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Raghuram Rajan, Professor of Finance at the Graduate School of Business, University of Chicago, was appointed chief economist at the IMF in 2003. He presented a paper, titled "Has Financial Development Made the World Riskier," at the annual Jackson Hole meeting of economists and central bankers for 2005. Rajan says he had planned to write about how financial developments during Greenspan's 18 year old tenure had made things safer, but the more he looked the more evidence came up that the risk reward relationships in a normal functioning financial market had been terribly distorted. Market participants were being rewarded for wins but were not being asked to take on commensurate risks and impacts on their bonuses and rewards. He also cautioned about the use of credit default swaps which acted as insurance against bond defaults, and said insurers were generating big returns on this but with the appearance of little risk- even though the pain could be immense in a default. Banks were carrying credit securties on their books that posed risks to the whole financial system if things went wrong with the credit securities. Reaction from the gathering was unfavorable. Lawrence Summers, a former Treasury Secretary said, "the basic, slightly lead eyed premise of the paper was misguided."...

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Fomer Defense Secretary Leon Panetta says America needs to take up a vigorous foreign policy in his book "Worthy Fights." Both Panetta and Hillary Clinton, and Gen. Dempsey of the Joint Chiefs, Gen. Petraeus of the CIA, supported U.S. taking a strong stand in Syria by supporting Syrian opposition forces in the summer of 2011 and were overruled by president Obama and his election advisers because of the approaching 2012 election. Here Mark Landler provides more insights into Hillary Clinton's deeply held belief shared with Panetta that the U.S. had to take strong action where necessary to deter foes, to get into the ring to use Panetta's expression. The U.S. support for action in Libya to support Britain and France comes from the efforts of Clinton, and any lack of followup one of president Obama's errors in foreign policy. In April 2016 president Obama said that he considered his failure to followup in Libya to help the new Libyan government his biggest mistake in his presidency. Here Mark Landler looks at Hillary Clinton's entire career as showing a conviction and belief on the need for action where necessary in the U.S. global engagement. Compared to the bluster of the candidates Trump, Cruz and Sanders, with little experience to back this up in their careers in real estate, law or the Senate , Landler says Clinton is the last remaining hawk. Here he describes Hillary Clinton's contact and empathy for the troops from her trip to the American base in Tuzla, Bosnia, in March 1996. In fact many have forgotten that Yugoslavia is what it is today after the Milosevic years and the ethnic wars with Slovenia, Croatia, Montenegro, members of the EU and Serbia negotiating to enter EU, because of the bombing campaign taken by Bill Clinton through NATO in 1999 to prevent ethnic cleansing in Kosovo, and peacemaking following the Bosnian War using diplomat Holbrooke to negotiate the 1995 Dayton Accords. Here Landler describes the meetings with Gen. Keane who pushed for the troop surge that worked in Iraq under president George W. Bush. Clinton supported Keane's proposal made in April 2015, for a no-fly-zone in Syria that would help opposition forces till a settlement could be negotiated. Keane pointed out to Clinton that there was a flaw in Obama's policies- that negotiation would work only if the no-fly-zone was used to support opposition forces. By the end of 2015 Hillary Clinton publicly adopted this position. During a period when Americans are weary of foreign entanglements but understand the need to provide leadership where needed, Hillary Clinton, provides a balance between the pendulum swinging too sharply in one direction in the Bush years and in another direction in the Obama years, says Landler. A view also articulated by Leon Panetta, who was chief of staff for President Clinton during the Bosnian conflict and the Dayton Accords, where the U.S. showed strength of purpose in war and also in negotiating the peace without major entanglements....

