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WSJ looks at the 75 years of the US Saudi Arabia relationship that started when US president Franklin Delano Roosevelt met Saudi king Ibn Saud at Bitter Creek, Egypt, on a US Navy destroyer ship in 1945. It has gone through many phases over this period and mainly involved the Saudi kingdom maintaining its supply of oil to the US and Western Europe. This relationship went through an oil embargo during tense periods of Israeli Palestine conflict as in 1983 with an oil embargo that pushed up oil prices. What is different this time is the situation in Yemen where Iranian supported Houthi rebels near the border with Saudi Arabia are engaged in a conflict with the Saudis. Democratic administrations under first Obama and Biden today support reaching a deal with Iran on nuclear weapons development and limit US military support for the war in Yemen. The Saudis for their part are not keen on a regional war and turned down efforts by president Trump to respond to attacks from Yemen. Mr. Biden's envoy has arranged for a deal to reduce tensions between the Houthis in Yemen and Saudis. The diplomatic impasse in relations stems from the Kashoggi incident and president Biden's concern for the human rights situation in Saudi Arabia. Other factors making relations difficult are the economic interests of the two countries diverging. The relationship Roosevelt started in 1945 has changed in its fundamental character. Oil supplies for imports into the US is no longer a factor for the US which was the original interest of president Roosevelt in Saudi Arabia. This changed by 2015 as the US fracking industry enabled US to become self sufficient in oil and able to supply LNG to western Europe. Instead of the US Saudi oil now goes to China. Russian oil also goes to China as its industry expanded with American investment. This has led to a new Saudi relationship with China which has changed the dynamic of the American Saudi relationship. Some of the new aspects of this can also be seen in Saudi relationship with South Asia. Saudi ties have increased with India and India in 2021 was the first country to provide vaccine supplies to Saudi Arabia. Saudis, Qatar, United Arab Emirates are building relationships with India as a close neighbor in the region. Relationships are in some ways improving in the Asian region compared to the period when oil was simply exchanged as a commodity for defense supplies from the US without regard to cultural, educational and other changes in Saudi society. In a sense US and Western Europe paid little attention to the huge democracy of over 1 billion people right in the middle of Asia and followed policies that led to major investments in China and little or no investment in India, and without realizing it followed a policy that the British had pursued in the British Empire of treating different communities and religions as separate as opposed to one community of people in South Asia that were engaged in modernizing, building infrastructure and changing centuries old ways of living. The British Empire was sustained by this kind of thinking, and as long as Indians were complacent and lacked the will to make their aspirations for a better life and infrastructure for modernization this kind of thinking prevailed. The economic crises in Asia have reinforced the idea that there is one community entirely focused on development and modernization in South Asia. The people in South Asia care most about the cost of living and the infrastructure and services for the quality of life they live and their children can aspire for- same in European Union that chose the Greens and chancellor Scholz, and same in the US that chose president Biden to invest infrastructure and people, the same in China and the same in India and the rest of Asia. This is the situation that the US and Britain, and the European Union are now beginning to learn and adapt to that is a constructive aspect of these changes to rebuild the connections and supply chains that were sorely neglected before now. ...

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WSJ's Trofimov talks to some of the 2.5 million refugees and displaced people in the sectarian conflict in Iraq in 2015. He finds a mood of despair and resignation to a permanent partition of the country following sectarian conflict between Shiites and Sunnis. The situation is being dictated by the facts on the ground as the refugees see little prospect of returning to their homes, and the different regions controlled by Sunni, Shiite and Kurdish forces with borders.

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Talks between Speaker Boehner and the Obama White House reached an impasse on debt ceiling and deficit reduction with strong opposition from members of their own parties.

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Kristof of the NYT says the narrative about Hillary Clinton being dishonest is clearly overdone and inaccurate. He says the gaffes about the use of personal email server have unfairly created a distorted narrative. On changing positions on trade and minimum wage- this happens frequently with all the candidates. Some are glib enough for not being noticed, Clinton not a natural politician drawing attention. On Libya, and on Syria, Clinton is blamed for the President's errors and not given credit for pushback in league with Panetta, Gen. Kean and Gen. Jones, that has influenced changes made in 2016, and the president accepting blame for errors. In this instance Clinton has been far from shifty by publicly allying herself with Leon Panetta's position in "Worthy Fights," and Gen. Jones's remarks. Far from having erred on Libya and Syria policy, Hillary Clinton, like Chuck Hagel and others in the administration including Joe Biden, showed exceptional patience in dealing with the president, national security advisor, and McDonough in policy matters- when they were right but the country was weary of what were seen as futile global engagements in remote areas setting too high a bar for any action. Clinton rightly described this as a pendulum swinging too far in the opposite direction after the Bush/Cheney years. On young women and being "progressive" Hillary Clinton is from a older generation that experienced the kind of discrimination that young women fail to grasp, according to a recent analysis of University of Massachusetts polling survey results cited in the Washingon Post. A PolitiFact Pulitzer winning fact checking site shows 50% of the Clinton statments are either true or mostly true, compared to 49% for Bernie Sanders, 9 percent for Trump, 22% for Ted Cruz, and 52% for John Kasich. ...

