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This issue of the Economist magazine looks at Saudi oil price cuts and the future for shale oil in the world's energy mix. In the short run overleveraged companies in the shale oil business in the U.S. will be affected by oil prices below $50 a barrel. The Economist points out that shale oil deposits are extensive in the U.S. and other parts of the world. The upfront costs are as little as $1.5 million for drilling a well. As a result the economics of shale will depend on new advances in technology and efficiency to bring costs down below existing costs averaging of about $57 a barrel, with some producers at costs of $35 a barrel. Because of technology advances anticipated in the field it points to shale oil as a reliable source of low cost oil supplies in the future, keeping oil prices lower than in the past and much less subject to manipulation by cartel pricing or oil price shocks. The lower volatility and lower level of oil prices will be good for the rapidly growing economies in Asia and the developed economies of Europe and the U.S., and for countries in Latin America such as Argentina with large shale deposits....

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Krugman says China's inflation is raising labor costs in China, and in this way gradually reducing the undervaluation of the yuan vs the dollar. But he cautions this would take a long time, 4-5 years. The U.S. faces the costs of high unemployment close to 10% today, and this requires serious efforts now to reduce the undervaluation. It alone will not solve America's problems. It is one of a number of actions that need to be taken and not put off again.

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Indifference on the Republican side, and a sense that not much is going to get done on the Democratic side, as President Obama pitches a $447 billion second stimulus plan in a speech to both houses of the U.S. Congress on September 8, 2011. Dana Milbank documents the attitudes and skepticism with which members of Congress received the proposals- a general sense that President Obama was too weak and ineffective to get things done and has lost credibility. John Taylor, senior economic advisor on the Republican side pointed out in a Wall Street Journal column a few days before the speech, that the jobs proposals Obama and economic advisor Alan Krueger were presenting were similiar to old plans that have not produced results. Taylor viewed them as placing too much reliance on government and not enough on the private sector to generate economic growth and jobs.

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In an effort to calm unsettled global financial markets ECB president Mario Draghi said in a speech on July 26, 2012: "Within our mandate, the ECB is willing to do whatever it takes to preserve the euro and, believe me, it will be enough." Yields on Spain's government bonds reached 7.5% as investors shunned Spanish bonds fearing the need for a government bailout.

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Estimates of the contraction of the Iranian economy in 2012-2013 show GDP declines for 2012 and 2013. The IMF estimate of the economic contraction for fiscal year ending March 2013 was 6%. Former president Ahmadinejad's policies led to hyper inflation, a sharp depreciation of the currency rial, similiar to the situation in Venezuela under Chavez and Maduro. To get a sense of the the scale of the damage to the Iranian economy- a decline of 39% in vehicle production in 2012 with the lack of essental parts and decline in demand, oil production declining to about 700,000 barrels at one point in 2013 from over 2 million barrels in the period before 2012. This was a result of lack of access to needed technology and parts as sanctions began to take a toll, and because of the decline in exports from the enforcing of sanctions by 2013. By June 2014 the newly elected leader Rouhani had made economic recovery the to priority- inflation had been cut in half and the rial currency had recovered from the lows in 2012-2013, and oil production increased to 1.2 million barrels. The IMF forecast is for GDP growth of 2.35% for 2015. The auto maker Khodro Industrial Group is keen on increasing production and partnering again with Renault, which left the country with the sanctions. Iran's oil producing company estimate is that about 700,000 increase in production could be achieved quickly with the lifting of sanctions for oil technology and parts. Rouhani has put together a large group of business leaders inside Iran and overseas to improve Iran's image with investors and attract foreign investment....

