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Barley points out the resignation of prime minister Monti in Italy is not a cause for panic, as his likely successor Luigi Bersani, head of the centre left Democratic party which leads in the polls with its electoral alliance having about 43% support, has committed to following through with Monti's policies and committments to the EU. Berlusconi is not the factor he once was with only 15% support in the polls, and anti establishment parties opposing public corruption such as Beppe Grillo's Five Star Movement appealing to younger people have about 20% support changing the political landscape in Italy. Other factors favoring Italy- a lower level of debt redemption in 2013 of 158 billion euros compared to 200 billion euros for 2012 will lower Italian bond issuance, Italy's primary budget surplus, the Italian economy bottoming out, and credit conditions improving. Year to date Italian bonds have returned 19.5%, and he sees no reason for an exit from Italian bonds. If polls continue to show a committment to the policies introduced by Monti, Italian bonds will continue to be attractive for investors. By setting Italy on the path to restoring and strengthening governance Monti has removed a key element for volatility in Italian bonds....

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Italy raised 18 billion euros in a record auction on Oct. 18, 2012, meeting its needs for the rest of the year. Italy's yield dropped to 4.64% on Oct 18. Spain raised 4.6 billion euros at 5.32%. Italy sold most of the BTP Italia bonds to Italian citizens with a 4 year bond linked to Italian inflation and designed for Italian retail investors with a new eBay type internet platform, including a loyalty premium of extra 40 basis points. Italian retail investors have 8 trillion euros in net private wealth and household wealth in Italy is more than 4 times the sovereign debt, according to the Bank of Italy. This is a big difference compared to Spain, because the interest on the bonds remains in Italy for consumption and investment. Spanish households are highly indebted after the housing bubble.

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A statement by German Finance Minister Schauble that Germany would be able to accept inflation of between 2 and 3% showed the new flexibility of the German position after the election of Hollande in France. Schauble said on April 10, 2012, Germany would find inflation "in the corridor between 2 and 3%" acceptable. The ECB's target is 2%. Earlier the Bundesbank in statements to the German parliament indicated that higher inflation rate in Germany was acceptable if the overall eurozone rate remained near target. This would give other eurozone countries an opportunity to improve competitiveness. Schauble also indicated willingness to accept higher wages in Germany because of years of wage concessions by workers in Germany. France's major parties, unions and industry are in agreement on a plan for reducing wages to avoid layoffs. This gives the normal process of adjustments in free markets a chance to function to restore competitiveness and balance. It also addresses the concerns of workers in Germany who would benefit after a decade of wage concessions, and improve consumption in Germany, as demand for Germany's exports adjusts to a slowdown in the global economy....

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Romney says in the first presidential debate he will not increase taxes on the middle class: "I will not reduce taxes paid by high income Americans. And I will not, under any circumstances, raise taxes on middle-income families. I will lower taxes on middle income families." How he would do this is through limiting or eliminating deductions and loopholes among several measures, with work done on this by his advisor Martin Feldstein, Reagan's economic advisor and a professor at Harvard University- Romney's Tax Plan can raise revenue, WSJ, 8/28/2012. Where the Democrats and Republicans differ is that economic growth generated by creating incentives for business to invest and hire also plays a part in generating the additional revenues as it did under Reagan's economic plan. Behavioural factors play a large part of this as much as the incentives and other steps, to create a climate of business confidence- search in Janvoo for the Group "Reagan memo of 1980 by Shultz, Friedman," for more on this....

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New rules by the Government Accounting Standards Board (GASB) and Moody's would show U.S. public pension funds as about 57% funded instead of 75% funded under earlier rules. This will open up an even wider gap in how much they have in the funds and their promises to retirees to about an estimated $2.2 trillion. This puts pressure on state and local governments to either reduce benefits for new hires, have workers increase contributions, or set aside more money from the budget. Local governments face the risk of credit downgrades and higher borrowing costs if no action is taken and finances are worsening. An example is Illinois retired teachers who earn annual pensions of about $46,000 on average, and do not participate in Social Security under state opt-out. Even under old accounting rules this pension fund had $37 billion of assets and $81 in future liabilities. Under the new rules the unfunded liabilities could jump to 83% by one estimate, from over 50%.

