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Research shows that when a home's value falls below 75% of the amount owed on the mortgage, the homeowner thinks hard about walking away even if he has the money to keep paying, as it does not make economic sense to keep paying. By 3rd quarter 2009 4.5 million Americans reached this point and by June 2010 it is estimated by Corel Logic, a real estate firm, that 5.1 million will reach the 75% point- or 10% of all mortgages. Homeowners who made the mistake of buying as the market was cresting are seriously considering walking away and bank's reluctance to reduce the payments is for them the last straw. The Obama administration hasn't helped as this comment by assistant Treasury secretary for financial institutions, Michael Barr, shows. He discounts the idea that many people will walk away from their homes, saying that the overwhelming number will stay in their homes. Consultants at Oliver Wyman show from their research that at least 17% walked away from their homes even though they could make payments in 2008, or 588,000 people, and this was before the full impact of the global financial crisis. These numbers could be much higher in today's depressed market....

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Martin Fedstein has a new idea for solution to the mortgage and credit crisis. He has a Loan Substitution Program and this is how it works. The Government would loan mortgage holders 20% of their current mortgage loan, with a 15 year payback period, and an adjustable interest rate based on what the government pays on two-year Treasury debt (now just 1.6%).The loan proceeds would go to immediately reduce the borrower's primary mortgage, cutting interest and principal payments by 20%. Participation in the program would be voluntaryand participants could prepay the government loan at any time. The basic idea is to lower the Loan to Value Ratios and help prevent foreclosures and defaults so that house prices which may have another 10-15% to fall, do not fall steeply and overshoot as millions of foreclosures take place across the country in coming months. Legislation would require that the government must be repaid before all creditors except the mortgage lenders, and that the debt to the government would have to be paid, even if the homeowner defaults on a mortgage. The critical thing this would accomplish is that homeowners would pay less in total interest. In exchange for that reduction in that interest, they would decrease the amount of the debt they can escape by defaulting on their mortgage....

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The US with 5% of the world's population has 25% of the world's prisoners. The US has 2.3 million peope behind bars according to the International Center for Prison Studies. China with 4 times the population has 1.6 million people in prison. The US has 751 people in prison per every 100,0000. It varies a lot within the states Louisiana at 1138 per 100,000 and Maine at 273 being the lowest, Minnesota at 300 is more like Sweden at 80 per 100,000 people.Interestingly it shot up in 1975, for a long period from 1925 to 1975 it was about 110 per 100,000. Explanations are given such as the war on drugs but only 500,000 are in prison for drug offences, so its only part of the explanation. tougher sentencing, availability of handguns and higher murder rates, and even the election of judges who respond to public opinion favoring tougher sentencing, are all given as answers. Interestingly Canada's crime rates parallel those seen in the US but the imprisonment rate has been stable for the last 40 years according to one expert Mr. Tonry. He says that english speaking countries have higher prison rates than French and other European peoples. Higher prison rates for black people are known to be the case in English speaking countries but no figures are given here. This is part of the problem....

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Paul Barrett of Business Week reviews McLean and Nocera's new book on the financial crisis; "All the Devil's Are Here." The title takes a line from The Tempest- "Hell is empty. All the devils are here." McLean and Nocera focus on securitization, the credit-ratings that were improperly given, and the chicanery of bankers, mortgage issuers and others behind the idea that every American should be able to have a home. Attention is also focussed on the loose monetary policy of the Greenspan era, with Greenspan airily dismissing all concerns, including concerns about the growing trade deficit with China. Barrett asks, what about the future? Barrett says the Bernanke easy monetary policy risks making the mistake a second time, and in all probability the devils will be coming back again in some other form.

