U.S. Asks China Not to Destroy World Economy

As efforts to contain economic damage stumble,  fail, around the world , it's time to revisit a post from November 2009.   I've updated with a few notes added in blue (below).  China's sustained effort to increase its exports through subsidies (via its currency peg/manipulation) -- which also raises the prices of American goods in China -- have greatly worsened devastating global trade imbalances.

The effect of these gigantic trade surpluses are widespread joblessness and gradual economic collapse in the western world.

But global trade imbalances maintained by currency pegs, like stress in the earth, must eventually release.  We now are witnessing the escalating quakes in Europe as both austerity and ability to borrow are failing.  These are like the little tremors and the medium sized tremors before the big one.

One wonders how long China will drag its feet to rebalance its own economy as the world economy falters.  Will it wait until exports collapse and it sees riots in its own cities?

But then, rarely are people willing to realize, to comprehend, the harmful effects of actions they believe benefit themselves, especially if the illusion can be maintained a little longer....

They don't want to know that their export model is slowly destroying the world economy, via their sheer size and manufacturing investment. Not any more than Germans would like to understand that their prosperity has come in large part from a currency peg against the rest of Europe via the EMU (European monetary union -- the Euro).  Were a (reestablished) German Deutsche Mark and the Chinese Renminbi allowed to freely float, so that their exchange rates were freely set by markets, nations like Greece, Italy, Ireland, Portugal, Spain, the U.K....and the U.S., to name a few, would quickly feel a fresh breeze of new economic activity and hope.

In fact, we could change course away from a very dark future (see this post).

But Germany has experienced record low unemployment (as the world economy deteriorates).  Why would Germans want to recognize reality?

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November, 2009:

Finally, after years, even economists like Krugman are publicly recognizing that the Chinese peg of their currency to the dollar is more than a nuisance or a developing-country tactic. It's a profound handicap placed on American manufacturing.

(2012: During the last year, the understanding of the effects of the Chinese peg has become widespread.)

The peg threatens American recovery. It is in effect a Chinese trade war against America, ongoing for years.

Many economists haven't yet really wrapped their minds around the reality that if exports are heavily subsidized (relative price held down) by a currency peg during an imbalance, then it is no longer "free trade."

We do not have free trade with China.

"Free trade" is effectively an ideology in recent times. Economists understand the advantages of free trade -- how it increases most everyone's absolute wealth (buying power in goods). It's understood the disruption and economic damage the raising of trade barriers would cause. All true.

But not enough. The thinking simply needs to continue beyond this basic level of understanding.

When a government intentionally bends a nation to accomplish an international goal of gaining manufacturing jobs at the expense of other nations (at the expense of jobs in other nations), this is a kind of powerful trade interference. It becomes in effect a trade war.

Damage to the U.S. isn't the only result of this managed effort. The peg actually threatens Chinese stability by extending a reliance on an unsustainable imbalance.

But more, the Chinese peg threats global economic stability.

(2012: Witness Europe)

And that raises an open question.

Does China have the smarts to recognize that both alternatives that could follow from maintaining the currency peg are quite harmful to China itself?

It's a multi-trillion dollar question.

Here are the two alternative scenarios I see if China maintains the peg.

Either:

A) As Martin Wolf points out, the U.S. is truly forced, without choice, to initiate major tariffs within a few years:

“Yet we do not have that much time. If the US domestic economy remained weak and unemployment high, while our trade deficit soared, particularly our bilateral deficit with China, the pressure to ‘do something’ would become irresistible. I would have to consider the sort of actions that Richard Nixon took in 1971. To force revaluations by Germany and Japan, he threatened a 10 per cent import surcharge. With great regret, I might feel obliged to do the same. I would then argue that China’s determination to thwart needed adjustment in exchange rates had become intolerable. The US is entitled to protect itself against such mercantilism. The trading system would be terribly damaged. But the alternative would be unbearable.”

OR

B) If somehow the U.S. government delayed such a response for little longer based on "free trade" fallacies, then the buildup of political pressure in the U.S. due to joblessness would only lead to a more drastic final U.S. response than the one Martin suggests.

Ideology -- the mental error of trying to maintain "free trade" when the U.S. faces in reality a kind of ongoing trade war -- can only withstand a contrary reality up to a certain limit, at which point the ideology, or illusion, collapses and great political energy is released. America could actually be pushed into a genuine change in ideology.

