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A 93 year old hero of the French Resistance, Stephane Hessel, publishes a pamphlet called "Indignez-Vous!," released by a small publishing house from the publisher's home. He calls for resisting the "international dictatorship of the financial markets" and "defending the values of modern democracy." He protests France's treatment of illegal immigrants, the influence on the media by the affluent, cuts to the social safety net, French educational reforms. It was first published in October, and now has sold 1.5 million copies, all through word of mouth advertising. It has been translated into Spanish, Italian, Portuguese, and Greek. New editions are planned for Slovenian, Korean, Japanese, Swedish and other languages. In Britain, it was published with the title "Time for Outrage." The pamphlet is about 4000 words and only 14 pages of text. Its timing is good, as the French are debating what to do in their politics with an election approaching and Sarkozy's standing at new lows. The short length and low price are a big plus, at $4 it made a convenient Christmas gift. Britain, Spain, Portugal and Greece are going through austerity cuts. Public sentiment has been aroused by the cuts, and by the overarching influence of financial markets on the economies of these countries. Some of these countries referred derisively as piigs- Portugal, Ireland, Greece, Spain -countries in the financial markets. The economic impact has fallen disproportionately on the young, with high jobless rate for young people from Italy to Spain, and cuts in funding for universities and schools in the UK also fall heavily on young people. A sense that something has gone wrong in the free market system and the western world. Austerity cuts in spending in the U.S. create a similiar feeling and joblessness among young people is also high in the U.S....

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Conversation with Ford's marketing chief Jim Farley who had 17 years with Toyota and marketed the Scion brand. He is a guy who likes to get a fresh look at things like talking to a security guard before coming up with a marketing plan for the Scion, and talking to a maintenance technician about the 150, all off the beaten track. This is reflective of the approach of Jim Farley. Even talking to psychologists about how to convince people to come and try out Ford cars. He is excited about Ford's Eco-boost engine which is a direct injection technology engine which Ford can democratize as he puts it to put it, on some 500,000 cars and trucks by 2013, something not done before. This is a technology that scales up pretty well. Drivers in Western Europe are familiar with direct injection diesels as a way to cut high gas costs and cut emissions, but Americans are not that familiar with it. It boosts fuel economy by 20% and reduces emissions by 15%, and giving a V6 the power and torque of a V8 engine. Basically it injects fuel directly into the engine in small specific amounts so that very little is wasted and the turbocharger uses waste energy from exhaust gas to drive the turbine. He is also in charge of promoting and marketing the Eco-Boost engine, which will show up first in the 2009 MKS Lincoln sedan. ...

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Russia is excluded for the second year for the G-7 Summit meeting of leaders in Berlin, in June 2015. The exclusion follows Russian intervention in Ukraine.

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Floyd Norris says the announcement by the ECB on Dec. 20, 2011, that 523 banks borrowed 489 billion euros under the newly created Long Term Financing Operation goes a long way towards giving Europe time to address the debt crisis. A major problem is recapitalization of European banks and the ECB's action helps address this problem. This is one of the achievements of the December summit of European leaders, though it was not the way markets had expected. Markets were focussed on large scale bond buying by the European Central Bank or issuance of euro bonds. ECB head, Mario Draghi, aware of widespread opposition in Germany to such proposals made it clear this was not going to happen. The Long Term Financing Operation of the ECB provides unlimited amounts of loans to European banks at 1% for 3 years, and accepts sovereign government debt as well as other types of securities as collateral. The result of this action was to lower the yield on a recent Spanish bond auction to 1.7% for three month bills from 5.1% the prior month. Spanish and Italian banks can now buy government debt of their countries and use the bonds as collateral at the ECB for three year loans at 1%. This Norris estimates will generate profits of about 37 billion euros for European banks from the difference between the ECB rate of 1% and the rate on two year bonds of Spain and Italy of 3.6% and 5.1% respectively for the bond purchases of 489 billion euros- calculated on a spread of 2.5 percentage points over three years. Another infusion of funds from the ECB will occur in February 2012. The new capital infusion gives European banks less reason to reduce lending in the eurozone as they work to meet the higher capital reserve requirements set under new Basel III rules. This is especially important given the austerity measures being implemented across the eurozone countries and Britain to reduce government deficits, and in light of the lower growth expected as a result....

