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Paul de Grauwe, a economist at the London School of Economics points to two problems with the June 28, 2012 EU deal that allows the EU rescue fund to buy Spanish and Italian bonds and provide capital aid directly to Spanish banks. One is the limited funds of the rescue fund, European Financial Stability Facility or by its other name European Stability Mechanism. The EFSF or ESM lacks credibility because it lacks resources, it has only 248 billion euros, and has to first raise money in the bond markets. A better approach would be for the ECB to buy Spanish and Italian bonds aggressively, allowing a smaller spread between these bonds and the German bonds, says Grauewe. Germany is the largest shareholder at the ECB and opposes this move as a form of mutualizing of debt in the EU. Grauwe's recent paper shows that the depressed bond conditions for Spain and Italy are driven largely by a psychology of fear and not hard true economic numbers. Christopher Marks, global head of debt capital markets at BNP Paribas, says it is important to create the confidence to get longer term core investors such as pension funds, sovereign wealth funds and insurance companies back into this market for Spanish and Italian bonds by reducing volatility and yield. These longer term investors have left the market creating a severe problem. The shorter term investors, who came into this market in the last 1-2 years, are now the loudest voice saying Spain and Italy are likely to fail. These shorter term investors are either selling these bonds short or getting credit default swaps. A big problem coming out of the June 28, 2012 agreement, is that it is short on details. The details of how the rescue fund will operate, its funding, and the conditions for making making direct loans for stakes in banks or buying government bonds are still to be clarified. Germany's Constitutional Court also will rule on how this would be conducted and the Merkel government would continue tough negotiations on the details creating added uncertainty. ...

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The new prime minister of Japan Yoshihide Suga is critical of the three phone carriers forming an oligopoly and keeping prices for mobile phone service in Japan very high. Another criticism is that Japan has failed to compete in phone technologies by staying out of world markets that would improve its competitive spirit. Japan has failed to keep up with China and other countries in mobile technologies. 

As part of the first step to change this and make NTT competitive by entering world markets, NTT is paying a 41% premium on the part of NTT Docomo that it does not own in a $40 billion deal. NTT chief Sawada sees this as a way to speed up decision making, as he sees a crisis in Japan's struggle to compete with China and the U.S. in world markets.

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David Leonhardt talks to Raghuram Rajan, Mr Obama, and other experts on how the government should act after the stress test results are announced. Has the government toned down the results of the stress tests, and is it paying too much deference to Wall Street. Leonhardt put this question to Obama, why he asked his advisers were key figures of Mr Rubin's inner circle, Mr Geithner and Mr Summers, who like Rubin are inclined to have too much deference to Wall Street. Obama's answer was that he had other advisers outside of Summers and Geithner. Which wasn not convincing for Leonhardt considering the key positions Geithner and Summers hold. Rajan of the University of Chicago who anticipated the crisis, was not too reticent to criticize Greenspan policies and was in turn criticized for that by Summers, told Leonhardt that certain things may be presented as holy cows not to be touched for fear of something bad happening, but until you find out you cannot be sure. This applies to the bank rescue plans. Should the creditors of banks be asked to take haircuts or swap debt for equity. This may be necessary as there just isn't enough money in TARP - $130 billion left in TARP funds versus the $1 trillion that the IMF thinks American banks may need for solvency in the next 2 years- to do the bank rescue operations. Should the administration consider this a holy cow as Wall Street is suggesting, or come to its own conclusions independently of what Wall Street is saying. Wall Street has to look at it from its vantage point out of sheer necessity, not from what is the best option for someone in the administration's position, considering all the facts without any preconceived ideas or notions....

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In an intervew with WSJ's David Pearson, Tom Enders, CEO of Airbus, points to the changes at Airbus after improvements in governance in 2012, leading to a smaller role for the governments of France and Germany. One is the shift away from Europe. Compared to 2004 when Airbus orders were 50% from Europe, this has dropped to 10% in 2014. Airbus is also staying away from a 623 million euros loan from Germany for the new Airbus A350 widebody jet, because of pressure from the German government to allocate work to German factories. The same policy will be followed in future programs to rely less on government support. Enders does not want to be tied down to certain workshare agreements imposed by governments with the loans. In 2012 Airbus reduced the role of the German and French governments with a large increase in the percentage of shares traded on stock markets. In the past the funding was critical for programs. Today Airbus has 9-10 billion euros on its books because of booming sales.