China by nature should be a natural ally of the U.S. Only the paranoid right has needed to see China as a serious rival.

That could change.

So this question is really a question of smarts. Are they smart enough to see the train coming down the track? Are we smart enough to sound the horn instead of patiently waiting for China to answer a diffident phone call?

It has become evident that conditions similar to the 1930s could arise... (2012 update: have arrived.  We have economic depression in several nations in Europe now, and are seeing a dramatic rise of nationalism.  We are progressing on the list towards a much darker time I reluctantly laid out in the link above.)  ... if these trade imbalances persist, which could lead to a increased risk of economic wars and even a general destabilization of currently peaceful parts of the world, with risk of major warfare.

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Update (2010):

Cui Tiankai, a Chinese vice foreign minister who is in charge of preparing for the G20 summit, said the yuan was "China's currency, so I don't think it is an issue that should be discussed internationally.

Regardless of internal Chinese politics/signals, the exchange rate of the yuan to the U.S. dollar, which China is massively intervening to control, is with the U.S. dollar and directly intervenes in U.S. exports by controlling U.S. export prices to China and many nations.

China is controlling U.S. export prices by directly controlling the value of the U.S. dollar.

Is that an "international" issue? Yes.

The U.S. dollar is the currency of the United States, so interventions that affect the dollar are central to U.S. economic health, and fully within the purview of the federal government of the United States.

Can Obama Match Roosevelt's Impact? (Updated)

Like Franklin Roosevelt, President Obama presides over a nation in a crisis which is profound and lasting, and where progress is slow.

But the weakness is deeper rooted, more substantial than many people realize. It won't be enough to have a housing bottom (especially where prices remain too high for new families to afford). It won't help to rely on exports as Europe begins to stagnate and China remains locked in destructive mercantilism with systematic trade barriers.

There is more here than only the housing bubble and its collapse.

Like the Great Depression, this collapse was also proceeded by a zooming economy (the roaring 20s and the roaring 90s) with automation, innovation, productivity and tax breaks that helped to create great wealth.

When there is so much wealth unspent that must be invested, a special problem arises.

Since high earners cannot spend all their income and must invest much of it, and when good investments are saturated in an economy, then speculative investments (such as dot com stocks, soaring housing, mortgage-backed securities) follow.

As wealth builds to extraordinary levels, speculation blows into bubbles.

We've have the stock bubble of 1998-2000, the great housing bubble of 1999-2007, the oil price bubble of 2008, and the US Treasury bond bubble of 2009 to the present.

Great wealth with nowhere to go that is productive.

History shows large bubbles and their collapses are devastating and the recoveries are always slow and prolonged (due to debts after asset prices collapse).

As before, many cannot pay what they owe (mostly mortgages), or can pay only by spending little on anything else.

Spending is reduced while productivity still rises, so many jobs are lost, and even a stimulus-aided recovery is slow under the weight of the debts.

These are the well-known effects of bubble collapses in developed economies.
No other result is possible without overwhelming intervention. Without at least a significant intervention (as we have had), a great spiral downward ensues until government does something big enough, and long enough.

How long, how big? Consider: even after Roosevelt's large programs and some good economic growth through the mid 30s that seemed to show light at the end of the tunnel, trying to reduce the federal deficit in 1937 immediately caused a sharp economic relapse.

What finally ended this underlying weakness? We do know that total war mobilization and World War was big enough to free an economy from this kind of lasting weak state.

But something less than total mobilization, and more targeted than we've done so far, could bring us out of this malaise in a lasting way (click here for a specific method of broad debt reduction).

Most Americans don't understand this situation, or the exact effects of the overhang of heavy mortgage debt. Heavy debt seems normal, as it has been around for a decade, and longer for many.

It just doesn't occur to people that a mid-range family income cannot really support $200,000 or more of mortgage debt (while also saving for college and retirement adequately). We are accustomed to many people paying 30%, 35%, and more of their income into a mortgage. We've lost perspective.

We are slogging more slowly than Americans believe we should, and many have no understanding of why and what to do, so they must fall back on simple concepts from talk show hosts and blame the current President.

...

President Roosevelt had two advantages that make President Obama seem weak in comparison.

One primary advantage, as I've explained before in posts on the Great Depression, is that Roosevelt took office many years into the collapse. By 1933, the damage was profound, and no one could pretend it was only about a lack of confidence or not enough freedom for enterprise, or any other partisan guessing.