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A shift in priorities away from focussing on high growth to lower sustainable growth was announced by China's premier Wen Jiabao at the National People's Congress, China's parliament, in March 2012. This shift will reduce investment in infrastructure, power generation and exports, which will affect the level of imports of commodities from commodity producing nations in the Middle East, Australia, Canada and Brazil. It should increase imports of software, computers, entertainment, tourism and high tech goods from the U.S. and Europe. Chinese leaders have said they would make this kind of shift for some years now but growth has consistently increased more than the target rate, and domestic consumption as a percentage of the economy has actually decreased in the last decade. Now 9-10% growth rates may be a thing of the past and the target of 7.5% set this year may be actually closer to the real figure. The Chinese leaders have belatedly realized the need to make these changes now because slowing markets in Europe -which is seeing declining growth and high unemployment- and in the U.S., make the issue impossible to avoid. Wen told the Congress: "Accelerating the transformation of the pattern of economc development... is both a long term task and our most pressing task at present... Domestically it has become more urgent but also more difficult... to alleviate the problem of unbalanced, uncoordinated and unsustainable development." This is his way of saying that its unavoidable and better to start in earnest now, and at the same time recognizing the resistance to change from the stateowned companies and the other interests who have benefitted from surging growth, and now occupy a central role in the power structure. An opinion article in the People's Daily, China's official newspaper, said: "imperfect reforms are to be preferred to a crisis caused by no reforms." The World Bank's president Zoellick is respected by the Chinese leaders. He also urged them to make changes now. The recent report of the DRC, China's planning research arm, and the World Bank, also laid out the new direction away from a focus on infrastructure to domestic consumption. The fear is sudden deceleration in the absence of policy action. The impact of this will be negative for commodities over time, leading to slower growth in Australia, Brazil, and Canada. It should boost imports from Europe and the U.S. of high tech, consumer, pharmaceutical goods over time....

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Some of the roots of the Alawite role in Syria go back to the colonial period. Alawites are a Muslim sect living in the coastal mountainous region of Syria in towns such as Tartus, Latakia and in the mountains. The French setup a Alawite state in 1924-1936 before it was merged with the rest of Syria. The Russians have set up a small naval base in Tartus. As the Free Syrian Army reaches Damascus and suburbs the Assad regime is expected to move to Tartus and the coastal region and mountains. This account by NYT reporters from the area reveal the unreal nature of the conflict and the Assad regime. The seaside town of Tartus swells with people fleeing Damascus and other cities, with people from the Assad regime or allied to it, and the real estate market booms. During the same week other accounts in the NYT reported accounts of cluster bombs being used against civilians by the Assad regime. The civil war brought artillery attacks and air raids by the predominantly Alawite Assad military regime on mostly Sunni civilian populations thorough most of 2012. The Russians, the Assad military and public officials, living what may be the last weeks of this civil war as it takes on a sectarian nature, in some kind of bubble. From the international community only France, Turkey, Britain, and Egypt may retain credibility in Syria after the passive role of the U.S. under president Obama to the struggle for freedom in Syria. The U.S. Democratic administration's distaste for engagements overseas may have carried it to the point of standing by as artillery was turned against a civilian population. France and Britain's role in the Libyan people's struggle, and its lower profile assistance to the freedom struggle in Syria compared to the earlier effort under president Sarkozy, still creates a measure of respect. A no fly zone by the U.S. would have prevented the destruction to civilian population that occurred and salvaged U.S. respect, at very little cost relative to the one trillion dollars spent in Iraq and Afghanistan....