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Only 23% of meals in America include a vegetable. The number of dinners made at home with a salad dropped to 17% in 2010 compared to 22% in 1994. Salads ordered at restaurants dropped to 5% in 2010 from 10% in 1989, according to NPD research company in its 25th edition of "Eating Patterns in America." The U.S. is going backwards in good eating habits and no enough attention is being paid to this in the debate about cost of health care. Their is a clear connection between good eating habits and health, and while invention and use of the latest research and innovations in health care are lauded, the decline in patterns of healthy living and food habits are receiving less attention.

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Swiss bank UBS plans to make 10,000 job cuts in the next 3-5 years. Most of the job cuts will come at the investment banking operations which has 16,432 employees. Carsten Kengeter will be made chief of investment banking to concentrate on the downsizing effort. Andrea Orcel, who was brought in by new CEO Sergio Ermotti to be co-head of investment banking will run the remaining businesses of advising on mergers and equity underwriting. Trading businesses, especially fixed income, will be closed down. A third of the employees and 15 lines of business in the investment banking operation will be cut. The strategy is focus on businesses that do not require much capital to run and to build on its competitive advantages. This means focussing on its strong points in wealth management operations and the asset management division, which combined have $2 trillion under management. This move away from capital intensive business is part of an effort by Mr. Ermotti to dispel notions that UBS is not adequately capitalized. UBS suffered losses of $50 billion during the early part of the 2008 financial crisis, followed by the rogue bets by a trader in the London office leading to a loss of $2 billion in 2012. Following the most recent losses Sergio Ermotti was hired to replace Oswald Grubel in 2012. UBS now provides an example for other banks to overhaul their banking operations and downscale the importance and risks of investment banking....

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The Fed's Term Asset Backed Loan Facility (TALF), by which the Fed would give money to banks on very favorable terms to loan out to others including hedge funds who would go out and buy consumer loan backed securities, has barely made it off the ground. Its vital if consumer loan markets for everything from cars to other products is to get off the ground. The large layoff and job losses are a result of the lack of credit to finance purchases creating unneeeded manufacturing capacity, with the ensuing job losses only exacerbating sales. Investors worried about defaults have stayed away from consumer loan backed securities. The figures tell the story. According to Dealogic only $3 billion of these asset backed securities were sold in Jan-Feb 2009, down from $1 trillion in 2006. The TALF has alimit of $200 billion for the early stage, but could grow to $1 trillion as more asset classes are added. There are only about 10 deals in progress but most of them are on hold. Nissan Ford Credit and Huntington Bank are preparing to sell securties backed by car buyers. The outcry over bonuses at AIG, makes investors wary of public outcry if they were to profit unduly from the TALF, and hedge funds don't like some of the language in the agreements they have to sign with the gbanks and the Fed that would have them liable for losses, and by stimulus legislation that restricts use of foreign workers....

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Theo Lubke was head of the Financial Infrastructure Department in the Banking Supervision Group, and was a key member working for reforms in the derivatives market. He oversaw efforts at the Fed to have Wall Street centrally clear trades in credit default swaps, which helps control the risk of a firm's failure. Lubke will join Goldman Sachs as a managing director in the securities division, and will help Goldman implement the facets of regulatory reform legislation. Prior to his 15 years at the New York Fed, Lubke worked on the staff of the National Economic Council under President Clinton, and worked as an investment-banking analyst at Lehman Brothers.