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Ishaan Tharoor provides a brief history of Russia's intervention in Syria and its role in the Middle East since 1950. This does not mention the Dulles period under Eisenhower in U.S. politics when the U.S. engaged in the Cold War withdrew support for building the Aswan High Dam, thinking that the Soviet Union would not come up with support. The Soviet Union under Krushchev provided $1.2 billion at 2% interest in 1958 for building the Aswan High Dam- constructed from 1960-1970- which helped increase irrigation and crops in the Nile river region and reduced the damage from droughts and floods. Soon after the dam was built it provided about 50% of Egypt's electricity. This was the high point of Soviet Union's economic engagement, latter support was defined by military arms supplies and led to the Six Day War, and the economic stagnation of the economy under Nasser's successors from the military. The Soviet Union was actively engaged in Iran with a Russian and British zone in the country in 1907, soon after the flowering of an effort to write a democratic constitution 1900-1907 for Iran with the help of British intellectuals, similar to the failed effort of the Arab Spring today. In neighboring Afghanistan the Soviet Union fought a long war under Brezhnev, contributing to the unravelling of the economic structure of the Soviet Union before the fall of the Berlin Wall. The British were primarily focussed on protecting oil interests in Iran in the period 1900-1950, yet contacts with British civil society led to the first grasp of democratic constitution and processes in Iran during this period. The American intervention funnelling arms support to the Saddam regime in Iraq in a war Iraq initiated against Iran 1980-1988, marks a low point in American intervention similiar to the Russian intervention in Iran-Iraq-Syria today. It may also define some of the problems of today because of the length of that war, the entrenching of military in the government in Iran, suspicions of the U.S., and the possible sense of a need for nuclear weapons to prevent attacks on Iran, as Pakistan has done in its conflict with India, though this is rarely brought up in discussions. The American arms support intervention, led to a series of cascading conflicts since 1980 with the invasion of Kuwait by the Saddam regime in 1990, the destruction of Shia in the marshlands of Iraq after a flawed peace agreement, and the follow up to that conflict with George Bush's invasion of Iraq on grounds of WMD development in 2003 for the 2003-2011 Second Gulf War including the Surge. The arms support of the Saddam regime in the war it initiated against Iran, was policy designed under President Reagan 1980-1988 following the hostage crisis and the Islamic revolution in Iran in 1979. The cascading crises with Iran and Iraq may not have led to this level of conflict and disruption, refugees and deaths in the Middle East, if American policymakers had heeded George Washington's advice during his presidency, that your enemy's enemy is not your friend when it comes to framing policy- for this reason Washington as president did not see it in the national interest to get involved in conflicts between Britain and France beginning in 1793, France having aided the American side against the British in the War of Independence. In the Proclamation of Neutrality, Philadelphia, April 22, 1993, he says: "Whereas it appears a state of war exists between Austria, Prussia, Sardinia, Great Britain and the United Netherlands, on the one part, and France on the other; and the duty and interest of the United States require, that they should with sincerity and good faith adopt and pursue a conduct friendly and impartial towards the belligerent powers.." And in a letter to Patrick Henry offering him the position of Secretary of State from Mount Vernon, October 9, 1795, Washington says: "My ardent desire is, and my aim has been, to comply strictly with all our engagements, foreign and domestic; but to keep the U States free from political connexions with every other Country. To see that they may be independent of all, and under the influence of none. In a word I want an American character, that the powers of Europe may be convinced we act for ourselves and not for others, this in my opinion is the only way to be respected abroad and happy at home and not by becoming the partizans of Great Britain or France, create dissensions, disturb the public tranquillity, and destroy perhaps for ever the cement which binds the Union." At a time of passionate political debate, it is time to step back and reflect on lessons that can be learned from the founding fathers about the way they tackled the important issues of their time....

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Experts in Germany and the U.S. look at areas adversely affected by free trade and globalization and the increasing support for right wing parties in these areas. David Autor is a labor economist in the U.S. at MIT who has studied these trends. He says trends in free trade have hurt low wage workers. In 2014 he and David Dorn, Gordon Hansen, Jae Song, published a paper showing how trade with China was affecting different parts of the U.S. Lower wage workers, most of them with less education and skills were prone to be unemployed or face lower earnings in areas where cheap imports from China were replacing domestic production. Donald Trump has strong support with the white working class and less educated workers who form this group. He has accused China of "currency manipulation" and proposed a 25% tax on Chinese imports. Experts say there is no strong evidence that immigrants are causing this type of dislocation in the U.S. Yet immigrant bashing is used by Trump and other right wing politicians which is attributed to it being an easy tactic for politicians to appeal to the anxieties of working class voters....

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Micky Hammon sponsored Alabama's HB 56, Alabama Taxpayer and Citizenship Protection Act, which passed in the legislature in 2011. The illegal immigrants it was said would follow "self-deportation" as the law would require frequent checks by police, and make renting a house or giving a job to an illegal immigrant a crime. The policy would be followed in schools also. At the time Donald Trump is cited by the Washington Post's David Weigel as telling reporter Kessler that the policy was "crazy," and "maniacal."

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The employment to population ratio in August 2011 was 58.2%, down from 62.7% in December 2007, according to the Labor Department. For men the ratio is 63.6%, down from 69.4% in 2007 when the recession began. About one percentage point of this is a result of a surge of retirements during this recession period.

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Efforts to reverse declining investor sentiment in India.

