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NYT's Landon Thomas gives this exceptional report on how Deutsche Bank changed from a lender to the German auto industry and safe banking practices to enter the derivatives business and other opaque financial products that led to taking on huge risks. Deutsche Bank has agreed on Dec. 22, 2016 to settle with the U.S. Justice Department paying a fine of $7.2 billion for practices relating to faulty mortgage securities. This report says the problems started in 1995 with Deutsche Bank's leadership hiring Edson Mitchell of Merrill Lynch to promote the investment banking business at Deutsche Bank. Mitchell hired two derivatives traders Broeksmit and Anshu Jain. Mr. Mitchell died in plane crash in 2000 when he was 47 years age, Mr. Broeksmit committed suicide in 2014, 58 years in age, Mr. Anshu Jain, 53 years old, is the only surviving person of the three. Under Mr. Jain Deutsche Bank assumed more and more risk, and was involved in complex and opaque financial products leading to the toxic mortgage crisis, and manipulation of the lending rate for London banks.  It also lent $300 million to Donald Trump's businesses. Most of the profits generated from this venture have evaporated, with analysts estimating $15 billion in fines and penalties owed of the $20 billion that these ventures generated. Not counting the serious damage to the bank's reputation in Germany and the U.S. This report points out the role played by the CEO from 2002 to 2012 of Deutsche Bank, Josef Ackermann, in encouraging these ventures converting the bank from its original loan as a contintental lender to business to a bank selling opaque financial products for most of its profits. Landon Thomas also describes the events and days leading up to the suicide by Broeksmit, including a visit to a psychiatrist and Broeksmit's facing enormous stress about the investigations underway in Germany and the U.S. looking into the opaque financial products and practices of Deutsche Bank. This is also a cautionary tale about what happened in banking from the late 1990's leading to the collapse in 2008, leading to the problems of today- the need to rescue the economy in 2008-2009 and the low rate world that ensued damaging the savings of ordinary people, the infrastructure that was never built, the parallel crisis of the hollowing out in manufacturing as a false prosperity boomed in banking and finance. In a sense it is also a story of everyday lives that were damaged in the high flying boardrooms of finance in New York, London and Frankfurt. The revolving door between regulators and the banks made it harder to monitor and control banking risk letting this story unfold over decades, damaging the credibility of governments and the established political parties without clear alternatives from outside; as the dominance of Wall Street executives in the new outsider Trump administration shows.  ...

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Andy Street, Mayor of the West Midlands Combined Authority, says when you consider that London gets 7 times the infrastructure spending per person than West Midlands, "its not bloody surprising" that his region is not growing fast. West Midlands covers a large part of central England, including Wolverhampton, Birmingham and Coventry. Even life expectancy is lower by 8 years in Blackpool, and disposable income can be quarter in Camden compared to North London. Labor's Corbyn and Conservative's Thatcher in the British general election are both campaigning for reviving the regions outside London, that have seen investment in people and technology lag substantially behind London. Regional revival is the big issue in this election. Consider that London which accounted for about 15% of economic output in the 1980's now accounts for nearly 25% of economic output of Britain. Berlin is about 4% of Germany's economy, and Paris 10% of France's economy. A word of caution on Brexit is sounded by experts at the University of Birmingham, who say the whole process of Brexit is so complicated that it may detract from the task of reviving this region. Even though the political upheaval had origins in this discontent, was it more about shifting government attention to the gap between London and the rest of the country, and less about a complex process of withdrawal from the European Union. ...

