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Report from the ground giving an unbiased account by a captain in the army who served tours in Iraq and Afghanistan. He spent 7 months as aspecial advisor to the NATO director of communications. He avoide the official tours through the countryside and tried to see and hear what ordinatry Afghans were saying. He says the outbursts against the corruption in the Karzai government reveal a level of distrust that is so great that it greatly diminishes the credibility of the American effort in Afgahnistan, and increases the difficulties of the mission there. He suggests ombudsmens committees to handle complaints of corruption, and the withholding of funds to districts and government agencies that do not meet transpanrency and accountability goals.

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Fears that another crisis like that of 2008 could emerge with asset bubbles in China and other countries. Also fears that policies of austerity in southern Europe and the UK, combined with Germany's tight control on spending, could lead Europe to years of slow growth or stagnation. It is a tricky situation especially in Europe, trying to avoid a Greece type situation, and at the same time not cutting spending to the point where it would lead to stagnation. Criticism of the German government's policy to cut spending and fears that the European Central Bank might follow Germany's policy to focus purely on the deficit. Lower US bond yields give the US some room for dealing with the deficit. The need for swift action in China to move the economy towards domestic consumption, and let the yuan strengthen so that China can absorb more of the world's exports.

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After the huge crisis the debate about capitalism. What went wrong, and importantly what did not go wrong. Not in the sense of more punditry to place the blame but to ask questions to have a better grasp of the fact and better understanding of the twists and turns of the last decade, the complexities, the frailties, the errors of judgement, and the failings, and the outright falsehoods and ethical breaks. So that the good things are not lost for instance the individual initiative and the bad things are corrected and measures put in place to prevent recurrence and minimize damage. Has the model of anglo-saxon capitalism failed? Actually some specific things failed, deregulation at a time when banks and markets were behaving irresponsibly and without any restraint internal or external, credit ratings agencies failed, financial institutions failed in performing their first line of business which is to finance investment in the economy not in housing and mortgages, and American consumerism failed in that value of saving disappeared and abundance of debt brought American savings to zero, leaving little for investment in the economy and infrastructure except by borrowing from other countries. And living on illusions and not on sound basics the leadership failed thinking that free enterprise and technology and productivity improvements somehow allowed a country or group of countries to live way beyond their means, and a tendency to excess in the popular mood of the country, excesssive consumption, excessive and profligate use of energy which sent trillions of dollars overseas over decades, and excessive expectations of the lower classes for housing and goods beyond their means, all played a part. What did not fail is the freedom to trade, the fall of "barriers to intercourse" between nations, that produced gains on a big scale so that computer and cell phone technology developed in one part of the world quickly spread around the world and the innovations and technology developed in one country spread producing benefits all over the world. It created amood of optimism in developing countries whose incomes rose especially where countries encouraged growth as in China, India, Russia, Brazil, Eastern Europe and pulled hundreds of millons out of poverty. With China, America and Germany in effect shipped technology goods in return for lower value added goods like textiles and shoes, to help China industrialize, and American consumption played a useful part until things reached an extreme and the system was abused by forgetting the basics and allowing excesses and failing to respect ethical responsibilities. Regarding regulation excessive regulation and red tape has proved to be bad as in the license Raj in India which stifled private initiative and new enterprise till it was abandoned in 1990, and no one in India is calling for more regulation. What is bad is to abandon good common sense and to rely on the illusion that no regulation is needed to run a complex financial system like we have today, a laissez fairre libertarian philosophy that was rampant in the Bush administration and in the country's leadership in the Bush years. As a result an underfunded SEC failed to deliver on its basic mission and responsibility, and the lack of a centralized regulatory authority with powers and funding to meet the challenges of modern finance as for instance ineffective derivative regulation under the CFTC, simply aggravated things further. ...