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Jon Hilsenrath of WSJ provides an illuminating account of how Daniel Tarullo as head of the Large Institution Supervision Coordination Committee has changed the way bank supervision and rules are set for U.S. banks since the days of the 2008 financial crisis. Tarullo started the effort under Ben Bernanke and continues this in 2014-2015 under Fed chairwoman Janet Yellen. The New York Fed is seen as ineffective in bank supervision and the supervisory role is now entirely performed under the leadership of Tarullo, assisted by Kenneth Gibson and Timothy Clark. The trio are some of the great unsung heroes of the effort to put the U.S. financial system and the economy on a safer footing.

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Von Mark Schieritz of Germany's Zeit Online describes the changes underway following the election campaigns in the U.S., and France, and the Brexit vote in Britain, all signalling the discontent of people left behind by the tech, capitalism, trade and globalization changes of the last two decades. The appeal of one time fringe politicians using racist slogans and divisive rhetoric to appeal to those left behind, appealing to people lacking intergenerational mobility, and without much hope for a better future, is a serious concern. People who are gullible enough, lack college education, or racially isolated so that they are not likely to look carefully at what is being offered in terms of programs and change of competing parties, and likely to overlook the hard and difficult road for corrective course of action, because of anger and pentup fears. Schieritz cites as part of this change the unanimously approved conclusion in its final declaration at the G-20 meeting in Chengdu, China- "The benefits of growth need to be shared more broadly within and among countries to promote inclusiveness." Yet this can be a sort of "too little, too late."  Bankers who are cited in an email going around Wall Street lack credibility with groups on Main Street, to people adversely affected by tech, trade and globalization changes that have been persistently ignored for over a decade, close to two decades. More convincing is the tone of Theresa May, the British prime minister's first statement outside 10 Downing Street- who spoke of the "burning injustices" and her determination to make this a top priority of her government. Still more convincing are the programs to invest $275 billion over 10 years in infrastructure put forward by the leading candidate in the U.S. presidential election of 2016, to provide easier access to public universities and colleges to those left behind, as a sure way to create new jobs and address intergenerational mobility. In fact every leading candidate had made the loss of upward mobility their central plank already in 2015, long before Trump and Sanders started their campaign. The real hope lies in western leaders Merkel, May, and Clinton, all keenly aware students of changes, all women by the way who have sensed the injustice and have the ability to come up with something new and promising for the future, after learning the lessons of the past. ...

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Robert Gordon of Northwestern University describes the problems in American Education and how this is the first generation which will not do better than its parents in educational attainment. The cost says Gordon comes in lower potential economic growth rates.

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A study by AARP of 514 brand name and generic drugs between 2005 and 2009, shows that generic drug prices went down an average of 31% during this period, and brand name drug prices went up by 41%. One of the authors of the report says that it is important to look at individual drug prices and not studies showing total spending on drugs, because this is a significant cost for people paying out-of-pocket, It drives up insurance premiums, and pushes retirees into coverage gaps in Medicare Part D drug program. Analysts indicate pharmaceutical companies are increasing prices on drugs before patent expiration to get as much profit before the patents expire.

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The elections in Italy in Feb. 2013 show the centre left coalition headed by Pier Luigi Bersani with 29.6% of the votes in the lower house, the centre right coalition headed by Silvio Berlusconi with 29.2% of the votes, the Five Star Movement headed by Beppe Grillo with 25.6% of the votes, and the Civic Choice headed by Mario Monti with 10.6% of the vote. In the Senate the results show the centre left coalition with 31.6% of the vote, the centre right with 30.7%, the Five Star Movement with 23.8%, and Civic Choice with 9.1%. Election rules in Italy give the party with the highest number of votes for the lower house an automatic majority of 340 of 630 seats. The vote shows voter protest over austerity measures. This benefitted both the centre right and the Five Star Movement and hurt the Civic Choice centrist party of Mario Monti which implemented austerity measures in 2012. The centre left was affected by its role in coming to the aid of Monte de Paschi bank in Siena and failing to mount a strong campaign under Bersani. A majority in both houses is needed to provide a stable coalition government which opens the prospect of new elections. The Five Star Movement emerged as the largest single party. Its support comes from young people, internet based campaigning, and a rejection of the right and left parties from the old order in Italian politics, and offers a new dimension to Italy's political future....

