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The Obama administration's foreclosure prevention programs were designed for subprime lending situations. They were not designed for the high unemployment experienced in the U.S. A Treasury Department effort allows jobless people to postpone mortgage payments for 3 months, the average length of unemployment however is 9 months. Only 7,397 participants are in this program. As part of the bailouts Treasury had $46 billion to spend to prevent foreclosures, as of May 2011 Treasury has spent only $1.85 billion. Because housing provide so much of the underpinnings for the U.S. economy, it is essential to put housing back on a stable footing for an economic recovery. The lack of a sensible plan in this area is simply incomprehensible. Morris Davis, a former Federal Economist, has estimated that a million more homeowners went into foreclosure because of a lack of help for the unemployed. Davis is an associate real estate professor at the University of Wisconsin. He says its simply outrageous that the Obama administration has done so little. President Obama recently took credit for a recovery and jobs saved in the auto industry in Detroit. The failure to come up with a workable plan and to do so little in the larger area of housing and unemployment, is likely to overshadow everything else. This is especially so with the Fed approaching its limits after QE II, and with the administration and the Congress in a stalemate over further stimulus and the deficit....

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Interview with Robert Shiller of Yale University, by Simon Constable of the Wall Street Journal. Shiller tells Constable that the second dip recession is imminent. Shiller senses that when the National Bureau of Economic Research looks at third quarter data for 2010, it will find that the second dip of the recession started here. In other comments Shiller said that the U.S. is standing at the edge of deflation. The view on housing markets of Shiller, who is one of the creators of the Case-Shiller Home Price Index, is that housing prices could decline for the next 5 years. Shiller sees the US's chief concern as unemployment. He suggests that local governments and the federal government create jobs. One idea is to have a teacher's aide in each classroom.

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Richard Thaler, a Professor of Economics at the Booth School of Business, University of Chicago, on the reasons why millions of homeowners under water- owing more on their homes than their homes are worth- have not defaulted in large numbers. In places like Nevada nearly two thirds of homeowners are under water. Changing a home, changing school for children, losing one's credit rating, social stigma. He points out that the costs are outweighed by the benefits of getting out of an underwater mortgage, and research has shown this is contagious once the process of defaulting has started. So once the neighbors are defaulting its much easier to do so and the proces picks up momentum, the psychic costs simply decline. So he says the result is that we may face a tsumani of strategic defaults. Professors Posner and Zingales of the University of Chicago have a proposal. Banks should be required to provide loan modifications in neighborhoods with home prices having dropped over 20%. Banks would reduce the payment by the average price reduction in the area and get in return 50% of the average gain in prices when the house is eventually sold. This requires Congress to pass legislation....

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The first of a series of quarterly reports put out by the Federal Reserve Bank of New York, on the subject of household debt and credit. It shows that the process of unwinding consumer debt in the US is a slow and painful one. The figures tell the story, which touch every aspect of the US economy and business, with ripple effects through the world economy. Total consumer debt is $11.7 trillion as of June 30, 2010, which is down 6.5% from the crest reached in the third quarter 2008. Credit card accounts are down 23% from the high reached in second quarter 2008, and mortgage obligations down 6.4% from 2008. By mid 2010 11.4% of consumer debt was delinquent, and this was up from 11.2% in 2009. $1.3 trillion of consumer debt is delinquent, and $986 billion is seriously delinquent- that is 90 days late. Serious delinquencies are up by 3.1%. Other figures fromt he Fed report: Half million people in the USA had a foreclosure added to the credit reports for the period March 31, 2010 to June 30, 2010. This was up 8.7% above the figure for first quarter of 2010. New bankruptcies showed up in credit reports for 624,000 people during that quarter, an increase of 34%. Another major problem stacked on top of this for consumer spending- the Fed's interest rate policy according to Todd Petzel, chief investment officer of Offit Capital Advisors, burdens consumers with a tax of $350 billion in income lost from low to zero interest rates. This creates two problems of its own. Not only does it depress consumer spending. It also makes consumers reach out for riskier investments. This figure was calculated by taking $14 trillion in debt issued by Treasury, federal agencies and municipalities. Rates are near zero on short term Treasuries compared to 3% average over the years. Taking 2.5% on $14 trillion, the figure of $350 billion was arrived at. Or 2% of gross domestic product. Analysts say that it would be better not to save a few zombie banks at the expense of consumers and pension funds. It lowers the cost of the deficits through the lower interest rates the government pays on its debt, but lower consumer spending and a limping economy hurt tax revenues and increases the deficit....

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The dollar is not expected to suffer asharp drop even though problems of increasing debt, and China's pegging of the yuan to the dollar remain for the future.

