility to the situation in Italy where he grew up, and where the economy has stagnated over the last decade with fewer opportunities for the younger generation.

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Yannis Stournaras, economcs professor at the University of Athens becomes the finance minister in the new administration of prime minister Antonis Samaras. He holds a doctorate from Oxford University in economic theory and policy, lectured at St. Catherine's College, Oxford and at the Oxford Institute for Energy Studies. He was special advisor on monetary policy to the finance minstry and Greece's central bank. His public official positions include vice chairman of the Greek natural gas company and board member of the public debt management agency. He is well qualified to lead the effort for Greece to remain in the European Union with modified terms that extend the achievement of deficit targets by 2 years to 2016, and offer tax cuts and other growth oriented measures to get the Greek economy back on the path to recovery and growth after 4 years of declining GDP. He also brings a sense of committment to the EU, because he was chief economic advisor to Greece's Finance Ministry in 1994-2000 and took part in the negotiations that led to Greece's joining the eurozone in 2001. His strong views about changes needed to Greece's overregulated economy which favors special interests also coincide with the moves for labor and other reforms taken by the Monti and Rajoy governments in Italy and Spain. ...

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The weaker dollar has given a boost to U.S. exports. The dollar has dropped by 9.1% compared to the prior year against a broad basket of currencies. U.S. exports have provided 1.4 percentage points of the 3.0% annualized growth since the 3rd quarter of 2009. The U.S. dollar is now 5% away from its all time low in March 2008, when tracked using the dollar index. Before the 2008 crisis the dollar had over a six year period lost about 40% of its value. Low interest rates in the U.S. and concerns about the deficit have contributed to the dollar's decline in value. While the decline helps boost exports, it also increases the price of oil in dollar terms and increases inflation. A Gallup poll in April showed 42% of Americans had no confidence in the Fed's policies for the economy, and 43% had no faith in Treasury Secretary Geithner. The decline is taking place even as Japan is recovering from the earthquake, and Greece is likely to have to restructure its debt obligations with European banks taking losses....

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Former Defense Secretary Leon Panetta's "Worthy Fights" provides a better perspective on the Syria-Iraq conflict- about a conflict in Syria that was the result of president Obama not acting when a "red line" of the use of chemical weapons was crossed. A similiar point is made by U.S. Secretary of State Clinton. Both advisors to Obama were ignored in favor of Mr. Donilon and other White House adviosrs who lacked the experience of Panetta and Clinton. On the Iraq conflict Maliki's misguided sectarian policies were not sufficiently constrained by U.S. effort to preserve earlier hard won gains under the Bush administration. At the end of the Bush administration Iraq was returning to a peaceful period and the war had largely been won against old Saddam loyalists in Anbar province. Ultimately Obama's lack of experience in foreign policy and his failure to heed the advice of people with that experience such as Panetta and Clinton, was the basis of the crisis inadvertently created in Syria by a tendency of inaction. The Syrian situation was not fully grasped as leaving Sunnis to suffer Assad regime air attacks creating 2 million refugees, something that should have prompted action by the international community. With Sarkozy gone in France and Cameron unable to convince the U.S. alone, or move forward with the French unilaterally, the inaction phenomenon of the Obama White House left the entire Sunni communty throughout the Middle East without any support as they watched the destruction in Syria. ...

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Krugman looks at the economies of indusrialized countries in 2014-2015. He points to the errors made by the Riksbank in Sweden to increase interest rates prematurely when a recovery was not on firm ground, ignoring the advice of deputy governor Lars Svensson. Sweden now faces the prospect of little growth and deflationary tendencies. He compares the decision of the ECB to raise rates in 2011 with Japan's decision to prematurely raise rates. The austerity policies in the EU driven by Germany and the lack of political consensus in the U.S., are faulted for making the situation worse when compared to Japan's poor handling of the situation. He says fiscal policy did not do enough in Japan to create growth, in the EU he says austerity policies were actually destructive of growth.

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Steinmeier has pursued the middle road in Germany's relations with Russia even after the tensions over Ukraine. He says we have to put behind us the illusions that a multipolar world will replace the bipolar world. He looks to his Protestant faith in these times, and says it is important to stay involved, and not allow escalation of conflicts at the periphery, such as the one in Ukraine. Critics such as the German newspaper Frankfurter Allgemeine Zeitung, say his diplomacy and efforts at Ostpolitik is a matter of just opening doors, that Putin has already created discord in Europe.