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Martin Feldstein points out why the recent agreement for a "fiscal compact" is no more than an empty statement about fixing the eurozone's finances. In this respect it is no different than the Stability and Growth Pact it replaces, with serious weaknesses. Feldstein cites the weaknesses in the language of the agreement. Each eurozone country is required to limit its"cyclically adjusted" budget deficit to 0.5% of GDP and bring its debt down to 60% of GDP. Compliance will be performed by the European Court of Justice and fines imposed. In practice the questions loom large- for a country like Spain with a 23% unemployment rate, isn't all of the 6% budget deficit cyclical? Again the agreement says deficits are calculated "net of one-off and temporary measures." Under this provision a lot of the stimulus programs would be considered in the category of "one-off." Other language lets eurozone countries frame budgets based on "exceptional circumstances" and "periods of severe economic downturn." Italy has declining economic growth, does it make sense to have a large budget surplus in that situation to lower debt to GDP, and how does that goal relate to "exceptional circumstances."...

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Friedman compares the anti-corruption movements in India and the U.S., the world's two largest democracies. The Occupy Wall Street anti-corruption movement in the U.S. focusses on the excessive influence of banks on lawmakers, regulators, and the government, through the use of campaign money, revolving door for government officials and regulators to join banks, and intense lobbying. The anti-corruption movement focusses on corruption in government at higher levels, such as the handling of government licenses, and at the basic levels of needing to bribe officials for something as simple as getting a birth certificate or other government document. Both have pernicious effects, in the U.S. excesssive bank influence leads to taking excessive risk for higher bonuses, putting the entire financial system at risk and creating a crisis in housing that delays the economic recovery. And in India the corruption leads to retarded progress, as funds to invest in infrastructure and development are siphoned off, business and entrepreneurs are required to pay bribes at each step, and ordinary people face the need to pay bribes for the most routine interactions with government officials. In the process this creates more unequal societies by skewing the distribution of benefits from wealth created to groups that are better equipped to game the system. The economic system once distorted in these ways has tendencies to take talent away from productive activity and innovation which create wealth, and direct it towards speculative activities....

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The ratification of the European Union's Fiscal Treaty of Dec. 2011 will require a two thirds majority in both houses of parliament. The coalition government of Angela Merkel lacks such a majority. This means the support of the Social Democrats and the Greens party will be needed to pass the treaty in Germany. The Social Democrats parliamentary leader Frank-Walter Steinmeier, says he cannot "picture an approval of the pact without growth-boosting measures." The Merkel position of strict austerity policies in tackling the eurozone debt crisis has come under intense criticism for lack of growth boosting measures. Recent economic performance clearly in Greece and Portugal, and to some extent in Ireland, Spain and Italy, shows the decline in GDP with austerity cuts alone will worsen the deficits or lead to a prolonged period of economic stagnation.

