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Axel Weber, former head of the Bundesbank, did economic and monetary research at the University of Siegen, Germany, where he received his doctorate. He joined the economics faculty at the University of Bonn in 1994. This is unlike others in central banking who rose through finance ministries or national central banks. He was made head of the Bundesbank in 2004. He resigned recently after expressing his dissent when the ECB made the decision to buy the government bonds of Greece and other financially troubled eurozone countries. In his view the ECB should stick to its mandate for setting monetary policy and not get involved in fiscal policy. He returned to academia and will teach central banking at the University of Chicago till May 2012. He brings an unconventional approach by his willingness to talk to the media and express his dissent over issues that affect Europe and the global financial system. The same informal style he adopted in teaching and engaging in discussion at the University of Bonn. See the interview in the Wall Street Journal, June 27, 2011....

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Risks to China's banking system from the bond market in China. China's bond market has grown rapidly to 25.5 trillion yuan or $4.1 trillion yuan, especialy in the period following the stimulus. But it is not similiar to bond markets in developed countries, the U.S., Japan and France. It has a patchwork of regulators, is closed to foreign investors, and does not offer protections to investors. It also lacks an effective ratings system. Most bonds are held and traded by the banks, which concentrates the risks in the banking system. In developed countries the risks are spread out among investors. Bond markets offer the advantage of reducing dependence on banks for lending but with banks holding most of the bonds in China, including that of local governments, the risks if bond issuers default are concentrated in the banking system.

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Share of mortgages at least 30 days past due declined to 6.39% in the 4th quarter 2013, down from 7.09% a year ago, according to the Mortgage Bankers Association. Foreclosure inventory declined to 2.9% for 4th quarter 2013. Three fourths of the troubled loans are from the period before 2007. The improved economic situation and lower unemployment has helped. Also helping is the increase in prices, with home prices up 8.4% in Dec. 2013 over the prior year, according to Black Knight Financial Services. The price increase has reduced the number of homes "under water"- owing more than the homes are worth- from 19% in Jan 2013 to 11.4% in October, according to Black Knight. Banks have also tightened their lending practices. The progress is uneven with California and Arizona, some of the worst hit states doing better in 2013. Judicial states such as New York and Florida, where courts have to approve foreclosure by banks, are making gradual improvement. About 1.5% of California homes were in foreclosure by the end of 2013, compared to 8.5% in Florida, according to MBA. In 2014 price improvements are expected to slow, and the 10% of homes in various stages of delinquency or foreclosure still remain as a hangover from the housing crisis that slows U.S. economic recovery....

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Richard Fisher, president of the Dallas Federal Reserve Bank, has a three part proposal for tackling the "too big to fail" problem and concentration of 70% of the U.S. banking assets in a few banks. It calls for Market Discipline to be exercized in a way that the Dodd-Frank legislation fails to do. This is to be accomplished by having deposit insurance and the Fed's discount window apply only to traditional commercial banks, not the nonbank affiliates and parent holding companies. Customers, creditors and counterparties of all nonbank affiliates and the parent holding companies would be asked to sign a disclosure accepting that there is no government guarantee. In addition the largest financial holding companies would be restructured so that all their corporate entities would fall under a speedy bankruptcy process. Fisher does not clarify how he would do this restructuring. The Fisher idea come after changes in the banking industry through internal management restructuring following trading losses, legal settlements and the passage of a Swiss referendum called the Minder Initiative on compensation. Fisher suggests the U.S. Fed and regulatory authorites in other countries should push for further restructuring and calls for action beyond the limited results from 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. He is critical of Dodd-Frank's often ambiguous and lengthy worded legislation- 849 pages for the law and 9000 pages for the regulations written to implement the law. Fisher emphasizes the point that its hard to implement a law and enforce rules when its not clear and is difficult to understand....

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U.S. Commerce Secretary, Wilbur Ross, has balanced the rhetoric of president Trump on trade in the NAFTA debate by saying the U.S. is looking for win-win solutions in trade relations with Mexico. At the WSJ CFO network Ross says the trade regime from the post war years is now an anachronism and does not work well especially for the U.S. Many experts agree that the trade framework from that period is problematic. It does not take into account, for instance say experts, the situation where a command economy such as China could help manufacturing industries with state policies, including currency policies. The rapid growth in China was different from the rapid growth in an earlier period of Japan, in terms of its impact say experts. The U.S was the dominant economy during the sixties, and the growth in Japan was not at the accelerated pace and of the magnitude that happened in China. As a result the impact on  some communities in the U.S. was much more intense in the last two decades, as documented by prominent trade studies, leading to the sense that trade did not work for these communities. ...

