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Hamas moves closer to the Sunni alliance of Turkey-Egypt-Quatar as it accepts a ceasefire with Israel. Other Arab nations including Tunisia move closer to this alliance. A fall of the Assad regime in Syria is increasingly likely and would lead to Syria joining this group of Sunni nations that stand apart from Shiite Iran.

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Krugman says the kind of spending on helping the US economy never happened. That is relative to the size of the US economy, not much happened uder the Obama administration. As evidence, he cites the figures that total government payrolls have declined by 350,000 since January 2009. And he says government purchases of goods and services increased only by 3% in the last 2 years.

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Paul de Grauwe, a economist at the London School of Economics points to two problems with the June 28, 2012 EU deal that allows the EU rescue fund to buy Spanish and Italian bonds and provide capital aid directly to Spanish banks. One is the limited funds of the rescue fund, European Financial Stability Facility or by its other name European Stability Mechanism. The EFSF or ESM lacks credibility because it lacks resources, it has only 248 billion euros, and has to first raise money in the bond markets. A better approach would be for the ECB to buy Spanish and Italian bonds aggressively, allowing a smaller spread between these bonds and the German bonds, says Grauewe. Germany is the largest shareholder at the ECB and opposes this move as a form of mutualizing of debt in the EU. Grauwe's recent paper shows that the depressed bond conditions for Spain and Italy are driven largely by a psychology of fear and not hard true economic numbers. Christopher Marks, global head of debt capital markets at BNP Paribas, says it is important to create the confidence to get longer term core investors such as pension funds, sovereign wealth funds and insurance companies back into this market for Spanish and Italian bonds by reducing volatility and yield. These longer term investors have left the market creating a severe problem. The shorter term investors, who came into this market in the last 1-2 years, are now the loudest voice saying Spain and Italy are likely to fail. These shorter term investors are either selling these bonds short or getting credit default swaps. A big problem coming out of the June 28, 2012 agreement, is that it is short on details. The details of how the rescue fund will operate, its funding, and the conditions for making making direct loans for stakes in banks or buying government bonds are still to be clarified. Germany's Constitutional Court also will rule on how this would be conducted and the Merkel government would continue tough negotiations on the details creating added uncertainty. ...

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Annamaria Andriotis does enormous service to millions of borrowers for student loans by putting down in simple payments terms everybody can understand the approach to take for a university education. She points out the pitfalls in taking federal loans and following the advice of the student loan office. The federal student loans have an origination fee of about 4.2%, so even if you pay off the loan early you are stuck with the origination cost, which private lenders such as major banks do not normally charge. On a $100,000 loan this could be $4200 right off the beginning, reducing the loan to $95,800. Private lenders offer fixed rates also at attractive terms of about 4%-4.25%, with added reduction of 0.25 to 0.5% for loans with automatic payment. The lenders include Wells Fargo, Suns Trust. It is important to have good credit ratings. Scores of over 700 or 720 in credit ratings provide the most attractive rates, yet a good credit rating is also acceptable. FICO scores range from 350 to 850 for credit ratings. Added reduction of quarter to half percentage point for automatic payment. A loan for $100,000 taken with Federal PLUS loan and government guarantees could run 7.21% for fixed rate. Andriotis points out that compared to the $4586 payment on a $100,000 student fixed rate private loan at 4.25% for 10 years, a federal guaranteed PLUS loan at fixed rate of 7.21% for 10 years would cost $3541 more over the life of the loan. Mortgage loans for 30 year fixed rate jumbo loan is about 4.14%. In September 2014, the rates for jumbo mortgage loans offered by private banks are now converging at the 4.18% for conventional mortgage loans. For auto loans zero percent financing from auto company lenders such as Toyota Financial are a better option. Rates of 2% on auto loans may be available from private banks and credit unions. SunTrust Banks has an online lending division LightStream that is offering personal loans to borrowers having good credit ratings scores, with interest rates of as low as 1.99%. The borrowers with excellent scores can get the unsecured option at the best rate of 1.99%. Credit unions are offering lower auto loan rates of 2.64% and 2.74% compared to banks charging average of 4.79% and 4.9%, according to data from SNL Financial. Millions of borrowers with good credit ratings, especially for student loans, need to start early in checking out the rates and shopping for the best rate. A good credit rating of parents can enable a student to make a huge difference in payments for undergraduate or postgraduate education, and avoid the unnecessary burden of high interest rate loans in a low interest rate environment....