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Yannis Stournaras, economcs professor at the University of Athens becomes the finance minister in the new administration of prime minister Antonis Samaras. He holds a doctorate from Oxford University in economic theory and policy, lectured at St. Catherine's College, Oxford and at the Oxford Institute for Energy Studies. He was special advisor on monetary policy to the finance minstry and Greece's central bank. His public official positions include vice chairman of the Greek natural gas company and board member of the public debt management agency. He is well qualified to lead the effort for Greece to remain in the European Union with modified terms that extend the achievement of deficit targets by 2 years to 2016, and offer tax cuts and other growth oriented measures to get the Greek economy back on the path to recovery and growth after 4 years of declining GDP. He also brings a sense of committment to the EU, because he was chief economic advisor to Greece's Finance Ministry in 1994-2000 and took part in the negotiations that led to Greece's joining the eurozone in 2001. His strong views about changes needed to Greece's overregulated economy which favors special interests also coincide with the moves for labor and other reforms taken by the Monti and Rajoy governments in Italy and Spain. ...

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Federal Reserve proposals in Dec 2011 for large U.S. banks leave capital cushions at 5% of assets. This phases in the higher 7% of assets rule for capital reserves and a surcharge of upto 2.5% based on bank risk levels under new Basel III regulations for implementation in 2016.

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During the Greek debt crisis in 2011 the ECB bought Greek bonds at a discount to face value to support the price of Greek bonds. It did so under the agreement that the bonds would be worth the full amount. Now as part of the negotiations between Greece and private bondholders (mostly French and German banks) about how much losses private bondholders will take- to make Greek debt serviceable as its economy shrinks and tax revenues decline- the ECB says it will take $11 billion in losses on these bonds as its contribution. The ECB will do this on the condition that Greece comes up with an agreement with private bondholders that makes debt serviceable. This could mean increasing private bondholder losses to 70%. from 50%. The central banks of EU countries hold $12 billion of Greek bonds. The ECB says this will not apply to these bonds. Negotiations are also underway between the EU and Greece for a 20% reduction in Greece's minimum wage and an additional 3 billion euros in government spending cuts, and pension cuts for retirees. The EU is asking for a written committment from the Greek government and from Antonio Samaras of the New Democracy party to the austerity program, as the measures are highly unpopular in Greece and are leading to continued street protests in Athens. ...

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Muhammad Azhar Ali, factory manager for National Foods plant near Karanchi, Pakistan, describes what it is like running a manufacturing operation in Pakistan. National Foods is the largest manufacturer of pickles and other spice products in Pakistan. A big problem is the lack of security and terrorism. This remains a constant cause of anxiety for business people in Pakistan. Its like being in a war zone says the National Foods chairman Abdul Majeed. Another major problem is lack of reliable electricity supplies. Supply of electricity is only one third of national demand in Pakistan. Larger companies such as Lucky Cement generate their own electricity, with Lucky Cement producing 150 megawatts from its plants. Smaller companies like National Foods rely on diesel generators. To conserve electricity many factory, floor office and bathroom lights are turned off. For workers the lack of electric supplies and high inflation affect lives in many ways. National Foods has a weighing department and assesses workers picked up from many parts of Karanchi to see if they are fit for work or are unduly stressed from poor living conditions. This is a side of Pakistani life that is rarely touched on-the daily lives of workers and managers. Ali works harder than other production managers in other countries because of the power shortages and lack of security. He would like to devote time to increase productivity and be more like other production managers. The war with the Taliban has cost Pakistan $68 billion in destroyed infrastructure, security costs, lost foreign investment according to one estimate. ...

