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Chrysler reported second quarter 2012 income of $436 million, compared with a loss of $370 million in the prior year quarter. The prior year quarter included charges for repaying U.S. government loans. First quarter 2012 income was $473 million. Fiat reported a loss of 246 million euros for the second quarter 2012. The combined operations Fiat-Chrysler reported aloss of 103 million euros. This shows how the effort by Sergio Marchionne to takeover Chrysler and turn it around have proved to be a very successful move for Fiat. With a relatively small investment Fiat is now a majority owner of Chrysler having invested mainly its management knowhow and leadership.

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The contrarians not just then, but still today, as many economists shrug off facts about the new savings rate and predict a bounce back in 2009. Jeremy Grantham, co-founder of Boston money mangement shop GMO LLC, got the date right, predicting real risk to the financial system in October 2008. He pointed out for years since 2000 that the Fed's moves and the government's fiscal actions (including 2 costly wars) after the 2001 terrorist attacks, had simply postponed "a sensational bust". Its useful to see how these three, Peter Schiff, President of EuroPacific Capital, Bob Rodriguez of the FPA New Income Fund, and Jeremy Grantham agree and where even they disagree, and where the common thread of logic runs. Currency valuations including the US dollar, are the hardest to predict, and the predictions in this regard are also hardest to state for their timing. When separated from the rest of the picture, they give a better sense of what this common thread of logic in most of the crisis picture is. Grantham saw this crisis coming, but its not clear that he sees this running for a long period of a decade. He agrees with Rodriguez and Schiff about another 30% fall in the S&P 500 stock index, but at the same time he predicts over the next 7 years returns in the US stock markets will be 7.5% annually. Rodriguez sees this going on far beyond periods 1 and 2 to periods 3 to 10. And he sees government efforts to jump start the economy leading to some progress and then sputtering out because consumers are turning frugal. The savings rate will grow eventually going up to 10% by 2010. What this means is that as 70% of the US economy depends on consumption spending, and consumption spending has been too deeply damaged to recover in a few years, the downturn will only deepen in 2009 and 2010. This is his central point, and the analysis free of clutter and controversy. Basically he says the policy makers do not fully grasp that the US consumer has turned into a saver, and while the Obama administration puts one foot on the accelerator to stimulate spending, consumers will be pushing on the brakes. Schiff sees difficulties in financing the debt leading to higher interest rates and a serious drop in the value of the dollar. The views on the dollar face a lot of uncertainty as to timing, the relative strength of currencies in countries in Europe which have weak economies (UK, Ireland and Spain), and the rapidly weakening Chinese economy. But the common thread of logic runs through Rodriguez's argument about the savings rate and consumption spending, with debt and the overstretched consumer in the US running through every discussion about a weakening economy. Something much like what is happening to the auto industry because of its extraordinary degree of oversupply (with capacity reaching 94 million vehicles worldwide and demand inflated by the boom years and easy money now deflating) playing out in a few quarters, is likely to happen across the whole economy. In a gradual pattern playing out over a few years, as consumers postpone purchases of retail goods. Already this is showing up in the inventories of electronic goods that is building up. See links. Kelly Evans in the WSJ front page on January 6, 2009, confirms the signs of a seriously frugal American consumer....

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A report released by the Organization for Economic Cooperation and Development (OECD) shows growing income inequality in 34 OECD countries. OECD Secretary General, Angel Gurria says: "The social contract is starting to unravel in many countries. This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that the greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, income inequality will continue to rise." Countries with the largest ratios between incomes at the top and the bottom, are the United States, Turkey and Israel, roughly 14 to 1. Germany, Denmark and Sweden have ratios of 6 to 1, with their ratios up from the 1980's. Gaps in Chile and Mexico are at 25 to 1. The study covers the period from 1980 to 2008. Overall inequality went up by 25% in the U.S. from 1980. In 2008 the top ten percent in the U.S. earned $114,000, 15 times than incomes for the bottom 10%. The top 1% of Americans saw incomes go up from 1980 to 2008, increasing from 8 percent to 18 percent. The richest 1% having $1.3 million in after tax income, and the lowest 20% making $17,700. The trends have accentuated an increase at the highest end- the top 1% and top 10% of the people- and a sharp decrease for the bottom 20%, which can be grasped from the $17,700 and the $1.3 million, both at extreme ends. The study attributes the rise in inequality to a growing gap in wages for highly skilled workers as technology advances, a surge in foreign direct investment and a looser regulatory regime that reduces employee protections leading to wage premiums for financial jobs and smaller incomes for workers at the bottom. Income groups and professions and sectors that had the greatest influence in government were able during this period to get the greatest protection for incomes, and able also to maximize their incomes. Incomes in the financial sector increased dramatically in the last decade, as a result of deregulation leading to higher risk and speculative activities in the financial sector, leading to the financial crisis of 2008-2009. Financial crises further depress incomes at the lower end. Similiar income inequality trends can be seen for India and China. China has a Ginni coefficient of 0.5 according to researchers at Beijing Normal University, up from 0.3 three decades ago- a Ginni Coefficient above 0.4 is considered destabilizing. Another factor that played a part in these countries is corruption and lobbying by special interests for favored treatment of sectors or groups. Austerity measures taken in Europe and in the U.S. are likely to widen income gaps by depressing the lower end income groups, creating social unrest, especially in the absence of efforts to stimulate growth....

