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Merkel's leadership as Germany goes through the economic crisis. There is not much enthusiasm for further reforms among the Social Democrats or the Christian Democrats. Other than raising the retirement age to 67, the mood is not for any changes in that direction. The economy will contract by 6.1% but Merkel's decision is not to go in for a big stimulus under pressure from the US, and instead stay with the status quo combined with help to workers for unemployment benefits and for retention of workers by companies. As elections approach Merkel is considered favorably, and according to a recent poll by Forschungsgruppe Wahlen nearly 60% are satisfied with the grand coalition of the CDU and the SPD, 78% think Ms Merkel has done well as chancellor, and 58% want her to remain on the job. Actually Merkel's popularity is behind the CDU's prospects, the CDU itself is popular among only 35% of voters. Her analytical habits from her training as a physicist show in the way she is governing, which is thoughtful, and connects well with voters. Merkel benefits from the reduction in unemployment. Unemployment fell from around nearly 5 million in 2005 to around 3 million in 2008. The risk is that Merkel's popularity may be affected by an increase in unemployment to 5.1 million from the averaage of 3.3 million in 2008, according to an OECD estimate. Merkel stands behind a German response to the crisis which is to support the priciples of a social-market economy, make unemployment as least painful as possible to the jobless, to keep every job that can be saved in the nonfinancial sector with a 115 billion euro "Germany fund" providing guarantees and credits to companies that are in trouble because of the credit crisis. Stimulus packages of 64 billion euros supported the auto industry with subsidies to car buyers, and subsidies to keep workers intheir jobs. The idea was to come up with a German version of the response to the crisis by balancing the need to respond based on German conditions, and the concerns for inflation and the budget deficit, that is shared by most Germans. THe vision offered by Merkel is that of a physicist daughter of a protestant minister in East Germany, who is low on the rhetoric and good on substance, and willing to make decisions based on careful study and discernment rather than ideology, without sharp swings in any direction. Her vision comes from her days as environment minister, which is quietly pushing Germany into the forefront of countries developing renewable energy, moving ahead in energy efficiency, with anational goal of cutting emissions by 40% by 2020. The other areas are immigration and education, both key to the future of Germany because of the huge demographic change happening there. She has afamily minister Ursula von der Leyden, who introduced "parents pay", a14 month stipend for parents of newborn children linked to salaries, and to to improve daycare by providing places for 35% of children aged three or less by 2013. And Merkel has approved 18 billion euros of additional funding for research and universities. Says Leyden Merkel has made "daycare" an acceptable term in the CDU, and made Germans accept that they are an immigration country. Which tells you that you have to look closely to find the reasons for Merkel's popularity, which does not carry the rhetoric of an Obama, but is just as effective in German conditions. There are deepseated demographic changes going on in German society, which require a cultural change, and change in mindset, such as that for daycare, immigration, and blending the best of the old in the social market economy with the new like the changes in the educational system. The Economist says that in big cities today nearly half of the children under 15 are immigrants or their children and grandchildren, who are more likely to be poorer, unemployed and with less education. ...

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A strong U.S. jobs report in July with 255,000 new jobs, unemployment at 4.9%, provides positive sentiment going forward. The Federal Reserve is likely to be wary of raising rates because businesses are hiring but are not making the investments needed to spur economic growth, which remains at about 1%. The labor force participation rate is now at 62.8%. The measure of unemployment and underemployment shows a better picture of how different age groups are faring including the 25-54 years age group- this is at 9.7% in July 2016, it was 9.6% in June 2016. This measure shows those working part time because they cannot find a full time job. The market today is stronger for those with the right job skills, but not across the spectrum for all Americans, only setting the stage for further progress and increasing investment as confidence improves.

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The mortgage interest deduction mostly benefits wealthier people with larger mortgages who need it least, and who are likely to buy homes regardless of the deduction, say experts. Both the Brookings Institution and other experts such as Moody's chief economist, Mark Zandi, see the deduction as part of the negotiations for deficit reduction. The Brooking Institution's Ted Gayer, says the deduction subsidizes acitvity such as borrowing large amounts of money to buy larger homes which the U.S. should not want to subsidize in the current state of the country's finances. The Simpson-Bowles plan and the Feldstein-Romney plan sought to put unnecessary tax expenditures and deductions on the table for negotiation. The deduction was not part of the last tax reform in 1986 under president Reagan. Zandi says any changes should be phased in over a number of years so that housing sales ar not affected in the current recovery. David Stephens, CEO of the Mortgage Bankers Association says any changes should be implemented gradually. ...

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India's ruling Congres party suffered losses in the two major states of Uttar Pradesh and Punjab. In Uttar Pradesh, the socialist Samajwadi party gained an absolute majority of 224 seats in the 403 seat assembly. The Bahujan Samaj party of Kumari Mayawati lost its majority winning only 80 seats, the BJP won 47 seats and the Congress won only 28 seats. Rahul Gandhi of the Congress party campaigned heavily in the state and the results show that his campaign against Mayawati did not result in Congress gaining enough seats to form a coalition government with the Samajwadi party led by Mulayam Singh Yadav and his son Akhilesh Yadav. Yadav has held the position of chief minister three times before, and campaigned for greater rights for lower castes and for a quota in education and jobs for Muslims. His other campaign promises included increasing electricity production, and improving the business climate. In the Punjab state, the Shiromani Akali Dal party won 56 of 117 seats, with the Congress getting 46 seats. National elections will be held in 2014, and the results reflect a repudiation of the Congress party after corruption scandals, slower economic growth, and lack of clear policy direction....

