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Dexter Filkins shows here how something is changing that may have been missed by American commanders and the new US administration- the evidence of a crumbling and unpopular feudal structure that the British maintained in Afghanistan to continue the imperial presence, and which has remained that way under the government of Pakistan for the last 50 years. Baitullah Mehsud and other Taliban leaders are from the lower strata of society, the porters and street cleaners and other occupations. The British operated through the malik system of tribal elders who were supposed to maintain order, and the British pretty much left them alone. The Pathan or Pastun people on both sides of the border between Pakistan and Afghanistan are going through some major social changes that are pent up for centuries. The malik system is beiing destroyed on one hand , and on the other hand the Taliban enjoy support among ordinary people in Pathan country as being good Muslims, and in parts of Pakistan itself. This creates a dangerous mix for American forces, popular sentiment of the lower strata and ordinary Afghans, with clandestine support from Islamist officers within the Pakistan army and intelligence services for more sophisticated warfare. Which only means that disproportionate resources would be needed for an expanded American project in Afghnistan, without much to offer in return....

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Liu Junning points out China's heritage of liberal ideas that goes back to Laozi, the founder of Taoism (6th century B.C.), Mencius (4th century B.C), Huang Zongxi (1610-1695) which are similiar to the liberal ideas of the Enlightenment in the Western nations. He says the liberal ideas and accountability of government are the heritage of all nations and not a particular western experience.

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Oil prices are up and staying there longer in December 2011. The 12 month rolling average for oil prices for Brent crude oil is at $109, compared to $106 a barrel in September 2008, according to consultants JBC Energy. The situation is worse for eurozone countries because of the declining value of the euro estimated at between $1.16-$1.30 in 2012 depending on how the eurozone crisis is handled. The 12 month rolling average was 70 euros when Brent crude prices were at their high in 2008, compared to 78 euros today. France and Italy are seeing their current account surplus disappear with reduced exports and higher import bill for oil.

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An account by Journal reporters based on over 25 interviews with eurozone policymakers shows how the central players in the eurozone drama acted to defend their national interests during the period April to July 2011. On one side France's president Sarkozy, Frenchman Claude Trichet at the European Central Bank, arguing in favor of the banks not to take bondholder losses or haircuts on loans made to Greece. On the other side the Bundesbanks Axel Weber, and Jens Weidman, Jurgen Stark and German Finance Minister Schauble. The Germans argued strongly for bondholder losses to take responsibility for bad loan decisions by French and German banks. French banks had committed more loans to Greece than German banks and had more at stake. German public opinion was strongly against German taxpayers paying for the losses, making German politicians insistent that European banks take losses on their bad loan decisions, or Germany would not support additional loans to Greece. Throughout April to July the two sides were locked in an impasse. The French feared losses for their banks and a Lehman Brothers bankruptcy style situation. The Germans at the Bundesbank and the Finance Ministry were equally insistent. A July 2011 summit meeting did not settle the issue. The events not covered here from the July to the December summit of eurozone leaders resulted in bondholders taking 50% haircut on loans to Greece, reducing the debt burden in Greece after austerity measures led to popular protests. The French pushed hard for the ECB or the EFSF to be allowed to make large purchases of bonds of troubled eurozone countries in an effort to protect Spain and Italy from contagion through higher bond yields. The Netherlands and Finland supported Germany's position. German bankers Weber, Weidman at the Bundesbank and Finance Minister Schauble opposed large scale buying by the ECB of Italy's and Spain's bonds and Chancellor Merkel said about a common eurobond that "this is not going to happen." Governments changed in Greece, Italy, and Spain by Dec. 2011, which committed to austerity programs and spending cuts. Italian Mario Draghi was appointed with German support as new head of the ECB. In late December 2011 Draghi launched the Long Term Financing Operation for lending unlimited amounts at 1% for three year loans to European banks and relaxing the terms to accept government bonds and other debt as collateral for loans. The effect of this was to provide a large infusion of liquidity into the banking system in Europe and drastically bring down the yields on bonds issued by Italy and Spain....

