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About $229 billion, three fourth of Greece's debt, is now held by the European Central Bank, the IMF and the European Commission. This is taxpayer money and the governments are making sure that they get back bailout loans in the form of interest payments. About two thirds of the $177 billion given to Greece as bailout loans since May 2010 actually came back to the ECB, IMF, and the EC, in the form of interest. The ECB is keen on recovering taxpayer money. The money route has been setup with an escrow account in Greece for bailout loans so that interest payments get paid, and this money cannot be used for any other purpose. Banking experts say this is a practice in risk management, and with Greece's poor record in finances the controls have been put in place to recover money the ECB invested in Greek bonds in an effort to calm nervous financial markets and now gets about 10% in annual interest payment. Under earlier debt restructuring for private creditors to Greece a haircut of over 50% on Greek bonds was taken, with the ECB insisting on receiving full payment. If Greece were to repudiate the loans under a new elected government losses would have to be taken by the ECB, IMF, and EC, and by private creditors. The ECB has Greek bonds in the range of $44 billion to $69 billion, and the European Financial Stability Facility $88 billion, by some estimates. Greece's exit from the euro would result in losses on these bonds .for the ECB and the EFSF, ultimately European taxpayers. It would also make the new bonds to private creditors under the restructuring of little value which is why European banks would not favor that outcome. Greece's tax receipts at some point, possibly 2013, would exceed basic operating expenses of the government, at which point a future Greek government might decide to exit the euro and stop interest payments on debt in its best interest....

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2012 car sales in France declined by 13.9%. This was higher than the 8.2% decline in the European market, according to the European Automobile Manufacturers Association. Analysts point to low new demand in the developed world- only 2% for U.S. and Europe compared to 70% in emerging markets. Replacement demand is also declining as younger people in urban areas increasingly use subway transportation and bicycles. Better made automobiles last longer and car owners drive less with an aging population reducing replacement demand. This reporter found few customers at auto dealerships in the centre of Paris.

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The approval of 254 investment projects in China, accelerating investments in infrastructure and construction as part of a second stimulus plan in 2012, folllowing the first stimulus in 2009. The risks are higher this time because of the inflated housing prices in China, the increasing lack of affordability of housing for average families, and the continuation of policies that emphasize infrastructure spending at the expense of consumption and earnings on savings for ordinary families. With that kind of spending has come increased levels of corruption. The glut in the steel industry will grow worse with more spending on steel plants.

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Critics of the nuclear agreement with Iran reached in April 2015 say the verification under a UN agency will be weak, and the "snap back" of sanctions in the event of failure may not work in the real world.

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Banks in the UK are considering giving investment bankers allowances to make up for lower bonuses mandated by new EU rules. This is one of the mechanisms banks are considering to be able to pay competitively. EU rules do not limit total compensation making it possible to shift pay given earlier as bonuses to the new 'allowance' category. For instance a 1.8 million euro bonus might be dropped to 1 million euros and 800,000 euros given as an allowance. Such an arrangement means banks can adjust the allowance as markets and regulations change. Increasing fixed salary would mean effects such as higher pension costs. Most of the 35,000 higher level banking employees to which the EU rules apply work in London, England. The UK Prudential Regulation Authority has come out against the EU bonus rule and the UK has taken this up in a legal challenge at the European Court of Justice. U.S. and Asian banks are deferring parts of bonuses and paying in a mix of shares and cash.