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Schumacher of DW.com provides insights into the referendum in Italy in which the "no" vote has a lead. Some aspects of the constitutional reforms are not positive and reduce representation, Renzi's failure to guage public frustration especially after the failure of Mayor Marino in Italy to improve services and infrastructure, the coalescing of different strands of public opinion from right to left in a referendum such as in Brexit especially with a failure to improve economic conditions for the middle class, make a "no' vote likely.

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Mervyn King, the governor of the Bank of England, is coming under increasing criticism for supporting the Conservative-Liberal coalition government's austerity plan, and for lack of efforts to fight inflationary pressures. On a major issue on which King has taken a clear stand- that the largest British banks should increase capital levels exceeding the international standards- not much has happened. Consumer prices in Britain were up at a 3.7% annual rate in December, and the government's austerity policies will also cause pain. In a recent speech King said that the Bank of England had limited ability to fight the higher unemployment and increased inflation. It was an admission of the limits of central bankers in the current situation. King said "a squeeze in living standards is the inevitable price to pay for the financial crisis and the subsequent rebalancing of the UK and world economies.

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This essay in the Economist magazine points out the special nature of the 2017 presidential election in France with the rejection of establishment candidates- Manuel Valls, Sarkozy, Juppe, and now Fillon. Fillon and Valls were prime ministers under Sarkozy and Hollande, from the Republican and Socialist parties respectively. With unemployment high in the areas outside the major cities their is a surge in support in these areas for the National Front. Emmanuel Macron, former Economy minister in the Hollande government, is the only candidate leading Marie Le Pen at this time. In a second round of voting he has to bring in centre right supporters and centre left voters and moderate voters, and appeal enough to working class voters, young unemployed people, offering hope for a better future to win this election against Le Pen. Economist magazine research shows support highest for Le Pen outside major cities in outlying areas, and for Macron in the major cities. There is also an education divide as seen in the U.S. election and Brexit referendum with less educated voters preferring the nationalist sentiment, church support sentiment fostered by the National Front.  ...

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Job prospects for college graduates in 2011 are showing significant improvement from the previous year. About 19% more graduates will be hired in 2011 compared to 2010, according to the National Association of Colleges and Employers. For college seniors, the survey shows 41% having an offer in 2011 compared to 38% in 2010. But the situation remains difficult for students who graduated in 2009 and 2010. Ernst & Young hired 2800 graduates in 2011- up 22% from 2010. The jobless rate for college graduates in the age group 20-24 is 6.4% in April 2011, coming down from 7.1% in the prior year, according to the Labor Department. In April 2007 the unemployment rate was 3.5%. The situation is uneven, with better prospects for graduates in computer science, engineering, accounting and economics, and most of the jobs in the private sector.

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China's housing developers are increasing the issuance of high yield bonds in 2013. European and American companies have issued $120 billion in junk bonds for Jan-March 2013. Chinese companies issued $8 billion to overseas investors for Jan-March 2013, increasing from $2.3 billion in junk bonds issued in the same period for 2012, according to Dealogic. Yields are dropping. In the U.S. yields have dropped from an historical level of 10% to 6% on junk bonds. The same pattern is seen for China's junk bonds. Yields for bonds issued by Chinese housing developers have dropped from 11-12% to 7-8%. Investors are taking on higher risks on these bonds and the current yields do not reflect higher risk, as the bonds are issued from overseas subsidiaries for foreign investors. As with the bankruptcy of Suntech Power, foreign bondholders could lose everything. These junk bonds are not backed by the company assets in mainland China, and local banks and creditors in China come first in getting their money back. ...

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Krugman raises questions about the way in which the government of Ireland made the decision to guarante all the debts of its banks. Debts that were incurred during a wild period of reckless speculation in real estate. This speculation ocurred with huge borrowings by Irish banks, mostly from banks in the UK and Germany. One would expect that those who lent the money should have paid attention to the risks, and should now share in the losses. But this is not what happened. He points out that before the speculative boom in real estate Ireland had little public debt. This decision put taxpayers suddenly in a situation where they were responsible for huge bank losses. He says Irelan is in a worse situation than Iceland, because it cannot devalue its currency. Iceland let foreign lenders to its runaway banks pay the price of their poor lending decisions, and he quotes the IMF which says- "private sector bankruptcies have led to a marked decline in external debt."