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This WSJ editorial says president Obama's inaction, including the smaller step of not putting in place a safe zone in Syria, comes at a price for Liberals. The recent action by Governors in Michigan and other states turning down Syrian refugees, it says is one of the moral consequences of Obama's policies. For Liberals it says a policy of inaction and turning America's back to the needs of ordinary Syrians during the Arab Spring is not neutral, it also has consequences. The consequences for Liberals is the steady stream of refugees to Europe, and the greater intolerance in western societies as the safe havens created by these policies in the Middle East lead to terrorist actions in Europe or the U.S. In short doing little or nothing carries risks for the kind of society liberals want to see. Through developing policy in response to the Bush Administration's policies the Obama administration makes a series of errors of its own that compromise liberal values, including the collapse of the Arab Spring without American and western support, and the creation of a huge refugee crisis in Syria, Iraq, with a spillover to Jordan and Turkey, and further spillover to Europe. Liberals in Europe also face a similiar situation, including Liberals in France....

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Polls show 83% of the German public support increasing the minimum wage to 8.50 euros an hour. About two thirds of the public support increasing income taxes on high wage earners. The Social Democrats talks with the CDU to form a coalition are likely to lead to CDU accepance of the condition for a minimum wage of 8.50 euros an hour, but not to the condition for raising the taxes on high income earners. The SPD sees the higher taxes as a way to pay for new infrastructure. A survey done for TV broadcaster ZDF shows 61% of Germans favoring a SPD-CDU coalition. In the 2013 elections the SPD gained 25.7% of the vote and the CDU-CSU gained 41.5%. The SPD is pushing for flexible retirement age, equal pay for men and women, a tighter financial regulation, and a growth and employment strategy in the EU.

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An audit of Spain's banking system by the consulting firm Oliver Wyman, shows that Spanish banks would need 53.745 billion euros to be cleaned up if mergers and acquisitions underway are completed.The amount goes up to 59.3 billion euros if this does not happen. Bankia bank will need 24.7 billion euros to meet capital requirements. Three other nationalized banks need 21.5 billion euros, including 3.2 billion euros for Banco Popular. Of the 14 audited banks only 7 need capital infusions. The other banks considered healthy include BBVA, Santander and La Caixa. These findings are similiar to a preliminary finding by Oliver Wyman and estimates provided by Luis de Guindos, Spain's economy minister, that Spanish banks will need 51 billion to 62 billion euros of capital infusion. Spain's secretary of state for the economy, Fernando Jimenez Latorre, says Spain will soon request about 40 billion euros of the 100 billion euro bailout offer for banks negotiated by Spain in June with the EU. It is not clear whether the capital infusion will go directly to Spain's banks as Spain has argued, or go through the Spanish government. The audits were important to provide credibility through independent assessment of losses in Spain's banking system, and remove the fog of uncertainty that is pushing up Spain's borrowing rate in capital markets....

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A 3 page July 14, 2015 update on the IMF's July 2015 debt sustainability analysis paper on Greece, points to severe damage to the Greek economy in the last year, especially under the uncertainty and closing of the banking system, making debt unsustainable without haircuts or extension of maturities and grace periods. About 85 billion euros is the additional financing needed as a result of the mismanagement under the Syriza government and closing of the banking system. It draws the conclusion that "haircuts could be avoided if instead there was a significant further extension of the maturities of the entire stock of European debt (GLF, EFSF) , in the form of doubling of grace and repayment periods, with similiar concessional terms on new financing." The paper adds that the maturity extension would have to be "very dramatic extension with grace periods of say, 30 years on the entire stock of European debt, including new assistance." One shocking part of the analysis is that within the space of one year from July 2014 to July 2015 the Greek economy went from reaching Debt to GDP ratio of 105% in 2022, to 170% after the closing of the banking system by July 12, 2015, according to the IMF. In 2014 it was at 177% of GDP....

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Inflation in China and rising wages are pushing up costs for American manufacturers. The pressure on China, most recently in Congress, is helping to push up the value of the yuan. This combined trend is making it attractive for some manufacturers to bring factories home to the U.S. A trend in the U.S. towards non-unionized labor and the new trend to a two-tier wage level- with lower wages for entry level workers- and the shedding of legacy health care costs, is creating a more cost competitive labor force in the U.S. This extends from older industries such as furniture and auto components to newer industries and technology. The new factories setup in the U.S. use technologies that require a smaller number of workers, in most cases less than half the number of workers that were employed earlier. This adds another element in cost efficiency, though it means fewer jobs are created with new plants.