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Its generally known that US airlines except for Southwest fly older planes but the extent to which this has been going on may not be gauged especially when compared to the foreign airlines. Because of bankruptcies and reducing the number of seats available by shrinking their fleets to keep prices at levels that sustain their margins, airlines are not ordering new planes and using the existing planes. The average age of the big jets in US airlines is now 12.2 years according to Airline Monitor. Boeing has a huge backlog of orders for its new planes but its mostly from foreign airlines. Only 43 of 710 Boeing 787 Dreamliners are going to domestic airlines, 25 to Continental and 18 to Northwest. And none of the 165 giant Airbus A380's are going to US carriers. These numbers are amazing because they suggest the new airplanes more comfortable more fuel efficient with more space and better air quality are just bypassing the US domestic routes. Quite amazing. Of the airlines Northwest has 109 of the oldest jetliners in the industry with an average age of 35 years. And worse still they could remain in service for another 5 years as there are no plans to replace them. Airline cleaning is not as frequent as before because of cost cutting and the dirt and grime, the conditions of the lavatory, all show their age and passengers can tell the difference. The seating is cramped and one passenger described a Northwest plane seating as feeling like being in a tuna can. And the airlines in the US are using these planes for longer routes with more chance of mechanical bfailures leading to more flight delays which are a huge problem this year especially into and out of the New York area. American flies a fleet of 300 older MD-80's which actually cost more to operate because they are gas guzzlers compared to the newer planes. Credit Sights estimates that this will continue for another 5 years because airlines are trying to save a cash cushion for leaner times, payoff debt and strengthen their balance sheets, and shareholders want some of the money returned to them. US Airlines had cash of about $28 billion as of June 30, 2007 but this is not enough. J.D. Poer and Associates estimates that US airlines need to spend $280 billion over the next 20 years to replace the aging planes. Meantime discount airlines in Europe are ordering new planes and Asian airlines have big orders. Air Berlin has about 85 737's on order and Wizz Air of Hugary ordered 50 Airbus A320's. ...

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This WSJ editorial says the recent agreement at the Caterpillar Joliet plant in llinois is not about leverage but about increasing U.S. manufacturing competitiveness. As U.S. competitivness improves and the economy grows wages will increase. It does little service to management, labor and the U.S. economy for above market wage rates to lead to loss of manufacturing competitiveness as happened in the U.S. automobile industry, resulting in closing of plants.

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Bank of Spain Governor Luis Maria Linde told a parliamentary committee "the loss of confidence in our banking system cannot be blamed exclusively on the global economc downturn, on problems in the eurozone, or on our own recession." He was critical of the previous Bank of Spain Governor Fernandez Ordonez, an appointee of the previous Socialist government, for "acting with little determination, or insufficiently or inadequately." He said the central bank's permitting of virtual mergers of troubled savings banks in place of real mergers with restructuring decisions, were part of the problem. Linde is a member of the ECB's governing council. Spain's central bank had for years championed macroprudential supervision, where banks set aside funds in good times for contingencies in bad times. Linde described those efforts as having failed because the Bank of Spain was "too timid" with the provisions set and failed to curb the credit and property bubble.

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Five rules the editors of the WSJ say should be followed when working on cleaning up the banking system. A clear no, as Krugman and other experts point out is for the government to make the rather imprudent move to take on all the debts of the banks as in Ireland. A second rule is not to underestimate the size of the problem and delay action till the problem gets much worse, when its harder to deal with. ECB president, Mario Draghi, pointed out the problem at Spain's handling of Bankia bank as a clear example, telling the European parliament recently: "There is a first assessment, then a second, a third, a fourth. This is the worst possible wayof doing things. Everyone ends up doing the right thing, but at the highest cost." A third rule is to set clear rules about banks, who gets rescued and who gets closed and why- so that its not left upto the discretion of officials. On this rule Spain's outgoing Zapatero administration gets good marks from WSJ for settting clear rules to the cajas svings banks. A fourth rule applicable to Europe is to first setup the expertise and conditions for a European banking regulator before setting up a banking union and direct injection of funds by the EFSF into banks of individual countries. A fifth rule is to avoid creating even larger mega banks by consolidating failing banks with large banks, and continuing the government's implicit guarantee of the bank because it is "too big to fail" and creates systemic risk- this is the situation after action by the U.S. Federal Reserve, regulators and the U.S. Treasury....

