Diversion: Mystical India Vacation

We just returned from this very interesting tour of northern India: Mystical India, 2011 at odysseys-unlimited.com -- with an extension to include the Pushkar Camel Fair.

Politics: How Should I Vote in the Republican Primaries 2012?

To see which Republican candidate best matches your positions on issues, see How Should I Vote in the Republican Primaries 2012?, November 22, 2011 at The Telegraph.

Economics: The Greek Debt Fallout

The euro zone's ongoing crisis talks have raised the specter of 60% haircuts for the Greek government's creditors. Not surprisingly, the cost of insuring Greek debt against default keeps hitting fresh highs. As of Tuesday [October 25th] afternoon, Greek credit default swap (CDS) protection stood at 5969.36 basis points, meaning that it would cost €5.97 million to insure €10 million of Greek debt for the next five years.

Because so much bank debt is bought together with insurance, many of the counterparties to Europe's Greek debt burden are American institutions. If Greece or any of Europe's other troubled sovereigns were to default on their debt obligations, the American financial sector would take a palpable hit.

According to the Bank for International Settlements, U.S. creditors own just 5% of direct exposure to Greek debt. But they are also indirectly exposed to at least 43% of such debt through CDSs, which total upwards of €25 billion. This equals about half of the European Central Bank's direct Greek exposure of €52 billion.

Meanwhile France's BNP Paribas, Groupe BPCE and Societe Generale, along with Belgium's Dexia, Germany's Commerzbank and Deutsche Bank and Dutch ING Groep, together hold more than more than €130 billion in Greek, Portuguese and Italian debt. The most exposed is France's BNP Paribas, with more than €37 billion in the troubled European countries' debt. The most exposed German institution, Commerzbank, holds more than €15 billion. More worrying still, markets have woken up to the interconnectedness of Europe's banking and sovereign-debt woes just as Europe's 90 largest banks (which this summer completed the EU's so-called stress tests) queue to roll over a total of €5.4 trillion of debt in the next two years alone.

A large write-down of Greek sovereign debt would cripple the country's banks unless they are refinanced instantly by the ECB or the European Financial Stability Facility. Along with their sovereign exposures, French banks hold up to 20% of Greek bank debt, or about €25 billion in a conservative estimate. German banks' exposure to Greek banking debt is just as high, with the state-owned Hypo Real Estate's holdings alone accounting for €8 billion, according to Barclays Capital.

As for the ECB, it would not only suffer heavy losses on its own holdings of Greek bonds in the event of a default. Having received those bonds as collateral from European banks with liquidity constraints, it might also have to call the loans and return the bonds to those banks, or ask them to make up the lost value of the collateral with cash. The banks would then need to find almost €330 billion in cash to pay back the ECB or compensate it for the losses brought about by the collateral default. The ECB might even invite questions as to its own solvency, though which European government would be ready and willing to recapitalize it is an open question.

Loud and persistent voices have recently called for the creation of a European TARP. Simply put, the idea is that European banks on the verge of collapse would be buying bonds from a special government-funded vehicle that is itself stocked full of bonds issued by some of those same insolvent European governments. The banks will then use these bonds as collateral to borrow money from the ECB, which is underwritten by European governments. The ECB would end up holding the loans to undercapitalized and almost insolvent banks, as well as bonds backed by debt issued by insolvent countries as collateral. Is it any wonder the ECB has resisted Greek haircuts for so long?

It's become fashionable to compare Greece and the CDS-swamped euro crisis to the Lehman Brothers meltdown. Given the true scale of the problem though, it's hard not to worry that Europe's crash, and the ripple effects around the globe, could be even worse.

For more, see The Greek Debt Fallout by Athanasios T. Ladopoulos, October 26, 2011 at WSJ.com.

Health: Childhood Obesity

In 2009, a 555-pound, 14-year-old South Carolina boy was removed to foster care after his mother was arrested and charged with criminal neglect. The state's Department of Social Services had determined that without state intervention, the boy was at risk of serious harm.

For more, see Obesity Fuels Custody Fights by Ashby Jones and Shirley S. Wang, October 29, 2011 at WSJ.com.

Taxes: Ronald Reagan's Tax Increases

Republicans today prefer to forget that Ronald Reagan signed into law 11 major tax increases, including the Tax Equity and Fiscal Responsibility Act of 1982, the largest peacetime tax increase in American history.

Of course, there was still a net tax cut during the Reagan administration. ... the federal budget for fiscal year 1990 shows that revenue was $264.4 billion lower in 1988 than it would have been without the 1981 tax cut. But Reagan effectively took back half of it by his last year in office.

For more, see The Republican Idea of Tax Reform by Bruce Bartlett, October 25, 2011 at Economix.

Health: Alcohol Linked to Better Survival After Heart Attack

Women who drank anywhere from a few alcoholic drinks a month to more than three a week in the year leading up to a heart attack ended up living longer than women who never drank alcohol, according to a study.

"One thing that was interesting was that we didn't see differences among different beverage types," said Joshua Rosenbloom, a student at Harvard Medical School who led the study.