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Efforts by BNP Paribas to get bondholders to take a 50% loss on Greek bonds, and exchange their old bonds for new ones that mature in 50 years. BNP Paribas is working for the Greek government to get other banks and bondholders to accept this exchange so that Greece can tackle its debt load and interest payments on debt. Some arm twisting by BNP Paribas to get bondholders who have insurance through CDS to accept the exchange. This is being done on the grounds that the I.S.D.A. committe would declare the restructuring in Greece as being "voluntary" and not a default, so that bondholders who do not accept this deal would not get paid through CDS insurance.

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Simms looks at the Plaza Accord of 1985 and the 60% appreciation of the yen, the lowering of interest rates and the real estate bubble that followed, and what this tells China's economic planners about managing the renminbi. A academic member of the People's Bank of China, Yu Yongding, sees one of the lessons as how Japan mismanaged the aftermath and creation of the asset bubble. There may be different complexities in China's situation with the increase in local government debt and loans in the shadow banking system, so that China cannot become complacent.

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The home ownership rate for the U.S. in March 2012, is 65.4%, the same rate as in 1997 before the housing bubble, according to the U.S. Census Bureau. The irony of this is that the housing bubble was inflated by politicians in Congress and mortgage lenders and purchasers of mortgage securities. Fannie Mae and Countryside worked together ostensibly to promote home ownership while pursuing profits. In the case of politicians they pursued goals of raising employment and growth without understanding the risks of artificially inflating home ownership, and without consideration for incomes of subprime borrowers. A less benign view of the interests and goals of politicians comes from reflections on the impact of political lobbying by Fannie Mae and other housing lenders in the U.S. Congress. The consequences in terms of foreclosures have been devastating for minorities as well as other middle class homeowners. It has also damaged the U.S. banking system, credit growth in the economy and prospects for recovery, which will take years to correct. The federal government is also saddled with large losses at Fannie Mae because of its quasi government agency role. That role led to inflation of the bubble. Most of the consequences will be borne by middle and lower income households in the U.S. The pass-through effects in a global economy affect Europe, and emerging market countries. ...

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The Merkel government's effort to convince a skeptical German public about the need to aid Spain's banks. This includes a video on YouTube. The German parliament will vote shortly on the loans to Spain's savings banks.

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White House visitors database shows lobbyists have frequent access to the White House. On one January day, Jan. 17, 2012, lobbyists came with the CEO's of their companies to 1600 Pennsylvania Avenue at 9 am for roundtable with President Obama. The CEO's are on the president's Jobs Concil. At 1 pm representatives from the meat industry arrive. And at 4 pm a lobbyist from Goldman Sachs comes for a meeting with Alan Krueger, chairman of the Council of Economic Advisors. Its a fairly routine day.

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The IMF's changing views on the value of fiscal austerity. In the current debate about the value of fiscal austerity, there is the IMF view, a German view based on its own experience, and the views of other countries in Europe. The IMF's view has shifted over time. The IMF World Economic Outlook 2010, describes its view of the effects of austerity measures in the form of spending cuts and tax increases- "Fiscal consolidation typically has a contractionary effect on output. A fiscal consolidation equal to 1% of GDP typically reduces GDP by about 0.5% within 2 years and raises the unemployment rate by about 0.3% percentage points." Over the longer term there are benefits as the private sector is not crowded out in the search for captal funding by the excessive government borrowing. The IMF's economic models suggest that it would take 5 years before reaching the breakeven point when the benefits of austerity measures exceed the effects of austerity. The German view held by German central bankers is that the actions stimulate growth in the short term. Manfred Neumann, professor emeritus at the Institute for Economic Policy at the University of Bonn, says this is called the "German hypothesis" as it reflects the experience of Germany from austerity actions taken by Germany. Laurence Ball, professor of Economics at John Hopkins University, is critical of the "German hypothesis" and its application across Europe in different situations. Germany is a large exporting nation and exports helped counterbalance the effects of austerity measures. Within the eurozone with fixed exchange rates the exports of less competitive countries cannot be boosted through devaluing the currency to gain price competitiveness. The other problem is that with interest rates close to zero in the euro zone the central banks cannot cut rates aggressively to counteract the effects of spending cuts. The problem gets compounded when a number of countries are taking austerity measures at the same time accentuating the downturn....