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Krugman sees Japanese style deflation as a plausible threat in 2011. He says that there is a very real possibility that the US would be seeing deflation in 2011.

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Because there is no cash available in financing these days, the few deals in commerical real estate aare like this one in Birmingham, Alabama. An office building there aold for $147 million, but the buyer put up only $1.3 million. See the link to the report by Conway of the Fed's Rapid Response program on the danger to 45% of commercial loans that are expected to sour in 2009. And the WSJ analysis on the risks facing 800 banks with heavy real estate exposure.

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Jason Zweig interviews John Bogle, founder of the Vanguard Group, in September 2011, after weeks of extreme volatility in the U.S. stock market. He says the index fund concept has been "bastardized" by exchange traded funds and the speculative behaviour in ETF's with insane turnovers approaching 10,000 percent. He considers investing in a balanced portfolio of stocks and bonds a useful way to approach investing even though the last decade has produced medicore results. And predicts a 7% return for the next decade, with money doubling every 10 years. The changes today mean you have to start earlier, save and invest for longer periods, says Bogle, but the returns should still be good. It would be insane to expect the high returns of the 70's and 80's today, says Bogle. In today's market Bogle has 80% of his investments in bonds and 20% in stocks.

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Jean Brunel, chief investment officer at GenSpring, says expect returns of 2-2.5% on bonds and 5% on stocks and not much higher in the next 5 years. He points out that with low rates the whole investment environment has changed. The consensus among investment managers is that it is a good idea to lower expectations and not chase risky returns in the next couple of years.

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The U.S. Commerce Department announced in March 2012 that it would impose tariffs ranging from 2.9% to 4.73% on solar panels imported from China. China has about 47% of the U.S. market for solar panels- with Suntech at 17%, Yingli at 11%, and Trina at 10%. U.S. based companies have 29%, and other including EU countries 24%. The imports of solar panels from China were $2.65 billion in 2011. In the last 4 years Chinese lower priced products have reduced the cost of panels by two thirds. What this does is send a signal to encourage companies to manufacture in the U.S., and show that the U.S. government was taking action against illegal subsidies by China without disrupting the availability of lower cost imports.

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Sanford Weill built Citigroup into a mega bank through repeated acquisitions. He was the strongest voice for the repeal of the Depression era Glass Steagall Act banning banks from risk taking activities in investment banking. The Glass Steagall Act was repealed in 1999, and repeal legislation was given the name of "Citigroup Authorization Act." On July 23, 2012, Weill told CNBC: "I am suggesting that they (the big banks) be broken up so that the taxpayer will never be at risk, the depositors won't be at risk... Mistakes were made." Weill said that the housing bubble and the financial crisis has proved that the repeal was a mistake.

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The warning light is again on for Greece in the beginning of 2012, as the rapidly deteriorating economy makes a 50% loss by private creditors insufficient to help it meet repayment or refinancing of bonds coming due in 2012. Additional funds will be needed from EU countries unwilling to do this. 14.5 billion euros in Greek bonds come due on March 20, 2012. Greece also faces a public increasingly resistant to austerity cuts. A vountary exchage of existing Greek bonds by private creditors for new bonds at 50% face value and maturing over a longer period will be done under English law. This will be harder to change in the future. Most of the existing bonds were issued under Greek law which can be altered by Greece's parliament.

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Angela Merkel is faced with the problem of getting German public opinion to support the bailout of Greece, Ireland, and then Portugal and next Spain. At the same time she wants to be seen as committed to the euro and the European Union. She is pushing for bondholders to bear a part of the costs of the bailout as part of their responsiblity for decisions they made, so that the German government and taxpayer is not left with the burden. This is not working out well and she is losing public support.

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Capital inflows into banks in Cyprus in the form of demand deposits accelerated in 2008 after it appeared that the banking system in Ireland was having serious problems. About $40.7 billion of capital inflows went into Cyprus in the form of loans and demand deposits in 2008, 161% of the GDP of the country, according to the McKinsey Global Institute. Cyprus became the place for hot money from other countries because of the higher interest rates on euros and the lax banking laws.