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Comparative effectiveness research will be conducted to evaluate what is the best treatment for any ailment or disease or health problem under the $1.1 billion allocated for this in the Stimulus Plan. What are the alternative methods of treatment, what is the effectiveness of each treatment, what are the comparative costs and so on. Is it better to treat neck pain with surgery or acombination ofphysical therapy, exercize and medications? If there is ablockage of arteries in the lower leg and leg pain, how does drugs and watchful waiting compare with surgery? For chronic heart failure how does home monitoring of blood pressure and weight and exercise in addition to medications provide an alternative route as opposed to just medications. Dr Fisher of Dartmouth Medical School cites these as examples of questions that can be asked in comparitive effectiveness research. The money will be available to the Health and Human Services Department and will be used over several years. About 15 federal employees will form a council to coordinate the research and advise President Obama and Congress on how to use the money. In 2007 the US spent $2.2 trillion, or 16% of GDP, on health care, and the Congressional Budget Office says it will grow to 25% of GDP at the rate its growing by 2025 if left to its own devices. ...

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Japan's prime minister Naoto Kan said after a loss in the Upper House parliamentary election, that he had not explained his plan to increase the consumption tax well enough to voters. He sees this as a big reason for the defeat in the upper house election. A small party called Your Party increased its seats from one to eleven seats. This party is popular for advocating small government.

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At the height of the Eurozone crisis in December 2011, David Brooks points out that it is important not to forget what the Germans are saying in this crisis. They are arguing for truth in accounting, which the government in Greece failed to do, and which may have more to do with negative opinion in the media and with the public in Germany about Greece than any other factor. They are arguing against speculative excesses that enabled Greece to borrow recklessly. And they are making the argument that the only way to put the finances of the eurozone on a sound basis is to have the financial discipline that is necessary for a sound currency. Anthony Faiola pointed out recently that one estimate for tax evasion in Italy is $340 billion a year- Washington Post, 11/25/2011. Greece has a similiar problem, which needs to be addressed. This view has credibility and the backing of every principle of sound financial practices, irrespective of country or region. For ordinary Germans who have gone through years of wage restraint during the period of high unemployment, their attitude is captured in one German workers response to Greece's situation - when she said there are "poor children in Germany also." Years after reunification were a difficult experience for Germany, and left parts of the country still affected by the experience. The period of high unemployment is still a fresh memory, as the economic recovery is fairly recent. There is a feeling that the situation is precarious, depending on exports, as the 2009 downturn showed. These facts remain even when one considers the criticism levelled at Germany. Germany benefitted from the bubble in the economies of Southern Europe through surging exports- from a currency that was undervalued in relation to neighbors- because of the common currency. German banks lent heavily to Greece, Ireland, Italy, Spain, and Portugal, along with French and British banks, and bear responsibility for reckless lending and not doing due diligence for loans to Greece and other countries. Germany also carries the burden of memories of hyperinflation in the 1920's, and the sense along with France that partnership is necessary for peace in Europe. Germany's position on austerity measures also has one underlying weakness - if this leads to shrinking economies in southern Europe in the name of fianncial discipline, then the plan fails as tax revenues decline and budget deficits increase. Given this experience Germany faces the challenge of convincing neighbors of the need for good governance and sound spending practices for long term stability of the currency, even as it leads the effort for providing short term funding. In the short run this reaps criticism for Germany, including criticism for some members such as Greece having to leave the euro as a way to regain competitiveness and growth. Experts have suggested that this would be a better option for Greece than a shrinking economy after strong austerity measures, and the referendum proposed by former prime minister Papandreou on strict austerity measures is likely to have gone in this direction. ...

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Former finance minister, Rodrigo Rato, resigns as executive chairman of Spain's Bankia bank. Spain's Bankia bank is believed to be one of the banks mentioned by the IMF that will need government help to address 32 billion euros in bad loans. Bankia bank is the result of consolidation in 2010 of seven of Spain's Cajas savings banks in a government led restructuring. Bankia is expected to get 7-10 billion euros from the government in the form of convertible bonds. The government gave $4.5 billion to Bankia to absorb some of the losses in 2010. Bankia made an IPO offering in 2011 in 3.3 billion euro listing. Since then the shares have lost one third of the value. Experts are uncertain about the extent to which this will restore confidence.