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A whole range of issues can be seen in the debt crises in developing countries. The margin for error shrinks with poor governance, lack of honest assessment and transparency for finances, wars and conflicts within or outside the countries, living beyond their means, lack of focus on development, infrastructure that is unproductive or unaffordable including some Belt and Road Initiative infrastructure at higher interest rates. Countries that are dependent on overseas remittances, tourism, that were hit hard by the pandemic have seen their finances further weakened reducing the margin for error even more to the point that the smallest tipping point can lead to huge crises. Once the finances are weak all it takes is an external tipping point that creates serious crisis. The war in Ukraine with shortages of wheat, fertilizer and skyrocketing oil prices acted as that tipping point. Because this was a major blow the crises have a level of magnitude that is more than a payments crisis. One sees this in South Asia in Sri Lanka and Pakistan, and in the Middle East for countries such as Egypt and Tunisia shown in this WSJ report. It is now not simply a crisis but a crisis of great magnitude because in the case of Sri Lanka and Pakistan this WSJ report says that both countries foreign exchange reserves have dwindled to the point where they can pay for only one or two months of imports according to central bank data, analysts and IMF. This crisis has affected countries that were seeing steady foreign investment such as Turkey for decades, then a sharp falloff in foreign investment with a change in the climate for foreign investment. The crisis has taken the form of high inflation, significant depreciation of currency that makes imports costlier so that shrinking revenues from loss of remittances, tourism, or other sources will now have less value in supporting import needs. Lack of a credible path can delay setting a path out of the crisis. The $1.5 billion fuel and electricity subsidy made by the prime minister of Pakistan in late February was done without IMF approval leading to the IMF program having to be renegotiated. Lack of national political and cultural consensus on a solution simply makes it that much more difficult to find the way through it. In this regard South Korea was able to tackle the 1997 financial payments crisis effectively because of a national consensus. The situation in Egypt- Egypt has borrowed $20 billion from the IMF since 2016., placing it second to Argentina in aid from IMF since 1980's.  In 2020 and 2021 Egypt' government spent more than 40% of its revenue servicing its debt, and is forecast to do the same in 2022. The situation in Tunisia- A shortage of sugar, flour, and other critical supplies, and government delaying wage payments to civil servants. The government got $400 million in financing last month from the World Bank and hopes to secure a lifeline from the IMF. Compared to the period between the 2 World Wars the two bright spots are China and India where lessons of the past of civil wars, religious or political conflict, and poor governance, lack of knowledge of how the western countries industrialized and modernized, was replaced with the conviction that drives patient effort, courage in the face of adversity, honesty, and humility to learn including from western countries that have forged their own path through the same difficult road. The most difficult experiences have offered lessons which were learned- for South Korea the Korean War and invasion from the north, China the civil war and Japanese invasion, for India the partition of India and million of refugees. Stagnation from stumbled efforts also taught lessons, the Great Leap Forward in China, the License Raj with corruption in India.       ...

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This report in the WSJ makes the America centric thinking mistake of forgetting where China started from in assessing progress and China's new priorities. In 1960 the World Bank shows China per capita at $90 which does not change much till 1990 when it was $300, the Deng opening to western technology and capital pushed it up to $3000 the year 2000 (US $36,000) and $4500 in 2010 (US $50,000) when the global financial crisis hit. Since 2010 the Chinese economy was burdened by high local government debt and struggled to get to $10,000 in 2020 under Xi Jinping's first two terms as president. Yet it paid a huge price for this -the chance of Bo Xilai (2014) upsetting the twin banners of Science and Modernization of the May 4th 1919 movement that set the course of China for 100 years uninterrupted through the Nationalists, the Japanese occupation, the Maoist CCP, the Deng CCP opening and Jinping CCP pullback. The huge inequality was seen as an opportunity for Bo Xi Lai or some other leader to capitalize on moving China in an unknown direction that posed risks for the future of China. Even then the first preference of Xi would be to carry on with what had worked after Deng. Yet it was clear that working class votes were shifting the dynamics of elections after the Trump election and closing the doors to open access to western capital, technology, and investment. With Trump in erratic and uncertain ways, with Biden after the elections of 2020 consistent and with single minded determination to limit flows. Not just Xi, any other Chinese leader would have had to have the internal discussions about the need to shift back to a model China was familiar with and one that worked before- that of state intervention in the economy, that of reducing the inequalities that posed risks for the CCP's survival as forging a path for stability to carry out the twin banners of the May 4, 1919 Movement - Science and Modernization as China's salvation. Unlike the hysteria about China posing a challenge to the US these internal debates of Xi and the party may have concluded that the US with about half the population of China's as it grows with immigration in the future and multiple times the per capita GDP was a country that no other country was going to come close to. In this sense the supply chains are deceptive as these are likely to be completely redone under the Biden administration to bring most important manufacturing back to China. It is in this context that Xi had limited room to manoeuvre and decided to focus on stability for the long term to fulfill China's dream of the May 4, 1919 Movement of the last 100 years for Science and Modernization casting aside the risks associated for instability of the inequality that comes with more of the western type of growth, and with the climate change risks also associated with it. Lower growth gives China a chance to correct some of the flaws of the hyper growth that was partly of its own making and partly thrust upon it by investors from the outside, so that the new climate would best serve the goals of the May 4, 1919 Movement of keeping high the banners of Science and Modernization. This kind of rethinking is also going on in the US in the same manner about inequalities and hardships for workers and families, with some of the anger directed at China as internal political sentiment- hence the trillions of dollars moved by the Biden administration to address the flaws of growth under free markets and intervene in the economy where needed as in climate change to give firm sense of direction. In a sense the direction taken in different contexts the American and the Chinese are the same - address the problems of workers and families, of the people, as Lincoln had pointed out and striven so hard for, so that Labor is the more important than Capital, and workers and families vital to the nation.   ...

