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In the most recent Global Financial Stability Report out in Sept. 2011, the increase in the ratio of a country's outstanding credit to GDP is highlighted as a key warning light indicator for country economies. An increase in this ratio of over 5% signals a warning light according to the IMF. It tells us that borrowing is expanding at significantly faster rate than the growth of the economy. Using this indicator would have set a warning light up for the U.S. before the 2008 mortgage crisis, and a warning light well before the financial crises in Greece, Portugal and Ireland. The outstanding credit to GDP ratio went up for China by 24 percentage points in 2009, with 4% percentage point increase in 2010. The ratio was up 30 percentage points in Hong Kong for 2010. The warning light is also up for Turkey and Vietnam. Capital inflows into countries that can be suddenly reversed, and overvalued currencies are a danger for emerging market countries and act as supplemental indicator warning lights. Brazil and South Africa have overvalued currencies. Turkey has high capital inflows. Only a small portion of this is foreign direct investment, the rest helps support a high amount of lending and credit provided by the banks. That a significant portion of this is in short term borrowing poses additional risks, as evident in the 1997 Asian financal crisis for S. Korea, Thailand and Malaysia....

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The Obama administration is pushing for new U.S. fuel efficiency standards of 56.2 mpg by 2025. In May 2009 President Obama announced domestic car and light truck fuel efficiency standards of 35 mpg by 2016. Europe is expected to reach fuel efficiency of 60 mpg by 2020. This would still leave Europe considerably ahead of the U.S. in fuel efficiency for automobiles, but the gap would be much smaller. For the last several decades the U.S. has fallen sadly behind Europe and Japan in fuel efficiency. The perception of poor fuel efficiency hurt the automakers badly during periods of high fuel prices and when buyers were facing difficult economic choices. The automakers are beginning to grasp this fact. Mark Reuss, president of General Motors, commented that- "it's very challenging, but its upto us engineers to provide high value to the customer and support the environment." This is an issue that has serious national and global implications as it affects the future prices and demand for oil, emissions, and future economic growth. It would also bring the U.S. in line with Europe and Japan when it comes to fuel efficiency of automobiles. ...

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Spain's banks have government debt holdings as a percentage of bank assets of 6.8% compared to 13.1% for Italy's banks. This is based on data available from the IMF. But Italian banks are far better capitalized than Spanish banks. Bank shares of Italy and Spain hit post Lehman lows in July 2011, but Italian bank shares are likely to recover faster than Spanish bank shares. Italian banks raised 8 billion euros of capital in 2011 and most banks have an average core Tier 1 ratio of over 8%. By contrast Spain's bank sector is perceived by markets as undercapitalized and the IPO's of savings banks Bankia and Banca Civica will be affected by the unsettled markets.

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Failure to provide principal reductions to millions of U.S. homeowners under water and the prospect of further price declines in housing in 2012-2013. This would prevent a recovery in the U.S. economy.

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Julie Creswell and Graham Bowley look at the history of setting ratings for Greece at Moody's credit rating agency. Greece always had a history of problems with its credit standing including two defaults in its history. In 2004 Greece admitted to providing false statistics to enter the eurozone, saying that it had run deficits for each year since 1997. Before joining the eurozone Greece was assessed an interest rate of 15% on Greek bonds, after joining the eurozone borrowing rates dropped to 5%. Was such a large differential justified purely on the basis of the assumption that the eurozone would back Greece. Moody's held onto its A rating on Greek debt right upto December 2009, two years before the country faced certain default. Pierre Cailletau, Moody's head of sovereign debt ratings till the spring of 2010 admits that Moody's assessment was "mediocre" and that this is a very, very steep fall to see in a ratings- something had gone very, very wrong. The ratings agencies say bankers were selling the idea that the Greek growth story was real. This suggests bankers did not read Greece's financial history of defaults, did not understand the lessons of the recurring Latin American debt crises that countries such as Argentina could only absorb capital upto the point of productive capabilities. And the euro currency founders had left a weak gap - the perception through an implied guarantee that the whole eurozone would ante up the money for the failings of individual countries- into which bankers and Greece's political class rushed in. ...