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Couple of things stand out. First an aging workforce at the oil companies. At ConocoPhillips half of the workers are eligible for retirement in 5 years. According to the Society of Petroleum Engineers about 40% of petroleum engineers are over 50 today. This also means that they are higher paid employees and takes up more of Conoco's budget for exploration of $11 billion as a compared to a younger workforce. What the industry needs is lots of people to do the explortation and drilling jobs from construction labor to project managers, to geologists and petroleum engineers to geoscientists. About half a million petroleum related jobs were lost between 1982 and 2000 when the oil industry had low prices and plenty of supply leading to large layoffs. During 1982 to 2003 petroleum related undergraduate programs saw enrolment drop dramitically by 85%. Now the industry is paying the price with severe people constraints when demand has picked up. Cambridge Energy Associates estimate is that there would be about a 10-15% deficit of people even a few years from now in 2010 because it takes time to turno out new engineers and geologists. Today there is big interest on campuses in petroleum engineering and petroleum related fields. Its the highest paid field for college grauates at $68,000 average and at schools like Texas Tech its $100,000 average. Still only 3700 petroleum engineering students are enrolled on campuses compared to the peak of 11,000 in 1983 so there is some hesitation about this field because of the cycles of ups and downs. The novel approach that oil companies are adopting of turning to the auto industry and to academia to fill the people needs is worth watching because here are 2 industries going in opposite directions and whereas one has a shortage the other has qualified people who have no opportunity, a shift makes sense and training to make that shift makes a lot of sense. The Association of Drilling Contractors has teamed up with Ford Motor Company to hold a career fair to attract auto employees who are subject to buyouts....

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The moderate positions of both parties in political life in Australia and New Zealand compared to the U.S.

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Edward DeMarco is head of the Federal Housing Finance Agency (FHFA), which is the independent regulatory agency overseeing U.S. housing lenders Fannie Mae and Freddie Mac. The FHFA was formed in 2008 after merging two existing agencies. Later that year Fannie and Freddie were taken over by the government. FHFA head, DeMarco, is reluctant to help homeowners with underwater mortgages on their homes with reduced payments because this would mean losses to the taxpayer. He sees his mandate as protecting the taxpayer. Sheila Bair, former head of the FDIC, says she understands DeMarco's mandate is not to provide fiscal stimulus, and the Obama administration has been all over the place when it comes to providing homeowner assistance. The result is that there is little help by the U.S. government to homeowners with underwater mortgages since 2008, and this creates larger headwinds for the Federal Reserve Bank to provide momentum to the U.S. economy. Many experts see this as a serious problem and a well respected economist, Martin Feldstein, has made repeated proposals for structuring the help to homeowners since 2008. ...

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Douthat offers insights into U.S. president Obama's thinking when he said at a National Prayer Breakfast, that Christians also had committed bad acts in the name of religion and reminded listener of the Jim Crow days when blacks were oppressed by church going Christians. The Crusades were a long battle against an advancing Islam over several centuries and many regions, says Douthat, and do not quite compare with the actions committed by an individual organization such as Islamic State in 2014-2015. The Jim Crow reference comes from personal experience during the fading days of racial discrimination. Yet says Douthat this reference to Christian culpability does little to bring the criticism back to self that the writer Niebuhr, Obama's role model, suggests, because it does not take the criticism back to self or political party to serve as useful introspection. It is almost like saying Christians are just as bad,(so why act?) without distinguishing from Christians and Muslims who respect tolerance and peaceful coexistence from those who do not. It also encourages one to remain a bystander in foreign and defense policy, leaving a younger generation with any future consequences. Ike does better by bringing self-criticism home to his own party and ideological wing by talking about the military-industrial complex and the problems it will create....