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Google has the lowest share of the search market in South Korea- 2%. This has prompted Google to follow the leading search portals in South Korea. Whats different in South Korea is that people say they go to a home page to see the news, and topics that are popular with fellow users. NHN and Daum the leading portals present users with home pages that look more like those of media outlets than asearch engine. They give latest news, photos, videos and updated lists of highly trafficked blogs and popular online chat sites. First they look at this information, then they start a search. NHN Naver has 66% of search queries, Daum 21% and SK Telecom's Nate 6%. Yahoo Korea 3%, Google 2%. Daum and Naver have created vast databases of popular content and link to them first. A search for lung cancer will show information from articles acquired or commissioned from Korean doctors and hospitals. Its adiffernt approach and it works in South Korea. To adapt to this user preference Google will now showblocks of links under the main search box about topics and news that are popular in for South Korean users....

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Steve Jobs, the co-founder of Apple and its CEO, passed away on September 5, 2011. He helped create the Macintosh, the iPod, iTunes, the iPhone and the iPad, changing the way people work, listen to music, or work and communicate with portable handheld devices. He made significant contributions through the devices he helped create by making them easy to use, look and feel good. By making as he said "the whole widget," both the software, hardware and other design, and a relentless focus on how the products worked in the hands of consumers, Jobs was able to come up with unique products like the Mac, iPod, iphone, and the iPad. The pioneering work of Jobs began early, in 1977 with the first Macintosh computer, and continued through 2010 with the introduction of the iPad. Jobs first first period at Apple lasted from 1976 to 1985, closing when Jobs left the company after differences with then CEO John Sculley. He rejoined the company in 1996 when Apple acquired Next, the company founded by Jobs in the intervening period. The first period saw the emergence of Microsoft in the personal computer world. In 1997 Apple accepted an investment of $150 million from Microsoft and told Mac fans that "we want to let go off this notion that for Apple to win, Microsoft has to loose." Microsofts Office software could be used on Mac computers by this arrangement and helped Apple survive this period. Later in a 2005 address at Stanford University, Jobs told students about the first period: "The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life." Jobs personal story is of being college dropout from Reed College, Oregon, where he dropped out after one semester in 1972, because of financial issues. He then worked parttime at Atari, and in 1975 associated with the Homebrew Computer Club where he met Apple co-founder Wozniak. He was the son of unwed parents, University of Wisoconsin grad student Joanne Carole Schieble and a Syrian exchange student Abdulfattah Jandali. He was adopted by Paul and Clara Jobs shortly after birth. ...

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Mead points out that the world with an effective U.S. leadership based on democracy and the values we cherish is needed now more than ever, after the failures of the Bush and Obama administrations to provide the kind of balanced leadership all Americans can stand behind. A world without an effective and enlightened leadership from the U.S, is one in which the world could fall apart in regional rivalry, one in which the hundreds of millions of people in the poorer parts of India, China, Russia, Brazil, and other developing countries of the world, will have less opportunity to meet their aspirations for a better life. This is because a focus on development requires less regional rivalry and because serious missteps can reverse in a few years decades of economic progress as shown in the 2008 global financial crisis. More so because we live in an increasingly interdependent global economy. It is also the kind of world where suppression of freedoms and suppression of the opposition as in China and Russia, provides a wrong kind of message, a world in which we or our children would not want to live in. Russia, India and China, are too driven by rivalry and lack the deep experience to go it alone, multipolar is more likely to end up being multipolar rivalry leading to a race to the bottom, which would be bad for all, especially for the poor in Asia and the developing world. The 2008 crisis showed what some serious economic mistakes could do to employment and incomes in the world with output dropping by a third in most places. Political missteps could lead to a slippery slope of this magnitude but more difficult to correct. Greater participation in the political process and more enlightened leadership is needed in all countries to allow many voices and greater interaction across boundaries, focussing on the dangers of such multipolar rivalries. The world of the G-7 is already moving to the G-20 where many voices are heard and serious discussion of differences takes place, but participatory is different from multipolar....