After at least 10 years of follow up, the team found that 44 out of every 100 women who had abstained from alcohol had died, while 25 out of every 100 light drinkers and 18 out of every 100 heavy drinkers had died.

In an earlier study including men and women, O'Keefe found that people who continued to drink moderately after having a heart attack had better health than those who abstained.

"You don't need to assume that people need to stop drinking once they develop heart disease," he said. "The problem is that alcohol is a slippery slope, and while we know that a little bit is good for us, a lot of it is really bad."

For more, see Alcohol Linked to Better Survival After Heart Attack October 28, 2011 at Fox News.

Economics: Back to Where We Began. Finally.

The American economy has finally reached the size it was before the recession began four years ago, according to the latest gross domestic product report from the Bureau of Economic Analysis.

For more, see Back to Where We Began. Finally. by Catherine Rampell, October 27, 2011 at Economix.

International: Brazil Trails Swaziland in World Bank Competitiveness Study

Brazil slipped six places in the World Bank's annual competitiveness study, as the world's seventh-largest economy fell behind countries including Swaziland and Nicaragua for the ease of setting up a business.

Brazil slipped to 126th place among 183 economies ranked in the World Bank's Doing Business survey published yesterday. The decline comes even as Brazil's central bank expects record foreign direct investment this year of $60 billion and the country invests in roads, ports and stadiums ahead of its hosting the 2014 World Cup and 2016 Olympics.

In Brazil it takes 119 days to start a business, compared with 14 days in Colombia, which was among the 12 countries that most improved its business climate last year, according to the study. The Andean nation jumped five spots to 42nd in the world. Chile rose two places to 39th, taking back from Peru, which fell two spots to 41st, the title of Latin America's most business- friendly economy.

For more, see Brazil Trails Swaziland in World Bank Competitiveness Study by Randall Woods, October 20, 2011 at businessweek.

Wealth: Top Earners Doubled Share of Nation's Income, Study Finds

From an article Martha contributed ...

... the Congressional Budget Office said Tuesday, ...

that from 1979 to 2007, average inflation-adjusted after-tax income grew by 275% for the 1% of the population with the highest income. For others in the top 20% of the population, average real after-tax household income grew by 65%.

By contrast, the budget office said, for the poorest fifth of the population, average real after-tax household income rose 18%.

And for the three-fifths of people in the middle of the income scale, the growth in such household income was just under 40%.

The findings, based on a rigorous analysis of data from the Internal Revenue Service and the Census Bureau, are generally consistent with studies by some private researchers and academic economists. But because they carry the imprimatur of the nonpartisan budget office, they are likely to have a major impact on the debate in Congress over the fairness of federal tax and spending policies.

For more, see Top Earners Doubled Share of Nation's Income, Study Finds by Robert Pear, October 25, 2011 at NYTimes.com.

Education: Cost of College on the Rise (Again)

Is this smart?

For more, see Cost of College on the Rise (Again) by Matthew Philips, October 27, 2011 at Freakonomics.

Health: Study Shows Why It's Hard to Keep Weight off

For years, studies of obesity have found that soon after fat people lost weight, their metabolism slowed and they experienced hormonal changes that increased their appetites. Scientists hypothesized that these biological changes could explain why most obese dieters quickly gained back much of what they had so painfully lost.

But now a group of Australian researchers have taken those investigations a step further to see if the changes persist over a longer time frame. They recruited healthy people who were either overweight or obese and put them on a highly restricted diet that led them to lose at least 10% of their body weight. They then kept them on a diet to maintain that weight loss. A year later, the researchers found that the participants' metabolism and hormone levels had not returned to the levels before the study started.

Dr. Stephen Bloom, an obesity researcher at Hammersmith Hospital in London, said the study needed to be repeated under more rigorous conditions, but added, It is showing something I believe in deeply — it is very hard to lose weight. And the reason, he said, is that your hormones work against you.

For more, see Study Shows Why It's Hard to Keep Weight off by Gina Kolata, October 26, 2011 at NYTimes.com.

Economics: The Path Not Taken

... bailing out the banks while punishing workers is not, in fact, a recipe for prosperity. But was there any alternative? Well, that's why I'm in Iceland, attending a conference about the country that did something different.

If you've been reading accounts of the financial crisis, or watching film treatments like the excellent Inside Job, you know that Iceland was supposed to be the ultimate economic disaster story: its runaway bankers saddled the country with huge debts and seemed to leave the nation in a hopeless position.

But a funny thing happened on the way to economic Armageddon: Iceland's very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.

So how's it going? Iceland hasn't avoided major economic damage or a significant drop in living standards. But it has managed to limit both the rise in unemployment and the suffering of the most vulnerable; the social safety net has survived intact, as has the basic decency of its society. Things could have been a lot worse may not be the most stirring of slogans, but when everyone expected utter disaster, it amounts to a policy triumph.

And there's a lesson here for the rest of us: The suffering that so many of our citizens are facing is unnecessary. If this is a time of incredible pain and a much harsher society, that was a choice. It didn't and doesn't have to be this way.