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Economists at the IMF estimate that the public debt of the leading 10 industrialized countries would reach 114% of GDP by 2014, from 78% today. The governments then owe about $50,000 for each person in the country. Unlike World War II this situation is not temporary, because of the pension and health care costs of a population that is getting older. So what is to be done? Without the stimulus, the deep and prolonged recession would lead to greater damage to the finances of these countries. But continued in this manner the government would crowd out private investment and lead to lower economic growth. In some countries, Greece, Ireland, Italy Portugal and Spain it might lead to default, in other countries the real cost of the debt may be reduced through inflation. In the USA yields on 10 year Treasuries reached about 4% on June 10th, in December it was about 2%, a consequence of the economic recovery. If interest rates are allowed to rise too fast, it might abort the economic recovery. A rise in taxes is also not the answer, because in Europe the taxes are already at 40%, in America they are around 30%. But raising consumption taxes at the time when the economy was fragile, aborted a recovery in Japan during Japan's earlier crisis decade. A caution signal that says fiscal tightening can backfire, especially some years after a banking crisis when things are still in a weak condition. Some steps that can be taken are raising the retirement age, which would cut pension costs as people work longer and would boost tax revenues, and eliminating the tax deduction for home mortgage payments in the US. Its important to build credibility that the government and the legislative bodies are serious about controlling the finances and acting with prudence. In America wasteful health care spending is a priority, as this would reduce the burden on public finances considerably , and should be as much of a priority for the new Obama administration, as providing universal health care. With today's finances its not something that can be put off....

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Jan Corzine, Governor of New Jersey has talked to governors from the states of Ohio, Michigan, Wisconsin, New York, and Massachusetts about how best to execute an effective economic recovery stimulus program with the federal government. Here are the ideas they have come up with. The stimulus should cover five areas, infrastructure, countercyclical programs, housing, education, and middle class tax cuts. The principle to keep in mind is to take advantage of the strengths of the federal government and of the state and local governments. Infrastructure investment should be intelligent ones to modernize the capabilities of the country for the next phase of development and competition in the global economy and in making far reaching changes in transportation and energy for sustainable development in a global economy. A key point of Corzine's here is that safety net social programs will need to be shored up or the stimulus effects will be lost. Over the 2 years 2009 and 2010 he suugests the federal government boost its countercyclical spending by at least $250 billion. And it should do this by increasing the federal medical assistance percentages, federal share of Medicaid costs and other health care related programs such as reimbursement to hospitals for treating the uninsured, Temporary Asistance for Needy families, and child care grants. He proposes doubling the federal funding of unemployment trust funds under the Unemployment Insurance Modernization Act, with incentives to cover vulnerable low-wage and part-time workers who are often denied unemployment benefits. Corzine emphasizes this. That even if the Obama administration puts large sums into infrastructure spending, cutbacks in state and local safety net programs would cancel out much of the effect of the stimulus. The reason is simple while the federal government is adding to jobs on one hand, the states without the money would be cutting back jobs and services. This point will be critical in making the stimulus work. The other point Corzine appears to emphasize by quoting Roosevelt at Oglethorpe University in 1932, is that bold experimientation not clinging to rooftops in the flood, will be needed....

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Only 1.9 million hourly workers in manufacturing now earn more than $20 per hour, its down 60% since 1979, according to the Bureau of Labor Statistics. Of all hourly workers in every sector of the economy the percentage of people earning more than $20 per hour shrunk to 18% in 2008 from 23% in 1979, thus losing some of the gains the US made since World War II which helped build the American middle class. One can see this unwinding clearly in the auto industry as wages are being reduced to match nonunion Japanese plants, and the industry itself is going through a huge downsizing fast. The hourly work force totals 76 million or 52% of all workers ranging from managers and professionals to factory and construction workers to technicians, educators and sales people. The wages of salaried workers show a similiar trend but are not converted into hourly amounts. As the numbers for 2007 are at the point where the economy was still booming, the path ahead as things go through a steep downturn can only have serious implications such as a slow recovery for demand in 2010. If a number of trends converge, employers shift to part time employment, auto related workers downshift to lower wages and benefits, shift to nonunion plants in the south or the midwest, and work is offshored or outsourced, this could worsen effects on consumption for years ahead especially with the credit remaining tight and consumers paying off old debt. Frank Levy, a labor economist at MIT, says that all this is happening wihtout a political debate or discussion, as people are worried more about having a job, and only secondly about what it pays and whether they are losing ground. Even the Pennsylvania primary debate, says Levy, between Hillary Clinton and Obama was conducted without quantifying the decline, and no one mentioned the eroding of the $20 per hour wage. What happened to support the consumption and support imports, was to pay for consumption by going into debt or refinancing the home. This has implications that range from the future of export industries in China's booming coastal sector, to how long the recovery drags on, and to what the future would look like....