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A striking change is coming over US airlines as they turn their focus from operating costs to taking out unprofitable routes, reducing the size of their plane fleets, and increase the number of seats filled on a flight. The numbers bear this out. According to ATA the airlines reduced fleets from 3469 aircraft to 2747 aircraft from 2000 to 2005. American Airlines is typical in discontinuing 27 MD-80 aircraft which are older and gas guzzling. Delta and Northwest used the bankruptcy period to to get court approval to return many planes to leaseholders by breaking the leases- before breaking the lease parking the planes was more expensive than flying them at a loss. As a result according to ATA US airlines filled an average of 77.6% up from 75.4% in 2004. With this strategy airlines recovered some of their pricing power. US Dept of Transportation statistics show prices are higher than at any time since Sept 11, 2001 and the Air Travel Price Index, increased by 9.1% in 4th quarter 2005 over 4th quarter 2004. And airlines are being more restrained in getting into new routes just because some other airline has eliminated that route. Airlines however have to be careful to increase prices just enough but not too much that demand starts falling, and this is possible with fewer seats on more popular routes. Other methods the airlines are using are sophisticated O&D origin and destination revenue management systems which reduce the number of inexpensive, and unprofitable seats available on the internet. Larger airlines have tried to get back corporate customers by reducing the extremely high fares they used to charge and instead raising last minute fares because corporate customers see this as a price burden they are willing to shoulder. Larger airlines are doing better in relation to the price discounters like Southwest and JetBlue. With Southwest's hedging strategy against fuel price increases not as useful as in prior years it too faces need to raise fares....

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Republican Senators Corker and Blount are confident that a solution can be devised for the sticking points on a deal between the Republicans and the Democrats. The Republicans consider the savings in the Reid plan from the wars in Afghanistan and Iraq a "gimmick," but essentially the Reid and Boehner plans say analysts are similiar in the inital cuts in spending. The sticking point for Democrats is on the whole process of the debt ceiling extension having to be redone in early 2012. For Republicans the sticking point is in in tax increases which the Reid plan leaves out in the initial period for debt limit extension into 2013 when a new president takes office. House majority leader Boehner is facing opposition within his party and this restricts his leeway for striking a deal- the Boehner plan passed in the House by a vote of 218 to 210 on July 29, 2011, with 20 Republicans voting no. It was voted down in the Senate that same evening with a vote of 59 to 41, with 6 Republican senators joining all 53 Democratic senators. As it stands now, the weekend before the August 2 deadline, President Obama concedes that there is "rough agreement" about the size of the first round of spending cuts, and the "next step" to rein in borrowing. He went on to say that "if we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I'll support that too, if it is done in a smart and balanced way." Its the design of this enforcement mechanism that is the main point in the remaining negotiation. The nature of the committee selected from both parties for the next phase of savings, its powers and the trigger in the sense of what it can ensure happening if no decisions are taken by both parties. ...

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Recruiting in the Afghan army from predominantly Pastun areas in the south and southeast is way down, almost nonexistent. For Kandahar, Helmand, Oruzgan, Zabul, Paktika, and Ghazni provinves with largely Pashtun people, the numbers show they make up 17% of the population and contributed only 1.5% of new recruits to the army since 2009. Kandahar and Helmand with 2 millon people contributed about 1200 recruits, or less 1% of 173,000 new recrutis since 2009. The northern provinces make up a large number of the new recruits, with Kunduz having a population of 900,000 and contributing 16,500 recruits. There are about 42% Pastuns in the population and a similiar number of Pastuns in the Afghan army, but most are from the northern or northeastern provinces where the insurgency has been weaker. One third are from one northeastern province- Nangarhar. The reason for this is fear of the Taliban finding out that that a young man has enlisted in the south and retaliation against the enlistee or his family. The lack of a southern Pastun presence in the army makes the army more of a northern institution. With withdrawal of American and NATO forces by 2014, this leaves Afghanistan deeply divided between the northern and southern regions. The southern region Pastuns have a significant presence across the border in the northern part of Pakistan, and the southern Pastuns draw support and resources from this region. Removing the foreign presence shifts the balance towards the southern Pastuns and Pakistani Pastuns in the largely mountainous country of this region. This is why the project in Afghanistan requires the support of all factions and ethnic communities in the South Asian region to succeed, setting aside differences and animosities of the past. D. Mahmood Khan, a member of parliament in Kandahar says ordinary Afghans in Kandahar see the Afghan government of Karzai collapsing in a week or two without foreign support and sense a much stronger Taliban....

