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Israeli prime minister Netanyahu retracts his statement about rejecting a two state solution in an interview with Andrea Mitchell of NBC News. He says he meant that it was not possible under the current conditions with terrorism in the Middle East, Iran pursuing a nuclear weapon, and the Palestinian Authority having an alliance with the militant Hamas movement. In 2009 Netanyahu said he supported a two state solution in a speech at Bar-Ilan University, and the statement before the election was meant to bring out larger number of right wing votes. He also clarified his comments about Israeli Arabs "voting in droves," as meant to bring out large numbers of his own voters to vote, saying Israeli Arabs voting was "sacrosanct." The White House response was to say that it was free to support a two state solution at the United Nations, and U.S. president Obama discussed the comments on Israeli Arabs- seen widely as racist baiting- with Netanyahu in a phone conversation. The rift between the two leaders is now seen as irreparable and bigger than ever....

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The cushion of pandemic savings of US households is thinning About 35% of it is spent already and by the end of the year 65% of it will be spent, says this report in WSJ. American households accumulated $2.7 trillion by the end of 2021 in extra savings during lockdowns that restricted spending and with stimulus government aid. At the exact time when transfer payments by the US government to households stopped there was inflation lowering the purchasing power and this has resulted in some households increasing credit card balances, dipping into savings and cutting spending. This is what economists are seeing at the Fed as resistance to price increases. Estimates show the percentage of disposable income saved in the US doubling to 16% in 2020 from 8% in 2019 with lockdowns, then dropping to 3% in 2022 with extra spending, and up to 4.5% by the end of 2023. This will have the effect of putting up resistance to inflation and lowering the Fed's interest rate increases to cut inflation. ...

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Wages are now consistently up more than inflationary pressures since mid 2023 to July 2024 by about 0.6 to 1.0% in Labor Department graphs about cost of living. This is good news for the US economy. It shows the policy of president Biden investing in rebuilding infrastructure and Science/Chips, and renewable energy is delivering for the American people alongside cost of living actions by the Fed's Powell and Biden. For the first time since 2021US CPI index for inflation from the Labor Department drops below 3%. It drops to 2.9% for July 2024. The Consumer Price Index increasing by 2.9% over the same month in the prior year 2023. This shows a definite trend for the cost of living to moderate after the supply chain events that increased inflation leading to lagging efforts for wages to catch up- cost of living issues for ordinary Americans. The costs of medical care and automobiles, automobile repair, food, all moderating. Housing costs still to moderate with higher interest rates.  ...

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The most important way out of this crisis- which is at bottom a crisis in homeowners defaulting and walking away from their homes in large numbers to unsettle everything the Fed has done so far for the credit markets- is to do what Bernanke and Feldstein have urged months ago. And that is make sure large numbers of homeowners have do not walk away from their homes because they are under water. And the way to do this is to reduce the loan burden with the government stepping in. See the link to Feldstein. But Congress is not upto this task and there is no leadership to undertake this, and the Bush Administration is not upto the task either. So if the steps are lukewarm and action is a bit late as politics takes away precious time then the foreclosures and price declines spiral will be a serious danger.

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Italy starts its first gradual reopening on May 4. Parks will reopen, and people will be allowed to visit relatives with masks. Schools will remain closed till September. Prime minister Conte said in outlining the plan "if you love Italy, keep your distance." Italy has over 26,000 deaths from coronavirus. Mr. Conte said social distancing measures will be needed for months to come. 