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Countrywide and Mozilo, Raj Rajaratnam and Galleon hedge fund, and the Madoff prosecutions. Nocera says the Galleon hedge fund prosecutions do not extend to others who benefitted or had knowledge of what was happening, as has happened in the Madoff case. In the case of Mozilo and Countrywide little has happened to deter future behaviour.

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This WSJ editorial is pessimistic about the prospects for Abenomics without the actions needed for structural economic reform. Japan is in a recession after two successive quarters of declining growth by the end of 2015. It gives credit to prime minister Abe for encouraging companies to add more independent directors to the boards and pushing for improving corporate governance, but finds other actions lacking. The low unemployment rate is seen as concealing the problem of two tier labor market with most of the recent job growth coming from temporary workers, and the total number of worked hours actually declining. The 30% decline in the yen has not boosted the economy as much as expected because it also means decline in consumer spending power, and Japanese companies continue to move jobs overseas. It cites a Nikkei poll showing only 25% of the Japanese public now see Abenomics as improving the condition of the economy. The declining growth in China is also playing a part in slowing growth in Japan, adding more headwinds for Abenomics in 2016....

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Bret Stephens articulates an idea presented earlier by Robert Kagan, Walter Mead and others, about the world of western liberal democracies needing the U.S. as a leader. He points out that the policies of U.S. president Bush committed the U.S. to activist policies worldwide following 9/11 terrorist attacks, followed by a backlash in the form of president Obama's policies that have reversed these policies to the other extreme leaving entire regional neighborhoods such as the Middle East to unravel, and undoing the very gains made under Bush at so much cost. Stephens says the "broken windows" theory for keeping streets in cities safe -by regular patrolling and making sure broken windows or other appearences of disorder and breakdown do not send the wrong signals to passersby and those with inclination to break the law- has application and lessons for America in the regional neighborhoods of Asia and Eastern Europe.

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Richard Haas, President of the Council on Foreign Relations, points to the need to reallocate the resources that are tied down in Afghanistan, to other needs in the area of national security. This especially true he says, considering the limited US interests in Afghanistan and the other threats in national security that the US needs to address around the world. He points to the grave threat to national security arising from the US deficit and the country's finances, with the $125 billion allocated to Afghanistan being a significant contributor to this. Savings in Afghanistan can be used to strengthen defense needs in other areas such as North Korea and Iran , modernization, and for reducing the deficit. He sees the resources spent in Afghnistan being a strategic distraction when other threats are building with nuclear developments in Iran and N. Korea. He cites the intelligence findings that the situation in Afghanistan will not improve with the Taliban connections in Pakistan, and the lack of a good partner in the government there. As for Pakistan, Haas says that the situation there is not to be understood through Afghanistan. The threats there are not external, they come from deep divisions within Pakistani society, and poor governance for most of the period since independence in 1947. The US should scale down to counter terrorism operations with a smaller force closer to the troops before the surge of 30,000, and not engage in the state-building that it is currently doing. On the efforts by Gen. Petraeus to get more resources, Haas says Petraeus is looking at the situation from the area of operations in Afghanistan, whereas the President has a different role. The President has to address all the challenges the US is facing now and will face in the near and medium term future, and he has to do this with the limited resources available for national security....

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The annual assumed rate of investment return is widely overestimated in the largest U.S. public pension systems. 59 of the largest pension systems use 8% return, 17 use 8.25%, 12 use 8.50%, and 32 use between 7.5 and 7.75%, according to the National Association of State Retirement Administrators. This is unrealistic in today's financial markets and overstates the extent to which the pension funds are funded. Calpers, California Public Employees Retirement System, is one of the largest pension systems that uses 7.75% assumed investment return. The Board of the $227 billion pension fund decided to retain the 7.75% return, against the advice of the fund's actuary, at a recent meeting. Calpers actuary had recommended a modest drop to 7.5%. The rate is used as a discount rate to calculate the present value of benefits owed to retirees in the future. The lower the discount rate the higher the pension fund's liabilities, probably requiring a higher contribution by local governments. Corporations use the interest rate on highly rated corporate bonds yielding about 6%, as their pension funds discount rate. An expert at Northwestern University suggests the use of a discount rate based on Treasury yields, which is now 4% for long term bonds. Even the modest drop to 7.5% would increase the amount local governments in California would be required to give the state pension fund by 1.5% to 3% of their payroll in many cases according to Calpers. The budget pain is the reason why state pension funds are sticking with unrealistic past returns....