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Was the deal with Cerberus to let it own a significant part of GMAC bad for GM, along with other decisions and missteps that led to disaster. The decision by GMAC to raise credit standards just when the full force of the credit squeeze was hitting financial markets has to have hurt GM sales, and aggravated a bad situation in which consumers first turned away from SUV's and trucks, which were big in GM's and also Detroit's product lineup, and then in November simply postponed purchases of automobiles. The November numbers coming in at over 40% below 2007 numbers for the same month, were a disaster for GM, making it necessary to turn to the government for help. Brian Johnson of Barclays Capital says GMAC financed just 1% of GM's sales in November compared with as much as 45% in a normal month. Thats huge for impact. And Cerberus appears to be responsible for the decision to raise the credit standards, and it has not acted in the best interests of GM but more in its own interests as a private equity firm. And its decisions have been heavily influenced by its souring investment in Chrysler, and its desire to extricate itself from Chrysler without putting in any more funds than it has absolutely need to put in. Now with government help to GMAC, the situation is being restored to where the credit standards are set at the minimum acceptable credit score of 621. Johnson of Barclays Capital estimates that with this lower score GMAC should be able to recapture about one third of its former loan volume, which considering that it had 45% of GM sales is only 15%. This still leaves GM in a bad situation compared to things before October 2008. And with the deteriorating unemployment situation in 2009 and further economic strain in 2009, this will not be enough for the uphill climb facing GM sales. ...

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Questions raised about the government's committment to serious health care reform. New leaders of China who took power in 2002 and 2003 with concern for the poor, did not put discuss reform till 2006 and during this crisis there isn't the urgency that is needed. Recent documents, says the Economist, that were circulated secretly within the bureaucracy for 3 weeks before being made public, provide no clear target about how much people would be reimbursed for medical treatment. The other concern is that the central government provides only 40% of the 850 billion yuan allocated for additional spending on health care in the years 2009-2011. This is about $125 billion. Burt local governments may not be keen on spending on health care as officials are still judged by how much they can boost employment and GDP growth. Over three years the central government's annual share of the additional spending on health care of 850 billion yuan is 111 billion yuan, according to Caijing, a business magazine.But the 2009 budget on health care is 118 billion yuan, so its not clear that things add up. The central government's additional spending in each of the 3 years is only $16 billion. How this can provide help to the 200 million uninsured, the insured who still pay a large amount for health care, and pay for essential pharmaceuticals on a list prepared by the government, and pay a portion of the expensive diagnostic tests that hospitals like to make money from, is not clear. The whole system will have to be overhauled so that hospitals do not have the incentive to prescribe these expensive tests and pills that cost more. The government says it will be 2020 when 90% of Chinese are covered by agovernment financed health insurance system- 11 years away. This only means that domestic consumption may remain depressed for a decade or so. With export markets collapsing, this leaves China dependent on infrastructure spending for growth for a long time, and lower growth rates with higher unemployment. ...

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The party congress of the Communist party does not look like its going to lead to any changes in the system, only to make sure it runs better by getting public input through pollsters on public officials, and on web sites on new legislation. The pollster, including a firm, Horizon Group, describes his role as working out a mechanism for people to express themselves as there is very real frustration in society. Websites airing public opinion helped introduce nondiscriminatory clauses in the new employment legislation. But otherwise there is actually a tightening of the control of dissent, as the party is worried that once it starts it will get out of control and jeopardize the economic progress However this leaves the future quite uncertain as there is still not enough room for airing the very real frustrations and concerns such as for the environment, health and services, the prevailing corruption, and the problems in the countryside of the poorer regions in the interior of the country. These concerns are being pushed into the future. For instance without a free press its hard to air corruption cases, as in India. Only two of the several thousand petitions under the system of letters and complaints xinfang are resolved. About 12 million are received each year by the government. Because of the obsession with tight control many activists end up in prison even though the causes such as the environment are popular. Like the activist who called attention to the Lake Tai pollution, and the rural blind activist mentioned who argued on behalf of women that were forced into late term abortions. Here the government actually stepped in to announce plans to cleanup Lake Tai, but the system continues its inexorable push to drive out any dissent even if it does not relate to political issues. This may be one of the severe distortions of the present system. ...