For more, see The Path Not Taken by Paul Krugman, October 27, 2011 at NYTimes.com.

Education: College Is Worth It

For more, see College Is Worth It by Catherine Rampell, October 27, 2011 at Economix.

International: Iran's Supreme Leader Floats Proposal to Abolish Presidency

Ayatollah Ali Khamenei, who was appointed supreme leader for life in 1989 by Shiite Muslim clerics, said in a speech last week that, if deemed appropriate, Iran could do without a president.

Under the proposal, Iran would be ruled by Khamenei working in tandem with parliament, which would continue to be directly elected and would appoint one of its members to serve as prime minister.

Such a change could happen in the near or distant future, Khamenei said. The last time Iran's constitution was altered was in 1989 after the death of Ayatollah Ruhollah Khomeini, the founder of the Islamic republic and its first supreme leader. The position of prime minister was abolished at that time.

For more, see Iran's Supreme Leader Floats Proposal to Abolish Presidency by Thomas Erdbrink, October 25, 2011 at The Washington Post.

Society: U.S. Government Requests for Google User Data Jump

U.S. government agencies sent Google 5,950 criminal investigation requests during the first half of 2011 compared with 4,601 requests during the last six months of 2010. Google complied in part or completely with 93% of those requests which can include court orders and subpoenas.

The number of users and accounts affected: 11,057.

Google has an agenda here. It wants to spread this kind of information -- albeit incomplete as it does not include certain terrorism-related requests -- to push for reform of federal laws that give law enforcement unfettered access to online communications without a judge's order.

For more, see U.S. Government Requests for Google User Data Jump by Jessica Guynn, October 25, 2011 at the LA Times blog "Technology".

Religion: Survey of Muslims in American

Foreign born American Muslims dislike al Qaeda more than native born Muslims ...

For much, much more, see Muslim Americans: No Signs of Growth in Alienation or Support for Extremism, August 30, 2011 at Pew Research Center for the People & the Press.

Wealth: Why America's Highest Paid Ceos Are Insanely Overpaid

... the most rapacious pillage of shareholder property is John H. Hammergren, chairman and CEO of McKesson Pharmaceuticals. His compensation which is doesn't really capture the essence of his remuneration, was a mind blowing $131.2 million U.S. dollars. This number is obscene. It is just shy of 11% of the total $1.2 billion in net income for the entire company.

For more, see Why America's Highest Paid Ceos Are Insanely Overpaid by Christopher Helman, October 25, 2011 at Forbes.com.

Society: Which Americans Are Most Generous, and to Whom

For more, see Which Americans Are Most Generous, and to Whom by Catherine Rampell, October 18, 2011 at Economix.

Economics: The Wild Ride of the 1%

For decades after World War II, the top-one-percenters were the most steady line on the income and wealth charts. They gained less during good times and lost less during contractions than the rest of America.

Suddenly, in 1982, the wealthiest broke away from the rest of the economy and formed their own virtual country. Their incomes began soaring higher during good times. The top 1% of earners more than doubled their share of national income, to 20% as of 2008. Looking at another measure, the richest 1% increased their share of wealth from just over 20% to more than 33%.

Those surges were often accompanied by mini-crashes, even though the direction over time was always up. A top 1% that had once been models of financial sobriety set off on a wild ride of economic binges.

This marked a new personality type in the history of wealth: the High-Beta Rich.

"High beta" is a term used in financial markets to describe a stock or asset that has exaggerated up and down swings with the market. Tech start-ups and casino stocks have high betas, for example. Yet studies show that today's rich have higher betas than many of the riskiest gambling stocks. Between 1947 and 1982, the beta of the top 1% was a modest 0.72, meaning that their incomes moved relatively in line with the rest of America. Between 1982 and 2007, their beta soared more than three-fold.

The fallout from the "high betas" is likely to grow. As the wealthy gain a greater share of wealth and income, they account for a growing share of spending, taxes and investments. The top 5% of earners now account for 37% of consumer outlays, according to Moody's Analytics. The top 1% of earners pay 38% of federal income taxes. The richest 1% of Americans own more than half of the country's individually held stocks, according to the Federal Reserve.

As go the high-beta rich, so goes America. Their hyper-cycles will become our own, as the consumer economy, financial markets and tax revenues experience more rapid and extreme spikes and crashes.

The spending of the rich is even wilder than their incomes. The spending volatility of the top 10% of earners is now more than 10 times the spending volatility of the bottom 80%, according to one study.

For more, see The Wild Ride of the 1% by Robert Frank, October 22, 2011 at WSJ.com.

Economics: Tax Rates and Taxes Paid, by Wealth

Here's a look at effective tax rates, a measure that includes federal income taxes, payroll taxes, and excise taxes [by income level].

Here are two more graphs to take you home: the first shows share of income by quintile and the second shows share of federal income taxes by quintile. What you'll see is that income inequality is behind tax burden inequality.

For more, see One of These Graphs Will Make You Angry About the Rich and Taxes by Derek Thompson, October 6, 2011 at The Atlantic.