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More doubts about the $200 billion program that will lend money to private investors to buy securities backed by student and auto loans, credit card debt and small business loans, called the TALF or Term Asset -Backed Securities Loan Facility. The Fed will provide these loans at attractive interest rates and provide an insurance policy for possible default of some of the securities, as investors stoped buying in October 2008. This is a vitally necessary step to keep consumer lending going as it collapsed in October. Lenders package these loans into securities and sell them so they can make more loans. See the link and graph on this. But will it stimulate purchases of automobiles and other items? It will keep the lending going but the problem lies in that lenders are asking for higher credit scores from consumers to make loans, and banks do not have confidence in consumers just as millions of consumers have damaged their creditworthiness by missing or late payments. And consumers are reluctant to borrow and make purchases. And while this is a necessary move to keep unclogging the credit channels in the system by the Fed and Treasury, it still means in actual practice to be a limited lending and borrowing to make the continuing slide in demand a continuing fact. Small businesses may fare better with credit unions which should pick up their lending. The situation with mortgage lending is again the same with higher credit scores required and millions of homeowners under water not able to take advantage of the lower rates to refinance. Cameron Findlay, the chief economist at Lending Tree says that at the end of the day it is not just about lower rates but also of qualifications with credit scores of 720 required and a down payment of at least 20%, at a time when unemployment is rising and wages declining. So he sees little or no significant meaningful impact....

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Matt Miller's stump speech as an independent candidate and his 7 proposals for Renewing America.

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This report in the Economist magazine says views in the Trump base of support in rural areas and among white working class voters are likely to persist for some time. One reason given is that many of these people live in isolation and little contact with the more educated urban voters in America. Another factor cited here is that only a fifth of voters follow politics closely, and of these voters only a small fraction have a good grasp of the positions of the two major parties. Most people follow the instincts and thinking of the groups they are with. As a result many of the issues covered in the media such as climate change and U.S. withdrawal from the Paris agreement, the Comey firing and the Mueller investigation into Russian meddling in the election, president Trump's Twitter comments, are not having much impact on the president's ratings among his support base at this early stage of the Trump presidency. Yet it is too early to tell only 6 months into the Trump term in office. After 8 years of president Obama's two terms in office voters who feel left out are not likely to change their views in so short a time. Republican voters as distinct from the core Trump base voter are also unlikely to change their views after 8 years of Democratic party administration. By staying close to traditional Republican party positions president Trump is likely to continue to have the support of the lifelong Republican party voters unless things change. Can a centrist position emerge after voter fatigue with excessive partisan opinion, as voters seek to make America a more quieter place and a consensus on working together to lift all boats emerges. This could be expected as time passes.   ...

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Resistance to EU reforms for a Single Sky Plan by controllers and national aviation agencies. The EU Transport Commissioner, Sim Kallas, is pushing the Single European Sky plan. This is being planned for January 2012. With the creation of the Single Sky national barriers would fall, national air traffic bureaucracies would give up powers, and controllers in European countries will have to work more efficiently and may face job cuts. Europe's air traffic system is splintered. There are 39 national agencies, and Eurocontrol with 64 control centers. Europe has twice as many bureaucrats and support staff compared to the U.S. European air-traffic agencies costs per flight are 75% higher than the FAA's, mostly because of labor costs. According to Eurocontrol, air traffic in Europe went up 1% in 2010 over 2009, but delays went up by 34%. Over 40% of scheduled flights in Europe were over 5 minutes late in 2010- the comparable figure for the U.S. is a little over 25%. This splintered situation became an obvious drawback during the volcanic eruption in Iceland, when the lack of a single regulator meant the lack of a common standard. In 2009, the EU presented its own program that would group 32 national agencies into nine units called airspace blocks, which would given the task of breaking down internal barriers and integrating operations A common set of standards for all air traffic agencies would be set, and advanced technology would be used to support safety and efficient flight management. This program is now set for initial implementation in January 2012. As part of this effort European governments like Spain are tackling their high air trafffic controller costs....

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The memo to U.S. president Reagan written by his economic advisors in November 1980 before his first inauguration. Inflation was running at 13% and the economic problems looked as intractable as they do today. Advisors included Milton Friedman and George Shultz. The memo called for setting steady policies for the long run to encourage investment and growth, and at the same time steady monetary policy. This is different from the repeated quantitative easing efforts by the Federal Reserve responding to financial markets, and the Obama administration's stimulus efforts that have not led to long term growth. On the long term perspective the memo said: "The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success." The memo was released by George Shultz.