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John Harwood provides an insight into the polarized positions of each side in the negotiations and the changes in the national scene that have led to a polarized political climate and a polarized Congress. The political positions on the Republican and Democratic sides in Congress and the Senate are different from any other time in many decades of government. Between Tea party members of the House and Pelosi Democrats in the House there is a serious divide. The senior leaders of each party command less support. Consider the loud "no" given by newly elected House Republicans led by Rep. Cantor to Senate Republican leader Mitch McConnell's backup plan. The written pledge for no tax increases has given the Cantor House Republicans little room for compromise. And as Harwood points out each side, the tea party House Republican group, the Democrats in Congress, and the President, all know there is every chance that they could be voted out of office in 2012.The media is also splintered with vocal positions on either side. As Senator Chambliss of the Gang of Six Senators said on a talk show a week before the August 2 deadline for raising the U.S. debt ceiling: "Frankly, we don't know what's going to happen for sure." ...

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The Congressional Budget Office report in 2011 shows after tax resource flow that a family has to pay for consumption, a better approach to measuring the growth in incomes since 1970 including government help to lower income people and gains in the stock market for upper class Americans. This report shows after tax resource flow for the top 1% in the U.S. tripled from 1970 to 2011. For the middle fifth of the distribution families experienced real net income gains of 36 percent, and the bottom fifth of the distribution real net income gain of 50 percent.This suggests gains of about 10 percent a year if averaged over 30 years for the top 1 percent compared to 1% a year for the middle fifth and 1.5% for the bottom fifth. The report was done in 2011 and this could skew the results. Between 2011 and 2015 the stock market recovered and this would suggest a much higher gain for the top 1% of incomes and the top 10%, while also providing improvement in incomes for the middle fifth and the bottom fifth as unemployment decreased. Working class and minimum wage slowly recovered, and interest income on savings extremely low, with large student and other household debt, so that even at 10-12% gains per year for the top 1%, and 1-2% for the middle fifth of the distribution and 1.5-2% for the bottom fifth the last three decades have not been good for working class and middle income Americans compared to the the period 1950-1970 early postwar period recovery....

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Reasons why the U.S. Stimulus spending failed to give the economy the boost it needed.

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The new minimum wage of $15 effective Nov. 1, 2018, applies to 250,000 current employees at Amazon, 40% of its global  workforce. An additional 100,000 seasonal workers also get the $15 wage. California's minimum wage is set to go to $15 an hour in 2022. The Amazon move helps it attract and retain workers in competition with other retailers such as Target, UPS and Fedex. In doing this Amazon is removing certain incentive pay and stock compensation for these hourly employees. Target has set 2020 as the date for $15 per hour wage, currently it is $12 at Target. Walmart with 1.5 million employees set $11 per hour as the starting hourly pay for workers in 2018. Overall median salary annually for Amazon workers worldwide was $28,446 in 2017, which works out to about $13.68 an hour, but this includes software engineers and lower wage workers overseas. That figure is lower than the poverty level set by the U.S. government for a family of four. Much of the criticism has focused on wages at companies such as Amazon, as lack of upward mobility is a major issue in the U.S. - growing worse over two decades of tech advances, also carrying with it literacy levels for children which have also deteriorated. ...

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The WSJ's Alessandra Galloni speaks with Mario Monti, the Italian premier, for in-depth interviews. Here Galloni and Walker provide an account of what happened during and after the June 28, 2012 summit of European leaders. Monti described the comments of ECB president Draghi in early August- about ECB buying of bonds of Italy and Spain being within the mandate of the ECB if monetary transmission channels were not working properly to reduce yields- as a bold effort following the agreement made at the June 28 summit to support Italy and Spain. Monti expressed the idea that Draghi should feel morally and politically justified if and when he makes the bold moves to rescue the euro. The only problem he says is whether one has to wait till the night before the euro is about to disintegrate for this to happen. This is the first time Monti has publicly expressed the possibility of this happening.