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The May 6 episode of the stock market plunge of 900 points in the U.S. and then recovering had the effect of rattling investors nerves especially retirees. The impact of this episode is recorded in the experience of one Charles Schwab broker office in Englewood, Colorado. By the end of that day this broker had 50 calls on his answering machine from a fifth of his clients, all seeking to know what happened. Charles Schwab, who helped launch a period of individual investing in the U.S. after 1982 by cutting fees and going after the average investor, (along with others like Jack Bogle of Vanguard Funds), is also on edge. He says he has not seen anything like this since his early days. Schwab confirms Yale Prof. Shiller who says (see link) that his index for markets shows a lot of nervousness. Saying that 98% of people are still very concerned, coming after the May 6 incident, and the Greece and eurozone crisis that impacted US stock markets. One other factor he points out is the constant flow of headlines that suggest certain business people engaged in fradulent practices, something that fuels a lack of trust. Charles Schwab ponders from his office across the San Francisco Bay Bridge, whether words like safety and soundness mean anything anymore. Another factor of concern, Bogle points out, is that institutional investors now own 70% of American corporations, up from 35% in 1975. And the advantage has veered sharply in their direction as institutions, hedge funds, and investment banks trade on their own account, with wealth moving in that direction. This leaves the individual investor and especially the retiree or those about to retire in a severe predicament....

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Talabani, deputy prime minister under Iraq's new Abadi government, says centralization is not an option, as regional autonomy has to be respected. He says the toxic effects of the Maliki regime are only gradually being undone.

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The dollar is not expected to suffer asharp drop even though problems of increasing debt, and China's pegging of the yuan to the dollar remain for the future.

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The U.S. government sold its last remaining shares in auto company GM booking a loss of $10.5 billion- a recovery of $39 billion dollars of the $49.5 billon dollars given to GM. The Center for Automotive Research in Ann Arbor, Mich., points out that the cost of bailing out GM and Chrysler was about $13.7 billion. The benefits were 1.2 million jobs protected in 2009 during the depths of the financial crisis. It also preserved $39.4 billion in personal and social insurance tax collections in 2009 and 2010. The Treasury Department estimate of the cost is about $15 billon, including money invested in GM's former finance arm Ally Financial Inc. President Obama says the effort helped create 372,000 new jobs in five years. Treasury Secretary Lew summed it up by saying "it helped stabilize the auto industry and prevent another Great Depression." Other intangible but larger benefits in the long run were building up the companies anew with new pay structures the auto companies could support in a globalized economy, bringing in new management and discarding of old mindsets and culture, new relationships with unions and customers, committment to achieving fuel efficiency targets with new technologies in cooperation with the U.S. government guidelines, and renewed confidence of millions of employees in the U.S. auto sector. It is also the one area in which the Obama administration scores a clear win, and in which president Obama took the greatest interest as senator. That the public did not fully appreciate the significance of the step is more a reflecion of public frustration with how the companies were run by the old management, and a continual reminder of the importance of good management for the U.S. industry and economy....

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House Majority Leader Eric Cantor talks with Joseph Rago of the Wall Street Journal. There is a fundamentally different world view between Obama and Cantor. Cantor does not hesitate to present his view and says President Obama did not like to be challenged on policy grounds in debt negotiations, leading to the famous "I'll call your bluff Eric" remark by Obama. Cantor sees no chance of reaching an agreement with Obama that would go towards solving the fiscal crisis and feels it would be best to focus on incremental wins. He says of the Obama-Boehner deal that it did not address the problems with Social Security and Medicare. Without the transformational changes that are needed in those programs he did not think it was worth the cost. Cantor is mainly responsible for the Republicans not agreeing to include revenue increases in the negotiations or the final deal. Cantor says the super-committee part of the deal which has to come up with savings, will only lead to incremental progress- considering the huge divide that separates their world view and that of President Obama. The real fight says Cantor is to prevent President Obama from getting re-elected....

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Harvard professor, Benjamin Friedman, reviews journalist Timothy Noah's book "The Great Divergences: America's Growing Inequality Crisis and What We Can Do About It." Friedman says, Karl Marx got it wrong when he predicted greater inequality based on the situation he saw in Europe and the U.S. in the late nineteenth century. Inequality actually decreased in the U.S. and Europe with industrialization, technological progress, higher educational and income levels by the early part of the twentieth century. Similiarly Simon Kuznets, Nobel Laureate, also got it wrong when he extrapolated from what he saw in the early postwar period, assuming greater equality and better opportunities in future decades. The approach Noah and Friedman advise is to look at individual factors that promote or discourage less divergence in income levels, opportunities and upward mobility. And based on this shape policy and action agenda for better outcomes. A whole range of issues fall in this range- promoting manufacturing and higher wage jobs, immigration policy, investments in education to upgrade skills, better educational opportunities, vocational training, upgrading education to keep up with new technology, and investments in research and new technologies for new industries that would create better opportunities. Because inequality is increasing worldwide, and countries are focussing on improving competitiveness as well as preserving the social fabric in a global economy, this is an issue facing all countries that seek a better future....