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A New York Times/CBS poll shows 69% of Americans polled between March 21-25, 2012, feel the U.S. should not be involved in a war in Afghanistan. This is up from 53%, in a poll only 4 months before this poll.

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The home ownership rate for the U.S. in March 2012, is 65.4%, the same rate as in 1997 before the housing bubble, according to the U.S. Census Bureau. The irony of this is that the housing bubble was inflated by politicians in Congress and mortgage lenders and purchasers of mortgage securities. Fannie Mae and Countryside worked together ostensibly to promote home ownership while pursuing profits. In the case of politicians they pursued goals of raising employment and growth without understanding the risks of artificially inflating home ownership, and without consideration for incomes of subprime borrowers. A less benign view of the interests and goals of politicians comes from reflections on the impact of political lobbying by Fannie Mae and other housing lenders in the U.S. Congress. The consequences in terms of foreclosures have been devastating for minorities as well as other middle class homeowners. It has also damaged the U.S. banking system, credit growth in the economy and prospects for recovery, which will take years to correct. The federal government is also saddled with large losses at Fannie Mae because of its quasi government agency role. That role led to inflation of the bubble. Most of the consequences will be borne by middle and lower income households in the U.S. The pass-through effects in a global economy affect Europe, and emerging market countries. ...

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Edward DeMarco is head of the Federal Housing Finance Agency (FHFA), which is the independent regulatory agency overseeing U.S. housing lenders Fannie Mae and Freddie Mac. The FHFA was formed in 2008 after merging two existing agencies. Later that year Fannie and Freddie were taken over by the government. FHFA head, DeMarco, is reluctant to help homeowners with underwater mortgages on their homes with reduced payments because this would mean losses to the taxpayer. He sees his mandate as protecting the taxpayer. Sheila Bair, former head of the FDIC, says she understands DeMarco's mandate is not to provide fiscal stimulus, and the Obama administration has been all over the place when it comes to providing homeowner assistance. The result is that there is little help by the U.S. government to homeowners with underwater mortgages since 2008, and this creates larger headwinds for the Federal Reserve Bank to provide momentum to the U.S. economy. Many experts see this as a serious problem and a well respected economist, Martin Feldstein, has made repeated proposals for structuring the help to homeowners since 2008. ...

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Spanish banks agreed to reforms and job cuts as a condition for a 37 billion euro loan from the eurozone bailout fund, the European Stability Mechanism. The restructuring plan applies to Bankia, Novagalicia Banco, Catalunya Banc and Banco de Valencia, with the largest job cuts at Bankia bank. Bankia will have 6000 job cuts, 28% of the total employees, and cut branches by 39%. Banco de Valencia will be absorbed into Caixabank and receive 4.5 billion euros of the loan payment approved.

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ECB President Mario Draghi stated in his first speech to bankers and policy makers in Frankfurt that governments in Italy, Spain and other eurozone countries need to take stronger action and stop delaying. He said: "Where is the implementation of these long-standing decisions. We should not be waiting any longer." Jens Weidmann, president of the Bundesbank stated Germany's view: "The economic costs of any form of monetary financing of public debts and deficits outweigh its benefits so clearly that it will not help to stabilize the current situation." The ECB continues to maintain limited purchases of Italian and Spanish bonds, leading to a small easing of bond yields, but has ruled out large scale purchases. ECB officials fear that taking the heat off politicians in Italy and other eurozone countries through large scale bond purchases will only lead to a lack of action on irresponsible fiscal policies. Meanwhile the debate in Germany continues with the mass circulation tabloid Bild saying calls for the ECB to act were "hysteria." The conservative leaning newspaper Die Welt says Merkel could still change her mind. Die Welt pointed out that Germans remember the hyperinflation of the 1920's as what can result from printing money to buy government issued bonds, but forget the period in the early 1930's under Chancellor Heinrich Bruning, another deeply troubling period, when deep austerity led to mass unemployment and a prolonged depression....