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Wall Street Journal reporters Walker in Berlin, Forelle in Brussels, and Meichtry in Rome, reconstruct the events during critical days after the indecision and failure to reach agreement during the July summit of eurozone countries. This took the form of intervews with leading players and over 25 policy makers. What emerges are accounts of how Germany's Angela Merkel, daughter of a Lutheran pastor, and protege of Eurozone founder, former German chancellor Helmut Kohl, handled the crisis. Merkel was widely criticized in the media for indecision. What emerges is an account of a leader who took decisive action at key moments in the crisis- leading to the formation of new governments in Greece and Italy taking action to improve finances, and negotiations with banks represented by the International Finance Corporation leading to acceptance by banks of a 50% loss on loans to Greece to reduce Greece's unsustainable debt burden. Merkel also worked with the European Central Bank's departing president Frenchman Claude Trichet and new president Italian Mario Draghi to resist French president Sarkozy's efforts to have the ECB assume responsibility for the crisis through large scale buying of Italian and Spanish bonds; which was opposed by German public opinion as a backdoor way of having German taxpayers assume responsibility for European debt. Shown are three critical moments when Merkel intervened. In October 2011, after Italian prime minister Berlusconi reneged on promises to make pension and other reforms to improve Italian finances because of political resistance. He survived a parliamentary no-confidence vote by one vote. Merkel took the lead on October 20, by directly calling Italian President Georgio Napolitano on the phone, to urge him to take action for forming a new government in Italy. The result was Napolitano talking with all political parties to form a new government, leading to the formation of a government by a non-political figure respected in Italy, former EU commissioner Mario Monti. A day earlier, on October 19, French President Sarkozy met ECB president, Trichet, at an event honoring him as departing ECB president in Frankfurt's Alte Oper concert hall. Trichet, Merkel and Sarkozy met in a side room. Sarkozy asked for decisive help from the ECB for large scale buying of Italian and Spanish bonds to lower yields, which had reached 7% on Italian bonds. Trichet responded that the ECB's charter did not allow it to finance governments, with the meeting ending in a shouting match between the two leaders. On October 21, EU and IMF inspectors warned that Greece's debt was reaching unsustainable proportions and austerity measures alone would not work, unless the bondholders, the European banks, took losses of 60% on their excessive lending to Greece. At this point France agreed to the German position arguing for this level of bondholder haircuts or losses, fearing the prospect of large future bailouts that would jeopardize France's triple AAA credit rating. The July 2011 summit accord had only provided for 10% in losses for bondholders. On October 27, at a meeting that went past midnight, Merkel and Sarkozy called IIF head Charles Dallara, who headed negotiating for the banks, to EU headquarters in Brussels. Merkel handed Dallara an agreement containing the 50% bondholder loss demand, and told Dallara- "This is the last offer." Merkel was saying banks would be left with nothing if they rejected it and Greece defaulted. Dallara called bankers and the IIF accepted Merkel's agreement. The final moment that October came on October 31, when Greece's prime minister Papandreou said he would call a referendum on the bailout provisions and austerity measures demanded by the IMF, the EU and the ECB. Bond markets reacted negatively to the announcement fearing a rejection and a Greek default. The Group of 20 leaders was meeting in Cannes, France on Nov. 2, 2011. Papandreou was asked to come to Cannes for a pre-summit meeting. Here Merkel told Papandreou- "the real question" for the referendum was, "Do you want to be in the euro, or not?" Days later Papandreou, lacking support in Greece from political parties and opposition inside his party, submitted his resignation. A non-political figure respected in Greece, former ECB vice president, Lucas Papademos, was appointed prime minister to head a Unity government. Polls after the appointment showed three fourths of Greeks said that this was "a positive step for Greece," with Papandreou's party getting only 11% support and the opposition led by Samaras about 20%. The criticism leveled at Merkel is that Germany should take responsibility for debt throughout the euro area through the issuance of eurozone bonds or the ECB buying large amount of bonds of Spain and Italy. Merkel faced strong opposition inside Germany and from the Bundesbank to this idea. The other criticism was based on austerity measures worsening the finances of Greece because of a lack of growth in the economy, which is true; yet Germany may see the situation in Greece as taking a long time to be resolved in any event because of excessive and faulty financial management. For Italy and Spain putting finances in order was a necessity, and austerity measures should lead to short term sacrifice but improve prospects for the long term by returning the economies to growth. Another criticism is the installation of governments that lack popular or electoral support. As the polls in Greece showed the Unity government there has far greater support and public opinion blames the politicians for the huge mess. In Italy, Berlusconi was widely seen as losing popular support when he resigned. And in Spain Mariano Rajoy, the newly elected prime minister, was elected with a huge majority in parliament following winning in local government elections. Merkel also held her own party, the Chrisitian Democrats together at the recent Leipzig convention. Mario Draghi, was elected with German support to head the European Central Bank. He has long argued for better management of Italian finances as head of Italy's central bank. Draghi was able to support Merkel with carefully planned and managed actions. First to reduce interest rates to support economic growth in a slowing eurozone. Following this with the ECB's Long Term Financing Operation in late December 2011, to provide unlimited loans to European banks at 1% interest for three years in exchange for a broadened list of collateral deposited at the ECB. In a final twist in this drama, Charles Dallara, who was a key negotiator for the U.S. Treasury in setting up the Brady Bonds- that converted bad Latin American government debt owed to U.S. banks in the 1980's into long term debt with large reductions in principal owed and lower interest rates. This was in exchange for guaranteed repayment with 30 year U.S. zero coupon bonds. Dallara was now a negotiator for the banks to reduce the chance of the very same bondholder haircuts that he had negotiated in an earlier period to solve the Latin American debt crisis. Other players in the drama were Axel Weber, head of the Bundesbank, Germany's central bank, who resigned after strong and outspoken opposition to the ECB's large scale purchase of bonds of Greece, Italy and Spain. Jens Weidmann, his protege, who replaced him. And Jurgen Stark, German representative at the ECB, who also resigned in opposition to Germany assuming responsibility for eurozone debt. ...