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Toyota moves back to its utilitarian roots, where costs matter and pricing matters. Higher cost technological advances are being rejected in favor of older approaches that accomplish the same thing in the manufacturing process at alower cost. And pricier features like the solar ventilation system option on the new Prius are being rejected so that the price can be made more competitive with American cars. Even the idea of pricing Toyota's cars at apremium of $1000 or $1500 over American cars is being questioned in this market. The new Prius mad due to come out this year, developed at a time when Toyota was coasting as it emerged as the most profitable and the largest auto manufacturer in the world, has a price tag of $28,000 versus the $22,000 for the current Prius. This has alarmed some of the bigger Toyota dealers so much that Akio Toyoda the new CEO visited Southern California to talk to these dealers about what has gone wrong with the pricing. These dealers told him that they were worried about that price when they were drastically discounting current Prius models to maintain their sales rate. This is also happening when Toyotas are piling up unsold on car lots at most ports in the US. As Toyota competed with GM for top spot in sales Toyota's management of Watanabe and Kinoshita, the outgoing CEO and his assistant, say critics inside Toyota, lost sight of the need for caution as the company's manufacturing capacity expanded in Japan and overseas. Now with the selection of Akio Toyoda to succeed Watanabe as new CEO, the decision has been made to make a shift to anew generation of managers, with the retirement of 3 executives including Kinoshita and Watanabe. ...

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Russian president Putin tells Russians at an annual news conference on Dec. 17, 2014, that the West wanted to deprive Russia of its natural resources. He says steps taken by the central bank and his administration were proper, including avoiding capital controls, except that the decision to raise interest rates to 17% in mid-Dec. should have been taken earlier. He deflects criticism that the sanctions and the decline in the ruble were "payment for Crimea" (Russia's takeover of the Crimea) by saying it was "payment for our independence, our sovereignty." Putin expressed unease with the expansion of NATO to Russia's borders. He told Russians to expect that the crisis will last for 2 years and during this time the Russian economy will adapt, in particular shifting its heavy dependence on oil exports. During the 10 years of the Putin administration since 2004, Russia has not made a vigorous effort to diversify away from oil dependence. Progress was made primarily in better integrating the economy with the European Union, entry into WTO, building a sovereign reserves fund, until the crisis in Ukraine. The Putin years may be seen in the future as the transition years towards a more diversified economy, and may lead to a shift away from the kind of management of economic and foreign policy by a single leader that may have led to the disruption in relations with Germany, a critical economic partner for Russia. Chancellor Merkel said Germany would continue to support sanctions as long as Russia opposed the right of self- determination of people in Europe and European values. Germany continues even now to maintain dialogue with Russia through Social Democrat Foreign Minister Steinmeier, which is why Putin continues to refer to it as "our partners" and cites the differences with our partners, very different from the Cold War period when no such close relations with Germany existed. ...

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Four veteran U.S. Federal Reserve officials, most of whom have said they support rate increases, will join the central bank's rate setting committee. Bullard, Evans, and Rosengren, have made the case for increasing rates to restrain growth. The question in 2019 is how fast and at what pace there will be rate increases. This will be watched carefully in developed and developing countries that are affected by U.S. central bank policies.

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Earthquake in the middle of a civil war devastating Burma. A series of blunders made by politicians and well meaning westerners, and the failures of geopolitical competition that lead to the civil war after a recent restoration of democracy for a few years.

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China is increasing export rebates aand investing in vocational training to keep the economy growing . Laid off workers are returning to their farms. THe real impact on growth and industrial production will come in 2009 according to Clement Chen, the chairman of the Federation of Hong Kong Industries. Because China has sustained a high growth rate for so long and the US has not yet felt the full impact of the recession it is possible to underestimate the impact on China's export dependent economy of a deep slump in exports as western markets shrink. The current 9% for the third quarter which does not reflect the credit crisis of October in global markets shows merely the early impact of slowing growth, with serious debt induced dowturn in the western economies China could see its growth drop to 6-7%.

