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Public sector layoffs in Spain in 2012-2013 under the governments deficit reduction plan- as mandated under fiscal compact rules agreed to in the December 2012 eurozone meetings- will worsen Spain's severe unemployment rate of 25%. These public sector layoffs are only now taking place. Upto now local governments had helped offset rising layoffs in the private sector by preserving employment. The result will be a further increase in unemployment in Spain, creating a crisis of large proportions.

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Americans loaded up with debt may be turning to older thriftier ways of an earlier generation. This this will affect consumer spending, have an impact on Chinese exports, and on the Japanese economy which is dependent on China for growth. Some argue that there is a culture of consumer spending that runs through recent American history. Even after one boom was over the stock boom was replaced by a housing boom, each boom and easy credit offering free spending and borrowing lifestyles. Is it going to change now? But it could be that a point has been reached where the finances of households and of the nation's credit system can only go so far, and culture won't matter if banks tighten up credit. There is a limit for the Fed to act to lower rates, and household debt has reached highly serious proportions. The savings rate went from one tenth of income in 1984, to 5% in 1994, to slightly negative in 2008. Today for those who borrowed against their homes in 2003-2007, 34 million households or one third of the US households, savings rate was negative 13% in 2006 June. Thhis came down to 7% in end of 2007, according to Moody's Economy.com, which suggests that the cutback in consumer spending from this group of people had already begun. What will this mean for consumer spending in the USA? It means that even though the top fifth of American earners who generate half of all consumer spending according to Barclay's Capital, will continue spending though a bit more carefully than before. The rest of the American people will be cutting back, especially the one third of the nation that is heavily in debt, and the unemployed if job numbers aren't that good. Which could be why Goldman Sachs predicts that Japan is already in recession using the Japanese definintion of decline in output, and China may be slowing down more significantly than is understood because of the poor data that is coming out of China. The Chinese economic activity too chaotic to accurately measure, and with large time lags before what is actually happening is detected and quantified correctly. ...

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It is a reminder of far household debt went up in 10 years. Household debt was only 66% of GDP in 1998, Today it is 96% of GDP, and it is 130% of disposable income. For it to go back to the level only 10 years ago, it would have to drop 30%.

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Greece's problem says Carney, is that borrowed money simply financed the incomes of the large number of government employees- with one third of the workforce in the public sector- the unemployed and those on state pensions. It was not achieved by increasing productivity or increase in production. Nominal private sector labor costs went up by 62% in Greece from 2000 to 2008, when they increased by 15% in Germany. All this was done by using borrowed money after Greece joined the EU in 2001. And all this reckless borrowing was not visible to ordinary Greeks- worse it was being covered up till 2009 by the government till the IMF's Traa pointed this out. And Greeks still cannot come to terms with what happened.

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With 80% of Wisconsin precinct votes counted, Governor Walker had 55% of the vote compared to Tom Barrett's 44% in the recall election of June 2012.

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A mid-July 2011 CBS poll on where Tea party supporters stand on raising the debt ceiling and on a balanced deficit reduction approach combining tax increases and spending cuts. This poll shows 66% of Tea Party supporters saying Republicans in Congress should compromise on their positions to reach an agreement to raise the debt ceiling. Only 31% said they should stick to their positions even if this meant not reaching an agreement. On a balanced approach 53% said it should be the path taken including tax increases and spending cuts for a solution to deficits, and 45% said only spending cuts was the right way. This shows a more flexible Tea Party than is presented in the media reports and strident statements of politicians.

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Charlie Rose talks to Paul Ryan, the Republican Congressman from Wisconsin on his "Roadmap for the Future" and a major overhaul of taxes, spending, Medicare and Social Security. He tells Rose, who hosts a news show on Bloomberg TV, that in 2010 he is all by himself looking at the big picture for shaping ideas on economic reform, and still hopes others will join him in this effort.

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The U.S. House of Representatives passes the McConnell-Biden deal on raising the debt ceiling by 269 to 161. For its passage through the House 174 Republicans and 95 Democrats voted in favor, 66 Republicans and 95 Democrats voted against it. Republicans voted for it with a proportion of 3 in favor and 1 against, compared to Democrats where it was 1:1 and as many opposed it as supported it. It took much persuasion from Vice President Biden and Speaker Boehner to get the votes in favor of passage. Republicans who opposed it were concerned about the modest cuts in spending. Democrats who opposed it considered it a giveaway to Republicans with no tax increases or addressing of tax expenditures. The deal's trigger provision to require cuts in spending to be 50-50 for defence and entitlements was used by Biden to show Democrats that the next $1.2 trillion in cuts would take a more balanced approach. Democrats would have leverage to make their case for savings through tax increases or tax expenditures....