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Greg Ip provides useful insights into the nature of the economic recovery in Britain compared to the U.S. by 2015. The recovery in Britain has done better than in the U.S. in job creation, but has lagged behind in productivity gains. The labor force participation rate is 72% in Britain compared to 68% in the U.S., going back up to 2007 levels in Britain, whereas in the U.S. it has steadily declined with some older working class Americans too discouraged to look for work and left behind. Stagnant wage growth is a major issue in Britain, more so than in the U.S. where wage growth is slow. Economic austerity is not the main cause of the economic difficulties as the coalition government of prime minister Cameron relaxed earlier goals for austerity by 2012 with tax revenues and growth below forecasts. The structural budget deficit has been reduced by 6.6% of GDP since the peak, and the Office of Budget Responsibility estimates the UK economy was 1.5%-2% smaller by 2013 because of the austerity policies. Britain was also affected by the eurozone crisis to a larger degree than the U.S. Productivity remains a long term challenge- with needed investments in housing, education and infrastructure, improved lending for new business, and higher tech improvement exports....

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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....

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How German political leaders view the Euro currency and the European Union. German history and the need for fiscal discipline and the European Union. The constant between Chancellors Adenauer, Kohl and Merkel- a sense of European unity as part of the fabric of the new Germany. A desire to find a way through the sovereign debt crisis of 2010-2012, by introducing fiscal discipline into the structural framework and preserving the hard won gains for the Euro currency and the European Union.

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The pact of competitiveness is designed to bring a closer integration of the eurozone. It includes proposals for increasing the retirement age to 67, ending indexation of wages to inflation, and involvement of other eurozone countries in controlling out of control deficits in some countries. Germany sees this as necessary to convince the German public that financial responsibility is being exercized by countries in budget crises that get help from Germany. This may buy time but it does not come to terms with the reality of Greece being insolvent already, which may be true also for Ireland and Portugal. Some experts see the need for debt restructuring, and the need to start early, especially if Germany is unwilling to make large transfers to these countries.

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A new West Coast Model is emerging with ballot measures in the states of Washington, California and Oregon. The model is to make up for decades of faulty income distribution which favored tech communities in west coast states leaving behind people from minority communities and the working class outside tech hubs such as San Francisco, San Jose and Seattle. During this period budgets for education and healthcare, social services and essential infrastructure suffered as budgets were squeezed for local governments. Minimum wage also lagged behind and communities struggled to keep up. Washington votes for a ballot measure that raises the minimum wage to $13.25 statewide and mandate paid sick leave for workers. In California a ballot measure makes permanent an income tax surcharge on millionaires to use these funds for education. In Oregon measure 97 places a gross receipts tax on corporations with annual sales in Oregon over $25 million, raising $3 billion a year for schools, health care and other programs. The California and Washington measures are likely to pass, Oregon uncertain, say experts. And even in Oregon supporters have learned from the experience to put forward new proposals on the ballot. The Washington measure is supported by Nick Hanauer, and Zach Silk, president of Civic Ventures in Seattle, who say it is essential to put more money in workers wages to increase growth and to bring better lives outside the tech hub areas. Most of the tech booms of the last two decades have not touched the areas outside tech hub metropolitan areas. The conservative approach adopted in Louisiana and Kansas of reducing taxes first and then when holes in state budgets developed to cut education, health and other service expenditures has not worked, and it has led to the backlash in the form of the new West Coast Model, which is expected to be brought up in other states in the east and midwest. The tech hub areas have grown with the boom in tech but this has largely ignored the rural areas, communities just outside of the tech cities, and led to uneven and distorted growth shortchanging the working class and the middle class, and hurting investment in education and healthcare across each state. Bill Whalen, a research fellow at Stanford University's Hoover Institution conservative think tank ,says that its hard to deny that the balanced growth for all communities across the state has lagged far behind as the tech booms boosted growth in the economies of California, Oregon and Washington. An article in the German online site Zeit on Silicon Valley described this vividly showing how this can happen in communities sitting side by side in the San Jose area, with minority Hispanic communities and working class communties seeing very little of the benefits of growth. ...