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An account by Journal reporters based on over 25 interviews with eurozone policymakers shows how the central players in the eurozone drama acted to defend their national interests during the period April to July 2011. On one side France's president Sarkozy, Frenchman Claude Trichet at the European Central Bank, arguing in favor of the banks not to take bondholder losses or haircuts on loans made to Greece. On the other side the Bundesbanks Axel Weber, and Jens Weidman, Jurgen Stark and German Finance Minister Schauble. The Germans argued strongly for bondholder losses to take responsibility for bad loan decisions by French and German banks. French banks had committed more loans to Greece than German banks and had more at stake. German public opinion was strongly against German taxpayers paying for the losses, making German politicians insistent that European banks take losses on their bad loan decisions, or Germany would not support additional loans to Greece. Throughout April to July the two sides were locked in an impasse. The French feared losses for their banks and a Lehman Brothers bankruptcy style situation. The Germans at the Bundesbank and the Finance Ministry were equally insistent. A July 2011 summit meeting did not settle the issue. The events not covered here from the July to the December summit of eurozone leaders resulted in bondholders taking 50% haircut on loans to Greece, reducing the debt burden in Greece after austerity measures led to popular protests. The French pushed hard for the ECB or the EFSF to be allowed to make large purchases of bonds of troubled eurozone countries in an effort to protect Spain and Italy from contagion through higher bond yields. The Netherlands and Finland supported Germany's position. German bankers Weber, Weidman at the Bundesbank and Finance Minister Schauble opposed large scale buying by the ECB of Italy's and Spain's bonds and Chancellor Merkel said about a common eurobond that "this is not going to happen." Governments changed in Greece, Italy, and Spain by Dec. 2011, which committed to austerity programs and spending cuts. Italian Mario Draghi was appointed with German support as new head of the ECB. In late December 2011 Draghi launched the Long Term Financing Operation for lending unlimited amounts at 1% for three year loans to European banks and relaxing the terms to accept government bonds and other debt as collateral for loans. The effect of this was to provide a large infusion of liquidity into the banking system in Europe and drastically bring down the yields on bonds issued by Italy and Spain....

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European Central Bank president, Mario Draghi, addressing the European Parliament in Brussels on April 25, 2012, supported both sides in the issues facing the eurozone, calling for continued vigilance on structural reforms to improve competitiveness of countries in the eurozone such as Spain and Italy, and at the same time saying it was imperative to generate economic growth. He told the European parliament: "The uncertainty about the present situation is very, very, high... Any exit strategy is premature given the current economic situation." Saying that the fiscal compact had been negotiated recently to control spending, yet what Europe needed was also a growth compact- "but my most present thought right now is to have a growth compact." He emphasized that it was now upto governments and banks to pick up the ball. The ECB's achievement was buying time with its 3 year loans to banks in Spain and Italy and other EU countries in Dec. 2011-March 2012, which he described as no ordinary achievement. Francois Hollande and Angela Merkel seized on Draghi's comments to show they were doing the right thing. Merkel conceded that growth was needed, saying sustainable initatives would be good for Europe, that what Germany was opposing was simply stimulus spending that would increase debt without the structural reforms to improve competitiveness. Hollande for his part said he would call for eurozone bonds to pay for industrial and infrastructure projects, and a financial transactions tax....