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McCain's Plan announced in the debate with Obama moderated by Tom Brokaw was clarified further and looks more like the plan proposed by Hubbard in the WSJ. The government would step in and clear up the old mortgages and issue new 30 year mortgages at 5%. Taxpayer money would be involved, about $300 billion but the effect would be immediate relief to all homeowners, and the opportunity to stabilize home prices before a recession makes the situation worse with higher unemployment, more foreclosures. As much as 40% of all mortgages acccording to Deutsche Bank expected to go under water with home values dropping below the outstanding mortgages, and encouraging default in that situation. Lenders who made mistakes would get off without punitive price but even in the purchase of toxic assets by the government there is no certainty that private equity and other buyers of the assets from the government would not benefit. And the banks themselves could unload these assets at below their value to the Treasury because of asymmetric information, the lenders having a better idea than Treasury what these assets are really worth. And bad lending practices especially abusive ones can be prosecuted through investigation, the courts, and tough negotiations by the states and the government just as Jerry Brown obtained a settlement against Countrywide/Bank of America for $8 billion. And some of the people involved in the abusive practices and who benefited from them could have charges filed against them and end up serving time. The advantage of such a plan is that it would be decisive action and comprehensive action to see immediate effects of preventing whole neighborhoods being blighted across the nation, as most people underestimate the speed of this downturn from 6% to 16% home foreclosures from 2007 to 2008 and expected to hit as much as 40% of all mortgages in 2009 or 2010 absent any such action. Making what seems sensible letting lenders take the pain for their mistakes could then end up causing systemwide pain. When other ways of punitive action or shared pain or burden could be found especially prosecuting such behaviour and getting settlements through investigations and tough negotiations with the offending lenders. ...

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This Journal editorial points to a Philadelphia Fed study showing that students in the middle class with higher student debt are reluctant to start small business. The Fed study shows new firms with five employees declined by 17% on average for 2000-2010 in counties where relative student debt was up by 2.7%. The average student loan customer owes $28,000. Student debt has doubled from $547 billion in 2007 to over $1 trillion in 2015. As small business makes up about half of the private economy and generates 6 of 10 new jobs, the effects on small business show the damage being done rising student loan debt.

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New York Times readers respond to Drew Western's article in Sunday Review, NYT of August 7, 2011. Readers express disappointment with President Obama's lack of courage and initiative.

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Canadian tar sands oil production from Alberta faces increasing competition from production by Bakken oil fields in N. Dakota. The increasing production from Bakken fields in the U.S. and the lack of pipeline space to bring oil from Alberta to the U.S. is putting the more costly projects on hold. The costlier projects have costs of about $100 a barrel with crude prices dropping below $90 in the U.S. Projects using steam to get bitumen to the surface are viable at $50 a barrel, other projects that require mining the bitumen to make synthetic crude have costs upwards of $100 a barrel. Costs are rising quickly with the cost of geoscientists going up 14.5% in 2012 and salaries over 200,000. Production workers make $35-$39 an hour and can make about $170,000 a year. The boom has pushed costs higher each year. Suncor Energy, the largst producer, is reviewing the viability of large planned multibillion upgrading and mining projects and cutting capital spending in 2012 by 11%. By 2020 oil sands output is forecast to double from the 2011 figure of 1.6 million barrels a day, according to the Canadian Association of Petroleum Producers. In 2012 about 50% of production is from the costlier mining operations....

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Citigroup is bleeding even as the government has ringfenced $300 billion in bad assets and its not likely to go under. The next step may be to get these bad assets into a bad bank as Bernanke has suggested. Citigroup is now divesting many of the assets like Smith Barney that were hastily put together by Sandy Weil as some kind of financial supermarket. None of the companies with their separate cultures melded together, and managing this was a huge undertaking which never really got off the ground. Now its all coming apart and Citigroup will go back to its core assets.

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Tom Donilon, is national security advisor to President Obama. His experience includes working as chief of staff for Warren Christopher in the Clinton administration, and 8 years as an executive at Fannie Mae before being brought into the Obama circle by Rahm Emmanuel as deputy to national security advisor Gen. Jones. Robert Gates view was that Donilon would be "a disaster." His early experience as a political operative for the Carter campaign to his work for the 1988 Biden presidential campaign, and work at Fannie Mae as a business executive, suggests lack of experience in foreign affairs needed for this role. A focus on efficiency and being able to sync with Obama's thinking on foreign affairs may not be the qualities needed in this critical role.