Instead, it was obvious in 1933 that the economic collapse was something overwhelming, and that it had nothing at all to do with regulation, taxes, freedom, or any of the assertions we hear so often today. 1929-1932 had modest taxes, little regulation. Since then, high growth periods like the 1950s, 60s, and 90s had higher taxes, heavy regulation, welfare, you-name-it. All of those reasons, those talking points, are simply false by evidence of the history of economic growth.

In 2009, as Obama took office, our downturn had not yet progressed to 1933 or 1932 levels, though by the end of 2008 the spiral down was rapidly accelerating.  But we responded with stimulus in a way that did not happen in 1930 or 1931....

Our new depression has been held at bay while some of its force was spent and its downward momentum broken, for now.  But this depression, like the previous Great Depression, is global, and global effects may yet visit us again.


As we've kept the wolves at bay, not all people have become aware that we were are in a deeper economic crisis.

Many can be told that this glacial recovery is simply Obama's fault. Romney is working hard to establish just this 1984-style, up-is-down 'fact.' (and more, e.g.: Obama wants to "weaken our defense," etc.)

Roosevelt had a profound advantage, coming into the crisis late, after denial was impossible.

But....there is another advantage Roosevelt had, one needed now.

We think Obama is a great speaker, and he is in some ways, so we conclude he has communication down. He's able to communicate, we think.

No.

Roosevelt communicated more clearly, in the face of crisis, because Roosevelt used powerful terms and plain language and called a spade a spade in stark terms that could not be ignored or easily mislabeled. Roosevelt used effective language:




President Obama must realize that most care little about about Race; and we actually want Change. But these constructs are abstractions (!) -- they are not the real center of feeling for most of the nation.

We care about what is the real beating heart of our people -- our relations with each other, and Government is a part, an outer band, of our relation with each other.

This is the real center of the political debate, and the great question of our time.

Are we a people, or are we only a loose alliance?

This question shows underlies most of our debates -- pick a debate, and you are looking at an instance.

Will Obama take FDR's example?

He could.

The Savings Conundrum Writ Large -- Global Depression Threatens

As the first breezes of a gathering storm of great depression begins touching many shores, awareness of the driving forces is starting to spread.  For instance, in this link Ambrose Evans Pritchard nails our current situation -- we are in a global spiral into depression.

This is a good time to reprise and refine views I've presented before.  You see, all of this economic tumult around the globe is but the simple, straightforward outcome of a single dynamic.

When I first wrote on this dynamic, I called it the Savings Conundrum.   We are now beginning to see what happens when the Savings Conundrum operates on a global scale.


We are in the early stages.

Many large nations around the world are tightening budgets, reducing spending, while too many consumers are still cautious to spend and businesses still slow to invest. Only China and Germany --  the nations with the largest trade surpluses (created via currency pegs such as the EMU) -- are in a strong position to change this tune.

When government, business, and households together reduce their spending on net, the result is a vicious economic spiral -- a feedback loop -- that won't let up until some major event (like a world war) or massive intervention (like FDR's) break the spell.

The global economy will shrink if nations around the globe cut spending together, and the economic unraveling would continue not for months or one or two years, but for many years.

There is an explanation why this is no quickly passing storm we sense but is instead the menacing outer bands winds of a massive circling maelstrom -- we are looking at the Savings Conundrum writ large.

As I wrote about a year ago, The World Is Not On A Pleasant Course.

...

An end is now in sight, an absolute end of our current world order. The beginning of the end of this period of stability we've know most of our lives.

AEP's prediction of the rise of a new protectionist American trade bloc -- free trade among cooperating nations behind high tariff walls to exclude currency manipulators like China -- this is a best possible scenario.

It's a best scenario. A hopeful one.

One that has hope of avoiding the spiral into increasing economic desperation and the resulting rise in demagoguery, and then of demagoguery's children, that would result from general global economic downturn.

Let me be clear. I'm talking about not only global economic depression, but further, the possibility of the rise of power-seeking nationalists who would use external enemies to bend nations to their will, resulting in increasing tensions that could set the stage for large wars.

Widespread wars become possible in that world, like we haven't seen since the 1940s.

That's the less favorable possibility than that of AEP's new American Trade Bloc (which ends trade with China as it has been under the currency peg/subsidy/tariff).

Readers may notice this post is more alarming than posts I've written before. This is because the mistakes of nations around the world are all aligning in the same direction and negative momentum is building rapidly.