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Defense spending under the new Obama 2012-2013 budget for the fiscal year starting Oct. 1, 2012, is $525 billion, and an additional $88 billion for Afghanistan. This is $6 billon below the $531 billion budget for the 2011-2012 budget of $531 billion approved by Congress, $22 billion less than the Obama administration's proposed budget. An additional $115.1 billion was for Afghanistan. In a move to bring financial discipline to additional appropriations for foreign conflicts, the Obama administration is proposing in the 2012-2013 budget proposal a limit to "overseas contingency operations" appropriations. The total proposed is $450 billion for fiscal 2013 to 2021.

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The majority report of the Financial Crisis Inquiry Commisssion says Alan Greenspan and Ben Bernanke, regulators, and several financial institutions were responsible for what was an "avoidable disaster." The report criticizes Mr Greenspan for advocating deregulation and considers the failure to stem the flow of toxic mortgages under his leadership at the central bank as a "prime example" of negligence. The report also says that the New York Fed under Timothy Geithner, now Treasury Secretary, also missed signs of trouble at Citigroup and Lehman. There are 6 Democrats and 4 Republicans on the Commission. The fourth Republican has his dissent, calling policies to promote home ownership, the role of Fannie Mae and Freddie Mac a major cause. The panel was hobbled by internal divisions and staff turnover, which have made what should have been a report of major significance into one marred by partisan differences. The majority report itself was heavily shaped by Phil Angelides, the committee's chairman, and it has many literary phrases. Overleveraging was a critical factor in the crisis. For every $40 in assets, the US's 5 largest investment banks had only $1 in capital to cover losses. The banks hid their leveraging with derivatives, off-balance sheet entities and other devices. The banks relied heavily on short-term debt which worsened the crisis. The report also said the Clinton adminstration's decision to exempt over-the counter derivatives from regulation- made in the last year of Clinton's term- also helped set up the ground for later events leading to the crisis....

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Spiegel Online describes the discontent with the Tsipras government after two years in which it failed to keep promises of reducing the impact of austerity cuts on pensioners. government employees, teachers and other groups. Now riot police buses are situated in the street facing the presidential residence in Athens. In early 2015 after Tsipras won the election the police were removed from the area. German Foreign minister Schauble is for no further concessions for Greece's debt programs till after federal elections in 2017, and austerity cuts continue to affect people in Greece. About 90% of Greeks are dissatisfied with the Tsipras government according to a recent poll. Tsipras had said he would stop privatization projects when elected, now he is moving forward with privatization for airports and other state assets.

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Peter Altmaier is director of the chancellery in Berlin, and is the person closest to Angela Merkel. This report in the Economist points out that Altmaier has played a critical role in steps taken by Merkel- as chief whip in parliament for the CDU during the Greece financial crisis and bailouts, as environment minister implementing the program away from coal based electricity, and in negotiating deals such as the deal with Turkey on refugees, and now with Brexit negotiations. Merkel has asked Altmaier to write her manifesto for the September 2017 election. A member of the CDU's liberal wing, Altmaier is known for being a scholar on German history, especially Bismarck, and a workaholic. Here he is mentioned as a bridge maker for the CDU to the Greens Party and was part of a group of CDU and Green Party politicians who met at an Italian restaurant in Bonn. As the moderates are now dominant in the Greens Party, a CDU coalition with the Greens could be shaped by Altmaier if the election results move in that direction. ...

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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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Eurozone finance ministers meeting in Brussels give Spain one more year to meet deficit targets because of a slumping economy and lower tax receipts after raising taxes. Spain now has till 2014 instead of 2013 to meet the EU's 3% deficit target. Spain can now run a deficit of 6.3% in 2012, down from 8.9% in 2011, without risking EU penalties. The 2013 deficit target is 4.5% of GDP and the 2014 target is 2.8%. Spain can also have $30 billion by the end of July in the event that a Spanish bank needs to be recapitalized quickly.

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This Wall Street Journal editorial calls for more transparency in disclosing bad debt problems at Spanish and other European banks. It faults recent and upcoming stress tests of EU banks for not being stringent enough and taking into account adverse scenarios. While Spain's central bank says only 20 billion euros are needed to recapitalize the cajas savings banks, other estimates are much higher. Moody's country report says Spain could need upto 120 billion euros to recapitalize its banks. A big problem is European banks exposure in Spain which is over 700 billion euros as of September 2010- Spanish banks have high exposure in Portugal and German banks have high exposure to Spain.