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Antonis Samaras continues his efforts to get the EU to agree to a two year extension for deficit targets agreed to in the March 202 bailout. He meets Merkel in Berlin, Aug. 24 and Hollande in Paris, Aug. 25. Merkel's coalition partners the Free Democrats oppose an extension. The opposition Social Democrats leader Steinmeier tells the Frankfurter Rundschau newspaper "its not very smart to abandon all conditions for aid over an extension of 12 months." Samaras tells the Sueddeutsche Zeitung newspaper: "our economy shrank 27%. Greece is bleeding, It is really bleeding." And German finance minister Schauble tells Germany's SWR2 radio that its too early for Greece to come back and say the agreed aid is insufficient considering that its ony 6 months since the March 2012 agreement. Merkel and other leaders in the Christian Democrats say they will wait till a report from the troika (the EU, ECB and the IMF) in October 2012 before responding.

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Deocuments from the weekly cabinet meeting show the new budget in France will increase revenues from household income taxes by 23%, and business taxes by 30%. The top marginal income tax rate goes up to 45% from 41%. Limiting a deduction for financial charges for company's taxable income brings in $4 billion in 2013, according to the finance ministry. The goal is to cut the budget deficit to 3% of GDP in 2013 from 4.5% in 2012. The finance ministry has assumed higher borrowing rates for future years- 2.9% on 10 year debt for 2013, up to 3.65% in 2015, and is not relying on the low rate of 2.18% on 10 year government bonds as reported by Trade Web Sept 28, 2012. The overall tax burden will be 46.3% in 2013, and 46.7% in 2015. French debt is at 91% of GDP for the 2nd quarter 2012, expected to be 91.3% in 2013 and falling to 82.9% in 2015. Prime minister Ayrault emphasized- "If we don't put a stop to this, taxpayer money will keep paying for debt reimbursement." Swift anticipatory action and unified government-business-labor posture under a favorable borrowing environment characterizes the approach for Britain and France in 2011-2012, compared to the situation in Spain where government action has been slow, not tough enough in cleaning up the banks, fallen behind in anticipating events and the government-business-labor unified posture has cracked under the strain. As a result under an unfavorable borrowing environment money raised from austerity type tax increases now goes to paying for debt reimbursement in Spain, leading to a situation in which debt and deficit reduction targets just get harder to achieve. A looming drop in credit ratings to junk status for Spain only makes the situation harder to overcome. ...

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In comments made to the editors of the New York Times, Mario Monti, the prime minister of Italy, says the European Union will endure because it was in the vital interests of Germany. Competitive devaluatations if a number of countries exited the eurozone would have an enormous harmful effect on Germany. Germany is an export dependent economy and sends two thirds of its exports to EU countries. In the unlikely event Greece leaves the eurozone, Monti says effective political policy responses can be expected to prevent this from affecting the rest of the eurozone. Monti is on a visit to the U.S. for talks with President Obama. He praised the effort by Greece's prime minister Papademos to meet the demands of international lenders in difficult conditions.

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Washington Post editorial on the Obama Georgetown speech of April 13, 2009. It questions whether President Obama has the candour and courage to tackle the tough issues of deficit reduction and entitlement reform. New healthcare spending for coverage itself will add to entitlement, and it says some of the savings mentioned by the President are phony or already needed for new spending for the economic recovery and health care. At the same time the paper gives Obama good marks for his clarity and grasp of the crisis and steps for recovery, and the policy agenda in the areas of health care, energy and education. The questions about courage and candor also raise all the questions about facing upto the facts about insolvent banks that Krugman, Rosenfeld, the Economist and others have raised. Is Obama dodging the hard choices, is he dithering? On the toughest issues like foreclosures, insolvent banks, global regulation pushed by the Europeans, will he end up making inadequate or faulty choices, and when he comes around to making the tough choices, will he have lost so much valuable time as to prolong the crisis and stretch it out to many years....

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Japan is suffering from deflation, the public debt is a record 883 trillion yen or $9.78 trillion, and Premier Hatoyama was unable reduce spending. Yet the Japanese yen went up by 4% in May 2010. It went up by 11.5% vs the Euro. The causes lie in the weakness of the U.S. and European economies and the huge trade surpluses from Japanese exports, over $28 billion in 2009.