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1. ACCELERATION OF DECLINING PRODUCTION FROM GULF OF MEXICO AS DRILLING RIGS LEAVE THE GULF. Offshore oil production mostly in the Gulf fell by 19% between 2003 and 2005. Natural gas production fell by about 22% from 2001 to 2004, according to EIA. The drilling rigs jack-up rigs and deep-water rigs that drill for oil and gas are declining rapidly in the Gulf of Mexico. There were 148 rigs in 2001, now only 90 remain with more leaving soon. Many of the rigs that are leaving are jack-up rigs, used for drilling for natural gas in shallower waters, and this should lead to a pronounced effect on natural gas production. Gulf Gas reservoirs that use these jack-up rigs are quickly exhausted requiring new wells to be drilled to just maintain production. Fewer rigs available mean upward pressure on natural gas prices more so than oil because gas is a market supplied locally. EIA estimates natural gas will move from recent close (July 5, 2006) of $6.10 per million BTU's to a price of $10.00 by end of 2007. This compares with a price in 2001 of $2.43. Hurrican related disruptions pushed oil prices up by $10 a barrel for hurricanes Katrina and Rita, in each of two years, so there will be continued upward pressure on oil price from this acceleration in production declines in the Gulf. 2. SEA CHANGE IN THE OFFSHORE DRILLING RIG MARKET, IN DAY RATES, IN PREFERRED DRILLING LOCATIONS, AND IN RIG PRODUCTION. The hurricanes Katrina and Rita destroyed 5 rigs. What is a bigger effect is that drilling companies are signing longterm deals with companies overseas. Global Santa Fe Corp. for instance signed a deal last month to send 4 jack-up rigs to Saudi Aramco at $160,000 per day, for 4 years. Ensco International will send one to Tunisia at rates approaching $200,000 for 2 years. There are hotter prospects for petroleum offshore in the Middle east, and in Africa, whereas the easier drilling spots in the Gulf have already been tapped. Worldwide 91 major offshore rigs are under construction compared to 10 in 2003 according to ODS-Petrodata. The new rigs may take till 2009 and may have delays so as to come out after 2009. They cost $160-190 million for one jack-up rig and about $600 million for one deep-water rig. All this has pushed day rates throug the roof. BP PLC agreed to pay Transocean Inc $520,000 a day for three years for a massive drill ship. The same ship cost BP PLC $185,000 a day in 2004. The drilling ship is as large as 3 football fields and can drill in oceans upto 10,000 feet deep. ...

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Its incorrect to call a loan that has only slightly lower, same or higher monthly payment after modification, a loan modification. The intent is to make a loan affordable in monthly payments for the borrower, for it to be a meaningful modification. Says Tom Miller, the Attorney General of Iowa, "it should'nt be called modifications if people pay more or approximately the same." Many lenders and banks do not want to have to mark to market a whole set of loans of one type in one geographical region, as an accounting rule now requires, just because they have modified one loan of that type, because their reserves are severely depleted and most are already or nearly insolvent. So their way of discouraging loan modifications as a solution is to respond by saying that loans go into foreclosure even after modification, when the modification they are talking about is tacking on interest penalties and fees that accelerate the home into foreclosure in some cases, and in others by leaving payments higher or the same make foreclosure just as likely as before. Tom Miller, attorney general of Iowa, also says that " if you do real modifications, the default rate is significantly lower." Some mortgage companies say that default rates drop significantly, some to as low as 25%, when loan payments are reduced to the 30-40% of borrower income range, which is becoming the standard for a meaningful modification. Analyst Ron Dubitsky's research at Credit Suisse confirms this, showing lower payments reduced defaults to less than 50%. Research by Credit Suisse and Alan White, a law professor at Valparaiso University also show that at this time loan, 2 years into the foreclosure crisis, modification has mostly resulted in higher monthly payments. White says banks like Wells Fargo, a large servicer of loans, have done have modified few loans as apercentage of their delinquent mortgages. Sheila Bair and others have long advocated reducing loan payments to 30-40% of monthly income since early 2007, because foreclosure is costlier for banks than loan modification, but met resistance from the banks and lenders and their lobbying groups. The relevant question is that if the banks are misquided in pursuing this course, and its not in the interests of the banks or the country's economy- because accelerating foreclosures or not taking modification action in the middle of a huge wave of layoffs may result in a even bigger wave of foreclosures that threaten housing prices and effectively leave banks insolventleading to nationalization- then what purpose did all this serve except to exacerbate the crisis and increase the price tag of the government's and country's ultimate rescue of homeowners?...