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Criticism of the EU's handling of the Greece crisis by IMF officials in a report. The report says the actions taken for debt restructuring in 2012 should have come much earlier to reduce the debt burden and the size of austerity measures in Greece. Similiar criticism has been voiced by president Hollande of France and in editorials by the WSJ. President Samaras of Greece says the sharp cuts in spending reduced potential for growth in the economy.

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The slow hunch, serendipity, error, inventive borrowing and the collison between order and chaos. Nancy Koehn looks at two new books on innovation.

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U.S. budget deficit reached 10% of GDP with the 2008-2009 recession and the need for federal spending when tax revenues dropped. Partisan budget fights took place in Congress in 2010 and 2011, with a downgrade of the U.S. credit rating in 2011. By December 2014 the budget deficit declined to $488 billion for calendar year 2014, or $483 billion for fiscal year, as the unemployment situation improved. The deficit in 2014 was a liitle below 3% of GDP.

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Resistance to EU reforms for a Single Sky Plan by controllers and national aviation agencies. The EU Transport Commissioner, Sim Kallas, is pushing the Single European Sky plan. This is being planned for January 2012. With the creation of the Single Sky national barriers would fall, national air traffic bureaucracies would give up powers, and controllers in European countries will have to work more efficiently and may face job cuts. Europe's air traffic system is splintered. There are 39 national agencies, and Eurocontrol with 64 control centers. Europe has twice as many bureaucrats and support staff compared to the U.S. European air-traffic agencies costs per flight are 75% higher than the FAA's, mostly because of labor costs. According to Eurocontrol, air traffic in Europe went up 1% in 2010 over 2009, but delays went up by 34%. Over 40% of scheduled flights in Europe were over 5 minutes late in 2010- the comparable figure for the U.S. is a little over 25%. This splintered situation became an obvious drawback during the volcanic eruption in Iceland, when the lack of a single regulator meant the lack of a common standard. In 2009, the EU presented its own program that would group 32 national agencies into nine units called airspace blocks, which would given the task of breaking down internal barriers and integrating operations A common set of standards for all air traffic agencies would be set, and advanced technology would be used to support safety and efficient flight management. This program is now set for initial implementation in January 2012. As part of this effort European governments like Spain are tackling their high air trafffic controller costs....

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Porter cites a report by Kai Daniel Schmid and Ulrike Stein of the Macroeconomic Policy Institute in Dusseldorf. The report shows the top 10% of Germans having 26% of the country's income before taxes and transfers in 1991. This increased to 31% by 2010. For the same period of about 20 years the bottom half of the population took in 17% in 2010 dropping by 5% from 22%. The growing income inequality in Germany is comparable to what has happened in the U.S. over this period.

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Darren Woods of Exxon gives the view of many in business in the U.S. when he says of the Paris climate change accords of 2015- "We need a framework like that to address the threat of climate change." GE's CEO Immelt says a decision to leave the Paris accords "is not going to change one thing we do for energy efficiency, and I think all business is going to feel the same way." Most utilities including AEP see the political changes in government as coming and going, making it important to base their long term strategies on the economics and the general trends worldwide. Only support for the move to leave is coming from some coal companies and the steel industry, a small fraction of the overall industry in the U.S. Not mentioned here is the moves worldwide, by China motivated by health and pollution concerns to shift away from coal after disastrous pollution effects seen in China, and the decades old effort in Germany that has made the country self sufficient in renewable energy through use of solar and wind energy. India has set aggressive targets for renewables energy and is likely to join this long term trend as the economics shift in favor of wind and solar, especially when the health costs are counted in.   ...

