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The high cost of fines is likely to affect recapitalization of UK banks. Fines for Libor-rigging and compensations for customers on Payment Protection Insurance may cost the UK banking industry about 20 billion pounds, says Nixon. Other fines such as the $1.9 billion fine for money laundering activities of HSBC have to be added to this. This means less money for meeting stronger capital requirements and for lending to business and households. Higher compliance costs will mean higher costs in future years. HSBC estimates of the anti money laundering systems are about $990 million a year. The Bank of England has raised concerns about the need for additional capital to safeguard British banks.

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The Muslim Brotherhood and the democracy movement activists in Egypt reject any connection to Iran, Hezbollah or Islamic movements in other parts of the Middle East.

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The US is facing a new pattern of demographic changes and their impact on Medicare and Social Security programs. The number of people on Medicare will grow in 2 decades, 2010- 2030, from 47 million to 80 million for Medicare, and from 44 million to 73 million for Social Security, according to this estimate. The workforce will grow more slowly and the tax base wiill shrink accordingly during this period. This pending worker-pensioner imbalance and the jump in the cost of the bill for Medicare and Medicaid, as well as the federal health benefit for poor people, create a major problem for the US. At the same time the group of people over 65 will rise in these 2 decades from 17% of the voting age population to 26%. This group and the people who expect to soon join this group will resist any changes to Medicare or Social Security programs, making it that much harder for the political process to tackle these issues to make the programs sustainable in the long run.

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The House of Representatives just passed a bill to stem foreclosures and stabilize house prices by having the government through the Federal Housing Administration reinsure upto $300 billion of problem loans. The bills backers estimate 1.5 million foreclosures could be prevented by this bill but the Congressional Budget Office estimates only about 500,000 foreclosures can be averted this way. Under this bill lenders would have to writedown their loans to 85% of current value of the house. Borrowers pay a fee for the insurance and give up any share in future price appreciation to the government. According to the Congressional Budget Office the cost to the government is modest about $1.7 billion over years. The reason for the limited effectiveness of this bill is that it is voluntary, not much government money is extended. Many of the comments in the blog on this article as is the case with other articles on help to homeowners facing foreclosure show the widespread idea that its a bailout of irresponsible decisions by homeowners and mortgage companies who made the loans. This may be the reason why so little has been done in this regard and the limited government money extended even in plans put forth by Congressional Democrats like Barney Frank. Feldstein who is a former Chairman of the Council of Economic Advisors under Reagan has taken a different approach focussing on homeowners who may see the rational decision is to walk away from homes where they have no equity in their homes as prices drop by 20% and for government to prevent a wave of foreclosures in this manner. The danger is if not much is done there could be a downward spiral in home prices as foreclosure reach a new high in 2009. Last year according to Economist's charts foreclosures were averaging more than 100,000 a month now they are averaging more than 200,000 a month, this would take it from 1.5 million foreclosures in 2007 to 2.5 million in 2008. According to the Economist 9 million people owe more than their house is worth, the homeowners who have negative equity, and if they were to foreclose at the rate of 2-3 million a year and accelerating as the economy deteriorates, this could be enough to start a downward spiral. At that point a new President and Congress would have to take drastic action with a substantial amount of the government's money. In that kind of crisis not much thought would be given to the cost because like the financial meltdown that was feared during the Bear Stearns crisis the fears of a global severe economic crisis would make action necessary on many fronts of which housing would be one....