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Professors Cole and Ohanian of the University of Pennsylvania and UCLA, provide a new interpretation of FDR's economic policies during the period 1932-1934 and the period 1937-1941, based on their research. This suggests conclusions different from that of Obama advisor, Christina Romer, and Fed chairman, Bernanke about that period. Changes in economic policies under the Roosevelt administration that helped bring wages in line with productivity, reduced strikes, and gradual elimination of the undistributed profits tax, improved incentives for business investment during 1938-1939. Cole and Ohanian, say that by 1941, before the U.S. entered the war, close to half of the increase in nonmilitary hours worked in the U.S. between 1939 and the peak of the war, had already been achieved. And this was primarily the result of the changes in FDR's policies in 1938. They say a similiar opportunity is presented by the proposals of the Bowles-Simpson commission on deficit reduction, by lowering the corporate income tax through simplification of the tax code and reducing or eliminating most tax expenditures. Improving the incentives for business to hire and invest through this and other steps is likely to do more for the economy than the steps tried so far since 2009....

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The riots in Athens as the Greek parliament voted to support the passage of an EU plan of austerity cuts, including a 22% cut in the minimum wage, pension cuts and large cuts in the number of government employees. The Popular Orthodox Rally party in the governing Greek coalition withdrew its support, 22 members of the Socialist party and 21 members of the New Democracy party in parliament opposed the measures. Elections are planned for April, 2012. Antonio Samaras, head of the New Democracy party, told parliament that he supported the measure only so that Greece could continue using the euro and have "the possibility tomorrow to negotiate and change the policy that is being imposed on us today."

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Jon Hilsenrath of WSJ provides an illuminating account of how Daniel Tarullo as head of the Large Institution Supervision Coordination Committee has changed the way bank supervision and rules are set for U.S. banks since the days of the 2008 financial crisis. Tarullo started the effort under Ben Bernanke and continues this in 2014-2015 under Fed chairwoman Janet Yellen. The New York Fed is seen as ineffective in bank supervision and the supervisory role is now entirely performed under the leadership of Tarullo, assisted by Kenneth Gibson and Timothy Clark. The trio are some of the great unsung heroes of the effort to put the U.S. financial system and the economy on a safer footing.

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Prime minister Mario Monti responded with humor to the remark of former prime minister Berlusconi before the June 2012 summit of European leaders that he could unplug the Monti government, by saying that his government was not a home appliance. In August Monti's long intervew with the Wall Street Journal is published in which he says the Italian bond spreads with German bonds would be 1200 or something if Berlusconi was still running the government. Angelinia Alfano, of Berlusconi's party, the People of Freedom party, calls this "nonsensical" and the parliamentary whip calls this a "stupid provocation." WSJ's Alessandra Galloni intervewed the Italian premier. Monti's office says he called Berlusconi saying he regretted the "banal and abstract extrapolation of a trend in spread values, which was included in a wide ranging interview with the WSJ, was taken as a political consideration, which was not at all the intention."

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Mario Monti, the new prime minister of Italy, is taking on one of Italy's toughest problems, a pervasive culture of tax evasion. The loss to the economy is not measured ony in terms of the loss of money to the Treasury, which one estimate puts at $340 billion a year. This burdens companies and the manufacturing sector with higher taxes and reduces investment in new plants, research and development, capital equipment, which would increase jobs. By encouraging this culture of tax evasion Berlusconi undercut and jeopardized his own plans to bring new economic growth to Italy. Berlusconi prevented allegations of false accounting against his companies by passing a law through parliament that made reduced penalties for false accounting. In Italy one saying goes that "only fools pay." In a country of 60 millon people only 394,000 people earn an income of more than $135,000 a year. "Evasion totale," referred to in newspapers in Italy is about total evasion by some owners of large property. One effort in parliament is to introduce legislation that would require the use of debit or credit cards, electronic transfer or other similiar methods of payment for amounts above a certain amount- with one of the amounts proposed being 100 euros. A recent poll by Demopolis showed that 73% of Italians polled want to see strong action to prevent tax evasion. This is also a strong reason why Monti, Draghi at the ECB, Bundesbank officials at Germany's central bank, and German chancellor Merkel, do not see the ECB's large scale buying of eurobonds by essentially printing money as a solution to eurozone debt problems- it puts off taking the neccessary and essential steps for reviving eurozone economies....

