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Japan's Prime Minister, Kan, announced that his government is planning to increase the country's broad sales tax from 5% today over several years. He said he plans a major sales tax increase to avoid a Greece type situation in Japan.

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Norway's sovereign wealth fund, the Government Pension Fund Global, is run by Yngve Slyngstad. The fund has $570 billon, $100,000 for each of Norway's 4.9 million people. The fund took a 23% loss in 2008. Then the fund made a shift from 40% equity holding to 60% equity holding, which has paid off. The losses were reversed with a 26% gain in 2009 and a 10% gain in 2010. The fund gets all of Norway's oil revenues less about 4% of the fund's value that goes to the state budget. Slyngstad became CEO in 2008, and persuaded finance ministers to take on greater risk, leading to $175 billion in stock investments during the financial crisis. He has told Parliament that he will get returns of 4% after inflation- higher than returns of 3.1% that were made since 1998. With assets equal to 2% of the total market value of stocks trading in Europe, the Norwegian fund is a major investor. Rules set for the fund prohibit investments larger than 10% in any one stock.

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Denning provides a reminder of the growth but also real risk in emerging markets. The weighted average score in Transparency International's 2010 Corruption Perceptions Index for BRICs countries is 3.3 out of 10, compared to 6.7 for the Eurozone, and 7.1 for the U.S. Russia needs an oil price of $120 in 2012 to balance its finances, and the consensus is for oil price to be $103. China has a bad loan problem at its banks. Brazil and India have inflation problems and growth constraints from poor infrastructure. There is aneed to be grounded in realities when it comes to emerging markets. The IMF underscored this weakness in its recent report. Sudden capital outflows could reveal serious weakness in some countries.

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Feldstein, adviser to the Romney campaign, refutes the assertion based on computer models that the Romney Tax Plan of a 20% across the board cut in taxes cannot be paid for by limiting the deductions of high income tax earners. His own analysis based on IRS data, shows taxpayers with adjusted gross incomes of over $100,000 made itemized deductions of $636 billion in 2009. By taxing these deductions at a 30% marginal rate, additional revenue of $191 billion can be raised to pay for the Romney Tax Plan's static revenue loss of $181 billion. A smaller revenue loss of $148 billion is predicted based on increased incomes and taxes from the behavioural effects of lower taxes on earners. He says this was the thinking behind the Reagan tax cuts of 1986 and the Simpson-Bowles commission plan that would generate economic growth by reforming the tax system's distortions.

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CreditSights, a New York research firm says about $33 billion in losses from home equity loans will hit the five largest banks in the latter part of 2010, an amount equal to what they expect in earnings for 2010. This would have an adverse effect on the banks and has the potential to stall the economic recovery.

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David Super, a professor at Georgetown University Law School, says letting the fiscal cliff cuts in spending go into effect is fairer to the poor and middle class than the $1.2 trillion in spending cuts proposed by president Obama and the Democrats. He says the pressure of public opinion would lead to some minideals for the Bush tax cuts to go to lower incomes and for restoring some funds to defense after the fiscal cliff agreement goes into effect, leading to a fairer outcome.

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Are there costs or are there savings from the Obama health care bill? Does it affect jobs and how? The Congressional Budget Office says the health care law will save $230 billion in ten years based on a whole set of calculations and assumptions. Commonsense and basic math leads others to question how spending $930 billion on insuring 32 million Americans could end up with significant savings. The different view argues that the Budget Office erred in making some calculations, by counting $70 billion in premiums from long term care because they would be used to pay benefits later, omitted $115 billion in spending to adminster the law, and omitted $208 billion needed to prevent scheduled reductions in Medicare payments to doctors. The money needed on the Stimulus, on two wars in Iraq and Afghanistan, and the uncertain prospects of the US economy in the longer term till debt and other issues are resolved, injects the critical element of difficult choices and priorities. If state and local budgets are severely strained in 2011-2012 would that require federal help and will there be other needs that will have to be met by the federal government that are critical such as another unexpected downturn, or a resolution of unresolved bad debt at the large US banks There is also a sense that the health care law does not do enough to reduce the cost of health care that will be needed over the next decade so that other priorities are not neglected. Both parties are not up to the task in this respect for running the country's finances withot using the numbers to tell different stories....