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Italy's debt sustainability analysis shows how critical it is to improve prospects for growth and competitiveness and avoiding any lowering of growth from current forecasts. Equally critical is lowering of borrowing rates. And vital to setting the right tone for this is the future of the Monti government and nature and committment of the new government after spring 2013 elections.

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The Ifo Institute's Hans-Werner Sinn presents the German view on bailouts for Greece, Ireland, Portugal, Spain and Italy. He says that socializing of debt was proved to be a bad idea even in the U.S. experience when eight states and territories were allowed to go bankrupt in the 1830's and 1840's, and even though California is close to being bankrupt no one suggests socializing the debt. The European Economic Advisory Group has favored short term assistance and liquidity assistance but not aid for insolvency. Bundesbank assistance for international shift of refinancing credit, also called Target credit, is estimated at $874 billion, since 2007. Greece and Portugal current account deficits were financed using this. ECB purchase of government bonds $250 billion, and $500 billion in rescue programs from the IMF, and additional help from the European rescue funds such as EFSF. Sinn says Germany would lose $1.35 trillion if the euro fails. If Greece, Ireland, Italy, Portugal and Spain go bankrupt and repay nothing, and the euro survived, Germany would have lost $899 billion by his estimates. He responds to critics by saying that the Marshall Plan gave Germany 0.5% of GDP for 4 years, or 2% in total, or about $5 billion today if taken as 2% of Greek GDP....

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Krugman points out that about 13 million Americans without insurance gained health insurance under the Obama plan. He says if it is turned back 8 million whites without a college degree in that 13 million will lose health insurance. Of these eight million about two out of three voted for Trump, so that 5 million Trump supporters could now lose health insurance even though they are older and have more health conditions. Krugman says this aspect of the election campaign was not covered well in the misinformation and social media information of the 2016 campaign, and the lack of media focus on the important issues in the election. On manufacturing jobs he says most of the jobs lost are not returning, and only token jobs such as at a Carrier plant in the news will take their place.

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The artificial nature of the target of debt to GDP of 120% for Greece in 2020. This is the target being followed in negotiations by the troika of the ECB, IMF and the EU. Experts say the sustainable level would be much lower for Greece -this would be much lower because of the aging population in Greece and lower level of workers to support retirees in future years, the inefficient tax collection system and poor prospects for changing it, the degree of control over monetary policy and the rate of change of debt. A recent study by the Bank for International Settlements shows debt sustainability at 85% after studying 18 countries from 1980 to 2010. No precise source has been found for the 120% target. An IMF Report in 2011 said the 120% was the "maximum level considered sustainable." Alan Auerbach at UC Berkeley and Michael Woodford at Columbia University, say the additional factors are relevant to Greece. The many unpredictables over the course of ten years is another serious difficulty.

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Honda plans to move more of its manufacturing to the U.S. as the value of the yen drops below 80 to the dollar in 2011. Honda faces problems from parts shortages after floods in Thailand, and U.S. market share down 1.5 percentage points to 9% in 2011. Honda's profit declined by more than 50% for the third quarter of 2011. The yen trading at 77 to the dollar in Dec 2011 is making it impossible for Honda to make a profit from vehicles made in Japan and sold in the U.S. Honda plans to double the capacity of the Civic plant in Greensburg, Indiana, increase capacity at its other assembly plants. It will build a new plant in Celaya, Mexico, in 2014, to manufacture the Fit subcompact. This will raise North American production from 1.29 million vehicles to close to 2 million. About 200,000 to 300,000 of these vehicles will be exported to other international markets. Profits on small subcompacts are small, making manufacture of the Fit more economical in North America than in Japan. In 2011 Honda manufactured between 30-40% of vehicles in Japan, the new plans are to reduce this to 10-20% in the next 10 years, a major shift....