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Sacramento is the first city going through an amazing transformation from a city with urban sprawl to a city with its own plan that is trying to bring residents closer without sprawl, and planning the layout from scratch so that residents can live without the long commutes and can bike to work or use other transportation. It has a socalled Blueprint which was developed by a coalition of ordinary citizens, politicians, developers and environmentalists. Behind this Blueprint is the dedication, the insight, ability at effective persuasion of Mr. McKeever Sacramento leading advocate for the Blueprint, using a model which showed what Sacramento would look like un the future and the impact on traffic, job growth and pollution depending on which way the houses were built, nearer jobs or distant from jobs. McKeever took this database, software and computer to townhall type get togethers in which people tweaked the models to see what impact it would have on pollution and traffic, even letting them play with it all day in a kind of display of grassroots democracy at work. He also showed how this would help developers by providing additional business of a different type than their typical lots and typical urban sprawl type construction of individual homes. By spreading their business they would do better if one type of housing suffered. This is what has happened in the current downturn and the housing demand and values of housing have done much better where they followed the Blueprint as this took account of higher gasoline prices and the bad effects of urban sprawl. Now neighbors can talk to each other walk down to where the community places like restaurants, library etc are. It has a feeling of community. Between 2003 and 2007 the number of projects with apartments condominiums and townhouses for sale in the region increased by 533%, while the number of subdivisions with homes on lots bigger than 5500 square feet fell by 21%, according to housing-research firm Hanley Wood Market Intelligence....

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Renewed warnings about the bubble in housing prices in China. Earlier warnings came from Krugman, Lardy, John Taylor. This one comes from Nomura economists Zhiwei Zhang and Wendy Chen. Could the government's action to curb rising housing prices not be adequate leading to a financial crisis as early as 2014, is the question posed by Zhang and Chen. They cite the rise of housing prices by 84% from 2001 to 2006, before the financial crisis of 2008 in the U.S., using the Case-Shiller housing price index. One problem- the government statistics may have underestimated the extent of the bubble. China's official index shows housing prices rising 113% in major cities from 2004 to 2012. Zhang and Chen say this is much smaller than the actual rise because it includes older, lower quality housing property. They cite an academic paper that adjusts for this and finds prices jumping by 250% in the period 2004 to 2009. Another problem is that China's housing prices growth slows after government action but then resumes the growth, leaving the risk exposure at the high level as before. Because the local governments are tied up in the housing bubble the problem would hit the banking system. About 14.1% of the outstanding bank loans are to local government financing vehicles, and 6.2% to property developers, according to Nomura economists. The declining potential growth rate in China means there is less room for bad loans to be absorbed by hyper growth levels than in the past. Errors in policy can magnify the risk including loosening monetary policy and exacerbating the bubble at the wrong time. In the absence of errors the risks still remain requiring the sale of public assets to bail out local governments and banks. The argument made by Krugman and other economists has been that China is not immune to the risks of a housing bubble going bad, in any way less than Sweden, the U.S., Spain and other countries, requiring bailouts of banks....

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The decision to replace Gen. McKiernan with Gen. McChrystal and to have Lt. Gen David Rodriguez as his deputy, was made by Defense Secretary Gates and Jt Chiefs chairman Mullen, after thinking about this during the transition to the new Obama administration. The failing war effort in Afghanistan with the Karzai government controlling only pockets of Afghanistan and Kabul and leaving the countryside to the Taliban has alot to do with this. Gates feeling is "we can and must do better." That it took so long, with the Taliban only 50 miles from Islamabad, Pakistan, and the question of Paksitan's nuclear weapons falling into thier hands vexing the adminstration, shows that things slowed down with the transition and the economic crisis. The decision was not adifficult one considering that McKiernan had little to show for his efforts, and the rapidly deteriorating situation by all accounts. McKiernan was a senior officer who spent his entire military career commanding conventional forces, serving in the Balkans and the Iraq war in 2003, and has the wrong midset and background for counterinsurgency warfare. McChrystal has experiences suited to counterinsurgency warfare, having commanded commando teams that took out leading insurgents. He is also director of the Joint chiefs of staff, so known to Mullen for his abilities. Rodriguez commanded the 82nd Airborne Division in eastern Afghanistan, is seen as aleading expert in counterinsurgency warfare. He is also Gates's senior military advisor so known to Gates for his abilities. The new strategy is to go with counterinsurgency warfare to turn this thing around. This puts 2 commanders with this kind of experience in Kabul, and close communication with Gates and Mullen because they worked together before. With additional troops, and shift in resource acquisition at the Pentagon that Gates is trying to secure for this kind of warfare, this creates the kind of combination that could help the US in Afghanistan and Pakistan, and achieve more modest goals. See the links to Gates's and Petraeus's more modest goals....