The last-chance alternative to these radical changes is for the major surplus nations -- China, Germany and Japan -- to increase their governmental spending as necessary to run governmental deficits roughly equal to all of their trade surpluses each year so as to create increased demand, income, and a circle of spending at home.

Chinese and German spending could rescue the world we've known: improved retirement stipends, infrastructure investments, consumption incentives, and even purchases of goods from deficit nations. For example, China (which still has a significant sector of command economy) might buy additional airplanes, locomotives, software, and more.

Or China could do something more dramatic and necessary in the long run -- simply move to free trade. That is, begin to have a freely floating currency without a peg and without currency controls.

That would be a very different situation than we have now.

But even today with the currency peg, China could immediately take big steps to improve the global economy by: A) ending domestic piracy of foreign goods such as US software and movies, B) greatly increasing their move to establishing a social safety net and retirement system, and C) creating more incentives for domestic consumption. China could easily implement these economy-saving changes now.  (See, China itself, dependent on big exports, is one of the most vulnerable nations to a global depression.)

These steps might save the current world order, but the more basic adjustment is ultimately needed.

An end to the Chinese trade-war via currency peg and to the German trade-war via European Monetary Union would tremendously benefit the global economy, and in turn would benefit China and Germany on net relatively quickly, certainly within years.

In fact, only such true free trade (with freely floating currencies) has any chance of creating truly healthy global growth, which China and Germany need to thrive in a sustainable way.

It's in their national interests.

But that doesn't mean they will see it.  Psychology and mythology normally rule over reason and facts.

As global riots haven't been sufficient yet and economies still sputter along for a while, China and Germany are likely to continue to maintain comfortable national illusions for now, and perhaps until we have irreversibly entered a different and more dangerous world.

They will most likely drive the world into collapse, and most of their citizens -- good Germans, good Chinese of good will -- will wonder to themselves why most of the other nations and peoples in the world are so irresponsible and wrong....

That it is still the greater likelihood, for now -- that the storm will intensify, that a global depression is coming.

Ultimately this is driven by the "global imbalances," by the great excess of Chinese and German savings over consumption.

This can put an end to the current world order of relative peace and relative safety most of us have known all our lives.

A Truly Fair Tax Structure In A Nutshell

After seeing tax proposals and much wrong analysis thereof in the media and blogs, I've taken time to summarize my ideas from this blog on how to change our tax system to boost American jobs and our economy.

The key to protecting and enriching working American families is boosting our economy and thereby boosting wages.  Key to boosting the American economy is to put American labor on an equal footing with its foreign competition.

We currently tax American jobs in two ways.  Taxing your job only once would actually increase tax revenues over time by increasing the total number of American jobs and increasing wages, and thus income tax revenues.

This effective double taxation encourages many American businesses to open new factories, labs, service centers overseas.

Currently, if a business is considering where to open it's next plant or center, it must consider that in the U.S. it will pay a high tax rate on the business itself (unless it corrupts Congress with bribes to get tax loopholes) and then employees and stock holders will then pay tax again on their earnings.

But, imports from overseas get a tax-free ride, coming into the American market without federal taxes.

Foreign goods come tax free into America, while we heavily tax American goods.

What do you think that does to the playing field?

You're right.

That's not all.  Other nations are far more rational -- they tax all goods sold with a national sales tax.  Therefore, American goods end up paying foreign taxes, foreign sales taxes when competing in other markets.

That means the tax penalty of making things in America is very high.   Since it is often a close call whether to expand or build in America, this difference often is the deciding factor (when the sum of other factors, like transportation, skills, etc. are close).

Our tax structure is a strong, direct incentive to ship American jobs overseas!

(President Obama campaigned in part on changing this.  It hasn't changed yet.)

...

The net result is a tax penalty on American-made goods and services of about 15%-20% versus foreign competition.

This is in addition to a price disadvantage American products face vs Chinese goods caused by the Chinese currency peg that amounts to about 25-30%.

Our competitors tax us.   And we don't tax them.

Our bad tax structure threatens your own job, no matter what that job is, because all jobs depend on the health of our economy.  All jobs are interconnected, interdependent.

Customers that support your job, or your stock portfolio, are simply other Americans that have jobs.  If there are fewer American jobs, and therefore more job seekers and thus lower wages, then all American businesses have fewer customers and lower profits.