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Fuel efficiency rules require average fuel efficiency in the U.S. of 35 mpg by 2016. The debate is now on what to do for 2017 to 2025. New technology such as the P2 systems for hybrids already used in VW, Nissan and Hyundai vehicles makes a 20% increase in fuel efficiency possible. Large investments are being made to bring new technology to bear on increasing fuel efficiency significantly. Government agencies are looking at different scenarios by which the new fuel economy standards beyond 2017-2025 could be set between 47 mpg and 62 mpg. An additional factor is the reduction in greenhouse gas emissions- at 47 mpg the reduction would be 3%, at 62 mpg the reduction would be 6%. Another factor is how much the impact is on the cost of vehicles and reduced cost on gasoline. Here there is a wide range in the numbers for average mpg rules at 62 mpg- with EPA estimates at $2800-$3500 increase in vehicle cost and $5000 savings in fuel cost, Centre for Automotive Research estimates at $9790 increase in vehicle cost. The 62 mpg translates into "real world" actual efficiency of 45 mpg. In April 2011, 17 senators put out a letter of support for the 62 mpg proposal. There is a public value involved in this that is also significant- the reduced dependence on foreign oil means savings in defense expenditures in parts of the Middle East, and an economy that is less impacted by volatility in the price of oil. As this aspect of public value or benefits cannot be quantified easily even though they are significant, this may tend to be lost in the debate and the politics of fuel efficiency. For automakers there is significant marketing value in having a visible and strong presence in fuel efficient vehicles because of perception as forward looking- something that hurt Detroit carmakers in the last decade. During periods of gasoline prices at $5 a gallon this provides carmakers with an extra cushion of safety in securing car sales. Carmakers in one country such as the U.S. also have to worry about what carmakers in other countries such as Japan and Germany are doing- if the standards in the U.S. develop a gap compared to other countries developing advanced fuel efficiency technologies this poses significant risks because of the global nature of the automobile marketplace. See the group "Asleep at the Spigot" for more details on this. Many of these less quantifiable factors do not get the attention they deserve because they are significant from experience but not easily quantified. Throw into this the large unknown of what new technologies not yet developed lie ahead with a burst of effort by one country or another, which bring cost reductions at the same time - and the debate requires as much a good sense of what is the path offering the greatest advantages in years ahead than a pure exercize in numbers. ...

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Misgivings among Egyptians not connected with the Muslim Brotherhood about the coup in Egypt. Tamer El-Ghobashy covers this part of Egyptian opinion which sees the best approach to poor performance by Morsi would be to vote him out of office or hold a referendum.

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Prime Minister Medvedev of Russia proposes banning advertising of cigarettes and blames cigarette companies for targeting children and women. He says Russia had unfortunately not calculated the risks of investment by foreign cigarette companies. A ban on smoking in public spaces will go into effect in 2015. Each year he says cigarettes take a toll of 400,000 lives- "it works out that each year an entire large city disappears from the earth due to tobacco.:

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Hillary Clinton narrowly loses the Michigan primary to Bernie Sanders in March 2016, as the Sanders campaign focusses on Clinton's support for trade agreements that hurt American workers and lead to loss of manufacturing jobs. About three fifths of voters in the Michigan primary considered this a major issue. Many less educated younger workers see their job prospects diminish and wages drop with free trade that hurts American manufacturing jobs. Bill Clinton signed the NAFTA agreement with Mexico, and as a member of the Obama administration Clinton supported the Trans Pacific Trade Agreement, later opposing TPP when she left the cabinet. Sentiment against trade that hurts manufacturing jobs in the U.S. is strongest in midwestern states such as Michigan, Ohio and Illinois. This was also a major issue benefitting the Liberals under Justin Trudeau who won in Canada's industrial Ontario province which has suffered hollowing out and loss of manufacturing jobs under the Conservative Harper administration. In the U.S. the issue goes back to the Clinton Administration for two decades. New jobs created by Apple, Google, and other tech companies pale in comparison with the industrial jobs created in another era that benefitted working class families. This issue and high unemployment or under employment, lower wages for working class families, was a major issue in the 2016 U.S. presidential election campaign. Widening wealth disparities, and lack of upward mobility, high tution and healthcare costs for ordinary families, dominated the campaign in the U.S....

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Criticism of the EU's handling of the Greece crisis by IMF officials in a report. The report says the actions taken for debt restructuring in 2012 should have come much earlier to reduce the debt burden and the size of austerity measures in Greece. Similiar criticism has been voiced by president Hollande of France and in editorials by the WSJ. President Samaras of Greece says the sharp cuts in spending reduced potential for growth in the economy.

