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The Economist points out (in this cover issue on India-Pakistan relations) several fundamental facts. The first is that the current state of relations betweeen India and Pakistan hurts Pakistan the most. It makes a much smaller country and smaller economy bear the burden of defense against a large neighbor- defense takes up much needed allocation of funds for infrastructure and development, education and healthcare. It also weakens democratic institutions and their development by an overdependence on the military for governance. Poor India-Pakistan relations have significant adverse effects on the U.S. In fighting the Taliban U.S. forces are fighting a force that Pakistan's military helped create and support from its early beginnings as a way to counter Indian influence. With an Indian-Pakistani peace settlement of issues in Kashmir and other outstanding issues the U.S. would be in a significantly better position to disengage from the region, especially when the entire Middle East is moving in a new direction in 2011. Consider the difficulties in establishing peace in Northern Ireland, and between Turkey and Greece, and the difficulties of establishing peace between India and Pakistan cannot be considered even more difficult. Pakistan and India muddle along- neither side is doing much to take the initiative. For the U.S. disengagement from South Asia can be best achieved by pushing for a settlement between the two countries. Pakistan and India have much to gain from a settlement. Considering the progress made in Ireland, such places as Yugoslavia, and in Turkish-Greek relations, there is a lot more that can be done and should be done to bring India and Pakistan together. In Ireland diplomatic efforts were made by U.S. envoy George Mitchell, and in Yugoslavia U.S. envoy Holbrooke made diplomatic efforts towards the Dayton accords. Greek-Turkish relations have advanced to the point where Erdogan and Papandreou, the Greek and Turkish prime ministers, discuss solutions to the Greek debt crisis. This includes options to reduce Greece's defense expenditures in the light of Turkey's new foreign policies. The lack of such efforts to break the deadlock between India and Pakistan by the U.S,. the U.K. and other countries involved in the NATO mission in Afghanistan, the emphasis on a military solution supported first by Gen. McChrystal, and then by by Gen. Petraeus, all show a lack of understanding of the real issues that need to be tackled- issues relating to a peace settlement between India and Pakistan....

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U.S. federal government efforts through changes in programs for loan repayment to reduce the burden of $1 trillion in student debt. A weakness of the programs is that no effort is made to put some form of cap on what colleges charge for tution, which is moving ever upwards. As a result students will continue to be burdened by high debt. The loan forgiveness after 20-25 years is not an adequate solution as the writer suggests, because extending loan payments of 15% of income for such an extended period of time leaves less for buying a house, for mortgage payments, education of children, and limits what a family can spend for two decades, a poor option for any family especially when both husband and wife are paying off student debt. As long as young people with student debt defer purchases for a new home and other purchases consumer spending will be weak.

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The 10 year Greece government bond yield was 9.183% on May 14, 2013, according to Tradeweb, declining from a high of about 30% during the peak of the eurozone financial crisis in 2011.

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Microsoft has done poorly in anticipating and developing products for the internet and mobile devices. On the enterprise side the server and tools business has done well. Microsoft's Server And Tools business made operating profit of $8.2 billion in the year ending June 2013, up 13% from the prior year. Office 365 sold on a subscription basis to accomodate the shift to cloud computing, and other cloud products are expected to make up for decline in Windows revenues with decline in PC sales. Satya Nadella, who ran the Server and Tools business from 2011 till he was shifted to head the cloud computing effort in the reorganization of 2013, is a candidate for the CEO position.