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Lt. Gen. Frederick "Ben" Hodges is the U.S. Army Commander in Europe. He describes the threats facing the U.S. in an interview with Sohrab Ahmari of the WSJ. Hodges says Russians are preparing for a conflict five or six years down the road, and should have capabilities built up in 2 to 3 years. The U.S. military remains stretched with 9 of 10 division headquarters committed to some requirement, and new crises popping up unpredictably, such as Islamic State and Ukraine in 2014- a situation not faced even at the height of the engagement in Afghanistan and Iraq. The budget sequestration cuts continue to limit the army's capabilities just when additional resources are needed. Hodges calls for depth in resources as the only way for the army to be there to counteract bad actors in Europe or the Middle East, or some other place. With further budget cuts the army will have to drop down to 420,000 personnel from 500,000 today, just when the number of crisis areas are increasing, hurting preparedness and modernization....

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The U.S. Defense Department is about to move forward with a plan to store battle tanks, infantry fighting vehicles and heavy weapons, for about 5000 American troops in Baltic countries and Eastern Europe. The move is in response to calls from Baltic republics to prepare a rapid reaction capability in response to any Russian action.

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A Pew Center poll in Greece shows support for the Euro at 69% in 2013. The situation in Greece has improved in 2013 with the economy expected to decline by 4% in 2013 and return to growth in 2014. The current account deficit at 11% in 2008 is now close to zero. Unemployment is stabilizing and the competitiveness is being restored as labor costs per hour are down 30%, according to Alpha Bank. Ten year government bond yields are now below 8% in 2013, a dramatic improvement.

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JP Morgan agrees to a legal settlement of $4.5 billion for losses to investors from toxic mortgage securities sold by Washington Mutual and Bear Stearns. JP Morgan acquired the two financial institutions following the 2008 financial crisis. The investor group includes Black Rock Inc, Allianz's PIMCO, MetLife, and Goldman Sachs. The same group of institutional investors settled with Bank of America for $8.5 billion. JP Morgan has set aside $23 billion at the end of the third quarter for legal losses. The settlements now are at about $20 billion. A private suit by Deutsche Bank National Trust Company representing 100 trusts for poorly perfoming bonds sold by Washington Mutual, and seeking $10 billion is still pending. The FDIC is arguing that JP Morgan is liable because it inherited the liabilities when it acquired Washington Mutual. JP Morgan says the acquisition was made as part of a government arranged acquisition at the height of the 2008 financial crisis. It says the FDIC receivership that took Washington Mutual's assets when it failed in September 2008 should pay for any claims related to misrepresentation and false promises for the bonds. ...

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A way of gauging the extent of a bubble in the internet IPO's in 2013, says Hulbert, is the first day return on IPO's in the U.S. of 25% in mid-Aug to mid-Nov 2013 compared to 96% in the first quarter of 2000. He cites a study by finance professors Jerry Wurgler of New York University's Stern School of Business and Malcolm Baker of Harvard Business School, which stresses the need to use objective indicators in assessing the current equity markets and not relying on memories alone. Investor caution after two bubbles since 2000, active regulatory oversight of markets, and legal frameworks updated for changes in financial markets have provided additional safety and stability to markets. The study authors cite evidence for the changes in the way investor sentiment values speculative stocks compared to established stocks. The price/book ratio per share or net worth of established stocks is way higher compared to speculative stocks in 2013 compared to 2000. In 2013 established companies in the S&P 1500 index, according to FactSet, had a 49% higher price/book ratio on average than speculative stocks. Wurgler and Baker used dividend paying stocks as "established" stocks compared to non dividend paying stocks as "speculative." Another piece of evidence that companies are also adjusting to sentiment this time is that less money is coming from stock issuance in 2013 of 11% compared to 20% in 2000. Visible evidence of company behaviour is also telling- banks are changing bahaviour after tougher regulatory oversight and settlements in 2013. GE is planning to shrink GE Capital and put it on sale. Investors have sharply cut back allocations to stocks and are returning to modestly higher allocations from much lower levels and memories of 2000 and 2008 are still present....

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Entous, Malas and Abushakra of the WSJ give a detailed account of the series of smaller chemical attacks that ended with this large attack in the suburbs of Damascus in August 2013, the actions of key participants, and the responses of the global community.