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Much of what is written here about Xi Jinping pursuing Chinese socialist vision was known since he became president in 2013 when China's Communist party was losing its appeal, and efforts were made to seize power within the communist party by a leader in the western province of Chongqing. Bo Xi Lai attempted to take advantage of the situation with appeals to the working class and without any genuine commitment beyond a power grab. It was well known that Xi Jinping is a son of one of the veterans of the Communist party under Mao, Xi Zhongxun, unlike leaders who followed premier Deng Xiaoping such as Jiang Zemin. Zemin was a relatively unknown figure who was in university during the crucial period of 1947-49 when Mao came to power in mainland China. It would not be correct to say that little was known about Xi's own ideas about socialism as the long term answer to China's problems. Xi also came in as president at a time when the Communist party was losing its appeal to working class people after three administrations that followed premier Den Xiaoping. These three administrations followed a form of state capitalism that allowed companies to pollute the environment, compete without any regulations, and allowed to operate without any controls as long as they pursued growth aggressively and expanded the economy.There was an effort by Communist party regional leader in western Chinese province of Chongqing, Bo Xi Lai, to use this as an opportunity to grab power in China. During his first year as president Xi had to resolve this issue by having a court trial after revelations of corruption and misuse of power by Bo Xi Lai.  Xi's father Zhongxun's role in the revolutionary movement offers clues to Xi's own convictions and faith in the party. Zhongxun was a communist soldier who set up the revolutionary base areas in Shanxi-Gansu northwest border region of China that provided a refuge for Mao's army following the Long March. Other clues come from Zhongxun's role as head of propaganda during the period after 1944 and in 1952. Xi's family background particularly on his mother's side shows a fervent commitment to Chinese socialist vision during the chaotic years when the Japanese invaded China and Chiang Kai-Shek's nationalist forces failed to defend China's sovereignty. One reason Xi has been less understood is that little attention is paid to Xi's mother, Qi Xin who was highly educated and fervently believed in Chinese socialism and nationalist spirit during the Japanese invasion in 1938. In fact Qi Xin had to leave middle school after the Japanese took over Beijing. She joined the Counter Japanese Political and Military University to continue education and in 1941 attended the Central Party school. She met Xi's father Zhongxun in 1944. In 1953 she enrolled in the Marx School of Communism, and it was her position at the school that offered her husband added protection during the Cultural Revolution that affected Deng Xiaoping and others. With such a history in the 1930's, 1940's, and 1950's it is likely that Xi was profoundly influenced by his father's role in the revolutionary movement, and his mother's faith in socialism with national spirit as the way to protect against the foreign invasions. It would now appear that by the time Xi joined the Politburo in 2003 there was no question about the future course China would take given the role of his parents, and the events of 1938 the fall of Beijing, his mother having to flee, and the events that followed. Xi showed resilience during the period of the Great Proletarian Revolution when he was sent to the villages at a time when he would be studying in school and college. He was sent to an agricultural commune in largely rural Shanxi province where he worked as a manual laborer alongside other people and developed a relationship with the local farmers. Unlike other leaders during that period which could even be said about premier Deng Xiaoping in 1989, Xi took a different lesson from this experience largely because his father and mother were committed to the socialist vision for the long run. His father was still not fully rehabilitated by premier Chou en-lai when Xi was allowed to enter Beijing's Tsinghua University in 1975. He studied chemical engineering at Tsinghua graduating in 1979. Upon graduation he worked as a assistant for 3 years to a vice premier who was minister of defense. He then left Beijing for Hebei province to work as a deputy secretary of the provincial CCP. He was made Mayor of Xiamen, then governor of Fujian province in 1999 where he tackled environmental conservation before moving to Zheziang province. His father passed away in 2002 and it would appear that he was carefully trained in different provinces instead of staying in Beijing, for a position of national leadership. Xi got his break in 2007 when the upper leadership of Shanghai city was tainted in a wide ranging pension fund scheme. He was made party secretary for Shanghai. This was the position Jiang Zemin had held before he succeeded premier Deng Xiaoping. In only a few months in October 2007 Xi was made one of the 8 Politburo members, ready to succeed Hu Jintao as president. Xi's perception of being sent to the villages and making it to university education was that it was part of the long run socialist struggle, with pain that his father had also endured as simply a phase in which things would be right in the end. Xi's mother comes across as a resilient figure and one who had herself gone through the struggles of the 1930's and aided her husband on one occasion. Some of this resilience could have been passed on to the son. Xi's wife is a zealous participant in Chinese dance and music performances that created enthusiasm for the Chinese socialist revolution from the 1930's period. In his conversations  with colleagues in the party, in culture and temperament, Xi has been forthright about this background and his style of work.  Xi is unlike premier Deng and the presidents who succeeded him such as Hu Jintao mentored by a former mayor of Shanghai Jiang Zemin who came to power in 1989. Xi is more in line with the leaders around Mao like his father in his outlook and thinking, with a cautious temperament that comes from years going through ups and downs of political struggles. He is once said to have responded with dismay about being in a top position in the government knowing how precarious this had been for his father. The education at Tsinghua, his engineering background, and his easy familiarity with farmers in the provinces, mean that he understands China and its history well enough to have the confidence to shape Chinese policies in a way that none of his predecessors had except Mao, premier Chou-en-lai, Liu Shao Chi and a few veterans from that time in the 1930's. That Xi waited patiently for so long to gradually assert his ideas about socialist vision for China may be the surprising part of his behaviour till 2021.  It may be that he wanted to make the changes only after he could persuade party leaders and colleagues of his vision and long run goals. And because the Chinese economy had grown so large that it would take time to steer the ship in a different direction for the long term. In most of the negotiations with president Trump he cautiously let trade negotiators handle the situation, all the time learning about how to tackle problems of China's relationship with US and Europe. US president Biden also has a vision that is veering towards a socialist perspective in terms of bringing gains of progress to workers and families. So does Mr. Trump, Mr. Boris Johnson in UK, and Social Democrat's Scholz in Germany. It is both economic and political as Mr. Xi is quoted as saying in this WSJ report. The necessities of such action are both economic, social and politically driven as capitalism has veered way off course.  In this report it is mentioned that Soho China 40% stake was taken by a large capital markets firm in New York in the hope of large gains, as Soho China developer was a tycoon who wanted to leave China. Seeing it as not favorable to his company following events in Hong Kong. This behaviour of capital markets groups in New York and tech companies in Silicon Valley, driven by profits and not aware of the social and economic problems of working class American families is a problem in the US and in Europe. It is also what has driven so many large tech companies to expand manufacturing operations in China, that hurt US manufacturing capabilities and American workers jobs- an issue raised by president Trump and taken up by president Biden. Biden has already moved to make Intel Corporation change its plans and invest in American manufacturing technologies in a quietly implemented U turn. US president Biden is left with the unenviable job of solving this huge problem during the pandemic. He has also committed to a somewhat socialistic vision with a $3.5 trillion plan for workers and families, as has vice chancellor Scholz in Germany with his own version of programs, after the failures of unregulated forms of capitalism. Scholz goes so far as to say his mission is to show that there is really no such thing as a self-made man, that it is help from society, his fellow citizens, and government, that makes it possible for him to do his work. In a sense the world is shifting away from Reagan forms of capitalism without regulation after seeing disastrous results during the pandemic. Not just China. Some form of government guidance and regulations are now seen as essential in China, the US, UK, Germany and India for a better society and a better, healthier life, and for opportunity for all in each country.   ...