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Prof. Jeffrey Wasserstrom of UC Irvine reviews Henry Paulson's "Dealing With China." Paulson was head of Goldman Sachs investment bank and Secretary of the Treasury 2006-2009, the period of the global financial crisis. He made 70 visits to China since his days at Goldman Sachs and calls Chinese leaders Jiang Zemin and Jinping "old friends." He established the Strategic Economic Dialogue in the Bush administration for dialogue on economic issues with China, and setup the Paulson Institute at the University of Chicago to focus on China-U.S. relations. One of Paulson's points is that China's financial system faces a day of reckoning, with large losses and many restructurings. Wasserstrom's review looks at Paulson's view of dealing with China and points to a sense that it needs updating because by the time the book is published a lot has changed with the new Jinping administration. The new administration in China is more assertive in foreign affairs, and less tolerant of both the corruption that became part of the Chinese capitalist development inside a state run one party system, and of the voices for more openness. It also has placed tight controls on the Internet. Jinping sees a constructive role for the Communist party in the future as China makes economic reforms away from state run enterprises, and is working to strengthen the party through discipline and anti-corruption initiative. The reckoning Paulson mentions, Krugman and other experts have described in other language- not as a reckoning but that China was no exception and would face the same problems that the U.S. and the eurozone faced since 2008 from financial excesses. In this sense Paulson's views and interactions with the Chinese leadership may represent another era, a period of exuberance when some of these financial excesses were being built up. Today's economic team of Jinping and Li Keqiang is more focussed on making sure the transition through a economic crisis is managed carefully, keeping in mind the risks for China considering its history, and the situation where China is still a "middle income country" with aspirations for further development to improve incomes and living standards. Their view is that tight control is needed as China makes this transition to a less state enterprise dependent, and more consumer economy, so that there is no loss of the gains made so far. A different set of skills and deft management of the economy is needed, making Paulson's views from another era less relevant. External influences such as managing the complex China-Japan relationship as both countries become more assertive are creating another dynamic in Asia, which Chinese leaders may see as requiring careful management, making Paulson's experience less relevant for a new period with new challenges. For the U.S. the economic cooperation with China now occurs with an added political dimension. Of concern for the tight control, seen as not forward looking and not bringing more constructive voices into the system, and the new complexities of carefully managing the changing U.S.-China-Japan relationship in Asia. ...

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Lipton, Austin and LaFraniere of the NYT tell the story of how the serious differences between the prime contractor for the federal healthcare website, CGI Federal, and the Obama administration officials handling the website, evolved into conflicts that could not be resolved. This led to the flawed website being rolled out on schedule ignoring serious problems with the website. The detailed report comes after interviews with Obama administration officials and specialists who worked on the project and looking into government and contractor documents. A month ago in October 2013 the healthcare website for the Obama healthcare law was up only 42% of the time with 10 hour failures happening frequently. Basic steps for the functioning of website backup systems in case there is a failure, testing to ensure negligible or no outages, were not secured. The government officials responsible for the rollout did not have the capabilities to handle such a project. Henry Chao, who worked in the Medicare agency for 19 years was left to oversee day to day questions for the website HealthCare.gov, but lacked a formal background in software engineering and no authority to make the decisions needed. The $630 million project was setup inside the Medicare Agency, instead of a separate agency specially setup for this project and staffed with the appropriate skills as originally proposed. Five different lower level government officials made decisions without the authority needed and no one person with the necessary skills was given overall responsibility and decisionmaking. A series of missteps were allowed to take place- settting many added requirements that made it difficult for contractors to focus on basic steps and get them right, use of the MarkLogic database system instead of systems from IBM or Oracle against the advice of contractors, multiple contractors without a way to control the overall project, shifting requirements from the government and bureaucratic delays for resolving basic issues such as use of social security numbers, all worked to create delays. With the delays came a deterioration of relations between Obama administration officials and the contractors. The government officials response was to stick to the deadline of Oct. 1 rollout, with Michelle Snyder, chief operating officer of Medicare agency telling people she would fire the contractor if possible. In the end no one took responsibility for a safe reliable rollout, even though the system failed a test of 500 users in late September and was down half the time in mid-October. President Obama or his advisors were either not kept fully informed, or did not grasp the significance of the collapse in relations between contractors and the government and a project out of control. His aloof distanced approach was not an asset in such matters- saying about the rollout and use of the website: "this is real simple" like using the Kayak website for travel bookings- and he saw no need to take action leading to the major failure for the administration that followed....