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Gerald Seib of the WSJ says president Biden is coming back with new actions to revive the Democratic agenda after a challenging period in the first year. Yesterday's first formal press conference of 2022 gave Biden an opportunity to respond. Why the WSJ, NYT, did not cover on their online edition front pages president Biden's first formal press conference on Jan. 19, after 1 year of the Biden administration, will remain a mystery. With the American press acting this way it did not take much for Germany's DW.com to run the story with the title "Biden's first year weighed down by disappointment," with a thoughtful Biden at the press conference replaced by a picture of Biden staring downwards.  This is only the first year of the Biden administration. Actions are planned to ease the supply chain situation and bottlenecks at ports. Much is made of inflation, Afghanistan, Ukraine, by Republicans assailing the Biden record. President Biden responded to this by asking at the press conference what Republicans are for. On Afghanistan Biden held firm on not investing billions of dollars every week when there is so much need in America and the rest of the world at this time of the pandemic after a failed adventure for 20 years in "a graveyard for empires."  Biden pointed to the bright spots in 2022- vaccination and testing achievements in the face of anti-vax sentiment with 200 million vaccinated, the job creation in the economy with unemployment way down and wage increases by employers, and the $1 trillion in infrastructure spending tackling much needed projects state by state with immediate impact. Rarely has a president faced so many challenges in the first year as Biden pointed out- vaccination drive in the face of the Delta variant and anti-vax sentiment, the Ukraine crisis with a president Truman period like event of the Berlin Wall coming up just potentially around the corner, and efforts to tackle problems left untackled for a generation in infrastructure, for working families and climate change. Scoring on infrastructure spending, one of the three, with the other two for working families and climate change to be tackled in the remaining three years and beyond.  Biden also told the American audience at the press conference that he was reminded of what his father used to tell him- that if all goals are equally important, nothing is important. In saying this he said help for working families through child tax credit, child care assistance, community college education funding, health care costs, climate change investment were priorities for his administration that would be tackled step by step. And he pointed out from the outset of the conference that only one or two senators were blocking the party's plan for children and working families. All 48 other senators were united in the Democratic party behind his plans for workers and families. As were 5 Republican senators who he said he would not disclose because of confidentiality. In that sense president Biden already has the majority he needs in Congress. This is not happening because of the peculiar situation of the 2016 and 2020 elections in the US and also in Europe- the historical problem of administrations of Democrats in US, Social Democrats in Germany, and Labor in Britain having give up on their working class families and middle class roots. Tech revolution and internet has further complicated the situation with economic changes, tech companies not paying taxes normally due, and tech workers shifting to Democrats yet living in a world distant from working class families fracturing social cohesion. This is changing in Germany with Scholz in Germany with the help of the Greens determined to restore the dignity of working class families, for Biden with a similar coalition, and a process underway in Britain as Labor returns to its roots. In essence Biden was saying- the process of unwinding decades of unwise policy that hurt America as a nation and leader of the free world would take time, requiring a patient step by step approach. To bring America closer to its own roots and Jefferson's immortal words of "all men are created equal and endowed by their Creator with certain unalienable Rights, and among these are Life, Liberty, and the pursuit of Happiness." Jefferson went on to say in the Declaration that when government becomes destructive of these ends it is the Right of the People to alter it.   ...

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Gordon Brown, former prime minister of Britain from 2007 to 2010, chaired the April 2009 G-20 meeting that came up with ways to tackle the global financial crisis. Brown also led the way by recapitalizing British banks, a step the U.S. followed. He comments on the volatility in financial markets in August 2007 following the S&P credit downgrade of the U.S.. Brown gives an incomplete grade to the tasks the 2009 G-20 set out to accomplish. He points to three goals the G-20 had set in the middle of the financial crisis in April 2009. The first was to prevent a recession from becoming a depression. The other two were to establish a financial stability regime, and a compact for growth. These two became paper promises says Brown. Brown sees the best approach to prevent a lost decade is for U.S. and Europe trading their way out of a downturn as the Asian market absorbs more industrial goods from Europe and the U.S. This includes policies that would keep commodity prices low and ways of coping with currency shocks. Analysts have pointed to an export led recovery as one of the solutions the U.S. was hoping to achieve with a lower value of the dollar. This has had only limited success because of deep structural problems- high consumer indebtedness, bad debt at the banks, weak housing sector following the mortgage crisis, and a rising U.S. deficit- which will take some time to clear. Brown does not come to grips with these underlying imbalances built up during the boom years of the last decade, both in Britain and in the U.S., during which he was the finance minister of Britain....

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France is moving quickly with spending on the $37 billion stimulus. Public buildings, museums, cathedrals and historical sites are being renovated in 2009. About 50 chateaus, and 75 cathedrals are part of 100 million euros for cultural centres. About 75% of France's stimulus money will be spent in 2009, in contrast to the slow work in the USA.

