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Friday, March 19th, 2010

Apologies for the very, very light posting. There are quite a number of personal issues I’ve been dealing with – aside from the uprooted tree in my yard and miscellaneous damage.

But let me still give you some must-reads for the week.

1. China’s distortionary exchange rate policy. On Sunday, Keith Bradsher in the New York Times gave a good primer on how China is using currency manipulation and the global trade organizations to gain economic advantages as part of a global strategy to increase China’s power. China has also been using the global financial crisis to further their economic aims:

China is starting to describe its currency interventions as stimulus. But unlike extra government spending in the United States and other countries, currency intervention does not expand global demand, but shifts it from other countries to China.

Paul Krugman followed this up with a column urging action regarding China:

Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure. This is the most distortionary exchange rate policy any major nation has ever followed.

And it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset. [My emphases.]

My first attempt to make sense of this issue here.

2. Mario Savio. Scott Saul of The Nation follows up with an excellent profile of Mario Savio who at one point seemed poised to lead the 1960s radical New Left, but who then dropped out of public view:

Savio was a revolutionary and civil libertarian, logician and poet, scientific observer and self-aware partisan–and in his heyday a virtuosic extemporizer who seemed not so much to perform all these identities as to incarnate them. He was, in short, an icon of possibility for his generation of student activists; and so it’s a great historical riddle, tinged with pathos, why he was, in Berkeley in 1964, the lightning rod of his time and, almost immediately afterward, a man who couldn’t conduct the energy he’d summoned.

3. David Brooks on Obama. David Brooks wrote an excellent column last Friday arguing that both the right and left have Obama wrong, as they accuse excessive fealty to an extreme left wing ideology and of being a weak, passive, unprincipled traitor respectively. Brooks describes Obama as I have always understood and described him – and in fact, as he has described himself:

Obama is as he always has been, a center-left pragmatic reformer. Every time he tries to articulate a grand philosophy — from his book ”The Audacity of Hope” to his joint-session health care speech last September — he always describes a moderately activist government restrained by a sense of trade-offs.

4. Ezra Klein. Ezra Klein best summarized the CBO score released yesterday and how it gave the Democrats exactly what they needed:

According to the Congressional Budget Office, the bill cuts deficits by $130 billion in the first 10 years, and up to $1.2 trillion in the second 10 years. The excise tax is now indexed to inflation, rather than inflation plus one percentage point, and the subsidies grow more slowly over time. So one of the strongest cost controls just got stronger, and the automatic spending growth slowed. And then there are all the other cost controls in the bill: The Medicare Commission, which makes entitlement reform much more possible. The programs to begin paying doctors and hospitals for care rather than volume. The competitive insurance market.

This was a hard bill to write. Pairing the largest coverage increase since the Great Society with the most aggressive cost-control effort isn’t easy. And since the cost controls are complicated, while the coverage increase is straightforward, many people don’t believe that the Democrats have done it. But to a degree unmatched in recent legislative history, they have.

Klein then succinctly explained what was missing from the Republican approach to the deficit that this health care bill – to its great credit – attempted to address:

Our long-term deficit is not a function of our current spending, which is manageable. It is a function of our expected spending growth, particularly in health care. With the system growing at 8 percent a year and GDP growing at 2 percent or 3 percent a year, there’s a real long-term problem there. But you can’t cut, or even tax, your way out of it. If you cut 5 percent from the system in one year, that cut disappears by the next year.

5. The Mission. I’m currently reading this 2003 book by Dana Priest who writes for the Washington Post on the military’s mission and how it evolved after the Cold War through the 1990s and into the War on Terror. Absolutely excellent. I highly recommend it.

[Image by me, this morning.]

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