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The Nebraska Supreme Court reverses a lower court ruling clearing a hurdle for construction of the Keystone pipeline. At about the same time the U.S. House of Representatives voted 266 to 153 in Jan. 2014 to pass a bill approving the project. It will pass a Senate vote. President Obama says he will veto the bill. The pressure clearly increases on Obama to approve the pipeline.

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An indepth look at Mexico, its assets, its huge potential and what is holding Mexico back. It ranks much higher than Brazil in many respects- higher investment as a fraction of its GDP, technical education, an easier place to do business, less regulation, better management talent, more industrialized. In 2010 Mexico had $400 billion of business with the U.S. With rising Chinese wages Mexico is an attractive place for foreign investment, with a hardworking and educated workforce. Mexico suffered badly during the 2008 recession in the U.S. It is trying to reduce its dependence on exports to the U.S in key areas such as the automotive industry. Exports to the U.S. by the automotive industry are now 65% of the total, and the auto industry association in Mexico is working to bring this figure to 50% by exporting to Latin America and Europe. Economic growth was 5.4% in 2010, and expected to be 4-5% in 2011. Drug violence may have reduced the growth by one percentage point according to some estimates. The think tank, Mexican Institute for Competitiveness, estimates that economic growth would be 2.5% percentage points higher if labor market and competition laws are changed, and the oil industry is opened up to foreign investment as happened in Brazil. A study by OECD and the Federal Competition Commission (CFC) of Mexico has shown that 31% of Mexican household spending goes to products operating in high price monopolistic or oligopolistic markets. The bottom ten percent spend even higher proportion of incomes, around 38%, for products supplied in such markets. This includes pharmaceuticals, airline travel, banking, and electricity. Taking on these cartels is a difficult task. The CFC is beginning to take the first steps in this direction, in what will be a long road to fair prices for Mexican consumers. Banking was opened to Wal-Mart. The collapse of Mexicana was an opportunity to auction landing slots to other airlines. An auction system has been developed by CFC for drugs. A new competition law sets penalties for collusion in pricing, with upto 10 years in jail. And Carlos Slim's telephone monopoly was fined $1 billion for its telecom monopoly practices. In 2009 the Calderon government shut down Luz y Fuerza, a state electricity company costing the governmment $3 billion in subsidies for an highly inefficient operation. ...

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Eisinger says ten years from now people will look back and say Dodd-Frank has made our financial system safer. It has received the kind of criticism leveled at Sarbanes-Oxley which was a response to another period of bad practices in accounting and finance.

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Yuka Hayashi describes the remarkable comeback of prime minister Shinzo Abe in Japan, his "Japan is Back," strategy and its personal overtones. He describes a visit- by Japanese known for taking that second or third chance and making it work through difficulties- to the prime ministers residence for discussion on the theme of "the second chance." The premier tells the visitors that Walt Disney would never have been heard of if he had not tried the sixth time after five failures, and not succeeded in Japan, which has a risk and failure averse business environment. Encouraging risk taking to setup new ventures and open up new frontiers and markets is part of the growth strategy for Japan. His personal struggle with ulcerative colitis during the period of his first term as prime minister, and the new drug discoveries that made it possible for him to recover, give Abe a fresh burst of energy this time. His story and Japan's story now coincide. Abe says the mission of the new LDP is to make sure that talent now flows from mature industries to the industries of the future....

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The government bailout of Fannie and Freddie was expected to cost hundreds of billions of dollars according to some estimates during the financial crisis in 2008-2009. The costs peaked at $187 billion in 2011. The transfer of $59.4 billion by Fannie Mae to the U.S. Treasury in 2013 lowers the net cost to $60.5 billion. The net cost of the Troubled Asset Relief Program or TARP has decreased to less than $23 billion. At one point the cost of TARP reached $419 billion for the U.S. Treasury. The government sold the last of its shares in private insurance company AIG and made $22.7 billion in gains. Treasury and Fed loaned $182 billion to AIG and at one point owned 90% of the company. Chrysler exited the TARP bailout program in 2011 at a net cost to the U.S. government of $1.2 billion. So far in May 2013 the GM bailout cost $19.6 billion, this would come down to about $11.82 billion if the U.S. government sold its GM shares at the price in May 2013. The U.S. Federal Reserve says it has not lost money in any of its emergency lending facilities, even though some loans are outstanding. The FDIC says its fees from rescue programs exceed losses....