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Working America, an arm of the U.S. trade union the AFL-CIO, conducted conversations with 350,000 voters in 17 U.S. states. Here a representative of Working America, says the overwhelming response to the question "does it make a difference whether Democrats or Republicans are in power for my well being," is reflected in one of the responses- "does it even matter?"

The suggested approach here is for Democrats in particular who have represented working class voters in the past, to start with a fresh approach by creating new conversations with working class Americans.

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This editorial in the Journal provides reflections on U.S. foreign policy in the Obama years and advice for U.S. presidential candidate Mitt Romney before the third presidential debate on foreign policy on Oct. 22, 2012. It says the U.S. has always done better from a position of economic strength and defense preparedness in addressing foreign policy issues. It also points to the failure of president Obama to support the freedom struggle of the peoples of the Middle East, and a withdrawal from Iraq without securing an agreement that failed to consolidate the gains of the long conflict and resources spent in that region.

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O'Malley, Sanders, and Clinton emphasize the issue of wages, income disparities, rising inequality, and a shrinking middle class in the first Democratic debate of the U.S. 2016 presidential election. Clinton points out that "at the center of my campaign is how we're going to raise wages." Sanders says that "the middle class of this country for the last 40 years has been disappearing." Clinton points out her opposition to the Trans Pacific Partnership trade agreement because it does not help raise American wages. Clinton calls herself a progressive, but "a progressive who gets things done," and a moderate when it comes to getting things done. Sanders points to the "deep injustice, an economic injustice that threatens to tear our country apart, and it will not solve itself." Sanders points to the wealth concentration in the U.S. "with the top one tenth of 1 percent owning about as much as the bottom 90 percent, and 57% of all new income going to the top 1 percent." Clinton comes to Sanders defense on the issue saying "it's our job to rein in the excesses of capitalism so that it doesn't run amok and doesn't cause the kind of inequities we're seeing in our economic system."...

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The yuan is up 5.5% since the peg to the dollar ended in 2010, reaching 6.469 to the dollar. But this is not helping the U.S. trade deficit. The U.S. Bureau of Labor Statistics shows the price of imports from China are up 2.8% in May over the same month prior year. And the trade surplus for China in the first four months of 2011 is higher than the same period in 2010. What is happening? The improvements in productivity of Chinese manufacturers and the acceptance of lower margins is reducing the effects on trade balance of a small appreciation of the yuan, so that only a fraction of that appreciation is showing up in higher prices for Chinese goods. Also significant is that the yuan's small appreciation against the dollar is not enough to make up for the dollar's fall against other currencies. The yuan is down 8.3% against the euro and has actually declined 3.7% on a trade weighted basis in the last year.

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This report by Martin in the NYT points out that Ohio no longer plays a critical role in U.S. presidential elections. It was critical for a Bush win over Gore, and president Obama carried it by 2 points against Romney in 2012. It is critical for Trump to win. For Hillary Clinton other states are gaining importance as they better reflect the demographic changes in the U.S. and the mix with minorities- states such as Georgia, N. Carolina, Colorado and Florida. Ohio has not seen an influx of Hispanics as other states, and is now more white, more evangelical voters, and reflects a mix that was prevalent earlier. 

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Landon Thomas Jr. looks at the situation in Spain and finds it hard not to conclude that austerity policies are not working in the absence of economic growth, and increasing unemployment. Unemployment in Spain is at 24% and growing. Deficit reduction is likely to take longer with the deteriorating economic outlook. Spain's economy minister, Luis de Guindos has announced Spain plans to increase consumer taxes in 2013, including the VAT, which is currently at 18%. This would further depress consumer spending. Bondholders sense dangers from lack of economic growth and competitiveness, as much as they sense dangers from uncontrolled regional spending. As a result investors are leaving Spain. According to analysts at Credit Agricole Cheuvreux in Madrid, 100 billion euros (132 billion) have left Spain, including distress sales- coming from insurance companies, pension and sovereign wealth funds reducing holdings of Spanish bonds.