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Von Mark Schieritz of Germany's Zeit Online describes the changes underway following the election campaigns in the U.S., and France, and the Brexit vote in Britain, all signalling the discontent of people left behind by the tech, capitalism, trade and globalization changes of the last two decades. The appeal of one time fringe politicians using racist slogans and divisive rhetoric to appeal to those left behind, appealing to people lacking intergenerational mobility, and without much hope for a better future, is a serious concern. People who are gullible enough, lack college education, or racially isolated so that they are not likely to look carefully at what is being offered in terms of programs and change of competing parties, and likely to overlook the hard and difficult road for corrective course of action, because of anger and pentup fears. Schieritz cites as part of this change the unanimously approved conclusion in its final declaration at the G-20 meeting in Chengdu, China- "The benefits of growth need to be shared more broadly within and among countries to promote inclusiveness." Yet this can be a sort of "too little, too late."  Bankers who are cited in an email going around Wall Street lack credibility with groups on Main Street, to people adversely affected by tech, trade and globalization changes that have been persistently ignored for over a decade, close to two decades. More convincing is the tone of Theresa May, the British prime minister's first statement outside 10 Downing Street- who spoke of the "burning injustices" and her determination to make this a top priority of her government. Still more convincing are the programs to invest $275 billion over 10 years in infrastructure put forward by the leading candidate in the U.S. presidential election of 2016, to provide easier access to public universities and colleges to those left behind, as a sure way to create new jobs and address intergenerational mobility. In fact every leading candidate had made the loss of upward mobility their central plank already in 2015, long before Trump and Sanders started their campaign. The real hope lies in western leaders Merkel, May, and Clinton, all keenly aware students of changes, all women by the way who have sensed the injustice and have the ability to come up with something new and promising for the future, after learning the lessons of the past. ...

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The recent appointment of fast food executive Andrew Puzder as Labor Secretary has caused great concern among union leaders. Puzder supports a $9 minimum wage compared to $15 supported by Democrats. Unions now represent 7% of the labor force, down from a high of 20% during Reagan's time when Reagan appointed a construction company executive as Labor Secretary and cut regulations.  Globalization has thinned the ranks of workers in unions. And the failure of Democratic administrations to stem the shift of factories overseas to China, Mexico and other places, as part of global supply chains focussed on cost, has weakened Democratic support among workers since the period of Bill Clinton. It eroded to the point where Obama won 65% of support among unions and Hillary Clinton won 56% in 2016. Interestingly the Republican Romney gained 33% versus 37% for Trump, showing voters were more inclined to move away from Democrats and only a smaller number willing to support Republicans, but the shift enough to give Republicans a win in 2016 for the presidency. The figures are from a Election Day survey of trade union AFL-CIO, and a larger proportion in midwestern states showed disaffection with policies from Clinton to Obama. In fact Obama spent years promoting another free trade agreement TPP that favored tech more than auto and older industries, just as Bill Clinton had promoted NAFTA, without giving thought to what this was doing to its worker base of support. A similar situation happened with Social Democrats in Germany as a SPD administration moved to the centre and handed Christian Democrats led by Merkel a win in parliamentary elections. As Democrats such as former Labor Secretary Reich, a professor at UC Berkeley who served under Bill Clinton, describe the problems of working class people their is less reflection on the impact of the changes from globalization and how Democrats handled or mishandled it, and more on the politics between the two parties.   ...