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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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Only the week before Tuesday April 7 Pakistan Foreign Minister Dhar failed to convince China to get involved. April 7th Tuesday in the US 1.30 pm US time, 8 pm Islamabad Pakistan time, China finally decided to jump in to convince Iran to accept peace talks in Islamabad. It is quite possible that behind the scenes the US was talking with China which has a 25 Year Comprehensive Agreement with Iran signed in 2021 that is the main support for the Iranian economy. China acted to reassure Iran that talks in Islamabad would proceed smoothly, and persuade Iran to accept ceasefire and talks. Why? Knowing that brinksmanship by US and Iran would lead to unforeseen consequences and hurt China's economy with oil price volatility as well as  hurt the US economy, and hurt the prospects for the planned May14-15 visit by DJT to Beijing to improve economic and political ties, both China and the US wanted to do everything to prevent this from happening. The result a hastily arranged peace talks in Islamabad so that by 4 am Islamabad time on Wednesday or 6.30 pm US time on Tuesday evening the ceasefire had already been agree to by US and Iran, according to this report in The Guardian from Pakistan. The crux of the matter was that it would affect US and China's economy with oil volatility, and US-China relations by jeopardizing May 14-15 revised date for DJT visit to Beijing. This good sense prevailed over all the war rhetoric and the media information and disinformation. It is confusing because of all the misinformation, but becomes clear when one understands this in the context provided in this report from Pakistan by the Guardian. Why Pakistan? For Pakistan the missile attack the day before of a Saudi petrochemical complex by Iran was drawing Saudis into the war and Pakistan has signed a defense agreement with Saudi Arabia that requires Pakistan to support Saudi Arabia if it gets into a war. For Pakistan it was a fragile situation that would be a catastrophe with unforeseen consequences on its economy. Already schools are closed for 1 month in Pakistan and oil is in short supply, paying for it at $115 or $125 a barrel would put severe strain on Pakistan. Who wins, who loses is being told in the media- much less on the good sense that prevailed  the efforts and the predicament of the large powers China, India, the US, and Germany, European Union, the poorer countries, all hurt economically, caught in a war they do not want, do not need. ...

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Rise in prices of milk, first price increases in 30 years, and other food, will cut into Japanese consumption, as Japanese prices measured by the CPI index rose1.2 % from a year earlier for month of March. This CPI index includes energy and excludes fresh food. Bank of Japan is likely to lower forecast of growth estimated at 2.1% in October 2007 for 2008 fiscal year ending March 2009 down to 1.5%.

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A tentative Brexit deal with the EU is reached but it is not clear that it can win support of the Cabinet of prime minister Theresa May, even before it has any chance in the British parliament. March 29, 2018 is the 2 year period for negotiations to arrive at a deal with the EU. The pro-EU transport minister Jo Johnson resigned and called for a second referendum, saying that the decision in the first referendum to leave the EU was made because false prospects had been presented by the Leave EU campaign. 

Because of the issue of Northern Ireland the U.K would remain indefinitely in the customs union, and this is opposed by the Leave EU supporters in the Conservative party government of prime minister May.

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The new cabinet of prime minister Valls in France includes Segolene Royal as Ecology minister. Michel Sapin, labor minister in the outgoing cabinet, becomes finance minister. Sapin was finance minister under the Mitterand government in the 1990's. A critic of austerity policies Industry Minister Arnaud Montebourg, continues in this position with a wider role. After losing badly in local elections in March 2014, president Hollande has asked the new cabinet to combine planned tax cuts for businesses with efforts to increase spending power of households. Finance Minister Sapin faces the task of convincing the EU and Germany that France should have more leeway in plans for deficit reduction to boost its economy and especially reduce unemployment. Unemployment is at a high of 11%. Sapin is seasoned in the ways of operating in EU circles. In his role as finance minister in the Mitterand administration he pushed for the passing of the French referendum on the Maastricht Treaty that laid the baiss for the euro currency....

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Netanyahu and Gantz form a unity government in Israel with the two leaders alternating as prime minister every 18 months. The alternative was new elections for the fourth time. Israel like other countries needs a strong government to tackle the coronavirus.

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The Chinese market is shifting to more economical cars and to price conscious customers in China's growing middle cllass typicall making about $13000 a year. With the constant pressure to provide more value and better price China's local carmakers are willing to work with slim margins. The Chinese car makers are gaining market share and will continue to gain share in a very competitive price conscious market. In just one year from 2006 to the first 7 months of 2007 the Chineses carmakers increased their share from 26.4% to 30.6%. The Chinese carmakers include smaller makers in addition to the companies Cherry and Geely and these smaller carmakers are also gaining share. The Chinese companies are offering better equiped cars, more fashion and styling, and better prices. one example is a Hyundai Santa Fe SUV selling for $18500 versus a Hover SUV made by Great Wall Motor Company. The Hover SUV selling for $14500 than the comparable Santa Fe which this customer drove through the mountainous border of Sichuan with Tibet. See the article by Fairclough in wsj August 25-26, 2007 of a Cherry A1 compact driven through the Silk road 1700 miles trip in the westernmost province of Xingiang. What this also means for foreign carmakers is that there have to be price cuts to move product. GM took off 27% off the price of its Chevy Sail stationwagon and Hyundai cut prices by as much as 13%. ...