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The Economist points out (in this cover issue on India-Pakistan relations) several fundamental facts. The first is that the current state of relations betweeen India and Pakistan hurts Pakistan the most. It makes a much smaller country and smaller economy bear the burden of defense against a large neighbor- defense takes up much needed allocation of funds for infrastructure and development, education and healthcare. It also weakens democratic institutions and their development by an overdependence on the military for governance. Poor India-Pakistan relations have significant adverse effects on the U.S. In fighting the Taliban U.S. forces are fighting a force that Pakistan's military helped create and support from its early beginnings as a way to counter Indian influence. With an Indian-Pakistani peace settlement of issues in Kashmir and other outstanding issues the U.S. would be in a significantly better position to disengage from the region, especially when the entire Middle East is moving in a new direction in 2011. Consider the difficulties in establishing peace in Northern Ireland, and between Turkey and Greece, and the difficulties of establishing peace between India and Pakistan cannot be considered even more difficult. Pakistan and India muddle along- neither side is doing much to take the initiative. For the U.S. disengagement from South Asia can be best achieved by pushing for a settlement between the two countries. Pakistan and India have much to gain from a settlement. Considering the progress made in Ireland, such places as Yugoslavia, and in Turkish-Greek relations, there is a lot more that can be done and should be done to bring India and Pakistan together. In Ireland diplomatic efforts were made by U.S. envoy George Mitchell, and in Yugoslavia U.S. envoy Holbrooke made diplomatic efforts towards the Dayton accords. Greek-Turkish relations have advanced to the point where Erdogan and Papandreou, the Greek and Turkish prime ministers, discuss solutions to the Greek debt crisis. This includes options to reduce Greece's defense expenditures in the light of Turkey's new foreign policies. The lack of such efforts to break the deadlock between India and Pakistan by the U.S,. the U.K. and other countries involved in the NATO mission in Afghanistan, the emphasis on a military solution supported first by Gen. McChrystal, and then by by Gen. Petraeus, all show a lack of understanding of the real issues that need to be tackled- issues relating to a peace settlement between India and Pakistan....

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Economist Paul Krugman points out the risks of a trade war in the tariffs announced for steel and aluminium by president Trump. Yet he accepts that he advocated stronger action on China's currency in 2009-2010 when the U.S. economy was weaker. In the past on the TPP agreement proposed by president Obama, Krugman said that it would have an insignificant impact as most of the gains on trade were already made. Here Krugman is critical of the language used by president Trump about trade wars being "easy."  This is taken out of context though as president Trump is saying that it is easy in the context of a country enjoying a $100 billion surplus with the U.S., because that country is going to have incentives to maintain a good trading relationship with the U.S. Essentially this means that the steel industry in the U.S. benefits. China also benefits as it closes many of the older steel plants that led to overproduction. This would reduce overcapacity in China's steel industry, a problem China's economic planners see as a priority. China already is making the shift to higher technology products and this process will be accelerated, as it puts less emphasis on steel and metals as it did in its earlier stage of development. As a result contrary to textbook economics this has the potential to be a win-win solution for the U.S. and China in the long run. So little was done under the Bush and Obama administrations to manage trading relationships with other countries so that the interests of small communities across the U.S. were protected from unfair trade- that Reagan administration trade expert Robert Lighthizer took up the cause of the U.S.,workers in these communities. Surveys showed U.S. public opinion also had shifted among educated, professionals and middle class on this issue by 2015, against unfair trade that hurt U.S. interests. Robert Lighthizer is now the Trade Representative for the U.S. in the Trump administration. Reports in the WSJ about the discussion within the Trump economic council, show Gary Cohn favored not imposing the tariffs on steel and aluminum. Lighthizer advocated the tariffs and was able to convince the president.  For Trump this presents a win-win situation, as a mild response by China -and other trading nations that have enjoyed a favorable situation in the past -with its huge surplus and favorable trading relationship with the U.S. would present a win for the president. Economist Krugman accepts this when he says tariffs in the current context of the trading field- that is more favorable to other countries- are not such a big deal, only the use of such policy that is likely to endanger world trade.  As in much of the debate that takes place this adds to the headlines today yet provides delayed and limited relief to communities across the U.S. devastated by world trade as documented by experts who studied trade patterns and their effect on regions across the U.S.  As the WSJ points out in one report the trade deficit itself may continue to grow under president Trump because of other factors. The U.S. dollar surged 8% during the last 2 years of the Obama administration with the economic recovery underway. With Trump's election win the dollar surged another 3%. This may play a bigger role in the direction of the trade deficit than the new steel tariffs announced by president Trump. Workers and unions matter. As TPP pushed by Democratic party president Obama was opposed by the unions, and by the auto industry (workers and auto companies) in the midwestern states which suffered a hollowing out in the last decade. A WSJ survey after the election showed Clinton received 56% support from union workers in 2018 compared to 65% for president Obama in the 2012 election. Some of that erosion in support may come from Obama's TPP stand fervently opposed by the unions and workers in the auto industry. A similar situation took place in Ontario with hollowing out of the auto industry in this large industrial state in Canada and led to the rejection of the Conservative government and election of the Liberal Party under Justin Trudeau. This lesson is so far lost in the Democratic Party's debate.     ...