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Who is Ed Whitacre? What is he like and where is he from? Ed Whitacre headed Southwestern Bell or SBC, which he merged with AT&T. Bored as a retiree in San Antonio after leaving AT&T, he took the job at GM. He golfs, wishes and hunts with his chocolate Labrador retriever at a ranch near his house in San Antonio. He is impatient by nature and likes to see things done. Managers who worked with him at Southwestern Bell say while they were working on day to day business, Whitacre would be the one thinking ahead, trying to figure out how to compete in the future, and the things that were likely to happen in the changing environment. For a smaller Bell he saw that it was simply whether his Bell would be acquired or whether he would acquire other Bell companies. He is a hands-on guy who like to do things himself, like running a bulldozer around his ranch, one of the things Whitacre likes to do. His beginnings are in small town Texas. The place is a sleepy railroad town called Ennis, Texas, where for 50 years his father was a locomotive engineer. Whitacre says his father had never finished high school, and he did not want Whitacre working for the railroad. Both his parents insisted that he get acollege degree. Whitacre went to Texas Tech in Lubbock, Texas, because the tution was only $75, and landed a job at Southwestern Bell in 1963 as a facility engineer. And he stayed with the company all the way- with 19 moves living in Texas, Arkansas, Missouri and Kansas- till it became the new AT&T. Frost, a retired San Antonio banker and a member of Southwestern Bell's Board in 1990 when Whitacre became CEO, says Whitacre started from the bottom, and literally, even climbing telephone poles. So it isn't surprising that this guy walks around the GM Renaissance Center, talks to GM employees, tries out a Taco at the Food Court at the Renn center (says its OK but not like Texas tacos), and uses all elevators like everybody else, unlike GM executives who equiped elevators so they could bypass floors. And he isn't hesitant to wear jeans and a sweat shirt while visiting a factory, which he says is all the clean clothing he had at the hotel. Now he has an apartment. Works 14 hours a day, 5-6 days a week, and has his phone ringing just when he hopes to leave town to escape for a weekend. ...

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According to the American Society of Civil Engineers over 10% of the 607,000 bridges in the U.S. are structurally deficient. And 42% of U.S. highways are congested. A poor transportation system makes the U.S. less competitive. The cost to U.S. businesses from a poorly funded and maintained transportation system is about $430 billion more in operating expenses by 2020 and $1.7 trillion in lost opportunities, according to ASCE.

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Obama makes an effort to reach out to Turkey and the Muslim world. He said the U.S. would seek broader engagement based on mutual respect and mutual interest. And added "the US has bee enriched by Muslim-Americans. Many other Americans have Muslims in their family, or have lived in a Muslim-majority country. I know, because I am one of them." Obama spent part of his childhood in Indonesia, and had a step-parent from Indonesia.

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Christina Pretto, a Citigroup spokeswoman says the company was carefuly managing its employee levels, nothing has changed. Statements like this, a kind of corporatese speak that has been around for years is taking on a new life these days, as companies go through heart wrenching change, yet put on many different faces. Citigroup executives are saying that in addition to the 9100 layoffs expected to be announced next week, another 25% reduction in employees will likely take place by end of 2009, which would take the total employee levels to 264,000 from 354,000. Everyone from investment bankers to the backoffice functions and legal and human resources divisions will be hit. Citi's stock has lost 68% of its value this year, and is now down to single digits. On November 13 Citi fell to $9.45. The company is losing money, and will likely need more government money next year. And Vikram Pandit who has been in the CEO position for a year after selling his hedge fund to Citigroup for $165 million, appears to have lost focus, and with the loss of the Wachovia merger and the opportunity to lure deposits and built up its branch network, it is simply going forward without a strategy....

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The Italian government is making changes that would increase competition, provide funds for infrastructure and reduce red tape. Mario Monti, the Ialian prime minister, told a news conference: "Italy's economy has for decades been hindered in its economic and social growth by three big problems: insufficent competition, inadequate infrastructure and too much red tape." There are fears that the $40 billion in tax increases and spending cuts set in December 2011 to cut the deficit would lead to a sharp contraction in the economy. The IMF predicts a 2.2% decline in GDP for 2012, the Bank of Italy's estimate is 1.5%. Changes planned would permit gas stations to choose providers, improve the legal system, add 5,000 pharmacy licenses, and add 500 notaries. Industry minister Passera says the cabinet approved 5.5 billion euros for infrastructure projects.

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Global sales growth will be from developing countries as US sales slow down to the rate of a 4-5% growth, losing 1 percentage point and be at the level growth is in Europe. This growth will mean U.S. sales of 305 billion dollars in 2009 for pharmaceuticals. Next year two thirds of prescriptions will be generics, increasing from 50% in 2003. Forecasts from IMS. Also FDA is taking a tougher line in regulation. Top seven emerging markets will grow at 12 to 13% a year in contrast- from improving economies and greater demands for spending on health care.