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Mr. Tom Tugendhat, chairman of the select committee on foreign affairs, a Tory MP, says UK companies are vulnerable to takeover by foreign state backed entities and calls for new laws to protect British companies. Prime minister Boris Johnson is preparing to announce new laws that will make it mandatory for British companies to report to the government when any foreign company attempts to take over 25% of the shares in a British company, or which could pose a security threat, with strong sanctions. Failing to do so would have directors jailed, disqualified, or face large fines.

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A humorous story on how Lady Hale delivered the unanimous decision of the UK Supreme Court against the prorogation of parliament by prime minister Boris Johnson, with a pun on the word pro-rogue-ation. And some ideas on how this was received by all sides. The decision was not popular in Britain and was seen by the royals and people around Queen Elizabeth as bad advice given to the Queen by the prime minister. Much of the behaviour of Boris Johnson and adviser Dominic Cummings is based on polls showing them winning over Labour seats in northern England that voted for Brexit in a general election to give the Conservatives a majority. Labour leader McDonnell has said that they have miscalculated. Labour party continues to emphasize that the real issue before the country is failing infrastructure, inequalities, lack of opportunity, jobs and the economy, not leaving the European Union. Labour's strategy is to wait out the general election for a couple of months so that voters can judge from the actions the competence of the Boris Johnson government to run the country for 5 years. ...

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Turkey is reviving its relations with Saudi Arabia and the UAE. Prince Bin Salman will visit Turkey as part of a remake of Turkey Saudi relations. Turkey's economic crisis has revived the relationship as Turkey badly needs aid for its economy. The pressure on emerging markets is increasing with US central bank raising rates reducing inflows of western money into Turkey even further. Prince Salman has already received visits from French and British leaders. He visited Jordan and Egypt this week and will now be in Ankara. In the summer he will visit Greece and Cyprus. Saudis are modernizing their economy changing culture in relationships of men and women, in women's rights and education, and broadening relationships with the world under Salman. There is an astonishing openness to science and technology in a drive to be modern. The old Saudi monarchy and conservative rule with ancient traditions is giving way to what the Saudis in the group under Salman see as the modernization of Europe and America in the 20th century using science and technology as what they would like to see in their own country. There is also a drive to think independently from the dogmatic positions of the past that have turned the Kingdom into an American dependency with no obligation or incentive to modernize its culture and be open to the world outside.  The US fought a war to ostensibly modernize a backward mountainous remote state as Afghanistan, while being perfectly comfortable with the old Saudi monarchies of the past that made little change in the ancient culture and tradition and in women's rights and education. Such were the contradictions in American policy and the failure to think anew. As president Lincoln said "as our case is new we must think anew, and act anew." President Biden will now visit Saudi Arabia to build a new relationship with an independent nation, which along with the UAE is bringing change to the Middle East through infrastructure development and modernization. Salman's modernization comes as the kingdom also faced a need to make a transition out of dependence on fossil fuels. Salman sees trips to Greece and Turkey as opening up to all sides. Saudis have good relations with Israel and Egypt another part of this openness. The US senses this, India has sensed this. India's Modi government  made sending the Oxford vaccines manufactured in India to Saudis a priority during 2021. The Indian example is also changing the way the UAE and Saudis see infrastructure development and modernization in the region. This is also changing the way the region is looking at itself. For decades Egypt lacking the resources to build infrastructure on its own has languished economically. A helping hand from the Saudis is changing Egypt. The entire rail system is being modernized with the latest technology from Siemens. The Saudis have stabilized the Egyptian economy with a $5 billion deposit in the Central Bank of Egypt. On June 21 Egypt and Saudis signed $7.7 billion in investment deals for infrastructure, logistics, port administration, food, industry, medicine, energy and technology. In the investments in Egypt some of the oil money going to Saudis with $100 per barrel oil price is going to an economy in Egypt that can easily absorb and make good use of the investment to modernize.   The influence of Saudi leverage in fossil fuels which drove the US relationship with Saudis since FDR is being replaced with an independent Saudi kingdom making decisions to modernize across the board in all aspects compared to one that favored a few American companies such as Exxon Mobil and ARAMCO or arms makers such as Boeing and Lockheed that helped recycle American money going to pay for Saudi fossil fuels back to America.    ...