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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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Larsen says the EFSF should get the funding it needs to recapitalize troubled European banks, as the first step to solving the eurozone financial crisis. Banks in Spain and Italy that failed stress tests would get funds to build up their capital. Creditor haircuts should be part of the effort to reduce the debt burden of troubled eurozone countries.

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Mario Draghi faces his first test as head of the European Central Bank as Italian bond yields approach 8%. Draghi has limited purchases of bonds of troubled EU countries to 5-10 billion euros each week. This has been sufficient to keep Italian bond yields from going out of control, but high enough to keep pressure on governments in Italy, Spain, Portugal and Greece to make necessary changes. France, Germany and other countries in the EU are working on new rules for making strict budget discipline legally binding, with enforcement sanctions by a EU budgetary authority. Germany is pushing for the new rules. France's Sarkozy with a legacy of Gaullist reluctance to surrender sovereignty in such matters had resisted such calls in the past, but is moving in the direction of convergence of fiscal policies as the only way to preserve the euro currency and the EU idea alive. Draghi is taking a flexible stance on inflation and lowering rates compared to his predecessor, Trichet. He sees signs of slowing manufacturing activity and credit tightening in Europe as signs that inflation will come down from above 3% to something closer to the 3% target set by the ECB. Economists expect him to lower interest rates for the eurozone to 1% from 1.25%, when the ECB meets in a week. The manufacturing purchasing manager's index went down to 46.4 in November, below the breakeven point of 50, which signals a contraction. Output and orders were down across all of Europe, including Germany. Economists say Draghi has left open the possibility of larger bond purchases if the new rules are made legally binding on eurozone members....

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Analysts see the likelihood of Greece exiting the eurozone at over 50%. The actions of the ECB under Mario Draghi to provide funding to weak banks through the Long Term Financing Operation have reduced the effect the effects of contagion from a Greek default spreading to banks in other EU countries. The fiscal pact signed in Jan 2012 at the EU summit with automatic penalties for countries lacking budget discipline provides Angela Merkel more room with her domestic political base to support the EFSF's capacity to help other eurozone countries. Greece with its deteriorating economic situation would then be considered a special case.

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Former finance minister, Rodrigo Rato, resigns as executive chairman of Spain's Bankia bank. Spain's Bankia bank is believed to be one of the banks mentioned by the IMF that will need government help to address 32 billion euros in bad loans. Bankia bank is the result of consolidation in 2010 of seven of Spain's Cajas savings banks in a government led restructuring. Bankia is expected to get 7-10 billion euros from the government in the form of convertible bonds. The government gave $4.5 billion to Bankia to absorb some of the losses in 2010. Bankia made an IPO offering in 2011 in 3.3 billion euro listing. Since then the shares have lost one third of the value. Experts are uncertain about the extent to which this will restore confidence.

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Edmund Phelps, is 2006 Nobel prize winner and director of the Center on Capitalism and Society at Columbia University. Phelps offers a deep reflection on capitalism and what it is as a system and isn't, from the insights gathered and knowledge accumulated about its workings- conditions in which operates best, and conditions under which it is stressed or fails. It is the actors and overseer's, the public's ignorance about how the system works, the insights about its advantages and its serious hazards if neglected, that lead him to say we need deep reform and re-education. Capitalist systems, he says, are mechanisms by which economies may generate growth in knowledge- with much uncertainty in the process owing to the incompleteness of knowledge- with growth in that knowledge leading to income growth and job satisfaction. The uncertainty can be serious and dangerous if not accounted for, and the knowledge offers opportunities for personal growth, problem solving and exploration. There has been an intellectual failure in developing a wide understanding of its benefits as well as its serious costs if not kept in check, costs that arise from uncertainty and moral issues of proper behaviours if not properly guided. This is an admirable and clear expression of what capitalism is and how it should be understood....