Your own wages/earnings depend entirely on other Americans having jobs.  You get a raise if enough other Americans are earning good money.

You get laid off if not enough other Americans are earning good money.

Whatever decreases American jobs and depresses American wages takes money right out of your own pocket (even if your income is dividends, stock market gains, or rental income....).

...

Our tax code should put American workers on a level playing field with foreign workers.

This way we can we stop exporting our jobs and our future prosperity to other nations.

Tax Fairness in a nutshell:

Replace the tax on American businesses (and thus on American jobs) with a national sales tax (with exclusions) at a rate of 12% to 15% (using measures below to make it progressive).
Exclude from the national sales tax: Food, children's clothing/items, school and educational supplies, tuition and expenses and out of pocket medical expenses.

To counteract the regressive effect of the national sales tax on other goods and services, increase the federal income tax personal exemption (for oneself, one's spouse, and one's dependents such as children) from the current $3,700 per person to $10,000 per person.

Otherwise, we can keep the current income tax rate structure as is and as it will be later when the Bush tax cuts expire with tax rates and deductions reverting to the levels of the growth-filled 1990s.  The new and higher personal exemptions will improve tax fairness.  (A special 15% rate for direct investment can be separately set up to encourage business expansion.)

Taxing imports equally to American goods will result in rising American wages and increased employment.

Foreign goods being sold in America will begin to pay their fair share of American taxes, just as our goods sold overseas pay shares of foreign taxes.

Now...is your favorite candidate on board with what is best for America, or only what is best for his donors who have special tax breaks they purchased from Congress?

America!

Inspiring sight this weekend.  We were going to a festival and traveled along a commercial boulevard in a big suburb, on a nice sunny and windy day, when a truly novel sight met my eyes in that landscape.

To get this scene, imagine an archetypal suburb shopping road, all chain stores, restaurants, gas stations,  totally consumers jockeying along wishing there were less people doing the same thing at the same time, packed, slow roads (judging from this road, there isn't much recession going on).

Suddenly alongside the road at a major intersection I saw a large, sparkling, 4' x 6' American flag whipping straight in the wind, like a vision.  So new, so clean, so red and blue and white.  At first, such a sight made me expect some same-old-same-old protest.

3 people stood there, and as we passed slowly from the intersection in heavy traffic I saw the man holding the flag pole smiling like it was a new world.

His sign read:

War is stupid.

-- Gen. Eisenhower

Cars were honking in support -- this in a suburb of a large city, the classic Republican stronghold.

The 3 protesters waved, smiling at the cars and people, in a clear mutual love fest kind of atmosphere.

Do representatives realize how well most of the American people understand this war is pointless, useless?  I've a feeling anti-war feeling is well above 50%.

There is hope for our nation.

...

"War settles nothing."

~Dwight D. Eisenhower

Yes, He Can, If He Will (Update)

Can Obama speak to Americans, in language that works for a larger portion of the populace?

Yes, he can. He showed us during the address to Congress.

Here's a newer bit I'm listening to now. We want to know if Obama's new way of speaking might stick, as we need it to.... I'll give the address to Congress an A, and this effort (the C-Span video) below a C+.

It's not easy to change. What's needed: more of a sense of emotional urgency. That's a fine line to walk, and Obama has the personality to walk it well, if he can remember what it's all about.



There are two main communication needs for the Country now. One is for a leader to rally us in the right direction.

The second is for someone to widely explain the simple reality that your job depends on the total demand in the economy and whether there is true free trade. We have to get both right. This means we need both public/private investment (such as the proposed Jobs Act would increase), and we need to require (not ask) an end to the Chinese import tariffs against our made-in-America goods and huge export subsidies for their goods sold to us, to give American workers a fair chance in the global economy.

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Update 9/13 PM from the Newshour -- This is more like it:

Watch the full episode. See more PBS NewsHour.

What We Really Need Now (Updates: Martin Wolf; Krugman and Rogoff)

(Update 8/23: Krugman and Rogoff at bottom)
(Update 8/2: see Martin Wolf below)

7/29 -- As the popular American dialogue -- which our media blows into a theatrical crisis of the day/week/month -- tends to obscure reality, I thought it would be useful to remember where we really are.

We are on an economic bridge -- a support of deficit spending/investment on education/infrastructure/unemployment benefits -- over a deep economic chasm. Reality is more dramatic than the popular fiction this time.