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Applebaum talks to two researchers at the University of Chicago and Princeton, Prof. Sufi and Prof. Mian, on the record of U.S. president Obama and Fed chairman Bernanke in helping homeowners facing foreclosure and underwater borrowers, comparing that record with their record in helping the banks. The issue is relevant as the policy and handling of homeowners had to be part of an overall effective plan for recovery in the U.S. economy, because ultimately without the U.S. consumer any recovery would be weak in the long run- a situation the U.S. faces in early 2014. The response to the issue of irresponsible homeowners borrowing beyond the limit without an equally robust response to irresponsible bank management that allowed wildly excessive leveraging of assets, and successful aggressive lobbying by banks in a shortsighted policy of going through with a wave of foreclosures; besides creating questions of fairness and equitable handling of the problem, also had major ramifications for the future of the U.S. and global economic growth. Here Christina Romer and other administration advisors say Bernanke was right in tackling the problem from the perspective of the banks needing to be recapitalized. Thoughtful advisors looking at the entire problem, Martin Feldstein and Sheila Bair strongly pushed for providing the same help to homeowners without getting caught up in the issue of who was responsible home buyers or the banks, and looking at the interests of the U.S. economy and the U.S. people. Proposals by Feldstein and Bair were equally robust in helping banks as they were in helping homeowners, only the banks understood their interests narrowly and had more access to policymakers in the Bush, as well as the Obama administration, Paulson as well as Geithner. This leaves us with the ultimate irony of the Obama administration pushing for the minimum wage, even to the point of electoral posture, when lasting damage had been inflicted on homeowners from the weaker portions of America's middle class by a policy that went against what two respected financial and economic experts from the Reagan period, Sheila and Bair had strongly advocated. See links and groups on Feldstein and Bair. Applebaum has followed most aspects of this problem closely and continues to provide exceptional reporting including the piece on the thinking of new Fed chairman, Janet Yellen. Private enterprise rules that require management at banks just as for other companies to take responsibility for failures, and be replaced with new management, was largely avoided leading to a fundamental failure in how a free market economy such as the U.S. and western European economies are supposed to function. Rules aggressively pushed by Geithner's mentor Treasury Secretary Rubin for a vigorous cleanup at banks in South Korea during a similiar situation in 1997, were not followed in any way here, also setting wrong precedents for the long run. ...

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Leon Panetta, former U.S. Defense Secretary, answers questions from a CNN correspondent and GW professor at George Washington University in Washington D.C. He says President Obama dropped the ball when it came to taking on Congress over budget cuts and on tough issues in Iraq and Syria. Panetta says he told Obama that getting back into the ring was necessary to get things done.

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David Stockman, director of the Office of Management and Budget under Reagan, is interviewed by Tom Keene. Stockman says the US has $52 trillion of debt on a $14.5 trillion economy, a ratio of 3.6 times GDP. Historically, before 1980, it has been around 1.6. This debtification of the US, he says, is the major problem facing the US today. Stockman sees little or no economic growth in the next 5 to 10 years, as debt reduction progresses.

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Posturing and negotiating between Republicans and Democrats on deficit reduction before the "fiscal cliff" of automatic spending cuts and tax increases on Jan. 1, 2013.

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Kirkpatrick and Erlanger's interview with Egypt's president Mohamed Morsi. He says successive U.S. governments used taxpayer money to buy the dislike and hatred of peoples in the region by backing governments run by corrupt dictators who suppressed popular opposition. Morsi calls for a new attitude from the American people and Arab people of mutual respect of each other's cultures, and recalls his own days studying engineering at the University of Southern California.

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OECD studies and views of experts show India's current inflexible labor laws hurt manufacturing workers by denying workers the benefits that would come from larger enterprises in a formal economy, and reducing job growth. Labor laws currently in place provide inducement to keep companies small, with less than 100 workers, the threshold at which labor laws on hiring and letting go of employees are enforced. The Modi government is implementing reforms as pilot programs in states where it is running the state government. Rajasthan is being used for this pilot overhaul of labor laws to attract manufacturing investment.The idea is to create competition between states to attract investment as one state gains in employment growth and good jobs.

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Polls just days before the French presidential election show independent candidate Macron getting about 60% of the 18-24 year age group. There is discontent in this age group because of high unemployment. The unemployment rate is 24% for people below age 25, higher than 18% before the financial crisis of 2008, compared to 7% in Germany for this age group. For people 25 to 29 years it is 14%. This is why Marie Le Pen has appeal in economically struggling northern towns. Yet most French people are finding it difficult to take on an agenda as radical as Le Pen's that takes France out of the eurozone. In the final debate just 24 hours before the vote Le Pen entered into a discussion about leaving the eurozone but showed she had no clear idea of what this would mean for France. She described Brexit as an example and Macron shot back that Britain was never in the eurozone to begin with, and it appeared that Le Pen was just hoping that it would all work out, without a clear grasp of the facts. She had no response to Macron on how an exit could create panic in the markets and lower the value of savings of ordinary French people by about 20%. On pensions she stated that 60 was the age for retirement under her plan opening herself up to the criticism that she had no clear idea of the facts as Macron pointed out- that it would mean lower benefits or higher payments into the retirement system. This may be why even some young people who see the banking experience of Macron as a liability, may be offset by others who see this as a possible asset because of the need for some valuable experience in an independent candidate, as described by Dalton.    ...