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Gillespie lists the myths and describes the reality about Ron Paul. Ron Paul is not a "top tier" candidate- with many Republican candidates assuming top tier status and fizzling out this has become a term that has lost meaning. Paul is a doctrinaire libertarian- he has positions similiar to libertarians but also has his own views on immigration and abortion. His views on the U.S. central bank, the Federal Reserve, such as "ending the Fed" are crazy- actually Ron Paul's legislation on auditing the Fed is gaining credibility, and Fed policy is viewed skeptically by both the Tea party and Occupy movement, as well as some in the Federal Reserve such as Kansas City Fed chairman, Thomas Hoenig, and respected economists such as Alan Meltzer of Carnegie-Mellon University.Ron Paul is anti-military- Paul has support from servicemen in the military and raised more money from them than any other candidate including Obama. Ron Paul has youth support because he is against the war on drugs- the war on drugs has not worked that well and new approaches are needed. His support among youth comes from a believing that individuals are better at making the right decisions, his idealism, and his faith in making the U.S. a better place. ...

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Germany's finance minister, Wolfgang Schauble, says Germany can move faster than expected to allow shared liability of eurozone debt. He also accepts the need for short term measures such as the European Stability Facility buying bonds of Spain and Italy in private markets to drive down yields. Schauble indicated this flexibility in an hour long interview with the WSJ on June 27, 2012. This comes after Angela Merkel's remarks made in talks with coalition partners the Free Democrats that she would not accept any mutualization of debt in the eurozone in her life time. Schauble reiterated his view that before joint liability of debt can take place there has to be a joint EU fiscal policy, and sequencing was critical. He called for a EU fiscal commissioner arrangement for reviewing EU member budgets and policies. At the same time he said Germany was open to some level of mutual financial support between members of the eurozone, under the right conditions.

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Nocera looks at the lack of efforts to help homeowners under water in the Obama administration. Sheila Bair comments on Geithner's role, as Geithner's book "Stress Test" provides little detail on how the Obama administration addressed the issue. A story by Dougherty in the WSJ on April 20, 2014, points out that about 10 million households in America are underwater in 2014, and another 10 million households have only 20% equity in their homes. Unemployment statistics in the same issue of the WSJ show 7 million people taking parttime jobs because they cannot find work. These households are critical for consumer spending to support growth. The weak economic recovery could very well be one of the results of poor policy decisions by the Obama administration including this one, when other alternatives proposed by Sheila Bair and Martin Feldstein were offered repeatedly in 2009-2010. Here Nocera documents the efforts by Senator Durbin to give homeowners rights to go to bankruptcy court to provide ways to negotiate ways out of foreclosure....

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Macroprudential policies of central banks in S. Korea, Indonesia, China, Canada, and other countries, as concerns grow about a housing and credit bubble.

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Mark Landler's interview with Hussain Haqqani in Oct. 2013 provides insights into the misperceptions on both sides of the U.S.-Pakistan relationship since 1947. Particularly the way Pakistan cannot shake free from seeing everything through the prism of India. He points out that Ambassador Holbrooke had a forward looking approach to the South Asian region, but failed to get the support of president Obama and the weak leadership of president Zardari, resulting in a squandered opportunity for the region to look beyond the twentieth century's conflicts towards a brighter future.

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Galston of the Brookings Institution says globalization has hurt workers in manufacturing with job losses and declining incomes. It has produced outcomes that have favored some industries such as tech, and not others such as automobiles which in the past helped create the broad middle class by offering good paying jobs to people with less than a college education. Immigration has created an issue that political leaders outside of the main parties have appealed to in France, the U.S. and Britain. The result is a polarization in the voters that has rarely been seen to this extent before. The middle class in the period from the 1950's to the 1980's is not the middle class that we see today in Europe and the U.S. The 2008 financial crisis added to the problems with the slow and uncertain recovery for some groups such as white men, the less educated, students, and people on minimum wage. 

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Dana Milbank of the WP says the views of some Democrats on Trump as a good Republican nominee based on the notion that he has high negative perception with voters is fraught with dangers for U.S. democracy. Milbank points out that this ignores what is good for the country. Having Trump as the nominee of one of the two main parties would create a divisive atmosphere and is not good for the country, says Milbank. In comparing Trump with Cruz, he says Trump is likely to follow his instincts to operate outside the U.S. constitutional system. Cruz as a person believes in the U.S. constitution and would never endorse violence or action against minorities. Cruz has not done enough to come across as a likable person with his persistent focus on conservative or Reagan values to the exclusion of everything else. This is changing in mid-April 2016 following a CNN interview with the Cruz family, a MSNBC town hall answering questions from undecided voters, and NYT coverage of Cruz at a Brooklyn bakery, that shows a different human face that people have never seen about Cruz. Cruz's self-deprecating humor in a NYT article where he talks about voters not liking "a hectoring scold," is part of this needed change that could have happened earlier in the campaign. About Trump Milbank cites Conservative party prime minister Cameron who says Trump would unite all Britons against him if he ever came to Britain....