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Voters took note of the quality of each candidate, and Democrats were scrappier  in the fight this time around to give a tight result. Voters did not know much of what Mr. Biden had done to cap healthcare costs in midterm elections for 36 governors races and for control of the US Congress. The pocket book issues mattered to voters with sharp increases in the price of oil and groceries, but less so than made out earlier and voters may have grasped the bigger picture.

The quality of candidates mattered and on the Republican side the influence of Mr. Trump in the primaries led to choosing weaker candidates because of their loyalty to Mr. Trump. In the end with a large turnout of voters on both sides the election was much tighter than expected. Democrats in each state did better using their own initiative and effort this time and were much scrappier in the fight for the Governors races and the Senate.

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Attacks by Houthi rebels in Yemen on Sauid Arabia's Aramco oil company installations are adding to geopolitical tensions. Houthi rebels in Yemen are supported by Iran and are in a war with a Saudi Arabia led coalition. This report says that the three year conflict has reached a point where instead of targeting Riyadh with missiles the Yemeni rebels in Sanaa are now targeting oil installations of Saudi Arabia. The rebels ousted a Said supported government in Sanaa and the the Saudis have failed to oust them from Sanaa, yet the conflict continues. The increase in geopolitical tensions between Iran and Saudis is pushing up oil prices along with the collapse of Venezuela's oil industry and production. Prices reached $75 a barrel in April 2018. Damage from a Yemeni missile hit a Saudi tanker in the Red Sea, a latest sign that the conflict could disrupt oil tanker traffic going towards the Suez Canal.  Trump administration plans to scuttle the Iran nuclear deal or renegotiate it are also increasing tensions. France's Macron favors renegotiating it compared to scuttling the whole deal, a point he made at the U.S. Congress this week, saying also that France will respect the nuclear deal with Iran. Tensions throughout the Middle East are now part of the rival powers Iran and Saudi Arabia and their proxy allies in the region seeking more influence. ...

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Patrick Buisson, a key Sarkozy adviser, who helped him win the presidential election in 2007, says Marie LePen's chances in the 2017 election are dimmer than people realize. Her Front National is popular in the north of France with working class people who formerly voted in favor of the Communist or Left parties. In the south of France in areas like Nice her niece Marion is popular with people who have social views on the right on abortion, and gay marraige. The problem is reconciling these 2 blocs of voters and the way Le Pen appears to have moderated her views on social issues. The opposing candidate from the Right parties formerly led by Sarkozy is Francois Fillon, actually prime minister for the full term of 5 years under Sarkozy. Fillon's views are closer to the FN voters in the south and opposes gay marraige and abortion, and has a strong foothold with Catholic voters in traditionally Catholic France. It is this split that hurts LePen who had hoped to run against Bordeaux mayor LeJuppe. The left parties are in disarray and likely not to be a factor. Another difference is that the voters in the south of FN do not see it the same way as FN voters in the north on issues of increasing the size of the state. Voters in southern France do not favor increasing the size of the state as Le Pen has promised and opposed by Fillon. Fillon has plans to cut France's large state employees by 600,000. France has a large state owned sector of companies and increasing the work week to 48 hours, reducing the state sector size to help private companies with incentives is seen as a way to increase productivity and grow the economy, plans supported by Fillon. A major problem for Marie LePen is her family name of Le Pen which Buisson says people in France associate with her father Jean LePen, and extremist positions. Buisson thinks Marie LePen will never be able to shake off this image in the second round of the election as she loses some of her right wing Catholic support to Fillon, and fails to attract enough working class voters in the north of France because of the family name. ...