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The commodities boom allowed Brazil under president Lula to commit to heavy state spending, subisidies, protection of favored sectors with large tariffs, that led to inefficiency and high debt. The policies continued under president Rousseff. Corruption scandals in the latter part of the Lula administration led to more populist policies for the Workers Party to stay in power, says Porter. Compared to Mexico and Chile, Brazil and Argentina under presidents Lula and Kirchner moved in the direction to closing up their economies to trade and foreign investment that would make corporate sectors more competitive and less dependent on the state for subsidies and favors. Mexico's economy other than the automobile sector is struggling, as mismanagement also plays a part as with the handling of Pemex and huge capital injections needed. Mindfulness and thoughtfulness is needed in setting policy direction, aware of the risks free of illusions about rosy scenarios, knowing that ideology plays less of a part than exercizing good judgement....

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David Brooks of the NYT describes the approach taken by British prime minister David Cameron and his Conservative Party government to help the working class poor in Britain, and tackle the social roots of poverty. He says an American adaptation similar to this is badly needed in the Republican Party, with the candidates in the election providing solutions from an old rulebook. Only after Trump's popularity with appeals to less educated older Americans has the Republican leadership responded, with Speaker Ryan helping organize a forum on poverty under the Jack Kemp Foundation- emphasis was placed on education, work, opportunity and accountability for anti-poverty programs in the discussion moderated by Ryan and Senator Tim Scott. Less attention was paid to the other social aspects mentioned here by Brooks, and cited by Cameron when he described the inadequacy of traditional solutions from the right and left of the political spectrum. Cameron outlined the principles of his anti-poverty plans called "Life Chances Strategy," in a speech on Jan. 11, 2016, in north London, with the entrie transcript on the gov.uk website. Cameron acknowledged in the speech that social issues including single parent families, and other social problems such as long term unemployment, can make it harder for some people to use self-reliance and personal responsibility in a growing economy as a way to grasp opportunities. Cameron proposes a combination of economic, social and job growth strategies. His second term plans include 30 hours a week of free childcare for 3 and 4 year olds so both parents can work, parental maternity leave, expansion of Troubled Families Program, in addition to the introduction of National Living Wage, tax cuts, universal credit. In tackling social aspects of the problem Cameron cited the need for development in the early years of childhood, the huge importance of family, social connections and experiences, informal mentors, cultural experiences, broadenend horizons, that enable young people to acquire language skills, character and resilience. Second term projects include expanding reach of high performing schools to deprived areas, emphasis on core English, math, science, history, geography Ebacc skills, a 1 billion pound investment in the National Citizens Service by 2021, a plan to transform housing estates including rebuilding from scratch, additional 1 billion pounds to provide mental health treatment including treatment within 2 weeks in homes and communities. Throughout Cameron's "Life Chances strategy" is aimed at tackling not just the material dimensions of poverty, but also what he describes is broken in Britain- "the paucity of opportunity."...

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Mitt Romney on the weaknesses of America's position in the Middle East in policies for Syria, Libya, Egypt and the rest of the Arab world. The problems with Iran and the lack of results in bringing an end to Iran's nuclear program.

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Senator McCain and Senators Lieberman and Graham say the U.S. is squandering goodwill of people in the Middle East by not taking action to to help the democracy movement in Syria in its struggle with the Assad regime. They say this is a unfair fight as the rebels are lightly armed and face the artillery, helicopter gunships and fighter aircraft of a brutal regime. The lack of active U.S. and European support only prolongs the struggle and cost in human lives.

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Harold Meyerson looks into the causes of the decline of white working class Americans by 2015. A whole section of society that was helped by the work of FDR is being undone by a combination of forces, from the decline in working class wages and jobs through globalized business, social structures unravelling, and support structures weakening. Meyerson refers to the Deaton-Case Princeton study on increasing death rates for this group. The white working class is much smaller now than in 1940 when he says 82% of Americans over 25 had only an high school education, down to 29% in 2007. The result is that it has less power to affect policies, yet is close to one third of Americans. Economic recovery, the American dream, all remain hobbled without efforts to tackle this problem. Trump's effort to appeal to this class, Meyerson points out, is similiar to the National Front's effort in France, making the political dialogue even more divisive by targeting immigrants.

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Tunisia's president Moncef Marzouki comments on the violent demonstrations in Arab countries after the anti-Islamic video in Sept. 2012. He says the violent demonstrations do not reflect the true feelings of the vast majority of Arab people. He says the Arab Spring is not pro or anti-western but focussed on social justice and democracy, and not even about religion when truly understood.