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Diesel prices are regulated and subsidized by the Indian government, but gasoline prices are deregulated since 2010, resulting in gasoline costing 64% more than diesel in India. As a result buyers are staying away from gasoline cars and shifting to diesel creating distortions in demand. The government is considering a tax on diesel cars and SUV's of between $3000 to $4600 to correct the distortion. Because lower income people woud be hurt by increasing the price of diesel it continues to be subsidized. Because of the uncertainty car manufacturers are shutting down production to reduce growing inventory of gasoline vehicles. High interest rates of 12% on car loans also reduces demand. Suzuki Maruti sales declined 6% in May 2012, Ford and GM showed sales declines of 14% and 20%. The year ending March 2012 shows Indian car sales growing only slightly by 2.2% to 2 million cars. Sales were rising at 29% only about a year ago. Gasoline costs 68 rupees a liter in New Delhi after a 11.5% increase in May 2012, compared to 41 rupees per liter for diesel. The increase in gasoline prices is a result of the government having difficulty paying the rising imports of oil, costing $141 billion for the year ending March 31, 2012. The sharp slowdown in the car industry and the problems in the energy sector have affected India's growth rate....

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Even after receiving 5000 complaints over ayear and half about aggressive short selling that amounted to market manipulation, the SEC did not bring any enforcement cases, according to areport by the SEC's inspector general. Of the 5000 complaints between Jan 2007 and Jne 2008 only 123 were investigated, and no cases were brought.12.5% of emails alleging insider trading prompted an investigation. About 1.38 million emails were handled by 4 staffers, showing horrendous understaffing. In a written response SEC enforcement staff played down the likelihood of naked short selling abuses. It noted that alarge number of cases settle over time. The SEC staff said that the agency needed to "intelligently leverage" its resources and alarge number of complaints provide "no support for the allegations". Morgan Stanley, Citigroup and other frims came under extreme pressure from short selling, and short selling has led to near collapse of many firms during the crisis since the middle of 2008, so its strange that the SEC takes this position. But it is not surprising as in recent years enfocement has been lax, regulation has been neglected almost by design, and resources and staffing are severely short of needs for the SEC's mission to be performed with some degree of confidence....

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The new head of U.S. President Obama's Council of Economic Advisors, is Princeton economics professor, Alan Krueger. Kueger is known as the academic's academic, whose office is located with other labor scholars in the Princeton library. His work has focussed on what he calls "Rockenomics" (research about which bands do well and the reasons for this), on commuting, on studies such as the one with a suggestive title, "Sorting in the Labor Market: Do Gregarious Workers Flock to Interactive Jobs?" His appointment suggests the Obama administration is looking at no new policy initiatives, focussing on an incrementalist approach in policy actions, with the hope that he can get both political parties behind smaller changes. Putting a micro-specialist in charge at a time of huge volatility in financial markets shows an administration that is likely to continue the status quo with small changes till the presidential elections in 2012- the opposite of strong action because the Obama adminstration has no idea how to turn this economy around and only hopes things will change....

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Renewed warnings about the bubble in housing prices in China. Earlier warnings came from Krugman, Lardy, John Taylor. This one comes from Nomura economists Zhiwei Zhang and Wendy Chen. Could the government's action to curb rising housing prices not be adequate leading to a financial crisis as early as 2014, is the question posed by Zhang and Chen. They cite the rise of housing prices by 84% from 2001 to 2006, before the financial crisis of 2008 in the U.S., using the Case-Shiller housing price index. One problem- the government statistics may have underestimated the extent of the bubble. China's official index shows housing prices rising 113% in major cities from 2004 to 2012. Zhang and Chen say this is much smaller than the actual rise because it includes older, lower quality housing property. They cite an academic paper that adjusts for this and finds prices jumping by 250% in the period 2004 to 2009. Another problem is that China's housing prices growth slows after government action but then resumes the growth, leaving the risk exposure at the high level as before. Because the local governments are tied up in the housing bubble the problem would hit the banking system. About 14.1% of the outstanding bank loans are to local government financing vehicles, and 6.2% to property developers, according to Nomura economists. The declining potential growth rate in China means there is less room for bad loans to be absorbed by hyper growth levels than in the past. Errors in policy can magnify the risk including loosening monetary policy and exacerbating the bubble at the wrong time. In the absence of errors the risks still remain requiring the sale of public assets to bail out local governments and banks. The argument made by Krugman and other economists has been that China is not immune to the risks of a housing bubble going bad, in any way less than Sweden, the U.S., Spain and other countries, requiring bailouts of banks....