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Drew Western, a professor of psychology at Emory University, asks the question about Obama that is on many people's minds- who is this man who wrote the book "Dreams of My Father." And what happened to him? It is as if he is asking did they conjure up something that didn't exist, was there really too little about the man in a book written when the young Obama was still in law school- about his experience growing up between two races, except a remarkable effort to grapple with that experience. It would say little about the man himself, the choices he would make, the decisions he would face as he entered his thirties, and forties, a period that provides the crucible and the formative experiences in the development of character. It is as if readers had appended their own chapter at the end of the book and conjured up many things that really did not exist. And which would serve as a kind of Rorschach test experience where readers were free to read into the picture whatever they wished to see- and something Obama could use to be all things to all people. Drew Western draws from his knowledge of psychology and his direct or virtual conversations with about 50,000 people to reflect and make some hypotheses about what has happened to Obama, or what Obama was always about. He starts by pointing out what was missing in the inauguration speech and has been missing ever since- a clear sense of narrative and a vision, a story about what had happened and how it could be made different in the midst of the global financial crisis of 2008-2009. Western provides several hypotheses for what has happened. Obama simply lacks the experience to handle the presidency -having been merely a community activist and not run a city, a state or a business, and had accomplished little before becoming president, and had an unremarkable career as a law professor having published nothing during his 12 years at the University of Chicago except an autobiography. And remarkably says Western voted 130 times in the Senate as "present" instead of "yea" or "nay," suggesting a tendency not to take a stand on difficult issues. The auto fuel efficiency standards issue may be the singular exception. The challenges of a presidency are much larger, and the challenges in 2009 were even greater. Obama could not measure upto the task. A related hypothesis is that given the lack of experience and the inability to make the narrative because of an unresolved identity, Obama is willing to do whatever it takes to dial for dollars and get re-elected. ...

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Bruni on the view that Obama has squandered his advantages of oratorical transcendence, poetry, serious thoughtfulness, in the U.S. presidential election of 2012. He does not mention the lack of a serious plan to turn the economy around, high rate of joblessness and declining incomes that are a basic issue in the 2012 election, and how oratorical transcendence has little correlation with getting the right policies implemented. The Des Moines Register's support in 2008 put Obama on the road to the presidency in 2008 with a victory in the Iowa primary. In 2012 it gave its endorsement to Romney to give him a chance to correct the problems with the economy and to do this with a new effort to forge the bipartisan consensus missing in the Obama first term.

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Thomas Sargent of New York University, the 2012 Nobel prize winner in economics, says the EU leaders can learn from the way the federal government in the U.S. handled the issue of state's debt when it came up in the 1790's and in 1840. In 1790 the federal government- under the leadership of Washington and Hamilton- saw the need to honor state's debt because of the contribution made by states in the war of independence and the U.S. assumed state's debt. In 1840 the U.S. refused to assume state's debt and states went into default. The result was beneficial because state's passed balanced budget rules and restrained reckless spending. Another benefit was that this preserved state rights to manage their finances and the federal structure setup under the constitution.

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The Home Affordable Refinance Program's (HARP) gradual success in 2012-2013 in reducing foreclosures, after struggling in 2010-2011. From about cumulative 1 million who refinanced loans under HARP for relief in home payments the numbers went up to close to 3 million by the end of 2013, according to the Federal Housing Finance Agency. Of this a major proportion were people who owed less than 105% of their home's value. The performance of the program improved with a revamp of HARP at the end of 2011.