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Lack of individual accountability has been a defining feature of large U.S. Justice Department legal settlements with banks and other corporate entities since 2009. This WSJ editorial says establishing individual accountability where wrongdoing has happened is something it has consistently called for since 2009, especially as establishing this would reduce the unnecessary burden imposed on shareholders and employees who may have had nothing do to with the wrongdoing.

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Ford plans to reduce the weight of its F-150 pickup truck by about 700 pounds, a 15% reduction in weight, by switching parts of the body from steel to aluminium. The new F-150 pickup truck is designed to be introduced in 2014 and capable of meeting new fuel efficiency standards through 2020. This would enable a 25% increase in fuel efficiency and help meet the Obama administration fuel efficiency standards of 2011, which require the U.S. vehicle fleet to average 54.5 miles per gallon by 2025.

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The Economist cites a think tank that says about 600,000 young educated Kashmiri adults are jobless. Kashmiri religious and political leaders worry that their youngest followers might take up radical positions. The violent insurgency has so far subsided but is now replaced with stone pelting and hartals (strikes). The fear is that the influence of moderate leaders such as Mr Geelani, who is in his eighties, will be replaced with leaders who would reignite tensions and an insurgency. Dr Mushtaq Margoob, of the psychiatric hospital in Srinagar, talks about the throngs of patients with stress and anxiety, with the youngest the most damaged. He sees "a collective anger, a traumatized generation." A three man team, comprising 2 academics and a journalist, was sent by the central government to Kashmir to prepare a series of reports by talking to all sides in the conflict The team has proved ineffective as the members do not carry political weight to influence decisions. A Wahhabi organization, al Hadith is using Saudi funds to establish itself as a strong welfare, religious, and cultural force. The non-muslim minority in Kashmir sees al Hadith as bringing Saudi Islamization to a region long known for its Muslim's religious tolerance, building community centres, mosques, schools and clinics. Are there creative better ways to bring peace to Kashmir and redirect the resources India has to commit to the region, Pakistan has to commit to its border with India, and the U.S. has to commit to its ground war in Afghanistan. For now India is locked into a silence about Kashmir in international discussions, Pakistan is playing out its own "security objectives" in Afghanistan, and the U.S. is locked into its anti-terrorism objectives in Afghanistan. Only by connecting all these dots can peace and redirection of resources be achieved. The U.S., Pakistan and India, would come up with a creative solution only if each side finds itself pushed to the point where continued commitment of resources is no longer tenable because of economic crises, or the US and the Western alliance see the need to pull South Asia together to act as a balancing element in Asia in relation to China and Japan; and push for negotiations with an offer of stronger economic ties. ...

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As Japanese prime minister Noda prepares to restart the Oi nuclear plant in June 2012, former prime minister Naoto Kan, who was premier during the Fukushima nuclear disaster, answers questions in a parliamentary inquiry. He says he realized how dangerous nuclear power can be when it got to the point where the evalcuation of Tokyo was being considered, Japan was then on "the verge of national collapse." His fears were that a number of meltdowns could together " release into the air and sea many times, no, many dozens of times, many hundreds of times the radiation released by Chernobyl." The Japanese public has focussed on the parliamentary hearings because the previous inquiry is thought to have been perfunctory, and not really examined in depth all the issues the Fukushima disaster had raised, and the general feeling is that a proper public dialogue had not taken place. In contrast in Germany the issues had been discussed openly, and the Angela Merkel government which had been receptive to nuclear power reversed its stand on nuclear power. Germany is phasing out dependence on nuclear energy. Kan pointed out that the "nuclear village," the network of nuclear power companies, bureaucrats, and researchers, had hijacked national nuclear policy and was putting Japan back on the same path. He went so far as to compare it with the situation facing Gorbachev in Russia after Chernobyl: "Gorbachev said in his memoirs that the Chernobyl accident exposed the sickness of the Soviet system. The Fukushima accident did the same for Japan." In his assessment of what happened Kan said: "It is impossible to ensure safety sufficiently to prevent the risk of a national collapse. Experiencing the accident convinced me that the best way to make nuclear plants safe is not to rely on them, but rather to get rid of them."...