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Krugman puts it best when he says in the NYT that he's got a sick feeling in the pit of his stomach. Its just that the Republican challenge of not a single vote in the House for the $789 billion Stimulus bill just makes it harder to go back for more money which most definitely will be needed. The Congressional Budget Office predicts that over the next 3 years there will be a $2.9 trillion gap between what the economy could produce and will actually produce. $789 billion won't be enough, and more so because the weightage shifted in the direction of tax cuts from the original version. And considering the accelerating nature of the crisis on the housing front and in layoffs and consumption, the absence of a clear action plan with specifics to deal with the bad debt in the banking system, is what gives this sick feeling in the stomach. Because as is stated on these same pages by experts from Japan on February 12, NYT, see the link, Japan went through this same soul searching, public anger, controversy, and political leaders were afraid to take strong action for years from the mid 1990's till 2003 after Koizumi's election. Each action or set of actions each year during that period before 2003 was behind the curve, and did not match what was needed. For the USA this has happened already for 2007, 2008 and is heading in that direction for 2009, with a lack of consensus for the strong action needed. Would 4 million new jobs be generated by the current stimulus if that is a measure of success, as Obama indicated at his first press conference? With less going into spending for education, infrastructure, energy and other green projects, in favor of tax cuts and the AMT, and the feeling that going to Congress for more money will be harder and a partisan affair, will this become difficult to achieve? ...

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The resistance to serious government assistance to make a large impact on foreclosures stems from arguments like these. They only tell one side of the story, as the mortgage industry and politicians pushed high cost loans on minorities like Hispanics and Black people who did not understand the risks, and dispensed with even the basic requirements for ability to pay on a sustained basis. Instead pushing them into higher amount loans which raised the chances of aquick default on the loan. See the link to this, a detailed article on Hispanics experience in the WSJ, with a graph that shows that more subprime loans were made to minorities than whites in 2004 and 2005, and especially to Hispanics. The other thing about this is that its a very shortsighted approach and one that will end up costing more money. Its also ending up having effects on the global economy which comes back to affect US exports, and make this a severe prolonged downturn that could last anywhere upto ten years if its not tackled in its most serious dimensions, with this one being crucial. Its crucial because the bank bailouts which are approaching a trillion dollars as the bill mounts after each passing month, and the lack of lending thats crimping businesses and leading to huge job losses of 500,000 a month are directly a result of the inability to fix this problem. Its like trying to find out who started the fire when irresponsible borrowers, speculators, the mortgage industry, the credit rating agencies who signed off on irresponsible securtization, the regulators who fell asleep on the job, and central bankers and treasury secretaries who lauded the innovation and the depth and sophistication of the US financial system ignoring the risks of too much liquidity in markets, all lit the matches that got the fire going. The longer the fire burns and bigger it gets, the harder it becomes to put it out the and more fire fighting resources it will take....

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The graph showing the monthly volume of issued bonds shows that the bonds issued came to a complete halt in October 2008, leading to a collapse in this market, making consumer finance almost impossible to get. The action by the Fed to lend $600 billion to investors to buy these bonds is an effort to unclog these markets for consumer finance. It also comes as the market for cars collapsed in October, with auto loan financing difficulties a major factor in this collapse, especially for GM. The market for mortgage securities issued by Fannie and Freddie also seemed to be drying up as investors and foreign central banks shunned Fannie and Freddie, resulting in the spread over Treasury bonds for these securities issued by Fannie rising from 0.7 percentage points in September to 1.7 percentage points in October 2008. The Fed announced that it would buy $600 billion of these securities starting December 1, 2008, and hire asset managers to manage this portfolio for the Fed. Mortgage rates dropped half a point to to 5.5% on the announcement injecting some life in to housing markets. This does not help the 11.8 million homeowners under water, and those facing foreclosure, and it does not help those buyers who do not qualify for mortgages. It does help those who were responsible in their finances through the recent years and helps others refinance. So it helps those who were better off but started cracking under this economy. So it does not change the underlying fundamentals say some experts, but it does help keep some life in the housing markets say other experts. The Case-Shiller index of housing prices which declined 15.1 % in the second quarter, declined 16.6% in the third quarter, year over year. This helps keep up the prices from severe drops, but even the lower mortgage rates from this Fed action may not last as the rates dropped after the rescue of Fannie and the again started creeping upwards again. . . ...