Here's the normal outcome from a credit/debt/asset bubble-and-collapse such as the one the U.S. has experienced. From the abstract of Kenneth Rogoff and Carmen Reinhart's paper on the normal aftermath of such bubble-and-collapse:

This paper examines the depth and duration of the slump that invariably follows severe financial crises, which tend to be protracted affairs. We find that asset market collapses are deep and prolonged. On a peak-to-trough basis, real housing price declines average 35 percent stretched out over six years, while equity price collapses average 55 percent over a downturn of about three and a half years. Not surprisingly, banking crises are associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts on average over four years. Output falls an average of over 9 percent, although the duration of the downturn is considerably shorter than for unemployment. The real value of government debt tends to explode, rising an average of 86 percent in the major post-World War II episodes. The main cause of debt explosions is usually not the widely cited costs of bailing out and recapitalizing the banking system. The collapse in tax revenues in the wake of deep and prolonged economic contractions is a critical factor in explaining the large budget deficits and increases in debt that follow the crisis. Our estimates of the rise in government debt are likely to be conservative, as these do not include increases in government guarantees, which also expand briskly during these episodes.

And this is the average from bubbles both large and medium sized (big enough to put much of a nation's banking system into real trouble/insolvency). And an average that includes especially the last 100 years where governments acted to mitigate the crises, instead of allowing them to slowly grind out (as the US did in the nineteenth century, such as 1870s-1880s long depression).

Since Ronald Reagan's massive deficits ignited a new debt binge, we have experienced an unusually large credit/debt bubble:

From the wiki on the economy of the US:



We are far from getting out of the aftermath: Total public and private debt in the US is still at higher levels vs total US income (GDP) than at the peak of the Great Depression.

And after the asset bubble bursts (housing prices in our case), then households respond to their high debts by cutting spending for many years, even decades if nothing changes. This reduces or eliminates job growth.

That's where we are.

...

In order to recover from this massive debt overhang that would reduce consumer spending and job growth for decades without intervention, household debt vs income ratios must be sharply improved.

When debts become smaller in ratio to incomes, people will feel safe in purchasing more goods and services (much of which will be new style green goods and services -- economic growth and consumption can be environmentally favorable).

In short, for US recovery, people must have less debt and/or more income, including less mortgage debt.

That can only happen by three, make that four, means:

1) Rising incomes
2) Debt restructuring
3) Debt forgiveness

4) Or a lot of time treading water (if very slow growth is even possible -- if economic collapse doesn't ensue!) and such stagnation means a lot of people suffering for a long time

Since rising incomes can only happen via inflation or economic growth (and growth requires more consumer spending), it is obvious, necessary that we need significant help from restructuring and forgiving debts.

Foreclosures and bankruptcies are the two of the most rapid means of forgiving debt.

For this reason, current foreclosures and bankruptcies are especially beneficial to the US economic future.

Instead of a bad sign for our economy, these are a very good sign. They will help the US economy enormously.

(Yes, it is notable how incompetent so much commentary is -- suggesting that what actually helps us the most is a drag on the economy!)

If we had a lot more bankruptcies and foreclosures, quickly, we would get a quicker return to a good economy.

Economic growth also relies heavily on investment, both public and private.

Economic growth happens in response to new products, rising productivity/wages, and rising consumer spending.

Productivity and new products, key to growth, require investment.

Because the private sector is afraid to invest significantly now, deficit spending for public investments -- education (investment in people), infrastructure, technology, and science -- is indispensable to the future economy of the US.

Public investment will kickstart increasing private investment.

Without such public investment, we won't remain among the world's leading economies.

We should therefore focus federal spending, now, on education, infrastructure, science and technology, and require a level playing field in trade with all trading partners (this requires an end to the Chinese export subsidy/import tariff via currency peg).

For a good future, we must have public investment and fair trade. These are the real priorities.

Instead of the current media melodrama about whether the world's strongest economy is a good credit risk (whether US treasuries are a good investment, as the market clearly thinks).... we need to focus on reality and make good decisions now.

It's time for Obama to step up to the microphone in a more dramatic, clear way.

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8/2: Martin Wolf lays out the big picture succinctly:

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8/23: Paul Krugman and Ken Rogoff on how to get out of this "Great Contraction" (Great Depression) (hat tip to Mark Thoma). Rogoff's idea of mortgage debt relief is one of the most powerful steps we could take to shake off the decades long fallout a credit/debt bubble such as our entails.
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