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James Pressley, in this review of Joseph Stiglitz's new book- "Freefall: America, Free Markets and the Sinking of the World Economy," says Stiglitz's advice should be taken into account by the new administration. Stiglitz, says, the Obama administration has so far offered no alternative vision of capitalism and is only "mudddling through." It is simply following the course the Bush administration had taken. And has retained as key economic advisors, Geithner, Ben Bernanke and Summers, all from previous administration's economic teams, thus largely removing the possibillity of serious change. And by doing so, says Stiglitz, the Obama administration has "squandered the opportunity," to fix things that needed to be fixed in the economy. Stiglitz, says Pressley, urges Americans to think what kind of America they want to see, what kind of society they want to make, and then what kind of economy will get them there. Stiglitz wants to see banks back to where they they only make loans, and act as an efficient payments system, and not engaged in risk taking. At a meeting of the American Economic Association, Stiglitz, presented a paper that suggested that between globalization for integrating world financial markets and keeping them separate, the latter is the better course. Financial markets he believes, need circuit breakers to not bring down the whole system....

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El-Erian points to the risks posed by the long term unemployed in the U.S. He cites the 43.9% of the unemployed or 5.5 millon people out of work for 27 weeks or more. In fact the U-6 measure for unemployment that includes the people who have quit looking for work and parttime workers is abetter indication of where things are. This was an estimated 11% in November 2011, according to Ed Luce in the Financial Times, cited by Klein in the Washington Post.

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Japanese prime minister Noda setup a council to look at three energy options, the first to phase out nuclear energy completely by 2030, the second to reduce dependence to 15%, and the third to keep nuclear dependence at current level of 20-25%. Renewable energy use goes up from 10 to 20% under all the options. At one point it appeared that the government would choose the second option. Now with growing public opposition the government is considering the first option seriously to phase out nuclear energy. After the passage of the legislation doubling the sales tax to 10% in three years, and increasing unpopularity, the government is looking for ways to accomodate public opinion. Noda will now meet with nuclear protesters. A recent poll in the Asahi Shimbun shows 43% favoring zero-nuclear policy, and 31% supporting the 15% option, only 11% support keeping nuclear energy at the 20-25% option.

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Krugman sees Germany's Chancellor Angela Merkel and her Finance Minister Peer Steinbruck stalling an overall stimulus plan for the whole of the EU. Merkel told a political party meeting that Germany "wasn't going to participate in this senseless race for billions." And Steinbruck said Britian was engaging in "crass Keynesianism". True Germany has not been on the debt financed consumption binge that the UK has been in and does not have a housing bubble bursting like the UK, but says Krugman Germany is also facing a crisis like the rest of Europe. Ifo, German Research Insttitute points to the worsening crisis in Germany as the worst since the 1940's. Part of the reason is that Germany is abig exporter and its medium sized companies are big exporters and a large part of the economy. With the slowdown in China and the rest of Asia these exports have been hit hard. See the links to this. What happens without acoordinated response in the EU? Krugman warns that it would lead to leakages in which the advantages of the stimulus by the rest of the EU would not be as effective as with a coordinated response including Germany the biggest EU nation. He expects Merkel to wake up to the need for this once she sees the new numbers. ...

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Graham Allison of the Kennedy school of Government at Harvard and John Deutsch former head of the CIA under Clinton and now a Professor at MIT, say it would be adesirable thing that Afghanistan develop into a prosperous, poppy-free and democratic country, but it is not vital for American interests. They say lets face it, one cannot push Afghistan into modernity overnight, just because we wish it. It would be atragic mistake to do so, and take a huge and ultimately failing effort to do this, with a vast expenditure of American blood and money, to do this. One can expect for Afghanistan after we exit to revert to conditions that exist in other countries at the same level of development, like Bangladesh, Sudan, Somalia. Allison sees a vital interest at stake in Pakistan because of nuclear weapons.

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Holman Jenkins makes some good points as the auto companies in Detroit look for government rescue. He suggests dumping CAFE altogether if Congress is serious about conservation, a gas tax would be the only intellectually honest thing to do. In the light of falling gas prices in November 2008 with $1.98 a gallon in Michigan and across the country, how will demand for hybrids and the Chevy Volt at $40,000 fare? Its hard to tell but some serious thinking about energy and automobiles is in order. Congressional mandates have a tendency to have poor consequences as Holman mentions, because of the loopholes in the mandates like the fuel mileage rules that allowed fleet averages, loopholes Detroit automakers used to lead the trucks and SUV boom to coverup hidden problems for so long. Some of these had to do with the UAW's insistence on rules and benefits and things like the Jobs Banks that were obsolete in a age of globalized manufacturing and unequal playing fields with the Japanese and Koreans in mostly unuionized factories in the southern United States. Some of them with lack of effort, vision and innovation by Detroit car companies to make the fuel efficient technologies to reduce costly fuel imports, and the failure to bridge the union management divide that has been there all the time in the postwar period skewing decisions and leading to obsolete behaviours. Holman sees nationalization of the auto companies as the only possibility given the car companies history and failures, with or without bankruptcy. Even then he does not see them becoming competitive without good leadership and right policies in running the companies and honest policy at the government level, and courage to get a firm grip on reality. ...