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This analysis in the South China Morning Post shows that some of the nuclear options China has in a trade war with the U.S. are not as effective as they appear. Selling off China's huge Treasury holdings would lead to a situation where there are no buyers on the other side. It says private sector bond buyers would run a mile, and the lack of buyers, actions by the U.S. government freezing these assets could render them effectively worthless. The bond yields would jump but only for a short period as the Federal Reserve would step in to buy bonds, and yields would stabilize with the actions of central banks of U.S., Europe and Japan. A dent in the dollar would only make Chinese goods more costly in the U.S. exactly what U.S. tariffs are trying to achieve. A 10% devaluation of the yuan would have the effect of creating expectation of further devaluation, and lead to capital outflows from China on a large scale. A small devaluation in 2015 led to a large outflow. This would lead to a significant loss in foreign exchange reserves for China.  In this way China's deterrent would be less effective than it appears. ...

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John Steele Gordon has done a good job of covering the history of banking in the United States since the days of Alexander Hamilton. One of his books is "Hamilton's Blessing", describing the first effort to set up a central bank in the US, the Bank f the United States, modeled on the Bank of England. Here he describes the resistance by Jeffersonians and their successors like Andrew Jackson who did not understand the purpose served by a good central bank and did everything to either dissolve it or to not give it the powers and the authority and the staffing that it needed. It was not till after the crisis of 1907 in which JP Morgan acted as the central bank in loaning his own money to prevent a bank and financial panic and collapse, that the first central bank the Federal Reserve was set up in 1913. Even then it was not given the authority and powers and staffing needed to command the economy in panic or financial collapse which happened in 1931. Part of the reason the crises were less frequent after 1931 is because of a better understanding of economics and also because of the Federal Reserve's ability to step in during a crisis. What went wrong in the 1990's with the S&L crisis and in 2008? Gordon points to a system of undue political influence as one big problem. And the lack of a unified, coherent regulatory system free of undue polticial influence. Both in the 1990's and in 2008 Congress and the regulatory authorites failed to keep undue political influence from distorting and damaging the financial system. In the 2008 crisis ideology simply componded the problem as deregulation and dependence on free markets without any checks simply compounded the problem into its huge dimensions. ...

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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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Hysteresis is the term used for entrenched stubborn unemployment especially as workers stay on the job market for so long that they become dispirited and permanently unemployed. Britain's New Deal policies introduced by the Labor party do not work well in such situations because forcing people to find jobs has to be accompanied by jobs being available. The most successful so far are job subsidizing programs like Germany's Kurzarbeit. Kurzabeit encourages companies to adopt shorter working hours and reduce job losses and layoffs, because 60% of the lost income is paid to workers by the government. Since September 2008 the numbers taking advantage of this scheme went up from 80,000 to 1.4 million in June 2009. At present the OECD counts 22 governments that support a shorter working week to reduce job losses.

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Hingh unemployment in important states including Florida, Pennsylvania, Colorado (8%). Unemployment has improved in Ohio (7%), Virginia and Iowa (6%).

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Speaking at the Economc Club of Indiana, U.S. Federal Reserve chairman Bernanke, says responsibility for fiscal policy lies fully on Congress and the administration. Monetary easing through QE I,II and III, which reduces the borrowing costs of the U.S. government by keeping interest rates low, cannot be seen as taking pressure off Congress and the administration, as critics claim. He countered criticism by saying: "Suppose notwithstanding our legal mandate, the Federal Reserve were to raise interest rates for the purpose of making it more expensive for the government to borrow. Such an action would substantially increase the deficit, not only because of higher interest rates, but also because the weaker recovery that would result from premature monetary tightening would further widen the gap between spening and revenues." Lawmakers would be no more inclined to come up with a program to reduce the deficit in this situation argues Bernanke. This statement of Bernake only reaffirms that low interest rates are an important goal here in the U.S.,- just as they are for France and other countries in Europe that are faced with tackling large debt and deficits- and are part of the overall solution for the government to manage its finances....

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NYT reporters Lyman and Eddy show how the city of Weimar in Germany is coping with the arrival of about 900 refugees, and how well the integration efforts are working.

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Krugman points out the risks for the U.S. economy as the U.S. loses export competitiveness with the euro reaching parity with the dollar. The huge shift from $1.50 to the dollar at one point to parity gives Europe a sudden strong boost. Europe needs the boost to escape a deflationary trap, and there is little that can be done for capital flows and exchange rates, says Krugman. He points out that many Federal Reserve governors were clueless of the impact this could have on U.S. growth, sanguinely assuming the U.S. would boost growth in 2015. Better says Krugman for the Fed to be very careful about raising rates at a time when wage growth is sluggish, and inflation low.

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Dow Chemical CEO Liveris says he sees signs of recovery in China in 2013. He says small and medium sized businesses in China have better access to financing in Dec. 2012 after a period of destocking and hard times accessing credit.

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Prince Mohammed bin Salman, son of the Saudi king Salman, oversees economic policy. He says stock sales of 5% of Saudi Aramco will be used to create a sovereign wealth fund of about $2 trillion that would help create the jobs with income from overseas investments and projects at home. About three times the jobs created in 2003-2013 will be needed with the demographic changes, according to McKinsey consultants. This will act as a diversification away from oil income dependence.