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The U.S. Federal Reserve Flow of Funds report for 2011 shows Fed purchases of 61% of total net Treasury issuance. Goodman points out that the net issuance of Treasury securities for covering U.S. budget deficits is normally 0.6% to 3.9% of GDP on average for the last six decades since 1950, compared to on average 8.6% of GDP today. A big jump in Fed purchases with a corresponding steep fall in the participation of foreigners and the private sector. Foreign purchases declined from 6% of GDP in 2009 to 1.9% of GDP in 2011. U.S. private sector- mutual funds, banks, corporations and individuals- purchases declined from 6% of GDP in 2009 to 0.9% of GDP in 2011. This helps keep interest rates low and funds U.S. government needs. Lawrence Lindsay pointed out in the WSJ in 2011 that Fed has itself boxed in being forced to keep interest rates low for years. If the government borrowed at a more normal rate of 5.7%, instead of the Fed induced rate of 2.5% today, Lindsay estimated the U.S. government would face an additional $800 billion in interest costs by 2021....

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Japan's situation, a strong yen and a stagnant economy, continues in 2010.

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Applebaum talks to two researchers at the University of Chicago and Princeton, Prof. Sufi and Prof. Mian, on the record of U.S. president Obama and Fed chairman Bernanke in helping homeowners facing foreclosure and underwater borrowers, comparing that record with their record in helping the banks. The issue is relevant as the policy and handling of homeowners had to be part of an overall effective plan for recovery in the U.S. economy, because ultimately without the U.S. consumer any recovery would be weak in the long run- a situation the U.S. faces in early 2014. The response to the issue of irresponsible homeowners borrowing beyond the limit without an equally robust response to irresponsible bank management that allowed wildly excessive leveraging of assets, and successful aggressive lobbying by banks in a shortsighted policy of going through with a wave of foreclosures; besides creating questions of fairness and equitable handling of the problem, also had major ramifications for the future of the U.S. and global economic growth. Here Christina Romer and other administration advisors say Bernanke was right in tackling the problem from the perspective of the banks needing to be recapitalized. Thoughtful advisors looking at the entire problem, Martin Feldstein and Sheila Bair strongly pushed for providing the same help to homeowners without getting caught up in the issue of who was responsible home buyers or the banks, and looking at the interests of the U.S. economy and the U.S. people. Proposals by Feldstein and Bair were equally robust in helping banks as they were in helping homeowners, only the banks understood their interests narrowly and had more access to policymakers in the Bush, as well as the Obama administration, Paulson as well as Geithner. This leaves us with the ultimate irony of the Obama administration pushing for the minimum wage, even to the point of electoral posture, when lasting damage had been inflicted on homeowners from the weaker portions of America's middle class by a policy that went against what two respected financial and economic experts from the Reagan period, Sheila and Bair had strongly advocated. See links and groups on Feldstein and Bair. Applebaum has followed most aspects of this problem closely and continues to provide exceptional reporting including the piece on the thinking of new Fed chairman, Janet Yellen. Private enterprise rules that require management at banks just as for other companies to take responsibility for failures, and be replaced with new management, was largely avoided leading to a fundamental failure in how a free market economy such as the U.S. and western European economies are supposed to function. Rules aggressively pushed by Geithner's mentor Treasury Secretary Rubin for a vigorous cleanup at banks in South Korea during a similiar situation in 1997, were not followed in any way here, also setting wrong precedents for the long run. ...

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India's central bank chief, Raghuram Rajan, points to the risks for developing economies from changes in monetary policy of the U.S. Federal Reserve. The Indian rupee lost about a fourth of its value in 2013 as the U.S. Fed announced plans to withdraw from its quantitative easing policies. Large depreciations in other developing economies, Indonesia, Turkey and Brazil, happened at the same time. Rajan and India's Reserve Bank increased the interest rate by half a percentage point in 2013 to deal with the impact on inflation as a result of the large depreciation of the rupee. The volatility of capital flows and sudden reversal in inflows of capital to developing economies leaves these countries exposed to sharp declines in economic growth. India's growth has slowed to 5%, larger than expected from the slower growth in the global economy in 2013, largely as a result of decreases in direct foreign investment and capital outflows.

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India had 11 interest rate increases in 18 months, but this has not slowed the rise of inflation. The Wholesale Price Index is around 10%. Inflation expectations as measured by the Reserve Bank of India are around 12% in mid-2011.

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The dollar has reached the mark of 86 yen by the begining of August 2010. Japanese analysts see the dollar at 90-100 yen as reasonable for Japan's export based companies. One factor causing this is the Chinese government increasing its holding of Japanese government bonds. By May 2010 China had accumulated 1.27 trillion yen according to the Japanese government. This rise of the yen will have a negative effect on Japanese exporting companies.

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Prof. Calomiris of Columbia University, says the U.S. Federal Reserve should increase the cash reserve requirement for U.S. banks to prevent a surge in inflation. He points out that excesss reserves at banks stand at about $1.5 trillion. He suggests the Fed should take early action to prevent a jump in lending and credit creation- a pattern seen in the past after several years of dampened credit and lending.