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One big concern says Nancy Keates of the WSJ about the National Association of Realtors, is that the organization collects and puts out objective data about home sales, and at the same time provides a commentary on the statistics. It also has a mission to advance the interests of its members. There are 2.6 million licensed real estate agents, and NAR represents about 1.3 million of these real estate agents. Would the real estate agents and the NAR tolerate an economist who raised concerns about the boom in lending? David Lereah, is former chief economist for the NAR ,and worked there from 2000 to April 2007. He remained upbeat throughout these years, even when the market was headed downwards. And the way he sees it he was doing for 7 years everything the NAR wanted him to do, and he was pressured to issue these upbeat reports. Critics called him "Baghdad Dave", after a Iraqi information minister for his false upbeat reports even when the war on the Iraqi side was lost. And a Credit Suisse analyst called him Liar-eah for some of these upbeat assesments, when things were clearly going wrong. The way Nancy Keates sees it this economist was eager to profit himself in the boom years. He was an economics Professor at Rutgers, at the University of Virginia, and later an economist and regulator at the Federal Deposit and Insurance Corporation. He himself bought condos 2 in Washington in 2003 and 2004, and one each in Tampa, Richmond, Va. and Alexandria, Va. and Naples, Florida. Owning by 2006 six condos worth between $150,000 and $400,000 a condo. He had an expensive lifestyle says his wife, with a big house worth $780,000, a country club, sports fishing boat. So in some ways suggests this reporter, he was caught up in the boom himself with his investments and the demands of a expensive lifestyle, with little room left for independent opinion and analysis. This is a striking example of things gone wrong, with all the meticulousness and comprehensiveness with which data is collected having its value destroyed by the lack of strict objectivity in the analysis. And the intrusion of strong personal interest bias in one direction making the destruction of objectivity complete. Looking at the economists at companies and associations, there is a subtle bias in operation that needs to be discounted by CEO's and association heads, a bias for giving the CEO's better and optimistic assessments on a consistent basis. An example is the way a large number of economists see the recovery taking place in 2009. Another related example is the sales forecasts for the Detroit auto companies that continued to assume sales in the 16-17 million a year rate into the latter half of 2008, even after the Bear Stearns collapse in March and the increasing foreclosures suggested something was amiss. All with horrendous consequences for the companies or industries involved, and the US and global economies....

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Krugman points to the need for action on revaluation of the yuan, and sees the vote in the House of Representatives sponsored by Sander Levin as a necessary step to get China to act. He sees China as dragging its feet on this issue for many years, and the need to keep the heat on US policy makers, who have acted very passively on this issue. He describes the US policymakers as being infuriatingly, incredibly passive in the light of the Chinese inaction and stalling on currency appreciation. China he says denies manipulating the exchange rate, even as $2.4 trillion foreign currency was purchased by China. Krugman says China is not letting what is a natural process to unfold that would help the world economy as a whole to recover. Its manipulation of the exchange rate, is in effect subsidizing its exports at the expense of other countries like the US. See the link to Roubini, who shows how this is bad for China. Roubini says China will see a growth collapse in 2-3 years, if it does not change direction and let the yuan appreciate. He says it is in effect a large transfer of income from Chinese households to Chinese state owned companies which is dangerous because of increasing misallocation of resources and real estate speculation. See David Barboza for information on the real estate speculation of these Chinese state owned companies. When all this information is added up, it shows China's serious need to act. This would make possible a transition to a new model of development that relies on domestic consumption, and bettter allocation of resources and investment. ...

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Italy's prime minister, Monti, says he will submit his "irrevocable" resignation, after about 1 year in office, following the withdrawal of support from Berlusconi's People of Liberty party. He told president Giorgio Napolitano he would make an effort to pass the budget and a financial stability law to defer "the consequences of a government crisis" before turning in his resignation.

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Michael Gerson was there in June 2005, with then Secretary of State Condoleeza Rice and nine Egyptian opposition figures, including presidential candidate Ayman Nour, in a shabby Cairo conference room. Rice was in that room to call on President Mubarak to allow free elections. Nour was skeptical about the result. The Mubarak legacy was to undermine all legitimate opposition to thirty years of rule. Gerson makes a remarkable statement when he says that the universal desire for self-government is rooted in the natural human resentment of humiliation. A 26 year old fruit vendor in Tunisia is humiliated and set himself on fire in protest, setting off protests against servility, oppression and silence. He calls the lack of faith in American ideals a pervasive failure of foreign policy elites. Someday he says, Americans are likely to say the same for China, with the complete absence of a policy for anticipating a democratic transition.

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Efforts to change labor laws by Italy's prime minister, Mario Monti.

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The CDU convention in Leipzig, Germany passed a compromise resolution that lays the ground for a EU country to voluntarily leave the euro zone and still maintain membership in the European Union. The resolution called for changes to the Lisbon Treaty to allow a euro zone member that is "unable or unwilling to permanently obey the rules connected to the common currency... to voluntarily... leave the euro zone without leaving the European Union." Merkel told delegates that Europe must change the EU treaty to allow for strong automatic sanctions for violations of the monetary union treaty. "We need to send a clear signal. We don't whine; we don't complain. We know instead that we have a job to do." On the issue of voluntary withdrawal from the eurozone, the earlier decision by Merkel and President Sarkozy of France- when prime minister Papandreou of Greece decided to put the issue of membership to a referendum- was to tell Greece that leaving the eurozone would mean leaving the European Union. This CDU resolution provides a basis for Greece to resolve its debt problems outside the euro currency, as experts suggest....

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