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This Journal editorial looks at the reason why Trusts and shadow banking became systemic risks, with trust products growing 7- fold in 2007-2012. It says money tends to find its way where its needed, and without junk bonds as in the U.S. the additional capital needs were being met by Trusts. The lid on interest rates meant individuals turned to the Trusts for higher rates. And the regulators failed to control the systemic risks posed by Trusts with their low transparency and regulatory control.

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Brooks says no to the current health reform bill as most experts say it does little to control the bulging healthcare cost curve which will take it from 17% of GDP to 22% and beyond. He goes over the pros and cons. Passing this gets little done for health care reform in a fundamental way that is so badly needed today. Says Brooks the system today is rotten to the bone with opaque pricing and insane incentives, with consumers insulated from the costs of their decisions, this won't change with the current health care bill. In fact he says according to the chief actuary for Medicare it will cause health care spending to grow faster. At this rate we will be giving more money to insurance companies and programs that have great social value like expanded preschool and other needs that America has will be shoved aside. In coming years as the population of America ages there will be growing needs for health care. With no increase in supply, and the perverse incentives still in place, prices will continue to grow rapidly without the focus on efficiencies that is badly needed. Brooks points out that its not the politics is the chief obstacle to reform as most people say, but the reverse is the truth, unless one gets the fundamental incentives right politics will be terrible forever. ...

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Greenspan's legacy is called into question with the bursting of the housing bubble which he had not expected and the growth of subprime which he did little to slowdown. His libertarian spirits took a dogmatic view of free markets that said that the best approach was an handsoff one. This conflicted with the proper monitoring and supervision of rapid growth of subprime and the abuses that went on in the market for mortages and mortgage securities. He was also slow to raise rates after the rate cuts were down to as low as 1% which fueled the housing boom. Greenspan actually felt the borrowing on home equity loans for consumption was a good thing but failed to see the excesses in consumption spending and dangers of a negative savings rate. He felt that it was necessary to keep rates low to keep deflation from happening at that point in time. He was too complacent and in the position for too long to do the job well for so long. He was appointed by Reagan in 1987 and retired in 2005 three years ago in this role for 18 years. Could the Clinton or Bush administrations have chosen a fresh face who could have performed quite well and had to prove himself and not become complacent in a wave of adulation during good times? He argues that is decision making process was sound. This showed in the LTCM crisis and during the 9/11 crisis. But what went wrong were that his assumption about the goodness of human nature inherent in an innocent view of free market innovation where only the best happens ignores the possibilities of bad things happening when this innocent innovation is converted into a negative kind of innovation by human greed as happened in the mortgage securities market. And the lack of transparency that can creep in when a watchful eye is taken off the financial machinery and it is left all to its own devices as when these mortgage securities were made complex and dispersed in protfolios all over the global financial in places like Nordic towns in Arctic Norway as well as in far off places in Asia. So the basics: careful watchdog role, continually reassessing things like the patchwork of regulation that Secretary Paulson criticized recently fit for 10-20 years ago, getting interest rates right etc requires a good mind, some grace and a fresh face and energies that a man close to 80 years in 2005 after 18 years in the position got too complacent, overstayed and in the end made crucial errors of judgement and wisdom that his libertarian logic may have made all too easy. ...

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China's environmental protection ministry's report on what its costing China to have runaway growth- it would cost 136 billion dollars to clean up the environmental damage done by haphazard reckless growth and dumping of chemicals. Meantime about 300 million people suffer from the contamination of water and lack of access to clean water. Of the 25 most polluted cities in the world 16 are in China.

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The terms of the final deal approved by the French government for GE to acquire Alstom's gas turbine and energy businesses, and Alstom to acquire the rail signalling business of GE. The Alstom name will be preserved and the French government will take a 20% interest in the remaining Alstom unit.