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A lot of the same subprime lenders who had questionable ethical practices and in many cases defrauded homeowners are back in business as FHA guaranteed lenders. The FHA gets to pick up the tab for faulty lending by these brokers and companies. Inside Mortgage Finance, a research newsletter, estimates that over the next 5 years fresh FHA loans that go sour will cost thaxpayers $100 billion more. Risk Mitigation Group, a consultancy, says over the next 12-18 months there is going to be a FHA Insurance Armageddon. Founded in the New Deal years the FHA is supposed to promote first time home purchases by allowing small down payments, as little as 3%, and lenient standards on borrower income , as long as mortgage and related expenses do not exceed 31% of household earnings. Buyers pay a modest fee for the taxpayer backed insurance. Lenders and brokers can get a license to participate in FHA programs by showing industry experience and knowledge of agency rules. BUt experts say the FHA does not have the staff to deal with its expanded responsibilities under the new Bush programs like HOPE for homeowners, and does not have the IT systems to show if the brokers had violations and convictions in the past in their records. Overburdened, lacking the computer systems to track brokers records, and understaffed, the FHA has licensed some of the same brokers who caused the subprime disaster as they applied under different names and as different companies. After the subprime market evaporated in 2007 FHA loans are all thats available for many borrowers. In fact by fall 2008 FHA loans accounted for 26% of all new mortgages issued nationwide, up from only 4% a year earlier. The Bush administration and FHA extended $300 billion in loan guarantees to HOPE. And these brokers who defraud investors with deceptive practices are known to put down even disabled people as employed, and show incomes that are not verified. Once these loans are sold as securities these brokers engaged in deceptive practives have collected their fees and being FHA guaranteed they hold their value as securities, except that the losses as they default are the taxpayers responsibility. This is the $100 billion in losses that Inside Mortgage Finance is warning about. Along the way it leaves a trail of trouble for homeowners, state agencies trying to stem these practices, and taxpayers. ...

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Full face veils for women are now a topic in the immigration debate in Germany. Interior Minister Thomas de Maiziere now favors a ban on full face veils, agreeing with state level party members of the Christian Democratic Union. CDU interior ministers are now in agreement to come up with legislation to require that people show their faces where necessary "for living together in our society." Maziere says the Social Democrats SPD party agrees with much of this agreement, called the Berlin declaration. Chancellor Merkel told news group RND that she understands and accepts that "a fully covered woman has little chance of integrating in Germany." Some CDU officials such as state premier of Hesse, Volker Bouffier, say its all about liberating women, because he thinks it simply isn't true that this is what a woman wants. Other CDU leaders interior ministers in Berlin and Mecklenburg, Henkel and Caffier, say dual citizenship needs to be abolished. The Berlin Declaration put off this issue by requiring a report on this by 2019, on whether it helps integration. The Berlin Declaration calls for 15,000 additional police officers, though the association BDK of police officers says this is not enough. ...

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 Mayor Reiter of Munich, Christian Kern, head of Austrian railway OBB, say here that the actions of Viktor Orban of Hungary gave the German government very little time, only a few hours, to act. The first motivation was to act in a humanitarian way, which is what happened. The German government had asked Orban to register and handle immigrants in an orderly way. In the end with the failure of Orban to do this, the immigrants who would have come north anyway, streamed into Germany and Austria in buses and trains. Clearly Hungary and Germany could have handled this better. The German public provided support with a large number of volunteers helping. One German minister is cited here as saying that if Orban wanted to build a fence he should have done it in a quiet way, as there are fences between Bulgaria and Turkey, and Turkey and Greece and it has not bothered anyone.

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Brazilian President Lula's interview witht the Economist, just before leaving office. It is not still clear how Lula will be seen, even though his popularity at the moment is helping elect his chief of staff Ms. Rousseff, as his successor. Lula's success in office is seen as a continuation of the policies of President Cardozo, who helped tame Brazil's inflationary crisis. Lula has benefitted from the continuation of the policies of his predecessor, and also from the boom in exports to China for soya, metals and other exports. By helping expand Brazil's middle class and the aid to poorer segments of society with the Bolsa programme, he has earned credibility and wide popular support. The dangers lie in the areas of an extremely overvalued currency- see the link to the Brazilian currency Real- with the Real at 1.7 and analysts with computer models showing the Real really worth 2.65 dollars. Part of the problem is government deficits to finance increased spending which require inflow of foreign capital and higher interest rates. Brazil is very dependent on exports to China for the increased level of growth, this poses risks if China's growth slows as expected from the high growth rates of the past. This poses risks for the level of infrastructure spending the Lula and Ms. Rousseff goverments plan on developing. Brazil's educational system is weak and efforts to improve this under the Lula government have not produced results. So the longer term assessment of the Lula goverment will have a balanced score card of wins and losses, without the euphoria of the moment....