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Masks will be mandatory in more public spaces in Britain starting August 8. Prime minister Boris Johnson says it is time "to squeeze the brake pedal" as cases jump to 4200 a day July 30, as provided by ONS. Northern England has more cases and new restrictions. Face coverings will be mandatory in more indoor spaces such as cinemas. Standing next to Mr. Johnson at a briefing, Prof. Chris Whitty, England chief medical officer said the "idea that we can open everything and keep the virus under control is wrong."

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Macron started out in the Socialist Party in Amiens, France. After going to elite schooling he joins the Socialist Party ministry of Francois Hollande. As Minister of the Economy he rises rapidly to replace Hollande with his own party called the Movement that he sets up and within a year wins presidential elections. The rapid rise, the lack of his Movement party having much experience and put together quickly with new younger people, his aloof presidency, and a lack of connection with the problems brought on by the deindustrialisation of France as production shifts to China, the problems of lack of work and cost of living in smaller towns in France, lead to Macron's loss of popularity. His party won only 10% of the vote in EU elections and 20% in the first round of Assembly elections in 2024. He is now allied with Sarkozy's Les Republicains, the very party he sought to replace by calling it old school and no longer relevant.  A small faction of the Les Republicains shifts out to ally with the National Rally of Le Pen and together the 2 parties seek a majority or near majority in the Assembly to take the prime minister position under Macron. The result would be a too young at 28 years Bardella as PM and the Socialist Alliance a close second in the National Assembly. Macron would have to come to terms with the Socialists he had abandoned to run the country and appoint Oliver Faure as prime minister if a second round gives his Movement and the Socialists over 50% of the vote. ...

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The shift from non-conventional polluting single cylinder engine contraptions used by poorer Chinese called "Inkfish" to conventional fuel efficient engines will reduce oil consumption in China even as more cars are on the road. This explains the paradox of Chinese vehicle sales being up by 77% year over year in the first quarter of 2010, and still gasoline demand went up by only 3%. Kack Perkowski, founder of Chinese auto-parts manufacturer Asimco Technologies, says the shift from the low tech "inkfish" type vehicles to fuel efficient small cars popular with the Chinese and encouraged by government policies to reduce oil consumption is a big factor in this development. Perkowski says 50 million engines are manufactured in China each year and if you subtract the 13.6 million cars, trucks and buses sold in China last year, another 36 million low tech highly fuel inefficient engines including "inkfish" engines were sold. China's car buyers are very price conscious and prefer smaller cars. Smaller cars are also well suited to the crowded roads in the coastal cities. And the Chinese government wants to keep oil consumption down so it is pushing buyers in the direction of smaller engines with tax breaks. The Chinese governmet is expected to announce subsidies for plug-in hybrids worth about one third of the sticker price. The motives are environmental and energy security related, but also have the intent of enabling China's car manufacturers to gain experience and leadership in newer electric car technologies. Bottom line: some experts including Deutsche Bank's Sankey view China's oil demand growing much slower, at about 2.6% a year over the next 15 years. This would mean oil demand tapering off at 13-14 million barrels of oil per day by 2025, much higher than the 9.1 million bpd in 2010, but growth curbed by fuel efficient engines and increasing fuel efficency of the Chinese vehicle population....

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Germany's chancellor Merkel sees Britain as necessary for Europe and the European spirit. This even though she has differences with British prime minister Cameron on how to elect the new president of the EU following EU parliamentary elections in May 2014. She told the German parliament in June 2014- "Britain is really no cozy partner. Yet Germany and Britain share values and interests. I consider it grossly negligent, in fact unacceptable, how easily some people say that it is really all the same whether Britain goes along or not, or more: whether Britain remains a member of the European Union or not."

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Some key features of the Iraqi effort to retake Ramadi are evident in the effort by new prime minister to keep out Shiite militias called Popular Mobilization Forces from Sunni areas. The effort to retake Ramadi involves American air support and retrained Iraqi units after the disasters in 2014 when Iraqi army units ill equipped and poorly led fled the area. By using tribal forces and Iraqi army units the effort keeps down sectarian tensions- essential for it to work in Sunni areas.

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Martin Feldstein renews his call for new policies that channel significant government aid to homeowners under water. He says this is the only way to stem the decline in home prices. Letting the forest fire of foreclosures burn itself out is simply not an option, as it would only damage the economy further.