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German leadership in the eurozone and the EU- with the strong stand for eurozone countries to do their economic homework and restore fiscal balance, and the action taken to bring the EU countries together on Russian intervention in Ukraine- is leading to questions about the dominant role played by Germany. Chancellor Merkel has played a leadership role partly because of the absence of other leaders with strong support in their home base who could provide such leadership. Merkel's poll rating in Germany actually shot up during the eurozone crisis from 40% in 2010 to 70% in 2013, and steady at 67% in June 2015, as German taxpayers and voters see Merkel as preventing debt ridden countries in the eurozone passing on higher costs in the debt crisis to Germany. With German wages kept low for the last decade to ensure a economic recovery and lower unemployment, Germans see no reason to support other eurozone countries when a low wage sector exists inside Germany, except under conditions that ensure fiscal balance. In a Harris poll taken in France June 30-July 1, 2015, Chancellor Merkel is rated higher at 43% expressing approval compared to 36% saying they approve of French premier Hollande's handling of the Greece and eurozone crisis. Over 50% of people in Spain and in France disapprove of Merkel's handling of the eurozone crisis, yet two thirds of France's main centre right party support Merkel's handling of the eurozone crisis. In the Harris poll when asked how Merkel, IMF, Hollande and Tsipras handled the Greece crisis people polled in France gave 43% approval to the IMF and Merkel compared to 36% for Hollande and Tsipras of Greece, and 60% disapprove of Hollande and Tsipras handling of the crisis compared to 53% disapproval for the IMF and Merkel. The Christian Democrats party in Germany has dominant leaders in its tradition starting with Konrad Adenauer in the early postwar years, through the Kohl years during reunification and Merkel in the eurozone crisis. By contrast the Social Democrats from the period under Wily Brandt, through the Schmidt years and Schroeder have operated under more of a consensus leadership. Under Sigmar Gabriel or some other Social Democratic leader Germany is likely to have a different style of leadership in the future, especially because the German public does not favor Germany playing this kind of dominant role. At different points in the eurozone crisis Merkel's leadership was needed for decisionmaking- making banks take a 50% writedown on their loans in negotiation with Charles Dallara in Brussels, calling for Italy's president to bring in a new government (led by Mario Monti) when premier Berlusconi failed to make needed changes, and providing flexibility for spending rules for Spain, Italy and France. Merkel has actually moved to the centre to maintain popular support inside Germany, especially since the new coalition government was formed with Social Democrat leader Sigmar Gabriel. On the other major issue of immigration Merkel has provided decisive leadership to prevent the rise of anti-immigrant parties in Germany. Herfried Munkler, author of "Power in the Middle," about why Germany is playing this role may provide clues to Germany's role- by representing different aspects of German public opinion Merkel has prevented the rise of right wing populist or nationalist parties in Germany, which would distort the German narrative about what it sees as its role in keeping Europe together after three wars. ...

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This report in the WSJ on a Gallup study with 87,000 interviews points to Trump supporters being affected more by racial isolation and cultural anxiety, health prospect anxiety,  than merely by being working class or in lower income groups affected by the shift in manufacturing jobs overseas. The report confirms previous observations that these Trump supporters are more likely to be whites without bachelors degrees. The information does'nt show that they face abnormally high degree of economic distress as those who have lost jobs in this recession, as they are shown to be less likely to be unemployed, more likely to be self-employed. The Gallup study does not show areas more adversely impacted by trade competition to have higher support for Trump. This is a critical finding.  An interesting finding is that Trump supporters are more likely to live in areas with higher mortality rates and poorer health outcomes, higher obesity rates, and lower rates of intergenerational mobility. This combines with living in much higher rates of being surrounded by whites, whiter and more racially isolated. The finding is that they have high cultural and economic anxiety from not finding their well being and prospects for children meet expectations. This may also explain the tendency not to be able to reason out possible outcomes based on policies of each candidate, less openness and more inward looking behaviours.   ...