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Peter Coy of Bloomberg Business Week points out that the debt ceiling and proposed deficit reductions in the range of $4 trillion really obscure the real size of the problem which is much larger. The real problems hit when the U.S. faces a larger graying population by 2020 with sharply higher per capita health care spending; and at the same time workers from this generation retire and become beneficiaries of Social Security and Medicare with fewer younger workers to support the system with tax revenues. Another problem is that older Americans are likely as a voting bloc to vote themselves benefits that will cost the younger generation, benefits that the younger generation will not be able to enjoy. Even the Paul Ryan plan with its cuts to Medicare insulated todays seniors from the sharp cuts, as it becomes political necessity for both Republicans and Democrats to shy away from touching the current beneficiaries.

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Yields on Greece's 10 year bonds rise to nearly 9% in October 2014, as growth slows to near zero in the eurozone, including Germany, in the second half of 2014.

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Even though E-Bay executive Meg Whitman has outspent Jerry Brown by $130 million, much of it her own money, she trails Brown by 8 percentage points in an Oct 20 survey by nonpartisan Public Policy Institute of California. That survey showed Brown leading 44% to 36%. She had a hard line stance on illegal immigration in her ads for the primaries, which changed later in the campaign to attract Latino voters. Her campaign crafted by consultants focussed on three themes- cut government spending, create jobs, and fix education. Brown is a former Governor of the state and current attorney general. Experts attribute the lagging Whitman campaign to voters leery of 2 kinds of politicians- the first is the career politician and the second is longtime corporate executives. In other polls Senator Barbara Boxer is leading Ms Fiorina, former HP executive, 43% to 38%. Because of last minute surges in the polls, a lead of 8 points or more is considered necessary for the governor's campaign, for a candidate to win. Another factor is that Governor Schwarznegger came in with no political experience, and was beset by the state's fiscal troubles, with his poll ratings now at 28%....

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Jean Claude Trichet is one of the last leaders from a generation that helped create the euro currency union and a pathway to closer union of European nations. For four decades he has worked at the upper echelons of European economic policy making. In accepting the Charlemagne prize he stayed true to his idea for closer integration in the European Union. He said- "Confronting the challenges of the future requires strengthening the institutions of economic union." He would like to see a finance ministry for the EU, saying that "in this union of tomorrow, or the day after tomorrow, would it be too bold...to envisage a ministry of finance of the Union?" Such a ministry would exercize oversight over European nations economic policies and exercize veto power over national budgets. In the current crisis in Greece such a ministry could take actions and make decisions applicable to Greece. Trichet's remarks were delivered in Aachen, Germany. At the very same time finance ministry officials from 24 European countries were meeting in Vienna to come up with a solution to the Greece debt crisis. A main stumbling block is disagreement between Germany and others including the ECB, about how to make private-sector creditors share the burden of helping Greece avoid a default. Trichet and the European central bank and other central bankers have rejected Germany's insistence of an extension on the maturities of Greece's bonds, because they fear this would be perceived as a default by financial markets.This in turn would lead to contagion effects spreading to Spain and Italy, and a Europe wide crisis. In direct exchanges between Trichet and French president Sarkozy, Sarkozy has told Trichet he represents the bankers views whereas Sarkozy and Merkel have to take public opinion into account. In fact in past resolutions of financial crises in Latin America this type of extension of maturities for bonds has been applied, as for instance in the Brady Bonds and negotiated settlement arranged by the U.S. for banks, and Latin American and some Asian governments. Search term "brady" and see Landon Thomas's piece Nov. 30, 2010, in the NYT. This becomes necessary when countries such as Greece, Ireland and Portugal are unlikely to ever be able to repay the debt without a renegotiation of the original debt agreemments, spreading the debt over longer maturities, and private creditors taking some losses. By shifting the entire burden on austerity and spending cuts the current agreements leave the EU lurching from crisis to crisis as the underlying situation remains unresolved. It is here that Trichet's laudable vision of European unity runs aground because of the failure to build bridges between the outlook of the financial community and the public opinion of Germany, Greece, Ireland, Portugal and other countries. The governments of creditor countries such as Germany seek a renegotiation for a restructuring of debt. The governments of Greece, Ireland and Portugal understand that severe austerity cuts alone with declining growth can never resolve the situation, and would welcome a restructuring especially because the cuts are deeply unpopular. The renegotiation has to be conducted with the full faith and credibility of the European governments, ECB and the support of the U.S. government, so that financial markets are given a certain reassurance that the situation will be managed to a successful conclusion, and not lead to contagion effects on Spain and Italy. When asked about this Nicholas Brady recently said this required "a unified decision." This would include money set aside for recapitalization of European banks that are affected by such a restructuring. In such a restructuring the German government and other European governments would still come up with taxpayer money for the resolution, yet the shared cost by all parties would create a fair and workable financial arrangement that has the potential for successful resolution to the sovereign debt crisis. This disconnect between the political leaders and the bankers is why observers say the Europeans have not been able to wrap their arms around this problem. ...

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A research paper by the Federal Reserve Bank of New York shows 43% of Americans in 2012 under the age of 25 with student debt, having average debt of $20,326. Compare this with about 25% of young Americans having student debt in 2003, with average debt of $10,649. This is crowding out other borrowing such as buying new homes or cars by younger Americans because of borrower unwillingness to take on more debt and banks unwilling to lend to borrowers who might default.