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Russian president Putin tells the Italian newspaper Corriere Della Sera, before his visit to Italy, that the failure to carry out the agreement of Feb. 2015 called Minsk II- following the eruption in fighting at Debaltseve and Mariupol in eastern Ukraine- is because of the Poroshenko government in Kiev. He called on the U.S. and Europe to pressure the government in Kiev. The Ukrainian position is that the local elections cannot move forward until pro-Russian fighters and weapons are withdrawn, and the control of the border with Russia is given back to Ukraine. As western sanctions on Russia over intervention in Ukraine are coming up for renewal at a meeting of the G-7, Putin said he was committed to the Minsk II agreement for autonomy to be given to the region of the Luhatsk and Donetsk republics, which were established in the east with Russian assistance. Putin told the newspaper in an interview: "The document we agreed upon in Minsk, called Minsk II, is the best agreement and perhaps the only unequivocal solution to this problem. We would never have agreed upon it if we had not considered it to be right, just and feasible. On our part, we take every effort, and will continue to do so, in order to influence the authorites of the unrecognized, self-proclaimed Donetsk and Luhansk republics. But not everything depends on us. Our European and U.S. partners should exert influence on the current Kiev administration, We do not have the power, as Europe and the U.S. do, to convince Kiev to carry out everything that was agreed on in Minsk." That the two sides are far apart on issues is shown by Ukraine president Poroshenko's position that for an election to take place for implementing decentralization in the eastern region of Donetsk and Luhansk - "It is impossible to provide the election when the bandits and terrorists with guns are on the street. This is not free and not fair." Putin's position is that " Specifically there needs to be a constitutional reform to ensure the autonomous rights of the unrecognized republics. The Kiev authorites do not want to call it autonomy- they prefer different terms, such as decentralization. Our European partners, those very partners who wrote the corresponding clause in the Minsk agreements, explained what should be understood as decentralization. It gives them the right to speak their language, to have their own cultural identity and engage in cross-border trade- nothing special beyond the civilized understanding of ethnic minorities' rights in any European country." ...