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Political activism and grassroots efforts- other than street protests - are increasing in eurozone countries facing high unemployment and austerity cuts. The focus is on cleaning up the political system rife with cronyism, corruption and wasteful spending. Brat and Bjork describe one such effort in the town of Torrelodones, Spain, 18 miles from Madrid. Criminal investigations in many Spanish cities have increased public awareness and participation in local government. European Social Survey based in London, reports political activity of this kind in Spain jumped from 27% in 2008 to 39% in 2010. There is an increasing sense that the political elites of the two main parties, the Partido Popular and the Socialists have failed to bring clean government and transparency to Spain. As a result progressives are joining conservatives in an effort to clean up years of wasteful spending, cronyism and corruption in government. The Union for Progress and Democracy, representing an alliance of such groups would win 13% of the vote in a national election, and the ruling conservative Partido Popular would lose half of its support and get only 22.5%, according to independent Spanish polling firm Metroscopia. The new push for transparency is one of the welcome changes at a time of austerity cuts and 27% unemployment in Spain. Many of the perks of public officials such as chaeuffer driven cars and police escorts, contracts for favored few at higher prices, are out in many cities, and accounts made public for scrutiny and change. Transparency International's transparency index shows 33 out of 110 of Spain's biggest cities scoring top grades on the 2012 index, jumping from only one. Following the example of the regional government in Navarra, the central government is drafting the first open-records law. Castilla-La Mancha, the area around Toledo, run by a clean government advocate Maria Dolores de Cospedal from the Partido Popular has taken aggressive steps to clean up the local government and wasteful spending- see the link to Castilla La Mancha. Her long term approach is to clean up government spending and accounts with the idea of preserving spending where it is most needed, in education, healthcare and vital services hit by cuts, an approach being taken in other Spanish cities. ...

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Haruhiko Kuroda, 68 years old, a senior finance ministry expert who ran the ministry's currency policy as vice finance minister for 4 years in the early 2000's, is prime minister Abe's nominee for central bank chief. He lectured at Hitoshibashi University for two years before becoming the head of the Asian Development Bank. His book "Success and Failure in Fiscal and Monetary Policy," is critical of the Bank of Japan for mistakes in being first too accomodative in monetary policy to set up the 1987 crash, and then tightening too quickly leading to the deflation and recessions of the last two decades. By choosing an expert with a long experience in the field of monetary policy and a vigorous advocate of getting things right to shake off the deflationary trends, Abe is sending a strong signal to financial markets. Kuroda says he is looking at a shorter time frame to achieve a 2% target for inflation- about two years. In essence Kuroda is taking a page from the policy book of a small group of MIT trained economists, Bernanke at the U.S. Federal Reserve, Draghi at the European Central Bank, and Mervyn King at the Bank of England to boost domestic economies in the context of increasing global growth. The yen weakened to 94.77 to the dollar on Feb 25, 2013, after the announcement. Abe's nominee for one of two deputy governor appointments is Kikuo Iwata, a 70 year old economist who was also critical of Bank of Japan monetary policy since the 1990's. The Abe administration has also carefully communicated this message. Speaking at the Centre for Strategic and International Studies in Washington D.C. Abe said Japan's goal was to increase exports, but at the same time it will increase imports which should benefit the U.S., China, India and other countries. He described a recovery in Middle America from the Dakotas to the Carolinas and sees something like this happening also in Japan. Even the appeals to nationalist sentiment are also coupled with the message to China and S. Korea of not climbing up the escalation ladder and seeking good relations to promote mutually beneficial development. Abe's focus is on building the U.S.- Japan relationship....

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The first signs of a return to growth are seen in the European automobile market. The European Automobile Manufacturers Association reports a 1.7% increase in new passenger car registrations for May compared to April 2013.