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Professors Cole and Ohanian of the University of Pennsylvania and UCLA, provide a new interpretation of FDR's economic policies during the period 1932-1934 and the period 1937-1941, based on their research. This suggests conclusions different from that of Obama advisor, Christina Romer, and Fed chairman, Bernanke about that period. Changes in economic policies under the Roosevelt administration that helped bring wages in line with productivity, reduced strikes, and gradual elimination of the undistributed profits tax, improved incentives for business investment during 1938-1939. Cole and Ohanian, say that by 1941, before the U.S. entered the war, close to half of the increase in nonmilitary hours worked in the U.S. between 1939 and the peak of the war, had already been achieved. And this was primarily the result of the changes in FDR's policies in 1938. They say a similiar opportunity is presented by the proposals of the Bowles-Simpson commission on deficit reduction, by lowering the corporate income tax through simplification of the tax code and reducing or eliminating most tax expenditures. Improving the incentives for business to hire and invest through this and other steps is likely to do more for the economy than the steps tried so far since 2009....

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European Commissioner Michael Barnier calls for banning credit ratings on countries receiving financial aid. This comes after Moody's strongly downgraded Portugal's rating to Ba2 in July 2011.The downgrade was more severe than expected and comes right after the Greek parlaiment passed austerity measures in Greece. Moody's Ba2 rating suggests a 5 year default probability of 8.1% for Portugal, according to Deutsche Bank.

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Merkel expresses her support for Portugal during a meeting with prime minister Pedro Passos Coelho of Portugal in Lisbon on Nov. 11, 2012. In a news conference which was live on German television Merkel said: " I feel a great sense of determination here in Portugal to overcome this difficult phase." Recognizing the cost of austerity measures and spending cuts, the 16% unemployment rate, Merkel added: " I know that its very hard for some people. Unemployment is high, especially among young people. Consequently, Germany in particular wants to support Portugal through professional training for young people." The German chancellor is travelling with a German business delegation which is meeting with Portuguese executives to determine areas for German cooperation with Portugal to generate growth in the economy.

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Jurgen Kroger, is the chief negotiator for the European Commission, and Poul Thomsen, heads the IMF negotiating team, for the 78 billion euros in loans extended to Portugal under a bailout agreement. Kroger offered his views on the agreement in Lisbon. Kroger said he was convinced that the program gives Portugal the means to boost growth and jobs, as it builds a sustainable and competitive economy. Two thirds of the loans come from the EU at an interest rate that is yet to be set. The yield on Portugal's 10 year bonds keeps rising and is now at 10.20%. The IMF will provide one third of the funds. The IMF's Thomsen said the issue of interest rates was addressed by arranging for two thirds of the loan package money coming in the first of the three years of the program. What this does is to take Portugal out of the markets for medium and long term debt for a "little over two years" he said and gives Portugal the "breathing space" it needs to restore credibility before going to the financial markets. The fear expressed by analysts is that the tough austerity measures in the programs of the EU and IMF can cause the economies of these countries to worsen, making it even harder to repay the much larger debts when the loan package money is added to the original debt. The IMF and the EU negotiators had to create a credible program for recovery in the light of these facts. Already Portugal's finance minister is predicting a contraction in the Portuguese economy of 2% in 2011, and 2% in 2012. The negotiators appear to have taken this into account in setting interest rates. Portugal will pay the IMF an interest rate of 3.25% for the first 3 years, with the rate going to 4.25 in the fourth year. By comparison Greece's loans are for seven years with an average interest rate of 4.2%. Ireland's seven year loans carry an interest rate of 5.8%, which it is working to renegotiate. To give Portugal more breathing space the terms of the loans set a slower reduction in the budget deficit than originally planned. Portugal gets to cut its budget deficit to 5.9% of GDP in 2011, and 4.5% of GDP in 2012. The 3% target is set for 2013, one year later. Economists such as Carl Weinberg of High Frequency Economics, say the loan package will only increase Portugal's debt and lead to a larger default later on when the debt amount owed is larger. The debt restructuring solution is being actively debated in the EU, including the risks that European banks would take large hits. Negotiators are also mindful of keeping any negative impact on Spain as low as possible. As Portugal's financing costs have risen, Spain's have risen also. Spain offered higher rates to sell 3.4 billion euros of five year bonds on May 5, with the average yield on Spain's bond sale rising to 4.55%, up from 4.39% on March 3. ...