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David Wessel, looks at the economic forecasts, and figures comparing this downturn to others in the 20th century, and looks at what experts like Eichengreen at Berkeley are saying. He puts the odds based on this information and comes up with 75% chance that this will be of the kind that produces a lost decade, a recovery that takes many years.

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Theo Lubke was head of the Financial Infrastructure Department in the Banking Supervision Group, and was a key member working for reforms in the derivatives market. He oversaw efforts at the Fed to have Wall Street centrally clear trades in credit default swaps, which helps control the risk of a firm's failure. Lubke will join Goldman Sachs as a managing director in the securities division, and will help Goldman implement the facets of regulatory reform legislation. Prior to his 15 years at the New York Fed, Lubke worked on the staff of the National Economic Council under President Clinton, and worked as an investment-banking analyst at Lehman Brothers.

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David Brooks of NYT povides this exceptional essay on a long neglected question. If so much of the politics today is about different communities that are alienated from each  other, what is it about these communities that makes this happen, and how did this come about? After decades of integrating communities and building the economy after the second world war through a strong middle class, what has happened now to see all that progress reverse itself. Rural America and the less educated voted in one way and the urban areas voted in the opposite way, one feeling neglected and the other becoming more segregated in cultural outlook, education, and work. Brooks cites a new book by Richard Reeves of the Brookings Institution called the "Dream Hoarders." The book shows two structural barriers that divide America. One is the residential zoning restrictions, housing and construction rules that keep the less educated away from the opportunities and schools in cities such as Portland, San Francisco and New York. The second structural barrier is the college admissions game that favors the parents and children of the better educated classes. The immigrant communities who come from families that are struggling hard to get into the middle class and upper class work hard to get an edge. As a result about 70 percent of the students in the top 200 competitive schools in America are from the top 25% in the income distribution.  Other barriers are formed by the extent of investment parents in one group put into their children, estimated at 300% by Brooks compared to a flat line for the other group. This accelerated investment leaves the other group far behind. Social barriers form to prevent the kind of interactions one would find normal in an open democratic society. Brooks say the cultural differences show up in the language and product selections, in food and other choices. Just take a typical Brooklyite and someone from western New York state. It is not the intent of one group to look upon this as a desired result. It is their indifference to what is happening that is alarming for a free, open and democratic society. It is their lack of understanding about the implications for life in a free, open, democratic society, of segregating themselves from the vast expanse of humanity around them. It is their lack of knowledge of the history of this continent built on the idea of education and opportunities for all from the time of Benjamin Franklin in Pennsylvania and the early settlers, the idea of out of many one- E Pluribus Unum. Yet out of this crisis something good can emerge if a way is found, and leadership is needed in the right direction with the right ideas, consistent with the ideals that guided the best leaders from its past. What resentment, alienation and wrong direction cannot do, courage, perseverance and right direction can do.     ...

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An argument for more troops, as Max Boot of the Council of Foreign Relations vists Afghanistan at the request of General Petraeus. This is a local account, what is the larger picture. And can the problems of a failed Afghan government and the way American boots are seen as foreign occupiers be wished away? See the link to Kristof who says even the Punjabis in the Pakistan army are not welcomed in Pashtun land on both sides of the border, and there are 40 million Pashtuns.