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The new South Korean government proposes a resumption of military dialogue with North Korea in an effort to bring down tensions in the region. A military hotline existed between North Korea and South Korea till early in 2016. North Korea cut off the hotline after relations with the South Korean government of President Park Geun-hye deteriorated following a missile test in January 2016 by North Korea. By May 2016 the North Korean leader, Kim Jong-un proposed military dialogue and talks, an offer rejected by the Park government. With the impeachment of president Park the newly elected government of president Moon proposed improving relations. The recent series of North Korea missile tests was a setback for that effort. With China the new U.S.missile defense system called THADD that was installed in 2016 for South Korea was seen as a setback for China-South Korea relations. As a result the tensions are high in the region. The rhetoric and tone deteriorated after the Trump administration took office in the U.S. in early 2017. After the last missile test the South Korean government of president Moon is now reaching out to the North especially for restoring the hotline that connects the two governments in the event of a crisis, so that a disaster can be avoided on both sides. ...

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Ms Constantini is one of the executives who followed Mr. Macri as he became president of Argentina. She is a former CEO of GM Argentina. She was appointed CEO of Argentina's national airline Aerolineas Argentinas. The state owned airline has lost about $5 billion, and loses about $1 billion a year. There is no culture of budgets or revenue at the airline, say people familiar with the airline. Ms. Constantini has set the goal of cutting losses to $260 million in 2016. The goal is to increase revenues and improve earnings to the point where the airline is profitable in 4 years. The new CEO is taking an approach that she sees has a better approach of succeeding. She is getting employees involved in the company's decisions and progress. She carefully tells labor leaders of her plans and seeks feedback. Because it was run more like a government ministry than a performance based airline, says Constantini, the transformation requires a patient and employee involved approach. In 2008 the government of Mrs. Kirchner nationalized the airline previously owned by Spain's Marsans Group. Because Argentines see the airline with national pride, its like the country's soccer team. Sales are up 10% in 2016 and the airline flew one million passengers in July, up 13% from the prior year.  ...

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The vast expansion of the Indian middle class takes on a different dimension a few weeks before the election say experts, as India heads into a general election after the India Pakistan conflict in February 2019. This is because national security now has a wider constituency. It could help the incumbent party the BJP with urban voters and swing voters as the issue of security remained prominent in the northern states. In other states where caste and regional politics, farmer agricultural related issues are prominent, this could be less of a factor. Overlooked in this is the manner in which new investments in infrastructure have been pushed forward for rail, road and bridges, and in other infrastructure such as hospitals and universities. The government slogan is that what was once considered impossible is now possible. New metro lines are being inaugurated in many cities including Ahmedabad, Mumbai. The speed with which the Metro in Mumbai is being built, with the head of the project saying it should have been built yesterday, is an example of the urgency given to infrastructure. The government is pushing hard to convey the image that the next 5 years would lead to an infrastructure building boom that it has shown can be done. A recent report in the Guardian shows that China is pouring every 2 years more concrete than the U.S. did in the entire 20th century. This fact drives India under Modi as it heads into the 2019 election, the sense that previous governments had never pushed India's potential for modernization similar to its East Asian neighbors, Japan, South Korea and China.    ...

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Spain's national statistics agency confirmed that the Spanish economy contracted by 0.3% of GDP in the 4th quarter of 2011. The central bank of Spain predicts the economy will contract by 1.5% in 2012 if Spain makes spending cuts to meet the defict target committed by Spain with the EU of 4.4% of GDP. The deficit was 8% of GDP in 2011 and the new Rajoy government announced cuts and tax increases amounting to 1.5% of GDP. A separate IMF report predicts a 1.7% contraction in GDP of Spain in 2012. Opposition party leader Rubalcalba says Spain should renegotiate its deficit target with the EU in the light of the expected contraction. Spain's prime minister Rajoy hinted he would move in this direction.