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Indian rating agency Crisil says expeditious settlement of stressed assets in India's banking system is needed for the private sector to play its part in the country's infrastructure development. In the last 4 years much of the effort in infrastructure was undertaken by the government. Crisil CEO Ashu Suyash, says Rupees 50 lakh crore needs to be allocated for capital investment in infrastructure for the 5 year period 2018- 2022. About Rupees 3000 crore investment per day is required. In addition to improving the banking system, other actions needed are new private-public partnership efforts, front ending of projects, and a deepening of the infrastructure financing system. Infrastructure investments have suffered from lack of investment in India and this should be a top priority for the government, say experts. This includes tapping into pension and insurance funds under new arrangements. The central government has announced a 7 lakh crore investment plan to build 83,000 kilometres of highways by 2022. Crisil has developed an "investability index" to track and measure the attractiveness of such projects.   ...

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"There is'nt another planet to export to," is what Paul Krugman of the New York Times says, when referring to the impossibility of all countries keeping up exports and reducing imports at the same time. In crises similiar to what the US faces today, countries have increased exports as a way to stage an economic recovery. But this time countries are depressing their currencies to gain or preserve a large share of global demand achieved through high exports. China has resisted demands for a significant revaluation of the yuan, and persists in efforts in currrency markets to keep the value of the yuan low. This cuts off one avenue of recovery. Bloomberg Business Week and Bloomberg News interviewed Edmund Phelps, Jan Hatzius, Krugman, and other economists, with the idea of figuring out how the US could stage an economic recovery. Krugman is not optimistic, considering the effects of the financial crisis being really protracted. Krugman points out that when comparing the US currently to the eaarly stages of Japan's lost decade, the US is doing worse. Unemployment is worse, and overall he says, a weaker policy response. And he says Japan is still a depressed fragile economy 18 years after its financial crisis. Jan Hatzius of Goldman Sachs, predicts that the unemployment rate will rise back to 10% in early 2011, with a 30% chance that the economy will fall back into a recession. He says that in the postwar economy, there has never been an increase in the unemployment rate of one third of one percentage point that did not result in a recession. Phelps and Hatzius see one way the US could stage a recovery is with replacement old structures and equipmet as wear and tear and obsolescence takes place. Phelps sees the possibility of technological innovation resultig in a new burst of activity. Robert Gordon of Northwestern University, is less optimistic about this, and predicts a lower growth rate of 1.5% over the next 20 years. ...

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Mervyn King, the governor of the Bank of England, is coming under increasing criticism for supporting the Conservative-Liberal coalition government's austerity plan, and for lack of efforts to fight inflationary pressures. On a major issue on which King has taken a clear stand- that the largest British banks should increase capital levels exceeding the international standards- not much has happened. Consumer prices in Britain were up at a 3.7% annual rate in December, and the government's austerity policies will also cause pain. In a recent speech King said that the Bank of England had limited ability to fight the higher unemployment and increased inflation. It was an admission of the limits of central bankers in the current situation. King said "a squeeze in living standards is the inevitable price to pay for the financial crisis and the subsequent rebalancing of the UK and world economies.

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Foreign investors make up only 7% of Russia's domestic bond market compared to 30% for similiarly rated Mexico. Russia is rated BBB by Standard & Poor's. Moody's Investors Services rating is one notch higher. The yield on Russia's 10 year government bond is about 7%, compared to 4.35% for Italy and 1.8% for U.S. Treasurys. Russia's deputy finance minister, Alexei Moiseyev, says he hopes changes will raise the foreign holdings to about 33%. Martin Gilman, a former IMF representative to Russia in 1998, and now a professor at Moscow's Higher School of Economics, says rates will go higher because of appreciation in the ruble and large monetary easing in Europe and the U.S. The situation has changed completely from the 1998 Russian default on debt payments of $160 billion. The IMF estimate is for overall debt to be about 11% of GDP by the end of 2014.