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About 680,000 homeowners applied for the Home Affordability Modification Program, or HAMP, and had their loans modified so that their mortgage payments are reduced. This is only one in four of the 2.7 millon homeowners who tried to to join the program. This according to a Wall Street Journal analysis of data released by the Treasury Department. In 2009 the Obama administration launched the program to reverse the rising home foreclosures in the U.S., by reducing the monthly mortgage payments through lower interest rates and extending the term of loans. About $75 billion was estimated as the cost of the program at the time. Only $1 billion of this has been spent by the Obama administration. The program offered payments to 100 mortgage servicers as inducement to complete loan modifications. About half the applicants or 1.3 million were declared ineligible from the beginning, and the program used stricter qualification criteria than loan modification programs offered by individual banks. Applicants were rejected because the necessary paperwork was not submitted or it was lost by the mortgage company- 266,000 falling in this category. An additional 770,000 homeowners who started the program were later disqualified mostly for the paperwork and eligibility problems, with only a small number rejected for failing to make trial payments. Mortgages less than 31% of pretax income were considered affordable and considered ineligible-255,000 were in this category. Over 80% of homeowners in the southern states of Arkansas, Louisiana, Oklahoma, Texas, Alabama, Kentucky, Mississippi, and Tennessee, received no loan modification....

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Kenneth Lewis's thinking that the Merrill acquisition would work in September 2008, and the brutal markets in the months afterwards.His urgent meeting on December 17 with Paulson and Bernanke after learning of large new losses at Merrill. The decision to do what was he says patriotic and not cancell the deal leading to his staying mum on the meeting and on the huge new losses. Shareholder protest. Merrill's loss for the 4th quarter of 2008 was a huge and devastating $15.3 billion, leading to the firing of Merrill's John Thain for not disclosing everything he knew about the new losses.

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High inflation and depreciating currencies in India, Turkey, Brazil, Indonesia and South Africa in 2012-2014.

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The ECB's annual report for 2012 and the role the ECB under Mario Draghi played in the eurozone crisis in 2011-2012. The gains made in eurozone financial architecture, especially the agreement for the ECB as financial supervisor for European banks. The ECB sees itself as the supervisor for all European banks- the French position in the discussions in Brussels. The agreement of Dec. 12, 2012 only says banks with assets over 30 billion euros, or 20% of GDP of countries, or operations in two or more countries will come under supervision by the ECB.

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India's inflation rate declined to 4.4% in Nov. 2014 and 5% in Dec. 2014. Price pressures are moderating throughout the economy. With lower oil prices in 2015 and long term trend for lower prices the outlook has improved for controlling inflation. The central bank governor Rajan cut rates by one quarter of a percentage point in Jan. 2015 and indicated further rate cuts are ahead to boost economic growth. The financial markets reflect a 1% decline in interest rates and the stock markets were up 2% in Jan. 2015

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The constructive contribution made by the G-20 meetings of leaders towards building agreement on economic and other policies for peace and progress in the global economy. The meetings were especially useful for coordinating policy and addressing issues arising in the global economy after the 2008 financial crisis. Here Li Baodong, China's vice minister for international organizations and conferences, international economic affairs, describes the path ahead: IMF reforms implementation, better coordination of macroeconomic policies, pursuing the anti-protectionist and free trade policies with further support to the WTO and ministerial MC9 meeting in Bali in Dec. 2013, and infrastructure financing proposals for developing countries on the agenda at the St Petersburg, Russia, G-2- meeting in Sept. 2013. Baodong says the mechanism called the Framework for Strong, Sustainable and Balanced Growth as part of the G-20 meetings is a major achievement. Each G-20 economy submits it macroeconomic policy plan for a Mutual Assessment Process under this arrangement. The progress from the Bretton Woods financial architecture to the new arrangement- from the G-6 to the G-20 to include developing countries from India to Mexico and Brazil- is another major achievement, not fully recognized by the public, says Baodong. Interestingly Baodong makes particular mention to global rebalancing, rather than pushing what he calls the impossible task of increasing demand to get growth. This is a realization coming to China's economic policymakers under the new Jinping-Keqiang administration after the overly aggressive effort to stimulate demand in the 2009-2011 Stimulus, and the ensuing financial problems in the banking and credit system. It is indicative of the policy shift and its implementation underway in China in 2013-2015....

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Over the last ten years average growth in real per capita income has averaged 1.6%, with declines only in two years of the last twenty years, 2008 with the global financial crisis, and in 1991 a year before President George H.W. Bush lost the election to Clinton. A forecast by Mark Zandl of Moody's Economy.com shows real disposable income per capita is expected to increase by 0.4% by the end of the third quarter of 2010 from a year earlier. This will show up in consumer spending and will weaken the recovery. It is also likely to be reflected in elections in the latter part of 2010.