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Rajneesh Goel, Bangalore's chief civil servant, says the city never followed scientific landfill practices. Instead as Bangalore expanded with new business campuses for Infosys and other companies, the garbage was trucked out to sites with little planning and no interest on the part of companies on where this was ending up. Most of the landfill sites outside the city are now filled and the city is running out of places to dump the garbage. About 4000 tons of garbage needs disposal every day, over a millon tons a year now that the city is no longer the smaller garden city it used to be, a place where people looked to go for retirement years in the early post 1947 period. A new effort is being made in crisis conditions by NGO's and business to come up with better disposal practices that are good for the environmental air quality and water quality.

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Bill Keller looks at the options to use force to end Iran's nuclear weapons programs. He points out the common goals set by the Obama administration and the Bush administration for Iran's nuclear programs, even though politicians have taken different positions.

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Something that shows how much of a loss of civility, facts and dialogue in public life that has taken place, is the manner in which political campaigning is taking place today. Reports show that Ms. Giffords was among a group of Democratic House candidates featured on the web site of Sarah Palin's political action committee with cross hairs over their districts. This fact disturbed Giffords at that time. "We're on Sarah Palin's targeted list," Ms Giffords said in March. "But the thing is the way that she has depicted has the cross hairs of a gun sight over our district. When people do that, they've got to realize there's consequences to that."

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This editorial in the New York Times favors President Obama's policy with Iran outlined during the visit of Israeli prime minister Netanyahu to Washington.

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As appliance maker Fagor goes into bankruptcy with $1.16 billion in debt during Spain's long downturn, 1800 workers lose their jobs. Unemployment in the Basque town of Mondragon in northern Spain where Fagor is located, is up from 15% to 22%. Fagor was founded in 1955 and sold refrigerators, washing machines and televisions. Sales were 14 billion euros in 2012. An injection of 300 million euros from other members of the Mondragon co-op network and 80 million euros from workers failed to prevent the factories from closing. Decisions for international expansion with the acquisition of a French appliance maker created problems for Fagor because of the long economic downturn in the home base. Failure to move jobs to emerging markets with lower costs hurt Fagor, as Whirlpool and Electrolux moved jobs to China and other developing countries. Fagor's unique co-op structure of worker ownership made it difficult to move jobs outside Spain and France, and issuing new shares for capital is not possible under the co-op structure. ...

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Mr. Trump was offered a deal for his border wall with Mexico that provided a fourth of the founding and covered a 55 mile fence on the border. $1.375 billion in funding was offered by Congress to cover building a 55 mile fence in the Rio Grande Valley of Texas. It includes money for better screening at border entry points and more customs officers.

President Trump has asked Congress for $5.7 billion to build a 215 mile fence along the border with Mexico. Building the border wall was a key campaign promise of Mr. Trump in the 2016 campaign. A similar deal was rejected by Mr. Trump in December 2018 leading to a 35 day partial government shutdown.

The fence proposed by Congress would be made of steel posts and built along the levees on the Rio Grande RIver that separates the U.S. and Mexico.

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Strong growth in Europe and Japan and in the rest of Asia plus the weaker dollar which has energized exports will help the US to handle the housing crisis. Asian countries will be less affected than before because of a surging trade between Asia and Europe, Europe just passed the US as China's leading trade partner this year, as well as trade between Asian countries which is also surging. Still if consumer spending is impacted heavily it will affect big export oriented economies in Asia to some extent. Its interesting how the mortgage securities that were passed on from the US to Europe, show up also in the holdings of the likes of Mizuho bank in Japan.