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CNN reporter Cassie Spodak provides this exceptional report into the minds of New Hampshire Democratic voters who gave Bernie Sanders a 22 percent lead in the New Hampshire Democratic primary over Hillary Clinton. In October 2016 Hillary Clinton has the support of Bernie Sanders against Donald Trump in the U.S. presidential election. She described it as "100 percent support" in television debate. Sanders has appeared with Clinton twice, and campaigned 4 times in New Hampshire, and continually across the country. Younger New Hampshire voters still long for Sanders as their favored candidate. Older voters and some who have been motivated by Sanders to run for local office see the shaping of the Democratic Party platform as a victory for Sanders. Key planks of Sanders, taxes on the wealthy and higher incomes to pay for student tuition, infrastructure, and helping working class families, are now key parts of the Democratic platform. These voters see this as a pragmatic step and are enthusiastic in their support for Hillary Clinton. Overall Clinton now has 87 percent of Democratic voter support in New Hampshire according to a WMUR/UNH poll in mid October 2016, and she is doing well with millenials and independents nationally, a critical bloc of voters for Clinton to show nationwide support. One member of the steering committee for Sanders in New Hampshire named Dudley Dudley, reflects the opinion that has shifted the party to emerge united during and even more so in the final months of the presidential campaign of 2016- she tells the CNN reporter Spodak that she supports Hillary because "of the way she has grown, and stretched," and the way Clinton and Sanders are now campaigning together and working together. Both Clinton and Sanders deserve credit for their extraordinary ability to grow during their campaigns and during the party's way to shape the way forward. ...

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The Merkel government's effort to convince a skeptical German public about the need to aid Spain's banks. This includes a video on YouTube. The German parliament will vote shortly on the loans to Spain's savings banks.

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Sheila Bair releases her new book in Sept 2012 on the financial crisis of 2008-2009 and the efforts to introduce financial reforms for a safer financial system: "Bull By the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself." She is particularly critical of U.S. Treasury Secretary, and former head of the New York Federal Reserve, Timothy Geithner, as protecting the interests of Citigroup and Wall Street in his position as Treasury Secretary of the U.S. government. She describes in detail the situations in which Geithner tried to water down essential reforms to the financial system to make it safer, including the Volcker Rule. Of particular concern is the revolving door by which banking regulators or government officials join banks after service in the government which leads to weakening of regulatory and government oversight and systemic risks as in 2008-2009. Sheila Bair is widely respected for her efforts during the financial crisis from 2008 to 2011, when she headed the Federal Deposit Insurance Corporation, the FDIC. Her active involvement in defending reforms and setting up the system by which financially failing banks could be taken over and unwound without risks to the U.S. financial system are lasting contributions. She also succeeded as a manager by setting up an experienced and effective successor in Martin Gruenberg as head of the FDIC, to continue this work. A former Congresswoman, she describes herself as a Republican populist from Kansas. Her current role is as senior advisor to the Pew Charitable Trusts, which itself is a rare phenomenon today for a senior government official leaving government....

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Five rules the editors of the WSJ say should be followed when working on cleaning up the banking system. A clear no, as Krugman and other experts point out is for the government to make the rather imprudent move to take on all the debts of the banks as in Ireland. A second rule is not to underestimate the size of the problem and delay action till the problem gets much worse, when its harder to deal with. ECB president, Mario Draghi, pointed out the problem at Spain's handling of Bankia bank as a clear example, telling the European parliament recently: "There is a first assessment, then a second, a third, a fourth. This is the worst possible wayof doing things. Everyone ends up doing the right thing, but at the highest cost." A third rule is to set clear rules about banks, who gets rescued and who gets closed and why- so that its not left upto the discretion of officials. On this rule Spain's outgoing Zapatero administration gets good marks from WSJ for settting clear rules to the cajas svings banks. A fourth rule applicable to Europe is to first setup the expertise and conditions for a European banking regulator before setting up a banking union and direct injection of funds by the EFSF into banks of individual countries. A fifth rule is to avoid creating even larger mega banks by consolidating failing banks with large banks, and continuing the government's implicit guarantee of the bank because it is "too big to fail" and creates systemic risk- this is the situation after action by the U.S. Federal Reserve, regulators and the U.S. Treasury....